Ingersoll Rand (IR) 10-K risk factor changes: FY2018 vs FY2017

[removed: The] [added: _The] following risk factors as well as the other information included in this Form 10-K, including “Selected [removed: Historical Consolidated] [added: Historical_ _Consolidated] Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results [removed: of Operations”] [added: of_ _Operations”] and our consolidated financial statements and related notes thereto should be carefully considered.

[removed: Any of] [added: Any_ _of] the following risks could materially and adversely affect our business, financial condition or results of [removed: operations.][added: operations._ _The selected risks described below, however, are not the only risks facing us.]

Additional risks and uncertainties [removed: not currently] [added: not_ _currently] known to us or those we currently view to be immaterial may also materially and adversely affect [removed: our business,] [added: our_ _business,] financial condition or results of [removed: operations.][added: operations._]

[removed: Risks] [added: Risks] Related to Our [removed: Business][added: Business]

[removed: We] [added: _We] have exposure to the risks associated with instability in the global economy and financial markets, which [removed: may negatively] [added: may_ _negatively] impact our revenues, liquidity, suppliers and [removed: customers.][added: customers._]

[removed: More] [added: _More] than half of our sales and operations are in non-U.S. jurisdictions and we are subject to the [removed: economic, political,] [added: economic,_ _political,] regulatory and other risks of international [removed: operations.][added: operations._]

For the year ended December 31, [removed: 2017,] [added: 2018,] approximately 56% of our revenues were from customers in countries outside of the United States.

Non-U.S. operations and United States export sales could be adversely affected as a result of: political or economic instability in certain countries; differences in foreign laws, including increased difficulties in protecting intellectual property and uncertainty in enforcement of contract rights; credit risks; currency fluctuations, in particular, changes in currency exchange rates between the U.S. dollar, Euro, British Pound and the Chinese Renminbi; exchange controls; changes in [removed: tariff restrictions; significant] [added: and uncertainties with respect to tariffs and; import/export trade restrictions (including] changes in [removed: import/export] [added: United States] trade [removed: restrictions;] [added: policy toward other countries, such as the imposition of tariffs and the resulting consequences), as well as other changes in political policy in the United States, China, the U.K. and certain European countries (including the impacts of the U.K.’s national referendum resulting in an election to withdraw from the European Union);] royalty and tax increases; nationalization of private enterprises; civil unrest and protests, strikes, acts of terrorism, war or other armed conflict; shipping products during times of crisis or war; and other factors inherent in foreign operations.

[removed: Our] [added: _Our] revenues and operating results, especially in the Energy segment, depend on the level of activity in the [removed: energy industry,] [added: energy_ _industry,] which is significantly affected by volatile oil and gas [removed: prices.][added: prices._]

The Energy segment generated approximately [removed: 43%] [added: 42%] of our consolidated revenues for the year ended December 31, [removed: 2017.][added: 2018.]

[removed: Our] [added: _Our] results of operations are subject to exchange rate and other currency risks.

A significant movement [removed: in exchange] [added: in_ _exchange] rates could adversely impact our results of operations and cash [removed: flows.][added: flows._]

A significant portion of our revenue, approximately 52% for the year ended December 31, [removed: 2017,] [added: 2018,] is denominated in currencies other than the U.S. dollar.

[removed: Potential] [added: _Potential] governmental regulations restricting the use, and increased public attention to and litigation [removed: regarding the] [added: regarding_ _the] impacts, of hydraulic fracturing or other processes on which it relies could reduce demand for our [removed: products.][added: products._]

While the [removed: newly appointed] EPA [removed: administrator] [added: in the Trump administration] and the Trump administration more generally have indicated their interest in scaling back or rescinding regulations that inhibit the development of the U.S. oil and gas [removed: industry,] [added: industry and have taken steps to do so,] it is difficult to predict the extent to which such policies will be implemented or the outcome of [removed: any] litigation challenging such implementation, such as the suit the State of California’s attorney general filed in January 2018 challenging the BLM’s rescission of its March 2015 rule referred to [removed: above.][added: above; in July 2018, the federal district judge in the Northern District of California, where the suit was filed, denied motions by the BLM and several petroleum industry groups to transfer the challenge to Wyoming.]

For example, in December 2016, the Oklahoma Corporation Commission’s Oil and Gas Conservation Division (the “OCC Division”) and the Oklahoma Geologic Survey released well completion seismicity guidance, which requires operators to take certain prescriptive actions, including mitigation, following anomalous seismic activity within 1.25 miles of hydraulic fracturing [removed: operations; and in February 2017, the OCC Division issued an order limiting future increases in the volume of oil and natural gas wastewater injected into the ground in an effort to reduce earthquakes in the state.][added: operations.]

[removed: We] [added: _We] face competition in the markets we serve, which could materially and adversely affect our operating [removed: results.][added: results._]

[removed: Large] [added: _Large] or rapid increases in the cost of raw materials and component parts, substantial decreases in [removed: their availability] [added: their_ _availability] or our dependence on particular suppliers of raw materials and component parts could materially [removed: and adversely] [added: and_ _adversely] affect our operating [removed: results.][added: results._]

[removed: Our] [added: _Our] operating results could be adversely affected by a loss or reduction of business with key customers [removed: or consolidation] [added: or_ _consolidation] or the vertical integration of our customer [removed: base.][added: base._]

[removed: The] [added: _The] loss of, or disruption in, our distribution network could have a negative impact on our abilities to [removed: ship products,] [added: ship_ _products,] meet customer demand and otherwise operate our [removed: business.][added: business._]

[removed: Our] [added: _Our] ongoing and expected restructuring plans and other cost savings initiatives may not be as effective as [removed: we anticipate,] [added: we_ _anticipate,] and we may fail to realize the cost savings and increased efficiencies that we expect to result from [removed: these actions.][added: these_ _actions.]

Our operating results could be negatively affected by our inability to effectively implement [removed: such restructuring] [added: such_ _restructuring] plans and other cost savings [removed: initiatives.][added: initiatives._]

From 2015 to 2017, we incurred restructuring charges of approximately [removed: $42.9] [added: $48.0] million across our [removed: segments in connection with these initiatives.][added: segments.]

[removed: Our] [added: _Our] success depends on our executive management and other key [removed: personnel.][added: personnel and our ability to attract and retain_ _top talent throughout the Company._]

Our future success depends to a significant degree on the skills, experience and efforts of our executive management and other key [removed: personnel, many of whom have joined the Company since the KKR Transaction,] [added: personnel] and their ability to provide us with uninterrupted leadership and direction.

The availability of highly qualified talent is [removed: limited,] [added: limited in a number of the jurisdictions in which we operated,] and the competition for talent is robust.

Our future success [removed: will] also [removed: depend] [added: depends] on our ability to [removed: have adequate succession plans in place and to] attract, retain and develop qualified [removed: personnel.][added: personnel at all levels of the organization.]

A failure to [removed: efficiently replace executive management members and other key personnel and to] attract, retain and develop new qualified personnel [added: throughout the organization] could have an adverse effect on our operations and implementation of our strategic plan.

[removed: Credit] [added: _Credit] and counterparty risks could harm our [removed: business.][added: business._]

[removed: If] [added: _If] we are unable to develop new products and technologies, our competitive position may be impaired, which [removed: could materially] [added: could_ _materially] and adversely affect our sales and market [removed: share.][added: share._]

[removed: Cost] [added: _Cost] overruns, delays, penalties or liquidated damages could negatively impact our results, particularly [removed: with respect] [added: with_ _respect] to fixed-price contracts for custom engineered [removed: products.][added: products._]

[removed: The] [added: _The] risk of non-compliance with U.S. and foreign laws and regulations applicable to our international [removed: operations could] [added: operations_ _could] have a significant impact on our results of operations, financial condition or strategic [removed: objectives.][added: objectives._]

The Tax Act makes broad and complex changes to the U.S. tax code that [removed: will affect 2017,] [added: affected 2017 and 2018,] including, but not limited [removed: to,] [added: to] (1) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years and (2) bonus depreciation that will allow for full expensing of qualified property.

[removed: The] [added: Further, the specific] future impacts of the Tax Act on holders of our common shares are uncertain and could in certain instances be adverse.

[removed: A] [added: _A] significant portion of our assets consists of goodwill and other intangible assets, the value of which may [removed: be reduced] [added: be_ _reduced] if we determine that those assets are [removed: impaired.][added: impaired._]

As of December 31, [removed: 2017,] [added: 2018,] the net carrying value of goodwill and other intangible assets, net represented [removed: $2,658.8] [added: $2,657.9] million, or [removed: 58%,] [added: 59%,] of our total assets.

See Note 8 “Goodwill and Other Intangible Assets” to our audited consolidated financial statements [added: included elsewhere in this Form 10-K] for additional information related to impairment testing for goodwill and other intangible assets and the associated charges taken.

[removed: Our] [added: _Our] business could suffer if we experience employee work stoppages, union and work council campaigns or [removed: other labor difficulties.][added: other_ _labor difficulties._]

As of December 31, [removed: 2017,] [added: 2018,] we had approximately [removed: 6,400] [added: 6,700] employees of which approximately [removed: 2,050] [added: 2,100] were located in the United States.

[removed: We] [added: _We] are a defendant in certain asbestos and silica-related personal injury lawsuits, which could adversely affect [removed: our financial condition.][added: our_ _financial condition._]

A change in economic conditions also puts pressure on our receivables and collections.

In February 2017, the OCC Division issued an order limiting future increases in the volume of oil and natural gas wastewater injected into the ground in an effort to reduce earthquakes in the state, and it announced further requirements (involving seismic monitoring) in February 2018.

| --- | --- | --- |

In 2018, we incurred restructuring charges of $12.7 million.

_Changes in tax or other laws, regulations, or adverse determinations by taxing or other governmental authorities_ _could increase our effective tax rate and cash taxes paid or otherwise affect our financial condition or operating_ _results._

The Tax Act also established new tax laws that significantly affected 2018 and 2017.

While we monitor proposals and other developments that would materially impact our tax burden and/or effective tax rate and investigate our options, we could still be subject to increased taxation on a going forward basis no matter what action we undertake if certain legislative proposals or regulatory changes are enacted, certain tax treaties are amended and/or our interpretation of applicable tax or other laws is challenged and determined to be incorrect.

The inability to realize any anticipated tax benefits related to our operations and corporate structure could have a material adverse impact on our results of operations, financial condition and cash flows.

See Note 1 “Summary of Significant Accounting Policies” and Note 15 “Income Taxes” to our audited consolidated financial statements included elsewhere in this Form 10-K for additional information related to our accounting for income tax matters.

The inability to realize any anticipated tax benefits related to our operations and corporate structure could have a material adverse impact on our results of operations, financial condition and cash flows.

If one of more of our manufacturing facilities are damaged by severe weather

We rely on a combination of patents, trademarks, trade secrets, copyrights, confidentiality

industries in which we compete; placing us at a disadvantage compared to other, less leveraged competitors; increasing our cost of borrowing; and hampering our ability to execute on our growth strategy.

cross-acceleration or cross-default provision applies.

| --- | --- |

The selected risks described below, however, are not the only risks facing us.

However, we provide long-term equity incentives and certain other benefits for our executive officers which provide incentives for them to make a long-term commitment to us.

U.S. Federal income tax reform could adversely affect us.

The Tax Act also establishes new tax laws that will affect 2018, including, but not limited to, (1) reduction of the U.S. federal corporate tax rate; (2) elimination of the corporate alternative minimum tax (“AMT”); (3) the creation of the base erosion anti-abuse tax (“BEAT”), a new minimum tax; (4) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (5) a new provision designed to tax global intangible low-taxed income (“GILTI”), which allows for the possibility of using foreign tax credits (“FTC”) and a deduction of up to 50% to offset the income tax liability (subject to some limitations); (6) a new limitation on deductible interest expense; (7) the repeal of the domestic production activity deduction; (8) limitations on the deductibility of certain executive compensation; (9) limitations on the use of FTCs to reduce the U.S. income tax liability; and (10) limitations on net operating losses (“NOL”) generated after December 31, 2017, to 80% of taxable income.

The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act.

SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740.

In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

In connection with our initial analysis of the impact of the Tax Act, we have recorded a discrete net tax benefit of $95.3 million in the period ending December 31, 2017.

This net expense benefit primarily consists of (1) a net expense benefit for the corporate rate reduction of $89.6 million, (2) a net expense for the transition tax of $63.3 million and (3) a corresponding reduction of the repatriation liability under ASC 740-30 (formerly Accounting Principles Board 23) of $69.0 million.

For various reasons we have not completed our accounting for the income tax effects of certain elements of the Tax Act.

If we were able to make reasonable estimates of the effects of elements for which our analysis is not yet complete, we recorded provisional adjustments, as described above.

If we were not yet able to make reasonable estimates of the impact of certain elements, we have not recorded any adjustments related to those elements and have continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the Tax Act.

As we complete our accounting of the income tax effects of the Tax Act, we anticipate that we may record additional charges or benefits at such time as prescribed by ASC 740 and SAB 118, and as further information becomes available regarding the Tax Act, we may make further adjustments to the provisions that have been recorded in our financial statements.

We also continue to examine the impact this tax reform legislation may have on our business.

In 2015, we recorded a goodwill impairment charge of $343.3 million within the Energy segment and recorded impairment charges related to other intangible assets of $78.1 million within our Industrials, Energy and Medical segments.

Selected Financial Data” and our audited consolidated financial statements and related notes [removed: thereto] [added: to our consolidated financial statements] included elsewhere in this Form 10-K.

[removed: Executive Overview][added: Executive Overview]

[removed: Our Company][added: _Our Company_]

To support our customers and market presence, we maintain significant global scale with [removed: 38] [added: 41] key manufacturing facilities, more than 30 complementary service and repair centers across six continents and approximately [removed: 6,400] [added: 6,700] employees worldwide as of December 31, [removed: 2017.][added: 2018.]

As a result, our aftermarket revenue is significant, representing [removed: 41%] [added: 39%] of total Company revenue and approximately [removed: 45%] [added: 43%] of our combined Industrials and Energy segments’ revenue in [removed: 2017.][added: 2018.]

[removed: Our Segments][added: Our Segments]

[removed: Industrials][added: _Industrials_]

[removed: We] [added: In the Industrials segment, we] design, manufacture, market and service a broad range of air compression, vacuum and blower [removed: products, including associated aftermarket parts, consumables and services,] [added: products] across a wide array of technologies and [removed: applications for use in diverse end-markets.][added: applications.]

Almost every manufacturing and industrial facility, and many service and process [removed: industry applications,] [added: industries,] use air [removed: compression, vacuum] [added: compression] and [removed: blower] [added: vacuum] products in a variety of [removed: process-critical applications,] [added: applications] such as [removed: the] operation of [removed: power industrial] [added: pneumatic] air tools, vacuum packaging of food products and aeration of waste [removed: water, among others.][added: water.]

In [removed: 2017,] [added: 2018,] the Industrials segment generated Segment Revenue of [removed: $1,130.7] [added: $1,303.3] million and Segment Adjusted EBITDA of [removed: $242.7] [added: $288.2] million, reflecting a Segment Adjusted EBITDA Margin of [removed: 21.5%.][added: 22.1%.]

[removed: Energy][added: _Energy_]

[removed: We] [added: In the Energy segment, we] design, manufacture, market and service a diverse range of positive displacement pumps, liquid ring vacuum [removed: pumps, compressors] [added: pumps] and [removed: integrated systems,] [added: compressors, and] engineered [removed: fluid] loading [added: systems] and [added: fluid] transfer [removed: equipment] [added: equipment, consumables,] and associated aftermarket [removed: parts, consumables] [added: parts] and services.

In [removed: 2017,] [added: 2018,] the Energy segment generated Segment Revenue of [removed: $1,014.5] [added: $1,121.1] million and Segment Adjusted EBITDA of [removed: $296.1] [added: $337.8] million, reflecting a Segment Adjusted EBITDA Margin of [removed: 29.2%.][added: 30.1%.]

[removed: Medical][added: _Medical_]

[removed: We design, manufacture and market a broad range of highly specialized gas, liquid and precision syringe pumps and compressors that] [added: Our customers] are [removed: specified by medical] [added: mainly medium] and [removed: laboratory] [added: large durable medical] equipment suppliers [removed: and integrated] [added: that integrate our products] into their final equipment for use in [removed: applications,] [added: applications] such as oxygen therapy, blood dialysis, patient monitoring, [removed: laboratory sterilization and] wound treatment, [removed: among] [added: and] others.

We are one of the largest [removed: product] suppliers in [removed: the] [added: these] markets [removed: we serve] and have long-standing customer [removed: relationships with industry-leading medical and laboratory equipment providers.][added: relationships.]

In [removed: 2017,] [added: 2018,] the Medical segment generated Segment Revenue of [removed: $230.2] [added: $265.4] million and Segment Adjusted EBITDA of [removed: $62.4] [added: $75.0] million, reflecting a Segment Adjusted EBITDA Margin of [removed: 27.1%.][added: 28.3%.]

[removed: Components] [added: Components] of Our Revenue and [removed: Expenses][added: Expenses]

[removed: Revenues][added: _Revenues_]

[removed: Industrials Revenue][added: _Industrials Revenue_]

Our large installed base of products in our Industrials segment drives demand for recurring aftermarket support services primarily composed of replacement [removed: parts] [added: part] sales to our distribution partners and, to a lesser extent, by directly providing replacement parts and repair and maintenance services to end customers.

[removed: Energy Revenue][added: _Energy Revenue_]

[removed: Certain contracts with] customers in the mid- and downstream and petrochemical markets are higher sales value and often have longer lead times and involve more application specific engineering.

Provisions for estimated losses on uncompleted contracts are [removed: made] [added: recognized] in the period in which such losses are determined to be probable.

[removed: Medical Revenue][added: _Medical Revenue_]

[removed: Expenses][added: _Expenses_]

[removed: Cost] [added: _Cost] of [removed: Sales][added: Sales_]

[removed: Selling] [added: _Selling] and Administrative [removed: Expenses][added: Expenses_]

Selling and administrative expenses consist of (i) salaries and other employee-related expenses for our selling and administrative functions and other activities not associated with the manufacture of products or delivery of services to customers; (ii) facility operating expenses for selling and administrative activities, including office rent, maintenance, depreciation and insurance; (iii) marketing and direct costs of selling products and services to customers including internal and external sales commissions; (iv) research and development expenditures; (v) professional and consultant fees; (vi) [removed: Sponsor] [added: KKR] fees and expenses; (vii) expenses related to our public stock offerings and to establish public company reporting compliance; and (viii) other miscellaneous expenses.

[removed: Amortization] [added: _Amortization] of Intangible [removed: Assets][added: Assets_]

Amortization of intangible assets includes the periodic amortization of intangible assets recognized when an affiliate of [removed: our Sponsor] [added: KKR] acquired us on July 30, 2013 and intangible assets recognized in connection with businesses we acquired since July 30, 2013, including customer relationships and trademarks.

[removed: Impairment] [added: _Impairment] of Goodwill and Other [added: Identified] Intangible [removed: Assets][added: Assets_]

Impairment of [removed: goodwill and] other intangible assets includes non-cash charges we recognized for the impairment of [removed: goodwill and] other intangible assets.

[removed: Other] [added: _Other] Operating Expense, [removed: Net][added: Net_]

[removed: Benefit or Provision] [added: _Provision (Benefit)] for Income [removed: Taxes][added: Taxes_]

The [removed: benefit or] provision [added: or benefit] for income taxes includes U.S. federal, state and local income taxes and all non-U.S. income taxes.

We are subject to income tax in approximately [removed: 33] [added: 35] jurisdictions outside of the United States.

The Tax Act makes broad and complex changes to the U.S. tax code that affected [removed: 2017,] [added: 2017 and 2018,] including, but not limited to, (1) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years, (2) bonus depreciation that will allow for full expensing of qualified property, and (3) a change in US deferred tax assets and liabilities relating to the US tax rate reduction from 35% to 21%.

[removed: Items] [added: Items] Affecting our Reported [removed: Results][added: Results]

[removed: General] [added: _General] Economic Conditions and Capital Spending in the Industries We [removed: Serve][added: Serve_]

We maintain a leading position in our markets and serve customers globally.

We offer comprehensive aftermarket parts and an experienced direct and distributor-based service network world-wide to complement all of our products.

We serve customers in the upstream, midstream, and downstream oil and gas markets, and various other markets including petrochemical processing, power generation, transportation, and general industrial.

Our positive displacement pumps are used in the oilfield for drilling, hydraulic fracturing, completion and well servicing.

Our liquid ring vacuum pumps and compressors are used in many power generation, mining, oil and gas refining and processing, chemical processing and general industrial applications including flare gas and vapor recovery, geothermal gas removal, vacuum de-aeration, enhanced oil recovery, water extraction in mining and paper and chlorine compression in petrochemical operations.

Our engineered loading systems and fluid transfer equipment ensure the safe handling and transfer of crude oil, liquefied natural gas, compressed natural gas, chemicals, and bulk materials.

In the Medical segment, we design, manufacture and market a broad range of highly specialized gas, liquid and precision syringe pumps and compressors primarily for use in the medical, laboratory and biotechnology end markets.

Further, with recent acquisitions, we expanded into liquid handling components and systems used in biotechnology applications including clinical analysis instrumentation.

We also have a broad range of end use deep vacuum products for laboratory science applications.

The majority of Industrials segment revenues are derived from short duration contracts and revenue is recognized at a single point in time when control is transferred to the customer, generally at shipment or when delivery has occurred or services have been rendered.

Certain contracts may involve significant design engineering to customer specifications, and depending on the contractual terms, revenue is recognized either over the duration of the contract or at contract completion when equipment is delivered to the customer.

The majority of Energy segment revenues are derived from short duration contracts and revenue is recognized at a single point in time when control is transferred to the customer, generally at shipment or when delivery has occurred or services have been rendered.

Certain contracts with

Depending on the contractual terms, revenue is recognized either over the duration of the contract or at contract completion when equipment is delivered to the customer.

Revenue is recognized when control is transferred to the customer, generally at shipment or when delivery has occurred.

Our Medical segment also has limited aftermarket revenues related to certain products.

In addition to energy prices, demand for our upstream energy products are positively impacted by increasing global land rig count, drilled but uncompleted wells, the level of hydraulic fracturing intensity and activity measured by horsepower utilization and lateral lengths as well as drilling and completion capital expenditures.

We announced a restructuring program in the third and fourth quarters of 2018 that primarily involves workforce reductions and facility consolidations.

In the year ended December 31, 2018, $12.7 million was charged to expense related to this restructuring program.

We expect additional restructuring activity in the first half of 2019 focused on targeted workforce optimization within general and administrative back-office and manufacturing overhead as well as continued facility consolidation.

In February 2018, we acquired a leading global manufacturer of turbo vacuum technology systems and optimization solutions for industrial applications in our Industrials segment for total consideration, net of cash acquired, of

approximately $94.9 million.

In May 2018, we acquired a leading manufacturer of plungers and other well service pump consumable products in our Energy segment for total consideration, net of cash acquired of approximately $21.0 million (inclusive of cash payments of $18.8 million, a $2.0 million promissory note and a $0.2 million holdback).

In November 2018, we acquired a leading manufacturer of rotary screws and piston compressors and associated aftermarket parts in our Industrials segment for total consideration, net of cash acquired, of $16.1 million (inclusive of cash payments of $14.8 million and a $1.3 million holdback).

In December 2018, we acquired a leading manufacturer of specialty industrial pumps and associated aftermarket parts in our Industrials segment for total consideration of $58.5 million, net of cash acquired (inclusive of cash payments of $57.8 million, a payable for a $0.1 million purchase price adjustment and a $0.6 million holdback).

See Note 3 “Business Combinations” to our audited consolidated financial statements included elsewhere in this Form 10-K for further discussion around the outstanding holdbacks for the years ended December 31, 2018, 2017 and 2016.

For the year ended December 31, 2018, we incurred stock-based compensation expense of approximately $2.8 million which was reduced by $5.1 million primarily due to a decrease in the estimated accrual for employer taxes related to DSUs as a result of a lower per share stock price.

The $2.8 million of stock-based compensation expense included expense for the modification of equity awards for certain former employees of $3.8 million and expense for equity awards granted under the 2013 Plan and the 2017 Plan of $7.2 million reduced by a benefit for a reduction in the liability for stock appreciation rights (“SAR”) of $8.2 million.

As of December 31, 2018, there was $20.3 million of unrecognized stock-based compensation expense related to outstanding stock options that will be recognized in future periods.

The new legislation contains several key tax provisions that affected us, including a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others.

We are required to recognize the effect of the tax law changes, including the determination of the transition tax, the remeasurement of our U.S. deferred tax assets and liabilities as well as the reassessment of the net realizability of our deferred tax assets and liabilities, in the period of enactment.

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allowed us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date.

As a result, we previously provided a provisional estimate of the effect of the Tax Act in our financial statements for 2017 and through the first nine months of 2018.

In the fourth quarter of 2018, we completed our

accounting for all of the enactment-date income tax effects of the Tax Act by increasing the total benefit taken in 2017 of $95.3 million to $96.5 million.

Due to the Tax Act, the total U.S. deferred changed from a tax benefit of $89.6 million in 2017 to $74.5 million in 2018, with a 2018 measurement-period adjustment of $15.1 million and the ASC 740-30 (formerly APB 23) liability, related to the permanent reinvestment of earnings in foreign subsidiaries assertion, changed from a tax benefit of $69.0 million in 2017 to $72.5 million in 2018, with a 2018 measurement-period adjustment of $3.5 million.

The provisional one-time transition tax of $63.3 million in 2017 decreased to $50.5 million in 2018, with a 2018 measurement-period adjustment of $12.8 million.

The total $1.2 million benefit has a (0.3)% impact to the overall rate in 2018.

The Company has determined that it will follow the period cost method (option 1 above) going forward.

The tax provision for the twelve month period ended December 31, 2018 reflects this decision.

| --- | --- |

Compressors are used to increase the pressure of air or gas, vacuum products are used to remove air or gas in order to reduce the pressure below atmospheric levels and blower products are used to produce a high volume of air or gas at low pressure.

We offer one of the broadest portfolios of compression, vacuum and blower technology in our markets, which we believe, alongside our geographic footprint, allows us to provide differentiated service to our customers globally and maintain leading positions in many of our end-markets.

We sell our Industrials products through an integrated network of direct sales representatives and independent distributors, which is strategically tailored to meet the dynamics of each target geography or end-market.

The highly engineered products offered by our Energy segment serve customers across upstream, downstream and midstream energy markets, as well as petrochemical processing, transportation and general industrial sectors.

Our positive displacement pumps are fit-for-purpose to meet the demands and challenges of modern unconventional drilling and hydraulic fracturing activity, particularly in the major basins in the North American land market.

The products we sell into upstream energy applications are highly aftermarket-intensive, and so we support these products in the field with one of the industry’s most comprehensive service networks, which encompasses locations across all major basins and shale plays in the North American land market.

Our liquid ring vacuum pumps and compressors are highly engineered products specifically designed for continuous duty in harsh environments to serve a wide range of applications, including oil and gas refining and processing, mining, chemical processing, petrochemical and industrial applications.

Finally, our engineered fluid loading and transfer equipment and systems ensure the safe and efficient transportation and transfer of petroleum products as well as certain other liquid commodity products to serve a wide range of industries.

We offer a comprehensive product portfolio across a breadth of pump technologies to address the medical and laboratory sciences pump and fluid handling industry, as well as a range of end-use vacuum products for laboratory science applications, and we recently expanded into liquid pumps and automated liquid handling components and systems.

Our product performance, quality and long-term reliability are often mission-critical in healthcare applications.

Revenue is recognized when products are shipped or delivered, title and risk of loss are passed to the customer and collection is reasonably assured.

Historically, our shipments and revenues have peaked during the fourth quarter as our customers seek to fully utilize annual capital spending budgets.

Revenue is recognized for these arrangements when the contract is complete or substantially complete, provided all other revenue recognition criteria have been met.

The arrangement is considered substantially complete when the Company receives acceptance and remaining tasks are perfunctory or inconsequential and in control of the Company.

Revenue is recognized when products are shipped or delivered, title and risk of loss pass to the customer, and collection is reasonably assured.

Our Medical segment has no substantive aftermarket revenues.

As energy prices start improving from low levels observed in the first half of 2016, we have observed increases in drilled but uncompleted wells, global land rig count, wells and footage drilled as well as drilling and completion capital expenditures to positively impact our results of operations.

Seasonality

Also, our EMEA operations generally experience a slowdown during the July, August and December holiday seasons.

General economic conditions may, however, impact future seasonal variations.

Variability in the upstream energy industry can significantly impact our financial results period to period.

Since oil prices peaked in 2014, contractions in the upstream energy industry negatively impacted our financial results in 2015 and 2016.

The annual average daily closing West Texas Intermediate spot market crude oil prices declined from $92.89 in 2014 to $48.80 in 2015 and $43.42 in 2016.

Many exploration and production companies scaled back drilling activity during this period.

As a result, according to Baker Hughes, Inc., the annual average weekly U.S. land rig count declined from 1,804 in 2014 to 943 in 2015 and 486 in 2016 and, according to Spears & Associates, Inc., the annual average monthly new wells drilled in the United States declined from 3,857 in 2014 to 2,398 in 2015 and 1,093 in 2016.

With these precipitous declines in exploration and production activity, many oilfield service companies deferred maintenance and growth capital expenditures during 2015 and 2016.

Upstream energy markets stabilized late in 2016 and have continued to recover throughout 2017, positively impacting our financial results in the current year.

In 2017 the annual average daily closing West Texas Intermediate spot market crude oil price increased to $50.80.

As a result, there has been increased exploration activity and capital expenditures by upstream energy companies.

According to Baker Hughes, Inc., the annual average weekly U.S. land rig count increased to 856 in 2017 compared to 486 in 2016, and according to Spears & Associates, Inc., the annual average monthly new wells drilled in the United States increased to 2,033 in 2017 compared to 1,093 in 2016.

We have experienced significant improvement in demand for our upstream energy products and services in 2017.

In 2014, we commenced operational excellence initiatives to streamline our cost structure and support margin expansion, including through manufacturing footprint reduction, selling and administrative expense efficiency, and strategic sourcing in our Industrials, Energy and Medical segments.

In April 2015, we acquired a manufacturer of precision syringe pumps and related technologies for approximately $30.8 million, creating a new automated liquid handling platform within our Medical segment.

The Tax Act makes broad and complex changes to the U.S. tax code that will affect 2017, including, but not limited to, (1) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years and (2) bonus depreciation that will allow for full expensing of qualified property.

The Tax Act also establishes new tax laws that will affect 2018, including, but not limited to, (1) reduction of the U.S. federal corporate tax rate; (2) elimination of the corporate alternative minimum tax (“AMT”); (3) the creation of the base erosion anti-abuse tax (“BEAT”), a new minimum tax; (4) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (5) a new provision designed to tax global intangible low-taxed income (“GILTI”), which allows for the possibility of using foreign tax credits (“FTC”) and a deduction of up to 50% to offset the income tax liability (subject to some limitations); (6) a new limitation on deductible interest expense; (7) the repeal of the domestic production activity deduction; (8) limitations on the deductibility of certain executive compensation; (9) limitations on the use of FTCs to reduce the U.S. income tax liability; and (10) limitations on net operating losses (“NOL”) generated after December 31, 2017, to 80% of taxable income.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act.

SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740.

In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

[removed: Interest] [added: Interest] Rate [removed: Risk][added: Risk]

As of December 31, [removed: 2017,] [added: 2018,] we had variable rate debt [removed: outstanding] [added: outstanding, net] of [removed: $893.2] [added: our interest rate swaps, of $724.1] million at a current weighted average interest rate of [removed: 3.9%,] [added: 3.1%,] substantially all of which was incurred under our [removed: $2,785.0] [added: $2,280.6] million Senior Secured Credit Facility, under which [removed: $1,282.3] [added: $952.6] million was outstanding under the $1,285.5 million Dollar Term Loan Facility and [removed: €613.5] [added: €607.3] million was outstanding under the €615.0 million Euro Term Loan Facility.

[removed: However, both facilities are subject to a 0% LIBOR base rate floor, and thus] [added: Thus,] the interest rate on the Dollar Term Loan Facility and the Euro Term Loan Facility will fluctuate when LIBOR or EURIBOR, respectively, exceeds that percentage.

As of December 31, [removed: 2017,] [added: 2018,] LIBOR was higher [added: than the 0% floor] and EURIBOR was lower than the 0% [removed: LIBOR minimum rate.][added: floor.]

As of December 31, [removed: 2017,] [added: 2018,] we were a fixed rate payer on [removed: 12] [added: eight] fixed-floating interest rate swap contracts that effectively fixed the LIBOR-based index used to determine the interest rates charged on our LIBOR-based variable rate borrowings.

See Note [removed: 16] [added: 17] “Hedging Activities, Derivative Instruments, and Credit Risk” to our audited consolidated financial statements included elsewhere in this Form 10-K.

The following table presents the impact of hypothetical changes in market interest rates across the yield curve by 100 basis points, including the effect of our interest rate swaps for the years ended December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] on our interest expense.

| | [removed: | Year] [added: Year] Ended December [removed: 31, |] [added: 31,] | | | | | |

| [removed: Increase] [added: Increase] (decrease) in market interest rates [removed: | |] | | | | | | |

| 100 basis points | [removed: | | 6.1] [added: $] | [added: 4.8] | | $ | [removed: 4.4] [added: 6.1] | |

| (100) basis points(1) (2) | | [removed: | (1.6] [added: (0.3] | ) | | [removed: | \-] [added: (1.6] | [added: )] |

| | [removed: (1)] [added: (2)] | A decrease in interest rates would not have impacted our interest expense in 2017 on EURIBOR debt which was lower than the 0% base rate [removed: floors] [added: floor] under the Senior Secured Credit Facility for the entire fiscal year 2017, but would have impacted interest expense in 2017 on LIBOR debt which was higher than the 0% based rate floors under the Senior Secured Credit Facility during the second half of fiscal year 2017. |

| | [removed: (2)] [added: (1)] | A decrease in interest rates would not have impacted our interest expense in [removed: 2016 because LIBOR and] [added: 2018 on] EURIBOR [removed: were] [added: debt which was] lower than the [removed: 1.0%] [added: 0%] base rate [removed: floors, applicable] [added: floor under the Senior Secured Credit Facility for the entire fiscal year 2018, but would have impacted interest expense] in [removed: that period,] [added: 2018 on LIBOR debt which was higher than the 0% based rate floors] under the Senior Secured Credit Facility for the [removed: entirety of 2016.] [added: year ended December 31, 2018.] |

[removed: Foreign] [added: Foreign] Currency [removed: Risk][added: Risk]

In [removed: 2017,] [added: 2018,] the relative [removed: weakening] [added: strengthening] of the U.S. dollar against foreign currencies had [removed: a favorable] [added: an unfavorable] impact on our revenues and results of operations while in [removed: 2016,] [added: 2017,] the relative [removed: strengthening] [added: weakening] of the U.S. dollar against foreign currencies had [removed: an unfavorable] [added: a favorable] impact on our revenues and results of operations.

The table below presents the percentage of revenues and gross profit by principal currency for the years ended December 31, [removed: 2017] [added: 2018] and [removed: 2016.][added: 2017.]

| | [removed: | U.S. Dollar | | | | Euro] [added: U.S. Dollar] | | | [added: Euro] | [removed: British Pound] | | [added: British Pound] | | [removed: Chinese Renminbi] | [added: Chinese Renminbi] | | | [removed: Other] [added: Other] | | |

| [removed: Year] [added: Year] Ended December 31, 2017 [removed: | | | | |] | | | | | | | | | | | | | | | |

| Revenues | | [removed: |] 48 | % | | [removed: |] 30 | % | | [removed: |] 5 | % | | [removed: |] 5 | % | | [removed: |] 12 | % |

| Gross profit | | [removed: | 45] [added: 48] | % | | [removed: | 34] [added: 31] | % | | [removed: |] 5 | % | | [removed: | 6] [added: 7] | % | | [removed: | 10] [added: 9] | % |

| [removed: Year] [added: Year] Ended December 31, [removed: 2016 | | | | |] [added: 2018] | | | | | | | | | | | | | | | |

| Revenues | | [removed: | 39] [added: 48] | % | | [removed: | 34] [added: 30] | % | | [removed: | 6] [added: 5] | % | | [removed: | 6] [added: 5] | % | | [removed: | 15] [added: 12] | % |

| Gross profit | | [removed: | 36] [added: 45] | % | | [removed: | 38] [added: 34] | % | | [removed: | 7] [added: 5] | % | | [removed: | 7] [added: 6] | % | | [removed: | 12] [added: 10] | % |

These currency translation effects and offsetting impacts of our derivatives for the years ended December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] are summarized in Note 13 “Accumulated Other Comprehensive Income (Loss)” to our audited consolidated financial statements included elsewhere in this Form 10-K.

As of December 31, [removed: 2017,] [added: 2018,] we were party to [removed: 12] [added: seven] foreign currency forward contracts, all of which are carried on our balance sheet at fair value.

The table below presents, for the year ended December 31, [removed: 2017,] [added: 2018,] the hypothetical effect of a 10% appreciation in the average exchange rate of the U.S. dollar relative to the principal foreign currencies in which our revenues and gross profit are denominated.

| | [removed: | Year] [added: Year] Ended December 31, [removed: 2017 | |] [added: 2018] | | | | | | | | |

| [removed: (in millions)] | [removed: | Euro | |] [added: Euro] | | [removed: British Pound] | [added: British Pound] | | | [removed: Chinese Renminbi] [added: Chinese Renminbi] | | |

| Gross profit | | [removed: $ |] (30.3 | ) | | [removed: $ | (4.7] [added: (4.8] | ) | | [removed: $ | (5.6] [added: (6.4] | ) |

The Dollar Term Loan Facility is subject to a 0% LIBOR base rate floor and the Euro Term Loan Facility is subject to a 0% EURIBOR base rate floor.

| --- | --- | --- | --- | --- | --- | --- |

| | 2018 | | | 2017 | | |

| --- | --- | --- |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | |

See Note 17 “Hedging Activities, Derivative Instruments, and Credit Risk” to our audited consolidated financial statements included elsewhere in this Form 10-K.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Revenues | $ | (72.1 | ) | $ | (11.1 | ) | $ | (13.3 | ) |

| --- | --- |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| (in millions) | | 2017 | | | | 2016 | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Revenues | | $ | (70.4 | ) | | $ | (11.1 | ) | | $ | (12.6 | ) |

Gardner Denver Holdings, Inc. is [removed: an affiliate of Kohlberg Kravis and Roberts & Co. L.P. (“KKR” or “Sponsor”) and] a holding company whose operating [removed: subsidiary is] [added: subsidiaries are] Gardner Denver, Inc. [removed: (“GDI”).][added: (“GDI”) and certain of GDI’s subsidiaries.]

The holding company and its consolidated [removed: subsidiary, GDI,] [added: subsidiaries] are collectively referred to in this Annual Report as “we,” “us,” “our,” “ourselves,” “Company,” or “Gardner Denver.”

Service marks, trademarks and trade names, and related designs or logotypes owned by Gardner Denver or its subsidiaries are shown in [removed: italics.][added: _italics._]

[removed: Our Company][added: Our Company]

We have sales in more than 175 countries and our diverse customer base utilizes our products across a wide array of [removed: end-markets that have favorable near- and long-term growth prospects,] [added: end-markets,] including industrial manufacturing, energy (with particular exposure to the North American upstream land-based market), transportation, medical and laboratory sciences, food and beverage packaging and chemical processing.

[removed: To support our customers and market presence, we maintain significant global scale with 38 key] manufacturing facilities, more than 30 complementary service and repair centers across six continents and approximately [removed: 6,400] [added: 6,700] employees worldwide as of December 31, [removed: 2017.][added: 2018.]

As a result, our aftermarket revenue is significant, representing [removed: 41%] [added: 39%] of total Company revenue and approximately [removed: 45%] [added: 43%] of our combined Industrials and Energy segments’ revenue in [removed: 2017.][added: 2018.]

[removed: Our Segments][added: Our Segments]

[removed: Industrials][added: _Industrials_]

Our vacuum products and blowers also cover the full technology spectrum; vacuum technologies include side channel, liquid ring, claw vacuum, [removed: screw] [added: screw, turbo] and rotary vane vacuum pumps among others, while blower technologies include rotary lobe blowers, screw, claw and vane, [removed: turbo,] side channel and radial blowers.

[removed: Energy][added: _Energy_]

This [removed: North American land-based] service network is critical to serving our customers and, by supporting them in the field, to generating demand for new original equipment [removed: sales.][added: sales and aftermarket parts, consumables, service and repair sales which in aggregate are often multiples of the cost of the original equipment.]

[removed: Medical][added: _Medical_]

We offer a comprehensive product portfolio across a breadth of technologies to address the medical and laboratory sciences pump and fluid handling industry, as well as a range of end-use vacuum products for laboratory science [removed: applications, and we recently expanded into liquid pumps and automated liquid handling components and systems.][added: applications.]

[removed: Our] [added: Our] Industries and [removed: Products][added: Products]

[removed: Compression Products][added: _Compression Products_]

[removed: Vacuum Products][added: _Vacuum Products_]

[removed: Blower Products][added: _Blower Products_]

[removed: Upstream][added: _Upstream_]

| | [removed: ·] [added: •] | Positive displacement pumps in the upstream energy end-market primarily move fluid to assist in drilling, hydraulic fracturing and well servicing applications. The majority of positive displacement pumps we sell are frac pumps, which experience significant service intensity during use in the field and, as such, typically have useful life spans of approximately four to six years before needing to be replaced. During that useful life, such pumps will need to receive intermittent repairs as well as major overhauls. In addition, we also sell positive displacement pumps that are used in drilling and well servicing applications. [removed: Spears & Associates, Inc. estimates that we have the second largest market share in the global frac pump market based on installed base, and management estimates that we have the largest market share based on new unit sales from 2014 to 2017.] |

| | [removed: ·] [added: •] | Fluid ends are a key component of positive displacement pumps that generate the pumping action, along with other parts, such as plungers, and consumables, such as valves, seats and packing, which pressurizes the fluid, in the case of drilling or well servicing applications, or fluid and proppant mixture, in the case of hydraulic fracturing, and propels such fluid or mixture out of the pump and into a series of flow lines that distribute the fluid or mixture into the well. Fluid ends are incorporated in original equipment pumps, and due to the highly corrosive nature of the fluids and the abrasive nature of the proppants used in hydraulic fracturing operations, need to be frequently replaced. [removed: Specifically, fluid ends used in hydraulic fracturing operations represent approximately 30% of the original cost of the pump and need to be replaced approximately four times per year on each operating pump, depending on the basin and the operating nature of the hydraulic fracturing fleet. As such, fluid ends, other aftermarket parts and consumables represent a significant source of aftermarket product sales.] |

[removed: Midstream] [added: _Midstream] and [removed: Downstream][added: Downstream_]

| | [removed: ·] [added: •] | Fluid transfer equipment, including fluid loading systems, tank truck and fleet fueling products and couplers: Fluid loading systems are used in the transfer and loading of hydrocarbons and certain other liquid commodity products in marine and land applications. Tank truck and fleet fueling products allow for safe transfer of liquid products without spillage or contamination while safeguarding the operator and the environment. Operators use Dry-Break® technology couplers and adapters to provide a secure connection for the transfer of liquid products without spillage or contamination while safeguarding the operator and the environment. |

| | [removed: ·] [added: •] | Liquid ring vacuum pumps and compressors: Liquid ring vacuum pumps and compressors are designed for continuous duty in harsh environments, including vapor and flare gas recovery equipment (which recovers and compresses certain polluting gases to transmit them for further processing), primarily in downstream applications. The liquid ring technology utilizes a service liquid, typically water, oil or fuel, to evacuate or compress gas by forming a rotating ring of liquid that follows the contour of the body of the pump or compressor and acts like a piston to deliver an uninterrupted flow of gas without pulsation. |

[removed: Petrochemical][added: _Petrochemical_]

[removed: Demand for our petrochemical industry products correlates with growth in the] development of new petrochemical plants as well as activity levels therein, which drive demand for aftermarket parts and services on our market-leading installed base of equipment.

[removed: Customers] [added: Our gas pumps] are [removed: mainly medium and large durable medical equipment manufacturers who integrate our products into their devices] [added: used] for a wide range of applications, such as aspirators, blood analyzers, blood pressure monitors, compression therapy, dental carts, dialysis machines, gas monitors and ventilators.

Our liquid pump products are primarily used to meter and transfer both neutral and chemically aggressive [removed: fluids.][added: fluids and our automated liquid handling products, which includes syringe pumps, systems and accessories that are integrated into large scale automated liquid handling systems primarily for clinical, pharmaceutical and environmental analyses.]

Our products are also used in the laboratory vacuum equipment space which includes end-use chemically resistant devices used in research and commercial [removed: laboratories which is a highly attractive niche market.][added: laboratories.]

[removed: Competition][added: Competition]

Our principal competitors in sales of compression, vacuum and blower products in our Industrials segment include Atlas Copco AB, Ingersoll-Rand PLC, Colfax Corp., Flowserve Corporation, IDEX [removed: Corporation, Accudyne] [added: Corporation] and Kaeser Compressors, Inc.

[removed: Customers] [added: Customers] and Customer [removed: Service][added: Service]

Our Energy and Medical products are primarily sold directly to end-use customers and OEMs, while approximately 50% of our Industrials sales in [removed: 2017] [added: 2018] were fulfilled through independent distributors and sales representatives.

Our customer base is diverse, and we did not have any customers that individually provided more than 4% of [removed: 2017] [added: 2018] consolidated revenues.

[removed: Patents,] [added: Patents,] Trademarks, and Other Intellectual [removed: Property][added: Property]

While in the aggregate our more than [removed: 570] [added: 610] patents and our trademarks are of considerable importance to the manufacture and marketing of many of our products, we believe that the success of our business depends more on the technical competence, creativity and marketing abilities of our employees than on any individual patent or trademark, and therefore we do not consider any single patent or trademark, group of patents or trademarks, copyright or trade secret to be material to our business as a whole, except for the [removed: Gardner Denver] [added: _Gardner Denver_] trademark.

Pursuant to trademark license agreements, Cooper Industries has exclusive rights to use the [removed: Gardner Denver] [added: _Gardner Denver_] trademark for certain power tools and their components, meaning that we are prevented from using our mark in connection with those products.

[removed: Raw] [added: Raw] Materials and [removed: Suppliers][added: Suppliers]

Most of our raw materials are [removed: generally available from a number of suppliers.]

[removed: Employees][added: Employees]

To support our customers and market presence, we maintain significant global scale with 41 key

_Industrials_

_Energy_

| --- | --- | --- |

Demand for our petrochemical industry products correlates with growth in the

_Medical_

_Industrials_

_Energy_

_Medical_

generally available from a number of suppliers.

See “Item 3.

Legal Proceedings.”

We returned to being a public company when we completed our initial public offering in May 2017.

| --- | --- |

We were acquired by an affiliate of KKR on July 30, 2013 (the “KKR Transaction”) and have undergone a significant transformation since that date.

From 2014 to 2016, our transformation significantly improved our underlying operating performance.

Our senior leadership team, led by our CEO Vicente Reynal, has been reconstituted and expanded, which we believe brought together deep expertise from leading global industrial organizations.

In addition, 45% of our top 100 business managers, including the senior management team, have joined since the KKR Transaction, which we believe added significant new levels of talent to our leadership team.

As part of our transformation, we also reorganized our Company into three business segments because of the sales drivers and market characteristics of each.

Together, our Industrials, Energy and Medical segments create a diverse portfolio with exposure to highly attractive end-markets, significant aftermarket revenues, upside from an upstream energy recovery and positive secular trends across all segments.

We believe our ability to support custom industrial application needs from nearly full vacuum to approximately 7,000 pounds per square inch (psi) pressure levels makes us a partner of choice for many of our long-standing customers.

For example, fluid ends are key aftermarket parts used in hydraulic fracturing operations that represent approximately 30% of the original cost of the pump and need to be replaced approximately four times per year on each operating pump (depending on the basin and operating nature of the hydraulic fracturing fleet).

Other aftermarket parts, such as plungers, and consumables, such as valves, seats and packing, are replaced on even shorter time frames, creating aftermarket opportunities which in aggregate are often multiples of the cost of the original pump.

For financial information about our segments and our geographic areas, see Note 20, “Segment Information” in the audited consolidated financial statements included elsewhere in this annual report on Form 10-K.

Because compressed air is utilized as a core component in manufacturing operations in nearly every manufacturing plant, it is often referred to as the “fourth utility” (in addition to electricity, gas and water).

The global industrial air compressor market is an estimated $13.2 billion industry, and according to Frost & Sullivan, we currently maintain a top three position in this market.

Importantly, according to Oil & Gas Financial Journal, the threshold oil price at which wells are profitable to drill has significantly decreased by an average across all U.S. shale plays of 47% from 2014 to 2016.

As a result of this improvement in well profitability and the crude oil price improvement since the low points observed during the first half of 2016, an increased number of drilling rigs have reentered the market.

However, it is important to note that while the crude oil price level has a meaningful impact on the level of activity in our upstream energy applications, the growth in demand for our products into such applications is significantly heightened by numerous other market dynamics and drivers (detailed below).

We believe that these additional market dynamics result in our exposure to the upstream energy industry being among the most attractive in the present environment.

We believe we are exposed to some of the highest growth market drivers in the context of an upstream energy recovery.

Secular industry trends are driving increased demand for and utilization of newer, fit-for-purpose equipment with innovations that increase productivity and are increasing the frequency of replacement, refurbishment and upgrade cycles of pumping equipment and associated consumable products used in drilling and hydraulic fracturing activity.

The number of wells drilled is growing at a faster rate than active rig count with each active rig drilling more unconventional wells per unit of time than previously experienced.

Further, each unconventional well, on average, is being drilled with longer laterals and more hydraulic fracturing stages per well.

Moreover, this quickly growing demand for hydraulic fracturing horsepower, in conjunction with the usage of more volume of abrasive proppant per well, is resulting in accelerated wear and tear on frac pumps and associated aftermarket parts and consumables.

As a result, there are multiple drivers of growth in frac pumps and associated aftermarket parts, including fluid ends, consumables and services that are incremental to active rig count, creating a growth profile that is leveraged to, but meaningfully accelerated relative to, the active rig count.

According to Petrochemical Update, North American downstream industry capital expenditures are expected to reach $17.3 billion in 2018, with the maintenance capital expenditure portion for U.S. refineries estimated to increase 39% in 2018 to a total of $1.3 billion.

These large investments in midstream and downstream energy end-markets are expected to drive sales of our equipment and future sales in aftermarket parts and services as these facilities age.

Further, deferred maintenance of downstream energy infrastructure is expected to drive increased future sales in our replacement products and aftermarket parts and services.

According to the American Chemistry Council, U.S. chemical industry capital spending reached $31.9 billion in 2016 and is expected to grow at a 6.2% CAGR from 2017 to 2019.

Further, the American Chemistry Council forecasts the annual U.S. capital spending by the chemical industry to reach $48 billion by 2022, more than double the level of spending in 2010.

Attractive secular trends in the petrochemical market provide additional sources of growth.

Advancements in the development of unconventional natural gas resources in North America over the past decade have resulted in the abundant availability of locally-sourced natural gas as feedstock for petrochemical plants in North America, supporting long-term growth.

In addition, new petrochemical plants are becoming larger, driving increased demand for more equipment within larger systems.

Based on internal estimates, the durable medical equipment pump market represents approximately a $1.2 billion opportunity globally and can be divided into two primary sub-markets: gas pumps and liquid pumps.

In both markets, energy efficiency, ultra-low vibration, reduced noise levels and compactness as compared to flow rate are key application considerations.

We estimate the size of the global gas pump market to be approximately $700 million.

Building on our strength in gas pump applications, we recently expanded into the liquid pump and automated liquid handling markets to gain share in sizable markets that were previously unaddressed by us.

We estimate the liquid pump market to be a $450 million market globally.

We view this space as an attractive adjacency to our existing strategy and one in which we are able to capture share in line with current operations in the gas pump market, building momentum and scale for our Medical business.

We believe both gas and liquid pump markets present attractive long-term growth profiles based on strong secular trends.

In addition, we recently expanded into the automated liquid handling end-market, which includes syringe pumps, systems and accessories that are integrated into large scale automated liquid handling systems primarily for clinical, pharmaceutical and environmental analyses.

In addition, we provide direct aftermarket support through our service and remanufacturing facilities in the United States, Germany, Finland, France, Spain, the United Kingdom, China and Australia.

[removed: Environmental Matters][added: Environmental Matters]

[removed: Asbestos] [added: _Asbestos] and Silica-Related [removed: Litigation][added: Litigation_]

We believe that the pending and future asbestos and silica-related lawsuits are not likely to, in the aggregate, have a material adverse effect on [removed: its] [added: our] consolidated financial position, results of operations or liquidity, based on: our anticipated insurance and indemnification rights to address the risks of such matters; the limited potential asbestos exposure from the Products described above; our opinion, based on our experience to date, that the vast majority of plaintiffs are not impaired with a disease attributable to alleged exposure to asbestos or silica from or relating to the Products or for which we otherwise bear responsibility; various potential defenses available to us with respect to such matters; and our prior disposition of comparable matters.

While the outcome of legal proceedings is inherently uncertain, based on presently known facts, experience and circumstances, we believe that the amounts accrued on [removed: the Company’s balance sheet] [added: our Consolidated Balance Sheets] are adequate and that the liabilities arising from the asbestos and silica-related personal injury lawsuits will not have a material adverse effect on [removed: the Company’s] [added: our] consolidated financial position, results of operations or liquidity.

We have accrued liabilities and other liabilities on our consolidated balance sheet to include a total litigation reserve of [removed: $105.6] [added: $105.8] million and [removed: $108.5] [added: $105.6] million as of December 31, [removed: 2017] [added: 2018] and December 31, [removed: 2016] [added: 2017] respectively, with respect to potential liability arising from our asbestos-related litigation.

In the event of unexpected future developments, it is possible that the ultimate resolution of these matters may be material to the [removed: Company’s] [added: our] consolidated financial position, results of operation or liquidity, and defense costs may be material.

We have entered into a series of agreements with certain of [removed: the Company’s] [added: our] or [removed: the Company’s] [added: our] predecessors’ legacy insurers and certain potential indemnitors to secure insurance coverage and/or reimbursement for the costs associated with the asbestos and silica-related lawsuits filed against us.

We have an insurance recovery receivable for probable asbestos related recoveries of approximately [removed: $100.4] [added: $103.0] million and [removed: $97.3 million, which is included on our consolidated balance sheet] [added: $100.4 million] as of December 31, [removed: 2017] [added: 2018] and December 31, [removed: 2016, respectively.][added: 2017 which was included in “Other assets” on the Consolidated Balance Sheets included elsewhere in this Form 10-K.]

On January 29, 2016, we prevailed on the first phase of that [removed: discovery and motions process (“Phase I”).]

Specifically, the Court in the Adams County Case ruled that we have rights under all of the policies in the case, subject to their terms and conditions, even though the policies were sold to our former owners rather than to [removed: the Company itself.][added: us.]

The case [removed: has] [added: is] now [removed: begun] proceeding through the discovery and motions process regarding the remaining issues in [removed: dispute.][added: dispute (“Phase II”).]

[removed: Environmental Liabilities][added: _Environmental Liabilities_]

Based on currently available information, [removed: our Company was] [added: we are] only a small contributor to these waste sites, and we have, or are attempting to negotiate, [removed: de minimis] [added: _de minimis_] settlements for our cleanup.

We have an accrued liability on our consolidated balance sheet of [removed: $7.5] [added: $6.9] million and [removed: $7.6] [added: $7.5] million as of December 31, [removed: 2017] [added: 2018] and December 31, [removed: 2016,] [added: 2017,] respectively, to the extent costs are known or can be reasonably estimated for our remaining financial obligations for the environmental matters discussed above and which does not anticipate that any of these matters will result in material additional costs beyond amounts accrued.

During the year ended December 31, 2018, we received asbestos related insurance recoveries of $14.4 million, of which $6.2 million related to the recovery of indemnity payments, and was recorded as a reduction of the insurance recovery receivable in “Other assets” on the Consolidated Balance Sheets included elsewhere in this Form 10-K, and $8.2 million related to the reimbursement of previously expensed legal defense costs and was recorded as a reduction of “Selling and administrative expenses” in the Consolidated Statements of Operations included elsewhere in this Form 10-K.

discovery and motions process (“Phase I”).

| --- | --- |

[removed: UNITED] [added: UNITED] STATES

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE COMMISSION

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

| [removed: ☒] | [removed: ANNUAL] [added: ☒ | ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year ended December 31, [removed: 2017][added: 2018]

| [removed: ☐] | [removed: TRANSITION] [added: o | TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the transition period [removed: from to][added: from to]

[removed: Commission] [added: Commission] File Number: [removed: 001-38095][added: 001-38095]

[removed: Gardner] [added: Gardner] Denver Holdings, Inc.

[removed: (Exact] [added: (Exact] Name of Registrant as Specified in Its [removed: Charter)][added: Charter)]

| [removed: Delaware |] [added: Delaware] | [removed: 46-2393770] [added: 46-2393770] |

| [removed: (State] [added: (State] or Other Jurisdiction of [removed: Incorporation] [added: Incorporation] or [removed: Organization) |] [added: Organization)] | [removed: (I.R.S.] [added: (I.R.S.] Employer [removed: Identification No.)] [added: Identification No.)] |

[removed: 222] [added: 222] East Erie Street, Suite 500

[removed: Milwaukee,] [added: Milwaukee,] Wisconsin 53202

[removed: (Address] [added: (Address] of Principal Executive Offices) (Zip [removed: Code)][added: Code)]

[removed: (414)] [added: (414)] 212-4700

[removed: (Registrant’s] [added: (Registrant’s] Telephone Number, Including Area [removed: Code)][added: Code)]

[removed: Securities] [added: Securities] Registered Pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of Each [removed: Class |] [added: Class] | [removed: Name] [added: Name] of Each Exchange on Which [removed: Registered] [added: Registered] |

| Common Stock, $0.01 Par Value | [removed: |] New York Stock Exchange |

[removed: Securities] [added: Securities] Registered Pursuant to Section 12(g) of the Act: [removed: None][added: None]

Yes [removed: ☐ No] ☒ [added: No  o]

Yes  [removed: ☒] [added: o] No [removed: ☐][added: ☒]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate website, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such [removed: files).][added: files).Yes ☒ No  o]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or [added: an] emerging growth company.

| Large accelerated filer | [removed: ☐] [added: ☒] | Accelerated filer | [removed: ☐] [added: o] |

| Non-accelerated filer | [removed: ☒] [added: o] (Do not check if a smaller reporting company) | Smaller reporting company | [removed: ☐] [added: o] |

| Emerging growth company | [removed: ☐] [added: o] | | |

The aggregate market value of the registrant’s [removed: common stock] [added: Common Stock] held by non-affiliates of the registrant on June [removed: 30, 2017] [added: 29, 2018] was approximately [removed: $1,026.4] [added: $3,155.6] million based on the closing price of such Common Stock on the New York Stock Exchange on such date.

The registrant had outstanding [removed: 196,315,518] [added: 198,884,808] shares of Common Stock, par value $0.01 per share, as of [removed: January 31, 2018.][added: February 20, 2019.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the Proxy Statement for the registrant’s [removed: 2018] [added: 2019] Annual Meeting of [removed: Shareholders] [added: Stockholders] are incorporated by reference in Part III of this report.

[removed: Table] [added: Table] of [removed: Contents][added: Contents]

| | [added: Page No.] | | [removed: Page No.] |

| [removed: | Item] [added: [Item] 1. [added: Business](#tITM1)] | [removed: [Business](#ITEM1.)] | [removed: 3] [added: [1](#tITM1)] | [added: |]

| [removed: | Item] [added: [Item] 1A. [added: Risk Factors](#tITM1A)] | [removed: [Risk Factors](#ITEM1A.)] | [removed: 11] [added: [9](#tITM1A)] | [added: |]

| [removed: | Item] [added: [Item] 1B. [removed: | [Unresolved] [added: Unresolved] Staff [removed: Comments](#ITEM1B.)] [added: Comments](#tITM1B)] | [removed: 21] | [added: [19](#tITM1B) | |]

| [removed: | Item] [added: [Item] 2. [added: Properties](#tITM2)] | [removed: [Properties](#PROPERTIES)] | [removed: 21] [added: [20](#tITM2)] | [added: |]

| [removed: | Item] [added: [Item] 3. [added: Legal Proceedings](#tITM3)] | [removed: [Legal Proceedings](#ITEM3.)] | [removed: 21] [added: [20](#tITM3)] | [added: |]

10-K 1 h10061123x1_10k.htm FORM 10-K

or

Yes ☒ No  o

Yes  o No ☒

| [SIGNATURES](#tSIG) | | [114](#tSIG) | |

| [SCHEDULE I](#tSCH1) | | [115](#tSCH1) | |

10-K 1 form10k.htm 10-K

Or

| | | | |

| [SIGNATURES](#SIGNATURES) | | | 135 |

| [SCHEDULE I](#SCHEDULE) | | | 136 |

| --- | --- | --- |

| --- | --- |

| | [removed: | Type] [added: Type] of Significant [removed: Property | | |] [added: Property] | | | | | | | | | | | |

| | [removed: | Manufacturing | | |] [added: Manufacturing] | [removed: Warehouse] | | [added: Warehouse] | | [removed: Other] | [added: Other(2)] | | | [removed: Total] [added: Total] | | |

| [removed: Industrials | | | |] [added: Industrials] | | | | | | | | | | | | |

| Americas | | [removed: | 5 |] [added: 7] | | | 1 | | | [removed: |] 0 | | | [removed: 6 |] [added: 8] | |

| EMEA | | [removed: | 9 |] [added: 10] | | | 1 | | | [removed: | 15 |] [added: 16] | | [removed: 25] | [added: 27] | |

| APAC | | [removed: |] 1 | | | [removed: |] 1 | | | [removed: |] 8 | | | 10 | | [removed: |]

| [removed: Industrials Total | | | 15 |] [added: Industrials Total] | | [added: 18] | [removed: 3] | | [added: 3] | | [removed: 23] | [added: 24] | | [removed: 41] | [added: 45] | |

| [removed: Energy | | | |] [added: Energy] | | | | | | | | | | | | |

| Americas | | [removed: |] 8 | | | [removed: | 2 |] [added: 3] | | | [removed: 9] [added: 8] | | | 19 | | [removed: |]

| EMEA | | [removed: |] 5 | | | [removed: |] 0 | | | [removed: |] 2 | | | 7 | | [removed: |]

| APAC | | [removed: |] 2 | | | [removed: |] 0 | | | [removed: |] 2 | | | 4 | | [removed: |]

| [removed: Energy Total | | | 15 |] [added: Energy Total] | | [added: 15] | [removed: 2] | | [added: 3] | | [removed: 13] | [added: 12] | | [removed: 30] | [added: 30] | |

| [removed: Medical | | | |] [added: Medical] | | | | | | | | | | | | |

| Americas | | [removed: |] 3 | | | [removed: |] 0 | | | [removed: |] 0 | | | 3 | | [removed: |]

| EMEA | | [removed: |] 4 | | | [removed: |] 0 | | | [removed: |] 1 | | | 5 | | [removed: |]

| APAC | | [removed: |] 1 | | | [removed: |] 0 | | | [removed: |] 0 | | | 1 | | [removed: |]

| [removed: Medical Total | | | 8 |] [added: Medical Total] | | [added: 8] | [removed: 0] | | [added: 0] | | [removed: 1] | [added: 1] | | [removed: 9] | [added: 9] | |

| [removed: Total] [added: Total] (All Segments) [removed: | | | |] | | | | | | | | | | | | |

| Americas | | [removed: | 16 | | |] [added: 18] | [removed: 3] | | [added: 4] | | [removed: 9] | [added: 8] | | [removed: 28] | [added: 30] | |

| EMEA | | [removed: | 18 |] [added: 19] | | | 1 | | | [removed: | 18 |] [added: 19] | | [removed: 37] | [added: 39] | |

| APAC | | [removed: |] 4 | | | [removed: |] 1 | | | [removed: |] 10 | | | 15 | | [removed: |]

| [removed: Company Total(1) | | | 38 |] [added: Company Total(1)] | | [added: 41] | [removed: 5] | | [added: 6] | | [removed: 37] | [added: 37] | | [removed: 80] | [added: 84] | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| | | | | | | | | | | | | |

| | | | | | | | | | | | | |

| | (2) | Other facilities includes service centers and sales offices. |

| --- | --- | --- |

| --- | --- |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | |

[removed: PART II][added: PART II]

| --- | --- |

[removed: Market Information][added: Market Information]

Our [removed: common stock,] [added: Common Stock,] $0.01 par value per share, [removed: began trading] [added: trades] on the New York Stock Exchange (“NYSE”) under the symbol [removed: “GDI” on May 12, 2017.][added: “GDI.” As of January 31, 2019, there were 196 holders of record of our common stock.]

[removed: Dividend Policy][added: Dividend Policy]

We did not declare or pay dividends to the holders of our common stock in the years ended December 31, [removed: 2017] [added: 2018] and [removed: 2016.][added: 2017.]

[removed: Company Purchases][added: Company Purchases]

The following table contains detail related to the repurchase of our common stock based on the date of trade during the quarter ended December 31, [removed: 2017.][added: 2018.]

| [removed: Period |] [added: 2018 Fourth Quarter Months] | [removed: Total] [added: Total] Number [removed: of] [added: of] Shares [removed: Purchased(1) |] [added: Purchased(1)] | | | [removed: Average] [added: Average] Price [removed: Paid Per Share(2) |] [added: Paid Per Share(2)] | | | [removed: Total] [added: Total] Number [removed: of] [added: of] Shares [removed: Purchased as] [added: Purchased as] Part of [removed: Publicly Announced Plans] [added: Publicly Announced Plans] or [removed: Programs |] [added: Programs(3)] | | | [removed: Maximum Approximate Dollar] [added: Maximum Approximate Dollar] Value [removed: of] [added: of] Shares [removed: that] [added: that] May Yet [removed: Be] [added: Be] Purchased [removed: Under] [added: Under] the [removed: Plans] [added: Plans] or [removed: Programs] [added: Programs(3)] | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| October 1, 2018 - October 31, 2018 | | 857,901 | | $ | 24.48 | | | 846,248 | | | 223,741,609 | |

| November 1, 2018 - November 30, 2018 | | — | | $ | — | | | — | | | 223,741,609 | |

| December 1, 2018 - December 31, 2018 | | 133,019 | | $ | 22.44 | | | 133,019 | | | 220,756,556 | |

| | (1) | All of the shares purchased during the quarter ended December 31, 2018 were acquired pursuant to the repurchase program described in (3) below, except for 11,653 shares that were repurchased during the period from October 1, 2018 through October 31, 2018 in connection with net exercises of stock options. |

| --- | --- | --- |

| | (3) | On August 1, 2018, the Company announced that our Board of Directors had approved a share repurchase program which authorized the repurchase of up to $250.0 million of the Company’s outstanding common stock over the next two years, effective August 1, 2018 until and including July 31, 2020. For a further description of the share repurchase program, see Note 24 “Share Repurchase Program” to our audited consolidated financial statements included elsewhere in this Form 10-K. |

| --- | --- | --- |

| --- | --- |

Prior to that time, there was no public market for our common stock.

As of January 31, 2018, there were 216 holders of record of our common stock.

The following table sets forth the high and low intra-day sale prices per share for our common stock as reported on the NYSE for the periods indicated.

| | | Stock Price | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | High | | | | Low | | |

| Fiscal year ended December 31, 2017: | | | | | | | | |

| Second quarter ended June 30, 2017 (beginning on May 12, 2017) | | $ | 24.55 | | | $ | 19.91 | |

| Third quarter ended September 30, 2017 | | $ | 27.65 | | | $ | 20.55 | |

| Fourth quarter ended December 31, 2017 | | $ | 34.63 | | | $ | 26.10 | |

Additionally, our ability to pay dividends is limited by restrictions on the ability of our operating subsidiaries to make distributions, including restrictions under the terms of the agreements governing our debt.

The repurchases relate to purchases of our common stock as a result of net exercises of stock options and have been recorded as “Treasury stock at cost” in the Consolidated Balance Sheet.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| October 1, 2017 - October 31, 2017 | | | 9,469 | | | $ | 29.21 | | | | \- | | | | \- | |

| November 1, 2017 - November 30, 2017 | | | 24,297 | | | $ | 27.23 | | | | \- | | | | \- | |

| December 1, 2017 - December 31, 2017 | | | \- | | | $ | \- | | | | \- | | | | \- | |

| | (1) | Includes 9,469 and 24,297 shares for the periods from October 1, 2017 through October 31, 2017 and November 1, 2017 through November 30, 2017, respectively, repurchased in connection with net exercises of stock options. |

The selected consolidated financial data as of December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] and for the fiscal years ended December 31, [removed: 2017, 2016,] [added: 2018, 2017] and [removed: 2015] [added: 2016] have been derived from our audited consolidated financial statements and related notes [removed: thereto] [added: to our audited consolidated financial statements] included elsewhere in this Form 10-K.

The selected consolidated financial data as of December 31, [removed: 2015, December 31, 2014,] [added: 2016, 2015] and [removed: for the period from July 30, 2013 through December 31, 2013] [added: 2014] have been derived from our consolidated financial statements and related notes [removed: thereto] [added: to our consolidated financial statements] not included in this Form 10-K.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our [added: audited] consolidated financial statements and related notes [removed: thereto] [added: to our audited consolidated financial statements] included elsewhere in this Form 10-K.

| [removed: (in] [added: (in] millions, except per share [removed: amounts) |] [added: amounts)] | [removed: Year] [added: Year] Ended [removed: December] [added: December] 31, [removed: 2017 |] [added: 2018] | | | [removed: Year] [added: Year] Ended [removed: December] [added: December] 31, [removed: 2016 |] [added: 2017(1)] | | | [removed: Year] [added: Year] Ended [removed: December] [added: December] 31, [removed: 2015 |] [added: 2016(1)] | | | [removed: Year] [added: Year] Ended [removed: December] [added: December] 31, [removed: 2014 |] [added: 2015(1)] | | | [removed: July 30, 2013 – December] [added: Year Ended December] 31, [removed: 2013 | | | | January 1, 2013 – July 29, 2013] [added: 2014(1)] | | |

| [removed: Consolidated] [added: Consolidated] Statements of Operations: [removed: | | | | | | | | |] | | | | | | | | | | | | | | | |

| Revenues | [added: $] | [added: 2,689.8 | |] $ | 2,375.4 | | [removed: |] $ | 1,939.4 | | [removed: |] $ | 2,126.9 | | [removed: |] $ | 2,570.0 | | [removed: | $ | 978.4 | | | $ | 1,231.6 | |]

| Cost of sales | | [added: 1,677.3] | [removed: 1,477.5] | | [added: 1,477.5] | | [removed: 1,222.7] | [added: 1,222.7] | | | 1,347.8 | | | [removed: |] 1,633.2 | | [removed: | | 666.5 | | | | 799.5 | |]

| Gross profit | | [added: 1,012.5] | [removed: 897.9] | | [added: 897.9] | | [removed: 716.7] | [added: 716.7] | | | 779.1 | | | [removed: |] 936.8 | | [removed: | | 311.9 | | | | 432.1 | |]

| Amortization of intangible assets | | [added: 125.8] | [removed: 118.9] | | [added: 118.9] | | [removed: 124.2] | [added: 124.2] | | | 115.4 | | | [removed: |] 113.3 | | [removed: | | 111.9 | | | | 9.9 | |]

| Impairment of goodwill | | [added: —] | [removed: \-] | | [added: —] | | [removed: \-] | [added: —] | | | 343.3 | | | [removed: |] 220.6 | | [removed: | | \- | | | | \- | |]

| Impairment of other intangible assets | | [added: —] | [removed: 1.6] | | [added: 1.6] | | [removed: 25.3] | [added: 25.3] | | | 78.1 | | | [removed: |] 14.4 | | [removed: | | \- | | | | \- | |]

| Other operating expense, net | | [added: 9.1] | [removed: 222.1] | | [added: 222.1] | | [removed: 48.6] | [added: 48.6] | | | 20.7 | | | [removed: |] 64.3 | | [removed: | | 76.9 | | | | 46.5 | |]

| Interest expense | | [added: 99.6] | [removed: 140.7] | | [added: 140.7] | | [removed: 170.3] | [added: 170.3] | | | 162.9 | | | [removed: |] 164.4 | | [removed: | | 65.4 | | | | 6.6 | |]

| Loss on extinguishment of debt | | [removed: | 84.5 | | | | \- | | | | \-] [added: 1.1] | | | [added: 84.5] | [removed: \-] | | [added: —] | | [removed: \-] | [added: —] | | | [removed: \-] [added: —] | |

| [removed: (Loss) income] [added: Income (loss)] before income taxes | | [added: 349.5] | [added: | |] (112.7 | ) | | [removed: |] (63.2 | ) | | [removed: |] (366.7 | ) | | [removed: |] (112.9 | ) | [removed: | | (133.9 | ) | | | 107.3 | |]

| [removed: (Benefit) provision] [added: Provision (benefit)] for income taxes | | [added: 80.1] | [added: | |] (131.2 | ) | | [removed: |] (31.9 | ) | | [removed: |] (14.7 | ) | | [removed: |] 23.0 | | [removed: | | (59.4 | ) | | | 35.4 | |]

| Net income (loss) | | [added: 269.4] | [removed: 18.5] | | [added: 18.5] | | [added: |] (31.3 | ) | | [removed: |] (352.0 | ) | | [removed: |] (135.9 | ) | [removed: | | (74.5 | ) | | | 71.9 | |]

| Less: Net income (loss) attributable to noncontrolling interest | | [added: —] | [removed: 0.1] | | [added: 0.1] | | [removed: 5.3] | [added: 5.3] | | | (0.8 | ) | | [removed: |] (0.9 | ) | [removed: | | (1.1 | ) | | | 0.7 | |]

| Net income (loss) attributable to Gardner Denver Holdings, Inc. | [added: $] | [added: 269.4 | |] $ | 18.4 | | [removed: |] $ | (36.6 | ) | [removed: |] $ | (351.2 | ) | [removed: |] $ | (135.0 | ) | [removed: | $ | (73.4 | ) | | $ | 71.2 | |]

| Earnings [removed: (Loss)] [added: (loss)] per share, basic | [added: $] | [added: 1.34 | |] $ | 0.10 | | [removed: |] $ | (0.25 | ) | [removed: |] $ | (2.35 | ) | [removed: |] $ | (0.91 | ) | [removed: | | | | | | | |]

| Earnings [removed: (Loss)] [added: (loss)] per share, diluted | [added: $] | [added: 1.29 | |] $ | 0.10 | | [removed: |] $ | (0.25 | ) | [removed: |] $ | (2.35 | ) | [removed: |] $ | (0.91 | ) | [removed: | | | | | | | |]

| Weighted average shares, basic | | [added: 201.6] | [removed: 182.2] | | [added: 182.2] | | [removed: 149.2] | [added: 149.2] | | | 149.6 | | | [removed: |] 148.9 | | [removed: | | | | | | | |]

| Weighted average shares, diluted | | [added: 209.1] | [removed: 188.4] | | [added: 188.4] | | [removed: 149.2] | [added: 149.2] | | | 149.6 | | | [removed: |] 148.9 | | [removed: | | | | | | | |]

| [removed: Statement] [added: Statement] of Cash Flow Data: [removed: | | | | | | | | |] | | | | | | | | | | | | | | | |

| Cash flows - operating activities | [added: $] | [added: 444.5 | |] $ | 200.5 | | [removed: |] $ | 165.6 | | [removed: |] $ | 172.1 | | [removed: |] $ | 141.8 | | [removed: | $ | (15.2 | ) | | $ | 77.4 | |]

| Cash flows - investing activities | | [added: (235.0] | [added: ) | |] (60.8 | ) | | [removed: |] (82.1 | ) | | [removed: |] (84.0 | ) | | [removed: |] (155.4 | ) | [removed: | | (3,806.7 | ) | | | (15.1 | ) |]

| Cash flows - financing activities | | [added: (373.0] | [added: ) | |] (17.4 | ) | | [removed: |] (43.0 | ) | | [removed: |] (35.0 | ) | | [removed: |] (3.7 | ) | [removed: | | 3,929.5 | | | | (205.0 | ) |]

| [removed: Balance] [added: Balance] Sheet Data (at period end): [removed: | | | | | | | | |] | | | | | | | | | | | | | | | |

| Cash and cash equivalents | [added: $] | [added: 221.2 | |] $ | 393.3 | | [removed: |] $ | 255.8 | | [removed: |] $ | 228.3 | | [removed: |] $ | 184.2 | | [removed: | $ | 218.7 | | | $ | 107.4 | |]

| Total assets | | [added: 4,487.1] | [removed: 4,621.2] | | [added: 4,621.2] | | [removed: 4,316.0] | [added: 4,316.0] | | | 4,462.0 | | | [removed: |] 5,107.1 | | [removed: | | 5,420.7 | | | | 2,376.4 | |]

| Total liabilities | | [added: 2,811.1] | [removed: 3,144.4] | | [added: 3,144.4] | | [removed: 4,044.2] | [added: 4,044.2] | | | 4,056.5 | | | [removed: |] 4,218.5 | | [removed: | | 4,226.4 | | | | 847.3 | |]

| Total stockholders’ equity | | [added: 1,676.0] | [removed: 1,476.8] | | [added: 1,476.8] | | [removed: 271.8] | [added: 271.8] | | | 405.5 | | | [removed: |] 888.6 | | [removed: | | 1,194.3 | | | | 1,529.1 | |]

| [removed: Other] [added: Other] Financial Data (unaudited): [removed: | | | | | | | | |] | | | | | | | | | | | | | | | |

| Adjusted [removed: EBITDA(1)] [added: EBITDA(2)] | [added: $] | [added: 681.8 | |] $ | 561.5 | | [removed: |] $ | 400.7 | | [removed: |] $ | 418.9 | | | | | [removed: | | | | | | | | |]

| Adjusted net [removed: income(1)] [added: income(2)] | | [added: 394.7] | [removed: 249.3] | | [added: 249.3] | | [removed: 133.6] | [added: 133.6] | | | 128.1 | | | | | [removed: | | | | | | | | |]

| Capital expenditures | | [added: 52.2] | [removed: 56.8] | | [added: 56.8] | | [removed: 74.4] | [added: 74.4] | | | 71.0 | | | | | [removed: | | | | | | | | |]

| Free cash [removed: flow(1)] [added: flow(2)] | | [added: 392.3] | [removed: 143.7] | | [added: 143.7] | | [removed: 91.2] | [added: 91.2] | | | 101.1 | | | | | [removed: | | | | | | | | |]

| | [removed: (1)] [added: (2)] | We report our financial results in accordance with GAAP. To supplement this information, we also use the following measures in this Form 10-K: “Adjusted EBITDA,” “Adjusted Net Income” and “Free Cash Flow.” Management believes that Adjusted EBITDA and Adjusted Net Income are helpful supplemental measures to assist us and investors in evaluating our operating results as they exclude certain items whose fluctuation from period to period do not necessarily correspond to changes in the operations of our business. Adjusted EBITDA represents net income (loss) before interest, taxes, depreciation and amortization, as further adjusted to exclude certain non-cash, non-recurring and other adjustment items. We believe that the adjustments applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about non-recurring items that we do not expect to continue at the same level in the future. Adjusted Net Income is defined as net income (loss) including interest, depreciation and amortization of non-acquisition related intangible assets and excluding other items used to calculate Adjusted EBITDA and further adjusted for the tax effect of these exclusions. [added: We use Free Cash Flow to review the liquidity of our operations. We measure Free Cash Flow as cash flows from operating activities less capital expenditures. We believe Free Cash Flow is a useful supplemental financial measure for us and investors in assessing our ability to pursue business opportunities and investments and to service our debt. Free Cash Flow is not a measure of our liquidity under GAAP and should not be considered as an alternative to cash flows from operating activities.] |

| | [removed: | Year] [added: Year] Ended December [removed: 31, | |] [added: 31,] | | | | | | | | |

| [removed: (in millions)] | [removed: | 2017 | |] [added: 2018] | | [removed: 2016] | [added: 2017] | | | [removed: 2015] [added: 2016] | | |

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