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EX-31.1 - EXHIBIT 31.1 - DOVER Corpa2015063010-qexhibit311.htm
EX-31.2 - EXHIBIT 31.2 - DOVER Corpa2015063010-qexhibit312.htm
EX-32 - EXHIBIT 32 - DOVER Corpa2015063010-qexhibit32.htm

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 June 30, 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 July 14, 2015 was 156,465,420.



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 June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenue
$
1,758,628

 
$
1,962,636

 
$
3,474,129

 
$
3,765,206

Cost of goods and services
1,104,060

 
1,194,537

 
2,192,402

 
2,289,247

Gross profit
654,568

 
768,099

 
1,281,727

 
1,475,959

Selling and administrative expenses
402,695

 
438,824

 
837,329

 
872,228

Operating earnings
251,873

 
329,275

 
444,398

 
603,731

Interest expense, net
31,988

 
31,961

 
64,025

 
64,616

Other income, net
(1,256
)
 
(6,233
)
 
(5,443
)
 
(6,042
)
Earnings before provision for income taxes and discontinued operations
221,141

 
303,547

 
385,816

 
545,157

Provision for income taxes
65,507

 
92,966

 
112,992

 
164,535

Earnings from continuing operations
155,634

 
210,581

 
272,824

 
380,622

Earnings (loss) from discontinued operations, net
176,762

 
3,378

 
269,082

 
(6,525
)
Net earnings
$
332,396

 
$
213,959

 
$
541,906

 
$
374,097

 
 
 
 
 
 
 
 
Earnings per share from continuing operations:
 
 
 
 
 
 
 
Basic
$
0.98

 
$
1.26

 
$
1.70

 
$
2.26

Diluted
$
0.97

 
$
1.25

 
$
1.69

 
$
2.23

 
 
 
 
 
 
 
 
Earnings (loss) per share from discontinued operations:
 
 
 
 
 
 
Basic
$
1.11

 
$
0.02

 
$
1.68

 
$
(0.04
)
Diluted
$
1.10

 
$
0.02

 
$
1.66

 
$
(0.04
)
 
 
 
 
 
 
 
 
Net earnings per share:
 
 
 
 
 
 
 
Basic
$
2.10

 
$
1.29

 
$
3.38

 
$
2.23

Diluted
$
2.07

 
$
1.27

 
$
3.35

 
$
2.19

 
 
 
 
 
 
 
 
Dividends paid per common share
$
0.40

 
$
0.375

 
$
0.80

 
$
0.75

 

See Notes to Condensed Consolidated Financial Statements



1


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

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Net earnings
$
332,396

 
$
213,959

 
$
541,906

 
$
374,097

 
 
 
 
 
 
 
 
Other comprehensive earnings (loss), net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments:
 
 
 
 
 
 
 
Foreign currency translation gains (losses) during period
39,287

 
10,971

 
(44,542
)
 
(6,402
)
Reclassification of foreign currency translation gains to earnings upon sale of subsidiaries
(2,837
)
 

 
(3,117
)
 

Total foreign currency translation
36,450

 
10,971

 
(47,659
)
 
(6,402
)
 
 
 
 
 
 
 
 
Pension and other postretirement benefit plans:
 
 
 
 
 
 
 
Amortization of actuarial losses included in net periodic pension cost
2,590

 
1,443

 
5,188

 
2,885

Amortization of prior service costs included in net periodic pension cost
1,227

 
1,392

 
2,455

 
2,784

Total pension and other postretirement benefit plans
3,817

 
2,835

 
7,643

 
5,669

 
 
 
 
 
 
 
 
Changes in fair value of cash flow hedges:
 
 
 
 
 
 
 
Unrealized net (losses) gains arising during period
(807
)
 
79

 
351

 
(395
)
Net gains reclassified into earnings
570

 
(50
)
 
471

 
(189
)
Total cash flow hedges
(237
)
 
29

 
822

 
(584
)
 
 
 
 
 
 
 
 
Other
277

 
745

 
491

 
619

 
 
 
 
 
 
 
 
Other comprehensive earnings (loss)
40,307

 
14,580

 
(38,703
)
 
(698
)
 
 
 
 
 
 
 
 
Comprehensive earnings
$
372,703

 
$
228,539

 
$
503,203

 
$
373,399


See Notes to Condensed Consolidated Financial Statements.


2


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

 
June 30, 2015
 
December 31, 2014
Current assets:
 
 
 
Cash and cash equivalents
$
595,168

 
$
681,581

Receivables, net of allowances of $18,491 and $18,894
1,149,414

 
1,186,746

Inventories, net
844,355

 
863,737

Prepaid and other current assets
80,964

 
101,482

Deferred tax assets
67,224

 
63,276

Total current assets
2,737,125

 
2,896,822

Property, plant and equipment, net
827,908

 
837,069

Goodwill
3,455,814

 
3,491,557

Intangible assets, net
1,276,018

 
1,369,520

Other assets and deferred charges
169,952

 
168,246

Assets of discontinued operations

 
327,171

Total assets
$
8,466,817

 
$
9,090,385

 
 
 
 
Current liabilities:
 

 
 

Notes payable and current maturities of long-term debt
$
381,951

 
$
777,956

Accounts payable
606,346

 
615,332

Accrued compensation and employee benefits
195,170

 
272,822

Accrued insurance
98,680

 
95,896

Other accrued expenses
250,805

 
266,277

Federal and other taxes on income
80,753

 
11,071

Total current liabilities
1,613,705

 
2,039,354

Long-term debt
2,225,063

 
2,253,041

Deferred income taxes
577,258

 
564,207

Other liabilities
458,309

 
482,340

Liabilities of discontinued operations

 
50,718

Stockholders' equity:
 

 
 

Total stockholders' equity
3,592,482

 
3,700,725

Total liabilities and stockholders' equity
$
8,466,817

 
$
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

 

 
541,906

 

 

 
541,906

Dividends paid

 

 
(127,659
)
 

 

 
(127,659
)
Common stock issued for the exercise of share-based awards
171

 
(3,190
)
 

 

 

 
(3,019
)
Tax benefit from the exercise of share-based awards

 
515

 

 

 

 
515

Share-based compensation expense

 
18,851

 

 

 

 
18,851

Common stock acquired

 

 

 

 
(500,134
)
 
(500,134
)
Other comprehensive loss, net of tax

 

 

 
(38,703
)
 

 
(38,703
)
Balance at June 30, 2015
$
256,064

 
$
917,009

 
$
7,489,029

 
$
(197,634
)
 
$
(4,871,986
)
 
$
3,592,482

 
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)
 
Six Months Ended June 30,
 
2015
 
2014
Operating Activities of Continuing Operations
 
 
 
Net earnings
$
541,906

 
$
374,097

 
 
 
 
Adjustments to reconcile net earnings to cash from operating activities:
 
 
 
(Earnings) loss from discontinued operations, net
(269,082
)
 
6,525

Depreciation and amortization
158,209

 
151,421

Share-based compensation
18,851

 
16,413

Cash effect of changes in assets and liabilities:
 
 
 
Accounts receivable
17,459

 
(167,833
)
Inventories
861

 
(97,258
)
Prepaid expenses and other assets
1,025

 
(7,197
)
Accounts payable
6,588

 
61,213

Accrued compensation and employee benefits
(87,716
)
 
(58,934
)
Accrued expenses and other liabilities
(21,313
)
 
10,708

Accrued and deferred taxes, net
(17,805
)
 
(58,646
)
Other, net
1,260

 
(17,135
)
Net cash provided by operating activities of continuing operations
350,243

 
213,374

 
 
 
 
Investing Activities of Continuing Operations
 

 
 

Additions to property, plant and equipment
(71,763
)
 
(75,245
)
Acquisitions (net of cash and cash equivalents acquired)
(6,500
)
 
(143,087
)
Proceeds from the sale of property, plant and equipment
7,723

 
1,838

Proceeds from the sale of businesses
685,000

 
4,482

Other

 
(21,766
)
Net cash provided by (used in) investing activities of continuing operations
614,460

 
(233,778
)
 
 
 
 
Financing Activities of Continuing Operations
 

 
 

Cash received from Knowles Corporation, net of cash distributed

 
359,197

Purchase of common stock
(500,134
)
 
(317,571
)
Proceeds from exercise of share-based awards, including tax benefits
3,481

 
15,738

Change in commercial paper and notes payable, net
(396,100
)
 
(178,500
)
Dividends paid to stockholders
(127,659
)
 
(126,430
)
Payments to settle employee tax obligations on exercise of share-based awards
(4,478
)
 
(18,364
)
Reduction of long-term debt
(42
)
 
(45
)
Net cash used in financing activities of continuing operations
(1,024,932
)
 
(265,975
)
 
 
 
 
Cash Flows from Discontinued Operations
 

 
 

Net cash (used in) provided by operating activities of discontinued operations
(10,053
)
 
47,228

Net cash used in investing activities of discontinued operations
(1,984
)
 
(15,607
)
Net cash (used in) provided by discontinued operations
(12,037
)
 
31,621

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(14,147
)
 
(1,736
)
 
 
 
 
Net decrease in cash and cash equivalents
(86,413
)
 
(256,494
)
Cash and cash equivalents at beginning of period
681,581

 
803,882

Cash and cash equivalents at end of period
$
595,168

 
$
547,388


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 as 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 during the six months ended June 30, 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 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 six months ended June 30, 2015, the Company acquired a product line in the Refrigeration & Food Equipment segment for a net cash consideration of $6,500. The Company assigned $2,076 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 allocation 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 and six months ended June 30, 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 June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenue from continuing operations:
 
 
 
 
 
 
 
As reported
$
1,758,628

 
$
1,962,636

 
$
3,474,129

 
$
3,765,206

Pro forma
1,758,628

 
2,048,178

 
3,474,636

 
3,939,789

Earnings from continuing operations:
 
 
 
 
As reported
$
155,634

 
$
210,581

 
$
272,824

 
$
380,622

Pro forma (1)
155,634

 
216,182

 
278,947

 
392,376

Basic earnings per share from continuing operations:
 
 
 
 
As reported
$
0.98

 
$
1.26

 
$
1.70

 
$
2.26

Pro forma (1)
0.98

 
1.30

 
1.74

 
2.33

Diluted earnings per share from continuing operations:
 
 
 
 
As reported
$
0.97

 
$
1.25

 
$
1.69

 
$
2.23

Pro forma (1)
0.97

 
1.28

 
1.72

 
2.30

(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.


7

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

4. Discontinued Operations

On March 2, 2015, the Company completed the sale of Datamax O'Neil for total proceeds of $185,000, which resulted in a net gain on sale of $87,781, of which $87,354 was recognized in the first quarter of 2015. On April 24, 2015, the Company completed the sale of Sargent Aerospace for total proceeds of $500,000, which resulted in a net gain on sale of $177,800. These businesses were previously included in the results of the Engineered Systems segment and were reclassified to discontinued operations in the fourth quarter of 2014 in connection with their impending sale at that time.

The results of discontinued operations for the three and six months ended June 30, 2015 and June 30, 2014 reflect the net earnings of these businesses prior to their respective sale dates. The results for the six months ended June 30, 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 $26,728 for the six months ended June 30, 2014, which are also reflected in the results of discontinued operations. See also Note 2 2014 Spin-off of Knowles Corporation.

Summarized results of the Company’s discontinued operations are as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenue
$
8,374

 
$
123,577

 
$
72,869

 
$
407,257

 
 
 
 
 
 
 
 
Gain (loss) on sale, net of tax
178,227

 
(4,173
)
 
265,581

 
(4,173
)
 
 
 
 
 
 
 
 
(Loss) earnings from operations before taxes
(272
)
 
12,205

 
8,708

 
4,363

Provision for income taxes
(1,193
)
 
(4,654
)
 
(5,207
)
 
(6,715
)
(Loss) earnings from operations, net of tax
(1,465
)
 
7,551

 
3,501

 
(2,352
)
 
 
 
 
 
 
 
 
Earnings (loss) from discontinued operations, net of tax
$
176,762

 
$
3,378

 
$
269,082

 
$
(6,525
)

Assets and liabilities of discontinued operations are summarized below:
 
June 30, 2015
 
December 31, 2014
Assets of Discontinued Operations:
 
 
 
Accounts receivable
$

 
$
46,691

Inventories, net

 
58,401

Prepaid and other current assets

 
8,571

       Total current assets

 
113,663

Property, plant and equipment, net

 
31,573

Goodwill and intangible assets, net

 
181,798

Other assets and deferred charges

 
137

Total assets
$

 
$
327,171

 
 
 
 
Liabilities of Discontinued Operations:
 

 
 

Accounts payable
$

 
$
21,199

Other current liabilities

 
17,675

       Total current liabilities

 
38,874

Deferred income taxes

 
8,752

Other liabilities

 
3,092

Total liabilities
$

 
$
50,718


At December 31, 2014, the assets and liabilities of discontinued operations relate to Sargent Aerospace and Datamax O'Neil, which were sold in 2015. Any remaining assets or liabilities relating to these businesses or other businesses previously sold are reflected in continuing operations.


8

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

5. Inventories, net
 
June 30, 2015
 
December 31, 2014
Raw materials
$
353,929

 
$
352,016

Work in progress
158,645

 
147,715

Finished goods
454,387

 
483,912

Subtotal
966,961

 
983,643

Less reserves
(122,606
)
 
(119,906
)
Total
$
844,355

 
$
863,737


6. Property, Plant and Equipment, net
 
June 30, 2015
 
December 31, 2014
Land
$
53,532

 
$
55,076

Buildings and improvements
535,530

 
537,474

Machinery, equipment and other
1,729,480

 
1,698,638

Subtotal
2,318,542

 
2,291,188

Less accumulated depreciation
(1,490,634
)
 
(1,454,119
)
Total
$
827,908

 
$
837,069


7. Goodwill and Other Intangible Assets

The following table provides the changes in carrying value of goodwill by segment for the six months ended June 30, 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

 

 

 
2,076

 
2,076

Purchase price adjustments
8,152

 

 

 

 
8,152

Disposition of business (1)

 
(19,128
)
 

 

 
(19,128
)
Foreign currency translation
(3,656
)
 
(10,899
)
 
(9,947
)
 
(2,341
)
 
(26,843
)
Balance at June 30, 2015
$
1,053,231

 
$
1,240,151

 
$
599,716

 
$
562,716

 
$
3,455,814

(1)
Amount reflects additional goodwill allocated to Sargent Aerospace upon its disposition, based on the fair value of this business relative to the remaining entities within the Engineered Systems segment.

During the six months ended June 30, 2015, the Company recorded adjustments totaling $8,152 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 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:
 
June 30, 2015
 
December 31, 2014
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Gross Carrying
Amount
 
Accumulated
Amortization
Amortized intangible assets:
 
 
 
 
 
 
 
Trademarks
$
137,462

 
$
39,727

 
$
138,650

 
$
34,097

Patents
148,902

 
111,615

 
150,404

 
108,484

Customer Intangibles
1,416,785

 
541,202

 
1,429,906

 
484,449

Unpatented Technologies
91,507

 
50,925

 
92,480

 
45,812

Drawings & Manuals
35,238

 
14,516

 
36,377

 
13,087

Distributor Relationships
64,614

 
35,994

 
64,614

 
34,377

Other
24,321

 
14,552

 
24,214

 
12,737

Total
1,918,829

 
808,531

 
1,936,645

 
733,043

Unamortized intangible assets:
 
 
 
 
 
 
 
Trademarks
165,720

 
 
 
165,918

 
 
Total intangible assets, net
$
1,276,018

 
 
 
$
1,369,520

 
 

Amortization expense totaled $39,619 and $38,009 for the three months ended June 30, 2015 and 2014, respectively. For the six months ended June 30, 2015 and 2014, amortization expense was $79,593 and $76,596, respectively.

8. Restructuring Activities

The following table details restructuring charges incurred by segment for the periods presented:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Energy
$
2,556

 
$
1,419

 
$
20,378

 
$
1,490

Engineered Systems
747

 
1,236

 
5,102

 
3,021

Fluids
58

 
(367
)
 
2,155

 
538

Refrigeration & Food Equipment
(243
)
 
10

 
(525
)
 
10

Corporate

 
648

 
111

 
1,157

Total
$
3,118

 
$
2,946

 
$
27,221

 
$
6,216

 
 
 
 
 
 
 
 
These amounts are classified in the unaudited Condensed Consolidated Statements of Earnings as follows:
 
 
 
 
 
 
 
 
Cost of goods and services
$
2,474

 
$
1,189

 
$
9,928

 
$
1,732

Selling and administrative expenses
644

 
1,757

 
17,293

 
4,484

Total
$
3,118

 
$
2,946

 
$
27,221

 
$
6,216


The restructuring expenses of $3,118 and $27,221 incurred in the three and six months ended June 30, 2015 related to restructuring programs initiated during 2015 and 2014. These programs are designed to better align the Company's costs and operations with current market conditions through targeted facility consolidations, headcount reductions and other measures to further optimize operations. The Company expects the programs currently underway to be substantially completed in the next twelve to eighteen months.

The $3,118 of restructuring charges incurred during the second quarter of 2015 primarily included the following items:

The Energy segment incurred restructuring charges of $2,556 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 $747 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 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
15,584

 
11,637

 
27,221

Payments
(21,151
)
 
(6,356
)
 
(27,507
)
Foreign currency translation
(442
)
 
(322
)
 
(764
)
Other, including write-offs of fixed assets
197

 
(7,019
)
 
(6,822
)
Balance at June 30, 2015
$
9,546

 
$
4,603

 
$
14,149


The accrual balance at June 30, 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:
 
June 30, 2015
 
December 31, 2014
Short-term
 
 
 
Current portion of long-term debt
$
300,051

 
$
299,956

Commercial paper
81,900

 
478,000

 
$
381,951

 
$
777,956


 
June 30, 2015
 
December 31, 2014
Long-term
 
 
 
4.875% 10-year notes due October 15, 2015
$
299,934

 
$
299,836

5.45% 10-year notes due March 15, 2018
349,093

 
348,928

2.125% 7-year notes due December 1, 2020 (Euro-denominated)
335,632

 
363,970

4.30% 10-year notes due March 1, 2021
449,852

 
449,839

6.65% 30-year debentures due June 1, 2028
199,534

 
199,517

5.375% 30-year debentures due October 15, 2035
296,764

 
296,685

6.60% 30-year notes due March 15, 2038
247,992

 
247,948

5.375% 30-year notes due March 1, 2041
345,910

 
345,830

Other
403

 
444

Total long-term debt
2,525,114

 
2,552,997

Less current installments
(300,051
)
 
(299,956
)
 
$
2,225,063

 
$
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 June 30, 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 and six months ended June 30, 2015 and 2014 were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Interest expense
$
33,053

 
$
32,933

 
$
66,058

 
$
66,624

Interest income
(1,065
)
 
(972
)
 
(2,033
)
 
(2,008
)
Interest expense, net
$
31,988

 
$
31,961

 
$
64,025

 
$
64,616

 
Letters of Credit

As of June 30, 2015, the Company had approximately $129,088 outstanding in letters of credit and guarantees with financial institutions, which expire at various dates in the last quarter of 2015 through 2020. 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 June 30, 2015 and December 31, 2014, the Company had contracts with U.S. dollar equivalent notional amounts of $36,508 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 $54,126 and $52,392 at June 30, 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 June 30, 2015 and December 31, 2014 reflected losses of $19,616 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 the fourth quarter of 2015.

The following table sets forth the fair values of derivative instruments held by the Company as of June 30, 2015 and December 31, 2014 and the balance sheet lines in which they are recorded:
 
Fair Value Asset (Liability)
 
 
 
June 30, 2015
 
December 31, 2014
 
Balance Sheet Caption
Foreign currency forward / collar contracts
$
1,295

 
$
973

 
Prepaid / Other assets
Foreign currency forward / collar contracts

 
(810
)
 
Other accrued expenses
Net investment hedge - cross currency swap
(19,616
)
 
(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 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 June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
(Loss) gain on Euro-denominated debt
$
(6,975
)
 
$
6,269

 
$
28,375

 
$
3,365

(Loss) gain on Swiss franc cross-currency swap
(2,716
)
 
309

 
(4,049
)
 
(23
)
Total (loss) gain on net investment hedges before tax
(9,691
)
 
6,578

 
24,326

 
3,342

Tax benefit (expense)
3,392

 
(2,303
)
 
(8,514
)
 
(1,170
)
Net (loss) gain on net investment hedges, net of tax
$
(6,299
)
 
$
4,275

 
$
15,812

 
$
2,172


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 June 30, 2015 and December 31, 2014:
 
June 30, 2015
 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency cash flow hedges
$

 
$
1,295

 
$

 
$

 
$
973

 
$

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency cash flow hedges

 

 

 

 
810

 

Net investment hedge derivative

 
19,616

 

 

 
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 June 30, 2015 and December 31, 2014 was $2,821,080 and $3,002,701, respectively, compared to the carrying value of $2,525,114 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 June 30, 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 June 30, 2015 and 2014 were 29.6% and 30.6%, respectively. Excluding unfavorable net discrete items in each period, the effective tax rates for the three months ended June 30, 2015 and 2014 were 29.3% and 30.4%, respectively. These discrete items principally resulted from the conclusion of certain federal, state and international tax audits. The reduction in the effective tax rate year over year is principally due to a change in the geographic mix of earnings.

The effective tax rates for continuing operations for the six months ended June 30, 2015 and 2014 were 29.3% and 30.2%, respectively. Excluding favorable net discrete items of $1.9 million in the prior year, the effective tax rate for the six months ended June 30, 2014 was 30.5%. These discrete items principally resulted from the conclusion of certain federal, state and international tax audits. The decrease in the effective tax rate for the six months ended June 30, 2015 relative to the prior year is due to the same factors discussed above.

Additionally, in the second quarter of 2015, the Company generated a $325.0 million gain for tax purposes on the sale of Sargent Aerospace. The tax liability resulting from the sale was $108.0 million which reflects utilization of the $8.6 million tax benefit generated in the first quarter by the sale of Datamax O'Neil.

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 $21.6 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 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 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 six months ended June 30, 2015:
 
Performance shares
 
2015
 
2014
Fair value per share at date of grant
$
73.28

 
$
82.51

Average attainment rate reflected in expense
24.87
%
 
42.49
%

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 June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Pre-tax compensation expense (1)
$
5,464

 
$
7,912

 
$
18,851

 
$
16,413

Tax benefit
(1,917
)
 
(2,835
)
 
(6,681
)
 
(5,835
)
Total stock-based compensation expense, net of tax
$
3,547

 
$
5,077

 
$
12,170

 
$
10,578


(1)
The increase in share-based compensation expense for the six months ended June 30, 2015 relative to the prior year period 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 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 June 30, 2015 and December 31, 2014, the Company has reserves totaling $31,285 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 June 30, 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.


15

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

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 June 30, 2015 and 2014 are as follows:
 
2015
 
2014
Beginning Balance, January 1
$
49,388

 
$
42,924

Provision for warranties
24,877

 
28,410

Settlements made
(28,390
)
 
(26,814
)
Other adjustments, including acquisitions and currency translation
(517
)
 
972

Ending balance, June 30
$
45,358

 
$
45,492


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 June 30,
 
Six Months Ended June 30,
 
U.S. Plan
 
Non-U.S. Plans
 
U.S. Plan
 
Non-U.S. Plans
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Service Cost
$
3,916

 
$
3,721

 
$
1,663

 
$
1,530

 
$
7,831

 
$
7,442

 
$
3,351

 
$
3,045

Interest Cost
5,791

 
6,315

 
1,476

 
2,023

 
11,582

 
12,629

 
2,962

 
4,006

Expected return on plan assets
(10,393
)
 
(10,399
)
 
(2,011
)
 
(2,082
)
 
(20,786
)
 
(20,797
)
 
(4,030
)
 
(4,111
)
Amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior service cost
224

 
270

 
22

 
27

 
448

 
541

 
45

 
54

Recognized actuarial loss
3,155

 
2,072

 
661

 
222

 
6,310

 
4,144

 
1,336

 
443

Transition obligation

 

 
9

 
2

 

 

 
18

 
2

Settlement loss

 

 

 

 

 

 

 
3

Curtailments, special termination benefits, and settlements (1)

 

 
1

 

 
810

 

 
3

 

Net periodic expense
$
2,693

 
$
1,979

 
$
1,821

 
$
1,722

 
$
6,195

 
$
3,959

 
$
3,685

 
$
3,442

(1)
One-time charges of $810 reflected in pension expense for the six months ended June 30, 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 six months ended June 30, 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 not significant for the six months ended June 30, 2014. The expense relating to these plans is reflected in earnings from discontinued operations.


16

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

Non-Qualified Supplemental Benefits
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Service Cost
$
935

 
$
830

 
$
1,870

 
$
1,660

Interest Cost
1,265

 
1,537

 
2,531

 
3,074

Amortization:
 
 
 
 
 
 
 
   Prior service cost
1,732

 
1,943

 
3,464

 
3,887

   Recognized actuarial loss (gain)
72

 
(106
)
 
143

 
(213
)
Net periodic expense
$
4,004

 
$
4,204

 
$
8,008

 
$
8,408


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 June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Service Cost
$
40

 
$
62

 
$
81

 
$
124

Interest Cost
128

 
157

 
256

 
314

Amortization:
 
 
 
 
 
 
 
   Prior service cost
(93
)
 
(102
)
 
(186
)
 
(204
)
   Recognized actuarial (gain) loss
(7
)
 
13

 
(15
)
 
26

Net periodic expense
$
68

 
$
130

 
$
136

 
$
260


The total amount amortized out of accumulated other comprehensive income into net periodic benefit expense totaled $5,775 and $4,341for the three months ended June 30, 2015 and 2014, respectively, and $11,563 and $8,680 for the six months months ended June 30, 2015 and 2014, respectively. The amortization included in other comprehensive income for the six months ended June 30, 2014 includes insignificant amounts related 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 $8,005, and $8,865 for the three months ended June 30, 2015 and 2014, respectively, and $17,011 and $17,242 for the six months ended June 30, 2015 and 2014.


17

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

15. Other Comprehensive (Loss) Earnings

The amounts recognized in other comprehensive (loss) earnings were as follows:
 
Three Months Ended
 
Three Months Ended
 
June 30, 2015
 
June 30, 2014
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Foreign currency translation adjustments (1)
$
33,058

 
$
3,392

 
$
36,450

 
$
13,274

 
$
(2,303
)
 
$
10,971

Pension and other postretirement benefit plans
5,775

 
(1,958
)
 
3,817

 
4,341

 
(1,506
)
 
2,835

Changes in fair value of cash flow hedges
(364
)
 
127

 
(237
)
 
45

 
(16
)
 
29

Other
317

 
(40
)
 
277

 
873

 
(128
)
 
745

Total other comprehensive earnings (loss)
$
38,786

 
$
1,521

 
$
40,307

 
$
18,533

 
$
(3,953
)
 
$
14,580

(1)
Foreign currency translation adjustments for the three months ended June 30, 2015 include pre-tax losses of $9,691 on the Company's net investment hedges, which resulted in a tax benefit of $3,392 reflected in other comprehensive income. The three months ended June 30, 2014 reflect gains of $6,578 on these hedges, which resulted in a tax expense of $2,303 included in other comprehensive income. See also Note 10 Financial Instruments.
 
Six Months Ended
 
Six Months Ended
 
June 30, 2015
 
June 30, 2014
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Foreign currency translation adjustments (2)
$
(39,145
)
 
$
(8,514
)
 
$
(47,659
)
 
$
(5,232
)
 
$
(1,170
)
 
$
(6,402
)
Pension and other postretirement benefit plans
11,563

 
(3,920
)
 
7,643

 
8,680

 
(3,011
)
 
5,669

Changes in fair value of cash flow hedges
1,265

 
(443
)
 
822

 
(898
)
 
314

 
(584
)
Other
558

 
(67
)
 
491

 
767

 
(148
)
 
619

Total other comprehensive (loss) earnings
$
(25,759
)
 
$
(12,944
)
 
$
(38,703
)
 
$
3,317

 
$
(4,015
)
 
$
(698
)
(2)
Foreign currency translation adjustments for the six months ended June 30, 2015 and 2014 include pre-tax gains on the Company's net investment hedges of $24,326 and $3,342, respectively, which resulted in tax expense of $8,514 and $1,170 reflected in other comprehensive income for these respective periods. See also Note 10 Financial Instruments.

Total comprehensive earnings were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Net earnings
$
332,396

 
$
213,959

 
$
541,906

 
$
374,097

Other comprehensive earnings (loss)
40,307

 
14,580

 
(38,703
)
 
(698
)
Comprehensive earnings
$
372,703

 
$
228,539

 
$
503,203

 
$
373,399


Amounts reclassified from accumulated other comprehensive earnings (loss) to earnings (loss) during the three and six months ended June 30, 2015 and 2014 were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015

2014
Pension and postretirement benefit plans:
 
 
 
 
 
 
 
Amortization of actuarial losses
$
3,890

 
$
2,203

 
$
7,792

 
$
4,402

Amortization of prior service costs
1,885

 
2,138

 
3,771

 
4,278

Total before tax
5,775

 
4,341

 
11,563

 
8,680

Tax provision
(1,958
)
 
(1,506
)
 
(3,920
)
 
(3,011
)
Net of tax
$
3,817

 
$
2,835

 
$
7,643

 
$
5,669

 
 
 
 
 
 
 
 
Cash flow hedges:
 
 
 
 
 
 
 
Net losses (gains) reclassified into earnings
$
877

 
$
(77
)
 
$
724

 
$
(291
)
Tax (provision) benefit
(307
)
 
27

 
(253
)
 
102