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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019 

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to

Commission File Number: 1-4018
DOV-20190331_G1.JPG
(Exact name of registrant as specified in its charter)
Delaware 53-0257888
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
3005 Highland Parkway  
Downers Grove, Illinois 60515
(Address of principal executive offices) (Zip Code)
(630) 541-1540
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ  No  o

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 files).
Yes þ  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12-b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o  No  þ

The number of shares outstanding of the Registrant’s common stock as of April 11, 2019 was 145,329,437.



Dover Corporation
Form 10-Q
Table of Contents

Page
 
1
2
 
3
 
4
 
5
 
6
28
41
41
   
 
41
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42
42
42
42
43
44






Table of Contents

Item 1. Financial Statements

DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)

  Three Months Ended March 31, 
  2019 2018
Revenue $ 1,724,757  $ 1,637,671 
Cost of goods and services 1,101,215  1,034,842 
Gross profit 623,542  602,829 
Selling, general and administrative expenses 408,466  435,026 
Loss on assets held for sale 46,946  — 
Operating earnings 168,130  167,803 
Interest expense 31,808  35,640 
Interest income (890) (2,058)
Other income, net (1,106) (30)
Earnings before provision for income taxes 138,318  134,251 
Provision for income taxes 32,613  24,841 
Earnings from continuing operations  105,705  109,410 
Earnings from discontinued operations, net  —  22,025 
Net earnings  $ 105,705  $ 131,435 
Earnings per share from continuing operations:
Basic $ 0.73  $ 0.71 
Diluted $ 0.72  $ 0.70 
Earnings per share from discontinued operations: 
Basic $ —  $ 0.14 
Diluted $ —  $ 0.14 
Net earnings per share:
Basic $ 0.73  $ 0.85 
Diluted $ 0.72  $ 0.84 
Weighted average shares outstanding:
Basic 145,087  154,520 
Diluted 146,911  157,090 
 

See Notes to Condensed Consolidated Financial Statements


1

Table of Contents

DOVER CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In thousands)
(Unaudited)

  Three Months Ended March 31,
  2019 2018
Net earnings $ 105,705  $ 131,435 
Other comprehensive earnings, net of tax 
Foreign currency translation adjustments:
Foreign currency translation gains   23,700  52,308 
Reclassification of foreign currency translation losses to earnings 25,339  — 
Total foreign currency translation adjustments 49,039  52,308 
Pension and other post-retirement benefit plans:
Amortization of actuarial losses included in net periodic pension cost 175  1,939 
Amortization of prior service costs included in net periodic pension cost 572  743 
Total pension and other post-retirement benefit plans 747  2,682 
Changes in fair value of cash flow hedges:
Unrealized net gains arising during period 2,594  1,362 
Net gains reclassified into earnings (230) (253)
Total cash flow hedges 2,364  1,109 
Other comprehensive earnings, net of tax  52,150  56,099 
Comprehensive earnings $ 157,855  $ 187,534 


See Notes to Condensed Consolidated Financial Statements

2

Table of Contents

DOVER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

  March 31, 2019 December 31, 2018
Assets 
Current assets:     
Cash and cash equivalents  $ 243,014  $ 396,221 
Receivables, net of allowances of $29,116 and $28,469  1,272,053  1,231,859 
Inventories  828,298  748,796 
Prepaid and other current assets  141,891  126,878 
Assets held for sale 44,210  — 
Total current assets  2,529,466  2,503,754 
Property, plant and equipment, net  797,682  806,497 
Goodwill  3,777,277  3,677,328 
Intangible assets, net  1,149,136  1,134,256 
Other assets and deferred charges  404,350  243,936 
Total assets $ 8,657,911  $ 8,365,771 
Liabilities and Stockholders' Equity
Current liabilities:     
Notes payable and current maturities of long-term debt $ 346,255  $ 220,318 
Accounts payable  952,162  969,531 
Accrued compensation and employee benefits  176,726  212,666 
Accrued insurance  99,215  97,600 
Other accrued expenses  337,417  313,452 
Federal and other income taxes  14,566  13,854 
Liabilities held for sale  20,581  — 
Total current liabilities  1,946,922  1,827,421 
Long-term debt 2,940,967  2,943,660 
Deferred income taxes  349,428  339,325 
Noncurrent income tax payable 54,304  54,304 
Other liabilities  528,837  432,395 
Stockholders' equity:     
Total stockholders' equity  2,837,453  2,768,666 
Total liabilities and stockholders' equity  $ 8,657,911  $ 8,365,771 


See Notes to Condensed Consolidated Financial Statements





3

Table of Contents



DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)

  Common stock $1 par value Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive (loss) earnings Total stockholders' equity
Balance at December 31, 2018  $ 257,822  $ 886,016  $ (5,947,562) $ 7,815,486  $ (243,096) $ 2,768,666 
Net earnings  —  —  —  105,705  —  105,705 
Dividends paid ($0.48 per share)  —  —  —  (69,809) —  (69,809)
Common stock issued for the exercise of share-based awards 392  (20,000) —  —  —  (19,608)
Stock-based compensation expense —  8,182  —  —  —  8,182 
Other comprehensive earnings, net of tax  —  —  —  —  52,150  52,150 
Other, net  —  (7,833) —  —  —  (7,833)
Balance at March 31, 2019  $ 258,214  $ 866,365  $ (5,947,562) $ 7,851,382  $ (190,946) $ 2,837,453 


  Common stock $1 par value Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive (loss) earnings Total stockholders' equity
Balance at December 31, 2017  $ 256,992  $ 942,485  $ (5,077,039) $ 8,455,501  $ (194,759) $ 4,383,180 
Adoption of ASU 2018-02
—  —  —  12,856  (12,856) — 
Cumulative catch-up adjustment related to Adoption of Topic 606
—  —  —  175  —  175 
Net earnings  —  —  —  131,435  —  131,435 
Dividends paid ($0.47 per share)  —  —  —  (72,691) —  (72,691)
Common stock issued for the exercise of share-based awards 290  (15,229) —  —  —  (14,939)
Stock-based compensation expense —  7,314  —  —  —  7,314 
Common stock acquired  —  —  (44,977) —  —  (44,977)
Other comprehensive earnings, net of tax  —  —  —  —  56,099  56,099 
Other, net  —  26  —  —  —  26 
Balance at March 31, 2018  $ 257,282  $ 934,596  $ (5,122,016) $ 8,527,276  $ (151,516) $ 4,445,622 



See Notes to Condensed Consolidated Financial Statements

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DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
  Three Months Ended March 31, 
  2019 2018
Operating Activities:    
Net earnings $ 105,705  $ 131,435 
Adjustments to reconcile net earnings to cash from operating activities:
Earnings from discontinued operations, net —  (22,025)
Loss on assets held for sale 46,946  — 
Depreciation and amortization 67,738  68,625 
Stock-based compensation expense 8,182  6,745 
Other, net 2,363  (5,440)
Cash effect of changes in assets and liabilities:
Accounts receivable, net (42,252) 22,781 
Inventories (73,041) (63,554)
Prepaid expenses and other assets (14,921) (14,778)
Accounts payable (22,638) (6,690)
Accrued compensation and employee benefits (55,559) (69,554)
Accrued expenses and other liabilities (16,107) (36,029)
Accrued and deferred taxes, net 18,108  4,019 
Net cash provided by operating activities 24,524  15,535 
Investing Activities:     
Additions to property, plant and equipment (37,122) (44,678)
Acquisitions, net of cash acquired (175,083) (68,385)
Proceeds from sale of property, plant and equipment 170  2,160 
Proceeds from sale of businesses 2,245  2,069 
Other (7,900) (13,763)
Net cash used in investing activities (217,690) (122,597)
Financing Activities:     
Repurchase of common stock
—  (44,977)
Change in commercial paper and notes payable 125,893  195,066 
Dividends paid to stockholders (69,809) (72,691)
Payments to settle employee tax obligations on exercise of share-based awards (19,608) (14,943)
Repayment of long-term debt —  (350,000)
Other (409) (1,558)
Net cash provided by (used in) financing activities 36,067  (289,103)
Cash Flows from Discontinued Operations     
Net cash provided by operating activities of discontinued operations —  19,963 
Net cash used in investing activities of discontinued operations —  (13,426)
Net cash provided by discontinued operations  —  6,537 
Effect of exchange rate changes on cash and cash equivalents 3,892  2,886 
Net decrease in cash and cash equivalents  (153,207) (386,742)
Cash and cash equivalents at beginning of period 396,221  753,964 
Cash and cash equivalents at end of period $ 243,014  $ 367,222 


See Notes to Condensed Consolidated Financial Statements

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
1. Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim periods and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America ("GAAP") for complete financial statements. These unaudited interim Condensed Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes for Dover Corporation ("Dover" or the "Company") for the year ended December 31, 2018, included in the Company's Annual Report on Form 10-K filed with the SEC on February 15, 2019. The year end Condensed Consolidated Balance Sheet was derived from audited financial statements. Certain amounts in the prior periods have been reclassified to conform to the current year presentation.  

On May 9, 2018, the Company completed a pro-rata distribution of the common stock of Apergy Corporation ("Apergy") to the Company's shareholders of record as of the close of business on April 30, 2018. Apergy holds entities conducting upstream energy businesses previously included in the Energy segment. As discussed in Note 5 - Discontinued and Disposed Operations, the Apergy businesses met the criteria to be reported as discontinued operations because the spin-off is a strategic shift in business that has a major effect on the Company's operations and financial results. Therefore, the Company is reporting the historical results of Apergy, including the results of operations, cash flows, and related assets and liabilities, as discontinued operations for all periods presented herein. Subsequent to the spin-off of Apergy, effective the second quarter of 2018, the Company no longer has the Energy segment and is aligned into three reportable segments. See Note 18 —Segment Information for additional information regarding the updated segments, including segment results for the three months ended March 31, 2019 and 2018. Unless otherwise noted, the accompanying Notes to the Consolidated Financial Statements have all been revised to reflect the effect of the separation of Apergy and all prior year balances have been revised accordingly to reflect continuing operations only.

The accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. The Condensed Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair statement of results for these interim periods. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year.

2. Spin-off of Apergy Corporation 

On May 9, 2018, Dover completed the distribution of Apergy to its shareholders. The transaction was completed through the pro rata distribution of 100% of the common stock of Apergy to Dover's shareholders of record as of the close of business on April 30, 2018. Each Dover shareholder received one share of Apergy common stock for every two shares of Dover common stock held as of the record date.

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The following is a summary of the assets and liabilities transferred to Apergy as part of the separation on May 9, 2018:
Assets:
Cash and cash equivalents $ 10,357 
Current assets 462,620 
Non-current assets 1,438,760 
$ 1,911,737 
Liabilities:
Current liabilities $ 185,354 
Non-current liabilities 119,568 
$ 304,922 
Net assets distributed to Apergy Corporation $ 1,606,815 
Less: Cash received from Apergy Corporation 700,000 
Net distribution to Apergy Corporation $ 906,815 

In connection with the spin-off from the company, Apergy issued and sold $300.0 million in aggregate principal amount of its 6.375% senior notes due May 2026 in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended, and incurred $415.0 million in borrowings under its new senior secured term loan facility to fund a one-time cash payment of $700.0 million to Dover. Dover received net cash of $689.6 million upon separation, which reflects $10.4 million of cash held by Apergy on the distribution date and retained by it in connection with its separation from Dover. Dover utilized the proceeds from Apergy as the primary source of funding for $1 billion of share repurchases started in December 2017 and completed in December 2018.
Included within the net assets distributed to Apergy is approximately $33 million of accumulated other comprehensive earnings attributable to Apergy, relating primarily to foreign currency translation gains, offset by unrecognized losses on pension obligations.
The historical results of Apergy, including the results of operations, cash flows, and related assets and liabilities have been reclassified to discontinued operations for all periods presented herein. See Note 5 — Held for Sale, Disposed and Discontinued Operations. Pursuant to the separation of Apergy from Dover, and the related separation and distribution agreements, any liabilities due from Dover to Apergy are not significant.

3. Revenue 

Effective January 1, 2018, the Company adopted Accounting Standard Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("Topic 606” or “ASC 606”), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018.
Under Topic 606, a contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance and where payment terms are identified and collectability is probable. Once the Company has entered a contract, it is evaluated to identify performance obligations. For each performance obligation, revenue is recognized as control of promised goods or services transfers to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The amount of revenue recognized takes into account variable consideration, such as discounts and volume rebates.
Over 95% of the Company’s performance obligations are recognized at a point in time that relate to the manufacture and sale of a broad range of products and components. Revenue is recognized when control transfers to the customer upon shipment or completion of installation, testing, certification, or other substantive acceptance provisions required under the contract. Less than 5% of the Company’s revenue is recognized over time and relates to the sale of engineered to order equipment or services that have no alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin. 


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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
Revenue from contracts with customers is disaggregated by end markets, segments and geographic location, as it best depicts the nature and amount of the Company’s revenue.
The following table presents revenue disaggregated by end market and segment:
Three Months Ended March 31,  
  2019 2018
Printing & Identification $ 282,086  $ 282,522 
Industrials 405,105  389,104 
Total Engineered Systems segment 687,191  671,626 
Fueling & Transport 373,050  319,304 
Pumps 177,439  162,309 
Process Solutions 152,735  146,485 
Total Fluids segment 703,224  628,098 
Refrigeration 277,598  278,655 
Food Equipment 57,045  59,580 
Total Refrigeration & Food Equipment segment 334,643  338,235 
Intra-segment eliminations (301) (288)
Total Consolidated Revenue $ 1,724,757  $ 1,637,671 

The following table presents revenue disaggregated by geography based on the location of the Company's customer:
Three Months Ended March 31,  
  2019 2018
United States $ 919,892  $ 853,002 
Europe 402,645  387,178 
Asia 196,350  194,603 
Other Americas 138,118  133,144 
Other 67,752  69,744 
Total $ 1,724,757  $ 1,637,671 

At March 31, 2019, we estimated that $83.0 million in revenue is expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. We expect to recognize approximately 65% of our unsatisfied (or partially unsatisfied) performance obligations as revenue through 2020, with the remaining balance to be recognized in 2021 and thereafter.

The following table provides information about contract assets and contract liabilities from contracts with customers:
  March 31, 2019 December 31, 2018 At Adoption
Contract assets $ 11,443  $ 9,330  $ 11,932 
Contract liabilities - current 39,733  36,461  48,268 
Contract liabilities - non-current 9,731  9,382  9,916 
The revenue recognized during the three months ended March 31, 2019 and 2018 that was included in the contract liabilities at the beginning of the period amounted to $15,414 and $13,781, respectively.




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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
4. Acquisitions

2019 Acquisitions

On January 25, 2019, the Company acquired the assets of Belanger, Inc. ("Belanger"), a leading full-line car wash equipment manufacturer for $175,083, net of cash acquired. The Belanger acquisition strengthens Dover's position in the vehicle wash business within the Fueling & Transport end market of the Fluids segment. The following presents the preliminary allocation of acquisition cost to the assets acquired and liabilities assumed, based on their estimated fair values:
 
Belanger 
Current assets, net of cash acquired $ 9,392 
Property, plant and equipment 597 
Goodwill 97,817 
Intangible assets 77,000 
Other assets and deferred charges 20 
Current liabilities (9,743)
Net assets acquired $ 175,083 

The amounts assigned to goodwill and major intangible asset classifications are as follows:
Amount allocated Useful life (in years)
Goodwill - Tax deductible 97,817  na
Customer intangibles 54,500  9
Patents 16,000  9
Trademarks 6,500  15
$ 174,817 

The goodwill recorded as a result of this acquisition reflects the benefits expected to be derived from product line expansions and operational synergies.

2018 Acquisitions

During the three months ended March 31, 2018, the Company acquired two businesses in separate transactions for total consideration of $68,385, net of cash acquired. These businesses were acquired to complement and expand upon existing operations within the Fluids and Refrigeration & Food Equipment segments. The goodwill recorded as a result of these acquisitions reflects the benefits expected to be derived from product line expansions and operational synergies. The goodwill is non-deductible for U.S. federal income tax purposes for these acquisitions.

On January 2, 2018, the Company acquired 100% of the voting stock of Ettlinger Group ("Ettlinger"), within the Fluids segment for $53,046, net of cash acquired. In connection with this acquisition, the Company recorded goodwill of $36,505 and intangible assets of $20,084, primarily related to customer intangibles. The intangible assets are being amortized over 8 to 15 years.

On January 12, 2018, the Company acquired 100% of the voting stock of Rosario Handel B.V. ("Rosario"), within the Refrigeration & Food Equipment segment for total consideration of $15,339, net of cash acquired. In connection with this acquisition, the Company recorded goodwill of $10,402 and a customer intangible asset of $4,149. The customer intangible asset is being amortized over 10 years.

Pro Forma Information

The following unaudited pro forma information illustrates the impact of 2019 and 2018 acquisitions on the Company’s revenue and earnings from operations for the three months ended March 31, 2019 and 2018, respectively.
 
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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The unaudited pro forma information assumes that the 2019 and 2018 acquisitions had taken place at the beginning of the prior year, 2018 and 2017, respectively. Unaudited pro forma earnings are adjusted to reflect the comparable impact of additional depreciation and amortization expense, net of tax, resulting from the fair value measurement of intangible and tangible assets relating to the year of acquisition.

The unaudited pro forma effects for the three months ended March 31, 2019 and 2018 were as follows:
  Three Months Ended March 31, 
  2019  2018 
Revenue: 
As reported  $ 1,724,757  $ 1,637,671 
Pro forma  1,728,525  1,651,530 
Earnings from continuing operations: 
As reported  $ 105,705  $ 109,410 
Pro forma  107,204  111,953 
Basic earnings per share from continuing operations: 
As reported  $ 0.73  $ 0.71 
Pro forma  0.74  0.72 
Diluted earnings per share from continuing operations: 
As reported  $ 0.72  $ 0.70 
Pro forma  0.73  0.71 

5. Held for Sale, Disposed and Discontinued Operations

Management evaluates Dover's businesses periodically for their strategic fit within its operations and may from time to time sell or discontinue certain operations for various reasons.

Assets and Liabilities Held for Sale

On March 29, 2019, the Company entered into a definitive agreement to sell Finder Pompe S.r.l ("Finder"), a wholly owned subsidiary, to Gruppo Aturia S.p.A (“Aturia”) for a total consideration of approximately $23,629 net of estimated selling costs. As of March 31, 2019, Finder met the criteria to be classified as held for sale. The Company classified Finder's assets and liabilities separately on the consolidated balance sheet as of March 31, 2019.

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The following table presents the assets and liabilities associated with the Finder business classified as held for sale as of March 31, 2019.

  March 31, 2019
Assets Held for Sale   
Accounts receivable, net  $ 12,698 
Inventories  3,693 
Prepaid and other current assets  1,050 
Total current assets 17,441 
Property, plant and equipment, net 13,596 
Goodwill and intangible assets, net 34,524 
Other assets and deferred charges 256 
Impairment on assets held for sale (21,607)
Total assets $ 44,210 
Liabilities Held for Sale   
Accounts payable  $ 7,859 
Other current liabilities  5,088 
Total current liabilities  12,947 
Deferred income taxes  7,011 
Other liabilities  623 
Total liabilities $ 20,581 

Based on the total consideration from the sale, net of selling costs, the Company recorded a loss on the assets held for sale of  $46,946, in the Condensed Consolidated Statements of Earnings during the three months ended March 31, 2019. The loss was comprised of an impairment on assets held for sale of $21,607 and $25,339 of foreign currency translation losses reclassified out of accumulated other comprehensive losses.  

The Finder business is included in the results of the Fluids segment. The sale does not represent a strategic shift that will have a major effect on operations and financial results and, therefore, did not qualify for presentation as a discontinued operation. The sale closed on April 2, 2019. See Note 22 — Subsequent Events for further details on the subsequent completed sale of Finder.

The Company had no assets or liabilities classified as held for sale as of December 31, 2018.

Disposed Operations

There were no dispositions during the three months ended March 31, 2019 and 2018.

Discontinued Operations

There were no discontinued operations as of and for the three months ending March 31, 2019.

In 2018, the Apergy businesses, as discussed in Note 2, met the criteria to be reported as discontinued operations because the spin-off was a strategic shift in business that has a major effect on the Company's operations and financial results. Therefore, the results of discontinued operations for the three months ended March 31, 2018 include the historical results of Apergy prior to its distribution on May 9, 2018. The three months ended March 31, 2018 included costs incurred by Dover to complete the spin-off of Apergy amounting to $11,746, reflected in selling, general and administrative expenses in discontinued operations. See Note 2 — Spin-off of Apergy Corporation for further information.

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
Summarized results of the Company's discontinued operations are as follows:

  Three Months Ended March 31, 2018 
Revenue $ 284,041 
Cost of goods and services 177,928 
Gross profit 106,113 
Selling, general and administrative expenses 79,123 
Operating earnings 26,990 
Other expense, net  484 
Earnings from discontinued operations before taxes  26,506 
Provision for income taxes  4,481 
Earnings from discontinued operations, net of tax  $ 22,025 

On May 9, 2018, all assets and liabilities of Apergy were spun-off. Therefore, as of March 31, 2019 and December 31, 2018 there were no assets and liabilities classified as discontinued operations.

6. Inventories
  March 31, 2019 December 31, 2018
Raw materials $ 474,204  $ 439,616 
Work in progress 177,544  154,878 
Finished goods 288,986  265,722 
Subtotal 940,734  860,216 
Less reserves (112,436) (111,420)
Total $ 828,298  $ 748,796 

7. Property, Plant and Equipment, net
  March 31, 2019 December 31, 2018
Land  $ 49,834  $ 53,623 
Buildings and improvements  518,238  529,982 
Machinery, equipment and other  1,589,863  1,555,345 
Property, plant and equipment, gross 2,157,935  2,138,950 
Accumulated depreciation  (1,360,253) (1,332,453)
Property, plant and equipment, net $ 797,682  $ 806,497 

Depreciation expense totaled $32,188 and $32,164 for the three months ended March 31, 2019 and 2018, respectively.
 
8. Leases
The Company adopted ASC Topic 842 - Leases as of January 1, 2019, using the transition method per ASU No. 2018-11 issued on July 2018 wherein entities were allowed to initially apply the new leases standard at adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Accordingly, all periods prior to January 1, 2019 were presented in accordance with the previous ASC Topic 840, Leases, and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC 842 resulted in an increase to total assets and liabilities due to the recording of operating lease right-of-use assets ("ROU") and operating lease liabilities of approximately $163 million, as of January 1, 2019. Finance leases were not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding ROU assets were already recorded in the balance sheet under the previous guidance, ASC 840. The adoption did not materially impact the Company’s Consolidated Statements of Earnings or Cash Flows.

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The Company has operating and finance leases for corporate offices, manufacturing plants, research and development facilities, shared services facilities, vehicle fleets and certain office and manufacturing equipment. Leases with an initial term of 12 months or less are not recorded in the balance sheet. The Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense. 

The Company determines if an arrangement is a lease at inception of a contract. Operating lease ROU assets are included in other assets and deferred charges and operating lease liabilities are included in other accrued expenses and other liabilities in the Consolidated Balance Sheet. Finance lease ROU assets are included in property and equipment, and the related lease liabilities are included in other accrued expenses and other liabilities in the Consolidated Balance Sheet.

ROU assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term. The Company's lease term include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. ROU assets also include any advance lease payments made and exclude lease incentives. As most of the Company's operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Finance lease agreements generally include an interest rate that is used to determine the present value of future lease payments. Operating fixed lease expense and finance lease depreciation expense are recognized on a straight-line basis over the lease term.

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The components of lease costs were as follows:
  Three Months Ended March 31, 2019
Operating Lease Costs:
Fixed $ 12,244 
Variable 2,047 
Short-term 4,865 
Total* $ 19,156 
* Finance lease cost and sublease income were immaterial.
Supplemental cash flow information were as follows:
  Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 12,414 
Operating cash flows from finance leases 108 
Financing cash flows from finance leases 409 
Total $ 12,931 
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases 10,708 
Finance leases 37 
Total $ 10,745 

Supplemental balance sheet information related to leases were as follows:
  March 31, 2019
Operating Leases:
Right of use assets:
Other assets and deferred charges $ 154,562 
Lease liabilities:
Other accrued expenses $ 43,247 
Other liabilities 118,783 
Total operating lease liabilities $ 162,030 
Finance Leases:
Right of use assets:
 Property, plant and equipment, net (1)
$ 11,856 
Lease liabilities:
Other accrued expenses $ 1,526 
Other liabilities 8,350 
Total financing lease liabilities $ 9,876 
(1) Finance lease assets are recorded net of accumulated depreciation of $909.

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The aggregate future lease payments for operating and finance leases as of March 31, 2019 were as follows:
  Operating Finance
2019 (excluding the three months ending March 31, 2019) $ 37,090  $ 1,425 
2020 39,237  1,881 
2021 29,666  1,793 
2022 21,329  1,608 
2023 13,544  1,204 
Thereafter 42,182  4,040 
Total lease payments 183,048  11,951 
Less: Interest (21,018) (2,075)
Present value of lease liabilities $ 162,030  $ 9,876 

The aggregate future lease payments for operating and capital leases as of December 31, 2018 are as follows:
  Operating Capital
2019 $ 49,009  $ 1,802 
2020 38,620  1,748 
2021 29,396  1,687 
2022 21,767  1,392 
2023 13,994  952 
Thereafter 42,087  3,802 
Total $ 194,873  $ 11,383 

Average lease terms and discount rates were as follows:
  March 31, 2019
Weighted-average remaining lease term (years)
Operating leases 5.8
Finance leases 6.4
Weighted-average discount rate
Operating leases 3.3%   
Finance leases 4.4%   

9. Goodwill and Other Intangible Assets
 
The changes in the carrying value of goodwill by reportable operating segments were as follows:
  Engineered Systems Fluids Refrigeration & Food Equipment Total
Balance at December 31, 2018 $ 1,623,660  $ 1,507,602  $ 546,066  $ 3,677,328 
Acquisitions —  97,817  —  97,817 
Held for sale —  (4,739) —  (4,739)
Foreign currency translation (1,460) 8,386  (55) 6,871 
Balance at March 31, 2019 $ 1,622,200  $ 1,609,066  $ 546,011  $ 3,777,277 

During the three months ended March 31, 2019, the Company recorded additions of $97,817 to goodwill as a result of the acquisition discussed in Note 4 — Acquisitions. As noted in Note 5 — Held for Sale, Disposed and Discontinued Operations, the Company classified Finder's assets and liabilities as held for sale as of March 31, 2019. As a result, the Fluids segment goodwill balance was reduced by $4,739.


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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The Company’s definite-lived and indefinite-lived intangible assets by major asset class were as follows:
March 31, 2019 December 31, 2018
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying Amount
Amortized intangible assets:
Customer intangibles $ 1,404,109  $ 648,177  $ 755,932  $ 1,395,742  $ 645,305  $ 750,437 
Trademarks 217,996  74,597  143,399  214,774  72,305  142,469 
Patents 160,240  129,692  30,548  144,302  128,254  16,048 
Unpatented technologies 155,481  89,379  66,102  155,380  85,560  69,820 
Distributor relationships 83,804  39,750  44,054  82,970  37,943  45,027 
Drawings & manuals 27,707  20,784  6,923  31,849  23,273  8,576 
Other 21,434  15,927  5,507  21,046  15,835  5,211 
Total 2,070,771  1,018,306  1,052,465  2,046,063  1,008,475  1,037,588 
Unamortized intangible assets:
Trademarks 96,671  —  96,671  96,668  —  96,668 
Total intangible assets, net $ 2,167,442  $ 1,018,306  $ 1,149,136  $ 2,142,731  $ 1,008,475  $ 1,134,256 

For the three months ended March 31, 2019 and 2018, amortization expense was $35,550 and $36,461, respectively, including acquisition-related intangible amortization of $35,155 and $35,889, respectively. 

10. Restructuring Activities

The Company's restructuring charges by segment were as follows:
  Three Months Ended March 31, 
  2019 2018
Engineered Systems $ 370  $ 1,375 
Fluids 1,119  2,051 
Refrigeration & Food Equipment 1,412  45 
Corporate 35  749 
Total $ 2,936  $ 4,220 
These amounts are classified in the Condensed Consolidated Statements of Earnings as follows:
Cost of goods and services $ 1,179  $ 2,339 
Selling, general and administrative expenses 1,757  1,881 
Total $ 2,936  $ 4,220 

The restructuring expenses of $2,936 incurred during the three months ended March 31, 2019 were related to two significant rightsizing restructuring programs initiated in 2018 comprised primarily of broad-based selling, general and administrative expense reduction and footprint consolidation initiatives designed to increase operating margin, enhance operations and position the Company for sustained growth and investment.

In 2019, the Company expects to incur charges of approximately $5 million related to the selling, general and administrative expense reduction initiative, $2 million of which was incurred during the three months ended March 31, 2019 and $3 million  of which the Company expects to incur during the remainder of 2019. In 2019 and 2020, the Company expects to incur total restructuring charges of approximately $10 million related to footprint consolidation initiatives, $1 million of which was incurred during the three months ended March 31, 2019 and $9 million of which the Company expects to incur in the second quarter of 2019 through 2020. Additional programs, beyond the scope of the announced programs, may be implemented during 2019 with related restructuring charges.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The $2,936 of restructuring charges incurred during the first quarter of 2019 primarily included the following items:
 
The Engineered Systems segment recorded $370 of restructuring charges related to programs focused on headcount reduction.  

The Fluids segment recorded $1,119 of restructuring charges principally related to headcount reductions and facility restructuring costs. 

The Refrigeration and Food Equipment segment recorded $1,412 of restructuring expense primarily due to headcount reductions and facility restructuring costs.

Corporate recorded $35 of restructuring charges primarily related to headcount reductions.

The Company’s severance and exit accrual activities were as follows:
  Severance Exit Total
Balance at December 31, 2018 $ 24,284  $ 3,880  $ 28,164 
Restructuring charges 1,941  995  2,936 
Payments (10,776) (424) (11,200)
Other, including foreign currency translation (754) (915) (1,669)
Balance at March 31, 2019 $ 14,695  $ 3,536  $ 18,231 


11. Borrowings

Borrowings consisted of the following:
  March 31, 2019 December 31, 2018
Short-term
Current portion of long-term debt and short-term borrowings $ 1,355  $ — 
Commercial paper 344,900  220,318 
Notes payable and current maturities of long-term debt $ 346,255  $ 220,318 

 
Carrying amount (1)
Principal March 31, 2019 December 31, 2018
Long-term
2.125% 7-year notes due December 1, 2020 (euro-denominated) 300,000  338,583  339,657 
4.30% 10-year notes due March 1, 2021 $ 450,000  449,293  449,200 
3.150% 10-year notes due November 15, 2025 $ 400,000  395,537  395,368 
1.25% 10-year notes due November 9, 2026 (euro-denominated) 600,000  670,021  672,103 
6.65% 30-year debentures due June 1, 2028 $ 200,000  199,080  199,054 
5.375% 30-year debentures due October 15, 2035 $ 300,000  295,873  295,811 
6.60% 30-year notes due March 15, 2038 $ 250,000  247,855  247,827 
5.375% 30-year notes due March 1, 2041 $ 350,000  343,946  343,877 
Other 779  763 
Total long-term debt 2,940,967  2,943,660 
Less long-term debt current portion —  — 
Net long-term debt $ 2,940,967  $ 2,943,660 
(1) Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discounts were
$15.4 million and $15.8 million as of March 31, 2019 and December 31, 2018, respectively. Total deferred debt issuance costs were $12.6 million and $13.0 million as of March 31, 2019 and December 31, 2018, respectively.

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The Company maintains a $1.0 billion five-year unsecured revolving credit facility (the "Credit Agreement") with a syndicate of banks which expires on November 10, 2020. The Company was in compliance with all covenants in the Credit Agreement and other long-term debt covenants at March 31, 2019 and had a coverage ratio of 9.7 to 1.0. The Company uses the Credit Agreement as liquidity back-up for its commercial paper program and has not drawn down any loans under the Credit Agreement and does not anticipate doing so. The Company generally uses commercial paper borrowings for general corporate purposes, funding of acquisitions and repurchases of its common stock.

As of March 31, 2019, the Company had approximately $142.4 million outstanding in letters of credit and performance and other guarantees which expire on various dates through 2028. These letters of credit are primarily maintained as security for insurance, warranty and other performance obligations. In general, we would only be liable for the amount of these guarantees in the event of default in the performance of our obligations.

12. Financial Instruments 

Derivatives 

The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations and certain commodity risks. In order to manage these risks, the Company has hedged portions of its forecasted sales and purchases to occur within the next twelve months that are denominated in non-functional currencies, with currency forward contracts designated as cash flow hedges. At March 31, 2019 and December 31, 2018, the Company had contracts with U.S. dollar equivalent notional amounts of $210,787 and $153,873, respectively, to exchange foreign currencies, principally the Pound Sterling, Chinese Yuan, Swedish Krona, Swiss Franc, and Canadian Dollar. The Company believes it is probable that all forecasted cash flow transactions will occur.

In addition, the Company had outstanding contracts with a total notional amount of $91,749 and $66,906 as of March 31, 2019 and December 31, 2018, respectively, that are not designated as hedging instruments. These instruments are used to reduce the Company's exposure for operating receivables and payables that are denominated in non-functional currencies. Gains and losses on these contracts are recorded in other (income) expense, net in the Condensed Consolidated Statements of Earnings.

The following table sets forth the fair values of derivative instruments held by the Company as of March 31, 2019 and December 31, 2018 and the balance sheet lines in which they are recorded:
Fair Value Asset (Liability)
March 31, 2019 December 31, 2018 Balance Sheet Caption
Foreign currency forward $ 3,996  $ 1,874  Prepaid / Other current assets
Foreign currency forward (637) (1,165) Other accrued expenses

For a cash flow hedge, the effective portion of the change in estimated fair value of a hedging instrument is recorded in accumulated other comprehensive loss (earnings) as a separate component of the Condensed Consolidated Statement of Stockholders' Equity and is reclassified into revenues and cost of goods and services in the Condensed Consolidated Statements of Earnings during the period in which the hedged transaction is recognized. The amount of gains or losses from hedging activity recorded in earnings is not significant, and the amount of unrealized gains and losses from cash flow hedges that are expected to be reclassified to earnings in the next twelve months is not significant; therefore, additional tabular disclosures are not presented. There are no amounts excluded from the assessment of hedge effectiveness and the Company's derivative instruments that are subject to credit risk contingent features were not significant.

The Company is exposed to credit loss in the event of nonperformance by counterparties to the financial instrument contracts held by the Company; however, nonperformance by these counterparties is considered unlikely as the Company’s policy is to contract with highly-rated, diversified counterparties.

The Company has designated the €600,000 and €300,000 of euro-denominated notes issued November 9, 2016 and December 4, 2013, respectively, as hedges of a portion of its net investment in euro-denominated operations. Changes in the value of the euro-denominated debt are recognized in foreign currency translation adjustments within other comprehensive earnings of the Condensed Consolidated Statements of Comprehensive Earnings to offset changes in the value of the net investment in euro-denominated operations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
Amounts recognized in other comprehensive earnings for the gains (losses) on net investment hedges were as follows:
Three Months Ended March 31, 
2019 2018
Gain (loss) on euro-denominated debt $ 3,557  $ (44,109)
Tax (expense) benefit (747) 9,263 
Net gain (loss) on net investment hedges, net of tax $ 2,810  $ (34,846)

Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018:
Level 2 Level 2
Assets:
Foreign currency cash flow hedges $ 3,996  $ 1,874 
Liabilities:
Foreign currency cash flow hedges 637  1,165 

In addition to fair value disclosure requirements related to financial instruments carried at fair value, accounting standards require interim disclosures regarding the fair value of all of the Company’s financial instruments.

The estimated fair value of long-term debt, net at March 31, 2019 and December 31, 2018, was $3,190,794 and $3,132,330, respectively, compared to the carrying value of $2,940,967 and $2,943,660, respectively. The estimated fair value of long-term debt is based on quoted market prices for similar instruments and is, therefore, classified as Level 2 within the fair value hierarchy.

The carrying values of cash and cash equivalents, trade receivables, accounts payable and notes payable are reasonable estimates of their fair values as of March 31, 2019, and December 31, 2018 due to the short-term nature of these instruments.

13. Income Taxes 

The effective tax rates for the three months ended March 31, 2019 and 2018 were 23.6% and 18.5%, respectively. The increase in the effective tax rate for the three months ended March 31, 2019 relative to the prior comparable period was predominantly driven by the exclusion of capital losses on assets held for sale of Finder under local tax law. Additionally, the effective tax rates for the three months ended March 31, 2019 and 2018 included discrete tax benefits principally from stock award exercises.  
 
Dover and its subsidiaries file tax returns in the U.S., including various state and local returns and in other foreign jurisdictions.  We believe adequate provision has been made for all income tax uncertainties. The Company is routinely audited by taxing authorities in its filing jurisdictions, and a number of these audits are currently underway. The Company believes that within the
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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
next twelve months uncertain tax positions may be resolved and statutes of limitations will expire, which could result in a decrease in the gross amount of unrecognized tax benefits of approximately zero to $12.2 million.

14. Equity Incentive Program

The Company typically grants equity awards annually at its regularly scheduled first quarter meeting of the Compensation Committee of the Board of Directors. During the three months ended March 31, 2019, the Company issued stock-settled appreciation rights ("SARs") covering 610,979 shares, performance share awards of 34,402 and restricted stock units ("RSUs") of 121,560.

The Company uses the Black-Scholes option pricing model to determine the fair value of each SAR on the date of grant. Expected volatilities are based on Dover's stock price history, including implied volatilities from traded options on Dover stock. The Company uses historical data to estimate SAR exercise and employee termination patterns within the valuation model. The expected life of SARs granted is derived from the output of the option valuation model and represents the average period of time that SARs granted are expected to be outstanding. The interest rate for periods within the contractual life of the SARs is based on the U.S. Treasury yield curve in effect at the time of grant.

The range of assumptions used in determining the fair value of the SARs awarded during the respective periods were as follows:
SARs
  2019 2018
Risk-free interest rate 2.51  % 2.58  % - 2.87  %
Dividend yield 2.13  % 1.99  % - 2.43  %
Expected life (years) 5.6 5.6 - 5.7
Volatility 22.35  % 20.95  % - 21.20  %
Grant price
$91.20  $79.75  - $82.09 
Fair value per share at date of grant
$17.55  $14.58  - $15.41 

The performance share awards granted in 2019 and 2018 are considered performance condition awards as attainment is based on Dover's performance relative to established internal metrics. The fair value of these awards was determined using Dover's closing stock price on the date of grant. The expected attainment of the internal metrics for these awards is analyzed each reporting period, and the related expense is adjusted based on expected attainment, if that attainment differs from previous estimates. The cumulative effect on current and prior periods of a change in attainment is recognized in selling, general and administrative expenses in the Condensed Consolidated Statements of Earnings in the period of change.  

The fair value and average attainment used in determining stock-based compensation cost for the performance shares issued in 2019 and 2018 is as follows for the three months ended March 31, 2019:
  2019 2018
Fair value per share at date of grant
$91.20  $79.75  $82.09 
Average attainment rate reflected in expense 211.68%    267.91%   

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The Company also has granted RSUs, and the fair value of these awards was determined using Dover's closing stock price on the date of grant.

Stock-based compensation is reported within selling, general and administrative expenses of continuing operations in the Condensed Consolidated Statements of Earnings. The following table summarizes the Company’s compensation expense relating to all stock-based incentive plans:
  Three Months Ended March 31, 
  2019 2018
Pre-tax stock-based compensation expense (continuing) $ 8,182  $ 6,745 
Tax benefit (1,048) (1,496)
Total stock-based compensation expense, net of tax $ 7,134  $ 5,249 

Stock-based compensation expense attributable to Apergy employees for the three months ended March 31, 2018 was $569. These costs are reported within earnings from discontinued operations in the Condensed Consolidated Statement of Earnings.

15. Commitments and Contingent Liabilities

Litigation

Certain of the Company’s subsidiaries are involved in legal proceedings relating to the cleanup of waste disposal sites identified under federal and state statutes that provide for the allocation of such costs among "potentially responsible parties." In each instance, the extent of the Company’s liability appears to be very small in relation to the total projected expenditures and the number of other "potentially responsible parties" involved and is anticipated to be immaterial to the Company. In addition, certain of the Company’s subsidiaries are involved in ongoing remedial activities at certain current and former plant sites, in cooperation with regulatory agencies, and appropriate reserves have been established. At March 31, 2019 and December 31, 2018, the Company has reserves totaling $31,555 and $31,797, respectively, for environmental and other matters, including private party claims for exposure to hazardous substances that are probable and estimable.

The Company and certain of its subsidiaries are also parties to a number of other legal proceedings incidental to their businesses. These proceedings primarily involve claims by private parties alleging injury arising out of use of the Company’s products, patent infringement, employment matters, and commercial disputes. Management and legal counsel, at least quarterly, review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and currently accrued to-date, and the availability and extent of insurance coverage. The Company has reserves for legal matters that are probable and estimable and not otherwise covered by insurance, and at March 31, 2019 and December 31, 2018, these reserves were not significant. While it is not possible at this time to predict the outcome of these legal actions, in the opinion of management, based on the aforementioned reviews, the Company is not currently involved in any legal proceedings which, individually or in the aggregate, could have a material effect on its financial position, results of operations, or cash flows.

Warranty Accruals

Estimated warranty program claims are provided for at the time of sale of the Company's products. Amounts provided for are based on historical costs and adjusted for new claims and are included within other accrued expenses and other liabilities in the Condensed Consolidated Balance Sheet. The changes in the carrying amount of product warranties through March 31, 2019 and 2018, were as follows:
  2019 2018
Beginning Balance, December 31 of the Prior Year $ 50,073  $ 59,403 
Provision for warranties 13,955  12,447 
Settlements made (14,993) (14,833)
Other adjustments, including acquisitions and currency translation (792) 848 
Ending Balance, March 31 $ 48,243  $ 57,865 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
16. Employee Benefit Plans

Retirement Plans

The Company offers defined contribution retirement plans which cover the majority of its U.S. employees, as well as employees in certain other countries. In addition, the Company sponsors qualified defined benefit pension plans covering certain employees of the Company and its subsidiaries. The plans’ benefits are generally based on years of service and employee compensation. The Company also provides to certain management employees, through non-qualified plans, supplemental retirement benefits in excess of qualified plan limits imposed by federal tax law.

The tables below set forth the components of the Company’s net periodic (income) expense relating to retirement benefit plans. The service cost component is recognized within selling, general and administrative expenses and cost of goods and services, depending on the functional area of the underlying employees included in the plans, and the non-operating components of pension costs are included within other income, net in the Condensed Consolidated Statements of Earnings. The amounts recorded to discontinued operations represent the net periodic benefit expense for several non-U.S. qualified and U.S. non-qualified plans that were transferred to Apergy at the spin-off date of May 9, 2018.

Qualified Defined Benefits
  Three Months Ended March 31, 
  U.S. Plan  Non-U.S. Plans
  2019 2018 2019 2018
Service cost $ 1,754  $ 2,984  $ 1,545  $ 1,577 
Interest cost 4,756  5,102  1,241  1,378 
Expected return on plan assets (8,534) (10,211) (1,517) (2,091)
Amortization:
Prior service cost (credit) 76  87  (58) (115)
Recognized actuarial loss —  1,931  816  803 
Transition obligation —  —  — 
Net periodic (income) expense (1,948) (107) 2,027  1,553 
Less: Discontinued operations —  677  —  174 
Net periodic (income) expense - Continuing operations $ (1,948) $ (784) $ 2,027  $ 1,379 

Non-Qualified Supplemental Benefits
Three Months Ended March 31, 
2019 2018
Service cost $ 486  $ 695 
Interest cost 668  893 
Amortization:
Prior service cost 703  963 
Recognized actuarial gain (570) (255)
Net periodic expense $ 1,287  $ 2,296 
Less: Discontinued operations —  254 
Net periodic expense - Continuing operations $ 1,287  $ 2,042 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
Post-Retirement Benefit Plans

The Company also maintains post-retirement benefit plans, although these plans are closed to new entrants. The supplemental and post-retirement benefit plans are supported by the general assets of the Company. The following table sets forth the components of the Company’s net periodic expense relating to its post-retirement benefit plans:
  Three Months Ended March 31, 
  2019 2018
Service cost $ $
Interest cost 78  73 
Amortization:
Prior service cost
Recognized actuarial gain (18) (8)
Net periodic expense $ 68  $ 76 

The total amount amortized out of accumulated other comprehensive earnings into net periodic pension and post-retirement expense totaled $952 and $3,410 for the three months ended March 31, 2019 and 2018, respectively.

Defined Contribution Retirement Plans

The Company also offers defined contribution retirement plans which cover the majority of its U.S. employees, as well as employees in certain other countries. The Company’s expense relating to defined contribution plans were $12,906 and $12,870 for the three months ended March 31, 2019 and 2018, respectively.

17. Other Comprehensive Earnings 

The amounts recognized in other comprehensive earnings were as follows:
Three Months Ended  Three Months Ended 
  March 31, 2019 March 31, 2018
  Pre-tax Tax Net of tax Pre-tax Tax Net of tax
Foreign currency translation adjustments  $ 49,786  $ (747) $ 49,039  $ 43,045  $ 9,263  $ 52,308 
Pension and other post-retirement benefit plans 952  (205) 747  3,410  (728) 2,682 
Changes in fair value of cash flow hedges  2,993  (629) 2,364  1,404  (295) 1,109 
Total other comprehensive earnings   $ 53,731  $ (1,581) $ 52,150  $ 47,859  $ 8,240  $ 56,099 

Total comprehensive earnings were as follows:
Three Months Ended March 31,
2019 2018
Net earnings $ 105,705  $ 131,435 
Other comprehensive earnings  52,150  56,099 
Comprehensive earnings $ 157,855  $ 187,534 

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
Amounts reclassified from accumulated other comprehensive loss to earnings during the three months ended March 31, 2019 and 2018 were as follows:
Three Months Ended March 31,
2019 2018
Foreign currency translation:
Reclassification of foreign currency translation losses to earnings for assets held for sale $ 25,339  $ — 
Tax benefit —  — 
Net of tax $ 25,339  $ — 
Pension and other postretirement benefit plans:
Amortization of actuarial losses $ 228  $ 2,471 
Amortization of prior service costs 724  939 
Total before tax 952  3,410 
Tax benefit (205) (728)
Net of tax $ 747  $ 2,682 
Cash flow hedges:
Net gains reclassified into earnings  $ (291) $ (320)
Tax provision  61  67 
Net of tax $ (230) $ (253)

The reclassification of foreign currency translation losses to earnings relates to the Finder assets and liabilities held for sale. See Note 5 — Held for Sale, Disposed and Discontinued Operations for further details.

The Company recognizes the amortization of net actuarial gains and losses and prior service costs in other income, net within the Condensed Consolidated Statements of Earnings.

Cash flow hedges consist mainly of foreign currency forward contracts. The Company recognizes the realized gains and losses on its cash flow hedges in the same line item as the hedged transaction, such as revenue, cost of goods and services, or selling, general and administrative expenses. 

18. Segment Information

The Company categorizes its operating companies into three distinct reportable segments. Segment financial information and a reconciliation of segment results to consolidated results is as follows:

Engineered Systems segment is comprised of two platforms, Printing & Identification and Industrials, and is focused on the design, manufacture and service of critical equipment and components serving the fast-moving consumer goods, digital textile printing, vehicle service, environmental solutions and industrial end markets.

Fluids segment, serving the Fueling & Transport, Pumps and Process Solutions end markets, is focused on the safe handling of critical fluids, and providing critical components to the retail fueling, chemical, hygienic, oil and gas, power generation and industrial markets.

Refrigeration & Food Equipment segment is a provider of innovative and energy efficient equipment and systems serving the commercial refrigeration and food equipment end markets.

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
Segment financial information and a reconciliation of segment results to consolidated results is as follows:
  Three Months Ended March 31, 
  2019 2018
Revenue: 
Engineered Systems  $ 687,191  $ 671,626 
Fluids  703,224  628,098 
Refrigeration & Food Equipment  334,643  338,235 
Intra-segment eliminations (301) (288)
Total consolidated revenue  $ 1,724,757  $ 1,637,671 
Earnings from continuing operations: 
Segment earnings: (1)
Engineered Systems  $ 123,074  $ 102,066 
Fluids (2)
52,221  67,348 
Refrigeration & Food Equipment  24,807  29,182 
Total segment earnings  200,102  198,596 
Corporate expense / other (3)
30,866  30,763 
Interest expense  31,808  35,640 
Interest income (890) (2,058)
Earnings before provision for income taxes and discontinued operations  138,318  134,251 
Provision for income taxes  32,613  24,841 
Earnings from continuing operations  $ 105,705  $ 109,410 
(1)  Segment earnings includes non-operating income and expense directly attributable to the segments.
(2) The three months ended March 31, 2019 includes a $46,946 loss on assets held for sale for Finder. Excluding this loss, Fluids segment earnings was $99,167.
(3) Certain expenses are maintained at the corporate level and not allocated to the segments. These expenses include executive and functional compensation costs, non-service pension costs, non-operating insurance expenses, shared business services costs and various administrative expenses relating to the corporate headquarters.

19. Share Repurchases

Under the January 2015 authorization which expired on January 9, 2018, the Company repurchased 440,608 shares of common stock during the three months ended March 31, 2018 at a total cost of $44,977, or $102.08 per share. There were 5,271,168 shares available for repurchase under this authorization upon expiration.

In February 2018, the Company's Board of Directors approved a new standing share repurchase authorization, whereby the Company may repurchase up to 20 million shares of its common stock through December 31, 2020. This share repurchase authorization replaced the January 2015 share repurchase authorization. There were no repurchases under the February 2018 authorization during the three months ended March 31, 2019 and 2018.  

As of March 31, 2019, 9,703,666 shares remain authorized for repurchase under the February 2018 share repurchase authorization.

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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
20. Earnings per Share

The following table sets forth a reconciliation of the information used in computing basic and diluted earnings per share:
  Three Months Ended March 31, 
  2019 2018
Earnings from continuing operations $ 105,705  $ 109,410 
Earnings from discontinued operations, net —  22,025 
Net earnings $ 105,705  $ 131,435 
Basic earnings per common share:
Earnings from continuing operations $ 0.73  $ 0.71 
Earnings from discontinued operations, net $ —  $ 0.14 
Net earnings $ 0.73  $ 0.85 
Weighted average shares outstanding 145,087,000  154,520,000 
Diluted earnings per common share:
Earnings from continuing operations $ 0.72  $ 0.70 
Earnings from discontinued operations, net $ —  $ 0.14 
Net earnings $ 0.72  $ 0.84 
Weighted average shares outstanding 146,911,000  157,090,000 

The following table is a reconciliation of the share amounts used in computing earnings per share:
  Three Months Ended March 31, 
  2019 2018
Weighted average shares outstanding - Basic 145,087,000  154,520,000 
Dilutive effect of assumed exercise of SARs and vesting of performance shares and RSUs 1,824,000  2,570,000 
Weighted average shares outstanding - Diluted 146,911,000  157,090,000 

Diluted earnings per share amounts are computed using the weighted average number of common shares outstanding and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of SARs and vesting of performance shares and RSUs, as determined using the treasury stock method.  

The weighted average number of anti-dilutive potential common shares excluded from the calculation above were approximately 42,000 and 13,000 for the three months ended March 31, 2019 and 2018, respectively. 

21. Recent Accounting Pronouncements

Recently Issued Accounting Standards

The following standards, issued by the Financial Accounting Standards Board ("FASB"), will, or are expected to, result in a change in practice and/or have a financial impact to the Company’s Consolidated Financial Statements:

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The guidance is effective for interim and annual periods for the Company on January 1, 2020, with early adoption permitted. Management has not yet completed its assessment of the impact of the new standard on the Company’s Consolidated Financial Statements. Currently, the Company believes that the most notable impact of this ASU may relate to its processes around the assessment of the adequacy of its allowance for doubtful accounts on trade accounts receivable and the recognition of credit losses.


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DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The Company early adopted this guidance prospectively beginning on January 1, 2019. The adoption of this ASU did not have a material impact on the Company's Consolidated Financial Statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU provides new guidance about income statement classification and eliminates the requirement to separately measure and report hedge ineffectiveness. The entire change in fair value for qualifying hedge instruments included in the effectiveness will be recorded in Other Comprehensive Income ("OCI") and amounts deferred in OCI will be reclassified to earnings in the same income statement line item in which the earnings effect of the hedged item is reported. The Company adopted this guidance on January 1, 2019. The adoption of this ASU did not have a material impact on the Company's Consolidated Financial Statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amends existing guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. This ASU also provides clarifications surrounding the presentation of the effects of leases in the income statement and statement of cash flows. The Company adopted this guidance on January 1, 2019.

The Company commenced its assessment of ASU 2016-02 in the second half of 2017 and developed a project plan to guide the implementation. The Company completed this project plan, in which it analyzed the ASU's impact on its leases, surveyed the Company's businesses, assessed the portfolio of leases, compiled a central repository of active leases, and established a future lease process to keep the lease accounting portfolio up to date. The Company evaluated the key policy elections and considerations under the standard and completed the internal policy documentation and training to address the new standard requirements. The Company also implemented a new lease accounting software solution to support the new reporting requirements. The Company adopted this new guidance using the updated modified transition method allowed per ASU 2018-11. Upon adoption on January 1, 2019, total assets and liabilities increased due to the recording of right-of-use assets and lease liabilities amounting to approximately $163 million.  See Note 8 — Leases for further details.