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EX-32 - EXHIBIT 32 - DOVER Corpa2016093010-qexhibit32.htm
EX-31.2 - EXHIBIT 31.2 - DOVER Corpa2016093010-qexhibit312.htm
EX-31.1 - EXHIBIT 31.1 - DOVER Corpa2016093010-qexhibit311.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 September 30, 2016

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 October 12, 2016 was 155,346,834.



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 data)
(unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Revenue
$
1,707,763

 
$
1,787,582

 
$
5,016,381

 
$
5,261,711

Cost of goods and services
1,075,975

 
1,114,974

 
3,164,116

 
3,307,376

Gross profit
631,788

 
672,608

 
1,852,265

 
1,954,335

Selling and administrative expenses
421,042

 
395,688

 
1,301,901

 
1,233,017

Operating earnings
210,746

 
276,920

 
550,364

 
721,318

Interest expense, net
32,994

 
31,983

 
96,865

 
96,008

Other income, net
(3,424
)
 
(367
)
 
(19,800
)
 
(5,810
)
Earnings before provision for income taxes and discontinued operations
181,176

 
245,304

 
473,299

 
631,120

Provision for income taxes
51,092

 
58,821

 
125,569

 
171,813

Earnings from continuing operations
130,084

 
186,483

 
347,730

 
459,307

(Losses) earnings from discontinued operations, net

 
(385
)
 

 
268,697

Net earnings
$
130,084

 
$
186,098

 
$
347,730

 
$
728,004

 
 
 
 
 
 
 
 
Earnings per share from continuing operations:
 
 
 
 
 
 
 
Basic
$
0.84

 
$
1.20

 
$
2.24

 
$
2.90

Diluted
$
0.83

 
$
1.19

 
$
2.22

 
$
2.87

 
 
 
 
 
 
 
 
Earnings per share from discontinued operations:
 
 
 
 
 
 
Basic
$

 
$

 
$

 
$
1.70

Diluted
$

 
$

 
$

 
$
1.68

 
 
 
 
 
 
 
 
Net earnings per share:
 
 
 
 
 
 
 
Basic
$
0.84

 
$
1.20

 
$
2.24

 
$
4.59

Diluted
$
0.83

 
$
1.19

 
$
2.22

 
$
4.55

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
155,300

 
155,300

 
155,182

 
158,507

Diluted
156,798

 
156,560

 
156,562

 
160,112

 
 
 
 
 
 
 
 
Dividends paid per common share
$
0.44

 
$
0.42

 
$
1.28

 
$
1.22

 

See Notes to Condensed Consolidated Financial Statements



1


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

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net earnings
$
130,084

 
$
186,098

 
$
347,730

 
$
728,004

 
 
 
 
 
 
 
 
Other comprehensive earnings (loss), net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments:
 
 
 
 
 
 
 
Foreign currency translation gains (losses) during period
11,489

 
(57,213
)
 
(21,734
)
 
(101,755
)
Reclassification of foreign currency translation gains to earnings upon sale of subsidiaries

 

 

 
(3,117
)
Total foreign currency translation
11,489

 
(57,213
)
 
(21,734
)
 
(104,872
)
 
 
 
 
 
 
 
 
Pension and other postretirement benefit plans:
 
 
 
 
 
 
 
Amortization of actuarial losses included in net periodic pension cost
1,413

 
2,575

 
4,238

 
7,763

Amortization of prior service costs included in net periodic pension cost
1,040

 
1,227

 
3,121

 
3,682

Total pension and other postretirement benefit plans
2,453

 
3,802

 
7,359

 
11,445

 
 
 
 
 
 
 
 
Changes in fair value of cash flow hedges:
 
 
 
 
 
 
 
Unrealized net (losses) gains arising during period
(282
)
 
185

 
(493
)
 
536

Net (losses) gains reclassified into earnings
(36
)
 
(678
)
 
131

 
(207
)
Total cash flow hedges
(318
)
 
(493
)
 
(362
)
 
329

 
 
 
 
 
 
 
 
Other
240

 
393

 
1,632

 
884

 
 
 
 
 
 
 
 
Other comprehensive earnings (loss)
13,864

 
(53,511
)
 
(13,105
)
 
(92,214
)
 
 
 
 
 
 
 
 
Comprehensive earnings
$
143,948

 
$
132,587

 
$
334,625

 
$
635,790


See Notes to Condensed Consolidated Financial Statements


2


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

 
September 30, 2016
 
December 31, 2015
Current assets:
 
 
 
Cash and cash equivalents
$
514,755

 
$
362,185

Receivables, net of allowances of $19,757 and $18,050
1,199,137

 
1,120,490

Inventories, net
828,286

 
802,895

Prepaid and other current assets
119,419

 
133,440

Assets held for sale
77,370

 

Total current assets
2,738,967

 
2,419,010

Property, plant and equipment, net
839,430

 
854,269

Goodwill
4,039,935

 
3,737,389

Intangible assets, net
1,475,757

 
1,413,223

Other assets and deferred charges
204,194

 
182,185

Total assets
$
9,298,283

 
$
8,606,076

 
 
 
 
Current liabilities:
 

 
 

Notes payable and current maturities of long-term debt
$
513,980

 
$
151,122

Accounts payable
748,799

 
650,880

Accrued compensation and employee benefits
221,278

 
223,039

Accrued insurance
101,225

 
99,642

Other accrued expenses
260,063

 
235,971

Liabilities held for sale
20,278

 

Federal and other taxes on income
25,448

 
6,528

Total current liabilities
1,891,071

 
1,367,182

Long-term debt, net
2,613,761

 
2,603,655

Deferred income taxes
586,408

 
575,709

Other liabilities
418,143

 
414,955

Stockholders' equity:
 

 
 

Total stockholders' equity
3,788,900

 
3,644,575

Total liabilities and stockholders' equity
$
9,298,283

 
$
8,606,076



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 (Losses)
 
Treasury Stock
 
Total Stockholders' Equity
Balance at December 31, 2015
$
256,113

 
$
928,409

 
$
7,686,642

 
$
(254,573
)
 
$
(4,972,016
)
 
$
3,644,575

Net earnings

 

 
347,730

 

 

 
347,730

Dividends paid

 

 
(199,159
)
 

 

 
(199,159
)
Common stock issued for the exercise of share-based awards
338

 
(13,362
)
 

 

 

 
(13,024
)
Tax benefit from the exercise of share-based awards

 
4,092

 

 

 

 
4,092

Share-based compensation expense

 
17,791

 

 

 

 
17,791

Other comprehensive losses, net of tax

 

 

 
(13,105
)
 

 
(13,105
)
Balance at September 30, 2016
$
256,451

 
$
936,930

 
$
7,835,213

 
$
(267,678
)
 
$
(4,972,016
)
 
$
3,788,900

 
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)
 
Nine Months Ended September 30,
 
2016
 
2015
Operating Activities of Continuing Operations
 
 
 
Net earnings
$
347,730

 
$
728,004

 
 
 
 
Adjustments to reconcile net earnings to cash from operating activities:
 
 
 
Earnings from discontinued operations, net

 
(268,697
)
Depreciation and amortization
263,421

 
235,383

Stock-based compensation expense
17,791

 
25,525

Gain on sale of assets
(3,466
)
 

Gain on sale of business
(11,228
)
 

Cash effect of changes in assets and liabilities:
 
 
 
Accounts receivable
(31,791
)
 
(40,528
)
Inventories
(21,223
)
 
22,058

Prepaid expenses and other assets
(15,932
)
 
(1,441
)
Accounts payable
38,582

 
33,979

Accrued compensation and employee benefits
(15,999
)
 
(63,487
)
Accrued expenses and other liabilities
23,076

 
(5,943
)
Accrued and deferred taxes, net
8,565

 
(16,623
)
Other, net
(26,580
)
 
(15,774
)
Net cash provided by operating activities of continuing operations
572,946

 
632,456

 
 
 
 
Investing Activities of Continuing Operations
 

 
 

Additions to property, plant and equipment
(115,768
)
 
(111,279
)
Acquisitions, net of cash and cash equivalents acquired
(501,828
)
 
(6,500
)
Proceeds from sale of property, plant and equipment
9,971

 
9,471

Proceeds from sale of businesses
47,300

 
689,314

Other
(1,057
)
 

Net cash (used in) provided by investing activities of continuing operations
(561,382
)
 
581,006

 
 
 
 
Financing Activities of Continuing Operations
 

 
 

Purchase of common stock

 
(600,164
)
Proceeds from exercise of share-based awards, including tax benefits
6,828

 
3,626

Change in commercial paper and notes payable
355,275

 
(316,800
)
Dividends paid to stockholders
(199,759
)
 
(192,744
)
Payments to settle employee tax obligations on exercise of share-based awards
(13,024
)
 
(4,808
)
Reduction of long-term debt

 
(76
)
Net cash provided by (used in) financing activities of continuing operations
149,320

 
(1,110,966
)
 
 
 
 
Cash Flows from Discontinued Operations
 

 
 

Net cash used in operating activities of discontinued operations

 
(91,689
)
Net cash used in investing activities of discontinued operations

 
(1,984
)
Net cash used in discontinued operations

 
(93,673
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(8,314
)
 
(27,731
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
152,570

 
(18,908
)
Cash and cash equivalents at beginning of period
362,185

 
681,581

Cash and cash equivalents at end of period
$
514,755

 
$
662,673


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, 2015, 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.  

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. Acquisitions

During the nine months ended September 30, 2016, the Company acquired four businesses in separate transactions for net cash consideration of $501,828. The businesses were acquired to complement and expand upon existing operations within the Engineered Systems and Fluids segments.

The following acquisitions were made during the nine months ended September 30, 2016:
2016 Acquisitions
 
 
Date
Type
Company / Product Line Acquired
Location (Near)
Segment
January 7
Stock
Tokheim Group S.A.S.
Dundee, UK
Fluids
Manufacturer of fuel dispensers, retail automation systems and payment solutions.

May 25
Stock
Fairbanks Environmental LTD
Skelmersdale, UK
Fluids
Provider of monitoring and optimization software and tools centered around fuel management and on-site services.
June 13
Stock
ProGauge
Milan, Italy
Fluids
Provider of automatic tank gauge solutions, including a variety of tank probes, consoles, and related software and calibration services for service stations to measure and monitor fuel tank levels.
September 23
Stock
Alliance Wireless Technologies, Inc.
Houston, Texas
Engineered Systems
Provider of mobile vision and safety monitoring technology for fleet management.


The following presents the allocation of acquisition costs to the assets acquired and liabilities assumed, based on their estimated fair values:
 
Total
Current assets, net of cash and cash equivalents acquired
$
109,032

Property, plant and equipment
31,310

Goodwill
314,633

Intangible assets
208,838

Other assets and deferred charges
5,564

Current liabilities
(109,471
)
Other liabilities
(58,078
)
Net assets acquired
$
501,828



6

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

The amounts assigned to goodwill and major intangible asset classifications for the 2016 acquisitions are as follows:
 
Amount allocated
 
Useful life (in years)
Goodwill - Non deductible
$
314,633

 
na
Customer intangibles
116,116

 
10
Trademarks
26,332

 
15
Technology
825

 
8
Other intangibles
65,565

 
10
 
$
523,471

 
 

The goodwill identified by these acquisitions reflect the benefits expected to be derived from product line expansion and operational synergies. Upon consummation of the acquisitions, these businesses are now wholly owned by Dover.

The Company has substantially completed the purchase price allocations for the 2016 acquisitions as discussed above. As additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), the Company will refine its estimates of fair value to allocate the purchase price more accurately. Purchase price allocation adjustments may arise through working capital adjustments, asset appraisals or to reflect additional facts and circumstances in existence as of the acquisition date. Identified measurement period adjustments will be recorded, including any related impacts to net earnings, in the reporting period in which the adjustments are determined and may be significant. See Note 6 Goodwill and Other Intangible Assets for purchase price adjustments.

The unaudited Condensed Consolidated Statements of Earnings include the results of these businesses from the date of acquisition.  

Pro Forma Information

The following unaudited pro forma information illustrates the impact of both the acquisitions completed in the nine months ended September 30, 2016 and the 2015 acquisitions on the Company’s revenue and earnings from continuing operations for the three and nine months ended September 30, 2016 and 2015. In 2015, the Company acquired four businesses in separate transactions for net cash consideration of $567,843.
 
The 2016 and 2015 pro forma information assumes that the 2016 and 2015 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 2016 and 2015 acquisitions.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Revenue from continuing operations:
 
 
 
 
 
 
 
As reported
$
1,707,763

 
$
1,787,582

 
$
5,016,381

 
$
5,261,711

Pro forma
1,712,752

 
1,920,936

 
5,045,548

 
5,657,933

Earnings from continuing operations:
 
 
 
 
As reported
$
130,084

 
$
186,483

 
$
347,730

 
$
459,307

Pro forma
131,440

 
196,229

 
357,507

 
482,014

Basic earnings per share from continuing operations:
 
 
 
 
As reported
$
0.84

 
$
1.20

 
$
2.24

 
$
2.90

Pro forma
0.85

 
1.26

 
2.30

 
3.04

Diluted earnings per share from continuing operations:
 
 
 
 
As reported
$
0.83

 
$
1.19

 
$
2.22

 
$
2.87

Pro forma
0.84

 
1.25

 
2.28

 
3.01


3. Held for Sale, Disposed and Discontinued Operations

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


7

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

Assets and Liabilities Held for Sale

On September 30, 2016, the Company entered into a definitive agreement to sell Tipper Tie, a wholly owned subsidiary, for total consideration of approximately $160,000, which is subject to normal closing adjustments. Tipper Tie is a global supplier of processing and clip packaging machines. As of September 30, 2016, Tipper Tie met the criteria to be classified as held for sale. The Company classified Tipper Tie’s assets and liabilities separately on the consolidated balance sheet as of September 30, 2016, and recorded the assets and liabilities at the lesser of the carrying value or estimated fair value less estimated costs to sell. Assets and liabilities held for sale were $77,370 and $20,278, respectively, at September 30, 2016.

The Tipper Tie business is included in the results of the Refrigeration & Food Equipment segment. The impending sale does not represent a strategic shift that will have a major effect on operations and financial results and, therefore, did not qualify for presentation as a discontinued operation.

The Company had no assets or liabilities classified as held for sale as of December 31, 2015.

Disposed Businesses

On February 17, 2016, the Company completed the sale of Texas Hydraulics, a custom manufacturer of fluid power components. This disposal did not represent a strategic shift in operations and, therefore, did not qualify for presentation as a discontinued operation. Upon disposal of the business, the Company recognized total proceeds of $47,300, which resulted in a gain on sale of $11,228 included within Other income, net within the Condensed Consolidated Statement of Earnings for the nine months ended September 30, 2016.
 
Discontinued Operations

The results of discontinued operations for the three and nine months ended September 30, 2015 reflect the net earnings of businesses held for sale that qualified for presentation as discontinued operations prior to their respective sale dates. 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. 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.

Summarized results of the Company’s discontinued operations are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2015
Revenue
$

 
$
72,869

 
 
 
 
(Loss) gain on sale, net of tax
(31
)
 
265,550

 
 
 
 
(Loss) earnings from operations before taxes
(100
)
 
8,608

Provision for income taxes
(254
)
 
(5,461
)
(Loss) earnings from operations, net of tax
(354
)
 
3,147

 
 
 
 
(Loss) earnings from discontinued operations, net of tax
$
(385
)
 
$
268,697


4. Inventories, net
 
September 30, 2016
 
December 31, 2015
Raw materials
$
355,772

 
$
333,551

Work in progress
152,287

 
135,624

Finished goods
426,738

 
443,032

Subtotal
934,797

 
912,207

Less reserves
(106,511
)
 
(109,312
)
Total
$
828,286

 
$
802,895



8

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

5. Property, Plant and Equipment, net
 
September 30, 2016
 
December 31, 2015
Land
$
55,278

 
$
55,567

Buildings and improvements
553,665

 
546,809

Machinery, equipment and other
1,776,219

 
1,772,031

Subtotal
2,385,162

 
2,374,407

Less accumulated depreciation
(1,545,732
)
 
(1,520,138
)
Total
$
839,430

 
$
854,269


Depreciation expense totaled $42,786 and $38,191 for the three months ended September 30, 2016 and 2015, respectively. For the nine months ended September 30, 2016 and 2015, depreciation expense was $132,316 and $116,807, respectively.
 
6. Goodwill and Other Intangible Assets

The following table provides the changes in carrying value of goodwill by segment for the nine months ended September 30, 2016:
 
Energy
 
Engineered Systems
 
Fluids
 
Refrigeration & Food Equipment
 
Total
Balance at December 31, 2015
$
1,047,180

 
$
1,473,864

 
$
655,745

 
$
560,600

 
$
3,737,389

Acquisitions

 
19,948

 
294,685

 

 
314,633

Purchase price adjustments

 
363

 
4,860

 
768

 
5,991

Disposition of business or held for sale

 
(9,615
)
 

 
(25,673
)
 
(35,288
)
Foreign currency translation
842

 
7,915

 
7,536

 
917

 
17,210

Balance at September 30, 2016
$
1,048,022

 
$
1,492,475

 
$
962,826

 
$
536,612

 
$
4,039,935


As noted in Note 3 Held for Sale, Disposed and Discontinued Operations, the Company completed the sale of its Texas Hydraulics business during the nine months ended September 30, 2016. As a result of this sale, the Engineered Systems goodwill balance was reduced by $9,615. Additionally, the Company has classified Tipper Tie's assets and liabilities as held for sale. As a result, the Refrigeration & Food Equipment goodwill balance was reduced by $25,673.

During the nine months ended September 30, 2016, the Company recorded adjustments totaling $5,991 to goodwill relating to purchase price adjustments as a result of working capital adjustments and refinements of estimates to assets acquired and liabilities assumed for the 2015 acquisitions of Gemtron, JK Group, Gala Industries, Xylon and Reduction Engineering Scheer. During the three and nine months ended September 30, 2016, the Company recorded adjustments of $6,892 and $24,092, respectively, to goodwill as a result of working capital and purchase price adjustments for the 2016 acquisitions of Tokheim, Fairbanks, and ProGauge. These adjustments are included in the acquisitions line in the table above.

In accordance with the applicable accounting standard, Dover performs its annual goodwill impairment testing in the fourth quarter of each year. In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. The Company has considered the economic environments in which its businesses operate, particularly those reporting units exposed to the decline in oil and gas markets, and the long-term outlook for those businesses. The Company has determined that a triggering event has not occurred which would require impairment testing in the third quarter of 2016.


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 assets:
 
September 30, 2016
 
December 31, 2015
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Gross Carrying
Amount
 
Accumulated
Amortization
Amortized intangible assets:
 
 
 
 
 
 
 
Trademarks
$
176,887

 
$
53,037

 
$
150,926

 
$
45,536

Patents
149,061

 
119,652

 
150,570

 
112,399

Customer Intangibles
1,679,427

 
691,040

 
1,567,048

 
595,635

Unpatented Technologies
135,026

 
62,198

 
137,919

 
56,495

Drawings & Manuals
39,940

 
23,561

 
34,232

 
15,760

Distributor Relationships
116,261

 
43,263

 
64,614

 
37,610

Other
27,275

 
21,040

 
23,923

 
18,168

Total
2,323,877

 
1,013,791

 
2,129,232

 
881,603

Unamortized intangible assets:
 
 
 
 
 
 
 
Trademarks
165,671

 
 
 
165,594

 
 
Total intangible assets, net
$
1,475,757

 
 
 
$
1,413,223

 
 

Amortization expense totaled $43,937 and $38,983 for the three months ended September 30, 2016 and 2015, respectively. For the nine months ended September 30, 2016 and 2015, amortization expense was $131,105 and $118,576, respectively.

7. Restructuring Activities

The following table details restructuring charges incurred by segment for the periods presented:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Energy
$
5,170

 
$
6,183

 
$
17,196

 
$
26,561

Engineered Systems
1,293

 
3,694

 
4,033

 
8,796

Fluids
1,139

 
1,382

 
9,129

 
3,537

Refrigeration & Food Equipment
146

 
91

 
219

 
(434
)
Corporate

 
169

 
757

 
280

Total
$
7,748

 
$
11,519

 
$
31,334

 
$
38,740

 
 
 
 
 
 
 
 
These amounts are classified in the unaudited Condensed Consolidated Statements of Earnings as follows:
 
 
 
 
 
 
 
 
Cost of goods and services
$
2,771

 
$
3,943

 
$
12,951

 
$
13,871

Selling and administrative expenses
4,977

 
7,576

 
18,383

 
24,869

Total
$
7,748

 
$
11,519

 
$
31,334

 
$
38,740


The restructuring expenses of $7,748 and $31,334 incurred in the three and nine months ended September 30, 2016, respectively, are related to restructuring programs initiated during 2016 and 2015. 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 $7,748 of restructuring charges incurred during the third quarter of 2016 primarily included the following items:

The Energy segment recorded $5,170 of restructuring charges related to various programs across the segment focused on workforce reductions and field and facility consolidations. These programs were initiated to better align cost base with the current demand environment.


10

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

The Engineered Systems segment recorded $1,293 of restructuring charges related to headcount reductions across various businesses primarily related to optimization of administrative functions within the Printing & Identification platform and U.S. manufacturing consolidation within the Industrial platform.

The Fluids segment recorded $1,139 of restructuring charges principally related to headcount reductions and facility consolidations at various businesses across the segment.

The Refrigeration & Food Equipment segment recorded $146 of restructuring charges related primarily to headcount reductions.

The following table details the Company’s severance and other restructuring accrual activity:
 
Severance
 
Exit
 
Total
Balance at December 31, 2015
$
11,036

 
$
2,955

 
$
13,991

Restructuring charges
23,867

 
7,467

 
31,334

Payments
(25,064
)
 
(4,524
)
 
(29,588
)
Foreign currency translation
101

 
47

 
148

Other, including write-offs of fixed assets and acquired balances
1,929

 
(2,403
)
 
(474
)
Balance at September 30, 2016
$
11,869

 
$
3,542

 
$
15,411


The accrual balance at September 30, 2016 primarily reflects restructuring plans initiated during the year, as well as ongoing lease commitment obligations for facilities closed in earlier periods.

8. Borrowings

Borrowings consist of the following:
 
September 30, 2016
 
December 31, 2015
Short-term
 
 
 
Current portion of long-term debt
$
6,880

 
$
122

Commercial paper
507,100

 
151,000

Total short-term borrowings
$
513,980

 
$
151,122


 
September 30, 2016
 
December 31, 2015
Long-term
 
 
 
5.45% 10-year notes due March 15, 2018
$
349,505

 
$
349,258

2.125% 7-year notes due December 1, 2020 (euro-denominated)
336,389

 
328,592

4.30% 10-year notes due March 1, 2021
449,885

 
449,865

3.150% 10-year notes due November 15, 2025
397,182

 
396,951

6.65% 30-year debentures due June 1, 2028
199,578

 
199,552

5.375% 30-year debentures due October 15, 2035
296,963

 
296,844

6.60% 30-year notes due March 15, 2038
248,102

 
248,036

5.375% 30-year notes due March 1, 2041
346,109

 
345,989

Other, less current installments
2,465

 
2,255

Total long-term debt
2,626,178

 
2,617,342

Unamortized debt issuance costs
(12,417
)
 
(13,687
)
Total long-term debt, net of debt issuance costs
$
2,613,761

 
$
2,603,655


The Company adopted new accounting guidance effective January 1, 2016 which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct reduction of the carrying amount of the related debt. Upon adoption, the Company reclassified $13,687 from other assets and deferred charges to long-term debt to reflect this guidance in the comparable balance as of December 31, 2015.
 

11

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

The Company maintains a $1.0 billion five-year unsecured revolving credit facility (the "Credit Agreement") with a syndicate of banks which expires on November 10, 2020. The Company was in compliance with its revolving credit and other long-term debt covenants at September 30, 2016 and had a coverage ratio of 9.2 to 1.0. The Company primarily uses this facility as liquidity back-up for its commercial paper program and has not drawn down any loans under the facility and does not anticipate doing so. The Company generally uses commercial paper borrowings for general corporate purposes, funding of acquisitions, and repurchases of its common stock.

On September 16, 2016, the Company entered into a $500 million unsecured term loan facility (the “Term Loan Agreement”) with a syndicate of banks.  Any borrowings under the Term Loan Agreement will mature on the one year anniversary of the drawing of the term loans.  The Company has not drawn down on the Term Loan Agreement as of September 30, 2016.

Interest expense and interest income for the three and nine months ended September 30, 2016 and 2015 were as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Interest expense
$
33,789

 
$
33,098

 
$
100,886

 
$
99,156

Interest income
(795
)
 
(1,115
)
 
(4,021
)
 
(3,148
)
Interest expense, net
$
32,994

 
$
31,983

 
$
96,865

 
$
96,008

 
Letters of Credit

As of September 30, 2016, the Company had approximately $101,241 outstanding in letters of credit and guarantees with financial institutions which expire at various dates within 2016 through 2024. These letters of credit are primarily maintained as security for insurance, warranty, and other performance obligations.  

9. Financial Instruments

Derivatives

The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations and certain commodity risks. In order to manage these risks the Company has hedged portions of its forecasted sales and purchases to occur within the next twelve months that are denominated in non-functional currencies, with currency forward or collar contracts designated as cash flow hedges. At September 30, 2016 and December 31, 2015, the Company had contracts with U.S. dollar equivalent notional amounts of $64,482 and $37,735, respectively, to exchange foreign currencies, principally the Chinese Yuan, Pound Sterling, U.S. Dollar, Swedish Krona, Euro, Canadian Dollar, and Swiss Franc. 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 $65,048 and $51,369 at September 30, 2016 and December 31, 2015, 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 following table sets forth the fair values of derivative instruments held by the Company as of September 30, 2016 and December 31, 2015 and the balance sheet lines in which they are recorded:
 
Fair Value Asset (Liability)
 
 
 
September 30, 2016
 
December 31, 2015
 
Balance Sheet Caption
Foreign currency forward / collar contracts
$
84

 
$
170

 
Prepaid / Other assets
Foreign currency forward / collar contracts
(615
)
 
(452
)
 
Other 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.


12

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

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.

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 earnings to offset changes in the value of the net investment in Euro-denominated operations.

Gains (losses) on net investment hedges are recognized in other comprehensive earnings (losses) as a part of foreign currency translation adjustments as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
(Loss) gain on Euro-denominated debt
$
(6,058
)
 
$
300

 
$
(7,723
)
 
$
28,675

Gain (loss) on Swiss Franc cross-currency swap

 
3,331

 

 
(718
)
Total (loss) gain on net investment hedges before tax
(6,058
)
 
3,631

 
(7,723
)
 
27,957

Tax benefit (expense)
2,119

 
(1,271
)
 
2,702

 
(9,785
)
Net (loss) gain on net investment hedges, net of tax
$
(3,939
)
 
$
2,360

 
$
(5,021
)
 
$
18,172


Fair Value Measurements

Accounting Standards Codification ("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 September 30, 2016 and December 31, 2015:
 
September 30, 2016
 
December 31, 2015
 
Level 2
 
Level 2
Assets:
 
 
 
Foreign currency cash flow hedges
$
84

 
$
170

Liabilities:
 
 
 
Foreign currency cash flow hedges
615

 
452


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

The estimated fair value of long-term debt, net of unamortized debt issuance costs at September 30, 2016 and December 31, 2015 was $3,104,447 and $2,880,734, respectively, compared to the carrying value of $2,613,761 and $2,603,655, respectively. The estimated fair value of long-term debt is based on quoted market prices for similar instruments and is, therefore, classified as Level 2 within the fair value hierarchy.

13

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


The carrying values of cash and cash equivalents, trade receivables, accounts payable, and notes payable are reasonable estimates of their fair values as of September 30, 2016 and December 31, 2015 due to the short-term nature of these instruments.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We also have assets and liabilities that may be measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment, allocation of purchase price in an acquisition or when a new liability is being established that requires fair value measurement. These include long-lived assets, goodwill and other intangible assets and investments in unconsolidated subsidiaries which may be written down to fair value as a result of impairment. The fair value measurements related to each of these rely primarily on Company-specific inputs and the Company's assumptions about the use of the assets. Since certain of the Company’s assumptions would involve inputs that are not observable, these fair values would reside within Level 3 of the fair value hierarchy.

10. Income Taxes

The effective tax rates for continuing operations for the three months ended September 30, 2016 and 2015 were 28.2% and 24.0%, respectively. Excluding discrete items, the effective tax rates for the three months ended September 30, 2016 and 2015 were 28.0% and 27.3%, respectively. The discrete items for the three months ended September 30, 2016 resulted primarily from the adjustment of the tax accounts to the U.S. tax return filed. The discrete items for the three months ended September 30, 2015 principally resulted from the conclusion of certain state tax audits and an adjustment of the tax accounts to the U.S. tax return filed. The increase in the effective tax rate for the three months ended September 30, 2016 relative to the prior comparable period is principally due to the adjustments of the tax accounts to the U.S. tax return filed.

The effective tax rates for continuing operations for the nine months ended September 30, 2016 and 2015 were 26.5% and 27.2%, respectively. Excluding discrete items, the effective tax rates for the nine months ended September 30, 2016 and 2015 were 27.8% and 28.5%, respectively. The decrease in the effective tax rate for the nine months ended September 30, 2016 relative to the prior comparable period is primarily due to the revaluation of deferred tax balances as a result of a tax rate reduction in a non U.S. jurisdiction.

Dover and its subsidiaries file tax returns in the U.S., including various state and local returns, and in other foreign jurisdictions.  We believe adequate provision has been made for all income tax uncertainties. The Company is routinely audited by taxing authorities in its filing jurisdictions, and a number of these audits are currently underway. The Company believes that within the 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 $18,179.

11. Equity Incentive Program

The Company typically grants equity awards annually at its regularly scheduled first quarter meeting of the Compensation Committee of the Board of Directors. During the first and second quarters of 2016, the Company issued stock-settled appreciation rights ("SARs") covering 1,346,354 shares, performance share awards of 79,561 and restricted stock units of 244,707.


14

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

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
 
2016
 
2015
Risk-free interest rate
1.05
%
 
1.51
%
Dividend yield
3.09
%
 
2.24
%
Expected life (years)
4.6

 
5.1

Volatility
26.17
%
 
27.19
%
 
 
 
 
Grant price
$
57.25

 
$
73.28

Fair value per share at date of grant
$
9.25

 
$
14.55


The performance share awards granted in 2016 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 selling and administrative expenses in the unaudited Condensed Consolidated Statements of Earnings in the period of change.  

The fair value and average attainment used in determining stock-based compensation cost for the performance shares issued in 2016 and 2015 is as follows for the nine months ended September 30, 2016:
 
Performance shares
 
2016
 
2015
Fair value per share at date of grant
$
57.25

 
$
73.28

Average attainment rate reflected in expense
20.38
%
 
31.78
%

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 September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Pre-tax stock-based compensation expense
$
3,431

 
$
6,674

 
$
17,791

 
$
25,525

Tax benefit
(1,192
)
 
(2,368
)
 
(6,272
)
 
(9,049
)
Total stock-based compensation expense, net of tax
$
2,239

 
$
4,306

 
$
11,519

 
$
16,476

 

15

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

12. 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 September 30, 2016 and December 31, 2015, the Company has reserves totaling $30,463 and $30,595, 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 September 30, 2016 and December 31, 2015, 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 for new claims. The changes in the carrying amount of product warranties through September 30, 2016 and 2015 are as follows:
 
2016
 
2015
Beginning Balance, January 1
$
44,466

 
$
49,388

Provision for warranties
44,752

 
36,821

Settlements made
(39,307
)
 
(41,842
)
Other adjustments, including acquisitions and currency translation
2,103

 
(1,245
)
Ending balance, September 30
$
52,014

 
$
43,122



16

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

13. 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 September 30,
 
Nine Months Ended September 30,
 
U.S. Plan
 
Non-U.S. Plans
 
U.S. Plan
 
Non-U.S. Plans
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Service cost
$
3,478

 
$
3,915

 
$
1,389

 
$
1,655

 
$
10,435

 
$
11,746

 
$
4,167

 
$
5,006

Interest cost
5,762

 
5,790

 
1,334

 
1,482

 
17,285

 
17,372

 
4,103

 
4,444

Expected return on plan assets
(9,698
)
 
(10,392
)
 
(1,899
)
 
(2,012
)
 
(29,095
)
 
(31,178
)
 
(5,821
)
 
(6,042
)
Amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior service cost
184

 
225

 
(100
)
 
22

 
550

 
673

 
(299
)
 
67

Recognized actuarial loss
1,610

 
3,155

 
670

 
665

 
4,828

 
9,465

 
2,010

 
2,001

Transition obligation

 

 
1

 
(15
)
 

 

 
3

 
3

Curtailments, special termination benefits, and settlements

 

 

 
2

 

 
810

 

 
5

Net periodic expense
$
1,336

 
$
2,693

 
$
1,395

 
$
1,799

 
$
4,003

 
$
8,888

 
$
4,163

 
$
5,484


Non-Qualified Supplemental Benefits
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Service cost
$
740

 
$
934

 
$
2,219

 
$
2,804

Interest cost
1,317

 
1,266

 
3,951

 
3,797

Amortization:
 
 
 
 
 
 
 
   Prior service cost
1,567

 
1,731

 
4,700

 
5,195

   Recognized actuarial (gain) loss
(141
)
 
71

 
(421
)
 
214

Net periodic expense
$
3,483

 
$
4,002

 
$
10,449

 
$
12,010



17

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 September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Service cost
$
13

 
$
41

 
$
39

 
$
122

Interest cost
105

 
128

 
314

 
384

Amortization:
 
 
 
 
 
 
 
   Prior service cost
(36
)
 
(93
)
 
(107
)
 
(279
)
   Recognized actuarial gain
(59
)
 
(8
)
 
(177
)
 
(23
)
Net periodic expense
$
23

 
$
68

 
$
69

 
$
204


The total amount amortized out of accumulated other comprehensive earnings into net periodic pension and post-retirement expense totaled $3,695 and $5,753 for the three months ended September 30, 2016 and 2015, respectively, and $11,084 and $17,316 for the nine months ended September 30, 2016 and 2015, respectively.

Defined Contribution Retirement Plans

The Company also offers defined contribution retirement plans which cover the majority of its U.S. employees, as well as employees in certain other countries. The Company’s expense relating to defined contribution plans was $8,153, and $7,601 for the three months ended September 30, 2016 and 2015, respectively, and $26,310 and $24,612 for the nine months ended September 30, 2016 and 2015, respectively.

14. Other Comprehensive Earnings (Loss)

The amounts recognized in other comprehensive earnings (loss) were as follows:

 
Three Months Ended
 
Three Months Ended
 
September 30, 2016
 
September 30, 2015
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Foreign currency translation adjustments
$
9,370

 
$
2,119

 
$
11,489

 
$
(55,942
)
 
$
(1,271
)
 
$
(57,213
)
Pension and other postretirement benefit plans
3,695

 
(1,242
)
 
2,453

 
5,753

 
(1,951
)
 
3,802

Changes in fair value of cash flow hedges
(488
)
 
170

 
(318
)
 
(760
)
 
267

 
(493
)
Other
269

 
(29
)
 
240

 
445

 
(52
)
 
393

Total other comprehensive earnings (loss)
$
12,846

 
$
1,018

 
$
13,864

 
$
(50,504
)
 
$
(3,007
)
 
$
(53,511
)

 
Nine Months Ended
 
Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Foreign currency translation adjustments
$
(24,436
)
 
$
2,702

 
$
(21,734
)
 
$
(95,087
)
 
$
(9,785
)
 
$
(104,872
)
Pension and other postretirement benefit plans
11,084

 
(3,725
)
 
7,359

 
17,316

 
(5,871
)
 
11,445

Changes in fair value of cash flow hedges
(557
)
 
195

 
(362
)
 
505

 
(176
)
 
329

Other
1,853

 
(221
)
 
1,632

 
1,003

 
(119
)
 
884

Total other comprehensive loss
$
(12,056
)
 
$
(1,049
)
 
$
(13,105
)
 
$
(76,263
)
 
$
(15,951
)
 
$
(92,214
)
    

18

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

Total comprehensive earnings were as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Net earnings
$
130,084

 
$
186,098

 
$
347,730

 
$
728,004

Other comprehensive earnings (loss)
13,864

 
(53,511
)
 
(13,105
)
 
(92,214
)
Comprehensive earnings
$
143,948

 
$
132,587

 
$
334,625

 
$
635,790


Amounts reclassified from accumulated other comprehensive earnings (loss) to earnings (loss) during the three and nine months ended September 30, 2016 and 2015 were as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016

2015
Pension and other postretirement benefit plans:
 
 
 
 
 
 
 
Amortization of actuarial losses
$
2,080

 
$
3,868

 
$
6,241

 
$
11,660

Amortization of prior service costs
1,615

 
1,885

 
4,843

 
5,656

Total before tax
3,695

 
5,753

 
11,084

 
17,316

Tax benefit
(1,242
)
 
(1,951
)
 
(3,725
)
 
(5,871
)
Net of tax
$
2,453

 
$
3,802

 
$
7,359

 
$
11,445

 
 
 
 
 
 
 
 
Cash flow hedges:
 
 
 
 
 
 
 
Net (losses) gains reclassified into (losses) earnings
$
(55
)
 
$
(1,042
)
 
$
201

 
$
(318
)
Tax provision (benefit)
19

 
364

 
(70
)
 
111

Net of tax
$
(36
)
 
$
(678
)
 
$
131

 
$
(207
)

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 and administrative expenses.


19

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

15. 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 September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Revenue:
 
 
 
 
 
 
 
Energy
$
273,248

 
$
363,872

 
$
815,486

 
$
1,160,339

Engineered Systems
570,562

 
579,396

 
1,739,989

 
1,745,683

Fluids
412,822

 
352,018

 
1,217,722

 
1,043,765

Refrigeration & Food Equipment
451,328

 
492,460

 
1,243,966

 
1,312,672

Intra-segment eliminations
(197
)
 
(164
)
 
(782
)
 
(748
)
Total consolidated revenue
$
1,707,763

 
$
1,787,582

 
$
5,016,381

 
$
5,261,711

 
 
 
 
 
 
 
 
Earnings from continuing operations:
 
 

 
 
 
 
Segment earnings:
 

 
 

 
 
 
 
Energy
$
13,279

 
$
48,726

 
$
24,448

 
$
141,940

Engineered Systems
97,240

 
102,866