Ingersoll Rand (IR) 10-K risk factor changes: FY2019 vs FY2018

[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._ _The selected risks described below, however, are not the only risks facing us.][added: operations.]

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: 2018,] [added: 2019,] approximately [removed: 56%] [added: 59%] 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 and uncertainties with respect to tariffs [removed: and;] [added: and] import/export trade restrictions (including changes in United States trade 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 [removed: an election to withdraw] [added: the U.K.’s withdrawal] 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: 42%] [added: 35%] of our consolidated revenues for the year ended December 31, [removed: 2018.][added: 2019.]

[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 [removed: 52%] [added: 56%] for the year ended December 31, [removed: 2018,] [added: 2019,] 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.]

[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] or [added: consolidation or] the vertical integration of our customer [removed: base._][added: base.]

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

[removed: _Acquisitions] [added: Acquisitions] and integrating such acquisitions create certain risks and may affect our operating [removed: results._][added: results.]

| | [removed: •] [added: ●] | managing geographically separated organizations, systems and facilities; |

| | [removed: •] [added: ●] | integrating personnel with diverse business backgrounds and organizational cultures; |

| | [removed: •] [added: ●] | complying with non-U.S. regulatory requirements; |

| | [removed: •] [added: ●] | fluctuations in currency exchange rates; |

| | [removed: •] [added: ●] | enforcement of intellectual property rights in some non-U.S. countries; |

| | [removed: •] [added: ●] | difficulty entering new non-U.S. markets due to, among other things, consumer acceptance and business knowledge of these new markets; and |

| | [removed: •] [added: ●] | general economic and political conditions. |

[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 [removed: 2017,] [added: 2018,] we incurred restructuring charges of approximately [removed: $48.0] [added: $60.7] million across our segments.

In [removed: 2018,] [added: 2019,] we incurred restructuring charges of [removed: $12.7] [added: $17.1] million.

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

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

[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.]

[removed: _Changes] [added: Changes] in tax or other laws, regulations, or adverse determinations by taxing or other governmental [removed: authorities_ _could] [added: authorities could] increase our effective tax rate and cash taxes paid or otherwise affect our financial condition or [removed: operating_ _results._][added: operating results.]

The Tax Act also established new tax laws that significantly affected [added: 2019,] 2018 and 2017.

[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: 2018,] [added: 2019,] the net carrying value of goodwill and other intangible assets, net represented [removed: $2,657.9] [added: $2,542.7] million, or [removed: 59%,] [added: 55%,] of our total assets.

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

Risks Related to Our Pending Merger with Ingersoll Rand Industrial

The pending Merger may have a material adverse effect on us whether or not it is completed.

On April 30, 2019, we entered into the Merger Agreement, pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, Ingersoll Rand will separate Ingersoll Rand Industrial and then combine it with the Company.

Under the terms of the Merger Agreement, which has been unanimously approved by the Boards of Directors of Ingersoll Rand and the Company, at the time of close, Ingersoll Rand will receive $1.9 billion in cash from Ingersoll Rand Industrial that will be funded by newly-issued debt assumed by the Company in the Merger.

Upon close of the transaction, existing Ingersoll Rand shareholders will receive 50.1% of the shares of the Company on a fully diluted basis.

The Merger and the preparation for the integration of our business with Ingersoll Rand Industrial has placed a significant burden on management and internal resources.

In addition, if the proposed Merger is completed, the anticipated benefits of the Merger may not be realized fully or at all and may take longer to realize than expected.

The integration process will be complex, costly and time-consuming, which could adversely affect our businesses, financial results and financial condition.

Even if we are able to integrate Ingersoll Rand Industrial successfully, the Merger may not result in the realization of the full benefits of anticipated cost synergies, innovation, operational efficiencies and incremental revenue growth opportunities that we expect to realize or these benefits may not be achieved within a reasonable period of time.

Moreover, the combined company may be unable to implement its business strategy or retain and hire key personnel.

We currently anticipate that we will close the Merger on February 29, 2020, but we cannot be certain that the customary closing conditions will be satisfied or waived on or prior to that date.

We may be required to pay to Ingersoll Rand a termination fee of approximately $176 million if the Merger Agreement is terminated under certain circumstances.

See also “Risks Related to Our Business—Acquisitions and integrating such acquisitions create certain risks and may affect our operating results.”

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See Note 20 “Contingencies” to our audited consolidated financial statements included elsewhere in this Form 10-K.

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For example, if one or more of our manufacturing facilities are damaged by severe weather or any other disaster, accident, catastrophe or event, our operations could be significantly interrupted impacting our ability to produce products and sell products to customers.

Interruptions to our operations and supply chain could also result from pandemic which could adversely impact our workforce or that of our suppliers, causing disruption to the manufacturing process or our supply chain, and last a week or months depending on the severity of the disruption.

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The Company may face risk associated with the discontinuation of and transition from currently used financial reference rates.

LIBOR and certain other floating rate benchmark indices to which our floating rate debt is tied, including, without limitation, the Euro Interbank Offered Rate (collectively, “IBORs”) are the subject of recent national, international and regulatory guidance and proposals for reform.

In a speech on July 27, 2017, Andrew Bailey, the Chief Executive of the Financial Conduct Authority of the U.K., or the FCA, announced the FCA’s intention to cease sustaining LIBOR after 2021.

The FCA has statutory powers to require panel banks to contribute to LIBOR where necessary.

The FCA has decided not to ask, or to require, that panel banks continue to submit contributions to LIBOR beyond the end of 2021.

The FCA has indicated that it expects that the current panel banks will voluntarily sustain LIBOR until the end of 2021.

It is possible that the ICE Benchmark Administration Limited (formerly NYSE Euronext Rate Administration Limited), or the IBA, and the panel banks could continue to produce LIBOR on the current basis after 2021, if they are willing and able to do so, but we do not currently anticipate that LIBOR will survive in its current form, or at all.

Other jurisdictions have also indicated they will implement reforms or phase-outs, which are currently scheduled to take effect at the end of calendar year 2021.

The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR.

At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates as the transition away from the IBOR benchmarks is anticipated in coming years.

As of December 31, 2019, we had $1.6 billion of floated rate debt with maximum maturities extending past 2021 tied to IBOR benchmarks and $825.0 million of interest rate swaps with maximum maturities extending past 2021 tied to IBOR benchmarks.

There is currently no definitive information regarding the future utilization of any IBOR benchmark or of any particular replacement rate.

In addition, any IBOR benchmark may perform differently during any phase-out period than in the past.

As such, the potential effect of any such event on our cost of capital cannot yet be determined and any changes to benchmark interest rates could increase our financing costs, which could impact our results of operations and cash flows.

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

For example, weakness in upstream energy activity in North America significantly impacted our business in 2015 and 2016.

In 2016, we recorded an impairment charge related to other intangible assets of $25.3 million primarily within the Industrials segment.

See “Business—Legal Proceedings—Asbestos and Silica-Related Litigation.”

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

or any other disaster, accident, catastrophe or event, our operations could be significantly interrupted.

provisions, contractual restrictions and licensing arrangements to establish and protect our proprietary rights.

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.

[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: 41] [added: 38] key manufacturing facilities, more than 30 complementary service and repair centers across six continents and approximately [removed: 6,700] [added: 6,600] employees worldwide as of December 31, [removed: 2018.][added: 2019.]

As a result, our aftermarket revenue is significant, representing [removed: 39%] [added: 38%] of total Company revenue and approximately [removed: 43%] [added: 42%] of our combined Industrials and Energy segments’ revenue in [removed: 2018.][added: 2019.]

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

[removed: _Industrials_][added: Industrials]

In [removed: 2018,] [added: 2019,] the Industrials segment generated Segment Revenue of [removed: $1,303.3] [added: $1,301.3] million and Segment Adjusted EBITDA of [removed: $288.2] [added: $296.6] million, reflecting a Segment Adjusted EBITDA Margin of [removed: 22.1%.][added: 22.8%.]

[removed: _Energy_][added: Energy]

In [removed: 2018,] [added: 2019,] the Energy segment generated Segment Revenue of [removed: $1,121.1] [added: $870.2] million and Segment Adjusted EBITDA of [removed: $337.8] [added: $225.1] million, reflecting a Segment Adjusted EBITDA Margin of [removed: 30.1%.][added: 25.9%.]

[removed: _Medical_][added: Medical]

In [removed: 2018,] [added: 2019,] the Medical segment generated Segment Revenue of [removed: $265.4] [added: $280.4] million and Segment Adjusted EBITDA of [removed: $75.0] [added: $84.4] million, reflecting a Segment Adjusted EBITDA Margin of [removed: 28.3%.][added: 30.1%.]

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

[removed: _Revenues_][added: Revenues]

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

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

[added: 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.

[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) KKR fees and expenses; (vii) expenses related to our public stock offerings and to establish public company reporting compliance; [removed: and] (viii) [added: employee related stock-based compensation for our selling and administrative functions and] other [added: activities not associated with the manufacture of products or delivery of services to customers; and (ix) 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 KKR acquired us on July 30, [removed: 2013 and] [added: 2013,] intangible assets recognized in connection with businesses we acquired since July 30, 2013, including customer relationships and [removed: trademarks.][added: trademarks, and internally developed software.]

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

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

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

Other operating expense, net includes foreign currency gains and losses, restructuring charges, certain litigation and contract settlement losses, environmental [removed: remediation, stock-based compensation expense] [added: remediation] and other miscellaneous operating expenses.

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

See Note [removed: 15 “Income Taxes”] [added: 10 “Debt”] to our audited consolidated financial statements included elsewhere in this Form [removed: 10-K.][added: 10-K for further details.]

[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]

[removed: _Foreign] [added: Foreign] Currency [removed: Fluctuations_][added: Fluctuations]

A significant portion of our revenues, approximately [removed: 52%] [added: 56%] for the year ended December 31, [removed: 2018,] [added: 2019,] was denominated in currencies other than the U.S. dollar.

[removed: Factors] [added: Factors] Affecting the Comparability of our Results of [removed: Operations][added: Operations]

[removed: _Variability] [added: Variability] within Upstream Energy [removed: Markets_][added: Markets]

We sell products and [removed: provide] services to customers in upstream energy markets, primarily in the United States.

For the upstream energy end-market, in our Energy segment, we manufacture pumps and associated aftermarket products and services used in drilling, hydraulic fracturing and well service [removed: applications, while in our Industrials segment we sell dry bulk frac sand blowers, which are used in hydraulic fracturing operations.][added: applications.]

We believe it is helpful to consider the impact of our [added: energy] exposure to upstream energy in evaluating our [removed: 2016, 2017 and] 2018 [added: and 2019] Segment Revenue and Segment Adjusted EBITDA, in order to better understand other drivers of our performance during those periods, including operational improvements.

For the Energy [removed: segment,] [added: segments,] we assess the impact of our exposure to upstream energy as the portion of Energy Segment Adjusted EBITDA of the business unit serving the upstream energy market.

[removed: _Restructuring] [added: Restructuring] and Other Business Transformation [removed: Initiatives_][added: Initiatives]

Transaction with Ingersoll Rand

In April 2019, our Board of Directors approved a merger that will combine Gardner Denver with the industrial segment of Ingersoll-Rand plc (“Ingersoll Rand”) (the “Merger”).

To facilitate this Merger, Ingersoll Rand will cause specific assets and liabilities of its industrial segment to be transferred to Ingersoll-Rand U.S. HoldCo, Inc. (“Ingersoll Rand Industrial”), a newly formed wholly-owned subsidiary of Ingersoll Rand, and distribute the shares of common stock of Ingersoll Rand Industrial to Ingersoll Rand’s shareholders.

Charm Merger Sub Inc. (“Merger Sub”), which is a newly formed wholly-owned subsidiary of Gardner Denver, will be merged with and into Ingersoll Rand Industrial, with Ingersoll Rand Industrial surviving such merger as a wholly-owned subsidiary of Gardner Denver.

Pursuant to the definitive agreement Gardner Denver entered into with Ingersoll Rand, Ingersoll Rand Industrial and Merger Sub with respect to the Merger (the “Merger Agreement”), Gardner Denver will issue an aggregate number of shares of its common stock to Ingersoll Rand Industrial stockholders which will result in Ingersoll Rand Industrial stockholders owning approximately, but not less than, 50.1% of the shares of Gardner Denver common stock outstanding on a fully-diluted basis upon the closing of the Merger.

The number of shares to be issued to Ingersoll Rand Industrial stockholders is based on the exchange ratio set forth in the Merger Agreement.

In addition, Ingersoll Rand will receive approximately $1.9 billion in cash from Ingersoll Rand Industrial that will be funded by newly-issued debt that is expected to be deemed issued under the existing Senior Secured Credit Facilities of Gardner Denver upon consummation of the merger.

The Merger is expected to close on February 29, 2020.

The Merger will result in Gardner Denver acquiring Ingersoll Rand Industrial, which includes compressed air and gas systems and services, power tools, material handling systems, fluid management systems as well as Club Car golf, utility and consumer low-speed vehicles.

Following the Merger, the combined company is expected to be renamed and operate under the Ingersoll Rand name and its common stock is expected to be listed on the New York Stock Exchange under Ingersoll Rand’s existing ticker symbol “IR.”

See Note 3 “Business Combinations” to our audited consolidated financial statements included elsewhere in this Form 10-K for additional information related to the transaction with Ingersoll Rand.

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Stock-based compensation expense for employees associated with the manufacture of products or delivery of services to customers is included in cost of sales.

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We continue to implement business transformation initiatives.

In July 2019, we acquired a company which specializes in customized pump solutions for liquid handling processes for use in medical, process and industrial applications, in our Medical segment for total consideration, net of cash acquired, of $10.0 million (inclusive of cash payments of $5.6 million, a $1.6 million holdback and up to $2.8 million in contingent earn-out provisions).

In August 2019, we acquired a provider of vacuum pumps, blowers and compressors in our Industrials segment for total consideration, net of cash acquired, of $7.0 million (inclusive of cash payments of $5.9 million and a $1.1 million deferred payment).

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For the year ended December 31, 2019, we incurred stock-based compensation expense of approximately $19.2 million which was increased by $3.9 million due to costs associated with employer taxes.

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This section discusses our results of operations for the year ended December 31, 2019 as compared to the year ended December 31, 2018.

For a discussion and analysis of the year ended December 31, 2018, compared to the same in 2017, please refer to the “Management’s Discussion and Analysis of Financial Condition” and “Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 27, 2019.

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| | | 2019 | | | | 2018 | | |

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Revenues for 2019 were $2,451.9 million, a decrease of $237.9 million, or 8.8%, compared to $2,689.8 million in 2018.

Selling and Administrative Expenses

Selling and administrative expenses as a percentage of revenues increased to 17.8% in 2019 from 16.2% in 2018.

Amortization of Intangible Assets

Amortization of intangible assets was $124.3 million in 2019, a decrease of $1.5 million compared to $125.8 million in 2018.

Other Operating Expense, Net

Other operating expense, net was $75.7 million in 2019, an increase of $66.6 million compared to $9.1 million in 2018.

Interest expense was $88.9 million in 2019, a decrease of $10.7 million compared to $99.6 million in 2018.

Other income, net, was $4.7 million in 2019, a decrease of $2.5 million compared to $7.2 million in 2018.

Provision for Income Taxes

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Certain contracts with

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).

The Tax Act makes broad and complex changes to the U.S. tax code that affected 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%.

We refer to these products and services in the Energy and Industrial segments as “upstream energy.” Our Medical segment is not exposed to the upstream energy industry.

For the Industrials segment, we assess the impact as the standard profit on the specific upstream energy market products.

Since 2013, our top priority has been to implement business transformation initiatives.

Under these restructuring programs, we incurred restructuring charges of $5.3 million and $32.9 million in 2017 and 2016, respectively.

In addition, we incurred program related facility reorganization, relocation and other costs of $5.3 million and $8.7 million in 2017 and 2016, respectively.

We also made capital expenditures related to these programs of approximately $3.1 million in 2017 and $16.2 million in 2016.

The Industrials restructuring program included the closure of a business that had approximately $3.0 million in revenues in 2016.

These restructuring programs were completed in 2017.

We generally expect that the savings associated with these restructuring programs will recover the associated costs within two to three years of such costs being incurred.

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.

Given our global reach, market leading position in our various product categories, strong channel access and aftermarket presence and operational excellence competency, our Company provides an attractive acquisition platform in the flow control and compression equipment sectors.

In August 2016, we acquired a manufacturer of highly specialized consumable micro-syringes and valves that are used in liquid handling instruments in our Medical segment for approximately $18.8 million.

approximately $94.9 million.

_KKR Management Fees and Expenses_

Through the date of our initial public offering in 2017, KKR charged an annual management fee, as well as fees and expenses for services provided.

These fees and charges were $1.1 million and $4.8 million for the years ended December 31, 2017 and 2016, respectively.

In May 2017, the monitoring agreement was terminated in accordance with its terms and we paid an additional termination fee of approximately $16.2 million.

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.

Subsequent to the initial public offering in May 2017, we recognized stock-based compensation expense of approximately $77.6 million related to time-based and performance-based stock options.

As of December 31, 2017 there was $9.1 million of unrecognized stock-based compensation expense related to outstanding stock options that will be recognized in future periods.

The Company also recognized $97.4 million of compensation expense related to a grant of 5.5 million DSUs to employees at the date of the initial public offering and employer taxes related to DSUs of $19.2 million.

The Company expects to make stock-based awards to employees and recognize stock-based compensation expenses in future periods.

In the fourth quarter of 2018, we completed our

We believe that we are well positioned to continue to benefit from a slower but positive industrial production and global GDP outlook.

Our fourth quarter of 2018 constant currency increase was on top of strong fourth quarter of 2017 growth of 25%.

This fourth quarter of 2018 constant currency decrease was off strong fourth quarter of 2017 growth of 62%.

During 2018, we focused on the development and introduction of new products and applications to access the liquid pump market, leveraging our technology and expertise in gas pumps.

This fourth quarter increase on a constant currency basis was on top of strong fourth quarter of 2017 growth of 29%.

EBITDA using corresponding prior period exchange rates.

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| | 2018 | | | 2017 | | | 2016 | | |

| Net income attributable to noncontrolling interest | | — | | | 0.1 | | | 5.3 | |

| Net income (loss) attributable to Gardner Denver Holdings, Inc | $ | 269.4 | | $ | 18.4 | | $ | (36.6 | ) |

| | | | | | | | | | |

Revenues for 2018 were $2,689.8 million, an increase of $314.4 million, or 13.2%, compared to $2,375.4 million in 2017.

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

As of December 31, [removed: 2018,] [added: 2019,] we had variable rate debt outstanding, net of our interest rate swaps, of [removed: $724.1] [added: $776.3] million at a current weighted average interest rate of [removed: 3.1%,] [added: 3.2%,] substantially all of which was incurred under our [removed: $2,280.6] [added: $2,460.7] million Senior Secured Credit Facility, under which [removed: $952.6] [added: $927.6] million was outstanding under the $1,285.5 million Dollar Term Loan Facility and [removed: €607.3] [added: €601.2] million was outstanding under the €615.0 million Euro Term Loan Facility.

As of December 31, [removed: 2018,] [added: 2019,] LIBOR was higher than the 0% floor and EURIBOR was lower than the 0% floor.

As of December 31, [removed: 2018,] [added: 2019,] we were a fixed rate payer on [removed: eight] [added: four] 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: 17] [added: 18] “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: 2018] [added: 2019] and [removed: 2017] [added: 2018] on our interest expense.

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

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

| 100 basis points | [added: |] $ | [removed: 4.8] [added: 4.7] | | [added: |] $ | [removed: 6.1] [added: 4.8] | |

| (100) basis points(1) (2) | | [removed: (0.3] | [added: (1.0 |] ) | | [removed: (1.6] | [added: (0.3 |] ) |

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

| | [removed: (2)] [added: (1)] | A decrease in interest rates would not have impacted our interest expense in [removed: 2017] [added: 2019] on EURIBOR debt which was lower than the 0% base rate floor under the Senior Secured Credit Facility for the entire fiscal year [removed: 2017,] [added: 2019,] but would have impacted interest expense in [removed: 2017] [added: 2019] on LIBOR debt which was higher than the 0% based rate floors under the Senior Secured Credit Facility [removed: during] [added: for] the [removed: second half of fiscal] year [removed: 2017.] [added: ended December 31, 2019.] |

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

In [removed: 2018,] [added: 2019,] the relative strengthening of the U.S. dollar against foreign currencies had an unfavorable impact on our revenues and results of operations while in [removed: 2017,] [added: 2018,] the relative weakening of the U.S. dollar against foreign currencies had 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: 2018] [added: 2019] and [removed: 2017.][added: 2018.]

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

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

| Revenues | | [removed: 48] | [added: 44 |] % | | [removed: 30] | [added: 31 |] % | | [added: |] 5 | % | | [removed: 5] | [added: 6 |] % | | [removed: 12] | [added: 14 |] % |

| Gross profit | | [removed: 48] | [added: 42 |] % | | [removed: 31] | [added: 35 |] % | | [removed: 5] | [added: 6 |] % | | [added: |] 7 | % | | [removed: 9] | [added: 10 |] % |

| [removed: Year] [added: Year] Ended December 31, [removed: 2017] [added: 2019] | | | | | | | | | | | | | | | | [added: | | | | |]

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

These currency translation effects and offsetting impacts of our derivatives for the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] are summarized in Note 13 “Accumulated Other Comprehensive [removed: Income (Loss)”] [added: (Loss) Income”] to our audited consolidated financial statements included elsewhere in this Form 10-K.

As of December 31, [removed: 2018,] [added: 2019,] we were party to [removed: seven] [added: six] 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: 2018,] [added: 2019,] 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: 2018] [added: 2019] | | | | | | | | | [added: | |]

| | [removed: Euro] | [added: Euro] | | [removed: British Pound] | | [added: British Pound] | [removed: Chinese Renminbi] | | | [added: Chinese Renminbi | | |]

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

| | | 2019 | | | | 2018 | | |

[Index](#Index)

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

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

| Revenues | | | 48 | % | | | 30 | % | | | 5 | % | | | 5 | % | | | 12 | % |

See Note 18 “Hedging Activities, Derivative Instruments, and Credit Risk” to our audited consolidated financial statements included elsewhere in this Form 10-K.

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

| Revenues | | $ | (69.2 | ) | | $ | (11.9 | ) | | $ | (13.5 | ) |

| Gross profit | | | (30.1 | ) | | | (5.3 | ) | | | (6.7 | ) |

[Index](#Index)

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

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

| | 2018 | | | 2017 | | |

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

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

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

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

| Gross profit | | (30.3 | ) | | (4.8 | ) | | (6.4 | ) |

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]

To support our customers and market presence, we maintain significant global scale with [removed: 41] [added: 38] key [added: manufacturing facilities, more than 30 complementary service and repair centers across six continents and approximately 6,600 employees worldwide as of December 31, 2019.]

As a result, our aftermarket revenue is significant, representing [removed: 39%] [added: 38%] of total Company revenue and approximately [removed: 43%] [added: 42%] of our combined Industrials and Energy segments’ revenue in [removed: 2018.][added: 2019.]

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

[removed: _Industrials_][added: Industrials]

[removed: _Energy_][added: Energy]

[removed: _Medical_][added: Medical]

[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: •] [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: _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]

[added: 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: Competition][added: Competition]

[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: 2018] [added: 2019] 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 [removed: 4%] [added: 3%] of [removed: 2018] [added: 2019] consolidated revenues.

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

While in the aggregate our more than [removed: 610] [added: 600] 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 [added: generally available from a number of suppliers.]

[removed: Employees][added: Employees]

As of December 31, [removed: 2018,] [added: 2019,] we had approximately [removed: 6,700] [added: 6,600] employees of which approximately [removed: 2,100] [added: 1,900] are located in the United States.

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

[removed: Corporate History][added: Corporate History]

[removed: Where] [added: Where] You Can Find More [removed: Information][added: Information]

Our SEC filings are available to the public over the internet at the SEC’s website at [removed: _http://www.sec.gov_.][added: *http://www.sec.gov*.]

Our SEC filings are also available on our website at [removed: _http://www.gardnerdenver.com_] [added: *http://www.gardnerdenver.com*] as soon as reasonably practicable after they are filed with or furnished to the SEC.

We maintain an internet site at [removed: _http://www.gardnerdenver.com_.][added: *http://www.gardnerdenver.com*.]

Financial and other important information regarding us is routinely accessible through and posted on our website at [removed: _www.investors.gardnerdenver.com_.][added: *www.investors.gardnerdenver.com*.]

In addition, you may automatically receive email alerts and other information about us when you enroll your email address by visiting the Email Alerts section at [removed: _www.investors.gardnerdenver.com_.][added: *www.investors.gardnerdenver.com*.]

Transaction with Ingersoll Rand

In April 2019, the Board of Directors of Gardner Denver approved a merger that will combine Gardner Denver with the industrial segment of Ingersoll-Rand plc (“Ingersoll Rand”) (the “Merger”).

To facilitate this Merger, Ingersoll Rand will cause specific assets and liabilities of its industrial segment to be transferred to Ingersoll-Rand U.S. HoldCo, Inc. (“Ingersoll Rand Industrial”), a newly formed wholly-owned subsidiary of Ingersoll Rand, and distribute the shares of common stock of Ingersoll Rand Industrial to Ingersoll Rand’s shareholders.

Charm Merger Sub Inc., (“Merger Sub”), which is a newly formed wholly-owned subsidiary of Gardner Denver, will be merged with and into Ingersoll Rand Industrial, with Ingersoll Rand Industrial surviving such merger as a wholly-owned subsidiary of Gardner Denver.

Pursuant to the definitive agreement Gardner Denver entered into with Ingersoll Rand, Ingersoll Rand Industrial and Merger Sub with respect to the Merger (the “Merger Agreement”), Gardner Denver will issue an aggregate number of shares of its common stock to Ingersoll Rand Industrial stockholders which will result in Ingersoll Rand Industrial stockholders owning approximately, but not less than, 50.1% of the shares of Gardner Denver common stock outstanding on a fully-diluted basis upon the closing of the Merger.

The number of shares to be issued to Ingersoll Rand Industrial stockholders is based on the exchange ratio set forth in the Merger Agreement.

In addition, Ingersoll Rand will receive approximately $1.9 billion in cash from Ingersoll Rand Industrial that will be funded by newly-issued debt that is expected to be deemed issued under the existing Senior Secured Credit Facilities of Gardner Denver upon consummation of the merger.

The merger is expected to close on February 29, 2020.

The Merger will result in Gardner Denver acquiring Ingersoll Rand Industrial, which includes compressed air and gas systems and services, power tools, material handling systems, fluid management systems as well as Club Car golf, utility and consumer low-speed vehicles.

Following the Merger, the combined company is expected to be renamed and operate under the Ingersoll Rand name and its common stock is expected to be listed on the New York Stock Exchange under Ingersoll Rand’s existing ticker symbol “IR.”

See Note 3 “Business Combinations” to our audited consolidated financial statements included elsewhere in this Form 10-K for additional information related to the transaction with Ingersoll Rand.

[Index](#Index)

[Index](#Index)

Industrials

[Index](#Index)

Energy

[Index](#Index)

[Index](#Index)

Medical

Industrials

Energy

Medical

[Index](#Index)

[Index](#Index)

[Index](#Index)

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

manufacturing facilities, more than 30 complementary service and repair centers across six continents and approximately 6,700 employees worldwide as of December 31, 2018.

Demand for our petrochemical industry products correlates with growth in the

generally available from a number of suppliers.

We are a party to various legal proceedings, lawsuits and administrative actions, which are of an ordinary or routine nature for a company of our size and [removed: in our] sector.

We believe that such proceedings, [removed: lawsuits,] [added: lawsuits] and administrative actions will not materially adversely affect our operations, financial condition, liquidity or competitive position.

For a detailed discussion of certain of these proceedings, lawsuits and administrative actions, see Note 20, “Contingencies” to our audited consolidated financial statements included elsewhere in this form 10-K.

A more detailed discussion of certain of these proceedings, lawsuits, and administrative actions is set forth below.

Environmental Matters

We are subject to numerous federal, state, local and foreign laws and regulations relating to the storage, handling, emission and disposal of materials and discharge of materials into the environment.

We believe that our existing environmental control procedures are adequate and we have no current plans for substantial capital expenditures in this area.

We have an environmental policy that confirms our commitment to a clean environment and compliance with environmental laws.

We have an active environmental management program aimed at complying with existing environmental regulations and reducing the generation of pollutants in the manufacturing processes.

We are also subject to laws concerning the cleanup of hazardous substances and wastes, such as the U.S. federal “Superfund” and similar state laws that impose liability for cleanup of certain waste sites and for related natural resource damages.

We have been identified as a potentially responsible party with respect to several sites designated for cleanup under the “Superfund” or similar state laws.

_Asbestos and Silica-Related Litigation_

We have been named as a defendant in many asbestos-related and silica-related personal injury lawsuits.

The plaintiffs in these suits allege exposure to asbestos or silica from multiple sources and typically we are one of approximately 25 or more named defendants.

Our predecessors sometimes manufactured, distributed and/or sold products allegedly at issue in these pending asbestos and silica-related lawsuits (the “Products”).

However, neither we nor our predecessors ever mined, manufactured, mixed, produced or distributed asbestos fiber or silica sand, the materials that allegedly caused the injury underlying the lawsuits.

Moreover, the asbestos-containing components of the Products, if any, were enclosed within the subject Products.

Although we have never mined, manufactured, mixed, produced or distributed asbestos fiber or silica, many of the companies that did engage in such activities or produced such products are no longer in operation.

This has led to law firms seeking potential alternative companies to name in lawsuits where there has been an asbestos or silica related injury.

However, in our opinion, based on our experience to date, the substantial majority of the plaintiffs have not suffered an injury for which we bear responsibility.

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 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.

However, inherent uncertainties of litigation and future developments, including, without limitation, potential insolvencies of insurance companies or other defendants, an adverse determination in the Adams County Case (discussed below), or other inability to collect from our historical insurers or indemnitors, could cause a different outcome.

While the outcome of legal proceedings is inherently uncertain, based on presently known facts, experience and circumstances, we believe that the amounts accrued on 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 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 $105.8 million and $105.6 million as of December 31, 2018 and December 31, 2017 respectively, with respect to potential liability arising from our asbestos-related litigation.

Asbestos-related defense costs are excluded from the asbestos claims liability and are recorded separately as an operating expense as services are incurred.

We currently expect to continue to incur significant asbestos-related defense costs.

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

However, at this time, based on presently available information, we view this possibility as remote.

We have entered into a series of agreements with certain of our or 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 also pursued litigation against certain insurers or indemnitors where necessary.

We have an insurance recovery receivable for probable asbestos related recoveries of approximately $103.0 million and $100.4 million as of December 31, 2018 and December 31, 2017 which was included in “Other assets” on the Consolidated Balance Sheets included elsewhere in this Form 10-K.

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.

The largest such recent action, Gardner Denver, Inc. v.

Certain Underwriters at Lloyd’s, London, et al., was filed on July 9, 2010, in the Eighth Judicial Circuit, Adams County, Illinois, as case number 10-L-48 (the “Adams County Case”).

In the lawsuit, we seek, among other things, to require certain excess insurer defendants to honor their insurance policy obligations to us, including payment in whole or in part of the costs associated with the asbestos-related lawsuits filed against us.

In October 2011, we reached a settlement with one of the insurer defendants, which had issued both primary and excess policies, for approximately the amount of such defendant’s policies which were subject to the lawsuit.

Since then, the case has been proceeding through the discovery and motions process with the remaining insurer defendants.

On January 29, 2016, we prevailed on the first phase of that

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 us.

On June 9, 2016, the Court denied a motion by several of the insurers who sought permission to appeal the Phase I ruling now rather than waiting until the end of the whole case as is normally required.

The case is now proceeding through the discovery and motions process regarding the remaining issues in dispute (“Phase II”).

A majority of our expected future recoveries of the costs associated with the asbestos-related lawsuits are the subject of the Adams County Case.

[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: | ☒] [added: ☒] | [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: 2018][added: 2019]

| [removed: | o] [added: ☐] | [removed: TRANSITION] [added: 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: Trading Symbol(s) | Name] of Each Exchange on Which [removed: Registered] [added: Registered] |

| Common Stock, $0.01 Par Value [added: per share] | [added: GDI |] New York Stock Exchange |

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

Yes ☒ No [removed: o][added: ☐]

Yes [removed: o] [added: ☐] No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such [removed: files).Yes ☒ No  o][added: files).]

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

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

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

The aggregate market value of the [removed: registrant’s Common Stock] [added: voting and non-voting common equity] held by non-affiliates of the registrant on June [removed: 29, 2018] [added: 28, 2019] was approximately [removed: $3,155.6] [added: $4,560.2] million based on the closing price of such [removed: Common Stock] [added: common equity] on the New York Stock Exchange on such date.

The registrant had outstanding [removed: 198,884,808] [added: 205,211,761] shares of Common Stock, par value $0.01 per share, as of February [removed: 20, 2019.][added: 19, 2020.]

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

Portions of the Proxy Statement for the registrant’s [removed: 2019] [added: 2020] Annual Meeting of Stockholders are incorporated by reference in Part III of this report.

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

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

| PART I | | [removed: | |]

| [Item 1. [removed: Business](#tITM1) | | [1](#tITM1)] [added: Business](#Item1)] | [added: 3] |

| [Item 1A. Risk [removed: Factors](#tITM1A) | | [9](#tITM1A)] [added: Factors](#Item1A)] | [added: 11] |

| [Item 1B. Unresolved Staff [removed: Comments](#tITM1B) | | [19](#tITM1B)] [added: Comments](#Item1B)] | [added: 21] |

| [Item 2. [removed: Properties](#tITM2) | | [20](#tITM2)] [added: Properties](#Item2)] | [added: 22] |

| [Item 3. Legal [removed: Proceedings](#tITM3) | | [20](#tITM3)] [added: Proceedings](#Item3)] | [added: 22] |

or

Yes ☒ No ☐

Yes ☒ No ☐

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

| | | | | | |

| | | | | | |

Yes ☐ No ☒

[Index](#Index)

| --- | --- |

| | |

| | |

| | |

| | |

| [SIGNATURES](#Signatures) | |

| | |

| [SCHEDULE I](#Sched1) | |

[Index](#Index)

10-K 1 h10061123x1_10k.htm FORM 10-K

or

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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

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

None.

[Index](#Index)

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None

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

| | [removed: Manufacturing] | [added: Manufacturing] | | [removed: Warehouse] | | [added: Warehouse] | [removed: Other(2)] | | | [removed: Total] [added: Other(4)] | | | [added: | Total | | |]

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

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

| [removed: EMEA] [added: EMEA(1)] | | [added: |] 10 | | | [added: |] 1 | | | [removed: 16] | [added: 15] | | [removed: 27] | | [added: 26 | |]

| [removed: APAC] [added: APAC(2)] | | [removed: 1] | [added: 0] | | [added: | |] 1 | | | [added: |] 8 | | | [removed: 10] | [added: 9] | [added: |]

| [removed: Industrials Total] [added: Industrials Total] | | [removed: 18] | [added: 16] | | [removed: 3] | | [added: 3] | [removed: 24] | | | [removed: 45] [added: 23] | | [added: | | 42 | |]

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

| Americas | | [removed: 8] | [added: 7] | | [removed: 3] | | [added: 1] | [removed: 8] | | | [removed: 19] [added: 7] | | [added: | | 15 | |]

| EMEA | | [added: |] 5 | | | [added: |] 0 | | | [removed: 2] | [added: 1] | | [removed: 7] | | [added: 6 | |]

| APAC | | [added: |] 2 | | | [added: |] 0 | | | [removed: 2] | [added: 1] | | [removed: 4] | | [added: 3 | |]

| [removed: Energy Total] [added: Energy Total] | | [removed: 15] | [added: 14] | | [removed: 3] | | [added: 1] | [removed: 12] | | | [removed: 30] [added: 9] | | [added: | | 24 | |]

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

| Americas | | [added: |] 3 | | | [added: |] 0 | | | [added: |] 0 | | | [added: |] 3 | |

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

| APAC | | [added: |] 1 | | | [added: |] 0 | | | [added: |] 0 | | | [added: |] 1 | |

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

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

| Americas | | [removed: 18] | [added: 16] | | [removed: 4] | | [added: 2] | [removed: 8] | | | [removed: 30] [added: 7] | | [added: | | 25 | |]

| EMEA | | [added: |] 19 | | | [added: |] 1 | | | [removed: 19] | [added: 17] | | [removed: 39] | | [added: 37 | |]

| APAC | | [removed: 4] | [added: 3] | | [added: | |] 1 | | | [removed: 10] | [added: 9] | | [removed: 15] | | [added: 13 | |]

| [removed: Company Total(1)] [added: Company Total(3)] | | [removed: 41] | [added: 38] | | [removed: 6] | | [added: 4] | [removed: 37] | | | [removed: 84] [added: 33] | | [added: | | 75 | |]

| | [removed: (1)] [added: (3)] | Two facilities are shared between our segments and each is counted once, in the Industrials segment, to avoid double counting. |

| | [removed: (2)] [added: (4)] | Other facilities includes service centers and sales offices. |

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| | (1) | Europe, Middle East and Africa (“EMEA”) |

| | (2) | Asia Pacific (“APAC”) |

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Of the 75 significant properties included in the above table, 44 of the properties are leased and 31 of the properties are owned.

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

Not Applicable.

[Index](#Index)

Not Applicable

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

Our Common Stock, $0.01 par value per share, trades on the New York Stock Exchange (“NYSE”) under the symbol “GDI.” As of January 31, [removed: 2019,] [added: 2020,] there were [removed: 196] [added: 106] 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: 2018] [added: 2019] and [removed: 2017.][added: 2018.]

[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: 2018.][added: 2019.]

| [removed: 2018] [added: 2019] Fourth Quarter [removed: Months] [added: Months] | [removed: Total] [added: | Total] Number [removed: of] [added: of] Shares [removed: Purchased(1)] [added: Purchased(1)] | | | [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(3)] [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(3)] [added: Programs (3)] | | |

| | (1) | All of the shares purchased during the quarter ended December 31, [removed: 2018 were acquired pursuant to the repurchase program described in (3) below, except for 11,653 shares that] [added: 2019] were [removed: 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, [removed: the Company] [added: we] announced that our Board of Directors had approved a share repurchase program which authorized the repurchase of up to $250.0 million of [removed: the Company’s] [added: our] 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 [removed: 24] [added: 25] “Share Repurchase Program” to our audited consolidated financial statements included elsewhere in this Form 10-K. |

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| October 1, 2019 - October 31, 2019 | | | \- | | | $ | \- | | | | \- | | | | 220,756,556 | |

| November 1, 2019 - November 30, 2019 | | | 38,285 | | | $ | 33.71 | | | | \- | | | | 220,756,556 | |

| December 1, 2019 - December 31, 2019 | | | 1,571 | | | $ | 35.02 | | | | \- | | | | 220,756,556 | |

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We may, in the future, decide to pay dividends on our common stock.

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| 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 | |

The selected consolidated financial data as of December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] and for the fiscal years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] have been derived from our audited consolidated financial statements and related notes to our audited consolidated financial statements included elsewhere in this Form 10-K.

The selected consolidated financial data as of December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015, and for the fiscal years ended December 31, 2016 and 2015,] have been derived from our [added: audited] consolidated financial statements and related notes to our [added: audited] consolidated financial statements not included 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: 2018] [added: 2019] | | | [removed: Year] [added: | Year] Ended [removed: December] [added: December] 31, [removed: 2017(1)] [added: 2018] | | | [removed: Year] [added: | Year] Ended [removed: December] [added: December] 31, [removed: 2016(1)] [added: 2017] | | | [removed: Year] [added: | Year] Ended [removed: December] [added: December] 31, [removed: 2015(1)] [added: 2016] | | | [removed: Year] [added: | Year] Ended [removed: December] [added: December] 31, [removed: 2014(1)] [added: 2015] | | |

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

| Revenues | [added: |] $ | [removed: 2,689.8] [added: 2,451.9] | | [added: |] $ | [removed: 2,375.4] [added: 2,689.8] | | [added: |] $ | [removed: 1,939.4] [added: 2,375.4] | | [added: |] $ | [removed: 2,126.9] [added: 1,939.4] | | [added: |] $ | [removed: 2,570.0] [added: 2,126.9] | |

| Cost of sales | | [added: | 1,540.2 | | | |] 1,677.3 | | | [removed: 1,477.5] | [added: 1,477.5] | | [removed: 1,222.7] | | [added: 1,222.7] | [removed: 1,347.8] | | | [removed: 1,633.2] [added: 1,347.8] | |

| Gross profit | | [added: | 911.7 | | | |] 1,012.5 | | | [removed: 897.9] | [added: 897.9] | | [removed: 716.7] | | [added: 716.7] | [removed: 779.1] | | | [removed: 936.8] [added: 779.1] | |

| Selling and administrative expenses | | [added: | 436.4 | | | |] 434.6 | | | [removed: 446.2] | [added: 446.2] | | [removed: 415.1] | | [added: 415.1] | [removed: 431.0] | | | [removed: 478.9] [added: 431.0] | |

| Amortization of intangible assets | | [added: | 124.3 | | | |] 125.8 | | | [removed: 118.9] | [added: 118.9] | | [removed: 124.2] | | [added: 124.2] | [removed: 115.4] | | | [removed: 113.3] [added: 115.4] | |

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

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

| Other operating expense, net | | [added: | 75.7 | | | |] 9.1 | | | [removed: 222.1] | [added: 222.1] | | [removed: 48.6] | | [added: 48.6] | [removed: 20.7] | | | [removed: 64.3] [added: 20.7] | |

| Operating income (loss) | | [added: | 275.3 | | | |] 443.0 | | | [added: |] 109.1 | | | [added: |] 103.5 | | | [added: |] (209.4 | ) | [removed: | 45.3 | |]

| Interest expense | | [added: | 88.9 | | | |] 99.6 | | | [removed: 140.7] | [added: 140.7] | | [removed: 170.3] | | [added: 170.3] | [removed: 162.9] | | | [removed: 164.4] [added: 162.9] | |

| Loss on extinguishment of debt | | [added: | 0.2 | | | |] 1.1 | | | [removed: 84.5] | [added: 84.5] | | [removed: —] | | [added: \-] | [removed: —] | | | [removed: —] [added: \-] | |

| Other income, net | | [removed: (7.2] | [added: (4.7 |] ) | | [removed: (3.4] | [added: (7.2 |] ) | | [removed: (3.6] | [added: (3.4 |] ) | | [removed: (5.6] | [added: (3.6 |] ) | | [removed: (6.2] | [added: (5.6 |] ) |

| Income (loss) before income taxes | | [added: | 190.9 | | | |] 349.5 | | | [added: |] (112.7 | ) | | [added: |] (63.2 | ) | | [removed: (366.7] | [removed: ) | | (112.9] [added: (366.7] | ) |

| Provision (benefit) for income taxes | | [added: | 31.8 | | | |] 80.1 | | | [added: |] (131.2 | ) | | [added: |] (31.9 | ) | | [added: |] (14.7 | ) | [removed: | 23.0 | |]

| Net income (loss) | | [added: | 159.1 | | | |] 269.4 | | | [added: |] 18.5 | | | [added: |] (31.3 | ) | | [removed: (352.0] | [removed: ) | | (135.9] [added: (352.0] | ) |

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

| Net income (loss) attributable to Gardner Denver Holdings, Inc. | [added: |] $ | [removed: 269.4] [added: 159.1] | | [added: |] $ | [removed: 18.4] [added: 269.4] | | [added: |] $ | [removed: (36.6] [added: 18.4] | [removed: )] | [added: |] $ | [removed: (351.2] [added: (36.6] | ) | [added: |] $ | [removed: (135.0] [added: (351.2] | ) |

| Earnings (loss) per share, basic | [added: |] $ | [removed: 1.34] [added: 0.78] | | [added: |] $ | [removed: 0.10] [added: 1.34] | | [added: |] $ | [removed: (0.25] [added: 0.10] | [removed: )] | [added: |] $ | [removed: (2.35] [added: (0.25] | ) | [added: |] $ | [removed: (0.91] [added: (2.35] | ) |

| Earnings (loss) per share, diluted | [added: |] $ | [removed: 1.29] [added: 0.76] | | [added: |] $ | [removed: 0.10] [added: 1.29] | | [added: |] $ | [removed: (0.25] [added: 0.10] | [removed: )] | [added: |] $ | [removed: (2.35] [added: (0.25] | ) | [added: |] $ | [removed: (0.91] [added: (2.35] | ) |

| Weighted average shares, basic | | [added: | 203.5 | | | |] 201.6 | | | [removed: 182.2] | [added: 182.2] | | [removed: 149.2] | | [added: 149.2] | [removed: 149.6] | | | [removed: 148.9] [added: 149.6] | |

| Weighted average shares, diluted | | [added: | 208.9 | | | |] 209.1 | | | [removed: 188.4] | [added: 188.4] | | [removed: 149.2] | | [added: 149.2] | [removed: 149.6] | | | [removed: 148.9] [added: 149.6] | |

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

| Cash flows - operating activities | [added: |] $ | [removed: 444.5] [added: 343.3] | | [added: |] $ | [removed: 200.5] [added: 444.5] | | [added: |] $ | [removed: 165.6] [added: 200.5] | | [added: |] $ | [removed: 172.1] [added: 165.6] | | [added: |] $ | [removed: 141.8] [added: 172.1] | |

| Cash flows - investing activities | | [removed: (235.0] | [added: (54.3 |] ) | | [removed: (60.8] | [added: (235.0 |] ) | | [removed: (82.1] | [added: (60.8 |] ) | | [removed: (84.0] | [added: (82.1 |] ) | | [removed: (155.4] | [added: (84.0 |] ) |

| Cash flows - financing activities | | [removed: (373.0] | [added: (11.5 |] ) | | [removed: (17.4] | [added: (373.0 |] ) | | [removed: (43.0] | [added: (17.4 |] ) | | [removed: (35.0] | [added: (43.0 |] ) | | [removed: (3.7] | [added: (35.0 |] ) |

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

| Cash and cash equivalents | [added: |] $ | [removed: 221.2] [added: 505.5] | | [added: |] $ | [removed: 393.3] [added: 221.2] | | [added: |] $ | [removed: 255.8] [added: 393.3] | | [added: |] $ | [removed: 228.3] [added: 255.8] | | [added: |] $ | [removed: 184.2] [added: 228.3] | |

| Total assets | | [added: | 4,628.4 | | | |] 4,487.1 | | | [removed: 4,621.2] | [added: 4,621.2] | | [removed: 4,316.0] | | [added: 4,316.0] | [removed: 4,462.0] | | | [removed: 5,107.1] [added: 4,462.0] | |

| Total liabilities | | [added: | 2,758.5 | | | |] 2,811.1 | | | [removed: 3,144.4] | [added: 3,144.4] | | [removed: 4,044.2] | | [added: 4,044.2] | [removed: 4,056.5] | | | [removed: 4,218.5] [added: 4,056.5] | |

| Total stockholders’ equity | | [added: | 1,869.9 | | | |] 1,676.0 | | | [removed: 1,476.8] | [added: 1,476.8] | | [removed: 271.8] | | [added: 271.8] | [removed: 405.5] | | | [removed: 888.6] [added: 405.5] | |

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

| Adjusted [removed: EBITDA(2)] [added: EBITDA(1)] | [added: |] $ | [added: 564.8 | | | $ |] 681.8 | | [added: |] $ | 561.5 | | [added: |] $ | 400.7 | | [added: |] $ | 418.9 | | [removed: | | |]

| Adjusted net [removed: income(2)] [added: income(1)] | | [added: | 332.4 | | | |] 394.7 | | | [removed: 249.3] | [added: 249.3] | | [removed: 133.6] | | [added: 133.6] | [removed: 128.1] | | | [added: 128.1] | |

| Capital expenditures | | [added: | 43.2 | | | |] 52.2 | | | [removed: 56.8] | [added: 56.8] | | [removed: 74.4] | | [added: 74.4] | [removed: 71.0] | | | [added: 71.0] | |

| Free cash [removed: flow(2)] [added: flow(1)] | | [added: | 300.1 | | | |] 392.3 | | | [removed: 143.7] | [added: 143.7] | | [removed: 91.2] | | [added: 91.2] | [removed: 101.1] | | | [added: 101.1] | |

| | [removed: (2)] [added: (1)] | 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. [removed: 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.] |