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EX-32 - EX - 32 - DOVER Corpa2015033110-qexhibit32.htm
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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, 2015

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

Dover Corporation
(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b-2 of the Exchange Act.
Large accelerated filer þ
 
Accelerated filer o
Non-accelerated filer o
(Do not check if smaller reporting company)
Smaller reporting company 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 14, 2015 was 160,382,513.



Dover Corporation
Form 10-Q
Table of Contents

Page
 
 
 
 
 
 
 
 
 
 
 







Item 1. Financial Statements

DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share figures)
(unaudited)

 
Three Months Ended March 31,
 
2015
 
2014
Revenue
$
1,715,501

 
$
1,802,570

Cost of goods and services
1,088,342

 
1,094,710

Gross profit
627,159

 
707,860

Selling and administrative expenses
434,634

 
433,404

Operating earnings
192,525

 
274,456

Interest expense, net
32,037

 
32,655

Other (income) expense, net
(4,187
)
 
191

Earnings before provision for income taxes and discontinued operations
164,675

 
241,610

Provision for income taxes
47,485

 
71,569

Earnings from continuing operations
117,190

 
170,041

Earnings (loss) from discontinued operations, net
92,320

 
(9,903
)
Net earnings
$
209,510

 
$
160,138

 
 
 
 
Earnings per share from continuing operations:
 
 
 
Basic
$
0.72

 
$
1.00

Diluted
$
0.72

 
$
0.99

 
 
 
 
Earnings (loss) per share from discontinued operations:
 
 
 
Basic
$
0.57

 
$
(0.06
)
Diluted
$
0.57

 
$
(0.06
)
 
 
 
 
Net earnings per share:
 
 
 
Basic
$
1.30

 
$
0.94

Diluted
$
1.28

 
$
0.93

 
 
 
 
Dividends paid per common share
$
0.40

 
$
0.375

 

See Notes to Condensed Consolidated Financial Statements



1


DOVER CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(in thousands)
(unaudited)

 
Three Months Ended March 31,
 
2015
 
2014
 
 
 
 
Net earnings
$
209,510

 
$
160,138

 
 
 
 
Other comprehensive (loss) earnings, net of tax
 
 
 
Foreign currency translation adjustments:
 
 
 
Foreign currency translation losses during period
(83,829
)
 
(17,373
)
Reclassification of foreign currency translation gains to earnings upon sale of subsidiaries
(280
)
 

Total foreign currency translation
(84,109
)
 
(17,373
)
 
 
 
 
Pension and other postretirement benefit plans:
 
 
 
Amortization of actuarial losses included in net periodic pension cost
2,598

 
1,442

Amortization of prior service costs included in net periodic pension cost
1,228

 
1,392

Total pension and other postretirement benefit plans
3,826

 
2,834

 
 
 
 
Changes in fair value of cash flow hedges:
 
 
 
Unrealized net gains (losses) arising during period
1,158

 
(474
)
Net gains reclassified into earnings
(99
)
 
(139
)
Total cash flow hedges
1,059

 
(613
)
 
 
 
 
Other
214

 
(126
)
 
 
 
 
Other comprehensive losses
(79,010
)
 
(15,278
)
 
 
 
 
Comprehensive earnings
$
130,500

 
$
144,860


See Notes to Condensed Consolidated Financial Statements.


2


DOVER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

 
March 31, 2015
 
December 31, 2014
Current assets:
 
 
 
Cash and cash equivalents
$
538,486

 
$
681,581

Receivables, net of allowances of $18,116 and $18,894
1,133,213

 
1,186,746

Inventories, net
861,952

 
863,737

Prepaid and other current assets
72,222

 
101,482

Deferred tax assets
65,678

 
63,276

Total current assets
2,671,551

 
2,896,822

Property, plant and equipment, net
821,736

 
837,069

Goodwill
3,464,041

 
3,491,557

Intangible assets, net
1,309,135

 
1,369,520

Other assets and deferred charges
164,813

 
168,246

Assets of discontinued operations
215,429

 
327,171

Total assets
$
8,646,705

 
$
9,090,385

 
 
 
 
Current liabilities:
 

 
 

Notes payable and current maturities of long-term debt
$
625,502

 
$
777,956

Accounts payable
584,100

 
615,332

Accrued compensation and employee benefits
189,174

 
272,822

Accrued insurance
97,318

 
95,896

Other accrued expenses
253,462

 
266,277

Federal and other taxes on income
32,498

 
11,071

Total current liabilities
1,782,054

 
2,039,354

Long-term debt
2,217,874

 
2,253,041

Deferred income taxes
578,438

 
564,207

Other liabilities
452,518

 
482,340

Liabilities of discontinued operations
36,711

 
50,718

Stockholders' equity:
 

 
 

Total stockholders' equity
3,579,110

 
3,700,725

Total liabilities and stockholders' equity
$
8,646,705

 
$
9,090,385



See Notes to Condensed Consolidated Financial Statements


3


DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)

 
Common Stock $1 Par Value
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Earnings (Loss)
 
Treasury Stock
 
Total Stockholders' Equity
Balance at December 31, 2014
$
255,893

 
$
900,833

 
$
7,074,782

 
$
(158,931
)
 
$
(4,371,852
)
 
$
3,700,725

Net earnings

 

 
209,510

 

 

 
209,510

Dividends paid

 

 
(64,442
)
 

 

 
(64,442
)
Common stock issued for the exercise of stock options and SARs
116

 
(1,019
)
 

 

 

 
(903
)
Tax benefit from the exercise of stock options and SARs

 
(102
)
 

 

 

 
(102
)
Share-based compensation expense

 
13,387

 

 

 

 
13,387

Common stock acquired

 

 

 

 
(200,055
)
 
(200,055
)
Other comprehensive loss, net of tax

 

 

 
(79,010
)
 

 
(79,010
)
Balance at March 31, 2015
$
256,009

 
$
913,099

 
$
7,219,850

 
$
(237,941
)
 
$
(4,571,907
)
 
$
3,579,110

 
Preferred Stock: $100 par value per share; 100,000 shares authorized; no shares issued.


See Notes to Condensed Consolidated Financial Statements


4


DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2015
 
2014
Operating Activities of Continuing Operations
 
 
 
Net earnings
$
209,510

 
$
160,138

 
 
 
 
Adjustments to reconcile net earnings to cash from operating activities:
 
 
 
(Earnings) loss from discontinued operations, net
(92,320
)
 
9,903

Depreciation and amortization
80,182

 
75,873

Share-based compensation
13,387

 
8,501

Cash effect of changes in assets and liabilities:
 
 
 
Accounts receivable
27,737

 
(101,608
)
Inventories
(18,861
)
 
(48,222
)
Prepaid expenses and other assets
(2,297
)
 
(8,847
)
Accounts payable
(18,876
)
 
40,999

Accrued compensation and employee benefits
(98,493
)
 
(95,814
)
Accrued expenses and other liabilities
(14,198
)
 
(9,929
)
Accrued and deferred taxes, net
55,843

 
7,594

Other, net
(10,282
)
 
(10,227
)
Net cash provided by operating activities of continuing operations
131,332

 
28,361

 
 
 
 
Investing Activities of Continuing Operations
 

 
 

Additions to property, plant and equipment
(27,956
)
 
(32,695
)
Acquisitions (net of cash and cash equivalents acquired)
(6,500
)
 
(109,870
)
Proceeds from the sale of property, plant and equipment
6,041

 
1,198

Proceeds from the sale of businesses
185,000

 

Other

 
(4,236
)
Net cash provided by (used in) investing activities of continuing operations
156,585

 
(145,603
)
 
 
 
 
Financing Activities of Continuing Operations
 

 
 

Cash received from Knowles Corporation, net of cash distributed

 
359,197

Purchase of common stock
(200,055
)
 
(292,565
)
Proceeds from exercise of share-based awards, including tax benefits
2,786

 
4,152

Payments to settle employee tax obligations on exercise of share-based awards
(2,361
)
 
(6,326
)
Dividends paid to stockholders
(64,442
)
 
(63,985
)
Change in commercial paper and notes payable, net
(152,500
)
 
(152,200
)
Reduction of long-term debt
(31
)
 
(47
)
Net cash used in financing activities of continuing operations
(416,603
)
 
(151,774
)
 
 
 
 
Cash Flows from Discontinued Operations
 

 
 

Net cash provided by (used in) operating activities of discontinued operations
2,717

 
(31,363
)
Net cash provided by (used in) investing activities of discontinued operations
800

 
(13,773
)
Net cash provided by (used in) discontinued operations
3,517

 
(45,136
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(17,926
)
 
(3,691
)
 
 
 
 
Net decrease in cash and cash equivalents
(143,095
)
 
(317,843
)
Cash and cash equivalents at beginning of period
681,581

 
803,882

Cash and cash equivalents at end of period
$
538,486

 
$
486,039


See Notes to Condensed Consolidated Financial Statements

5

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)


1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, in accordance with Securities and Exchange Commission (“SEC”) rules for interim periods, do not include all of the information and notes for complete financial statements as required by accounting principles generally accepted in the United States of America. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Dover Corporation (“Dover” or the “Company”) Annual Report on Form 10-K for the year ended December 31, 2014, which provides a more complete understanding of the Company’s accounting policies, financial position, operating results, business, properties, and other matters. The year-end condensed consolidated balance sheet was derived from audited financial statements. Certain amounts in the prior year have been reclassified to conform to the current year presentation.  

As discussed in Note 4 Discontinued Operations, the Company reclassified two businesses within the Engineered Systems segment to discontinued operations in the fourth quarter of 2014 based on its intention to divest these businesses. Therefore, the Company has classified the results of operations, cash flows, and related assets and liabilities for these businesses to discontinued operations for all periods presented.

It is the opinion of management that these financial statements reflect all adjustments necessary for a fair statement of the interim results. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year.

2. 2014 Spin-off of Knowles Corporation ("Knowles")

On February 28, 2014, Dover completed the distribution of Knowles to its stockholders. The transaction was completed through the pro rata distribution of 100% of the common stock of Knowles to Dover's shareholders of record as of the close of business on February 19, 2014. Each Dover shareholder received one share of Knowles common stock for every two shares of Dover common stock held as of the record date.

The following is a summary of the assets and liabilities distributed to Knowles as part of the separation on February 28, 2014:
Assets:
 
Cash and cash equivalents
$
40,045

Other current assets
340,945

Non-current assets
1,678,820

 
$
2,059,810

 
 
Liabilities:
 
Current liabilities
$
252,673

Non-current liabilities
383,940

 
$
636,613

 
 
Net assets distributed to Knowles Corporation
$
1,423,197


Knowles incurred $100,000 of borrowings under its revolving credit facility and $300,000 of borrowings under its term loan facility to finance a cash payment of $400,000 to Dover immediately prior to the distribution. Dover received total net cash of $359,955
upon separation, of which $359,197 was received in the first quarter of 2014, which reflects cash held by Knowles on the distribution date and retained by it in connection with its separation from Dover. Dover utilized the net proceeds from Knowles to pay down commercial paper and to repurchase shares of its common stock in the first quarter of 2014.

In addition to the net assets reflected above, the Company also allocated approximately $26,695 of accumulated other comprehensive earnings to Knowles, relating primarily to foreign currency translation gains, offset by unrecognized losses on pension obligations. Also, the Company was required to reallocate a portion of its goodwill from continuing operations to a reporting unit included in the Knowles distribution.

The historical results of Knowles, 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 4 Discontinued Operations.


6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

3. Acquisitions

During the three months ended March 31, 2015 the Company acquired a product line in the Refrigeration & Food Equipment segment for a net cash consideration of $6,500. The Company assigned $1,932 to goodwill, $2,500 to customer intangibles, and $300 to other intangibles. Useful lives for customer and other intangibles were 7 years and 3 years, respectively. The goodwill identified by this acquisition reflects the benefits expected to be derived from product line expansion and operational synergies. Upon consummation of the acquisition, this business is now wholly-owned by Dover.

The Company has substantially completed the purchase price allocations for the 2015 acquisition.  However, if additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), including through asset appraisals and learning more about the newly acquired business, the Company will refine its estimates of fair value to allocate the purchase price more accurately; any such revisions are not expected to be significant.

The unaudited condensed consolidated statements of earnings include the results of this business from the date of acquisition.  

Pro Forma Information

The following unaudited pro forma information illustrates the impact of both 2015 and 2014 acquisitions on the Company’s revenue and earnings from continuing operations for the three months ended March 31, 2015 and 2014. In 2014, the Company acquired Heidelberg CSAT GmbH, MS Printing Solutions, Timberline Manufacturing Company, WellMark Holdings, Inc., SweatMiser, and Liquip International for total consideration of $366,532, and Accelerated Companies for consideration of $435,722.
 
The 2015 and 2014 pro forma information assumes that the 2015 and 2014 acquisitions had taken place at the beginning of the prior year. Pro forma earnings are also adjusted to reflect the comparable impact of additional depreciation and amortization expense (net of tax) resulting from the fair value measurement of tangible and intangible assets relating to 2015 and 2014 acquisitions.
 
Three Months Ended March 31,
 
2015
 
2014
Revenue from continuing operations:
 
 
 
As reported
$
1,715,501

 
$
1,802,570

Pro forma
1,716,008

 
1,891,612

Earnings from continuing operations:
 
 
 
As reported
$
117,190

 
$
170,041

Pro forma (1)
123,313

 
176,221

Basic earnings per share from continuing operations:
 
 
 
As reported
$
0.72

 
$
1.00

Pro forma (1)
0.76

 
1.04

Diluted earnings per share from continuing operations:
 
 
 
As reported
$
0.72

 
$
0.99

Pro forma (1)
0.76

 
1.02

(1)
For pro forma presentation purposes, the 2015 pro forma earnings amount excludes certain one-time adjustments made in 2015 for 2014 acquisitions, since as noted above, the pro forma information assumes that the 2014 acquisitions had taken place at the beginning of 2013.

4. Discontinued Operations

The results of discontinued operations for the three months ended March 31, 2015 and March 31, 2014 reflect the net earnings of certain businesses held for sale, including Datamax O'Neil and Sargent Aerospace, two businesses with the Engineered Systems segment which were reclassified to discontinued operations in the fourth quarter of 2014. The results for the three months ended March 31, 2014 also include the historical results of Knowles prior to its distribution on February 28, 2014. Costs incurred by Dover to complete the spin-off of Knowles totaled $25,760 for the three months ended March 31, 2014, which are also reflected in the results of discontinued operations. See also Note 2 2014 Spin-off of Knowles Corporation.

On March 2, 2015, the Company completed the sale of Datamax O'Neil for total proceeds of $185,000. This sale resulted in a net gain on sale of $87,354. The Company expects to complete the sale of Sargent Aerospace in the second quarter of 2015.


7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

Summarized results of the Company’s discontinued operations are as follows:
 
Three Months Ended March 31,
 
2015
 
2014
Revenue
$
64,495

 
$
283,680

 
 
 
 
Gain on sale, net of tax
87,354

 

 
 
 
 
Earnings (loss) from operations before taxes
8,980

 
(7,842
)
Provision for income taxes
(4,014
)
 
(2,061
)
Earnings (loss) from operations, net of tax
4,966

 
(9,903
)
 
 
 
 
Earnings (loss) from discontinued operations, net of tax
$
92,320

 
$
(9,903
)

Assets and liabilities of discontinued operations are summarized below:
 
March 31, 2015
 
December 31, 2014
Assets of Discontinued Operations:
 
 
 
Accounts receivable
$
28,178

 
$
46,691

Inventories, net
43,624

 
58,401

Prepaid and other current assets
4,971

 
8,571

       Total current assets
76,773

 
113,663

Property, plant and equipment, net
27,744

 
31,573

Goodwill and intangible assets, net
110,912

 
181,798

Other assets and deferred charges

 
137

Total assets
$
215,429

 
$
327,171

 
 
 
 
Liabilities of Discontinued Operations:
 

 
 

Accounts payable
$
15,505

 
$
21,199

Other current liabilities
6,111

 
17,675

       Total current liabilities
21,616

 
38,874

Deferred income taxes
14,870

 
8,752

Other liabilities
225

 
3,092

Total liabilities
$
36,711

 
$
50,718


At March 31, 2015, the assets and liabilities of discontinued operations primarily relate to Sargent Aerospace, which was held for sale on that date. At December 31, 2014, the assets and liabilities of discontinued operations relate to Sargent Aerospace and Datamax O'Neil, which was sold in the first quarter of 2015.

5. Inventories, net
 
March 31, 2015
 
December 31, 2014
Raw materials
$
346,979

 
$
352,016

Work in progress
154,759

 
147,715

Finished goods
483,924

 
483,912

Subtotal
985,662

 
983,643

Less reserves
(123,710
)
 
(119,906
)
Total
$
861,952

 
$
863,737



8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

6. Property, Plant and Equipment, net
 
March 31, 2015
 
December 31, 2014
Land
$
53,115

 
$
55,076

Buildings and improvements
532,303

 
537,474

Machinery, equipment and other
1,694,208

 
1,698,638

 
2,279,626

 
2,291,188

Less accumulated depreciation
(1,457,890
)
 
(1,454,119
)
Total
$
821,736

 
$
837,069


7. Goodwill and Other Intangible Assets

The following table provides the changes in carrying value of goodwill by segment for the three months ended March 31, 2015:
 
Energy
 
Engineered Systems
 
Fluids
 
Refrigeration & Food Equipment
 
Total
Balance at December 31, 2014
$
1,048,735

 
$
1,270,178

 
$
609,663

 
$
562,981

 
$
3,491,557

Acquisitions

 

 

 
1,932

 
1,932

Purchase price adjustments
7,390

 

 

 

 
7,390

Foreign currency translation and other
(5,259
)
 
(14,124
)
 
(14,584
)
 
(2,871
)
 
(36,838
)
Balance at March 31, 2015
$
1,050,866

 
$
1,256,054

 
$
595,079

 
$
562,042

 
$
3,464,041

 
During the three months ended March 31, 2015, the Company recorded adjustments totaling $7,390 to goodwill relating to the finalization of the purchase price allocation to assets acquired and liabilities assumed for the 2014 acquisition of Accelerated Companies. The Company will continue to refine its estimates of fair value to allocate the purchase price more accurately; however, any such revisions are not expected to be significant.

Accounting Standards Codification ("ASC") 350, “Intangibles - Goodwill and Other Intangibles” provides guidance on an entity's subsequent measurement and recognition of goodwill and other intangibles, including required impairment testing. Dover performs its annual impairment testing in the fourth quarter; however, it is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. It has considered the economic environments in which its businesses operate, particularly the Energy segment due to the recent weakening of the oil and gas markets. The Company has determined that no triggering event has occurred which would require impairment testing at this time. Dover will continue to assess the economic environment throughout the year to determine whether a triggering event has occurred, thus requiring impairment testing.



9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset:
 
March 31, 2015
 
December 31, 2014
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Gross Carrying
Amount
 
Accumulated
Amortization
Amortized intangible assets:
 
 
 
 
 
 
 
Trademarks
$
136,706

 
$
36,572

 
$
138,650

 
$
34,097

Patents
148,411

 
109,239

 
150,404

 
108,484

Customer Intangibles
1,410,468

 
510,376

 
1,429,906

 
484,449

Unpatented Technologies
90,897

 
48,160

 
92,480

 
45,812

Drawings & Manuals
34,584

 
13,416

 
36,377

 
13,087

Distributor Relationships
64,614

 
35,185

 
64,614

 
34,377

Other
24,293

 
13,559

 
24,214

 
12,737

Total
1,909,973

 
766,507

 
1,936,645

 
733,043

Unamortized intangible assets:
 
 
 
 
 
 
 
Trademarks
165,669

 
 
 
165,918

 
 
Total intangible assets, net
$
1,309,135

 
 
 
$
1,369,520

 
 

Amortization expense totaled $39,974 and $38,587 for the three months ended March 31, 2015 and 2014, respectively.

8. Restructuring Activities

The following table details restructuring charges incurred by segment for the periods presented:
 
Three Months Ended March 31,
 
2015
 
2014
Energy
$
17,822

 
$
71

Engineered Systems
4,355

 
1,785

Fluids
2,097

 
905

Refrigeration & Food Equipment
(282
)
 

Corporate
111

 
509

Total
$
24,103

 
$
3,270

 
 
 
 
These amounts are classified in the unaudited Condensed Consolidated Statements of Earnings as follows:
 
 
 
 
Cost of goods and services
$
7,454

 
$
543

Selling and administrative expenses
16,649

 
2,727

Total
$
24,103

 
$
3,270


The restructuring expenses of $24,103 incurred in the three months ended March 31, 2015 related to restructuring programs initiated during 2015 and 2014. These programs are designed to better align the Company's operations with current market conditions through targeted facility consolidations, headcount reductions and other measures to further optimize operations. The Company currently expects full year 2015 restructuring expenses of approximately $36.0 million to $43.0 million, inclusive of first quarter actions, principally within the Energy segment. The Company expects the programs currently underway to be substantially completed in the next twelve to eighteen months.

The $24,103 of restructuring charges incurred during the first quarter of 2015 included the following items:

The Energy segment incurred restructuring charges of $17,822 related to various programs across the segment focused on workforce reductions and facility consolidations. These programs were initiated to better align cost base with the anticipated demand environment in 2015.

The Engineered Systems segment recorded $4,355 of restructuring charges relating to headcount reductions across various businesses, well as actions taken to optimize costs related to administrative functions within the Printing & Identification platform.

10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)


The Fluids segment recorded $2,097 of restructuring charges principally related to headcount reductions at various businesses across the segment.
The Refrigeration & Food Equipment segment recorded reversals of certain prior year restructuring reserves of $282, primarily related to the fourth quarter 2014 closure of a European-based facility within Refrigeration, as the related costs were lower than anticipated.

The following table details the Company’s severance and other restructuring accrual activity:
 
Severance
 
Exit
 
Total
Balance at December 31, 2014
$
15,358

 
$
6,663

 
$
22,021

Restructuring charges
13,354

 
10,749

 
24,103

Payments
(17,947
)
 
(4,540
)
 
(22,487
)
Other, including foreign currency
(532
)
 
(4,465
)
 
(4,997
)
Balance at March 31, 2015
$
10,233

 
$
8,407

 
$
18,640


The accrual balance at March 31, 2015 primarily reflects restructuring plans initiated during the year, as well as ongoing lease commitment obligations for facilities closed in earlier periods.

9. Borrowings

Borrowings consist of the following:
 
March 31, 2015
 
December 31, 2014
Short-term
 
 
 
Current portion of long-term debt
$
300,002

 
$
299,956

Commercial paper
325,500

 
478,000

 
$
625,502

 
$
777,956


 
March 31, 2015
 
December 31, 2014
Long-term
 
 
 
4.875% 10-year notes due October 15, 2015
$
299,885

 
$
299,836

5.45% 10-year notes due March 15, 2018
349,010

 
348,928

2.125% 7-year notes due December 1, 2020 (Euro-denominated)
328,632

 
363,970

4.30% 10-year notes due March 1, 2021
449,846

 
449,839

6.65% 30-year debentures due June 1, 2028
199,526

 
199,517

5.375% 30-year debentures due October 15, 2035
296,725

 
296,685

6.60% 30-year notes due March 15, 2038
247,970

 
247,948

5.375% 30-year notes due March 1, 2041
345,870

 
345,830

Other
412

 
444

Total long-term debt
2,517,876

 
2,552,997

Less current installments
(300,002
)
 
(299,956
)
 
$
2,217,874

 
$
2,253,041


The Company maintains a $1.0 billion unsecured revolving credit facility that expires on November 10, 2016. The Company primarily uses this facility as liquidity back-up for its commercial paper program and has not drawn down any loans under the $1.0 billion facility and does not anticipate doing so. The Company generally uses commercial paper borrowings for general corporate purposes, funding of acquisitions and the repurchases of its common stock. Under the credit facility, the Company is required to maintain an interest coverage ratio of EBITDA to consolidated net interest expense of not less than 3.0 to 1. The Company was in compliance with this covenant and its other long-term debt covenants at March 31, 2015, and it expects to remain in compliance with all of its debt covenants.

11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)


Interest expense and interest income for the three months ended March 31, 2015 and 2014 were as follows:
 
Three Months Ended March 31,
 
2015
 
2014
Interest expense
$
33,005

 
$
33,691

Interest income
(968
)
 
(1,036
)
Interest expense, net
$
32,037

 
$
32,655

 
Letters of Credit

As of March 31, 2015, the Company had approximately $136,114 outstanding in letters of credit and guarantees with financial institutions, which expire at various dates in the last quarter of 2015 through 2023. These letters of credit are primarily maintained as security for insurance, warranty, and other performance obligations.  

10. 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 that occur within the next twelve months and are denominated in non-functional currencies, with currency forward or collar contracts designated as cash flow hedges. At March 31, 2015 and December 31, 2014, the Company had contracts with U.S. dollar equivalent notional amounts of $51,759 and $47,047, respectively, to exchange foreign currencies, principally the U.S. dollar, Chinese Yuan, Euro, and pound sterling. 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 $67,350 and $52,392 at March 31, 2015 and December 31, 2014, 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.

The Company also has an outstanding floating-to-floating cross currency swap agreement for a total notional amount of $50,000 in exchange for CHF 65,100, which expires on October 15, 2015. This transaction continues to hedge a portion of the Company’s net investment in CHF-denominated operations. The agreement qualifies as a net investment hedge and the effective portion of the change in fair value is reported within the cumulative translation adjustment section of other comprehensive income. The fair values at March 31, 2015 and December 31, 2014 reflected losses of $16,900 and $15,567, respectively, due to the strengthening of the Swiss franc relative to the U.S. dollar over the term of the arrangement. The Company intends to settle this hedge upon maturity in 2015.

The following table sets forth the fair values of derivative instruments held by the Company as of March 31, 2015 and December 31, 2014 and the balance sheet lines in which they are recorded:
 
Fair Value Asset (Liability)
 
 
 
March 31, 2015
 
December 31, 2014
 
Balance Sheet Caption
Foreign currency forward / collar contracts
$
1,995

 
$
973

 
Prepaid / Other assets
Foreign currency forward / collar contracts
(506
)
 
(810
)
 
Other accrued expenses
Net investment hedge - cross currency swap
(16,900
)
 
(15,567
)
 
Accrued expenses

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.


12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

Additionally, the Company has designated the €300.0 million of Euro-denominated notes issued December 4, 2013 as a hedge of a portion of the its net investment in Euro-denominated operations. Due to the high degree of effectiveness between the hedging instruments and the exposure being hedged, fluctuations in the value of the Euro-denominated debt due to exchange rate changes are offset by changes in the net investment. Accordingly, changes in the value of the Euro-denominated debt are recognized in the cumulative translation adjustment section of other comprehensive income to offset changes in the value of the net investment in Euro-denominated operations.

Amounts recognized in other comprehensive earnings (loss) for the gains (losses) on its net investment hedges were as follows:
 
Three Months Ended March 31,
 
2015
 
2014
Gain (loss) on Euro-denominated debt
$
35,350

 
$
(2,904
)
Loss on Swiss franc cross-currency swap
(1,333
)
 
(332
)
Total gain (loss) on net investment hedges before tax
34,017

 
(3,236
)
Tax (expense) benefit
(11,906
)
 
1,133

Net gain (loss) on net investment hedges, net of tax
$
22,111

 
$
(2,103
)

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, 2015 and December 31, 2014:
 
March 31, 2015
 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency cash flow hedges
$

 
$
1,995

 
$

 
$

 
$
973

 
$

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency cash flow hedges

 
506

 

 

 
810

 

Net investment hedge derivative

 
16,900

 

 

 
15,567

 


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 at March 31, 2015 and December 31, 2014 was $3,000,809 and $3,002,701, respectively, compared to the carrying value of $2,517,876 and $2,552,997, 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 valuation 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, 2015 and December 31, 2014 due to the short-term nature of these instruments.


13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

11. Income Taxes

The effective tax rates for continuing operations for the three months ended March 31, 2015 and 2014 were 28.8% and 29.6%, respectively. Excluding favorable net discrete items in each period, the effective tax rates for the three months ended March 31, 2015 and 2014 were 29.3% and 30.7%, respectively. These discrete items principally resulted from the conclusion of certain state and international tax audits.

Additionally, in the first quarter of 2015, the Company generated a capital loss for tax purposes on the sale of Datamax O'Neil, which resulted in a tax benefit of $8.6 million. This benefit is expected to be utilized in 2015.

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. We believe that within the 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 $28.7 million, of which a portion will be reported as discontinued operations.

12. Equity Incentive Program

The Company typically grants equity awards annually at its regularly scheduled first quarter Compensation Committee meeting. In the first quarter of 2015, the Company issued stock-settled appreciation rights ("SARs") covering 1,144,529 shares, performance share awards of 61,611 and restricted stock units of 145,545.

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 assumptions used in determining the fair value of the SARs awarded during the respective periods are as follows:
 
SARs
 
2015
 
2014
Risk-free interest rate
1.51
%
 
1.70
%
Dividend yield
2.24
%
 
1.98
%
Expected life (years)
5.1

 
5.3

Volatility
27.19
%
 
30.81
%
 
 
 
 
Grant price
$
73.28

 
$
82.51

Fair value per share at date of grant
$
14.55

 
$
19.84


The performance share awards granted in 2014 and 2015 are considered performance condition awards as attainment is based on Dover's performance relative to established internal metrics. The fair value of these awards are 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 compensation cost in the period of change.  


14

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

The fair value and average attainment used in determining compensation cost for the performance shares issued in 2014 and 2015 is as follows for the three months ended March 31, 2015:
 
Performance shares
 
2015
 
2014
Fair value per share at date of grant
$
73.28

 
$
82.51

Average attainment rate reflected in expense
64.35
%
 
63.31
%

Stock-based compensation is reported within selling and administrative expenses in the accompanying unaudited 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,
 
2015
 
2014
Pre-tax compensation expense (1)
$
13,387

 
$
8,501

Tax benefit
(4,764
)
 
(3,000
)
Total stock-based compensation expense, net of tax
$
8,623

 
$
5,501


(1)
The increase in share-based compensation expense in 2015 relative to the prior year is due to the acceleration of expense for awards granted in 2015 to certain employees that have satisfied the terms of retirement eligibility under the the 2012 Equity and Cash Incentive Plan. As these individuals are guaranteed the right to vest in these awards, regardless of future service, the related expense was recognized immediately upon grant.
 
13. Commitments and Contingent Liabilities

Litigation

A few 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, a few 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, 2015 and December 31, 2014, the Company has reserves totaling $31,555 and $32,890, 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, 2015 and December 31, 2014, these reserves are 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. Amounts provided for are based on historical costs and adjusted new claims. The changes in the carrying amount of product warranties through March 31, 2015 and 2014 are as follows:
 
2015
 
2014
Beginning Balance, January 1
$
49,388

 
$
42,924

Provision for warranties
11,075

 
13,619

Settlements made
(13,395
)
 
(12,680
)
Other adjustments, including acquisitions and currency translation
(630
)
 
1,062

Ending balance, March 31
$
46,438

 
$
44,925



15

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

14. 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 following tables set forth the components of the Company’s net periodic expense relating to retirement benefit plans:

Qualified Defined Benefits
 
Three Months Ended March 31,
 
U.S. Plan
 
Non-U.S. Plans
 
2015
 
2014
 
2015
 
2014
Service Cost
$
3,915

 
$
3,721

 
$
1,688

 
$
1,515

Interest Cost
5,791

 
6,314

 
1,486

 
1,983

Expected return on plan assets
(10,393
)
 
(10,398
)
 
(2,019
)
 
(2,029
)
Amortization:
 
 
 
 
 
 
 
Prior service cost
224

 
271

 
23

 
27

Recognized actuarial loss
3,155

 
2,072

 
675

 
221

Transition obligation

 

 
9

 

Curtailments, special termination benefits, and settlements (1)
810

 

 
2

 
3

Net periodic expense
$
3,502

 
$
1,980

 
$
1,864

 
$
1,720

(1)
One-time charges of $810 reflected in pension expense for the three months ended March 31, 2015 represents curtailments, special termination benefits, and settlements for certain businesses classified as held for sale; therefore, this amount has been reflected in the results of discontinued operations.

The net periodic expense reflected above for non-U.S. plans for the three months ended March 31, 2014 excludes certain non-U.S. plans sponsored by Knowles that were distributed as part of the separation on February 28, 2014. The historical expense relating to these plans was $59 for the three months ended March 31, 2014. The expense relating to these plans is reflected in earnings from discontinued operations.

Non-Qualified Supplemental Benefits
 
Three Months Ended March 31,
 
2015
 
2014
Service Cost
$
935

 
$
830

Interest Cost
1,266

 
1,537

Amortization:
 
 
 
   Prior service cost
1,732

 
1,944

   Recognized actuarial loss (gain)
71

 
(107
)
Net periodic expense
$
4,004

 
$
4,204


The net periodic expense for the three months ended March 31, 2015 for the Company's qualified and non-qualified defined benefit pension plans reflects the impact of lower discount rates, which resulted in higher amortization of actuarial losses for the current period.


16

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

Post-Retirement Plans

The Company also maintains post retirement benefit plans, although these plans are effectively 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,
 
2015
 
2014
Service Cost
$
41

 
$
62

Interest Cost
128

 
157

Amortization:
 
 
 
   Prior service cost
(93
)
 
(102
)
   Recognized actuarial (gain) loss
(8
)
 
13

Net periodic expense
$
68

 
$
130


The total amount amortized out of accumulated other comprehensive income into net periodic benefit expense for the three months ended March 31, 2015 and 2014 totaled $5,788 and $4,339, respectively. The amortization included in other comprehensive income for the three months ended March 31, 2014 includes $61 relating to plans sponsored by Knowles that were transfered as part of the separation in 2014.

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 was $9,006, and $8,377 for the three months ended March 31, 2015 and 2014.

15. Other Comprehensive (Loss) Earnings

The amounts recognized in other comprehensive (loss) earnings were as follows:
 
Three Months Ended
 
Three Months Ended
 
March 31, 2015
 
March 31, 2014
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Foreign currency translation adjustments (1)
$
(72,203
)
 
$
(11,906
)
 
$
(84,109
)
 
$
(18,506
)
 
$
1,133

 
$
(17,373
)
Pension and other postretirement benefit plans
5,788

 
(1,962
)
 
3,826

 
4,339

 
(1,505
)
 
2,834

Changes in fair value of cash flow hedges
1,629

 
(570
)
 
1,059

 
(943
)
 
330

 
(613
)
Other
241

 
(27
)
 
214

 
(106
)
 
(20
)
 
(126
)
Total other comprehensive (loss) earnings
$
(64,545
)
 
$
(14,465
)
 
$
(79,010
)
 
$
(15,216
)
 
$
(62
)
 
$
(15,278
)
(1)
Foreign currency translation adjustments include pre-tax gains on the Company's net investment hedges of $34,017 for the three months ended March 31, 2015, which resulted in a tax expense of $11,906 reflected in other comprehensive income. For the three months ended March 31, 2014, the Company recognized pre-tax losses of $3,236 on these net investment hedges, which resulted in a tax benefit of $1,133 reflected in other comprehensive income. See also Note 10 Financial Instruments.

Total comprehensive earnings were as follows:
 
Three Months Ended March 31,
 
2015
 
2014
Net earnings
$
209,510

 
$
160,138

Other comprehensive (loss) earnings
(79,010
)
 
(15,278
)
Comprehensive earnings
$
130,500

 
$
144,860



17

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

Amounts reclassified from accumulated other comprehensive earnings (loss) to earnings (loss) during the three months ended March 31, 2015 and 2014 were as follows:
 
Three Months Ended March 31,
 
2015

2014
Pension and postretirement benefit plans:
 
 
 
Amortization of actuarial losses
$
3,902

 
$
2,199

Amortization of prior service costs
1,886

 
2,140

Total before tax
5,788

 
4,339

Tax provision
(1,962
)
 
(1,505
)
Net of tax
$
3,826

 
$
2,834

 
 
 
 
Cash flow hedges:
 
 
 
Net losses (gains) reclassified into earnings
$
(153
)
 
$
(214
)
Tax benefit (provision)
54

 
75

Net of tax
$
(99
)
 
$
(139
)

The Company recognizes net periodic pension cost, which includes amortization of net actuarial losses and prior service costs, in both selling and administrative expenses and cost of goods and services, depending on the functional area of the underlying employees included in the plans.

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 & administrative expenses.


18

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

16. Segment Information

For management reporting and performance evaluation purposes, the Company categorizes its operating companies into four distinct reportable segments. Segment financial information and a reconciliation of segment results to consolidated results is as follows:
 
Three Months Ended March 31,
 
2015
 
2014
Revenue:
 
 
 
Energy
$
430,423

 
$
478,773

Engineered Systems
573,196

 
567,674

Fluids
340,236

 
345,009

Refrigeration & Food Equipment
372,097

 
411,493

Intra-segment eliminations
(451
)
 
(379
)
Total consolidated revenue
$
1,715,501

 
$
1,802,570

 
 
 
 
Earnings from continuing operations:
 
 
 
Segment earnings:
 
 
 
Energy
$
52,305

 
$
118,968

Engineered Systems
88,149

 
83,227

Fluids
54,634

 
57,942

Refrigeration & Food Equipment
36,150

 
44,862

Total segments
231,238

 
304,999

Corporate expense / other (1)
34,526

 
30,734

Net interest expense
32,037

 
32,655

Earnings before provision for income taxes and discontinued operations
164,675

 
241,610

Provision for taxes
47,485

 
71,569

Earnings from continuing operations
$
117,190

 
$
170,041


(1)
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, and various administrative expenses relating to the corporate headquarters.

17. Share Repurchases

In January 2015, the Board of Directors approved a new standing share repurchase authorization, whereby the Company may repurchase up to 15,000,000 shares of its common stock over the following three years. During the three months ended March 31, 2015, the Company repurchased 2,753,165 shares of common stock under this program for $200,055, or an average share price of $72.66. As of March 31, 2015, there were 12,246,835 shares available to purchase under the January 2015 plan. Treasury shares increased to 95,633,809 at March 31, 2015 from a balance of 92,880,644 at December 31, 2014.

During the three months ended March 31, 2014, the Company completed its $1.0 billion share repurchase program through an accelerated share repurchase transaction, whereby Dover paid $292,565 to receive a variable number of shares over a specified period of time. The Company repurchased 3,596,980 shares under this transaction for an average share price of $81.06.


19

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

18. 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,
 
2015
 
2014
Earnings from continuing operations
$
117,190

 
$
170,041

Earnings (loss) from discontinued operations, net
92,320

 
(9,903
)
Net earnings
$
209,510

 
$
160,138

 
 
 
 
Basic earnings (loss) per common share:
 
 
 
Earnings from continuing operations
$
0.72

 
$
1.00

Earnings (loss) from discontinued operations, net
$
0.57

 
$
(0.06
)
Net earnings
$
1.30

 
$
0.94

 
 
 
 
Weighted average shares outstanding
161,650,000

 
169,750,000

 
 
 
 
Diluted earnings (loss) per common share:
 
 
 
Earnings from continuing operations
$
0.72

 
$
0.99

Earnings (loss) from discontinued operations, net
$
0.57

 
$
(0.06
)
Net earnings
$
1.28

 
$
0.93

 
 
 
 
Weighted average shares outstanding
163,323,000

 
172,013,000

 
The following table is a reconciliation of the share amounts used in computing earnings per share:
 
Three Months Ended March 31,
 
2015
 
2014
Weighted average shares outstanding - Basic
161,650,000

 
169,750,000

Dilutive effect of assumed exercise of employee stock options and SARs and vesting of performance shares
1,673,000

 
2,263,000

Weighted average shares outstanding - Diluted
163,323,000

 
172,013,000


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

The weighted average number of anti-dilutive potential common shares excluded from the calculation above were 56,000 and 48,000 for the three months ended March 31, 2015 and 2014, respectively.

19. Recent Accounting Standards

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The original standard was effective for fiscal years beginning after December 15, 2016; however, in April 2015, the FASB proposed a one-year deferral of this standard, with a new effective date of December 15, 2017. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.


20

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

Recently Adopted Accounting Standards

In April 2014, the FASB issued ASU 2014-08, which includes amendments that change the requirements for reporting discontinued operations and require additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations with a major effect on the organization's operations and financial results should be presented as discontinued operations. Additionally, the ASU requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The Company adopted the standard effective January 1, 2015.

In July 2013, the FASB issued ASU 2013-11, which provides that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. This standard was effective for fiscal years beginning after December 15, 2013. The Company's adoption of this standard did not have a significant impact on its consolidated financial statements.

In March 2013, the FASB issued ASU 2013-05, which permits an entity to release cumulative translation adjustments into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, or, if a controlling financial interest is no longer held. The revised standard was effective for fiscal years beginning after December 15, 2013; however, early adoption is permitted. The Company's adoption of this standard did not have a significant impact on its consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02 which requires additional disclosures regarding the reporting of reclassifications out of accumulated other comprehensive income. ASU 2013-02 requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. This guidance was effective for reporting periods beginning after December 15, 2012. The Company adopted this guidance effective January 1, 2013. The Company's adoption of this standard did not have a significant impact on its consolidated financial statements.


21

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)

20. Subsequent Events

The Company assessed events occurring subsequent to March 31, 2015 for potential recognition and disclosure in the consolidated financial statements. No events have occurred that would require adjustment to the consolidated financial statements.

Disposition

On March 26, 2015, Dover signed a definitive agreement to sell Sargent Aerospace to RBC Bearings Incorporated for a total purchase price of $500 million. The Company expects to complete the sale of this business early in the second quarter of 2015.


22


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Refer to the section below entitled “Special Notes Regarding Forward-Looking Statements” for a discussion of factors that could cause our actual results to differ from the forward-looking statements contained below and throughout this quarterly report.

Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), we refer to measures used by management to evaluate performance, including a number of financial measures that are not defined under accounting principles generally accepted in the United States of America (GAAP). These include organic revenue, organic revenue growth, free cash flow and adjusted working capital. Organic revenue and organic revenue growth refer to revenue and revenue growth excluding the impacts of foreign exchange, acquisitions and divestitures. Free cash flow is operating cash flow less capital spending, while adjusted working capital refers to accounts receivable, plus inventory, less accounts payable. We believe these measures provide investors with important information that is useful in understanding our business results and trends. Reconciliations within this MD&A provide more details on the use and derivation of these measures.

The MD&A is organized as follows:

Overview and Outlook
Consolidated Results of Operations
Segment Results of Operations
Financial Condition
Cash Flow Summary and Liquidity and Capital Resources
Critical Accounting Policies and Estimates and Recent Accounting Standards
Special Notes Regarding Forward-Looking Statements and Non-GAAP Disclosures


OVERVIEW AND OUTLOOK

Dover is a diversified global manufacturer delivering innovative equipment and components, specialty systems and support services through four major operating segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment. The Company's entrepreneurial business model encourages, promotes, and fosters deep customer engagement and collaboration, which has led to Dover's well-established and valued reputation for providing superior customer service and industry-leading product innovation. Unless the context indicates otherwise, references herein to “Dover,” “the Company,” and words such as “we,” “us,” and “our” include Dover Corporation and its subsidiaries.

Dover's four segments are as follows:

Our Energy segment, serving the Drilling & Production, Bearings & Compression, and Automation end markets, is a provider of customer-driven solutions and services for safe and efficient production and processing of fuels worldwide, and has a strong presence in the bearings and compression and automation markets.

Our 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 printing & identification, vehicle service, environmental solutions and industrial end markets.

Our Fluids segment, serving the Fluid Transfer and Pumps end markets, is focused on the safe handling of critical fluids across the oil & gas, retail fueling, chemical, hygienic and industrial end markets.

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


23


The following table shows the percentage of total revenue and segment earnings generated by each of our four segments for the three months ended March 31, 2015 and 2014:
 
Revenue
 
Segment Earnings
 
Three Months Ended March 31,
 
Three Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
Energy
25.1
%
 
26.6
%
 
22.6
%
 
39.0
%
Engineered Systems
33.4
%
 
31.5
%
 
38.1
%
 
27.3
%
Fluids
19.8
%
 
19.1
%
 
23.7
%
 
19.0
%
Refrigeration & Food Equipment
21.7
%
 
22.8
%
 
15.6
%
 
14.7
%

First quarter 2015 consolidated revenue of $1.7 billion declined $87.1 million, or 4.8%, as compared to the first quarter 2014 comprised of a 5.8% decrease in organic revenue and a 3.9% unfavorable impact due to foreign currency translation, offset, in part, by a 4.9% increase attributable to acquisitions. Increases in our industrial end market were more than offset by the continued deterioration in Energy end markets, especially in drilling and production, and the unfavorable impacts of foreign currency as the U.S. dollar continued to strengthen against a number of foreign currencies, most notably the Euro.

From a geographic perspective, our non-Energy-related U.S. markets moderated, while Europe and Asia were solid. Finally, due to the continued strengthening of the U.S. dollar against other currencies, particularly the Euro, consolidated revenue was negatively impacted by foreign currency translation of approximately $70.0 million, especially within the Printing & Identification platform of our Engineered Systems segment, as well as our Fluids and Refrigeration & Food Equipment segments.

We completed previously announced actions to adjust our costs and further streamline our businesses, as well as initiated new actions to better align our cost base with the demand environment, particularly within our Energy segment. These actions resulted in first quarter 2015 restructuring charges of $24.1 million, of which $17.8 million related to various programs across our Energy segment. In total, we have incurred approximately $61.5 million in restructuring charges over the last two quarters. We currently expect full year 2015 restructuring expenses of approximately $36.0 million to $43.0 million, inclusive of our first quarter actions, principally within our Energy segment. The 2015 cost savings expected to be realized as a result of the restructuring programs initiated in late 2014 and early 2015 is within the range of $75.0 million to $80.0 million. We will continue to pursue additional cost reduction opportunities throughout the remainder of 2015, as we continue to align our costs with market demands.

We completed the sale of Datamax O’Neil in the first quarter for $185.0 million. In addition, we announced the definitive agreement to sell Sargent Aerospace for $500.0 million, with the sale expected to take place in the second quarter of 2015. We plan to use the proceeds from the divestitures to fund a share repurchase of $600.0 million.

In January 2015, the Board of Directors approved a new standing share repurchase authorization for repurchase up to 15.0 million shares of its common stock over the following three years. During the first quarter of 2015, we repurchased 2.8 million shares of our common stock under this program for $200.1 million, or an average share price of $72.66. As of March 31, 2015, there were 12.2 million shares available for repurchase.

Due to the weaker North American oil & gas markets, the exchange rate impact of foreign currencies, and slower than expected spending within Dover's core retail refrigeration case and systems markets, we expect our full year results to be lower than previously communicated. Our forecast is largely unchanged for our Engineered Systems and Fluids segments except for the impact of foreign currency translation. For full year, we now expect revenue to decline 4.0% to 6.0% versus a prior revenue forecast of a 1.0% increase to a 2.0% decline. Organic revenue is anticipated to decline approximately 2.0% to 4.0%, and we expect a negative impact of approximately 4.0% from foreign currency translation. Completed acquisitions will now provide approximately 2.0% growth. In total, we now expect 2015 EPS to be $4.20 to $4.40, inclusive of $0.15 to $0.18 cents of restructuring costs.  The incremental $0.05 to $0.08 cents will mostly impact the second quarter. Regarding the second quarter, we expect revenue to be up 7% to 9% sequentially, largely driven by a seasonal increase in Refrigeration & Food Equipment and a sequential decline in Energy.

24


CONSOLIDATED RESULTS OF OPERATIONS

As discussed in Note 4 Discontinued Operations in the unaudited Condensed Consolidated Financial Statements, in the fourth quarter of 2014, we reclassified certain businesses in the Engineered Systems segment to discontinued operations based on our decision to divest these businesses. The results of operations of these businesses have been removed from the results of continuing operations and are presented within results of discontinued operations for all periods presented.

 
Three Months Ended March 31,
(dollars in thousands, except per share figures)
2015
 
2014
 
% Change
Revenue
$
1,715,501

 
$
1,802,570

 
(4.8
)%
Cost of goods and services
1,088,342

 
1,094,710

 
(0.6
)%
Gross profit
627,159

 
707,860

 
(11.4
)%
Gross profit margin
36.6
%
 
39.3
%
 
(2.7
)
 
 
 
 
 
 
Selling and administrative expenses
434,634

 
433,404

 
0.3
 %
Selling and administrative as a percent of revenue
25.3
%
 
24.0
%
 
1.3

 
 
 
 
 
 
Interest expense, net
32,037

 
32,655

 
(1.9
)%
Other (income) expense, net
(4,187
)
 
191

 
nm*
 
 
 
 
 
 
Provision for income taxes
47,485

 
71,569

 
(33.7
)%
Effective tax rate
28.8
%
 
29.6
%
 
(0.8
)
 
 
 
 
 
 
Earnings from continuing operations
117,190

 
170,041

 
(31.1
)%
Earnings (loss) from discontinued operations, net
92,320

 
(9,903
)
 
nm*
Earnings from continuing operations per common share - diluted
$
0.72

 
$
0.99

 
(27.3
)%
* nm - not meaningful 

Revenue

First quarter revenue decreased $87.1 million, or 4.8%, as compared to the first quarter of 2014 driven by a 5.8% decrease in organic revenue as the North American oil & gas markets experienced a steeper and broader deterioration than originally anticipated. This was partially offset by the impact of recent acquisitions, especially within the Energy segment, most notably Accelerated Companies and Wellmark Holdings, resulting in a 4.9% increase to revenue. Additionally, the impacts of foreign currency, especially the Euro, resulted in an unfavorable impact to revenue of approximately 3.9%.

Gross Profit

Gross profit for the first quarter of 2015 decreased $80.7 million, or 11.4% in connection with the declining revenues for the period. Gross profit margin declined 270 basis points. Reflected in cost of goods sold for the period were higher restructuring charges of $6.9 million and higher acquisition-related depreciation and amortization of $7.9 million, which represented approximately 90 basis points of the decline in gross profit margin. Our businesses with historically higher margin contributions were impacted more significantly during the quarter. In addition, higher labor costs and product mix contributed to the decline in gross profit margin for the three months ended March 31, 2015 relative to the prior year.

Selling and Administrative Expenses

Selling and administrative expenses increased $1.2 million, or 0.3%, as compared to the prior year quarter. The current year expense includes higher restructuring charges of $13.9 million to align our businesses with anticipated market conditions. As a percentage of revenue, selling and administrative expenses increased 130 basis points in 2015 to 25.3%, of which restructuring represented approximately 80 basis points of the increase.


25


Non-Operating Items

Interest expense, net
Net interest expense decreased $0.6 million, or 1.9%, for the three months ended March 31, 2015 due to lower interest on the Euro-denominated debt, as a result of the strengthening of the U.S. dollar relative to the Euro, offset in part by interest on higher average balances of commerical paper for the first quarter of 2015 relative to the first quarter of 2014.

Other (income) expense, net
Other income of $4.2 million for the three months ended March 31, 2015 primarily reflects a one-time favorable insurance settlement of $3.6 million. The prior year expense of $0.2 million included $2.5 million of net foreign exchange losses resulting from the remeasurement and settlement of foreign currency denominated balances. Partially offsetting the foreign exchange losses were other nonrecurring items, including $2.1 million related to an insurance settlement for property damage.

Income Taxes

The effective tax rates for continuing operations for the three months ended March 31, 2015 and 2014 were 28.8% and 29.6%, respectively. Excluding favorable net discrete items in each period, the effective tax rates for the three months ended March 31, 2015 and 2014 were 29.3% and 30.7%, respectively. These discrete items principally resulted from the conclusion of certain state and international tax audits.

Additionally, in the first quarter of 2015, the Company generated a capital loss for tax purposes on the sale of Datamax O'Neil, which resulted in a tax benefit of $8.6 million. This benefit is expected to be utilized in 2015.

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. We believe that within the 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 $28.7 million, of which a portion will be reported as discontinued operations.

Earnings from Continuing Operations

Earnings from continuing operations for three months ended March 31, 2015 decreased 31.1% to $117.2 million, or $0.72 diluted earnings per share. The decrease in earnings from continuing operations is primarily the result of lower revenues, especially within the drilling and production end markets, and higher restructuring charges. The decrease in earnings per share reflects the decrease in earnings, offset by lower weighted average shares outstanding for the 2015 period relative to the prior year.

Discontinued Operations

Management evaluates Dover’s businesses periodically for their strategic fit within its operations. Accordingly, the results of discontinued operations for the three months ended March 31, 2015 and 2014 reflect the net earnings of certain businesses that are either held for sale or have been previously sold. The results of Sargent Aerospace, which is currently held for sale, are reflected in the results of discontinued operations for all periods presented. The Company completed the sale of Datamax O'Neil in the first quarter of 2015 for a gain on sale of $87.4 million, which is reflected in earnings from discontinued operations. Additionally, in connection with the separation of Knowles from Dover on February 28, 2014, the results of operations and cash flows of Knowles are reflected within discontinued operations for the three months ended March 31, 2014 as well as costs incurred by Dover to complete the spin-off of Knowles, totaling $25.8 million. See Note 4 Discontinued Operations.

Restructuring Activities

The restructuring expenses of $24.1 million incurred in the three months ended March 31, 2015 related to restructuring programs primarily initiated during 2015. These programs are designed to better align the Company's operations with current market conditions through targeted facility consolidations, headcount reductions and other measures to further optimize operations. The Company currently expects full year 2015 restructuring expenses of approximately $36.0 million to $43.0 million, inclusive of our first quarter actions, primarily within our Energy segment. We expect the programs currently underway to be substantially completed in the next twelve to eighteen months.


26


The $24.1 million of restructuring charges incurred during the first quarter of 2015 included the following items:

The Energy segment incurred restructuring charges of $17.8 million related to various programs across the segment focused on workforce reductions and facility consolidations. These programs were initiated to better align cost base with the anticipated demand environment in 2015.

The Engineered Systems segment recorded $4.4 million of restructuring charges relating to headcount reductions across various businesses, as well as actions taken to optimize costs related to administrative functions within the Printing & Identification platform.

The Fluids segment recorded $2.1 million of restructuring charges principally related to headcount reductions at various businesses across the segment.

For the three months ended March 31, 2014, the Company incurred restructuring charges of $3.3 million for programs at several targeted facilities to optimize cost structure, across several of the segments. See Note 8 Restructuring Activities in our Condensed Consolidated Financial Statements for additional information related to our restructuring programs.


27


SEGMENT RESULTS OF OPERATIONS
 
Energy
Our Energy segment, serving the Drilling & Production, Bearings & Compression, and Automation end markets, is a provider of customer driven solutions and services for safe and efficient production and processing of fuels worldwide, and has a strong presence in the bearings and compression components markets.
 
 
Three Months Ended March 31,
(dollars in thousands)
 
2015
 
2014
 
% Change
Revenue:
 
 
 
 
 
 
Drilling & Production
 
$
299,530

 
$
352,527

 
(15.0
)%
Bearings & Compression
 
77,591

 
83,456

 
(7.0
)%
Automation
 
53,674

 
43,377

 
23.7
 %
Eliminations
 
(372
)
 
(587
)
 
 
Total
 
$
430,423

 
$
478,773

 
(10.1
)%
 
 
 
 
 
 
 
Segment earnings
 
$
52,305

 
$
118,968

 
(56.0
)%
Operating margin
 
12.2
%
 
24.8
%
 
 
 
 
 
 
 
 
 
Segment EBITDA
 
$
86,732

 
$
144,543

 
(40.0
)%
Segment EBITDA margin
 
20.2
%
 
30.2
%
 
 
 
 
 
 
 
 
 
Other measures:
 
 
 
 
 
 
Depreciation and amortization
 
$
34,427

 
$
25,575

 
34.6
 %
Bookings
 
416,628

 
478,469

 
(12.9
)%
Backlog
 
212,060

 
210,846

 
0.6
 %
 
 
 
 
 
 
 
Components of revenue decline:
 
 
 
 
 
YTD 2015 vs. 2014
Organic decline
 
 
 
 
 
(23.6
)%
Acquisitions
 
 
 
 
 
15.0
 %
Foreign currency translation
 
 
 
 
 
(1.5
)%
 
 
 
 
 
 
(10.1
)%

First Quarter 2015 Compared to the First Quarter 2014

Energy revenue decreased $48.4 million, or 10.1%, in the first quarter of 2015 as compared to the first quarter of 2014, comprised of organic revenue decline of 23.6%, 15.0% acquisition-related growth and a negative foreign currency translation impact of 1.5%.

Drilling & Production end market revenue (representing 69.6% of segment revenue) decreased $53.0 million, or 15.0%, primarily due to market deterioration in the North American oil and gas markets, resulting in inventory destocking and reduced capital spending of our customers. The decrease in revenue for Drilling & Production was partially offset by acquisition-related growth, mainly due to our October 2014 acquisition of Accelerated Companies LLC.

Bearings & Compression end market revenue (representing 18.0% of segment revenue) decreased $5.9 million, or 7.0%. Strength within our Compression end market was more than offset by ongoing declines in our Bearings end market as slower OEM build rates, especially with oil and gas customers, continued.

Automation end market revenue (representing approximately 12.4% of segment revenue) increased $10.3 million, or 23.7%. The impact of recent acquisitions more than offset customer project delays as low oil prices and uncertainties resulted in reduced capital spending by service and exploration and production companies.


28


Segment earnings decreased $66.7 million, or 56.0%, for our Energy segment, as compared to the prior year quarter, primarily driven by results for our businesses serving the Drilling & Production end markets. In addition, the current year quarter included restructuring charges of $17.8 million, of which $10.4 million related to our Artificial Lift businesses within the Drilling & Production end market, targeted at workforce reductions and facility consolidations to reduce costs and gain operating efficiencies.

Operating margin declined from 24.8% to 12.2%, or 1,260 basis points, as compared to the prior year quarter, mainly due to the aforementioned impact of weak market dynamics, as well as higher acquisition-related costs, including depreciation and amortization ($14.3 million higher), the previously mentioned restructuring costs, and modest price declines. Excluding higher restructuring charges and acquisition-related depreciation and amortization expense, operating margin was 19.6%, or a 520 basis point decline from first quarter 2014.

Bookings for the first quarter decreased 12.9% from the prior year quarter, reflecting weak oil and gas market conditions across the segment. Book-to-bill was 0.97.

29


Engineered Systems
Our Engineered Systems segment is comprised of two platforms, Industrials and Printing & Identification, and is focused on the design, manufacture and service of critical equipment and components serving the printing & identification, vehicle service, environmental solutions and industrial markets.
 
 
Three Months Ended March 31,
(dollars in thousands)
 
2015
 
2014
 
% Change
Revenue:
 
 
 
 
 

Printing & Identification
 
$
230,181

 
$
231,679