2014 Annual Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2014
Commission File Number: 1-4018
Dover Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
53-0257888
(I.R.S. Employer
Identification No.)
3005 Highland Parkway
Downers Grove, Illinois 60515
(Address of principal executive offices)
Registrant's telephone number: (630) 541-1540
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $1
2.125% Notes due 2020
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
No
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
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the close of business
on June 30, 2014 was $15,139,169,562. The registrant’s closing price as reported on the New York Stock Exchange-Composite
Transactions for June 30, 2014 was $90.95 per share. The number of outstanding shares of the registrant’s common stock as of February 6,
2015 was 163,045,137.
Documents Incorporated by Reference: Part III — Certain Portions of the Proxy Statement for Annual Meeting of Shareholders to be
held on May 7, 2015 (the “2015 Proxy Statement”).
Special Note Regarding Forward-Looking Statements
This annual report on Form 10-K, especially "Management’s Discussion and Analysis of Financial Condition and Results of
Operations," contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995,
as amended. Such statements relate to, among other things, operating and strategic plans, income, earnings, cash flows, changes
in operations, industries in which Dover businesses operate, and operating improvements. Forward-looking statements may be
indicated by words or phrases such as "anticipates," "expects," "believes," “suggests," "will," "plans," "should," "would," "could,"
"management is of the opinion that," and "forecast," or the use of the future tense and similar words or phrases. Forward-looking
statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from current
expectations, including, but not limited to, oil and natural gas demand, production growth, and prices; changes in exploration
and production spending by Dover’s customers and changes in the level of oil and natural gas exploration and development;
economic conditions generally and changes in economic conditions globally and in markets served by Dover businesses, including
well activity, U.S. industrials activity and the status of economic recovery in Europe; the ability of Dover's businesses to expand
into new geographic markets; Dover's ability to identify and successfully consummate value-adding acquisition opportunities
or planned divestitures; Dover's ability to achieve expected savings from integration and other cost-control initiatives, such as
lean and productivity programs; changes in customer demand or the impact of loss of a significant customer, or loss or non-
renewal of significant contracts; the ability of Dover's businesses to develop and launch new products, timing of such launches
and risks relating to market acceptance by customers; the relative mix of products and services which impacts margins and
operating efficiencies; increased competition and pricing pressures; the impact of loss of a single-source manufacturing facility;
short-term capacity constraints; increases in the cost of raw materials; domestic and foreign governmental and public policy
changes or developments, including environmental regulations, conflict minerals disclosure requirements, and tax policies;
Dover's ability to attract and retain qualified personnel; protection and validity of patent and other intellectual property rights;
breaches of data security; the impact of legal matters and legal compliance risks; the ability of third parties to comply with their
commitments to us; Dover's ability to timely complete certain dispositions; restrictions on certain corporate transactions for a
period of time after the Knowles spin-off; the impact of interest rate and currency exchange rate fluctuations; conditions and
events affecting domestic and global financial and capital markets; and a downgrade in Dover's credit ratings which, among
other matters, could make obtaining financing more difficult and costly. Certain of these risks and uncertainties are described
in more detail in "Item 1A. Risk Factors" on this annual report on Form 10-K. Dover undertakes no obligation to update any
forward-looking statement, except as required by law.
The Company may, from time to time, post financial or other information on its Internet website, www.dovercorporation.com.
The Internet address is for informational purposes only and is not intended for use as a hyperlink. The Company is not incorporating
any material on its website into this report.
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PART I
TABLE OF CONTENTS
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
Executive Officers of the Registrant
PART II
Item 5.
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors and Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of certain Beneficial Owners and Management and Related Shareholder
Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits, Financial Statement Schedules
Item 15.
SIGNATURES
EXHIBIT INDEX
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ITEM 1. BUSINESS
Overview
PART I
Dover Corporation is a diversified global manufacturer delivering innovative equipment and components, specialty systems and
support services through four major operating segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food
Equipment. The Company's entrepreneurial business model encourages, promotes, and fosters deep customer engagement and
collaboration, which has led to Dover's well-established and valued reputation for providing superior customer service and
industry-leading product innovation. Unless the context indicates otherwise, references herein to "Dover," "the Company," and
words such as "we," "us," and "our" include Dover Corporation and its subsidiaries. Dover was incorporated in 1947 in the State
of Delaware and became a publicly traded company in 1955. Dover is headquartered in Downers Grove, Illinois and currently
employs approximately 27,000 people worldwide within its continuing operations.
On February 28, 2014, the Company completed the separation of Knowles Corporation ("Knowles") from Dover through the
pro rata distribution of 100% of the common stock of Knowles to Dover's stockholders 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. As a result, Knowles became an independent, publicly traded company listed on the New York
Stock Exchange, and Dover retains no ownership interest in Knowles. The distribution was structured to be tax-free to Dover
and its shareholders for U.S. federal income tax purposes.
In the first quarter of 2014, Dover announced the realignment of its businesses into a new segment structure, consisting of four
segments and organized around its key end markets to better focus on growth strategies. The new structure is designed also to
provide increased opportunities to leverage Dover's scale and capitalize on productivity initiatives. Dover's four segments are
as follows:
• Our Energy segment, serving the Drilling & Production, Bearings & Compression, and Automation end markets, is a
provider of customer-driven solutions and services for safe and efficient production and processing of oil, natural gas
liquids, and gas worldwide, and has a strong presence in the bearings and compression components markets.
• Our Engineered Systems segment is comprised of two platforms, Printing & Identification and Industrials, and is
focused on the design, manufacture and service of critical equipment and components serving the printing and
identification, vehicle service, environmental solutions and industrial end markets.
• Our Fluids segment, serving the Fluid Transfer and Pumps end markets, is focused on the safe handling of critical fluids
across the retail fueling, chemical, hygienic, and industrial end markets.
• Our Refrigeration & Food Equipment segment, serving the Refrigeration and Food Equipment end markets, is a provider
of innovative and energy efficient equipment and systems serving the commercial refrigeration and food service
industries.
The following table shows the percentage of total revenue and segment earnings generated by each of our four segments for the
years ended December 31, 2014, 2013 and 2012:
2014
Revenue
2013
2012
Segment Earnings
2013
2014
2012
Energy
Engineered Systems
Fluids
Refrigeration & Food Equipment
26%
30%
18%
26%
27%
32%
17%
24%
34%
29%
19%
18%
35%
27%
17%
21%
39%
27%
15%
19%
26%
31%
18%
25%
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Management Philosophy
Our businesses are committed to operational excellence and to being market leaders as measured by market share, customer
service, growth, profitability, and return on invested capital. Our operating structure of four business segments and two platforms
allows for focused acquisition activity, accelerates opportunities to identify and capture operating synergies, including global
sourcing and supply chain integration, and advances the development of our executive talent. Our segment and executive
management set strategic direction, initiatives and goals, provide oversight, allocate and manage capital, are responsible for
major acquisitions, and provide other services. We foster an operating culture with high ethical standards, trust, respect, and
open communication, to allow individual growth and operational effectiveness.
In addition, we are committed to creating value for our customers, employees, and shareholders through sustainable business
practices that protect the environment and developing products that help our customers meet their sustainability goals. We have
accelerated our efforts and processes around innovation, focusing on technologies which create tangible value for our customers.
Our companies are increasing their focus on efficient energy usage, greenhouse gas reduction, and waste management as they
strive to meet the global environmental needs of today and tomorrow.
Company Goals
We are committed to driving shareholder return through three key objectives. First, we are committed to achieving annual organic
sales growth over the midterm of 2% to 4%, complemented by acquisition growth. Secondly, we continue to focus on segment
margin expansion through productivity initiatives, including supply chain activities, strategic pricing, and portfolio shaping.
Lastly, we are committed to generating free cash flow as a percentage of sales greater than 10% through disciplined capital
allocation, strong performance, productivity improvements, and active working capital management. We support these goals
through (1) alignment of management compensation with financial objectives, (2) well-defined and actively managed merger
and acquisition processes, and (3) talent development programs.
Business Strategy
To achieve our goals, we are focused on execution of the following three key business strategies:
Positioning ourselves for growth
We have aligned our business segments to focus on the needs of customers in key-end markets that are well-positioned for future
growth. In particular, our businesses are well-positioned to capitalize on growth trends in the areas of global energy demand,
sustainability, consumer product safety, and emerging economies. For instance, our Energy segment is positioned to continue
expansion in high growth spaces, accelerate capabilities to drive international growth, and increase investment in innovation
and technology to drive customer productivity and cash flow. Our Engineered Systems segment combines its engineering
technology, unique product advantages, and applications expertise to address market needs and requirements including
sustainability, consumer product safety, and growth in emerging economies. The Fluids segment is focused on accelerated growth
within the chemical/plastics, retail fueling, fluid transfer, industrial, and hygienic markets as well as globalizing brands across
geographies while expanding sales channels and engineering support. Our Refrigeration & Food Equipment segment is
responding to energy efficiency, sustainability and food safety as a result of government regulations, principally in the U.S. and
Europe.
Capturing the benefits of common ownership
We are committed to operational excellence, and have implemented various productivity initiatives, such as supply chain
management, lean manufacturing, and facility consolidations to maximize our efficiency, coupled with workplace safety
initiatives to help ensure the health and welfare of our employees. We foster the sharing of best practices throughout the
organization. To ensure success, our businesses place strong emphasis on continual quality improvement and new product
development to better serve customers and expand into new product and geographic markets. We have also developed regional
support centers and shared manufacturing centers in the U.S., China, Brazil, and India. Further, we continue to make significant
investments in talent development, recognizing that the growth and development of our employees are essential for our continued
success.
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Disciplined capital allocation
Our businesses generate annual free cash flow of approximately 10% of revenue. We are focused on the most efficient allocation
of our capital to maximize investment returns. To do this, we grow and support our existing businesses, with annual investment
in capital spending approximating 2 - 2.5% of revenue with a focus on internal projects to expand markets, develop products,
and boost productivity. We continue to evaluate our portfolio for strategic fit and intend to make additional acquisitions focused
on our key growth spaces: energy, product ID, industrials, refrigeration and food equipment, and fluid solutions. We consistently
provide shareholder returns by paying dividends, which have increased annually over each of the last 59 years. We will also
continue to repurchase our shares consistent with our previously announced share repurchase programs.
Portfolio Development
Acquisitions
Our acquisition program has two key elements. First, we seek to acquire value creating add-on businesses that enhance our
existing businesses either through their global reach and customers, or by broadening their product mix. Second, in the right
circumstances, we will strategically pursue larger, stand-alone businesses that have the potential to either complement our existing
businesses or allow us to pursue innovative technologies within our key growth spaces. Over the past three years (2012 – 2014),
we have spent over $2.2 billion to purchase 24 businesses that strategically fit within our business model. In the fourth quarter
of 2014 we acquired Accelerated Companies for approximately $435.7 million. Accelerated is an integrated provider of
equipment, parts, and services for handling fluids associated with oil and gas production and expands our artificial lift footprint
within our Energy Segment. In 2013, we acquired 10 businesses for an aggregate consideration of $322.8 million, including
Finder Pompe, which we acquired in the fourth quarter of 2013 for approximately $142.2 million to expand our Fluids segment.
In 2012, we spent approximately $603.2 million to acquire Anthony International, a leading manufacturer of specialty glass,
commercial glass refrigerator and freezer doors, lighting systems, and display equipment. The acquisition of Anthony expands
our portfolio of industry-leading technology in the refrigeration space and provides access to new geographies and new markets,
most notably the convenience store market. Recent significant acquisitions have also included Maag Pump Systems, a European
acquisition for our Fluids segment, which we acquired in the first quarter of 2012 for approximately $265.8 million and Production
Control Services, acquired in the second quarter of 2012 for consideration totaling $220.0 million, which added to our artificial
lift technology in our Energy segment.
For more details regarding acquisitions completed over the past two years, see Note 3 Acquisitions in the Consolidated Financial
Statements in Item 8 of this Form 10-K. Our future growth depends in large part on finding and acquiring successful businesses,
as a substantial number of our current businesses operate in relatively mature markets. While we expect to generate annual
organic growth of 2% - 5% over a long-term business cycle absent extraordinary economic conditions, sustained organic growth
at these levels for individual businesses is difficult to achieve consistently each year. Our success is also dependent on the ability
to successfully integrate our acquired businesses within our existing structure. To track post-merger integration and accountability,
we utilize an internal tool kit and defined processes to help ensure synergies are realized and value is created, as had been planned
when the acquisition was made.
Dispositions
We continually review our portfolio to evaluate whether our businesses continue to be essential contributors to our long-term
strategy. Occasionally, we may also make an opportunistic sale of one of our businesses based on specific market conditions
and strategic considerations. Accordingly, in an effort to reduce our exposure to cyclical markets and focus on our higher margin
growth spaces, during the past three years (2012 – 2014) we have sold two businesses for aggregate consideration of $267.8
million in addition to the Knowles spin-off as discussed below. Furthermore, the Company has classified Datamax O'Neil and
Sargent Aerospace as held for sale as of December 31, 2014 and expects to complete the sale of these businesses in the first and
second quarters of 2015, respectively.
The financial position and results of operations for these businesses have been presented as discontinued operations for all
periods presented. For more details, see Note 4 Disposed and Discontinued Operations in the Consolidated Financial Statements
in Item 8 of this Form 10-K.
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Spin-Off of Knowles
On February 28, 2014, the Company completed the separation of Knowles Corporation ("Knowles") from Dover through the
pro rata distribution of 100% of the common stock of Knowles to Dover's stockholders 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. As a result, Knowles became an independent, publicly traded company listed on the New York
Stock Exchange, and Dover retains no ownership interest in Knowles. The distribution was structured to be tax-free to Dover
and its shareholders for U.S. federal income tax purposes. Following the spin-off of Knowles, Dover re-aligned its segment
structure to ensure it is properly organized to execute its future growth plans.
Business Segments
As noted previously, we currently operate through four business segments that are aligned with the key end markets they serve
and comprise our operating and reportable segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment.
For financial information about our segments and geographic areas, see Note 17 Segment Information in the Consolidated
Financial Statements in Item 8 of this Form 10-K.
Energy
Our Energy segment serves the Drilling & Production, Bearings & Compression, and Automation end markets. This segment
is a provider of customer driven solutions and services for safe and efficient production and processing of oil, natural gas liquids,
and gas worldwide. This segment consists of the following lines of business:
• Drilling & Production – Our businesses serving the drilling market design and manufacture products that promote efficient
and cost-effective drilling, including long-lasting polycrystalline diamond cutters (PDCs) for applications in down-hole
drilling tools. Our businesses serving the production market design and manufacture products and components that facilitate
the extraction and movement of fuel from the ground, including steel sucker rods, down-hole rod pumps, electric submersible
pumps, progressive cavity pumps and drive systems, and plunger lifts. In addition, these businesses manufacture winches,
hoists, gear drives, swing drives, auger drives, slewing ring bearings, hydraulic pump, and electronic monitoring solutions
for energy, infrastructure, and recovery markets worldwide.
• Bearings & Compression – These businesses manufacture various compressor parts that are used in the natural gas production,
distribution, and oil refining markets. In addition, we offer bearings, bearing isolators, seals and remote condition monitoring
systems that are used for rotating machinery applications such as turbo machinery, motors, generators and compressors
used in energy, utility, marine and other industries.
• Automation - These businesses design and manufacture products that promote efficient drilling and production of oil and
gas including quartz pressure transducers and hybrid electronics used in down-hole tools and monitoring devices, chemical
injection and metering pumps, automated pump controllers, rod pumping optimization software, diagnostic instruments
and sensors for reciprocating machinery, control valves and instrumentation; and pressure, temperature, and flow monitoring
equipment.
Our Energy segment’s sales are made directly to customers and through various distribution channels. We manufacture our
products primarily in North America, and our sales are concentrated in North America with an increasing level of
international sales directed largely to Europe, Australia, and Asia.
Engineered Systems
Our Engineered Systems segment is focused on the design, manufacture and service of critical equipment and components
serving the printing & identification, vehicle service, waste handling, and select niche industrial end markets. To better serve
its end markets, the segment manages its products and services through two core business platforms, Printing & Identification
and Industrials, as described below.
• Printing & Identification - The Printing & Identification platform is a worldwide supplier of precision marking &
coding, digital textile, soldering and dispensing equipment, and related consumables and services. Our businesses
serving this market primarily design and manufacture marking & coding products used for printing variable information
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(such as date codes and serial numbers) on fast moving consumer goods, capitalizing on expanding food and product
safety requirements and growth in emerging markets. In addition, our business serving the textile market is benefiting
from a significant shift from analog to digital printing, resulting from shorter runs and more complex fashion designs,
as well as increasing regulatory and environmental standards.
•
Industrials - The businesses in this platform serve the vehicle service, industrial automation, and waste and recycling
markets. Our businesses serving the vehicle service markets provide a wide range of products and services that are
utilized in vehicle, maintenance, repair, and modification.
The businesses in the industrial automation market provide a wide range of modular automation components including
manual clamps, power clamps, rotary and linear mechanical indexers, conveyors, pick and place units, glove ports and
manipulators, as well as end-of-arm robotic grippers, slides, and end effectors. These products serve a very broad market
including food processing, packaging, paper processing, medical, electronic, automotive, nuclear, and general industrial
products.
Our businesses serving waste and recycling markets provide products and services for the refuse collection industry
and for on-site processing and compaction of trash and recyclable materials. Products are sold to municipal customers,
national accounts, and independent waste haulers through a network of distributors and directly in certain geographic
areas.
Fluids
Our Fluids segment is focused on the safe handling of critical fluids across the retail fueling, chemical, hygienic, and industrial
markets. The segment serves two broad global end markets: Fluid Transfer and Pumps.
• Fluid Transfer – Providing fully integrated fluid handling solutions from refineries and chemical-processing plants through
point-to-point transfers, transportation, and delivery to the final point of consumption at retail and commercial fueling
operations around the globe. This end market also specializes in the manufacturing of connectors for use in a variety of bio-
processing applications. We strive to optimize safety, efficiency, reliability, and environmental sustainability through
innovative fluid handling and information management solutions.
• Pumps – The pumps and compressors are used to transfer liquid and bulk products and are sold to a wide variety of markets,
including the refined fuels, LPG, food/sanitary, transportation, and chemical process industries. The pumps include
reciprocating pumps that are used in demanding and specialized fluid transfer process applications.
Fluids' products are manufactured primarily in the United States, Europe, and China, and are sold throughout the world directly
and through a network of distributors.
Refrigeration & Food Equipment
Our Refrigeration & Food Equipment segment is a provider of innovative and energy efficient equipment and systems serving
the commercial refrigeration and food service industries.
• Refrigeration – Our businesses manufacture refrigeration systems, refrigeration display cases, walk-in coolers and freezers,
specialty glass, commercial glass refrigerator and freezer doors, and brazed heat exchangers used in industrial and climate
control.
• Food Equipment – Our businesses manufacture electrical distribution products and engineering services, commercial food
service equipment, cook-chill production systems, custom food storage and preparation products, kitchen ventilation
systems, conveyer systems, beverage can-making machinery, and packaging machines used for meat, poultry, and other
food products.
The majority of the refrigeration/food systems and machinery that are manufactured or serviced by the Refrigeration & Food
Equipment platforms are used by the supermarket industry, “big-box” retail and convenience stores, the commercial/industrial
refrigeration industry, institutional and commercial foodservice and food production markets, and beverage can-making
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industries. Refrigeration & Food Equipment's products are manufactured primarily in North America, Europe, and Asia and are
sold globally, directly and through a network of distributors.
Raw Materials
We use a wide variety of raw materials, primarily metals and semi-processed or finished components, which are generally
available from a number of sources. As a result, shortages or the loss of any single supplier have not had, and are not likely to
have, a material impact on operating profits. While the required raw materials are generally available, commodity pricing has
trended upward over the past few years, particularly for various grades of steel, copper, aluminum, and select other commodities.
Although some cost increases may be recovered through increased prices to customers, our operating results are exposed to such
fluctuations. We attempt to control such costs through fixed-price contracts with suppliers and various other programs, such as
our global supply chain activities.
Research and Development
Our businesses are encouraged to develop new products as well as to upgrade and improve existing products to satisfy customer
needs, expand revenue opportunities domestically and internationally, maintain or extend competitive advantages, improve
product reliability, and reduce production costs. During 2014, we spent $118.4 million for research and development, including
qualified engineering costs. In 2013 and 2012, research and development spending totaled $117.2 million and $123.6 million,
respectively.
Our Engineered Systems segment expends significant effort in research and development because the rate of product development
by their customers is often quite high. Our businesses that develop product identification and printing equipment believe that
their customers expect a continuing rate of product innovation, performance improvement, and reduced costs. The result has
been that product life cycles in these markets generally average less than five years with meaningful sales price reductions over
that time period.
Our other segments contain many businesses that are also involved in important product improvement initiatives. These businesses
also concentrate on working closely with customers on specific applications, expanding product lines and market applications,
and continuously improving manufacturing processes. Most of these businesses experience a much more moderate rate of change
in their markets and products than is generally experienced by the Engineered Systems segment.
Intellectual Property and Intangible Assets
Our businesses own many patents, trademarks, licenses, and other forms of intellectual property, which have been acquired over
a number of years and, to the extent relevant, expire at various times over a number of years. A large portion of our businesses’
intellectual property consists of patents, unpatented technology, and proprietary information constituting trade secrets that we
seek to protect in various ways, including confidentiality agreements with employees and suppliers where appropriate. In addition,
a significant portion of our intangible assets relate to customer relationships. While our intellectual property and customer
relationships are important to our success, the loss or expiration of any of these rights or relationships, or any group of related
rights or relationships, is not likely to materially affect our results on a consolidated basis. We believe that our commitment to
continuous engineering improvements, new product development, and improved manufacturing techniques, as well as strong
sales, marketing, and service efforts, are significant to our general leadership positions in the niche markets we serve.
Seasonality
In general, our businesses, while not strongly seasonal, tend to have stronger revenue in the second and third quarters, particularly
those serving the transportation, construction, waste and recycling, petroleum, commercial refrigeration, and food service
markets. Our businesses serving the major equipment markets, such as power generation, chemical, and processing industries,
have longer lead times geared to seasonal, commercial, or consumer demands, and tend to delay or accelerate product ordering
and delivery to coincide with those market trends that tend to moderate the aforementioned seasonality patterns.
Customers
We serve thousands of customers, no one of which accounted for more than 10% of our consolidated revenue in 2014. Given
our diversity of served markets, customer concentrations are quite varied. Businesses supplying the waste and recycling,
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agricultural, defense, energy, automotive, and commercial refrigeration industries tend to deal with a few large customers that
are significant within those industries. This also tends to be true for businesses supplying the power generation, aerospace, and
chemical industries. In the other markets served, there is usually a much lower concentration of customers, particularly where
the companies provide a substantial number of products and services applicable to a broad range of end-use applications.
Backlog
Backlog is more relevant to our businesses that produce larger and more sophisticated machines or have long-term contracts,
primarily for the Refrigeration and Food Equipment markets of our Refrigeration & Food Equipment segment. Our total backlog
relating to our continuing operations as of December 31, 2014 and 2013 was $1.2 billion for both periods.
Competition
Our competitive environment is complex because of the wide diversity of our products manufactured and the markets served.
In general, most of our businesses are market leaders that compete with only a few companies, and the key competitive factors
are customer service, product quality, price, and innovation. However, as we become increasingly global, we are exposed to
more competition. A summary of our key competitors by end market within each our segments follows:
Segment
Energy
End Market
Drilling & Production /
Automation
Bearings & Compression
Engineered Systems
Printing & Identification
Industrials
Fluid Transfer
Pumps
Refrigeration
Fluids
Refrigeration & Food
Equipment
International
Key Competitors
DeBeers Group (Element Six), Schlumberger
Ltd.,Weatherford International Ltd., General
Electric (Lufkin), Baker Hughes, BORETS, and
Novomet
Compression Products International, Hoerbiger
Holdings AG, John Crane, Kingsbury
Danaher Corp. (Videojet), Domino Printing
Oshkosh Corp. (McNeilus), Siemens AG (Weiss
GmbH), Challenger Lifts, Labrie Enviroquip
Group, and numerous others
Danaher Corp. (Gilbarco Veeder-Root), Franklin
Electric, Gardner Denver, Inc. (Emco Wheaton)
IDEX Corp, Ingersoll Rand, ITT, SPX Corp.
Hussman Corp., Lennox International (Kysor/
Warren), Alfa Laval
Food Equipment
Manitowoc Company, Illinois Tool, Middleby
Consistent with our strategic focus on positioning our businesses for growth, we continue to increase our expansion into
international markets, particularly in developing economies in South America, Asia, the Middle East, and Eastern Europe.
Most of our non-U.S. subsidiaries and affiliates are currently based in France, Germany, the Netherlands, Sweden, Switzerland,
the United Kingdom and, with increasing emphasis, Australia, Canada, China, Malaysia, India, Mexico, Brazil, Eastern Europe,
and the Middle East.
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The following table shows annual revenue derived from customers outside the U.S. as a percentage of total annual revenue for
each of the last three years, by segment and in total:
% Non-U.S. Revenue by Segment
Years Ended December 31,
2013
2014
2012
Energy
Engineered Systems
Fluids
Refrigeration & Food Equipment
Total percentage of revenue derived from customers outside of the U.S.
28%
48%
53%
35%
40%
33%
47%
51%
36%
41%
30%
48%
47%
35%
40%
Our international operations are subject to certain risks, such as price and exchange rate fluctuations and non-U.S. governmental
restrictions, which are discussed further in "Item 1A. Risk Factors." For additional details regarding our non-U.S. revenue and
the geographic allocation of the assets of our continuing operations, see Note 17 Segment Information to the Consolidated
Financial Statements in Item 8 of this Form 10-K.
Environmental Matters
Our operations are governed by a variety of international, national, state, and local environmental laws. We are committed to
continued compliance and believe our operations generally are in substantial compliance with these laws. In a few instances,
particular plants and businesses have been the subject of administrative and legal proceedings with governmental agencies or
private parties relating to the discharge or potential discharge of regulated substances. Where necessary, these matters have been
addressed with specific consent orders to achieve compliance.
In 2010, we developed and implemented a process to conduct an inventory of greenhouse gas emissions. Since then, we have
evaluated our climate change risks and opportunities and have developed an energy and climate change strategy that includes
clearly defined goals and objectives, along with prioritized programs and projects for achieving energy use and greenhouse gas
emissions reductions. We have committed to reducing our overall energy and greenhouse gas intensity indexed to net revenue
by 20% from 2010 to 2020. We also participated as a respondent in the 2013 Carbon Disclosure Project.
All of our segments are investigating the energy efficiencies related to their operations and the use of their products and services
by customers. In some instances, our businesses may be able to help customers reduce some of their energy needs. Increased
demand for energy-efficient products, based on a variety of drivers (including, but not limited to, reduction of greenhouse gas
emissions) could result in increased sales for a number of our businesses.
There have been no material effects upon our earnings and competitive position resulting from our compliance with laws or
regulations enacted or adopted relating to the protection of the environment. We are aware of a number of existing or upcoming
regulatory initiatives intended to reduce emissions in geographies where our manufacturing and warehouse/distribution facilities
are located and have evaluated the potential impact of these regulations on our businesses. We anticipate that direct impacts
from regulatory actions will not be significant in the short- to medium-term. We expect the regulatory impacts associated with
climate change regulation would be primarily indirect and would result in "pass through" costs from energy suppliers, suppliers
of raw materials, and other services related to our operations.
Employees
We had approximately 27,000 employees in our ongoing operations as of December 31, 2014.
Other Information
We make available through the "Financial Reports" link on our Internet website, http://www.dovercorporation.com, our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports. We
post each of these reports on the website as soon as reasonably practicable after the report is filed with the Securities and Exchange
Commission. The information on our Internet website is not incorporated into this Form 10-K.
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ITEM 1A. RISK FACTORS
The risk factors discussed in this section should be considered together with information included elsewhere in this Form 10-K
and should not be considered the only risks to which we are exposed. In general, we are subject to the same general risks and
uncertainties that impact many other industrial companies such as general economic, industry and/or market conditions, and
growth rates; the impact of natural disasters, and their effect on global markets; possible future terrorist threats and their effect
on the worldwide economy; and changes in laws or accounting rules. Additional risks and uncertainties not currently known to
us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity, and
financial condition.
• Our results may be impacted by current domestic and international economic conditions and uncertainties.
Our businesses may be adversely affected by disruptions in the financial markets or declines in economic activity both
domestically and internationally in those countries in which we operate. These circumstances will also impact our suppliers
and customers in various ways which could have an impact on our business operations, particularly if global credit markets
are not operating efficiently and effectively to support industrial commerce.
Our Energy segment is subject to risk due to the volatility of global energy prices and regulations that impact drilling and
production, with overall demand for our products and services impacted by depletion rates, global economic conditions
and related energy demands.
Negative changes in worldwide economic and capital market conditions are beyond our control, are highly unpredictable,
and can have an adverse effect on our revenue, earnings, cash flows, and cost of capital.
• Trends in oil and natural gas prices may affect the drilling and production activity, profitability and financial stability of
our customers and therefore the demand for, and profitability of, our energy products and services, which could have a
material adverse effect on our business, consolidated results of operations, and consolidated financial condition.
The oil and gas industry historically has experienced periodic downturns. Demand for our energy products and services is
sensitive to the level of drilling and production activity of, and the corresponding capital spending by, oil and natural gas
companies. The level of drilling and production activity is directly affected by trends in oil and natural gas prices, which
have been recently volatile and may continue to be volatile.
Prices for oil and natural gas are subject to large fluctuations in response to changes in the supply of and demand for oil and
natural gas, market uncertainty, geopolitical developments and a variety of other factors that are beyond our control. Even
the perception of longer-term lower oil and natural gas prices can reduce or defer major capital expenditures by our customers
in the oil and gas industry. Given the long-term nature of many large-scale development projects, a significant downturn in
the oil and gas industry could result in the reduction in demand for our energy products and services, and could have a
material adverse effect on our financial condition, results of operations and cash flows.
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• We are subject to risks relating to our existing international operations and expansion into new geographical markets.
Approximately 40% of our revenues from continuing operations for 2014 and 41% of our revenues for 2013 were derived
outside the United States. We continue to focus on penetrating global markets as part of our overall growth strategy and
expect sales from outside the United States to continue to represent a significant portion of our revenues. In addition, many
of our manufacturing operations and suppliers are located outside the United States. Our international operations and our
global expansion strategy are subject to general risks related to such operations, including:
o political, social, and economic instability and disruptions;
o government embargoes or trade restrictions;
o the imposition of duties and tariffs and other trade barriers;
o import and export controls;
o limitations on ownership and on repatriation or dividend of earnings;
o transportation delays and interruptions;
o labor unrest and current and changing regulatory environments;
o increased compliance costs, including costs associated with disclosure requirements and related due diligence;
o the impact of loss of a single-source manufacturing facility;
o difficulties in staffing and managing multi-national operations;
o limitations on our ability to enforce legal rights and remedies; and
o access to or control of networks and confidential information due to local government controls and
vulnerability of local networks to cyber risks.
If we are unable to successfully manage the risks associated with expanding our global business or adequately manage
operational risks of our existing international operations, the risks could have a material adverse effect on our growth strategy
involving expansion into new geographical markets or our results of operations and financial position.
•
Increasing product/service and price competition by international and domestic competitors, including new entrants,
and our inability to introduce new and competitive products could cause our businesses to generate lower revenue,
operating profits, and cash flows.
Our competitive environment is complex because of the wide diversity of the products that our businesses manufacture and
the markets they serve. In general, most of our businesses compete with only a few companies. Our ability to compete
effectively depends on how successfully we anticipate and respond to various competitive factors, including new products
and services that may be introduced by competitors, changes in customer preferences, new business models and technologies,
and pricing pressures. If our businesses are unable to anticipate their competitors’ development of new products and services,
and/or identify customer needs and preferences on a timely basis, or successfully introduce new products and services in
response to such competitive factors, they could lose customers to competitors. If our businesses do not compete effectively,
we may experience lower revenue, operating profits, and cash flows.
Customer requirements and new regulations may increase our expenses and impact the availability of certain raw
materials, which could adversely affect our revenue and operating profits.
Our businesses use parts or materials that are impacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the "Dodd-Frank Act") requirement for disclosure of the use of "conflict minerals" mined in the Democratic Republic of
the Congo and adjoining countries. It is possible that some of our businesses' customers will require "conflict free" metals
in products purchased from us. We are in the process of determining the country of origin of certain metals used by our
businesses, as required by the Dodd-Frank Act. The supply chain due diligence and verification of sources may require
several years to complete based on the current availability of smelter origin information and the number of vendors. We
may not be able to complete the process in the time frame required because of the complexity of our supply chain. Other
governmental social responsibility regulations also may impact our suppliers, manufacturing operations, and operating profits.
The need to find alternative sources for certain raw materials or products because of customer requirements and regulations
may impact our ability to secure adequate supplies of raw materials or parts, lead to supply shortages, or adversely impact
the prices at which our businesses can procure compliant goods.
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• Our businesses and their profitability and reputation could be adversely affected by domestic and foreign governmental
and public policy changes (including environmental and employment regulations and tax policies such as export subsidy
programs, research and experimentation credits, carbon emission regulations, and other similar programs), risks
associated with emerging markets, changes in statutory tax rates, and unanticipated outcomes with respect to tax audits.
Our businesses’ domestic and international sales and operations are subject to risks associated with changes in local
government laws (including environmental and export/import laws), regulations, and policies. Failure to comply with any
of these laws could result in civil and criminal, monetary, and non-monetary penalties as well as potential damage to our
reputation. In addition, we cannot provide assurance that our costs of complying with new and evolving regulatory reporting
requirements and current or future laws, including environmental protection, employment, data security, data privacy, and
health and safety laws, will not exceed our estimates. In addition, we have invested in certain countries, including Brazil,
Russia, India, and China, and may in the future invest in other countries, any of which may carry high levels of currency,
political, compliance, and economic risk. While these risks or the impact of these risks are difficult to predict, any one or
more of them could adversely affect our businesses and reputation.
Our effective tax rate is impacted by changes in the mix among earnings in countries with differing statutory tax rates, changes
in the valuation allowance of deferred tax assets, and changes in tax laws. The amount of income taxes and other taxes paid
can be adversely impacted by changes in statutory tax rates and laws and are subject to ongoing audits by domestic and
international authorities. If these audits result in assessments different from amounts estimated, then our financial results
may be adversely affected by unfavorable tax adjustments.
• Our revenue, operating profits, and cash flows could be adversely affected if our businesses are unable to protect or obtain
patent and other intellectual property rights.
Our businesses own patents, trademarks, licenses, and other forms of intellectual property related to their products. Our
businesses employ various measures to maintain and protect their intellectual property. These measures may not prevent
their intellectual property from being challenged, invalidated, or circumvented, particularly in countries where intellectual
property rights are not highly developed or protected. Unauthorized use of these intellectual property rights could adversely
impact the competitive position of our businesses and have a negative impact on our revenue, operating profits, and cash
flows.
•
Some of our businesses may not anticipate, adapt to, or capitalize on technological developments and this could cause
these businesses to become less competitive and lead to reduced market share, revenue, operating profits, and cash flows.
Certain of our businesses sell their products in industries that are constantly experiencing change as new technologies are
developed. In order to grow and remain competitive in these industries, they must adapt to future changes in technology to
enhance their existing products and introduce new products to address their customers’ changing demands. If these businesses
are unable to adapt to the rapid technological changes, it could adversely affect our consolidated results of operations, financial
position, and cash flows.
• We could lose customers or generate lower revenue, operating profits, and cash flows if there are significant increases
in the cost of raw materials (including energy) or if we are unable to obtain raw materials.
We purchase raw materials, sub-assemblies, and components for use in our manufacturing operations, which expose us to
volatility in prices for certain commodities. Significant price increases for these commodities could adversely affect operating
profits for certain of our businesses. While we generally attempt to mitigate the impact of increased raw material prices by
hedging or passing along the increased costs to customers, there may be a time delay between the increased raw material
prices and the ability to increase the prices of products, or we may be unable to increase the prices of products due to a
competitor’s pricing pressure or other factors. In addition, while raw materials are generally available now, the inability to
obtain necessary raw materials could affect our ability to meet customer commitments and satisfy market demand for certain
products. Consequently, a significant price increase in raw materials, or their unavailability, may result in a loss of customers
and adversely impact revenue, operating profits, and cash flows.
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• Our growth and results of operations may be adversely affected if we are unsuccessful in our capital allocation and
acquisition program.
We expect to continue our strategy of seeking to acquire value creating add-on businesses that broaden our existing position
and global reach as well as, in the right circumstances, strategically pursue larger acquisitions that could have the potential
to either complement our existing businesses or allow us to pursue a new platform. However, there can be no assurance that
we will be able to continue to find suitable businesses to purchase, that we will be able to acquire such businesses on acceptable
terms, or that all closing conditions will be satisfied with respect to any pending acquisition. If we are unsuccessful in our
acquisition efforts, then our ability to continue to grow at rates similar to prior years could be adversely affected. In addition,
we face the risk that a completed acquisition may underperform relative to expectations. We may be unable to achieve
synergies originally anticipated, exposed to unexpected liabilities and unable to to sufficiently integrate completed
acquisitions into our current business and growth model. Further, if we fail to allocate our capital appropriately, in respect
of either our acquisition program or organic growth in our operations, we could be overexposed in certain markets and
geographies and unable to expand into adjacent products or markets. These factors could potentially have an adverse impact
on our operating profits and cash flows.
• Our operating profits and cash flows could be adversely affected if we cannot achieve projected savings and synergies.
We are continually evaluating our cost structure and seeking ways to capture synergies across our operations. If we are unable
to reduce costs and expenses through our various programs, it could adversely affect our operating profits and cash flows.
• Unforeseen developments in contingencies such as litigation could adversely affect our financial condition.
We and certain of our subsidiaries are, and from time to time may become, parties to a number of legal proceedings incidental
to their businesses involving alleged injuries arising out of the use of their products, exposure to hazardous substances, or
patent infringement, employment matters, and commercial disputes. The defense of these lawsuits may require significant
expenses and divert management’s attention, and we may be required to pay damages that could adversely affect our financial
condition. In addition, any insurance or indemnification rights that we may have may be insufficient or unavailable to protect
us against potential loss exposures.
• The indemnification provisions of acquisition and disposition agreements by which we have acquired or sold companies
may not fully protect us and may result in unexpected liabilities.
Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us
against certain liabilities related to the operation of the company before we acquired it. In most of these agreements, however,
the liability of the former owners is limited and certain former owners may be unable to meet their indemnification
responsibilities. Similarly, the purchasers of our discontinued operations may from time to time agree to indemnify us for
operations of such businesses after the closing. We cannot be assured that any of these indemnification provisions will fully
protect us, and as a result we may face unexpected liabilities that adversely affect our profitability and financial position.
• The proposed disposition of certain of our businesses may not be completed on the currently contemplated timeline or
terms, or at all.
There can be no assurance that the contemplated dispositions will be completed on the anticipated terms or timeframe, or at
all.
• Failure to attract, retain, and develop personnel or to provide adequate succession plans for key management could have
an adverse effect on our operating results.
Our growth, profitability, and effectiveness in conducting our operations and executing our strategic plans depend in part on
our ability to attract, retain, and develop qualified personnel, align them with appropriate opportunities, and maintain adequate
succession plans for key management positions and support for strategic initiatives. If we are unsuccessful in these efforts,
our operating results could be adversely affected and we could miss opportunities for growth and efficiencies.
• Our business operations may be adversely affected by information systems interruptions or intrusion.
We depend on various information technologies throughout our company to administer, store and support multiple business
activities. If these systems are damaged, cease to function properly, or are subject to cyber-security attacks, such as those
involving unauthorized access, malicious software and/or other intrusions, we could experience production downtimes,
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operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers,
the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches,
other manipulation or improper use of our systems or networks, financial losses from remedial actions, loss of business or
potential liability, and/or damage to our reputation. While we attempt to mitigate these risks by employing a number of
measures, including employee training, technical security controls, and maintenance of backup and protective systems, our
systems, networks, products and services remain potentially vulnerable to known or unknown threats, any of which could
have a material adverse affect on our business, financial condition or results of operations.
• Our reputation, ability to do business, and results of operations may be impaired by improper conduct by any of our
employees, agents, or business partners.
While we strive to maintain high standards, we cannot provide assurance that our internal controls and compliance systems
will always protect us from acts committed by our employees, agents, or business partners that would violate U.S. and/or
non-U.S. laws or fail to protect our confidential information, including the laws governing payments to government officials,
bribery, fraud, anti-kickback and false claims rules, competition, export and import compliance, money laundering, and data
privacy laws, as well as the improper use of proprietary information or social media. Any such violations of law or improper
actions could subject us to civil or criminal investigations in the U.S. and in other jurisdictions, could lead to substantial civil
or criminal, monetary and non-monetary penalties, and related shareholder lawsuits, could lead to increased costs of
compliance and could damage our reputation.
• Our exposure to exchange rate fluctuations on cross-border transactions and the translation of local currency results
into U.S. dollars could negatively impact our results of operations.
We conduct business through our subsidiaries in many different countries, and fluctuations in currency exchange rates could
have a significant impact on the reported results of operations, which are presented in U.S. dollars. A significant and growing
portion of our products are manufactured in lower-cost locations and sold in various countries. Cross-border transactions,
both with external parties and intercompany relationships, result in increased exposure to foreign exchange effects.
Accordingly, significant changes in currency exchange rates, particularly the Euro, Pound Sterling, Swiss franc, Chinese
Renminbi (Yuan), and the Canadian dollar, could cause fluctuations in the reported results of our businesses’ operations that
could negatively affect our results of operations. Additionally, the strengthening of certain currencies such as the Euro and
U.S. dollar potentially exposes us to competitive threats from lower cost producers in other countries. Our sales are translated
into U.S. dollars for reporting purposes. The strengthening of the U.S. dollar could result in unfavorable translation effects
as the results of foreign locations are translated into U.S. dollars.
• Our borrowing costs may be impacted by our credit ratings developed by various rating agencies.
Three major ratings agencies (Moody’s, Standard and Poor’s, and Fitch Ratings) evaluate our credit profile on an ongoing
basis and have each assigned high ratings for our long-term debt as of December 31, 2014. Although we do not anticipate
a material change in our credit ratings, if our current credit ratings deteriorate, then our borrowing costs could increase,
including increased fees under our five-year credit facility, and our access to future sources of liquidity may be adversely
affected.
•
In connection with the Knowles spin-off, the tax rules applicable to the distribution of shares to our shareholders may
restrict us from engaging in certain corporate transactions or from raising equity capital beyond certain thresholds for
a period of time after the spin-off, as applicable.
We received a private letter ruling from the Internal Revenue Service ("IRS") substantively to the effect that, among other
things, the distribution of shares to our shareholders, will qualify as tax-free for U.S. federal income tax purposes under
Sections 355 and 368(a)(1)(D) of the Internal Revenue Code (the "Code"). To preserve the tax-free treatment of the distribution
of shares to our shareholders, we will be subject to restrictions with respect to our activities, including restrictions relating
to certain issuances or repurchases of our common stock, asset sales, mergers and liquidations.
These restrictions may limit our ability to pursue strategic transactions of a certain magnitude that involve the issuance or
acquisition of our stock or engage in new businesses or other transactions that might increase the value of our business.
These restrictions may also limit our ability to raise significant amounts of cash through the issuance of stock, especially if
our stock price were to suffer substantial declines, or through the sale of certain of our assets.
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•
Indemnification agreements with Knowles may not fully protect us against certain liabilities.
In connection with the spin-off, Knowles agreed to indemnify us for any losses relating to the conduct of the Knowles
business. There can be no assurance that the indemnity agreements will be sufficient to protect us against the full amount
of any liabilities that may arise, or that the indemnitors will be able to fully satisfy their indemnification obligations. The
failure to receive amounts for which we are entitled to indemnification could adversely affect our results of operations, cash
flows and financial condition.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 2. PROPERTIES
The number, type, location and size of the properties used by our continuing operations as of December 31, 2014 are shown in
the following charts, by segment:
Energy
Engineered Systems
Fluids
Refrigeration & Food
Equipment
Manufacturing Warehouse
66
67
33
39
6
34
Number and nature of facilities
Sales / Service
77
86
19
30
20
22
Total
Square footage (in 000s)
Owned
Leased
210
158
59
72
2,815
3,205
2,457
1,975
1,691
1,520
1,460
2,696
North
America
131
41
16
Europe
5
46
15
34
14
Locations
Asia
Other
Total
9
42
16
11
5
1
4
3
150
130
51
62
Expiration dates of
leased facilities (in years)
Minimum Maximum
15
10
10
1
1
1
1
15
Energy
Engineered Systems
Fluids
Refrigeration & Food
Equipment
We believe our owned and leased facilities are well-maintained and suitable for our operations.
ITEM 3. LEGAL PROCEEDINGS
A few of our subsidiaries are involved in legal proceedings relating to the cleanup of waste disposal sites identified under federal
and state statutes which provide for the allocation of such costs among "potentially responsible parties." In each instance, the
extent of the subsidiary’s liability appears to be very small in relation to the total projected expenditures and the number of other
"potentially responsible parties" involved and it is anticipated to be immaterial to us on a consolidated basis. In addition, a few
of our subsidiaries are involved in ongoing remedial activities at certain plant sites, in cooperation with regulatory agencies, and
appropriate reserves have been established. At December 31, 2014 and 2013, we have reserves totaling $32.9 million and $34.0
million, 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,
exposure to hazardous substances, 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 December 31, 2014 and 2013, 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 affect on its financial position, results of operations, or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
All of our officers are elected annually at the first meeting of the Board of Directors following our annual meeting of shareholders,
and are subject to removal at any time by the Board of Directors. Our executive officers as of February 13, 2015, and their
positions with Dover (and, where relevant, prior business experience) for the past five years, are as follows:
Name
Robert A. Livingston
Ivonne M. Cabrera
Age
61
48
Brad M. Cerepak
C. Anderson Fincher
Jay L. Kloosterboer
William C. Johnson
Stephen R. Sellhausen
Sivasankaran Somasundaram
William W. Spurgeon, Jr.
Russell E. Toney
Kevin P. Buchanan
Paul E. Goldberg
Raymond T. McKay, Jr.
Brian P. Moore
Michael Y. Zhang
55
44
54
51
56
49
56
45
59
51
61
44
51
Positions Held and Prior Business Experience
Chief Executive Officer and Director (since December 2008) and President
(since June 2008).
Senior Vice President, General Counsel and Secretary of Dover (since January
2013); prior thereto Vice President, Deputy General Counsel, and Assistant
Secretary of Dover (from November 2012 to December 2012); prior thereto Vice
President, Business Affairs and General Counsel of Knowles Electronics, LLC
(from February 2011 to December 2012); prior thereto Vice President (from May
2010 to February 2011), Deputy General Counsel and Assistant Secretary (from
February 2004 to February 2011) of Dover.
Senior Vice President and Chief Financial Officer (since May 2011) of Dover;
prior thereto Vice President and Chief Financial Officer (from August 2009 to
May 2011) of Dover.
Vice President (since May 2011) of Dover and President and Chief Executive
Officer (since February 2014) and Executive Vice President (from November
2011 to February 2014) of Dover Engineered Systems; prior thereto Executive
Vice President (from May 2009 to November 2011) of Dover Industrial
Products.
Senior Vice President, Human Resources (since May 2011) of Dover; prior
thereto Vice President, Human Resources (from January 2009 to May 2011) of
Dover.
Vice President (since May 2014) of Dover and President and Chief Executive
Officer (since February 2014) of Dover Refrigeration & Food Equipment; prior
thereto President and Chief Executive Officer (from August 2006 to March
2014) of Hill Phoenix Inc.
Senior Vice President, Corporate Development (since May 2011) of Dover; prior
thereto Vice President, Corporate Development (from January 2009 to May
2011) of Dover.
Vice President (since January 2008) of Dover and President and Chief Executive
Officer (since August 2013) of Dover Energy; prior thereto Executive Vice
President (from November 2011 to August 2013) of Dover Energy; prior thereto
Executive Vice President (from January 2010 to November 2011) of Dover Fluid
Management; President (from January 2008 to December 2009) of Dover's Fluid
Solutions Platform.
Vice President (since October 2004) of Dover and President and Chief Executive
Officer (since February 2014) of Dover Fluids; prior thereto President and Chief
Executive Officer (from August 2013 to February 2014) of Dover Engineered
Systems; prior thereto President and Chief Executive Officer (from November
2011 to August 2013) of Dover Energy; prior thereto President and Chief
Executive Officer (from July 2007 to November 2011) of Dover Fluid
Management.
Senior Vice President, Global Sourcing (since February 2015) of Dover; prior
thereto General Manager, Market Development (from January 2013 to February
2015) of GE Energy Management; prior thereto Commercial Leader (from
January 2011 to January 2013) of GE Energy Global Industries; prior thereto
General Manager, Global Sourcing (from March 2007 to January 2011) of GE
Energy Services.
Vice President, Tax (since July 2010) of Dover; prior thereto Deputy General
Counsel, Tax (from November 2009 to June 2010) and Vice President, Tax (from
May 2000 to October 2009) of Monsanto Company.
Vice President, Investor Relations (since November 2011) of Dover; prior
thereto Treasurer and Director of Investor Relations (from February 2006 to
November 2011) of Dover.
Vice President (since February 2004) and Controller (since November 2002) of
Dover.
Vice President, Treasurer (since November 2011) of Dover; prior thereto Senior
Director, Investor Relations (from April 2010 to October 2011) of USG
Corporation; prior thereto Director of Credit & Accounts Receivable (from
December 2008 to April 2010) of USG.
Vice President (since May 2010) of Dover and President, Asia (since May 2011)
of Dover; prior thereto Managing Director (from January 2009 to May 2011) of
Dover Regional Headquarters, China.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Dividends
The principal market in which Dover common stock is traded is the New York Stock Exchange. Information on the high and
low adjusted close prices of our stock and the frequency and the amount of dividends paid during the last two years is as follows:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2014
Market Prices (1)
Low
High
$
$
81.02
90.11
90.22
82.76
67.34
79.69
79.94
67.76
Dividends
per Share
0.375
$
0.375
0.400
0.400
1.550
$
2013
Market Prices (1)
Low
High
$
$
59.95
65.14
75.04
78.67
53.31
54.70
61.88
70.49
Dividends
per Share
0.350
$
0.350
0.375
0.375
1.450
$
(1) Due to the February 28, 2014 distribution of Knowles, the high and low close prices shown above for each quarter prior to the
distribution have been adjusted for comparability purposes.
Holders
The number of holders of record of Dover common stock as of January 30, 2015 was approximately 21,387. This figure includes
participants in our domestic 401(k) program.
Securities Authorized for Issuance Under Equity Compensation Plans
Information regarding securities authorized for issuance under our equity compensation plans is contained in Part III, Item 12
of this Form 10-K.
Recent Sales of Unregistered Securities
None.
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Issuer Purchases of Equity Securities
During the fourth quarter of 2014, we made the following purchases of Dover shares:
Period
October 1 to October 31
November 1 to November 30
December 1 to December 31
For the Fourth Quarter
Total Number
of Shares
Purchased (1)
951,767
621,535
1,150,000
2,723,302
Average
Price Paid
per Share
78.82
$
80.47
72.57
76.56
$
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
951,767
621,535
1,150,000
2,723,302
Maximum Number (or
Approximate Dollar Value in
Thousands) of Shares that May
Yet Be Purchased under the
Plans or Programs (2)
May 2012
Program
1,809,576
1,188,041
38,041
38,041
November
2012 Program
—
$
—
—
—
$
(1)
In May 2012, the Board of Directors renewed its standing authorization of the Company's share repurchase program, on
terms consistent with its prior five-year authorization which expired at that time. This renewal authorized the repurchase
of up to 10,000,000 shares of the Company's common stock during the five-year period ending May 2017. All shares
repurchased during the fourth quarter were purchased under this program.
(2) As of December 31, 2014, the number of shares still available for repurchase under the May 2012 share repurchase
authorization was 38,041. This authorization was canceled and replaced in January 2015 with a new standing share
repurchase authorization approved by the Board of Directors, whereby the Company may repurchase up to 15,000,000
shares of its common stock over the following three years. In November 2012, the Board of Directors approved a $1
billion share repurchase program authorizing repurchases of Dover's common stock over the following 12 to 18 months.
This program was completed in the first quarter of 2014.
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Table of Contents
Performance Graph
This performance graph does not constitute soliciting material, is not deemed filed with the SEC, and is not incorporated by
reference in any of our filings under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the
date of this Form 10-K and irrespective of any general incorporation language in any such filing, except to the extent we
specifically incorporate this performance graph by reference therein.
Comparison of Five-Year Cumulative Total Return *
Dover Corporation, S&P 500 Index & Peer Group Index
Total Shareholder Returns
$300
$250
$200
$150
$100
$50
$0
12/09
12/10
12/11
12/12
12/13
12/14
Dover Corporation
S&P 500
Peer Group
Data Source: Research Data Group, Inc
_______________________
*Total return assumes reinvestment of dividends.
This graph assumes $100 invested on December 31, 2009 in Dover Corporation common stock, the S&P 500 index, and a peer
group index.
The 2014 peer index consists of the following 36 public companies selected by the Company.
3M Company
Actuant Corp.
AMETEK Inc.
Amphenol Corp.
Cameron International Corp.
Carlisle Companies Inc.
Corning Inc.
Crane Company
Danaher Corporation
Eaton Corporation
Emerson Electric Co.
Flowserve Corporation
FMC Technologies Inc.
Honeywell International Inc.
Hubbell Incorporated
IDEX Corporation
Illinois Tool Works Inc.
Ingersoll-Rand PLC
Lennox International Inc.
Nordson Corp.
Pall Corporation
Parker-Hannifin Corp.
Pentair Limited
Precision Castparts Corp.
21
Regal Beloit Corp.
Rockwell Automation Inc.
Roper Industries Inc.
Snap-On Inc.
SPX Corporation
Teledyne Technologies Inc.
Textron Inc.
The Timken Company
Tyco International Limited
United Technologies Corp.
Vishay Intertechnology Inc.
Weatherford International Limited
Table of Contents
ITEM 6. SELECTED FINANCIAL DATA
dollars in thousands except share data
2014
2013
2012
2011
2010
Revenue
Earnings from continuing operations
Net earnings
Basic earnings (loss) per share:
Continuing operations
Discontinued operations
Net earnings
$
$
7,752,728
778,140
775,235
4.67
(0.02)
4.65
$
$
$
$
7,155,096
797,527
1,003,129
4.66
1.20
5.86
$
$
6,626,648
650,075
811,070
3.58
0.89
4.47
$
$
6,051,011
579,348
895,243
3.12
1.70
4.82
5,069,665
447,413
700,104
2.39
1.35
3.75
Weighted average shares outstanding
166,692,000
171,271,000
181,551,000
185,882,000
186,897,000
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Net earnings
$
$
4.61
(0.02)
4.59
$
4.60
1.18
5.78
$
3.53
0.88
4.41
$
3.07
1.67
4.74
2.37
1.34
3.70
Weighted average shares outstanding
168,842,000
173,547,000
183,993,000
188,887,000
189,170,000
Dividends per common share
Capital expenditures
Depreciation and amortization
Total assets
Total debt
$
$
$
$
1.55
166,033
307,188
9,090,385
3,030,997
1.45
141,694
278,033
10,855,181
2,828,479
$
$
$
$
1.33
146,502
229,934
10,429,618
2,800,116
$
$
1.18
152,764
193,353
9,456,408
2,187,252
1.07
125,962
160,377
8,562,894
1,807,476
All results and data in the table above reflect continuing operations, unless otherwise noted. As a result, the data presented above
will not necessarily agree to previously issued financial statements. See Note 4 Disposed and Discontinued Operations in the
Consolidated Financial Statements in Item 8 of this Form 10-K for additional information on disposed and discontinued operations
and Note 3 Acquisitions for additional information regarding the impact of 2014 and 2013 acquisitions.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended
to help the reader understand our results of operations and financial condition for the three years ended December 31, 2014. The
MD&A should be read in conjunction with our Consolidated Financial Statements and Notes included in Item 8 of this Form
10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed
elsewhere in this Form 10-K, particularly in Item 1A. "Risk Factors" and in the "Special Note Regarding Forward-Looking
Statements" preceding Part I of this Form 10-K.
Throughout this MD&A, we refer to measures used by management to evaluate performance, including a number of financial
measures that are not defined under accounting principles generally accepted in the United States of America (GAAP). These
include organic revenue, organic revenue growth, free cash flow and adjusted working capital. Organic revenue and organic
growth refer to revenue and revenue growth excluding the impacts of foreign exchange, acquisitions and divestitures. Free cash
flow is operating cash flow less capital spending, while adjusted working capital refers to accounts receivable, plus inventory,
less accounts payable. We believe these measures provide investors with important information that is useful in understanding
our business results and trends. Reconciliations within this MD&A provide more details on the use and derivation of these
measures.
The MD&A is organized as follows:
• Overview and Outlook
• Consolidated Results of Operations
•
•
Segment Results of Operations
Financial Condition
Cash Flow Summary and Liquidity and Capital Resources
Critical Accounting Policies and Estimates and Recent Accounting Standards
Special Notes Regarding Non-GAAP Disclosures
OVERVIEW AND OUTLOOK
Dover is a diversified global manufacturer delivering innovative equipment and components, specialty systems and support
services through four major operating segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment.
On February 28, 2014, the Company completed the separation of Knowles from Dover through the pro rata distribution of 100%
of the common stock of Knowles to Dover's stockholders of record as of the close of business on February 19, 2014. The
distribution was structured to be tax-free to Dover and its shareholders for U.S. federal income tax purposes.
In the first quarter of 2014, Dover announced the realignment of its businesses into a new segment structure, consisting of four
segments and organized around its key end markets to better focus on growth strategies. The new structure is designed also to
provide increased opportunities to leverage Dover's scale and capitalize on productivity initiatives.
In connection with management's evaluation of Dover's businesses for their strategic fit within Dover's operations, the Company
announced in the fourth quarter of 2014 its intention to divest Datamax O'Neil and Sargent Aerospace, two businesses within
the Engineered Systems segment. Accordingly, these businesses were reclassified to discontinued operations. The Company has
reached a definitive agreement to sell Datamax O'Neil. Also excluded from continuing operations are the results of operations
of DEK International and Everett Charles Technologies (including the Multitest business, collectively "ECT"), until their
respective dates of sale of third quarter 2014 and fourth quarter 2013, respectively. The Company completed the sale of DEK
International in the third quarter of 2014 for total proceeds of $170.6 million, which resulted in an after-tax loss on sale of $6.9
million. In addition, the Company recognized a gain on sale of $3.2 million in 2014 in connection with a working capital
adjustment of $4.5 million for ECT. The results presented herein represent continuing operations, excluding the results of these
businesses, as well as the results of Knowles prior to the spin-off.
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Table of Contents
Full year 2014 consolidated revenue from continuing operations was $7.8 billion, an increase of $597.6 million, as compared
to prior year reflecting an increase in organic revenue of 4.4%, a 4.4% increase in acquisition-related revenue and a negligible
impact due to foreign currency translation. Increases across all four segments were led by strong results in our Engineered
Systems, Fluids and Energy segments. Our Engineered Systems segment achieved solid growth across both platforms, resulting
in overall revenue growth of 9.5% as compared to the prior year. Within the Printing & Identification platform of Engineered
Systems, our recent acquisition MS Printing performed well as did our core printing and coding businesses. In addition, the
Industrials platform achieved broad-based growth led by our auto-related and waste handling businesses. Our Fluids segment
performed well with revenue growth of 15.7% as compared to the prior year, as continuing robust market conditions for Fluid
Transfer products and solid Pumps markets resulted in strong organic growth, supplemented by acquisition-related growth. In
our Energy segment, revenue growth of nearly 9.0% largely driven by recent acquisitions, solid U.S. Drilling & Production
customer activity, as well as generally healthy Bearings & Compression markets. Our Refrigeration & Food Equipment segment
generated revenue growth of 1.8%, with solid performance in our Refrigeration end market, partially offset by the impact of
product mix within our Food Equipment end market.
Gross profit increased $195.7 million, or 7.0%, to $3.0 billion, reflecting the benefit of increased sales volumes mainly due to
broad-based order and shipment activity. This growth was partially offset by higher restructuring charges in the current year, as
well as higher labor costs. For further discussion related to our consolidated and segment results, see "Consolidated Results of
Operations" and "Segment Results of Operations," respectively, within Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Bookings increased 7.8% over the prior year to $7.8 billion, representing year-over-year growth across our Energy, Engineered
Systems and Fluids segments of 8.8%, 11.4% and 13.7%, respectively. This growth was partially offset by a 1.0% decrease for
our Refrigeration & Food Equipment segment. Overall, the book-to-bill of 1.00 slightly decreased as compared to the prior year.
Backlog of $1.2 billion remained relatively flat as compared to prior year.
From a geographic perspective for the year, our North American, European and Asian markets were all solid, whereas Latin
America was weak. We anticipate our North American growth will moderate, specifically for our Energy segment, due to the
recent decline in global oil markets; however, we expect North America to remain a solid market for our other three segments.
We acquired a total of seven businesses in 2014 for total net consideration of $802.3 million. These businesses were acquired
to complement and expand upon existing operations within our Energy, Fluids and Refrigeration & Food Equipment segments
and the Printing & Identification platform of the Engineered Systems segment. Included in these acquisitions was the October
1, 2014 acquisition of Accelerated Companies LLC ("Accelerated"), a supplier of artificial lift and fluid handling solutions to
oil and gas production markets. The business is now part of Dover Artificial Lift, a business unit within Dover's Energy segment.
The total purchase price for this acquisition, net of cash acquired and including final working capital adjustments, was
approximately $435.7 million, which was funded with commercial paper.
In addition to the aforementioned acquisitions, we completed previously announced actions to adjust our costs and further
streamline our businesses. These actions resulted in full year 2014 restructuring charges of $44.8 million, of which $37.4 million
was incurred in the fourth quarter of 2014. We expect to incur restructuring charges of approximately $17.0 million to $20.0
million in the first quarter of 2015, with approximately $12.0 million to $15.0 million of these charges within our Energy segment.
The 2015 cost savings expected to be realized as a result of the restructuring programs initiated in late 2014 and early 2015 is
expected to be within the range of $70.0 million to $75.0 million. In light of the economic uncertainty, particularly for the Energy
end markets, it is possible that additional programs may be implemented throughout the remainder of 2015.
During the year ended December 31, 2014, the Company purchased a total of approximately 7.5 million shares of its common
stock in the open market at a total cost of $601.1 million, or approximately $80.50 per share. Included in this total are 3.6 million
shares repurchased to complete the November 2012 $1.0 billion stock repurchase program. The remaining 3.9 million of share
repurchases in 2014 were made pursuant to the share repurchase program approved in May 2012. As of December 31, 2014,
the approximate number of shares still available for repurchase under the May 2012 share repurchase authorization was 0.1
million. This authorization was canceled and replaced in January 2015 with a new standing share repurchase authorization
approved by the Board of Directors, whereby the Company may repurchase up to 15 million shares of its common stock over
the following three years. In addition, we continued our history of increasing our annual dividend payments to shareholders by
paying $258.5 million in dividends in 2014.
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Table of Contents
Looking forward to 2015, we expect the following:
• Within our Energy segment, lower revenue in our U.S.-based Drilling & Production businesses, however, we continue
to expect our international oil and gas activity and our Bearings & Compression businesses to grow;
• Within our Engineered Systems segment, continued growth driven by strong dynamics in our Industrials platform and
global growth in Printing & Identification;
• The continuation of solid global markets in our Fluids segment driven by increased regulatory activity, a positive retail
fueling environment and new product introductions;
• Within our Refrigeration & Food Equipment segment, growth supported by our focus on customer service and best-
in-class products; and
• Continued share repurchases under the new standing authorization approved in January 2015.
Our 2015 guidance anticipates the combined impact of lower oil prices, discontinued operations, share repurchase activity and
the impact of foreign currency translation. We expect total revenue growth of 1% to (2%), primarily reflecting our outlook for
Energy. Within our total revenue forecast, organic growth is anticipated to be approximately 1% to (2%), completed acquisitions
will provide approximately 2% growth, and the impact of foreign currency translation is expected to have a negative impact of
2%. In total, we expect full year adjusted EPS to be in the range of $4.70 to $4.95.
If global or domestic economic conditions accelerate or deteriorate, our operating results for 2015 could be materially different
than currently projected.
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Table of Contents
CONSOLIDATED RESULTS OF OPERATIONS
As discussed in Note 4 Disposed and Discontinued Operations to the Consolidated Financial Statements in Item 8 of this Form
10-K, in the fourth quarter of 2014, we reclassified certain businesses in the Engineered Systems segment to discontinued
operations based on our decision to divest these businesses. The results of operations of these businesses have been removed
from the results of continuing operations and are presented within results of discontinued operations for all periods presented.
Years Ended December 31,
(dollars in thousands, except per share figures)
Revenue
Cost of goods and services
Gross profit
Gross profit margin
2014
$ 7,752,728
4,778,479
2,974,249
2013
$ 7,155,096
4,376,505
2,778,591
2012
$ 6,626,648
4,046,659
2,579,989
38.4%
38.8%
38.9%
Selling and administrative expenses
1,758,765
1,616,921
1,520,961
Selling and administrative as a percent of revenue
22.7%
22.6%
23.0%
% / Point Change
2014 vs.
2013
2013 vs.
2012
8.4 %
9.2 %
7.0 %
(0.4)
8.8 %
0.1
5.4 %
nm*
8.0 %
8.2 %
7.7 %
(0.1)
6.3 %
(0.4)
(0.5)%
nm*
Interest expense, net
Other (income) expense, net
Provision for income taxes
Effective tax rate
127,179
(5,902)
120,654
(4,970)
121,269
6,694
316,067
248,459
280,990
28.9%
23.8%
30.2%
27.2 %
5.1
(11.6)%
(6.4)
Earnings from continuing operations
778,140
797,527
650,075
(2.4)%
22.7 %
(Loss) earnings from discontinued operations, net
(2,905)
205,602
160,995
nm*
nm*
Earnings from continuing operations per common
share - diluted
$
4.61
$
4.60
$
3.53
0.2 %
30.3 %
* nm: not meaningful
Revenue
Our 2014 consolidated revenue increased $597.6 million, or 8.4% to $7.8 billion, reflecting organic growth of 4.4%, growth
from acquisitions of 4.4%, and a minor unfavorable impact from foreign currency translation. All four segments grew solidly
year-over-year. Acquisition growth of 4.4% was largely driven by our Energy segment and included recent acquisitions such as
Accelerated and WellMark.
Our 2013 consolidated revenue increased 8.0% to $7.2 billion compared with 2012, reflecting organic growth of 2.1%, growth
from acquisitions of 5.9% and a negligible impact from currency translation. All four of our segments generated 2013 organic
revenue growth, with the majority attributed to volume increases driven by strength in Energy, Refrigeration and Food Equipment,
and many of the other industrial markets served by our Engineered Systems segment.
Gross Profit
Our gross profit increased $195.7 million, or 7.0%, in 2014 compared with 2013, reflecting the benefit of increased sales volumes.
Gross profit margin declined 40 basis points due to the impact of higher restructuring costs of $14.4 million, higher acquisition-
related depreciation and amortization of $15.4 million, and higher one-time labor costs as we completed the transition to new
production sites.
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Our gross profit increased $198.6 million or 7.7% in 2013 compared with 2012, reflecting the benefit of increased sales volumes,
favorable net material costs, and benefits from productivity initiatives. The benefit from these factors were partly offset with
higher depreciation and amortization expense of $15.7 million. Gross profit margin was consistent year over year, with the
operating leverage achieved by the higher volumes being offset by the impact of normal pricing concessions, business mix and
higher labor costs.
Selling and Administrative Expenses
Selling and administrative expenses increased $141.8 million, or 8.8%, in 2014 compared with 2013 primarily due to general
increases across the segments in support of higher volumes. The current year expense included higher restructuring costs of
$21.3 million to align our businesses with anticipated market conditions and $15.0 million additional depreciation and
amortization expense relating primarily to the recent acquisitions of Finder Pompe, Wellmark, and Accelerated.
As a percentage of revenue, selling and administrative expenses increased 10 basis points in 2014 to 22.7%. Results for 2014
include a $3.6 million one-time settlement charge for lump-sum payments made to participants in our U.S. defined benefit
pension plan. Selling and administrative expenses for the 2013 period also include certain one-time gains of $6.8 million
associated with the sale of land in Switzerland and pension curtailment gain of $4.4 million recognized in connection with the
freeze of future service benefits for the U.S. benefit plans. Adjusting for these one-time items, selling and administrative expenses
as a percentage of revenue improved 20 basis points in 2014 relative to 2013 a result of leverage from higher revenue levels,
which more than offset higher acquisition-related depreciation and amortization and increased restructuring charges.
Higher selling and administrative expenses in 2013 relative to 2012 reflect general increases across the segments in support of
higher volumes. As a percentage of revenue, selling and administrative expenses decreased to 22.6% in 2013 compared with
23.0% in 2012. This 40 basis point improvement is the a result of leverage from the higher revenue levels which offset higher
acquisition-related depreciation and amortization charges of $11.6 million. Approximately 20 basis points of this improvement
is attributable to the $11.2 million of one-time items recognized in 2013 as discussed above.
Non-Operating Items
Interest expense, net, increased $6.5 million, or 5.4%, to $127.2 million in 2014 primarily due to higher interest expense related
to the euro-denominated debt issued in the fourth quarter of 2013. In 2013, our interest expense, net, decreased 0.5% to $120.7
million due primarily to lower interest rates on commercial paper borrowings for the period.
Other expense (income), net in 2014, 2013, and 2012 includes $2.1 million, $5.6 million, and $9.2 million, respectively, of net
foreign exchange losses resulting from the re-measurement and settlement of foreign currency denominated balances. These
foreign exchange losses were more than offset by other nonrecurring items including insurance settlements for property damage
of $5.1 million and $7.4 million in 2014 and 2013, respectively. Other income for 2014 also included $1.7 million for earnings
on minority investments during the year. Other expense, net in 2012 also included royalty income and other miscellaneous non-
operating gains and losses, none of which are individually significant.
Income Taxes
We operate globally, and 27.8%, 31.7%, and 31.2% of our pre-tax earnings in 2014, 2013, and 2012, respectively, were generated
in foreign jurisdictions. Foreign earnings are generally subject to local country tax rates that are well below the 35.0% U.S.
statutory rate. We also benefit from tax holidays and incentives in a number of the foreign jurisdictions. As a result, our effective
non-U.S. tax rate is typically significantly lower than the U.S. statutory rate.
The 2014 effective tax rate on continuing operations was 28.9% compared to the 2013 rate of 23.8%. The 2014 rate was impacted
by $11.3 million of favorable net discrete items, principally related to settlements of uncertain tax matters. The 2013 effective
tax rate was impacted by other favorable net discrete items totaling $75.5 million, principally related to the conclusion of certain
U.S. federal, state and international tax audits, a favorable court opinion, certain cross-border tax consequences and the effect
of the American Tax Relief Act of 2012 signed into law on January 2, 2013. After adjusting for discrete items, the effective tax
rates were 29.9% for 2014 and 31.0% for 2013.
We believe it is reasonably possible during the next twelve months that uncertain tax positions may be settled, which could result
in a decrease in the gross amount of unrecognized tax benefits. This decrease may result in an income tax benefit. Due to the
27
Table of Contents
potential for resolution of federal, state, and foreign examinations, and the expiration of various statutes of limitation, our gross
unrecognized tax benefits balance may change within the next twelve months by a range of zero to $27.0 million. Some portion
of such change may be reported as discontinued operations. We believe adequate provision has been made for all income tax
uncertainties.
The 2012 effective tax rate on continuing operations was 30.2%. The effective tax rate in 2012 was favorably impacted by net
discrete and other items totaling $17.8 million, arising principally from settlements with the U.S. federal and state taxing
authorities. After adjusting for discrete and other items, the effective tax rate for 2012 was 32.1%.
Earnings from Continuing Operations
Earnings from continuing operations decreased 2.4% to $778.1 million, or $4.61 diluted earnings per share ("EPS") in 2014,
compared with earnings from continuing operations of $797.5 million, or $4.60 EPS, in 2013. Excluding the impact of discrete
tax benefits of $11.3 million, or $0.07 EPS, in 2014 and $75.5 million, or $0.43 EPS, in 2013, earnings from continuing operations
increased 6.2%. The increase in these adjusted earnings for 2014 is primarily due to higher revenues and benefits from productivity
and cost containment initiatives, offset by higher restructuring and acquisition-related expenses. Excluding the impact of discrete
tax items, EPS increased 9.1% in 2014, reflecting the impact of higher earnings and lower weighted average shares outstanding
relative to 2013 due to over seven million shares repurchased during the year.
Earnings from continuing operations increased 22.7% to $797.5 million, or $4.60 EPS in 2013, compared with earnings from
continuing operations of $650.1 million, or $3.53 EPS, in 2012. Excluding the impact of discrete tax benefits of $75.5 million,
in 2013 and $17.8 million, or $0.10 EPS, in 2012, earnings from continuing operations increased 14.2%. The increase in 2013
adjusted earnings is primarily the result of higher revenues, offset in part by higher labor costs across all segments, as well as
higher acquisition-related expenses, including depreciation and amortization. Excluding the impact of discrete tax items, EPS
increased 21.2% in 2013, which reflects the increase in earnings, as well as the impact of six million share buybacks during the
period.
Discontinued Operations
The results of discontinued operations reflect the results of Datamax O'Neil and Sargent Aerospace, which were reclassified to
discontinued operations in the fourth quarter of 2014. These results also include Knowles prior to the distribution on February
28, 2014 and the results of DEK and ECT prior to their respective sale dates of July 2, 2014 and November 30, 2013.
The results of discontinued operations for the year ended December 31, 2014 totaled a net loss of $2.9 million. This amount
includes a loss on the sale of DEK of $6.9 million and a gain of $3.2 million in connection with a working capital adjustment
for ECT, which was sold in the prior year. Also reflected within the net loss from discontinued operations is $32.3 million of
after-tax earnings for those businesses classified as discontinued operations, $27.1 million of spin-off costs and a pension
settlement charge of $4.4 million, net of tax, attributable to lump sum payments made to Knowles participants in Dover's qualified
defined benefit pension plan.
Earnings from discontinued operations for the year ended December 31, 2013 totaled net earnings of $205.6 million, which
primarily reflects after-tax earnings of the five businesses classified as discontinued operations as well as discrete tax benefits
of $54.8 million, $30.1 million of spin-off costs, and $18.3 million of interest on tax obligations in foreign jurisdictions. Also
reflected in discontinued operations is a net loss on the sale of ECT, including impairments, of $21.5 million and $14.0 million
of impairment relating to DEK.
Earnings from discontinued operations for the year ended December 31, 2012 totaled net earnings of $161.0 million, which
primarily reflects after-tax earnings of the five businesses classified as discontinued operations as well as various expense and
accrual adjustments relating to other discontinued operations. This activity was offset by a goodwill impairment charge recognized
in connection with the anticipated sale of ECT of $51.9 million, net of tax.
Refer to Note 4 Disposed and Discontinued Operations in the Consolidated Financial Statements in Item 8 of this Form 10-K
for additional information on disposed and discontinued operations.
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Restructuring Activities
2014 Restructuring Activities
The Company incurred $44.8 million of restructuring charges during 2014 including the programs described below.
• The Energy segment incurred restructuring charges of $7.5 million, related principally to a facility consolidation in its
businesses serving the compression markets and a reduction in workforce.
• The Engineered Systems segment recorded $6.6 million of restructuring charges relating to facility consolidations
within both the Printing & Identification and Industrials platforms, as well as actions taken to optimize costs related
to engineering, sales, and administrative functions within the Printing & Identification platform.
• The Fluids segment recorded $3.8 million of restructuring charges principally related to reduction in workforce for
those businesses serving the Pumps markets.
• The Refrigeration & Food Equipment segment recorded restructuring charges of $24.9 million, primarily related to
headcount reductions and exit plans at targeted facilities, including approximately $17.5 million related to the closure
of a European-based facility within Refrigeration.
• Corporate recorded restructuring charges of approximately $2.0 million, primarily severance expense, resulting from
the Company's decision to realign its businesses into a new segment structure in the first quarter of 2014 following the
spin-off of Knowles.
Of the restructuring charges above, $37.4 million was incurred in Q4 2014 principally due to streamlining business across the
organization. We expect to incur restructuring charges of approximately $17.0 million to $20.0 million in the first quarter of
2015, with the majority of these charges in the Energy segment. We anticipate that much of the benefit of the 2014 and 2015
programs will be realized over the remainder of 2015 and into 2016. We also expect to fund the remainder of the 2014 programs
currently underway, as well those commenced in 2015, over the next 12 to 18 months. In light of the economic uncertainty in
certain of our end markets and our continued focus on improving our operating efficiency, it is possible that additional programs
may be implemented throughout the remainder of 2015.
2013 Restructuring Activities
During 2013, we initiated restructuring actions relating to ongoing cost reduction efforts, including targeted facility consolidations
and headcount reductions at certain businesses. As a result, in 2013, we incurred restructuring charges totaling $9.1 million
related to these programs, as follows:
• The Engineered Systems segment incurred restructuring charges of $3.6 million, mainly relating to facility consolidations
and other headcount reduction programs undertaken to optimize its cost structure.
• The Fluids segment incurred restructuring charges of $0.9 million, principally relating to rationalization of global headcount
to better align its footprint with present market conditions.
• The Refrigeration & Food Equipment segment incurred restructuring charges of $5.5 million, primarily relating to a facility
consolidation and related headcount reductions within its operations to better reflect the current market dynamics.
Restructuring initiatives in 2012 were limited to a few targeted facility consolidations. We incurred restructuring charges of
$13.9 million relating to such activities. See Note 9 Restructuring Activities in the Consolidated Financial Statements in Item
8 of this Form 10-K for additional details regarding our recent restructuring activities.
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Table of Contents
SEGMENT RESULTS OF OPERATIONS
This summary that follows provides a discussion of the results of operations of each of our four reportable operating segments
(Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment). Each of these segments is comprised of various
product and service offerings that serve multiple end markets. See Note 17 Segment Information in the Consolidated Financial
Statements in Item 8 of this Form 10-K for a reconciliation of segment revenue, earnings, and operating margin to our consolidated
revenue, earnings from continuing operations, and operating margin. Segment EBITDA and segment EBITDA margin, which
are presented in the segment discussion that follows, are non-GAAP measures and do not purport to be alternatives to operating
income as a measure of operating performance. We believe that these measures are useful to investors and other users of our
financial information in evaluating ongoing operating profitability as they exclude the depreciation and amortization expense
related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating
performance in relation to our competitors. For further information, see the Non-GAAP Disclosures at the end of this Item 7.
Energy
Our Energy segment, serving the Drilling & Production, Automation, and Bearings & Compression end markets, is a provider
of customer driven solutions and services for safe and efficient production and processing of oil, natural gas liquids, and gas
worldwide, and has a strong presence in the bearings and compression components markets.
(dollars in thousands)
Revenue:
Drilling & Production
Bearings & Compression
Automation
Total
Segment earnings
Operating margin
Segment EBITDA
Segment EBITDA margin
Other measures:
Years Ended December 31,
% Change
2014
2013
2012
2014 vs.
2013
2013 vs.
2012
$ 1,459,514
347,470
210,255
$ 2,017,239
$ 1,378,225
341,628
134,000
$ 1,853,853
$ 1,315,599
337,131
135,565
$ 1,788,295
5.9 %
1.7 %
56.9 %
8.8 %
4.8 %
1.3 %
(1.2)%
3.7 %
$
461,815
$
459,649
$
466,801
0.5 %
(1.5)%
22.9%
24.8%
26.1%
$
573,771
$
558,724
$
554,722
2.7 %
0.7 %
28.4%
30.1%
31.0%
Depreciation and amortization
Bookings
Backlog
$
111,956
2,016,411
233,347
$
99,075
1,853,562
206,790
$
87,921
1,801,580
224,284
13.0 %
8.8 %
12.8 %
12.7 %
2.9 %
(7.8)%
Components of revenue growth:
Organic growth
Acquisitions
Foreign currency translation
2014 Versus 2013
2014 vs.
2013
2013 vs.
2012
3.1 %
6.6 %
(0.9)%
8.8 %
0.3 %
3.4 %
— %
3.7 %
Energy segment revenue for the year increased $163.4 million, an 8.8% increase over the prior year including organic growth
of 3.1%, acquisition-related growth of 6.6%, slightly offset by a 0.9% unfavorable impact from foreign currency translation.
• Drilling & Production revenue (representing 72.4% of 2014 segment revenue) increased $81.3 million, or 5.9%. Growth
was driven by strong U.S. drilling and artificial lift activity and the impact of acquisitions, particularly Accelerated
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Companies LLC, purchased in October 2014. This growth was partially offset by expected lower project-related
shipments in Australia and lower demand for winches in the military and infrastructure markets.
• Bearings & Compression revenue (representing 17.2% of 2014 segment revenue) increased $5.8 million, or 1.7%. This
growth resulted from increased demand in our Compression end market, partially offset by softness in our Bearings
end market due to slower OEM build rates.
• Automation revenue (representing 10.4% of 2014 segment revenue) increased $76.2 million, or 56.9%, primarily
resulting from growth relating to the 2014 acquisitions of Wellmark Holdings, Inc. and Timberline Manufacturing as
well as the full year impact of the 2013 acquisition of SPIRIT. Growth in 2014 was also driven by strong drilling activity
and increased sensor replacement in the downhole pressure transducers business.
Energy earnings in 2014 increased $2.2 million compared to 2013, or 0.5%, primarily due to higher Drilling and Automation
revenue partially offset by higher acquisition-related depreciation and amortization of approximately $22.0 million, as well as
higher restructuring costs of $8.4 million. The operating margin decrease of 190 basis points was also partially impacted by
unfavorable material pricing in the artificial lift businesses.
Bookings for the year ended December 31, 2014 increased 8.8% compared to 2013, primarily due to broad-based growth across
our product lines. Backlog at December 31, 2014 increase 12.8% compared to the prior year, mainly due to large projects booked
in our Bearings end market.
2013 Versus 2012
Revenue generated by our Energy segment increased $65.6 million, or 3.7%, compared with 2012. The increase was driven
primarily by acquisition growth of 3.4% and organic growth of 0.3%. There was a negligible impact from foreign currency
translation.
• Drilling & Production revenue (representing 74.4% of 2013 segment revenue) increased by $62.6 million, or 4.8%,
driven by a large artificial lift project in Australia and market share gains and international growth in Drilling end
markets, partially offset by softer demand for winch products in the energy and recovery markets.
• Bearings & Compression revenue (representing 18.4% of 2013 segment revenue) increased by $4.5 million, or 1.3%,
reflecting a small increase in Bearing end market shipments, partially offset by slightly lower Compression product
sales.
• Automation revenue (representing 7.2% of 2013 segment revenue) decreased by $1.6 million, or 1.2%, driven by prior
year customer upgrade programs in our downhole pressure transducers business that did not repeat.
Energy's earnings decreased $7.2 million, or 1.5%, primarily resulting from lower yields and higher costs of new drilling products,
lower sales of winch products and investments in compression product expansion. Operating margin decreased 130 basis points
compared to the prior year due to the lower yields and higher costs of new drilling products, unfavorable product mix in artificial
lift products and investments in compression product expansion.
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Engineered Systems
Our Engineered Systems segment is comprised of two platforms, Industrials and Printing & Identification, and is focused on
the design, manufacture and service of critical equipment and components serving the vehicle service, environmental solutions,
industrial, and printing and identification markets. As discussed previously, Datamax O'Neil, a business previously within the
the Printing & Identification platform, and Sargent Aerospace, previously within the Industrials platform, were reclassified to
discontinued operations in the fourth quarter of 2014. The discussion that follows addresses continuing operations of the segment.
(dollars in thousands)
Revenue:
Industrials
Printing & Identification
Years Ended December 31,
% Change
2014
2013
2012
2014 vs.
2013
2013 vs.
2012
$ 1,397,081
988,884
$ 2,385,965
$ 1,300,095
877,875
$ 2,177,970
$ 1,292,844
850,843
$ 2,143,687
7.5 %
12.6 %
9.5 %
0.6 %
3.2 %
1.6 %
8.7 %
Segment earnings
Operating margin
$
386,998
$
347,497
$
319,704
11.4 %
16.2%
16.0%
14.9%
Segment EBITDA
Segment EBITDA margin
Other measures:
Depreciation and amortization
Bookings
Industrials
Printing & Identification
Eliminations
Backlog
Industrials
Printing & Identification
Eliminations
Components of revenue growth:
Organic growth
Acquisitions
Foreign currency translation
2014 Versus 2013
$
448,944
$
406,555
$
380,374
10.4 %
6.9 %
18.8%
18.7%
17.7%
$
61,946
$
59,058
$
60,670
4.9 %
(2.7)%
$ 1,451,847
993,260
(56)
$ 2,445,051
$ 1,316,228
879,468
63
$ 2,195,759
$ 1,296,372
854,762
(225)
$ 2,150,909
10.3 %
12.9 %
11.4 %
1.5 %
2.9 %
2.1 %
$
$
282,598
110,359
—
392,957
$
$
231,748
95,597
—
327,345
$
$
234,397
93,326
1
327,724
21.9 %
15.4 %
(1.1)%
2.4 %
20.0 %
(0.1)%
2014 vs.
2013
2013 vs.
2012
6.2 %
4.1 %
(0.8)%
9.5 %
1.6 %
— %
— %
1.6 %
Engineered Systems 2014 revenue increased $208.0 million, or 9.5%, including organic revenue growth of 6.2% and growth
from recent acquisitions of 4.1%, partially offset by an unfavorable impact from foreign currency translation of 0.8%.
• Revenue derived from the Industrials platform (representing 58.6% of 2014 segment revenue) increased $97.0 million,
or 7.5%, as compared to the prior year comprising organic growth of 7.1% resulting from broad-based growth led by
our auto-related and waste equipment businesses. Acquisition-related revenue increased 0.2%, while foreign currency
translation had a favorable impact of 0.1%.
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• Revenue of our Printing & Identification platform (representing 41.4% of 2014 segment revenue) increased $111.0
million, or 12.6% including organic growth of 4.8% and 9.7% acquisition-based growth, partially offset by a 1.9%
unfavorable impact of foreign currency translation. Broad-based global growth in both our fast moving consumer goods
and industrial markets, especially in the U.S., drove organic revenue growth. Acquisition growth was primarily driven
by MS Printing Solutions, acquired in February 2014, contributing revenue growth of approximately 8.0% as compared
to 2013.
Engineered Systems segment earnings in 2014 increased $39.5 million, or 11.4% compared with 2013, as a result of increased
volume and productivity improvements and recent acquisitions. Operating margin increased 20 basis points compared to 2013,
as productivity savings were partially offset by higher acquisition-related costs, including $6.5 million of depreciation and
amortization, as well as higher restructuring costs of $3.0 million.
Bookings for our Industrials platform reflected broad-based growth, resulting in an increase of 10.3%. Our Printing &
Identification platform's bookings increased 12.9%, due to the impact of recent acquisitions and continued strong activity in our
core fast moving consumer goods markets, especially in the U.S. Segment book-to-bill was 1.02.
2013 Versus 2012
Engineered Systems 2013 revenue increased $34.3 million, or 1.6%, due to organic revenue growth of 1.6%.
• Revenue derived from the Industrials platform (representing 59.7% of 2013 segment revenue) increased $7.3 million,
or 0.6%, driven by higher demand for waste equipment for large regional haulers and increased demand in vehicle
service markets, partially offset by lower demand for equipment serving the mining, utilities, military, and industrial
automation machinery sectors.
• Revenue of our Printing & Identification platform (representing 40.3% of 2013 segment revenue) increased $27.0
million, or 3.2%, favorably impacted by market improvements in Europe and developing markets.
Engineered Systems segment earnings in 2013 increased $27.8 million, or 8.7%, compared with 2012, due to the impact of
productivity improvements and favorable pricing. In addition, non-recurring gains in 2013 included settlements on insurance
related to property damage totaling $3.1 million that partially offset other miscellaneous non-recurring charges, none of which
were individually significant. Operating margin increased 110 basis points compared to 2012, primarily attributable to leveraging
higher volumes and ongoing productivity improvements, including restructuring savings from actions taken earlier in 2013 and
2012 in the Printing & Identification platform.
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Fluids
Our Fluids segment, serving the Fluid Transfer and Pumps end markets, is focused on the safe handling of critical fluids across
the oil and gas, retail fueling, chemical, hygienic and industrial markets.
(dollars in thousands)
Revenue:
Fluid Transfer
Pumps
Total
Segment earnings
Operating margin
Segment EBITDA
Segment EBITDA margin
Other measures:
Years Ended December 31,
% Change
2014
2013
2012
2014 vs.
2013
2013 vs.
2012
$
778,979
651,587
$ 1,430,566
$
665,559
571,279
$ 1,236,838
$
596,772
490,754
$ 1,087,526
17.0 %
14.1 %
15.7 %
11.5%
16.4%
13.7%
$
251,639
$
224,523
$
182,544
12.1 %
23.0%
17.6%
18.2%
16.8%
$
312,542
$
273,335
$
223,925
14.3 %
22.1%
21.8%
22.1%
20.6%
Depreciation and amortization
Bookings
Backlog
$
60,903
1,434,358
277,834
$
48,812
1,261,922
310,330
$
41,381
1,073,665
195,794
24.8 %
13.7 %
(10.5)%
18.0%
17.5%
58.5%
Components of revenue growth:
Organic growth
Acquisitions
Foreign currency translation
2014 Versus 2013
2014 vs.
2013
2013 vs.
2012
7.5 %
8.3 %
(0.1)%
15.7 %
6.8%
6.9%
—%
13.7%
Fluids segment revenue increased $193.7 million, or 15.7%, compared to 2013, comprised of organic growth of 7.5%, acquisition-
related growth of 8.3%, partially offset by a 0.1% unfavorable foreign currency impact.
•
•
Fluid Transfer revenue (representing 54.5% of 2014 segment revenue) increased $113.4 million, or 17.0%, compared
to the prior year. Growth was driven by strong fuel transportation and global retail fueling environment markets, as
well as from recent acquisitions.
Pumps revenue (representing 45.5% of 2014 segment revenue) increased $80.3 million, or 14.1%, as compared with
the prior year. Growth was driven by solid global demand, growth from recent acquisitions and new product
introductions.
Fluids segment earnings increased $27.1 million, or 12.1%, for the year ended December 31, 2014 compared to the comparable
prior year period, as volume leverage, productivity initiatives and strategic pricing more than offset incremental costs associated
with recent acquisitions, including approximately $10.7 million of depreciation and amortization. Operating margin decreased
60 basis points, primarily due to the aforementioned impact of recent acquisitions, as well as higher restructuring charges to
better streamline businesses, particularly within the businesses serving the Pumps end market.
Bookings for 2014 decreased 13.7% as compared to 2013, and backlog levels decreased 10.5% at December 31, 2014 compared
to the prior year end, primarily reflecting the timing of project-related orders within Pumps. Book to bill was solid at 1.0.
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2013 Versus 2012
Fluids segment revenue increased $149.3 million, or 13.7%, compared to 2012, attributable to organic revenue growth of 6.8%
and acquisition-related growth of 6.9%.
•
•
Fluid Transfer revenue (representing 53.8% of 2013 segment revenue) increased $68.8 million, or 11.5%, year-over-
year, reflecting acquisition-related growth from acquisitions made in the forth quarter of 2013, as well as broad-based
order and shipment activity.
Pumps revenue (representing 46.2% of 2013 segment revenue increased $80.5 million, or 16.4%, compared with the
prior year, primarily driven by the acquisitions of Ebsray Pumps and Finder Pompe in the second and fourth quarters
of 2013, respectively.
Fluids segment earnings increased $42.0 million, or 23.0%, in 2013 compared to 2012, with an increase in operating margin of
140 basis points, as the increased sales volume and productivity initiatives more than offset higher acquisition-related costs,
including depreciation and amortization.
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Refrigeration & Food Equipment
Our Refrigeration & Food Equipment segment is a provider of innovative and energy efficient equipment and systems serving
the commercial refrigeration and food service industries.
(dollars in thousands)
Revenue:
Refrigeration
Food Equipment
Total
Segment earnings
Operating margin
Segment EBITDA
Segment EBITDA margin
Other measures:
Years Ended December 31,
% Change
2014
2013
2012
2014 vs.
2013
2013 vs.
2012
$ 1,483,157
438,032
$ 1,921,189
$ 1,449,857
437,983
$ 1,887,840
$ 1,222,044
385,558
$ 1,607,602
2.3 %
— %
1.8 %
18.6 %
13.6 %
17.4 %
$
238,734
$
267,307
$
223,397
(10.7)%
19.7 %
12.4%
14.2%
13.9%
$
307,435
$
334,535
$
260,692
(8.1)%
28.3 %
16.0%
17.7%
16.2%
Depreciation and amortization
Bookings
Backlog
$
68,701
1,863,207
282,507
$
67,228
1,882,338
347,004
$
37,295
1,596,369
360,059
2.2 %
(1.0)%
(18.6)%
80.3 %
17.9 %
(3.6)%
Components of segment revenue growth:
Organic growth
Acquisitions
Foreign currency translation
2014 Versus 2013
2014 vs.
2013
2013 vs.
2012
1.7 %
0.2 %
(0.1)%
1.8 %
1.4 %
16.0 %
— %
17.4 %
Revenue generated by our Refrigeration & Food Equipment segment in 2014 increased $33.3 million, or 1.8%, compared to
2013. The overall increase in revenue includes organic growth of 1.7%, and acquisition growth of 0.2%. Foreign currency
translation had an unfavorable impact of 0.1%.
• Revenue growth in our Refrigeration end market (representing 77.2% of 2014 segment revenue) increased $33.3 million,
or 2.3%, resulting from solid activity with major food retailers.
• Revenue derived from Food Equipment (representing 22.8% of 2014 segment revenue) was flat year over year, where
growth in commercial kitchen and can-forming equipments was offset by soft food processing equipment activity.
Refrigeration & Food Equipment segment earnings in 2014 decreased $28.6 million, or 10.7%, compared with 2013, with a
decrease in operating margin of 180 basis points. The earnings and margin decreases were driven by non-recurring restructuring
of $24.9 million ($19.4 million higher as compared to 2013) primarily for the closure of a European-based facility, unfavorable
product mix, as well as a $6.8 million land sale gain in the prior year that did not repeat.
Bookings for the year ended December 31, 2014 decreased slightly as compared to 2013, reflecting anticipated lower orders for
Refrigeration and the timing of orders for Food Equipment. Backlog at December 31, 2014 decreased 18.6% due to the
aforementioned timing of orders for Food Equipment. Book to bill was 0.97.
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2013 Versus 2012
Revenue generated by our Refrigeration & Food Equipment segment increased $280.2 million, or 17.4%, compared with 2012.
The overall increase in revenue resulted primarily acquisition-related growth of 16.0%, as well as organic revenue growth of
1.4%.
• Our revenue in the Refrigeration market (representing 76.8% of 2013 segment revenue) increased $227.8 million, or
18.6%, primarily reflecting the favorable impact of recent acquisitions, most notably Anthony International acquired
in November 2012. These increases in revenue more than offset the impact of delayed shipments to a key retail customer
on a specific project.
• Our Food Equipment revenue (representing 23.2% of 2013 segment revenue) increased $52.4 million , or 13.6%, over
the prior year reflecting increased demand for beverage can-making equipment and the favorable impact of recent
acquisitions.
Refrigeration & Food Equipment's 2013 earnings increased 19.7% compared with 2012, with an increase in operating margin
of 30 basis points. The earnings and margin increases were mainly due to the impact of recent acquisitions and productivity
savings, partially offset by acquisition-related depreciation and amortization expense.
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FINANCIAL CONDITION
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities. Significant
factors affecting liquidity are: cash flows generated from operating activities, capital expenditures, acquisitions, dispositions,
dividends, repurchase of outstanding shares, adequacy of available commercial paper and bank lines of credit, and the ability
to attract long-term capital with satisfactory terms. We generate substantial cash from the operations of our businesses and
remain in a strong financial position, with sufficient liquidity available for reinvestment in existing businesses and strategic
acquisitions.
Cash Flow Summary
The following table is derived from our Consolidated Statement of Cash Flows:
Cash Flows from Continuing Operations (in thousands)
Net Cash Flows Provided By (Used In):
Operating activities
Investing activities
Financing activities
Operating Activities
Years Ended December 31,
2013
2012
2014
$
$
950,164
(782,557)
(255,489)
979,612
(361,677)
(678,542)
$
968,369
(1,225,330)
(342,942)
Cash provided by operating activities in 2014 decreased $29.4 million relative to 2013. This decline was driven by higher
investments in working capital of $43.4 million in 2014 relative to the prior year due, primarily due to the impact of timing of
inventory purchases and vendor payments. In addition, higher tax payments of approximately $54.0 million contributed to the
decline in operating cash flow in 2014. These reductions were partially offset by higher continuing earnings before the impact
of depreciation, amortization, and restructuring expenses and lower pension contributions of $16.0 million.
Cash provided by operating activities in 2013 increased $11.2 million as compared to the prior year. This increase was driven
by higher earnings from continuing operations; however, increased investments in working capital of $77.4 million, mostly due
to the timing of customer payments, reduced operating cash flow. Higher long-term and annual incentive compensation payouts
in 2013 drove reductions in compensation accruals of approximately $64.3 million. Additionally, higher tax payments of $51.9
million further reduced operating cash flow in 2013.
Pension and Post-Retirement Activity: The funded status of our qualified defined benefit pension plans is dependent upon many
factors, including returns on invested assets, the level of market interest rates, and the level of funding. We contribute cash to
our plans at our discretion, subject to applicable regulations and minimum contribution requirements. Cash contributions to the
U.S. qualified benefit plans totaled $9.0 million and $18.0 million in 2013 and 2012, respectively. Due to the overfunded status
of this plan, the Company made no contributions in 2014 and expects to make minimal contributions in the near term.
Our significant international pension obligations are located in regions where it is not economically advantageous to pre-fund
the plans due to local regulations. Total cash contributions to ongoing international defined benefit pension plans in 2014, 2013,
and 2012 totaled $9.5 million, $9.8 million, and $7.2 million, respectively. In 2015, we expect to contribute approximately $6.5
million to our non-U.S. plans. See Note 15 Employee Benefit Plans in the Consolidated Financial Statements in Item 8 of this
Form 10-K for further discussion regarding our post-retirement plans.
Adjusted Working Capital: In 2014, Adjusted Working Capital (a non-GAAP measure calculated as accounts receivable, plus
inventory, less accounts payable) increased from 2013 by $165.9 million, or 13.1%, to $1.4 billion, which reflected an increase
in receivables of $110.1 million, an increase in net inventory of $148.4 million, and an increase in accounts payable of $92.6
million, generally due to the impact of timing of inventory purchases and vendor payments in 2014. Excluding acquisitions and
the effects of foreign exchange translation of $51.3 million, Adjusted Working Capital would have increased by $81.4 million,
or 6.4%.
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Investing Activities
Cash used in investing activities are derived from cash outflows for capital expenditures and acquisitions, partially offset by
proceeds from sales of businesses, property, plant and equipment, and short-term investments. The majority of the activity in
investing activities was comprised of the following:
• Acquisitions: In 2014, we deployed $802.3 million to acquire seven businesses, including $435.7 million for Accelerated
and $158.6 million for WellMark Holdings, Inc., two U.S. acquisitions within the Energy segment. In comparison, we
acquired ten business in 2013 for an aggregate purchase price of approximately $322.8 million including $142.2 million
for Finder Pompe, a European acquisition in the Fluids segment. Total acquisition spend of nearly $1.1 billion in 2012
was comprised of seven businesses, including $265.8 million for Maag Pump Systems, $119.4 million for PCS, and
$603.2 million for Anthony International. See Note 3 Acquisitions in the Consolidated Financial Statements in Item 8
of this Form 10-K for additional information with respect to recent acquisitions.
• Capital spending: Capital expenditures, primarily to support capacity expansion, innovation, and cost savings, were
$166.0 million in 2014, $141.7 million in 2013, and $146.5 million in 2012. Our capital expenditures were approximately
$24.3 million higher in the 2014 period as compared to 2013, primarily due to expansion activities in the Bearings &
Compression end market. We expect 2015 capital expenditures to approximate 2.3% of revenue.
• Proceeds from sale of businesses: In 2014, we generated cash proceeds of $191.3 million, primarily from the sale of
DEK International and $16.3 million from the collection of deferred sale proceeds on the 2013 sale of Everett Charles
Technologies, which accounted for the majority of the $76.5 million of cash received in 2013.
• Other investing activities: The majority of other investing activities for 2014 was a minority investment in a business
serving the Refrigeration end market.
We anticipate that capital expenditures and any acquisitions we make in 2015 will be funded from available cash and internally
generated funds and, if necessary, through the issuance of commercial paper, the use of established lines of credit, or accessing
the public debt or equity markets.
Financing Activities
Our cash flow from financing activities generally relates to the use of cash for purchases of our common stock and payment of
dividends, offset by net borrowing activity and proceeds from exercise of stock options. The majority of financing activity was
attributed to the following:
•
•
Long-term debt and notes payable: During the 2014 period, we increased net borrowings from commercial paper
issuances by $251.5 million principally to fund acquisitions during the period, including Accelerated Companies in the
fourth quarter. In December 2013, the Company issued €300.0 million of 2.125% euro-denominated notes due in 2020.
The proceeds of $403.8 million from the sale of the notes, net of discounts and issuance costs, were primarily used to
repay commercial paper, which primarily accounted for the $381.0 million cash outflow during the year, as well as
fund business acquisitions. In the 2012 period, we had negligible reductions in long-term debt, but increased borrowings
of $607.5 million from commercial paper issuances for the purpose of funding acquisitions.
Treasury purchases: In November 2012, Dover's Board of Directors approved a $1.0 billion stock repurchase program
to drive additional shareholder value. During 2014, the Company completed this program through the repurchase of
3.6 million shares at a total cost of $292.6 million. We used $457.3 million in 2013 to repurchase 6.0 million shares
and $250.1 million in 2012 to repurchase 4.0 million shares under this facility. We repurchased an additional 3.9 million
shares in 2014 for a total cost of $308.5 million and 8.3 million shares for $493.0 million in 2012 under previous
repurchase programs authorized by the board of directors. In January 2015, Dover's board of directors approved a new
standing share repurchase authorization, whereby the Company may repurchase up to 15 million shares of its common
stock over the following three years. These share repurchases are opportunistic buybacks made as part of management's
capital allocation strategy. These repurchases are also made to offset the dilutive impact of shares issued under our
equity compensation plans.
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• Dividend payments: Total dividend payments to common shareholders were $258.5 million in 2014, $247.8 million
in 2013 and $241.0 million in 2012. Our dividends paid per common share increased 7% to $1.55 per share in 2014
compared to $1.45 per share in 2013. This represents the 59th consecutive year that our dividend has increased.
• Proceeds from the exercise of share-based awards: We had a net cash outflow of $0.8 million in 2014 from the exercise
of share-based awards, as compared to a net cash inflow of $7.6 million in 2013 and $43.1 million in 2012. These
proceeds have declined in recent periods as the number of stock options are diminishing and a larger number of cashless
exercises of equity awards have occurred.
Cash Flows from Discontinued Operations
In 2014, the businesses reported as discontinued operations generated net cash flow of $6.0 million. These cash flows reflect
the operating results of Datamax O'Neil and Sargent Aerospace as well as Knowles prior to its spin-off in the first quarter and
DEK prior to its sale in the third quarter. Cash flow generated for this period primarily reflects cash generated from operations
of approximately $53.8 million, offset by costs incurred for the spin-off of Knowles of $27.1 million and capital expenditures
of $20.6 million.
2013 and 2012 cash flows of $65.8 million and $171.1 million, respectively, include full year results for those business classified
as discontinued operations, which include Knowles, DEK, ECT, Datamax O'Neil, and Sargent Aerospace. Higher investments
in working capital of $115.4 million in 2013 relative to 2012, as well as costs of $30.1 million incurred in 2013 in connection
with the spin-off of Knowles contributed to the decline in operating cash flows from discontinued operations in 2013, offset by
higher earnings and lower capital expenditures for the period.
Liquidity and Capital Resources
Free Cash Flow
In addition to measuring our cash flow generation and usage based upon the operating, investing, and financing classifications
included in the Consolidated Statements of Cash Flows, we also measure free cash flow (a non-GAAP measure). We believe
that free cash flow is an important measure of operating performance because it provides management and investors a
measurement of cash generated from operations that is available to repay debt, pay dividends, fund acquisitions, and repurchase
our common stock. For further information, see the Non-GAAP Disclosures at the end of this Item 7.
The following table reconciles our free cash flow to cash flow provided by operating activities:
Free Cash Flow (dollars in thousands)
Cash flow provided by operating activities
Less: Capital expenditures
Free cash flow
Free cash flow as a percentage of revenue
$
$
Years Ended December 31,
2013
979,612
(141,694)
837,918
2014
950,164
(166,033)
784,131
$
$
$
$
2012
968,369
(146,502)
821,867
10.1%
11.7%
12.4%
For 2014, we generated free cash flow of $784.1 million, representing 10.1% of revenue and 100.8% of earnings from continuing
operations. Free cash flow in 2013 was $837.9 million or 11.7% of revenue, compared to $821.9 million, or 12.4% of revenue
in 2012. The full year decrease in 2014 free cash flow reflects a higher investment in working capital and higher capital
expenditures, partially offset by higher earnings from continuing operations before depreciation and amortization. We expect
to generate free cash flow in 2015 of approximately 11.0% of revenue.
The 2013 increase in free cash flow compared to 2012 reflects higher earnings from continuing operations and lower capital
expenditures, partially offset by higher investments in working capital and higher tax payments in 2013.
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Net Debt to Net Capitalization
We utilize the net debt to net capitalization calculation (a non-GAAP measure) to assess our overall financial leverage and
capacity and believe the calculation is useful to investors for the same reason. The following table provides a reconciliation of
net debt to net capitalization to the most directly comparable GAAP measures:
Net Debt to Net Capitalization Ratio
(dollars in thousands)
Current maturities of long-term debt
Commercial paper
Long-term debt
Total debt
Less: Cash and cash equivalents
Net debt
Add: Stockholders' equity
Net capitalization
Net debt to net capitalization
December 31, 2014 December 31, 2013 December 31, 2012
$
$
$
299,956
478,000
2,253,041
3,030,997
(681,581)
2,349,416
3,700,725
6,050,141
2,778
226,500
2,599,201
2,828,479
(803,882)
2,024,597
5,377,396
7,401,993
3,266
607,500
2,189,350
2,800,116
(800,076)
2,000,040
4,919,230
6,919,270
$
$
$
38.8%
27.4%
28.9%
Our net debt to net capitalization ratio increased to 38.8% at December 31, 2014 compared to 27.4% at December 31, 2013.
The increase in this ratio was driven primarily by the reduction in our net capitalization of $1.3 billion for the period primarily
due to the $1.4 billion distribution of Knowles, $601.1 million in share repurchases, and $258.5 million of dividends, offset by
$775.2 million of current earnings. As described above, we also received a cash payment of $360.0 million from Knowles, net
of cash distributed, upon separation on February 28, 2014, which was used to fund share repurchases and reduce commercial
paper balances. Net debt increased $324.8 million during the period primarily due to increases in commercial paper balances
and a reduction in cash levels to fund acquisitions, dividend payments, and other general operating purposes.
Our net debt to net capitalization ratio decreased slightly at December 31, 2013 compared to the prior year-end due to the
significant increase in equity levels driven by current net earnings, offset in part by $28.4 million of additional net borrowings.
We replaced commercial paper borrowings in 2013 with the issuance of €300.0 million of 2.125% euro-denominated notes due
2020, from which we received proceeds of approximately $403.8 million.
We use commercial paper borrowings for general corporate purposes, including the funding of acquisitions and the repurchase
of our common stock. We currently maintain an unsecured revolving credit facility with a syndicate of banks which permits
borrowings up to $1.0 billion and expires on November 10, 2016. This facility is used primarily as liquidity back-up for our
commercial paper program. We have not drawn down any loans under this facility nor do we anticipate doing so. If we were to
draw down a loan, at our election, the loan would bear interest at a Eurodollar or Sterling rate based on LIBOR, plus an applicable
margin ranging from 0.565% to 1.225% (subject to adjustment based on the rating accorded our senior unsecured debt by S&P
and Moody’s) or at a base rate pursuant to a formula defined in the facility. Under this facility, we are required to maintain an
interest coverage ratio of EBITDA to consolidated net interest expense of not less than 3.0 to 1. We were in compliance with
this covenant and our other long-term debt covenants at December 31, 2014 and had a coverage ratio of 12.7 to 1.0. We are not
aware of any potential impairment to our liquidity and expect to remain in compliance with all of our debt covenants.
We also have a current shelf registration statement filed with the SEC that allows for the issuance of additional debt securities
that may be utilized in one or more offerings on terms to be determined at the time of the offering. Net proceeds of any offering
would be used for general corporate purposes, including repayment of existing indebtedness, capital expenditures, and
acquisitions.
At December 31, 2014, our cash and cash equivalents totaled $681.6 million, of which approximately $509.8 million was held
outside the United States. Cash and equivalents are invested in highly liquid investment-grade money market instruments and
bank deposits with maturities of three months or less. We regularly invest cash in excess of near-term requirements in money
market instruments or short-term investments, which consist of investment grade time deposits with original maturity dates at
the time of purchase of no greater than three months.
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In 2014, we made a one-time cash dividend of approximately $235.0 million as a result of certain restructuring arising from the
spin-off of Knowles. The U.S. tax consequences of this intercompany dividend, which were not significant, have been included
in our total income tax expense. Since the remaining cash our foreign subsidiaries hold is generally used to finance foreign
operations and investments, including acquisitions, it is our intent to indefinitely reinvest those funds outside the U.S. It is not
practicable to estimate the amount of tax payable if some or all of such funds were to be repatriated and the amount of foreign
tax credits available to reduce or eliminate the resulting U.S. income tax liability. Management believes it has sufficient liquidity
to satisfy its cash needs, including its cash needs in the United States.
Our ability to obtain debt financing at comparable risk-based interest rates is partly a function of our existing cash-flow-to-debt
and debt-to-capitalization levels as well as our current credit standing. Our credit ratings, which are independently developed
by the respective rating agencies, were as follows as of December 31, 2014:
Moody's
Standard & Poor's
Fitch
Short Term
Rating
P-1
A-1
F1
Long Term
Rating
A2
A
A
Outlook
Stable
Stable
Stable
Short-term ratings of "P-1," "A-1" and "F1" are defined as a strong or superior ability to repay short-term debt obligations. A
long-term rating of "A" or "A2" is defined as a strong capacity to meet financial commitments, but susceptible to adverse business
or economic conditions.
We believe that existing sources of liquidity are adequate to meet anticipated funding needs at comparable risk-based interest
rates for the foreseeable future. Acquisition spending and/or share repurchases could potentially increase our debt. Operating
cash flow and access to capital markets are expected to satisfy our various cash flow requirements, including acquisitions and
capital expenditures.
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2014, we had approximately $135.5 million outstanding in letters of credit with financial institutions, which
expire at various dates in 2015 through 2020. These letters of credit are primarily maintained as security for insurance, warranty
and other performance obligations. In general, we would only be liable for the amount of these guarantees in the event of default
in the performance of our obligations, the probability of which we believe is remote.
We have also provided typical indemnities in connection with sales of certain businesses and assets, including representations
and warranties and related indemnities for environmental, health and safety, tax, and employment matters. We do not have any
material liabilities recorded for these indemnifications and are not aware of any claims or other information that would give rise
to material payments under such indemnities.
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A summary of our consolidated contractual obligations and commitments as of December 31, 2014 and the years when these
obligations are expected to be due is as follows:
(in thousands)
Long-term debt (1)
Interest payments (2)
Rental commitments
Purchase obligations
Capital leases
Supplemental & post-retirement benefits (3)
Uncertain tax positions (4)
Total obligations
Total
$2,552,997
1,658,098
272,935
74,914
7,202
135,510
95,980
$4,797,636
_________
Payments Due by Period
Less than
1 Year
$ 299,956
125,534
63,979
73,599
3,801
24,928
1,105
$ 592,902
1-3 Years
231
$
221,818
93,840
1,121
2,746
17,272
—
$ 337,028
3-5 Years
$ 348,958
193,206
57,580
194
308
22,094
—
$ 622,340
More
than 5
Years
$1,903,852
1,117,540
57,536
—
347
71,216
—
$3,150,491
Other
(5)
$
—
—
—
—
—
—
94,875
$ 94,875
(1) See Note 10 to the Consolidated Financial Statements. Amounts represent principal payments for all long-term debt,
including current maturities.
(2) Amounts represent estimate of future interest payments on long-term debt using the interest rates in effect at December
31, 2014.
(3) Amounts represent estimated benefit payments under our unfunded supplemental and post-retirement benefit plans and
our unfunded non-U.S. qualified defined benefit plans. See Note 15 to the Consolidated Financial Statements. We also
expect to contribute approximately $6.5 million to our non-U.S. qualified defined benefit plans in 2015, which amount is
not reflected in the above table.
(4) Due to the uncertainty of the potential settlement of future uncertain tax positions, we are unable to estimate the timing
of the related payments, if any, that will be made subsequent to 2014. These amounts do not include the potential indirect
benefits resulting from deductions or credits for payments made to other jurisdictions.
Financial Instruments and Risk Management
The diverse nature of our businesses’ activities necessitates the management of various financial and market risks, including
those related to changes in interest rates, foreign currency exchange rates, and commodity prices. We periodically use derivative
financial instruments to manage some of these risks. We do not hold or issue derivative instruments for trading or speculative
purposes. We are exposed to credit loss in the event of nonperformance by counterparties to our financial instrument contracts;
however, nonperformance by these counterparties is considered unlikely as our policy is to contract with highly-rated, diversified
counterparties.
Interest Rate Exposure
We may, from time to time, enter into interest rate swap agreements to manage our exposure to interest rate changes. As of
December 31, 2014, we did not have any open interest rate swap contracts. We issue commercial paper, which exposes us to
changes in variable interest rates; however, maturities are typically three months or less so a change in rates over this period
would have an immaterial impact on our pre-tax earnings.
We consider our current risk related to market fluctuations in interest rates to be minimal since our debt is largely long-term and
fixed-rate in nature. Generally, the fair market value of fixed-interest rate debt will increase as interest rates fall and decrease
as interest rates rise. A 100 basis point increase in market interest rates would decrease the 2014 year-end fair value of our long-
term debt by approximately $242.1 million. However, since we have no plans to repurchase our outstanding fixed-rate instruments
before their maturities, the impact of market interest rate fluctuations on our long-term debt does not affect our results of operations
or financial position.
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Foreign Currency Exposure
We conduct business in various non-U.S. countries, primarily in Canada, Mexico, substantially all of the European countries,
Brazil, Argentina, Malaysia, China, India, and other Asian countries. Therefore, we have foreign currency risk relating to receipts
from customers, payments to suppliers, and intercompany transactions denominated in foreign currencies. We will occasionally
use derivative financial instruments to offset such risks, when it is believed that the exposure will not be limited by our normal
operating and financing activities. We have formal policies to mitigate risk in this area by using fair value and/or cash flow
hedging programs.
Changes in the value of the currencies of the countries in which we operate affect our results of operations, financial position,
and cash flows when translated into U.S. dollars, our reporting currency. The strengthening of the U.S. dollar could result in
unfavorable translation effects as the results of foreign operations are translated into U.S. dollars. We have generally accepted
the exposure to exchange rate movements relative to our investment in non-U.S. operations. We may, from time to time, for a
specific exposure, enter into fair value hedges, and at December 31, 2014, we had one outstanding floating-to-floating cross
currency swap agreement for a total notional amount of $50.0 million in exchange for CHF 65.1 million, which matures on
October 15, 2015. This transaction hedges a portion of our net investment in non-U.S. operations. The agreement qualifies as
a net investment hedge and changes in the fair value are reported within the cumulative translation adjustment section of other
comprehensive earnings, with any hedge ineffectiveness being recognized in current earnings. The fair values at December 31,
2014 and 2013 reflected cumulative losses of $15.6 million and $23.7 million, respectively, due to the strengthening of the Swiss
franc relative to the U.S. dollar over the term of this arrangement. Due to the movement in currency rates subsequent to December
31, 2014, the loss on this net investment hedge has increased to approximately $21.0 million.
Additionally, the Company has designated the €300.0 million of euro-denominated notes issued December 4, 2013 as a hedge
of a portion of the its net investment in euro-denominated operations. Due to the high degree of effectiveness between the
hedging instruments and the exposure being hedged, fluctuations in the value of the euro-denominated debt due to exchange
rate changes are offset by changes in the net investment. Accordingly, changes in the value of the euro-denominated debt are
recognized in the cumulative translation adjustment section of other comprehensive income to offset changes in the value of the
net investment in euro-denominated operations. Due to the devaluation of the euro relative to the U.S. dollar in the latter half
of 2014, the U.S. dollar equivalent of this debt decreased, resulting in the recognition of a gain in other comprehensive income
of $47.6 million for the year ended December 31, 2014. In contrast, the Company recognized a loss of $6.1 million for the year
ended December 31, 2013 due to the appreciation of the euro relative to the U.S. dollar at that time.
Commodity Price Exposure
Certain of our businesses are exposed to volatility in the prices of certain commodities, such as aluminum, steel, copper, and
various precious metals, among others. Our primary exposure to commodity pricing volatility relates to the use of these materials
in purchased component parts or the purchase of raw materials. When possible, we maintain long-term fixed price contracts on
raw materials and component parts; however, we are prone to exposure as these contracts expire. We may, from time to time,
for a specific exposure, enter into cash flow hedges to mitigate our risk to commodity pricing; however, such contracts outstanding
at December 31, 2014 were not significant.
Critical Accounting Policies
Our consolidated financial statements and related public financial information are based on the application of generally accepted
accounting principles in the United States of America ("GAAP"). GAAP requires the use of estimates, assumptions, judgments,
and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts
we report. These estimates can also affect supplemental information contained in our public disclosures, including information
regarding contingencies, risk, and our financial condition. The significant accounting policies used in the preparation of our
consolidated financial statements are discussed in Note 1 Description of Business and Summary of Significant Accounting
Policies. The accounting assumptions and estimates discussed in the section below are those that we consider most critical to
an understanding of our financial statements because they inherently involve significant judgments and estimates. We believe
our use of estimates and underlying accounting assumptions conforms to GAAP and is consistently applied. We review valuations
based on estimates for reasonableness on a consistent basis.
• Revenue is recognized when all of the following circumstances are satisfied: a) persuasive evidence of an arrangement
exists, b) price is fixed or determinable, c) collectability is reasonably assured, and d) delivery has occurred or services
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have been rendered. The majority of our revenue is generated through the manufacture and sale of a broad range of
specialized products and components, with revenue recognized upon transfer of title and risk of loss, which is generally
upon shipment. Service revenue represents less than 5% of our total revenue and is recognized as the services are
performed. In limited cases, our revenue arrangements with customers require delivery, installation, testing, certification,
or other acceptance provisions to be satisfied before revenue is recognized. We do not have significant multiple
deliverable arrangements.
•
Inventories for the majority of our subsidiaries, including all international subsidiaries, are stated at the lower of cost,
determined on the first-in, first-out (FIFO) basis, or market. Other domestic inventories are stated at cost, determined
on the last-in, first-out (LIFO) basis, which is less than market value. Under certain market conditions, estimates and
judgments regarding the valuation of inventories are employed by us to properly value inventories. Certain businesses
tend to experience somewhat higher levels of inventory value fluctuations, particularly given the relatively high rate
of product obsolescence over relatively short periods of time.
• We have significant tangible and intangible assets on our balance sheet that include goodwill and other intangibles
related to acquisitions. The valuation and classification of these assets and the assignment of useful depreciation and
amortization lives involve significant judgments and the use of estimates. The testing of these intangibles under
established accounting guidelines for impairment also requires significant use of judgment and assumptions, particularly
as it relates to the identification of reporting units and the determination of fair market value. Our assets and reporting
units are tested and reviewed for impairment on an annual basis during the fourth quarter or, when indicators of
impairment exist, such as a significant sustained change in the business climate, or when a significant portion of a
reporting unit is to be reclassified to discontinued operations, during the interim periods. We estimate fair value using
discounted cash flow analyses (i.e. an income approach) which incorporate management assumptions relating to future
growth and profitability. Changes in business or market conditions could impact the future cash flows used in such
analyses. We believe that our use of estimates and assumptions are reasonable and comply with generally accepted
accounting principles. We performed the annual impairment testing of our 16 identified reporting units in the fourth
quarter of 2014, and the fair value of all reporting units exceeded the carrying value by at least 60% and, in most cases,
significantly more. If the fair value of each of these reporting units was decreased by 10%, the resulting fair value
would still have exceeded the carrying value and no impairment would have been recognized. Additionally, we have
considered the economic environments in which our businesses operate, particularly our Energy segment, as the recent
decline in oil and gas prices have impacted our 2015 projected results. Throughout 2015, we will continue to reassess
the Energy markets and related impact on projected results in order to determine whether a triggering event occurs, at
which point goodwill testing will be performed.
• The valuation of our pension and other post-retirement plans requires the use of assumptions and estimates that are
used to develop actuarial valuations of expenses and assets/liabilities. Inherent in these valuations are key assumptions,
including discount rates, investment returns, projected salary increases and benefits, and mortality rates. Annually, we
review the actuarial assumptions used in our pension reporting and compare them with external benchmarks to ensure
that they accurately account for our future pension obligations. Changes in assumptions and future investment returns
could potentially have a material impact on our pension expense and related funding requirements. Our expected long-
term rate of return on plan assets is reviewed annually based on actual returns, economic trends and portfolio allocation.
Our discount rate assumption is determined by developing a yield curve based on high quality corporate bonds with
maturities matching the plans’ expected benefit payment streams. The plans’ expected cash flows are then discounted
by the resulting year-by-year spot rates. As disclosed in Note 15 Employee Benefit Plans to the Consolidated Financial
Statements, the 2014 weighted-average discount rates used to measure our qualified defined benefit, supplemental, and
other post-retirement obligations ranged from 2.31% to 4.05%, a decrease from the 2013 rates, which ranged from
3.53% to 4.90%. The lower 2014 discount rates are reflective of the decrease in global market interest rates over these
periods. A 25 basis point decrease in the discount rates used for these plans would have increased the post retirement
benefit obligations by approximately $40.5 million from the amount recorded in the financial statements at December
31, 2014. Our pension expense is also sensitive to changes in the expected long-term rate of return on plan assets. A
decrease of 25 basis points in the expected long-term rate of return on assets would have increased our defined benefit
pension expense by approximately $1.8 million.
• We have significant amounts of deferred tax assets that are reviewed for recoverability and valued accordingly. These
assets are evaluated by using estimates of future taxable income streams and the impact of tax planning strategies.
Reserves are also estimated, using more likely than not criteria, for ongoing audits regarding federal, state, and
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international issues that are currently unresolved. We routinely monitor the potential impact of these situations and
believe that we have established the proper reserves. Reserves related to tax accruals and valuations related to deferred
tax assets can be impacted by changes in tax codes and rulings, changes in statutory tax rates, and our future taxable
income levels. The provision for uncertain tax positions provides a recognition threshold and measurement attribute
for financial statement tax benefits taken or expected to be taken in a tax return and disclosure requirements regarding
uncertainties in income tax positions. The tax position is measured at the largest amount of benefit that is greater than
50 percent likely of being realized upon ultimate settlement. We record interest and penalties related to unrecognized
tax benefits as a component of our provision for income taxes.
• We have significant accruals and reserves related to the self-insured portion of our risk management program. These
accruals require the use of estimates and judgment with regard to risk exposure and ultimate liability. We estimate
losses under these programs using actuarial assumptions, our experience, and relevant industry data. We review these
factors quarterly and consider the current level of accruals and reserves adequate relative to current market conditions
and experience.
• We have established liabilities for environmental and legal contingencies at both the business and corporate levels. A
significant amount of judgment and the use of estimates are required to quantify our ultimate exposure in these matters.
The valuation of liabilities for these contingencies is reviewed on a quarterly basis to ensure that we have accrued the
proper level of expense. The liability balances are adjusted to account for changes in circumstances for ongoing issues
and the establishment of additional liabilities for emerging issues. While we believe that the amount accrued to-date
is adequate, future changes in circumstances could impact these determinations.
• Occasionally, we will establish liabilities for restructuring activities at an operation, in accordance with appropriate
accounting principles. These liabilities, for both severance and exit costs, require the use of estimates. Though we
believe that these estimates accurately reflect the anticipated costs, actual results may be different than the estimated
amounts.
• We will from time to time discontinue certain operations for various reasons. Estimates are used to adjust, if necessary,
the assets and liabilities of discontinued operations, including goodwill, to their estimated fair market value. These
estimates include assumptions relating to the proceeds anticipated as a result of the sale. Fair value is established using
internal valuation calculations along with market analysis of similar-type entities. The adjustments to fair market value
of these operations provide the basis for the gain or loss when sold. Changes in business conditions or the inability to
sell an operation could potentially require future adjustments to these estimates. We recognized total goodwill
impairment charges of $63.8 million in 2013 and $63.8 million 2012 for certain reporting units included in discontinued
operations based on the reduction in fair value implied in the anticipated selling price. No impairment charges were
recorded in 2014. We will continue to evaluate impairment each reporting period for the remaining business held for
sale at December 31, 2014.
• We are required to recognize in our consolidated statements of earnings the expense associated with all share-based
payment awards made to employees and directors, including stock options, stock appreciation rights (SARs), restricted
stock, and performance share awards. We use the Black-Scholes valuation model to estimate the fair value of SARs
and stock options granted to employees. The model requires that we estimate the expected life of the SAR or option,
expected forfeitures and the volatility of our stock using historical data. We use the Monte Carlo simulation model to
estimate fair value of performance share awards which also require us to estimate the volatility of our stock and the
volatility of returns on the stock of our peer group as well as the correlation of the returns between the companies in
the peer group. For additional information related to the assumptions used, see Note 13 Equity and Cash Incentive
Program to the Consolidated Financial Statements in Item 8 of this Form 10-K.
Recent Accounting Standards
In June 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-12 which
requires that a performance target for share-based payments that affects vesting and that could be achieved after the requisite
service period be treated as a performance condition. Under this new standard, compensation cost should be recognized in the
period in which it becomes probable that the performance target will be achieved and should represent the compensation cost
attributable to the periods for which the requisite service has already been rendered. This update is effective for annual periods
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beginning after December 15, 2015. The Company has evaluated this guidance and determined that the adoption will not
significantly impact the consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09 that introduces a new five-step revenue recognition model in which an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures
sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from
contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments
and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal
years beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently
evaluating the new guidance to determine the impact it will have on its consolidated financial statements.
In April 2014, the FASB issued ASU 2014-08, which includes amendments that change the requirements for reporting
discontinued operations and require additional disclosures about discontinued operations. Under the new guidance, only disposals
representing a strategic shift in operations - that is, a major effect on the organization's operations and financial results - should
be presented as discontinued operations. Additionally, the ASU requires expanded disclosures about discontinued operations
that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued
operations. This update is effective for Dover in the first quarter of 2015. The Company has evaluated this guidance and determined
that the adoption will not significantly impact the consolidated financial statements.
In July 2013, the FASB issued ASU 2013-11, which provides that an unrecognized tax benefit, or a portion thereof, should be
presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax
loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit
carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of
a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for
such purpose, then the unrecognized tax benefit should be presented as a liability. This standard was effective for Dover for
fiscal years beginning after December 15, 2013. The Company adopted this guidance effective January 1, 2014. The adoption
of this ASU did not significantly impact the consolidated financial statements.
In March 2013, the FASB issued ASU 2013-05, which permits an entity to release cumulative translation adjustments into net
income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is
a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only
if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary
or group of assets had resided, or, if a controlling financial interest is no longer held. The revised standard was effective for
Dover for fiscal years beginning after December 15, 2013. The Company adopted this guidance effective January 1, 2014. The
adoption of this ASU did not significantly impact the consolidated financial statements.
In February 2013, the FASB issued ASU 2013-02 which requires additional disclosures regarding the reporting of reclassifications
out of accumulated other comprehensive income. ASU 2013-02 requires an entity to present, either on the face of the statement
where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income
by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to
net income in its entirety in the same reporting period. This guidance was effective for reporting periods beginning after December
15, 2012. The Company adopted this guidance effective January 1, 2013. The Company's adoption of this standard did not have
a significant impact on its consolidated financial statements.
In July 2012, the FASB issued ASU 2012-02, which allows an entity to first assess qualitative factors to determine whether it
is necessary to perform a quantitative impairment test of an indefinite-lived intangible asset. Per the terms of this ASU, an entity
would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on
qualitative assessment, that it is not more likely than not, the indefinite-lived intangible asset is impaired. The revised standard
was effective for Dover for its annual and interim impairment tests performed for fiscal years beginning after September 15,
2012. Its adoption did not have a material impact on the Company’s consolidated financial statements.
Non-GAAP Disclosures
In an effort to provide investors with additional information regarding our results as determined by generally accepted accounting
principles (GAAP), we also disclose non-GAAP information which we believe provides useful information to investors. Segment
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EBITDA, segment EBITDA margin, free cash flow, net debt, total debt, net capitalization, the net debt to net capitalization ratio,
adjusted working capital, earnings adjusted for non-recurring items, effective tax rate adjusted for discrete and other items,
revenue excluding the impact of changes in foreign currency exchange rates, and organic revenue growth are not financial
measures under GAAP and should not be considered as a substitute for cash flows from operating activities, debt or equity,
earnings, revenue, or working capital as determined in accordance with GAAP, and they may not be comparable to similarly
titled measures reported by other companies. We believe that segment EBITDA and segment EBITDA margin are useful to
investors and other users of our financial information in evaluating ongoing operating profitability as they exclude the depreciation
and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in
evaluating operating performance in relation to our competitors. Segment EBITDA is calculated by adding back depreciation
and amortization expense to segment earnings. Segment margin is calculated as segment EBITDA divided by segment revenue.
We believe the net debt to net capitalization ratio and free cash flow are important measures of operating performance and
liquidity. Net debt to net capitalization is helpful in evaluating our capital structure and the amount of leverage we employ. Free
cash flow provides both management and investors a measurement of cash generated from operations that is available to fund
acquisitions, pay dividends, repay debt, and repurchase our common stock. Reconciliations of free cash flow, total debt, and
net debt can be found above in this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of
Operation. We believe that reporting our effective tax rate adjusted for discrete and other items is useful to management and
investors as it facilitates comparisons of our ongoing tax rate to prior and future periods and our peers. We believe that reporting
adjusted working capital (also sometimes called "working capital"), which is calculated as accounts receivable, plus inventory,
less accounts payable, provides a meaningful measure of our operational results by showing the changes caused solely by revenue.
We believe that reporting adjusted working capital and revenues at constant currency, which excludes the positive or negative
impact of fluctuations in foreign currency exchange rates, provides a meaningful measure of our operational changes, given the
global nature of our businesses. We believe that reporting organic revenue and organic revenue growth, which exclude the impact
of foreign currency exchange rates and the impact of acquisitions and divestitures, provides a useful comparison of our revenue
performance and trends between periods.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this section is incorporated by reference to the section, Financial Instruments and Risk Management,
included within the MD&A in Item 7.
48
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ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
50 Management's Report on Internal Control Over Financial Reporting
51
52
53
54
55
56
57
97
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Earnings
Consolidated Balance Sheets
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Financial Statement Schedule - Schedule II, Valuation and Qualifying Accounts
(All other schedules are not required and have been omitted)
49
Table of Contents
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f).
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2014. In making this assessment, the Company’s management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).
Based on its assessment under the criteria set forth in Internal Control — Integrated Framework (2013), management concluded
that, as of December 31, 2014, the Company’s internal control over financial reporting was effective to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with U.S. GAAP.
In making its assessment of internal control over financial reporting as of December 31, 2014, management has excluded all
companies acquired in purchase business combinations during 2014. The Company is currently assessing the control
environments of these acquisitions. The following companies were acquired in purchase business combinations during 2014:
Heidelberg CSAT GmbH, MS Printing Solutions, Timberline Manufacturing Company, WellMark Holdings, Inc., Liquip
International, and Accelerated Companies, LLC. These companies are wholly-owned by the Company and their revenue for the
year ended December 31, 2014 represents approximately 2.6% of the Company’s consolidated total revenue for the same period
and their excluded assets represent approximately 3.0% of the Company’s consolidated assets as of December 31, 2014.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
50
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Dover Corporation:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects,
the financial position of Dover Corporation and its subsidiaries at December 31, 2014 and 2013, and the results of their operations
and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated
Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's
management is responsible for these financial statements and financial statement schedule, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included
in Management's Report on Internal Control Over Financial Reporting, appearing under Item 8. Our responsibility is to express
opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial
reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded from its
assessment of internal control over financial reporting as of December 31, 2014 those companies acquired by the Company in
purchase business combinations during 2014. We have also excluded certain companies from our audit of internal control over
financial reporting. Those companies are wholly-owned by the Company and their total assets and total revenues, comprised
of Heidelberg CSAT GmbH, MS Printing Solutions, Timberline Manufacturing Company, Wellmark Holdings, Inc., Liquip
International, and Accelerated Companies LLC, represent 3.0% and 2.6%, respectively, of the related financial statement amounts
as of and for the year ended December 31, 2014.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 13, 2015
51
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DOVER CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share figures)
Revenue
Cost of goods and services
Gross profit
Selling and administrative expenses
Operating earnings
Interest expense, net
Other (income) expense, net
Earnings before provision for income taxes and discontinued operations
Provision for income taxes
Earnings from continuing operations
(Loss) earnings from discontinued operations, net
Net earnings
Earnings per share from continuing operations:
Basic
Diluted
(Loss) earnings per share from discontinued operations:
Basic
Diluted
Net earnings per share:
Basic
Diluted
Dividends paid per common share
Years Ended December 31,
2014
$ 7,752,728
4,778,479
2,974,249
1,758,765
1,215,484
127,179
(5,902)
1,094,207
316,067
778,140
(2,905)
775,235
$
2013
$ 7,155,096
4,376,505
2,778,591
1,616,921
1,161,670
120,654
(4,970)
1,045,986
248,459
797,527
205,602
$ 1,003,129
2012
$ 6,626,648
4,046,659
2,579,989
1,520,961
1,059,028
121,269
6,694
931,065
280,990
650,075
160,995
811,070
$
$
$
$
$
$
$
$
4.67
4.61
$
$
(0.02) $
(0.02) $
4.65
4.59
1.55
$
$
$
4.66
4.60
1.20
1.18
5.86
5.78
1.45
$
$
$
$
$
$
$
3.58
3.53
0.89
0.88
4.47
4.41
1.33
See Notes to Consolidated Financial Statements
52
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DOVER CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In thousands)
Years Ended December 31,
2013
2012
2014
Net earnings
$
775,235
$ 1,003,129
$
811,070
Other comprehensive (loss) earnings, net of tax
Foreign currency translation adjustments:
Foreign currency translation (losses) gains during period
Reclassification of foreign currency translation gains to earnings
Total foreign currency translation
(144,643)
(6,300)
(150,943)
34,617
(29,881)
4,736
38,880
—
38,880
Pension and other postretirement benefit plans:
Actuarial (losses) gains arising during period
Prior service cost arising during period
Amortization of actuarial losses included in net periodic pension cost
Amortization of prior service costs included in net periodic pension cost
Total pension and other postretirement benefit plans
(60,766)
(354)
5,792
5,617
(49,711)
101,478
(1,246)
12,542
5,733
118,507
(56,159)
(4,685)
8,530
5,304
(47,010)
Changes in fair value of cash flow hedges:
Unrealized net (losses) gains arising during period
Net gains reclassified into earnings
Total cash flow hedges
Other
(137)
(107)
(244)
35
(84)
(49)
939
(565)
482
(357)
125
609
Other comprehensive (loss) earnings
(199,959)
122,629
(7,396)
Comprehensive earnings
$
575,276
$ 1,125,758
$
803,674
See Notes to Consolidated Financial Statements.
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DOVER CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31, 2014 December 31, 2013
Current assets:
Cash and cash equivalents
Receivables, net of allowances of $18,894 and $17,203
Inventories, net
Prepaid and other current assets
Deferred tax assets
Total current assets
Property, plant and equipment, net
Goodwill
Intangible assets, net
Other assets and deferred charges
Assets of discontinued operations
Total assets
Current liabilities:
Notes payable and current maturities of long-term debt
Accounts payable
Accrued compensation and employee benefits
Accrued insurance
Other accrued expenses
Federal and other taxes on income
Total current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Liabilities of discontinued operations
Stockholders' equity:
Preferred stock - $100 par value; 100,000 shares authorized; none issued
Common stock - $1 par value; 500,000,000 shares authorized;
255,892,502 and 255,320,345 shares issued at December 31, 2014 and
December 31, 2013, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss) earnings
Common stock in treasury
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$
$
$
$
$
681,581
1,186,746
863,737
101,482
63,276
2,896,822
837,069
3,491,557
1,369,520
168,246
327,171
9,090,385
777,956
615,332
272,822
95,896
266,277
11,071
2,039,354
2,253,041
564,207
482,340
50,718
803,882
1,076,641
715,311
62,037
60,101
2,717,972
787,849
3,108,580
1,258,911
202,806
2,779,063
10,855,181
229,278
522,713
267,579
92,600
219,609
10,469
1,342,248
2,599,201
491,851
508,864
535,621
—
—
255,893
900,833
7,074,782
(158,931)
(4,371,852)
3,700,725
9,090,385
$
255,320
871,575
7,954,536
67,723
(3,771,758)
5,377,396
10,855,181
See Notes to Consolidated Financial Statements
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DOVER CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
Balance at December 31, 2011
Net earnings
Dividends paid
Common stock issued for acquisition
Common stock issued for the exercise
of share-based awards
Tax benefit from the exercise of share-
based awards
Stock-based compensation expense
Common stock issued, other
Common stock acquired
Other comprehensive loss, net of tax
Balance at December 31, 2012
Net earnings
Dividends paid
Common stock issued for the exercise
of share-based awards
Tax benefit from the exercise of share-
based awards
Stock-based compensation expense
Common stock issued, other
Common stock acquired
Other comprehensive earnings, net of
tax
Balance at December 31, 2013
Net earnings
Dividends paid
Separation of Knowles
Common stock issued for the exercise
of share-based awards
Tax benefit from the exercise of share-
based awards
Stock-based compensation expense
Common stock issued, other
Common stock acquired
Common
Stock $1
Par Value
250,592
$
Additional
Paid-In
Capital
$
663,289
Retained
Earnings
$ 6,629,116
—
—
1,636
—
—
98,974
811,070
(240,959)
—
1,871
17,210
—
—
—
20
—
—
254,119
—
—
$
22,771
31,251
1,182
—
—
834,677
—
—
—
—
—
$ 7,199,227
$
— 1,003,129
(247,820)
—
1,194
(19,888)
—
—
7
—
25,661
30,480
645
—
—
—
—
—
—
—
255,320
—
871,575
—
$ 7,954,536
$
$
$
—
—
—
775,235
—
—
(258,487)
— (1,396,502)
565
(17,136)
—
—
8
—
15,110
31,628
639
(983)
—
—
—
—
—
Common
Stock in
Treasury
Total
Stockholders'
Equity
Accumulated
Other
Comprehensive
Earnings (Loss)
$
(47,510) $ (2,564,932) $
—
—
—
—
—
—
—
—
(7,396)
—
—
—
—
—
—
—
(748,955)
—
$
(54,906) $ (3,313,887) $
—
—
—
—
—
—
—
122,629
67,723
—
—
(26,695)
—
—
—
—
—
—
—
—
—
—
—
(457,871)
—
$ (3,771,758) $
—
—
—
—
—
—
—
(600,094)
4,930,555
811,070
(240,959)
100,610
19,081
22,771
31,251
1,202
(748,955)
(7,396)
4,919,230
1,003,129
(247,820)
(18,694)
25,661
30,480
652
(457,871)
122,629
5,377,396
775,235
(258,487)
(1,423,197)
(16,571)
15,110
31,628
647
(601,077)
(199,959)
3,700,725
Other comprehensive loss, net of tax
Balance at December 31, 2014
—
255,893
—
900,833
—
$ 7,074,782
$
$
$
(199,959)
(158,931) $ (4,371,852) $
—
See Notes to Consolidated Financial Statements
55
Table of Contents
DOVER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31,
2013
2012
2014
Operating Activities of Continuing Operations
Net earnings
Adjustments to reconcile net earnings to cash from operating activities:
Loss (earnings) from discontinued operations, net
Depreciation and amortization
Stock-based compensation
Provision for losses on accounts receivable (net of recoveries)
Deferred income taxes
Employee benefit plan expense
Contributions to employee benefit plans
Other, net
Cash effect of changes in assets and liabilities (excluding effects of acquisitions,
dispositions and foreign exchange):
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued compensation and employee benefits
Accrued expenses and other liabilities
Accrued taxes
Net cash provided by operating activities of continuing operations
Investing Activities of Continuing Operations
Additions to property, plant and equipment
Acquisitions (net of cash and cash equivalents acquired)
Proceeds from the sale of property, plant and equipment
Proceeds from the sale of businesses
Other
Net cash used in investing activities of continuing operations
Financing Activities of Continuing Operations
Cash received from Knowles Corporation, net of cash distributed
Proceeds from long-term debt, net of discount and issuance costs
Proceeds from exercise of share-based awards, including tax benefits
Change in notes payable, net
Reduction of long-term debt
Dividends to stockholders
Purchase of common stock
Payments for employee tax obligations upon exercise of share-based awards
Net cash used in financing activities of continuing operations
Cash Flows from Discontinued Operations
Net cash provided by operating activities of discontinued operations
Net cash used in investing activities of discontinued operations
Net cash provided by discontinued operations
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental information - cash paid during the year for:
Income taxes
Interest
$
775,235
$ 1,003,129
$
811,070
2,905
307,188
31,628
4,730
(33,866)
34,627
(24,232)
(21,813)
(87,207)
(63,717)
(18,527)
60,176
(17,731)
40,955
(40,187)
950,164
(166,033)
(802,254)
14,373
191,348
(19,991)
(782,557)
359,955
—
20,337
251,500
(6,566)
(258,487)
(601,077)
(21,151)
(255,489)
25,760
(19,753)
6,007
(40,426)
(122,301)
803,882
681,581
372,446
128,412
$
$
$
(205,602)
278,033
30,480
5,869
8,275
44,311
(40,258)
3,904
(87,806)
1,684
(8,452)
38,808
(17,817)
(7,353)
(67,593)
979,612
(141,694)
(322,838)
23,801
76,457
2,597
(361,677)
—
403,776
38,922
(381,000)
(3,246)
(247,820)
(457,871)
(31,303)
(678,542)
(160,995)
229,934
30,884
3,810
(3,450)
42,681
(47,584)
(14,834)
10,869
(16,295)
(1,776)
35,552
46,470
(22,571)
24,604
968,369
(146,502)
(1,080,433)
9,332
—
(7,727)
(1,225,330)
—
—
66,062
607,500
(3,582)
(240,959)
(748,955)
(23,008)
(342,942)
172,955
(107,191)
65,764
298,544
(127,446)
171,098
(1,351)
22,126
3,806
800,076
803,882
318,402
123,881
$
$
$
$
$
$
(406,679)
1,206,755
800,076
266,517
125,770
See Notes to Consolidated Financial Statements
56
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business - Dover Corporation (the "Company") is a diversified global manufacturer delivering innovative
equipment, components, and specialty systems. The Company also provides supporting engineering, testing, and other similar
services, which are not significant in relation to consolidated revenue. The Company’s businesses are based primarily in the
United States of America and Europe with manufacturing and other operations throughout the world. The Company operates
through four business segments that are aligned with the key end markets they serve: Energy, Engineered Systems, Fluids, and
Refrigeration & Food Equipment. For additional information on the Company’s segments, see Note 17 Segment Information.
Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The results of operations of
purchased businesses are included from the dates of acquisitions. As discussed in Note 4 Disposed and Discontinued Operations,
the Company is reporting certain businesses that are held for sale at December 31, 2014 as discontinued operations. The assets,
liabilities, results of operations, and cash flows of these businesses, as well as the results of Knowles Corporation prior to the
spin-off, have been separately reported as discontinued operations for all periods presented.
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the amounts reported in the Consolidated
Financial Statements and accompanying disclosures. These estimates may be adjusted due to changes in future economic,
industry, or customer financial conditions, as well as changes in technology or demand. Estimates are used in accounting for,
among other items, allowances for doubtful accounts receivable, net realizable value of inventories, restructuring reserves,
warranty reserves, pension and post retirement plans, stock-based compensation, useful lives for depreciation and amortization
of long-lived assets, future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and
other long-lived assets, deferred tax assets, uncertain income tax positions, and contingencies. Actual results may ultimately
differ from estimates, although management does not believe such differences would materially affect the financial statements
in any individual year. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the
Consolidated Financial Statements in the period that they are determined.
Cash and Cash Equivalents - Cash and cash equivalents include cash on hand, demand deposits, and short-term investments
which are highly liquid in nature and have original maturities at the time of purchase of three months or less.
Allowance for Doubtful Accounts – The Company maintains allowances for estimated losses as a result of customers' inability
to make required payments. Management evaluates the aging of the accounts receivable balances, the financial condition of its
customers, historical trends, and the time outstanding of specific balances to estimate the amount of accounts receivable that
may not be collected in the future and records the appropriate provision.
Inventories – Inventories for the majority of the Company’s subsidiaries, including all international subsidiaries, are stated at
the lower of cost, determined on the first-in, first-out (FIFO) basis, or market. Other domestic inventories are stated at cost,
determined on the last-in, first-out (LIFO) basis, which is less than market value.
Property, Plant and Equipment - Property, plant and equipment includes the historic cost of land, buildings, machinery, and
equipment, and significant improvements to existing plant and equipment or, in the case of acquisitions, a fair market value
appraisal of such assets completed at the time of acquisition. Property, plant and equipment also includes the cost of purchased
software. Expenditures for maintenance, repairs, and minor renewals are expensed as incurred. When property or equipment
is sold or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts and the
gain or loss realized on disposition is reflected in earnings. The Company depreciates its assets on a straight-line basis over their
estimated useful lives as follows: buildings and improvements 5 to 31.5 years; machinery and equipment 3 to 7 years; furniture
and fixtures 3 to 7 years; vehicles 3 years; and software 3 to 5 years. Depreciation expense totaled $152,079 in 2014, $144,087
in 2013, and $128,341 in 2012.
Derivative Instruments - The Company uses derivative financial instruments to hedge its exposures to various risks, including
interest rate and foreign currency exchange rate risk. The Company does not enter into derivative financial instruments for
speculative purposes and does not have a material portfolio of derivative financial instruments. Derivative financial instruments
used for hedging purposes must be designated and effective as a hedge of the identified risk exposure at inception of the contract.
The Company recognizes all derivatives as either assets or liabilities on the consolidated balance sheet and measures those
57
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
instruments at fair value. For derivatives designated as hedges of the fair value of assets or liabilities, the changes in fair value
of both the derivatives and of the hedged items are recorded in current earnings. For derivatives designated as cash flow hedges,
the effective portion of changes in the fair value of the derivatives is recorded as a component of other comprehensive earnings
and subsequently recognized in net earnings when the hedged items impact earnings.
Goodwill and Other Intangible Assets - Goodwill represents the excess of purchase consideration over the fair value of the net
assets of businesses acquired. Goodwill and certain other intangible assets deemed to have indefinite lives (primarily trademarks)
are not amortized. Instead, goodwill and indefinite-lived intangible assets are tested for impairment at least annually or more
frequently if indicators of impairment exist, such as a significant sustained change in the business climate or a current expectation
of an impending disposal. The Company conducts its annual impairment evaluation in the fourth quarter of each
year. Recoverability of goodwill is measured at the reporting unit level and determined using a two-step process. For 2014, the
Company identified 16 reporting units for its annual goodwill impairment test. Step one of the test compares the fair value of
each reporting unit using a discounted cash flow method to its book value. This method uses the Company’s own market
assumptions including projections of future cash flows, determinations of appropriate discount rates, and other assumptions
which are considered reasonable and inherent in the discounted cash flow analysis. The projections are based on historical
performance and future estimated results. These assumptions require significant judgment and actual results may differ from
assumed and estimated amounts. Step two, which compares the book value of the goodwill to its implied fair value, was not
necessary since there were no indicators of potential impairment from step one.
As discussed in Note 4 Disposed and Discontinued Operations, in connection with the sale of certain businesses held for sale,
the Company recognized total impairment losses of $53,439 and $51,854, net of tax, in 2013 and 2012, respectively, within the
results of discontinued operations. With respect to the fair value of businesses held for sale at December 31, 2014 each will be
evaluated in subsequent reporting periods until the time of sale, and further adjustments to fair value are possible if business
conditions should change.
Similar to goodwill, in testing its other indefinite lived intangible assets for impairment, the Company uses a discounted cash
flow method to calculate and compare the fair value of the intangible asset to its book value. This method uses the Company’s
own market assumptions which are considered reasonable and inherent in the discounted cash flow analysis. Any excess of
carrying value over the estimated fair value is recognized as an impairment loss. No impairment of indefinite lived intangibles
was indicated for the years ended December 31, 2014, 2013, or 2012.
Other intangible assets with determinable lives consist primarily of customer lists, unpatented technology, patents, and
trademarks. These other intangibles are amortized over their estimated useful lives, ranging from 5 to 15 years.
Long-lived assets (including intangible assets with determinable lives) are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable, such as a significant sustained change in
the business climate. If an indicator of impairment exists for any grouping of assets, an estimate of undiscounted future cash
flows is produced and compared to its carrying value. If an asset is determined to be impaired, the loss is measured by the excess
of the carrying amount of the asset over its fair value as determined by an estimate of discounted future cash flows.
See Note 7 Goodwill and Other Intangible Assets for additional details on goodwill balances.
Foreign Currency - Assets and liabilities of non-U.S. subsidiaries, where the functional currency is not the U.S. dollar, have
been translated at year-end exchange rates and profit and loss accounts have been translated using weighted-average yearly
exchange rates. Foreign currency translation gains and losses are included as a component of Accumulated Other
Comprehensive Earnings (Loss). Assets and liabilities of an entity that are denominated in currencies other than an entity’s
functional currency are re-measured into the functional currency using end of period exchange rates or historical rates where
applicable to certain balances. Gains and losses related to these re-measurements are recorded within the Statement of Earnings
as a component of other expense (income), net.
Revenue Recognition - Revenue is recognized when all of the following conditions are satisfied: a) persuasive evidence of an
arrangement exists, b) price is fixed or determinable, c) collectability is reasonably assured, and d) delivery has occurred or
services have been rendered. The majority of the Company’s revenue is generated through the manufacture and sale of a broad
range of specialized products and components, with revenue recognized upon transfer of title and risk of loss, which is generally
upon shipment. Service revenue represents less than 5% of total revenue and is recognized as the services are performed. In
limited cases, revenue arrangements with customers require delivery, installation, testing, certification, or other acceptance
provisions to be satisfied before revenue is recognized.
58
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Stock-Based Compensation – The principal awards issued under the Company’s stock-based compensation plans include non-
qualified stock-settled stock appreciation rights and performance share awards. The cost for such awards is measured at the
grant date based on the fair value of the award. The value of the portion of the award that is expected to ultimately vest is
recognized as expense on a straight-line basis, generally over the explicit service period of three years (except for retirement-
eligible employees and retirees) and is included in selling and administrative expense in the Consolidated Statements of
Earnings. Expense for awards granted to retirement-eligible employees is recorded over the period from the date of grant through
the date the employee first becomes eligible to retire and is no longer required to provide service. See Note 13 Equity and Cash
Incentive Program for additional information related to the Company’s stock-based compensation. At the time of grant, the
Company estimates forfeitures, based on historical experience, in order to estimate the portion of the award that will ultimately
vest.
Income Taxes - The provision for income taxes on continuing operations includes federal, state, local, and non-U.S. taxes. Tax
credits, primarily for research and experimentation, non-U.S. earnings, and U.S. manufacturer's tax deduction are recognized
as a reduction of the provision for income taxes on continuing operations in the year in which they are available for tax purposes.
Deferred taxes are provided using enacted rates on the future tax consequences of temporary differences. Temporary differences
include the differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases
and the tax benefit of carryforwards. A valuation allowance is established for deferred tax assets for which realization is not
assured. In assessing the need for a valuation allowance, management considers all available evidence, including the future
reversal of existing taxable temporary differences, taxable income in carryback periods, prudent and feasible tax planning
strategies, and estimated future taxable income. The valuation allowance can be affected by changes to tax regulations,
interpretations and rulings, changes to enacted statutory tax rates, and changes to future taxable income estimates.
Tax benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained
on examination by the taxing authorities, based on the technical merits of the position in consideration of applicable tax statutes
and related interpretations and precedents. Tax benefits recognized in the financial statements from such a position are measured
based on the largest benefit that has a greater than 50% likelihood of being realized on ultimate settlement.
The Company has not provided for any residual U.S. income taxes on unremitted earnings of non-U.S. subsidiaries as such
earnings are currently intended to be indefinitely reinvested outside of the U.S. It is not practicable to estimate the amount of
tax that might be payable if some or all of such earnings were to be repatriated, and the amount of foreign tax credits that would
be available to reduce or eliminate the resulting U.S. income tax liability.
Research and Development Costs – Research and development costs, including qualifying engineering costs, are expensed
when incurred and amounted to $118,411 in 2014, $117,178 in 2013, and $123,639 in 2012.
Advertising – Advertising costs are expensed when incurred and amounted to $38,882 in 2014, $36,453 in 2013, and $35,688
in 2012.
Risk, Retention, Insurance - The Company currently self-insures its product and commercial general liability claims up to $5.0
million per occurrence, its workers’ compensation claims up to $0.5 million per occurrence, and automobile liability claims up
to $1.0 million per occurrence. Third-party insurance provides primary level coverage in excess of these amounts up to certain
specified limits. In addition, the Company has excess liability insurance from third-party insurers on both an aggregate and an
individual occurrence basis well in excess of the limits of the primary coverage. A worldwide program of property insurance
covers the Company’s owned and leased property and any business interruptions that may occur due to an insured hazard affecting
those properties, subject to reasonable deductibles and aggregate limits. The Company’s property and casualty insurance programs
contain various deductibles that, based on the Company’s experience, are typical and customary for a company of its size and
risk profile. The Company does not consider any of the deductibles to represent a material risk to the Company. The Company
generally maintains deductibles for claims and liabilities related primarily to workers’ compensation, health and welfare claims,
general commercial, product and automobile liability and property damage, and business interruption resulting from certain
events. The Company accrues for claim exposures that are probable of occurrence and can be reasonably estimated. As part of
the Company’s risk management program, insurance is maintained to transfer risk beyond the level of self-retention and provide
protection on both an individual claim and annual aggregate basis.
Reclassifications – Certain amounts in prior years have been reclassified to conform to the current year presentation.
59
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Recent Accounting Pronouncements – In June 2014, the Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") 2014-12 which requires that a performance target for share-based payments that affects vesting and
that could be achieved after the requisite service period be treated as a performance condition. Under this new standard,
compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved
and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered.
This update is effective for annual periods beginning after December 15, 2015. The Company has evaluated this guidance and
determined that the adoption will not significantly impact the consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09 that introduces a new five-step revenue recognition model in which an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures
sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from
contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments
and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal
years beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently
evaluating the new guidance to determine the impact it will have on its consolidated financial statements.
In April 2014, the FASB issued ASU 2014-08, which includes amendments that change the requirements for reporting
discontinued operations and require additional disclosures about discontinued operations. Under the new guidance, only disposals
representing a strategic shift in operations - that is, a major effect on the organization's operations and financial results - should
be presented as discontinued operations. Additionally, the ASU requires expanded disclosures about discontinued operations
that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued
operations. This update is effective for Dover in the first quarter of 2015. The Company has evaluated this guidance and determined
that the adoption will not significantly impact the consolidated financial statements.
In July 2013, the FASB issued ASU 2013-11, which provides that an unrecognized tax benefit, or a portion thereof, should be
presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax
loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit
carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of
a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for
such purpose, then the unrecognized tax benefit should be presented as a liability. This standard was effective for Dover for
fiscal years beginning after December 15, 2013. The Company adopted this guidance effective January 1, 2014. The adoption
of this ASU did not significantly impact the consolidated financial statements.
In March 2013, the FASB issued ASU 2013-05, which permits an entity to release cumulative translation adjustments into net
income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is
a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only
if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary
or group of assets had resided, or, if a controlling financial interest is no longer held. The revised standard was effective for
Dover for fiscal years beginning after December 15, 2013. The Company adopted this guidance effective January 1, 2014. The
adoption of this ASU did not significantly impact the consolidated financial statements.
In February 2013, the FASB issued ASU 2013-02 which requires additional disclosures regarding the reporting of reclassifications
out of accumulated other comprehensive income. ASU 2013-02 requires an entity to present, either on the face of the statement
where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income
by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to
net income in its entirety in the same reporting period. This guidance was effective for reporting periods beginning after December
15, 2012. The Company adopted this guidance effective January 1, 2013. The Company's adoption of this standard did not have
a significant impact on its consolidated financial statements.
In July 2012, the FASB issued ASU 2012-02, which allows an entity to first assess qualitative factors to determine whether it
is necessary to perform a quantitative impairment test of an indefinite-lived intangible asset. Per the terms of this ASU, an entity
would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on
qualitative assessment, that it is not more likely than not, the indefinite-lived intangible asset is impaired. The revised standard
was effective for Dover for its annual and interim impairment tests performed for fiscal years beginning after September 15,
2012. Its adoption did not have a material impact on the Company’s consolidated financial statements.
60
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
2. Spin-off of Knowles Corporation
On February 28, 2014, Dover completed the distribution of Knowles Corporation 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
Other current assets
Non-current assets
Total assets
Liabilities:
Current liabilities
Non-current liabilities
Total liabilities
Net assets distributed to Knowles Corporation
$
$
$
$
$
40,045
340,945
1,678,820
2,059,810
252,673
383,940
636,613
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 net cash of $359,955
upon separation, which reflects $40,045 of cash held by Knowles on the distribution date and retained by it in connection with
its separation from Dover. Dover utilized the net proceeds from Knowles to pay down commercial paper and to repurchase
shares of its common stock in the first quarter of 2014.
In connection with the spin-off of Knowles, the Company allocated $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 reallocation of $19,749 of goodwill was determined using a relative fair value approach. See Note
7 Goodwill and Other Intangible Assets for additional information.
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 Disposed and Discontinued Operations.
Pursuant to the separation of Knowles from Dover, and the related separation and distribution agreements, any agreed upon
liabilities are not significant and will be settled in the near future.
3. Acquisitions
2014 Acquisitions
During 2014, the Company acquired seven businesses in separate transactions for net cash consideration of $802,254. The
businesses were acquired to complement and expand upon existing operations within the Energy, Fluids and Refrigeration &
Food Equipment segments and the Printing & Identification platform of the Engineered Systems segment. The goodwill identified
by these acquisitions reflects the benefits expected to be derived from product line expansion and operational synergies. Upon
consummation of the acquisitions, each of these businesses is now wholly-owned by Dover.
61
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The following table details the acquisitions made during the year ended December 31, 2014.
Date
Type
Company / Product Line Acquired
Location (Near)
Segment
Stock
January 1
Manufacturer of digital printing systems that are installed in-packaging-line for the identification of pharmaceutical and
medical products.
Heidelberg CSAT GmbH
Karlsruhe, Germany
Engineered Systems
February 3
Manufacturer of innovative digital ink jet printing systems for the textile and specialty material industries.
MS Printing Solutions
Milan, Italy
Stock
Engineered Systems
June 11
Manufacturer of chemical injection and metering solutions for oil and gas producers.
Timberline Manufacturing Company
Asset
Beaumont, Texas
Energy
July 30
Stock
WellMark Holdings, Inc.
Oklahoma City, Oklahoma Energy
Manufacturer of valves, instrumentation, and chemical injection pumps serving the oil and gas industry.
July 31
Asset
SweatMiser
McDonough, Georgia
Manufacturer of anti-sweat controllers for doors in the refrigeration industry.
Refrigeration & Food
Equipment
Stock / Asset Liquip International
August 25
Manufacturer of fluid handling solutions, loading arms, tank truck valves and fittings, electronic measurement systems for
tank trucks, fuel filtration systems, and aviation fueling components and services.
Smithfield, Australia
Fluids
October 1
Stock
Accelerated Companies LLC
The Woodlands, Texas
Energy
Integrated provider of hydraulic and gas lift systems, electric submersible pump systems, surface pumps and modular fluid
handling systems for oil and gas production.
The following presents the allocation of acquisition cost to the assets acquired and liabilities assumed, based on their estimated
fair values:
Current assets, net of cash acquired
Property, plant and equipment
Goodwill
Intangible assets
Current liabilities assumed
Non-current liabilities assumed, principally deferred taxes
Net assets acquired
Accelerated
133,475
$
51,070
222,808
131,200
(43,935)
(58,896)
435,722
$
Other
Acquisitions
74,712
$
6,199
209,330
163,727
(36,425)
(51,011)
366,532
$
$
$
Total
208,187
57,269
432,138
294,927
(80,360)
(109,907)
802,254
62
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The amounts assigned to goodwill and major intangible asset classifications by applicable segment for the 2014 acquisitions
are as follows:
Goodwill - Tax deductible
Goodwill - Non deductible
Customer intangibles
Trademarks
Patents
Other intangibles and assets
Energy
Engineered
Systems
Fluids
$
$
10,835
314,604
198,200
19,300
—
5,900
548,839
$
$
— $
80,581
22,843
6,594
878
10,374
121,270
$
184
24,912
23,273
2,125
—
4,340
54,834
$
Refrigeration
& Food
Equipment
1,022
—
600
—
500
—
2,122
$
Useful life
(in years)
na
na
12
11
8
6
Total
12,041
420,097
244,916
28,019
1,378
20,614
727,065
$
$
The Company has substantially completed the purchase price allocations for the 2014 acquisitions, including that of Accelerated
Companies LLC, which was purchased in October. As additional information is obtained about these assets and liabilities within
the measurement period (not to exceed one year from the date of acquisition), including finalization of asset appraisals, the
Company will refine its estimates of fair value to allocate the purchase price more accurately.
The Consolidated Statements of Earnings include the results of these businesses from the dates of acquisition. The aggregate
revenue and pre-tax loss of the 2014 acquisitions included in the Company’s 2014 consolidated revenue and earnings totaled
$207,000 and $7,000, respectively.
63
Table of Contents
2013 Acquisitions
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
During 2013, the Company acquired ten businesses for an aggregate consideration of $322,838, net of cash acquired. A summary
of the acquisitions made during 2013 is as follows:
Date
May 2
Manufacturer of rotary pumps in vane, regenerative turbine, and internal gear technologies.
Company / Product Line Acquired
Ebsray Pumps
Location (Near)
Brookvale, Australia
Type
Stock
May 7
The Curotto-Can, Inc.
Manufacturer of automated front loaders for use in the waste collection industry.
Stock
Sonoma, California
Segment
Fluids
Engineered Systems
May 21
Manufacturer of valves and gas compressor components that specializes in replacing parts designed to optimize the efficiency
and reliability of reciprocating compressors.
Klaus Enterprise, Ltd.
Alberta, Canada
Energy
Asset
May 30
Manufacturer of printing devices and software, specializing in thermal stationary barcode printers.
Source Technologies
Asset
Charlotte, North Carolina Engineered Systems
July 1
Manufacturer of thermal ink jet applications ranging from packaging line coding and marking to high-speed product
identification, authentication, and tracking systems for serialization.
Frederick, Maryland
Engineered Systems
RSI Systems
Asset
September 19
Manufacturer of artificial lift tools and technology for oil and gas producers.
SPIRIT Global Energy Solutions
Stock
Midland, Texas
Dorset, England
October 5
Manufacturer of composite access covers and containment systems for retail fueling sites.
Fibresec Holdings Ltd.
Stock
Energy
Fluids
October 9
Manufacturer of high density polyethylene fusion underground piping systems for retail fueling sites.
Kungsors Plast AB (KPS)
Kungsors, Sweden
Stock
Fluids
October 16
Provider of top loading and LNG onshore loading equipment in China.
Lianyungang Jump Equipment Co., Ltd. Lianyungang, China
Stock
Fluids
November 4
Manufacturer of engineered pumps, spare parts, and related services for critical applications mostly in the upstream, midstream,
and downstream oil and gas markets.
Finder Pompe S.p.A.
Merate, Italy
Fluids
Stock
The businesses were acquired to complement and expand upon existing operations within the Energy, Engineered Systems and
Fluids segments.
The following presents the allocation of acquisition cost to the assets acquired and liabilities assumed, based on their estimated
fair values:
Current assets, net of cash acquired
Property, plant and equipment
Goodwill
Intangible assets
Other non-current assets, principally deferred taxes
Current liabilities assumed
Non-current liabilities assumed, principally deferred taxes
Net assets acquired
64
$
$
98,641
33,403
141,888
149,228
2,622
(58,052)
(44,892)
322,838
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Pro Forma Information
The following unaudited pro forma information illustrates the effect on the Company’s revenue and earnings from continuing
operations for years ended December 31, 2014 and 2013, assuming that the 2014 acquisitions had taken place at the beginning
of 2013. As a result, the supplemental pro forma earnings reflect adjustments to earnings from continuing operations as reported
in the Consolidated Statements of Earnings to exclude $11,558 of nonrecurring expense related to the fair value adjustments to
acquisition-date inventory (after-tax) and $3,502 of acquisition-related costs (after-tax) from the year ended December 31, 2014.
The supplemental pro forma earnings for the comparable 2013 period were adjusted to include these charges as if they were
incurred at the beginning of 2012. The 2014 and 2013 supplemental 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 2014 and 2013 acquisitions.
Revenue from continuing operations:
As reported
Pro forma
Earnings from continuing operations:
As reported
Pro forma
Basic earnings per share from continuing operations:
As reported
Pro forma
Diluted earnings per share from continuing operations:
As reported
Pro forma
Years Ended December 31,
2014
2013
$
$
$
$
7,752,728
7,987,639
778,140
806,321
4.67
4.84
4.61
4.78
$
$
$
$
7,155,096
7,602,756
797,527
794,823
4.66
4.64
4.60
4.58
These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative
of the results of operations that actually would have resulted had the acquisitions occurred on the dates indicated or that may
result in the future.
4. Disposed and Discontinued Operations
Management evaluates Dover's businesses periodically for their strategic fit within its operations. Accordingly, in 2014, the
Company announced its intention to divest Datamax O'Neil and Sargent Aerospace, two businesses with the Engineered Systems
segment. The assets, liabilities, and results of operations of these businesses were reclassified to discontinued operations in the
fourth quarter of 2014.
Also included in discontinued operations are the assets, liabilities, and results of operations of DEK International and Everett
Charles Technologies (including the Multitest business, collectively "ECT"), until their respective sale dates of July 2, 2014 and
November 30, 2013. Additionally, the results of discontinued operations include Knowles Corporation until the distribution on
February 28, 2014, as well as costs incurred by Dover to complete the spin-off of Knowles. These costs totaled $27,055 and
$30,093 for the years ended December 31, 2014 and 2013, respectively. See also Note 2 Spin-off of Knowles Corporation.
65
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Summarized results of the Company’s discontinued operations are as follows:
Revenue
Loss on sale, including impairments, net of tax
Earnings from operations before taxes
(Provision) benefit for income taxes
Earnings from operations, net of tax
Years Ended December 31,
2014
568,991
2013
$ 1,970,965
2012
$ 1,918,035
(3,691) $
(35,473) $
(50,818)
$
$
13,611
(12,825)
786
$
209,293
31,782
241,075
241,023
(29,210)
211,813
160,995
$
$
(Loss) earnings from discontinued operations, net of tax
$
(2,905) $
205,602
2014 - The Company completed the sale of DEK International in the third quarter of 2014. Sale proceeds totaled $170,616, which
resulted in an after-tax loss on sale of $6,895. The Company also recognized a gain on sale of $3,204 in 2014 in connection with
a working capital adjustment of $4,482 for ECT, which was sold in the fourth quarter of 2013.
The net earnings from operations for 2014 of $786 includes after-tax earnings of $32,289 for those businesses classified as
discontinued operations. Also reflected in this amount are the aforementioned spin-off costs of $27,055 and a pension settlement
charge of $4,448, net of tax, attributable to lump sum payments made to Knowles participants in Dover's qualified defined benefit
pension plan.
2013 - In 2013, in connection with a change in goodwill reporting units within discontinued operations resulting from the
Company's expected manner of disposing of its electronic test and assembly businesses, the Company was required to allocate
goodwill to these individual reporting units based upon relative current fair values. This process resulted in a benefit of $25,520
in the discontinued operations deferred income tax provision for 2013 as a result of the elimination of certain deferred tax liabilities.
The Company recorded a goodwill impairment charge of $54,532 ($44,188 after tax) at ECT in 2013 in connection with the
anticipated sale of this business. This charge was a write-down of the carrying value to fair value, based on the current estimated
sales price.
The Company also recognized an impairment loss of $14,001 in the fourth quarter of 2013, in connection with the impending
sale of DEK. This loss included goodwill impairment of the related reporting unit of $9,251, of which none was deductible for
tax purposes.
The Company completed the sale of ECT in the fourth quarter of 2013 for total proceeds of $92,694, which resulted in an after-
tax loss on sale of $2,804. Included in the sale proceeds was a note receivable from the buyer of $16,250, net of $3,750 of
contingencies. The Company has since collected this note receivable.
The net earnings from operations of $241,075 reflects the after-tax earnings of all business classified as discontinued operations,
as well as $54,827 of discrete tax benefits principally related to the conclusion of certain federal, state and international tax audits,
$18,279 of interest on tax obligations in foreign jurisdictions, and the aforementioned spin-off costs of $30,093.
2012 - The net earnings from operations of $211,813 reflects after-tax earnings from operations generated by all business classified
as discontinued operations as well as various expense and accrual adjustments relating to other discontinued operations. In addition,
the Company recognized a goodwill impairment charge of $63,819 ($51,854 after tax) for ECT, representing a write-down of the
reporting unit's carrying value of goodwill to its fair value.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Assets and liabilities of discontinued operations are summarized below:
Assets of Discontinued Operations
Accounts receivable (1)
Inventories, net
Prepaid and other current assets
Total current assets
Property, plant and equipment, net
Goodwill and intangible assets, net
Other assets and deferred charges
Total assets
Liabilities of Discontinued Operations
Accounts payable (1)
Other current liabilities
Total current liabilities
Deferred income taxes
Other liabilities
Total liabilities
December 31, 2014 December 31, 2013
$
$
$
$
46,691
58,401
8,571
113,663
31,573
181,798
137
327,171
21,199
17,675
38,874
8,752
3,092
50,718
$
$
$
$
403,539
229,465
84,814
717,818
401,600
1,633,587
26,058
2,779,063
278,607
153,788
432,395
60,361
42,865
535,621
At December 31, 2014, the assets and liabilities of discontinued operations primarily relate to Datamax O'Neil and Sargent
Aerospace, which were held for sale on that date. At December 31, 2013, the assets and liabilities of discontinued operations
relate to those businesses mentioned above, as well as DEK International, which was sold on July 2, 2014 and Knowles, which
was spun off on February 28, 2014.
(1) Amounts at December 31, 2013 include estimated credits and liabilities associated with tax obligations in foreign jurisdictions resulting
from value-added tax for the Multitest business within ECT. Accounts receivable includes $93,598 of credits. Accounts payable
includes $76,443 of liabilities and $18,279 of interest. These balances were settled in 2014.
5. Inventories, net
Raw materials
Work in progress
Finished goods
Subtotal
Less reserves
Total
$
December 31, 2014 December 31, 2013
338,621
$
127,611
367,011
833,243
(117,932)
715,311
352,016
147,715
483,912
983,643
(119,906)
863,737
$
$
At December 31, 2014 and 2013, approximately 25% and 30%, respectively, of the Company's total inventories were accounted
for using the LIFO method.
6. Property, Plant and Equipment, net
Land
Buildings and improvements
Machinery, equipment and other
Subtotal
Less accumulated depreciation
Total
67
$
December 31, 2014 December 31, 2013
56,118
$
517,087
1,596,085
2,169,290
(1,381,441)
787,849
55,076
537,474
1,698,638
2,291,188
(1,454,119)
837,069
$
$
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
7. Goodwill and Other Intangible Assets
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 subsequent changes to carrying amounts,
impairment, and fair value adjustments. In accordance with the guidance set forth in ASC 350, and in connection with the
realignment of its businesses in the first quarter of 2014, the Company reallocated goodwill among its reporting units based on
their current relative fair value.
Due to the separation of Knowles in the first quarter of 2014, the Company was required to allocate a portion of its goodwill
from continuing operations to a reporting unit included in the distribution of Knowles. Accordingly, the assets distributed on
February 28, 2014 included an additional $19,749 of allocated goodwill, determined using a relative fair value approach.
During the fourth quarter of 2014, the Company announced its intent to sell two businesses within the Engineered Systems
segment. As a result, the Company allocated goodwill totaling $152,663 to these companies from their respective reporting units
using a relative fair value approach.
The adjustments made to goodwill due to the distribution of Knowles, the reclassification of businesses held for sale, and the
restatement of segment results due to the realignment of Dover's businesses has been applied to all periods presented on the
Consolidated Balance Sheet for goodwill and assets of discontinued operations.
The changes in the carrying value of goodwill by segment for the years ended December 31, 2014 and 2013 are as follows:
Goodwill
Accumulated impairment loss
Balance at January 1, 2013
Acquisitions
Purchase price adjustments
Foreign currency translation
Balance at December 31, 2013
Acquisitions
Purchase price adjustments
Foreign currency translation
Balance at December 31, 2014
Energy
$
716,210
—
716,210
19,810
(2,278)
(5,770)
727,972
325,438
(395)
(4,280)
$ 1,048,735
Engineered
Systems
$ 1,202,906
(10,591)
1,192,315
19,968
(521)
(1,143)
1,210,619
80,581
—
(21,022)
$ 1,270,178
$
$
Refrigeration
& Food
Equipment
Fluids
560,131
(59,970)
500,161
102,110
(2,417)
4,304
604,158
25,097
11,350
(30,942)
609,663
$
$
588,624
—
588,624
—
(22,922)
129
565,831
1,022
—
(3,872)
562,981
Total
$ 3,067,871
(70,561)
2,997,310
141,888
(28,138)
(2,480)
3,108,580
432,138
10,955
(60,116)
$ 3,491,557
During the year ended December 31, 2014, the Company recorded adjustments totaling $10,955 to goodwill relating primarily
to finalization of the purchase price allocation to assets acquired and liabilities assumed for the 2013 acquisitions. 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.
68
Table of Contents
NOTES TO 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:
Amortized intangible assets:
Trademarks
Patents
Customer Intangibles
Unpatented Technologies
Drawings & Manuals
Distributor Relationships
Other
Total
Unamortized intangible assets:
Trademarks
Total intangible assets, net
December 31, 2014
December 31, 2013
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
$
$
$
$
$
138,650
150,404
1,429,906
92,480
36,377
64,614
24,214
1,936,645
165,918
1,369,520
34,097
108,484
484,449
45,812
13,087
34,377
12,737
733,043
$
$
$
$
$
110,573
153,850
1,211,744
80,483
41,800
64,614
22,365
1,685,429
169,876
1,258,911
24,418
102,756
379,124
35,891
10,462
31,144
12,599
596,394
Total amortization expense for the years ended December 31, 2014, 2013, and 2012 was $155,109, $133,946, and $101,593,
respectively. Amortization expense for the next five years, based on current intangible balances, is estimated to be as follows:
$
140,046
139,880
136,746
125,827
110,262
$
December 31, 2014 December 31, 2013
39,824
$
22,839
34,229
31,738
16,909
11,151
4,986
4,967
52,966
219,609
46,704
20,678
28,452
31,318
16,352
12,799
22,021
7,868
80,085
266,277
$
$
2015
2016
2017
2018
2019
8. Accrued Expenses and Other Liabilities
The following table details the major components of other accrued expenses:
Warranty
Unearned/deferred revenue
Taxes other than income
Accrued interest
Accrued volume discounts
Accrued commissions (non-employee)
Restructuring and exit
Legal and environmental
Other (none of which are individually significant) (1)
69
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The following table details the major components of other liabilities (non-current):
Deferred compensation (2)
Unrecognized tax benefits
Unearned/deferred revenue
Legal and environmental
Warranty
Restructuring and exit
Other (none of which are individually significant) (1)
$
December 31, 2014 December 31, 2013
321,736
$
97,920
7,751
35,145
3,100
356
42,856
508,864
323,105
94,875
8,599
31,841
2,684
—
21,236
482,340
$
$
(1) The liability relating to the Company's cumulative loss of $15,567 on the Swiss franc cross-currency swap was reclassified from
other liabilities to other accrued expenses at December 31, 2014 in anticipation of the settlement of this net investment hedge when
it expires on October 15, 2015. See Note 11 Financial Instruments.
(2) Deferred compensation includes $229,128 and $232,669 at December 31, 2014 and 2013, respectively, for liabilities related to
defined benefit and other postretirement benefit plans. See Note 15 Employee Benefit Plans.
Warranty
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 December 31, 2014 and 2013 are
as follows:
Beginning Balance, January 1
Provision for warranties
Settlements made
Other adjustments, including acquisitions and currency translation
Ending balance, December 31
9. Restructuring Activities
2014
2013
$
$
42,924
60,833
(56,746)
2,377
49,388
$
$
39,554
52,943
(49,101)
(472)
42,924
From time to time, the Company will initiate various restructuring programs and incur severance and other restructuring costs.
The following table details restructuring charges incurred by segment for the periods presented:
Years Ended December 31,
2013
2012
2014
Energy (1)
Engineered Systems
Fluids
Refrigeration & Food Equipment
Corporate
Total
These amounts are classified in the Consolidated Statements of Earnings as follows:
Cost of goods and services
Selling and administrative expenses
Total
$
$
$
$
7,549
6,624
3,784
24,897
1,954
44,808
19,690
25,118
44,808
$
$
$
$
(811) $
3,628
850
5,451
—
9,118
$
584
8,320
2,215
2,761
—
13,880
5,320
3,798
9,118
$
$
3,613
10,267
13,880
(1) In 2013, restructuring charges incurred within the Energy segment included a net gain on the sale of buildings in connection with
facility consolidations.
The restructuring charges of $44,808 incurred in 2014 relate to restructuring programs initiated during 2014 and 2013. These
programs are designed to better align the Company's operations with current market conditions through targeted facility
70
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
consolidations, headcount reductions and other measures to further optimize operations. The Company expects to incur
restructuring charges of approximately $17.0 million to $20.0 million in the first quarter of 2015, with the majority of these
charges in the Energy segment. We expect to fund the remainder of the 2014 programs currently underway, as well those
commenced in 2015, over the next 12 to 18 months. In light of the economic uncertainty in certain of our end markets and our
continued focus on improving our operating efficiency, it is possible that additional programs may be implemented throughout
the remainder of 2015.
The $44,808 of restructuring charges incurred during 2014 included the programs as described below.
• The Energy segment incurred restructuring charges of $7,549, related principally to a facility consolidation in its
businesses serving the compression markets and reduction in workforce.
• The Engineered Systems segment recorded $6,624 of restructuring charges relating to facility consolidations within
both the Printing & Identification and Industrials platforms, as well as actions taken to optimize costs related to
engineering, sales, and administrative functions within the Printing & Identification platform.
• The Fluids segment recorded $3,784 of restructuring charges principally related to reduction in workforce for those
businesses serving the Pumps markets.
• The Refrigeration & Food Equipment segment recorded restructuring charges of $24,897, primarily related to headcount
reductions and exit plans at targeted facilities, including approximately $17.5 million related to the closure of a European-
based facility within Refrigeration.
• Corporate recorded restructuring charges of $1,954, primarily severance expense, resulting from the Company's decision
to realign its businesses into a new segment structure in the first quarter of 2014 following the spin-off of Knowles.
Restructuring expenses incurred in 2013 and 2012 also included targeted facility consolidations at certain businesses.
The following table details the Company’s severance and other restructuring accrual activity:
Balance at December 31, 2011
Restructuring charges
Payments
Other, including foreign currency
Balance at December 31, 2012
Restructuring charges
Payments
Other, including foreign currency
Balance at December 31, 2013
Restructuring charges
Payments
Other, including foreign currency
Balance at December 31, 2014
Severance
Exit
Total
$
$
1,654
10,583
(9,554)
4
2,687
7,103
(7,001)
87
2,876
23,532
(10,092)
(958)
15,358
$
3,110
3,297
(3,916)
74
2,565
2,015
(2,451)
337
2,466
21,276
(5,750)
(11,329)
6,663
$
(1)
$
4,764
13,880
(13,470)
78
5,252
9,118
(9,452)
424
5,342
44,808
(15,842)
(12,287)
22,021
(1) Other activity in exit reserves primarily represents the non-cash write-off of inventory and fixed assets in connection with certain
facility closures.
The accrual balances at December 31, 2014 primarily reflects restructuring plans initiated during the year, as well as ongoing
lease commitment obligations for facilities closed in earlier periods.
71
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
10. Borrowings and Lines of Credit
Borrowings consist of the following:
Short-term:
Current portion of long-term debt
Commercial paper
Long-term:
4.875% 10-year notes due October 15, 2015
5.45% 10-year notes due March 15, 2018
2.125% 7-year notes due December 1, 2020 (euro-denominated)
4.30% 10-year notes due March 1, 2021
6.65% 30-year debentures due June 1, 2028
5.375% 30-year debentures due October 15, 2035
6.60% 30-year notes due March 15, 2038
5.375% 30-year notes due March 1, 2041
Other
Total long-term debt
Less current portion
December 31, 2014 December 31, 2013
$
$
299,956
478,000
777,956
$
$
2,778
226,500
229,278
December 31, 2014 December 31, 2013
$
$
299,836
348,928
363,970
449,839
199,517
296,685
247,948
345,830
444
2,552,997
(299,956)
2,253,041
$
$
299,638
348,598
411,500
449,813
199,483
296,526
247,859
345,671
2,891
2,601,979
(2,778)
2,599,201
On December 4, 2013, the Company issued €300.0 million of 2.125% euro-denominated notes due 2020. The proceeds of
$403,776 from the sale of the notes, net of discounts and issuance costs, were used to repay commercial paper.
On October 15, 2015, the outstanding 4.875% notes with a face value of $300.0 million will mature. These notes have been
classified as current maturities of long-term debt as of December 31, 2014. Depending on capital requirements for 2015, the
Company may finance the repayment of these notes through either the issuance of additional commercial paper or new debt
instruments.
The long-term note borrowings presented above are net of unamortized discounts of $8,213 and $9,196 at December 31, 2014
and 2013, respectively. The debentures presented above include unamortized discounts of $3,798 and $3,991 at December 31,
2014 and 2013, respectively. The discounts are being amortized to interest expense using the effective interest rate method over
the life of the issuances. The notes and debentures are redeemable at the option of Dover in whole or in part at any time at a
redemption price that includes a make-whole premium, with accrued interest to the redemption date.
The Company maintains a $1.0 billion unsecured revolving credit facility with a syndicate of banks (the "Credit Agreement")
which expires on November 10, 2016. At the Company's election, loans under the Credit Agreement will bear interest at a
Eurodollar or Sterling rate based on LIBOR, plus an applicable margin ranging from 0.565% to 1.225% (subject to adjustment
based on the credit rating accorded the Company's senior unsecured debt by S&P and Moody's), or at a base rate pursuant to a
formula defined in the Credit Agreement. In addition, the Credit Agreement requires the Company to pay a facility fee and
imposes various restrictions on the Company such as, among other things, the requirement for the Company 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 December 31, 2014 and had a coverage ratio of 12.7 to 1. 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.
72
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Interest expense and interest income for the years ended December 31, 2014, 2013 and 2012 were as follows:
Interest expense
Interest income
Interest expense, net
Years Ended December 31,
2013
$ 124,535
(3,881)
$ 120,654
2014
$ 131,689
(4,510)
$ 127,179
2012
$ 125,992
(4,723)
$ 121,269
The weighted average interest rate for short-term commercial paper borrowings was 0.1% for 2014 and 0.1% for 2013.
Scheduled maturities of long-term debt for the years ending December 31 are as follows:
2015
2016
2017
2018
2019
2020 and thereafter
$
$
299,956
114
117
348,958
—
1,903,852
2,552,997
As of December 31, 2014, the Company had approximately $135,452 outstanding in letters of credit and guarantees with financial
institutions, which expire at various dates in 2015 through 2020. These letters of credit are primarily maintained as security for
insurance, warranty and other performance obligations.
11. 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.
In order to manage this risk the Company has hedged portions of its forecasted sales and purchases, which 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 December 31, 2014 and December 31, 2013, the Company had contracts with U.S. dollar equivalent notional
amounts of $47,047 and $33,216, respectively, to exchange foreign currencies, principally the U.S. dollar, euro, Chinese yuan.
The Company believes it is probable that all forecasted cash flow transactions will occur.
In addition, the Company had outstanding contracts at December 31, 2014 and December 31, 2013 with a total notional amount
of $52,392 and $104,688, respectively, that are not designated as hedging instruments. These instruments are used to reduce the
Company's exposure for operating receivables and payables that are denominated in non-functional currencies. Gains and losses
on the fair value of these instruments is reflected in other expense (income) on the Consolidated Statements of Earnings.
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 hedges 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 December 31, 2014 and December 31, 2013 reflected cumulative losses of $15,567 and $23,716, respectively, due to
the strengthening of the Swiss franc relative to the U.S. dollar over the term of the arrangement.
73
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The following table sets forth the fair values of derivative instruments held by the Company as of December 31, 2014 and
December 31, 2013 and the balance sheet lines in which they are recorded:
Fair Value Asset (Liability)
Foreign currency forward / collar contracts
Foreign currency forward / collar contracts
Net investment hedge - cross currency swap
973
(810)
(15,567)
879 Prepaid and other current assets
(168) Other accrued expenses
(23,716) Accrued expenses / Other liabilities (1)
December 31, 2014 December 31, 2013 Balance Sheet Caption
$
$
(1) The liability relating to the cumulative loss on the Swiss franc cross currency swap is reflected in accrued expenses on the Consolidated
Balance Sheet at December 31, 2014 as this swap matures on October 15, 2015. It was reflected in other liabilities as of December
31, 2013.
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 which 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.
Additionally, the Company has designated the €300.0 million of euro-denominated notes issued December 4, 2013 as a hedge
of a portion of the its net investment in euro-denominated operations. Due to the high degree of effectiveness between the
hedging instruments and the exposure being hedged, fluctuations in the value of the euro-denominated debt due to exchange
rate changes are offset by changes in the net investment. Accordingly, changes in the value of the euro-denominated debt are
recognized in the cumulative translation adjustment section of other comprehensive income to offset changes in the value of the
net investment in euro-denominated operations.
Amounts recognized in other comprehensive earnings (loss) for the gains (losses) on its net investment hedges were as follows:
Gain (loss) on euro-denominated debt
Gain (loss) on Swiss franc cross-currency swap
Total gain (loss) on net investment hedges before tax
Tax (expense) benefit
Net gain (loss) on net investment hedges, net of tax
Fair Value Measurements
2014
2013
2012
$
$
47,630
8,149
55,779
(19,523)
36,256
$
$
(6,099) $
(1,035)
(7,134)
2,494
(4,640) $
—
(1,025)
(1,025)
359
(666)
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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31,
2014 and December 31, 2013:
December 31, 2014
December 31, 2013
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Assets:
Foreign currency cash flow hedges
$
— $
973
$
— $
— $
879
$
Liabilities:
Foreign currency cash flow hedges
Swiss franc cross-currency swap
—
—
810
15,567
—
—
—
—
168
23,716
—
—
—
The derivative contracts are measured at fair value using models based on observable market inputs such as foreign currency
exchange rates and interest rates; therefore, they are classified within Level 2 of the valuation hierarchy.
In addition to fair value disclosure requirements related to financial instruments carried at fair value, accounting standards require
disclosures regarding the fair value of all of the Company’s financial instruments. The estimated fair value of long-term debt at
December 31, 2014 and December 31, 2013 was $3,002,701 and $2,872,454, respectively, compared to the carrying value of
$2,552,997 and $2,601,979, 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 December 31, 2014
and December 31, 2013 due to the short-term nature of these instruments.
12. Income Taxes
Income taxes have been based on the following components of “Earnings before provision for income taxes and discontinued
operations” in the Consolidated Statements of Earnings:
Domestic
Foreign
Years Ended December 31,
$
2014
789,689
304,518
$ 1,094,207
$
2013
714,723
331,263
$ 1,045,986
$
$
2012
640,896
290,169
931,065
Income tax expense (benefit) relating to continuing operations for the years ended December 31, 2014, 2013, and 2012 is
comprised of the following:
Years Ended December 31,
2013
2012
2014
Current:
U.S. Federal
State and local
Foreign
Total current
Deferred:
U.S. Federal
State and local
Foreign
Total deferred
Total expense
$
$
$
231,939
8,434
97,037
337,410
7,386
11,250
(39,979)
(21,343)
316,067
$
$
$
114,218
17,468
89,702
221,388
35,315
(4,556)
(3,688)
27,071
248,459
$
$
$
196,622
(1,590)
84,723
279,755
20,149
(2,262)
(16,652)
1,235
280,990
75
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Differences between the effective income tax rate and the U.S. federal income statutory rate are as follows:
Years Ended December 31,
2013
2012
2014
U.S. Federal income tax rate
State and local taxes, net of Federal income tax benefit
Foreign operations tax effect
R&E tax credits (1)
Domestic manufacturing deduction
Foreign tax credits
Branch losses
Release of valuation allowance
Resolution of tax contingencies
Other, principally non-tax deductible items
Effective rate from continuing operations
35.0%
1.3
(3.7)
(0.3)
(3.0)
0.4
(0.7)
(0.6)
(0.5)
1.0
28.9%
35.0%
1.2
(3.3)
(0.7)
(2.2)
0.3
(0.2)
—
(7.2)
0.9
23.8%
35.0%
1.3
(3.2)
—
(2.2)
0.3
—
—
(1.8)
0.8
30.2%
(1) On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, and this legislation retroactively extended the
R&E tax credit for two years, from January 1, 2012 through December 31, 2013. Income tax expense for 2013 includes $4.8 million
for the entire benefit of the R&E tax credit attributable to 2012.
The tax effects of temporary differences that give rise to future deferred tax assets and liabilities are as follows:
December 31, 2014 December 31, 2013
Deferred Tax Assets:
Accrued compensation, principally postretirement and other employee benefits $
Accrued expenses, principally for state income taxes, interest, and warranty
Net operating loss and other carryforwards
Inventories, principally due to reserves for financial reporting purposes and
capitalization for tax purposes
Accounts receivable, principally due to allowance for doubtful accounts
Accrued insurance
Long-term liabilities, principally warranty, environmental, and exit costs
Other assets
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets
$
Deferred Tax Liabilities:
Intangible assets, principally due to different tax and financial reporting bases
and amortization lives
Plant and equipment, principally due to differences in depreciation
Accounts receivable
Total gross deferred tax liabilities
Net deferred tax liability
Classified as follows in the consolidated balance sheets:
Current deferred tax asset
Non-current deferred tax asset
Current deferred tax liability
Non-current deferred tax liability
$
$
$
$
$
151,640
45,262
190,298
13,285
4,323
5,529
4,096
(8,838)
405,595
(141,252)
264,343
$
(694,602) $
(55,012)
(6,481)
(756,095)
(491,752) $
$
63,276
10,107
(928)
(564,207)
(491,752) $
130,326
43,700
70,821
14,068
4,507
4,353
3,777
(11,957)
259,595
(14,063)
245,532
(604,464)
(61,455)
(6,674)
(672,593)
(427,061)
60,101
5,642
(953)
(491,851)
(427,061)
As of December 31, 2014, the Company has loss carryforwards for U.S. Federal purposes totaling approximately $71.5 million
attributed to the 2011 Anthony acquisition, and loss carryforwards for non-U.S. purposes totaling $519.4 million primarily
76
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
resulting from restructuring undertaken to effect the Knowles spin-off. As of December 31, 2013, the Company had non-U.S
loss carryforwards of $39.9 million. The federal loss carryforwards are available for use against the Company's consolidated
federal taxable income and begin to expire in 2024. The entire balance of the non-U.S. losses as of December 31, 2014 is available
to be carried forward, with $20.3 million of these losses beginning to expire during the years 2015 through 2034. The remaining
$499.1 million of such losses can be carried forward indefinitely.
The Company has $109.2 million and $145.8 million of state tax loss carryforwards as of December 31, 2014 and 2013,
respectively, that are available for use by the Company between 2015 and 2034.
As of December 31, 2014 and 2013, the Company has research and development credit carryforwards for U.S. Federal purposes
of $0.8 million attributable to the 2011 Anthony acquisition and no alternative minimum tax credits. The research and development
credits begin to expire in 2025.
The Company maintains valuation allowances by jurisdiction against the deferred tax assets related to certain of these
carryforwards as utilization of these tax benefits is not assured for certain jurisdictions.
The Company has not provided for U.S. federal income taxes or tax benefits on the undistributed earnings of its international
subsidiaries, totaling approximately $1.3 billion at December 31, 2014, because such earnings are reinvested and it is currently
intended that they will continue to be reinvested indefinitely. It is not practicable to estimate the amount of tax that might be
payable if some or all of such earnings were to be repatriated, and the amount of foreign tax credits that would be available to
reduce or eliminate the resulting U.S. income tax liability.
Unrecognized Tax Benefits
The Company files U.S., state, local, and foreign tax returns. The Company is routinely audited by the tax authorities in these
jurisdictions, and a number of audits are currently underway. It is reasonably possible during the next twelve months that uncertain
tax positions may be settled, which could result in a decrease in the gross amount of unrecognized tax benefits. This decrease
may result in an income tax benefit. Due to the potential for resolution of federal, state, and foreign examinations, and the
expiration of various statutes of limitation, the Company's gross unrecognized tax benefits balance may change within the next
twelve months by a range of zero to $27 million. Some portion of any such change may be reported as discontinued operations.
The Company is no longer subject to examinations of its federal income tax returns for years through 2010. All significant state,
local, and international matters have been concluded for years through 2007. The Company believes adequate provision has
been made for all income tax uncertainties.
77
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The following table is a reconciliation of the beginning and ending balances of the Company’s unrecognized tax benefits:
Unrecognized tax benefits at January 1, 2012
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Lapse of statutes
Unrecognized tax benefits at December 31, 2012
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years (A)
Settlements
Lapse of statutes
Unrecognized tax benefits at December 31, 2013
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Lapse of statutes
Unrecognized tax benefits at December 31, 2014
Continuing
134,773
$
10,188
4,128
(14,257)
(418)
(12,550)
121,864
9,056
7,584
(62,610)
(2,823)
(7,845)
65,226
11,751
1,065
(5,782)
(843)
(5,050)
66,367
$
(B)
Discontinued
54,268
$
26
3,470
(25)
(85)
(3,429)
54,225
1
3,315
(40,240)
(2,523)
(1,564)
13,214
14
499
(265)
(155)
(2,585)
10,722
$
Total
189,041
10,214
7,598
(14,282)
(503)
(15,979)
176,089
9,057
10,899
(102,850)
(5,346)
(9,409)
78,440
11,765
1,564
(6,047)
(998)
(7,635)
77,089
$
$
(A) The settlement of certain income tax examinations of the 2009 and 2010 tax years resulted in a significant decrease in gross
unrecognized tax benefits.
(B) If recognized, the net amount of potential tax benefits that would impact the Company’s effective tax rate is $48.8 million. During
the years ended December 31, 2014, 2013, and 2012, the Company recorded potential interest and penalty expense (income) of
$(1.3) million, $(5.5) million and $0.1 million, respectively, related to its unrecognized tax benefits as a component of provision for
income taxes. The Company had accrued interest and penalties of $15.5 million at December 31, 2014 and $17.1 million at December
31, 2013, which are not included in the above table.
13. Equity and Cash Incentive Program
The Company's share-based awards are typically granted annually at its regularly scheduled first quarter Compensation Committee
meeting. Beginning in 2013, these awards were made pursuant to the terms of the Company's 2012 Equity and Cash Incentive
Plan (the "2012 Plan"), which was approved by shareholders on May 3, 2012. This plan replaced the 2005 Equity and Cash
Incentive Plan (the "2005 Plan"), which would have otherwise terminated according to its terms on January 31, 2015 and the 1996
Non-Employee Directors Stock Compensation Plan (the "Directors Plan"), which would have otherwise terminated according to
its terms on December 31, 2012. Upon approval of the 2012 Plan, no additional awards may be granted under the 2005 Plan.
Officers and other key employees, as well as non-employee directors, are eligible to participate in the 2012 Plan, which has a ten
year term and will terminate on May 3, 2022. The 2012 Plan provides for stock options and SARs grants, restricted stock awards,
restricted stock unit awards, performance share awards, cash performance awards, directors' shares, and deferred stock units.
Under the 2012 Plan, a total of 17,000,000 shares of common stock are reserved for issuance, subject to adjustments resulting
from stock dividends, stock splits, recapitalizations, reorganizations, and other similar changes.
The exercise price per share for stock options and SARs is equal to the closing price of the Company’s stock on the New York
Stock Exchange on the date of grant. New common shares are issued when options or SARs are exercised. The period during
which options and SARs are exercisable is fixed by the Company’s Compensation Committee at the time of grant. Generally, the
stock options or SARs vest after three years of service and expire at the end of ten years.
In addition, in connection with the separation of Knowles on February 28, 2014, the Company modified the outstanding equity
awards for its employees. The awards were modified such that all individuals received an equivalent fair value both before and
after the separation of Knowles. This modification resulted in the issuance of an additional 933,845 SARs, 20,523 stock options,
11,480 performance shares and 5,389 restricted stock units. The exercise price of these outstanding awards, where applicable, was
78
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
adjusted to preserve the value of the awards immediately prior to the separation. As no incremental fair value was awarded as a
result of the issuance of these additional shares, the modification did not result in additional compensation expense.
Stock-based compensation costs are reported within selling and administrative expenses. The following table summarizes the
Company’s compensation expense relating to all stock-based incentive plans:
Years Ended December 31,
2013
2012
2014
Pre-tax compensation expense
Tax benefit
Total stock-based compensation expense, net of tax
SARs and Stock Options
$
$
31,628
(11,201)
20,427
$
$
30,480
(10,745)
19,735
$
$
30,884
(10,904)
19,980
In 2014, 2013, and 2012, the Company issued SARs covering 1,043,734, 1,613,884, and 1,719,943 shares, respectively. Since
2006, the Company has only issued SARs and does not anticipate issuing stock options in the future. The fair value of each SAR
grant was estimated on the date of grant using a Black-Scholes option-pricing model with the following assumptions:
Risk-free interest rate
Dividend yield
Expected life (years)
Volatility
Grant price
Fair value at date of grant (1)
2014
2013
2012
1.70%
1.98%
5.3
30.81%
82.51
19.84
$
$
1.39%
2.06%
7.1
33.78%
63.33
18.17
$
$
1.05%
2.03%
5.7
36.41%
57.62
16.31
$
$
(1) Updated to reflect the modification of grants issued prior to 2014 in connection with the separation of Knowles.
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 options is based
on the U.S. Treasury yield curve in effect at the time of grant.
79
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
A summary of activity relating to SARs and stock options granted under the 2012 Plan and the predecessor plans for the year
ended December 31, 2014 is as follows:
Outstanding at 1/1/2014
Surrendered upon spin-off (1)
Modification upon spin-off (2)
Granted
Forfeit / expired
Exercised
Outstanding at 12/31/2014
Number of
Shares
7,520,760
(359,151)
933,845
1,043,734
(281,822)
(1,216,624)
7,640,742
$
56.67
62.55
—
82.51
65.65
43.97
54.69
Exercisable at 12/31/2014
3,631,702
$
42.43
SARs
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(Years)
Stock Options
Number of
Shares
Weighted
Average
Exercise
Price
$
209,827
(4,555)
20,523
—
(7,605)
(165,283)
52,907
38.39
38.00
—
—
41.79
35.04
33.50
52,907
$
33.50
Weighted
Average
Remaining
Contractual
Term
(Years)
0.1
0.1
6.3
4.6
(1) In connection with the spin-off on February 28, 2014, Knowles employees surrendered their outstanding Dover equity awards, which
were then converted to Knowles equity awards.
(2) Subsequent to the separation of Knowles, the Company modified its outstanding equity awards to employees such that all individuals
received an equivalent fair value both before and after the separation, which resulted in a lower exercise price for all outstanding equity
awards at the time of modification.
All option awards outstanding at December 31, 2014 are vested and exercisable. These awards have an exercise price in the range
of $33.49 to $34.73 and an aggregate intrinsic value of $2,022 at December 31, 2014. The following table summarizes information
about outstanding SARs at December 31, 2014:
Range of
Exercise Prices
$25.96 - $37.79
$40.54 - $58.69
$63.33 - $82.51
Number
of Shares
2,130,558
3,039,611
2,470,573
7,640,742
SARs Outstanding
SARs Exercisable
Weighted
Average
Exercise
Price
$
$
$
34.01
55.97
70.95
Weighted
Average
Remaining
Life
in Years
4.5
5.7
8.5
Aggregate
Intrinsic
Value
80,342
$
47,863
$
12,490
$
$ 140,695
Number
of Shares
2,130,558
1,491,509
9,635
3,631,702
Weighted
Average
Exercise
Price
$
$
$
34.01
54.26
70.57
Weighted
Average
Remaining
Life
in Years
4.5
4.9
8.5
Aggregate
Intrinsic
Value
80,342
26,035
50
$
$
$
$ 106,427
Unrecognized compensation expense related to SARs not yet exercisable was $22,807 at December 31, 2014. This cost is expected
to be recognized over a weighted average period of 1.5 years.
Other information regarding the exercise of SARs and stock options is listed below:
SARs
Fair value of SARs that became exercisable
Aggregate intrinsic value of SARs exercised
Stock Options
Cash received by Dover for exercise of stock options
Aggregate intrinsic value of options exercised
2014
2013
2012
$
$
$
$
26,796
51,813
5,227
8,614
$
$
$
$
23,605
83,944
14,830
19,937
$
$
$
$
16,484
61,531
38,029
29,866
80
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The Company recognized tax benefits of $15,110, $25,661, and $22,771 during 2014, 2013, and 2012, respectively, for the exercise
of SARs and stock options. These benefits have been recorded as an increase to additional paid-in capital and are reflected as
financing cash inflows in the Consolidated Statements of Cash Flows.
Performance Share Awards
Performance share awards granted are expensed over the three-year requisite performance and service period. Awards shall become
vested if (1) the Company achieves certain specified stock performance targets compared to a defined group of peer companies
and (2) the employee remains continuously employed by the company during the performance period. Partial vesting may occur
after separation from service in the case of certain terminations not for cause and for retirements.
In 2014, 2013, and 2012, the Company issued performance shares covering 58,206, 47,032, and 50,416 shares, respectively. The
performance share awards granted in 2014 are considered performance condition awards as attainment is based on Dover's
performance relative to established internal metrics. The fair value of the 2014 awards was determined using Dover's closing stock
price on the date of grant of $82.51. For the year end December 31, 2014, we have assumed an average attainment rate of the
internal metrics of 82.6%. The expected attainment of the internal metrics for these awards is analyzed each reporting period, and
the related expense is adjusted up or down 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.
The performance share awards granted in 2013 and 2012 are market condition awards as attainment is based on Dover's three-
year performance relative to its peer group for the relevant performance period. These awards were valued on the date of grant
using a Monte Carlo simulation model (a binomial lattice-based valuation model) with the following assumptions, and are generally
recognized ratably over the vesting period:
Risk-free interest rate
Dividend yield
Expected life (years)
Volatility
Fair value of performance award (1)
2013
2012
0.40%
2.06%
2.9
30.36%
70.92
$
0.37%
2.03%
2.9
34.10%
63.43
$
(1) Updated to reflect the modification of grants issued prior to 2014 in connection with the separation of Knowles.
Expected volatilities are based on historical volatilities of each of the defined peer companies. The interest rate is based on the
U.S. Treasury yield curve in effect at the time of grant.
81
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
A summary of activity for performance share awards for the year ended December 31, 2014 is as follows:
Unvested at January 1, 2014
Surrendered upon spin-off (1)
Modification upon spin-off (2)
Granted
Forfeit
Vested (3)
Unvested at December 31, 2014
Number of
Shares
92,545
(7,177)
11,480
58,206
(2,381)
(50,950)
101,723
Weighted-
Average
Grant-Date
Fair Value
76.05
$
76.67
—
82.51
80.21
63.43
77.33
$
(1) In connection with the spin-off on February 28, 2014, Knowles employees surrendered their outstanding Dover equity awards, which
were then converted to Knowles equity awards.
(2) Subsequent to the separation of Knowles, the Company modified its outstanding equity awards to employees such that all individuals
received an equivalent fair value both before and after the separation.
(3) Under the terms of the performance share award, the actual number of shares awarded can range from zero to 200% of the original
target grant, depending on Dover's three-year performance relative to the peer group for the relevant performance period. The awards
that vested in 2014, as shown above, will result in zero issuances of Dover common shares as a result of the three-year performance
from 2012 - 2014 relative to its peer group.
Unrecognized compensation expense related to unvested performance shares as of December 31, 2014 was $3,487, which will be
recognized over a weighted average period of 1.5 years.
Restricted Stock Awards
The Company also has restricted stock authorized for grant (as part of the 2005 and 2012 Plans), under which common stock of
the Company may be granted at no cost to certain officers and key employees. In general, restrictions limit the sale or transfer of
these shares during a two or three year period, and restrictions lapse proportionately over the two or three year period. The
Company granted 131,719 of restricted stock awards in 2014. No restricted stock awards were issued in 2013 or 2012.
A summary of activity for restricted stock awards for the year ended December 31, 2014 is as follows:
Unvested at January 1, 2014
Modification upon spin-off (1)
Granted
Forfeit
Vested
Unvested at December 31, 2014
Number of
Shares
40,000
5,389
131,719
(10,623)
(485)
166,000
Weighted-
Average
Grant-Date
Fair Value
66.59
$
—
82.51
82.51
82.51
76.00
$
(1) Subsequent to the separation of Knowles, the Company modified its outstanding equity awards to employees such that all individuals
received an equivalent fair value both before and after the separation.
Unrecognized compensation expense relating to unvested restricted stock as of December 31, 2014 was $7,255, which will be
recognized over a weighted average period of 1.4 years.
82
Table of Contents
Directors' Shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The Company issued the following shares to its non-employee directors under the 2012 Plan as partial compensation for serving
as directors of the Company:
Years ended December 31,
2013
2012
2014
Aggregate shares granted
Shares deferred
Shares withheld to satisfy tax obligations
Net shares issued
14. Commitments and Contingent Liabilities
Lease Commitments
17,331
(8,904)
(210)
8,217
14,271
(6,929)
(354)
6,988
20,344
—
(544)
19,800
The Company leases certain facilities and equipment under operating leases, many of which contain renewal options. Total rental
expense, net of insignificant sublease rental income, for all operating leases was $87,149, $76,541, and $66,118 for the years
ended December 31, 2014, 2013, and 2012, respectively. Contingent rentals under the operating leases were not significant.
The aggregate future minimum lease payments for operating and capital leases as of December 31, 2014 are as follows:
2015
2016
2017
2018
2019
2020 and thereafter
Guarantees
Operating
63,979
$
51,193
42,647
33,297
24,283
57,536
272,935
$
$
$
Capital
3,801
2,015
731
196
112
347
7,202
The Company has provided typical indemnities in connection with sales of certain businesses and assets, including representations
and warranties and related indemnities for environmental, health and safety, tax, and employment matters. The Company does
not have any material liabilities recorded for these indemnifications and is not aware of any claims or other information that
would give rise to material payments under such indemnities.
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 which 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 December 31, 2014 and 2013, the
Company has reserves totaling $32,890 and $34,031, 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,
exposure to hazardous substances, 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
83
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
legal matters that are probable and estimable and not otherwise covered by insurance, and at December 31, 2014 and 2013, 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 affect on its financial position, results of operations, or cash flows.
15. Employee Benefit 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. The Company’s expense relating to defined contribution plans was $34,263, $25,645, and $25,805
for the years ended December 31, 2014, 2013, and 2012, respectively.
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.
In July 2013, the Company announced that, after December 31, 2013, the U.S. qualified and non-qualified defined benefit plans
will be closed to new employees. All pension-eligible employees as of December 31, 2013 will continue to earn a pension benefit
through December 31, 2023 as long as they remain employed by an operating company participating in the plan. The Company
also announced that effective, January 1, 2024, the plan would be frozen to any future benefit accruals.
In connection with the recent separation of Knowles, the Company offered one-time lump sum payments in 2014 to Knowles
employees that participated in Dover's qualified defined benefit pension plan. In 2014, the Company made total lump sum
payments to participants in this plan of $49,338. Based on the total of the lump sum payments made to both Knowles and other
participants in the plan during the year, the Company recorded a settlement charge of approximately $10,279 in 2014.
The Company also maintains post retirement benefit plans which cover approximately 1,165 participants, approximately 1,143
of whom are eligible for medical benefits. These plans are effectively closed to new entrants. The supplemental and post
retirement benefit plans are supported by the general assets of the Company.
84
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Obligations and Funded Status
The following tables summarize the balance sheet impact, including the benefit obligations, assets, and funded status associated
with the Company's significant defined benefit and other postretirement plans at December 31, 2014 and 2013.
Qualified Defined Benefits
U.S. Plan
Non-U.S. Plans
Non-Qualified
Supplemental
Benefits
Post-Retirement
Benefits
2014
2013
2014
2013
2014
2013
2014
2013
Change in benefit obligation:
Benefit obligation at beginning of year
$ 519,552
$ 603,905
$ 299,284
$ 284,798
$ 133,056
$ 180,408
$ 14,136
$ 14,571
Benefits earned during the year
Interest cost
Plan participants' contributions
Benefits paid
Actuarial (gain) loss
Business dispositions
Amendments
Settlements and curtailments
Currency translation and other
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Company contributions
Plan participants' contributions
Benefits paid
Business dispositions
Settlements and curtailments
Currency translation
13,801
25,204
—
(17,957)
84,314
—
—
17,123
24,801
—
(35,266)
(76,605)
1,913
6,027
8,222
1,732
6,043
9,081
1,583
3,320
6,148
—
(5,452)
(11,237)
(13,939)
40,962
6,501
5,634
6,741
—
(20,686)
(34,831)
—
3,004
(7,228)
14
249
627
476
234
523
448
(1,222)
(556)
(1,163)
(618)
—
—
—
233
—
65
—
76
11,088
(3,137)
1,463
—
—
—
(60,164)
—
(390)
(49,338)
(16,818)
—
499
(25,198)
—
—
(3,036)
5,551
575,576
519,552
265,023
299,284
137,999
133,056
13,943
14,136
595,143
73,528
—
—
554,648
203,681
181,416
66,761
9,000
—
14,868
9,547
1,732
17,356
11,359
1,583
—
—
—
—
13,939
20,686
—
—
—
—
746
476
—
—
715
448
(17,957)
(35,266)
(5,452)
(11,237)
(13,939)
(20,686)
(1,222)
(1,163)
—
(49,338)
—
—
—
—
(46,334)
(390)
—
—
(14,142)
3,204
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Fair value of plan assets at end of year
601,376
595,143
163,510
203,681
Funded status
$ 25,800
$ 75,591
$(101,513) $ (95,603) $(137,999) $(133,056) $ (13,943) $ (14,136)
—
(971)
Amounts recognized in the balance sheets consist of:
Assets and Liabilities:
Other assets and deferred charges
$ 25,800
$ 75,591
$
152
$
2,976
$
— $
— $
— $
Accrued compensation and employee benefits
Other liabilities (deferred compensation)
—
—
—
(1,575)
(1,970)
(21,978)
(10,161)
(926)
— (100,090)
(96,609)
(116,021)
(122,895)
(13,017)
(13,165)
Total Assets and Liabilities
$ 25,800
$ 75,591
$(101,513) $ (95,603) $(137,999) $(133,056) $ (13,943) $ (14,136)
Accumulated Other Comprehensive Loss (Earnings):
Net actuarial losses (gains)
Prior service cost (credit)
Net asset at transition, other
Deferred taxes
$ 119,919
$ 86,108
$ 61,813
$ 38,596
$
(746) $ (12,520) $
192
$
799
3,388
—
4,471
—
1,058
(48)
1,146
(48)
—
—
31,381
38,646
(615)
(1,024)
(43,158)
(31,703)
(15,312)
(9,965)
(10,725)
(9,145)
—
90
—
20
Total Accumulated Other Comprehensive Loss
(Earnings), net of tax
80,149
58,876
47,511
29,729
19,910
16,981
(333)
(205)
Net amount recognized at December 31,
$ 105,949
$ 134,467
$ (54,002) $ (65,874) $(118,089) $(116,075) $ (14,276) $ (14,341)
Accumulated benefit obligations
$ 537,393
$ 482,181
$ 246,814
$ 280,763
$ 123,229
$ 93,153
The Company’s net unfunded status at December 31, 2014 and 2013 includes net liabilities of $101,513 and $95,603, respectively,
relating to the Company’s significant international plans, some in locations where it is not economically advantageous to pre-
fund the plans due to local regulations. The majority of the international obligations relate to defined pension plans operated by
the Company’s businesses in Germany, the United Kingdom, and Switzerland.
85
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The accumulated benefit obligation for all defined benefit pension plans was $907,436 and $856,097 at December 31, 2014 and
2013, respectively. Pension plans with accumulated benefit obligations in excess of plan assets consist of the following at
December 31, 2014 and 2013:
Projected benefit obligation (PBO)
Accumulated benefit obligation (ABO)
Fair value of plan assets
Net Periodic Benefit Cost
Components of the net periodic benefit cost were as follows:
Defined Benefit Plans
Qualified Defined Benefits
Service cost
Interest cost
Expected return on plan assets
Amortization of:
U.S. Plan
2013
$17,123
24,801
(40,194)
2014
$13,801
25,204
(41,594)
2012
$14,406
25,136
(38,978)
Non-U.S. Plans (1)
2013
$ 6,043
9,081
(9,608)
2014
$ 6,027
8,222
(8,498)
2012
$ 5,712
10,044
(8,765)
$
2014
372,931
342,158
133,930
$
2013
369,289
336,095
137,654
Non-Qualified
Supplemental Benefits
2013
$ 5,634
6,741
—
2014
$ 3,320
6,148
—
2012
$ 5,304
7,916
—
Prior service cost
Recognized actuarial loss (gain)
Transition obligation
Settlement & curtailment (gain) loss (2)
Other
Total net periodic benefit cost
1,083
8,289
—
10,279
—
$17,062
1,026
17,654
—
187
501
$21,098
1,048
13,515
—
—
—
$15,127
107
903
4
(45)
6
$ 6,726
114
1,492
(14)
697
5
$ 7,810
117
579
(47)
1,449
—
$ 9,089
8,110
7,775
(16)
(428)
—
—
— (4,411)
13
—
$16,071
$16,815
7,425
138
—
—
—
$20,783
(1) Net periodic benefit cost for non-U.S. plans includes $55, $1,220, and $1,231 of expense for the years ended December 31, 2014,
2013, and 2012, respectively, relating to plans sponsored by Knowles that were distributed as part of the separation on February 28,
2014.
(2) $6,675 of the 2014 settlement loss on the U.S. Plan is attributable to Knowles participants in the Dover Defined Benefit Plan and
has therefore, been reflected in the results of discontinued operations. The remaining $3,604 of this settlement loss has been reflected
in the results of continuing operations. The curtailment gain of $4,411 was recognized in continuing operations in 2013 in connection
with the freeze of the non-qualified supplemental benefit plan.
Post-Retirement Benefits
Service cost
Interest cost
Amortization of:
Prior service credit
Recognized actuarial loss (gain)
Settlement & curtailment gain
Other
Total net periodic benefit cost
2014
2013
2012
$
$
249
627
$
234
523
248
593
(409)
54
—
233
754
$
(416)
(416)
(19)
134
— (1,493)
—
77
$ (1,087)
552
$
86
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Amounts expected to be amortized from Accumulated Other Comprehensive Earnings (Loss) into net periodic benefit cost during
2015 are as follows:
Amortization of:
Prior service cost (credit)
Recognized actuarial loss (gain)
Transition obligation
Total
Assumptions
Qualified Defined Benefits
U.S. Plan
Non-U.S.
Plans
Non-
Qualified
Supplemental
Benefits
Post-
Retirement
Benefits
$
$
976
12,846
—
13,822
$
$
95
2,784
5
2,884
$
$
6,927
286
—
7,213
$
$
(372)
(30)
—
(402)
The Company determines actuarial assumptions on an annual basis.
The weighted-average assumptions used in determining the benefit obligations were as follows:
Qualified Defined Benefits
U.S. Plan
Non-U.S. Plans
Non-Qualified
Supplemental
Benefits
Post-Retirement
Benefits
2014
2013
2014
2013
2014
2013
2014
2013
Discount rate
Average wage increase
Ultimate medical trend rate
4.05%
4.00%
na
4.90%
4.00%
na
2.31%
2.50%
na
3.53%
2.86%
na
3.96%
4.50%
na
4.77%
4.50%
na
3.75%
na
5.00%
4.45%
na
5.00%
The weighted average assumptions used in determining the net periodic cost were as follows:
Qualified Defined Benefits
U.S. Plan
Non-U.S. Plans
Non- Qualified
Supplemental Benefits
Post-Retirement
Benefits
Discount rate
Average wage increase
Expected return on plan assets
2013
2012
2014
2014
4.90% 4.05% 4.85% 3.53% 3.31% 4.62% 4.77% 4.02% 4.77% 4.45% 3.65% 3.65%
na
4.00% 4.00% 4.00% 2.86% 2.74% 3.14% 4.50% 4.50% 4.50%
na
na
7.75% 7.75% 7.75% 5.35% 5.32% 5.90%
na
na
na
na
2012
2014
2013
2013
2012
2012
2013
2014
na
na
The Company’s discount rate assumption is determined by developing a yield curve based on high quality corporate bonds with
maturities matching the plans’ expected benefit payment streams. The plans’ expected cash flows are then discounted by the
resulting year-by-year spot rates.
For post-retirement benefit measurement purposes, an 8.0% annual rate of increase in the per capita cost of covered benefits
(i.e., health care cost trend rates) was assumed for 2015. The rate was assumed to decrease gradually to 5.0% by the year 2027
and remain at that level thereafter. The health care cost trend rate assumption can have an effect on the amounts reported. For
example, increasing (decreasing) the assumed health care cost trend rates by one percentage point in each year would increase
(decrease) the accumulated post-retirement benefit obligation as of December 31, 2014 by $234 and $(224), respectively, and
would have a negligible impact on the net post-retirement benefit cost for 2014.
Plan Assets
The primary financial objective of the plans is to secure participant retirement benefits. Accordingly, the key objective in the
plans’ financial management is to promote stability and, to the extent appropriate, growth in the funded status. Related and
supporting financial objectives are established in conjunction with a review of current and projected plan financial requirements.
As it relates to the funded defined benefit pension plans, the Company’s funding policy is consistent with the funding requirements
of the Employment Retirement Income Security Act ("ERISA") and applicable international laws. The Company is responsible
for overseeing the management of the investments of the plans’ assets and otherwise ensuring that the plans’ investment programs
87
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
are in compliance with ERISA, other relevant legislation, and related plan documents. Where relevant, the Company has retained
professional investment managers to manage the plans’ assets and implement the investment process. The investment managers,
in implementing their investment processes, have the authority and responsibility to select appropriate investments in the asset
classes specified by the terms of their applicable prospectus or investment manager agreements with the plans.
The assets of the plans are invested to achieve an appropriate return for the plans consistent with a prudent level of risk. The
asset return objective is to achieve, as a minimum over time, the passively managed return earned by market index funds,
weighted in the proportions outlined by the asset class exposures identified in the plans’ strategic allocation. The expected return
on assets assumption used for pension expense is developed through analysis of historical market returns, statistical analysis,
current market conditions, and the past experience of plan asset investments. Overall, it is projected that the investment of plan
assets within Dover’s U.S. defined benefit plan will achieve a 7.75% net return over time from the asset allocation strategy.
The Company’s actual and target weighted-average asset allocation for our U.S. Corporate Pension Plan was as follows:
Equity securities
Fixed income
Real estate and other
Total
2014
2013
Current
Target
55%
36%
9%
100%
64%
29%
7%
100%
58%
35%
7%
100%
While the non-U.S. investment policies are different for each country, the long-term objectives are generally the same as for the
U.S. pension assets. The Company's non-U.S. plans were expected to achieve rates of return on invested assets of 5.35% in
2014, 5.32% in 2013, and 5.90% in 2012.
The fair values of both U.S. and non-U.S. pension plan assets by asset category within the ASC 820 hierarchy (as defined in
Note 11 Financial Instruments) are as follows at December 31, 2014 and 2013:
December 31, 2014
December 31, 2013
Level 1
Level 2
Level 3
Total Fair
Value
Level 1
Level 2
Level 3
Total Fair
Value
U.S. Plan
Asset category:
Common stocks:
U.S. companies
Non-U.S. companies
Fixed income investments:
Corporate bonds
Private placements
Government securities
Common stock funds:
Mutual funds
Collective trusts
Real estate funds
Cash and equivalents
$ 164,006
3,874
$
— $
—
— $ 164,006
3,874
—
$ 180,038
5,526
$
— $
—
— $ 180,038
5,526
—
—
—
48,370
63,878
6,865
98,998
—
—
—
63,878
6,865
147,368
—
—
25,035
53,924
3,374
87,107
44,610
—
—
14,318
$ 275,178
—
119,312
37,145
—
$ 326,198
$
44,610
—
119,312
—
37,145
—
—
14,318
— $ 601,376
59,387
—
—
8,767
$ 278,753
—
138,236
33,749
—
$ 316,390
$
—
—
—
53,924
3,374
112,142
59,387
—
138,236
—
33,749
—
—
8,767
— $ 595,143
88
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Asset category:
Common stocks
Fixed income investments
Common stock funds
Real estate funds
Cash and equivalents
Other
December 31, 2014
December 31, 2013
Level 1
Level 2
Level 3
Total Fair
Value
Level 1
Level 2
Level 3
Total Fair
Value
Non-U.S. Plans
$
$
40,960
—
—
—
1,531
—
42,491
$
— $
59,791
43,821
—
—
7,431
$ 111,043
$
— $
—
—
9,976
—
—
9,976
40,960
59,791
43,821
9,976
1,531
7,431
$ 163,510
$
$
35,010
—
—
—
6,785
—
41,795
$
— $
75,574
66,285
—
—
5,090
$ 146,949
$
— $
—
—
14,937
—
—
14,937
35,010
75,574
66,285
14,937
6,785
5,090
$ 203,681
Common stocks represent investments in domestic and foreign equities which are publicly traded on active exchanges and are
valued based on quoted market prices.
Fixed income investments include U.S. treasury bonds and notes, which are valued based on quoted market prices, as well as
investments in other government and municipal securities and corporate bonds, which are valued based on yields currently
available on comparable securities of issuers with similar credit ratings.
Common stock funds consist of mutual funds and collective trusts. Mutual funds are valued by obtaining quoted prices from
nationally recognized securities exchanges. Collective trusts are valued using Net Asset Value (the "NAV") as of the last business
day of the year. The NAV is based on the underlying value of the assets owned by the fund minus its liabilities, and then divided
by the number of shares outstanding. The value of the underlying assets is based on quoted prices in active markets.
The real estate funds are valued on an annual basis using third-party appraisals, with adjustments estimated on a quarterly basis
using discounted cash flow models which consider such inputs as revenue and expense growth rates, terminal capitalization
rates, and discount rates. The Company believes this is an appropriate methodology to obtain the fair value of these assets.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective
of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments
could result in a different fair value measurement at the reporting date.
The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 2013 and 2014 due
to the following:
Balance at December 31, 2012
Actual return on plan assets:
Relating to assets still held at December 31, 2013
Purchases
Sales
Balance at December 31, 2013
Actual return on plan assets:
Relating to assets still held at December 31, 2014
Business dispositions
Sales
Balance at December 31, 2014
Real estate
funds
Other
Total
$
10,116
$
1,456
$
11,572
2,958
1,863
—
14,937
—
—
(1,456)
—
(4,527)
(362)
(72)
9,976
$
$
—
—
—
— $
2,958
1,863
(1,456)
14,937
(4,527)
(362)
(72)
9,976
There were no significant transfers between Level 1 and Level 2 investments during 2014 or 2013.
89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Table of Contents
Future Estimates
Benefit Payments
Estimated future benefit payments to retirees, which reflect expected future service, are as follows:
2015
2016
2017
2018
2019
2020 - 2024
Contributions
Qualified Defined Benefits
Non-U.S.
Plans
U.S. Plan
Non-
Qualified
Supplemental
Benefits
Post-
Retirement
Benefits
$
$
35,312
36,702
38,784
40,120
40,892
221,358
$
6,295
6,841
6,889
7,196
7,139
42,775
$
22,412
7,968
3,986
5,206
11,282
55,417
926
940
951
959
946
4,647
In 2015, the Company expects to contribute approximately $6.5 million to its non-U.S. plans and none to its U.S. plans.
Additionally, in 2015, the Company expects to fund benefit payments of approximately $22.4 million to plan participants of its
unfunded, non-qualified, supplemental benefit plans.
Multiemployer Pension Plans
The Company, through its subsidiaries, participates in a few multiemployer pension plans covering approximately 100 employees
working under U.S. collective bargaining agreements. None of these plans are considered individually significant to the
Company. Contributions to multiemployer plans totaled less than $2.0 million in each of the last three years.
16. Other Comprehensive Earnings
The amounts recognized in other comprehensive earnings were as follows:
Year Ended December 31, 2014
Foreign currency translation adjustments (1)
Pension and other postretirement benefit plans
Changes in fair value of cash flow hedges
Other
Total other comprehensive (loss) earnings
Pre-tax
$ (131,420) $
(70,705)
(375)
1,067
$ (201,433) $
Net of tax
Tax
(19,523) $ (150,943)
(49,711)
20,994
(244)
131
(128)
939
$ (199,959)
1,474
(1) Tax expense in current year relates to gain for net investment hedges, as these were favorably impacted by the decline in foreign
currency rates. See Note 11 Financial Instruments for additional information.
Year Ended December 31, 2013
Foreign currency translation adjustments
Pension and other postretirement benefit plans
Changes in fair value of cash flow hedges
Other
Total other comprehensive earnings (loss)
Pre-tax
Tax
Net of tax
4,736
$
118,507
(49)
(565)
122,629
2,494
(63,585)
26
77
(60,988) $
$
$
2,242
182,092
(75)
(642)
183,617
$
$
90
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Year Ended December 31, 2012
Foreign currency translation adjustments
Pension and other postretirement benefit plans
Changes in fair value of cash flow hedges
Other
Total other comprehensive (loss) earnings
Pre-tax
Tax
$
$
$
38,521
(70,642)
195
692
(31,234) $
359
23,632
(70)
(83)
23,838
Net of tax
38,880
$
(47,010)
125
609
(7,396)
$
The components of accumulated other comprehensive earnings (loss) are as follows:
Cumulative foreign currency translation adjustments
Pension and other postretirement benefit plans (1)
Changes in fair value of cash flow hedges
December 31, 2014 December 31, 2013
170,609
$
(105,381)
2,495
67,723
(14,884) $
(147,237)
3,190
(158,931) $
$
(1)
Includes accumulated other comprehensive losses of $7,855, net of tax, at December 31, 2013 attributable to defined pension plans
that were spun off with the distribution of Knowles on February 28, 2014.
Total comprehensive earnings were as follows:
Net earnings
Other comprehensive (loss) earnings
Comprehensive earnings
$
$
2014
Years Ended December 31,
2013
1,003,129
122,629
1,125,758
775,235
(199,959)
575,276
$
$
$
$
2012
811,070
(7,396)
803,674
Amounts reclassified from accumulated other comprehensive earnings (loss) to earnings (loss) during the year ended
December 31, 2014, 2013 and 2012 were as follows:
Years Ended December 31,
2013
2014
2012
Pension & postretirement benefit plans:
Amortization of actuarial losses
Amortization of prior service costs
Total before tax
Tax expense
Net of tax
Cash flow hedges:
Net gains reclassified into earnings
Tax benefit
Net of tax
$
$
$
$
8,822
8,556
17,378
(5,969)
11,409
$
$
19,250
8,834
28,084
(9,809)
18,275
$
$
12,673
8,174
20,847
(7,013)
13,834
(164) $
57
(107) $
(130) $
46
(84) $
(549)
192
(357)
The Company recognizes net periodic pension cost, which includes amortization of net actuarial losses and prior service costs,
in both selling & 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 and commodity contracts. The Company recognizes the realized
gains and losses on its cash flow hedges in the same line item as the hedged transaction, such as revenue, cost of goods and
services, or selling & administrative expenses.
91
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
17. Segment Information
In the first quarter of 2014, Dover announced the realignment of its businesses into a new segment structure, consisting of four
segments and organized around its key end markets to better focus on growth strategies. The new structure is designed also to
provide increased opportunities to leverage Dover's scale and capitalize on productivity initiatives. Dover's four segments are
as follows:
• Our Energy segment, serving the Drilling & Production, Bearings & Compression, and Automation end markets, is a
provider of customer-driven solutions and services for safe and efficient production and processing of fuels worldwide,
and has a strong presence in the bearings and compression components markets.
• Our Engineered Systems segment is comprised of two platforms, Printing & Identification and Industrials, and is
focused on the design, manufacture and service of critical equipment and components serving the printing &
identification, vehicle service, environmental solutions and industrial end markets.
• Our Fluids segment, serving the Fluid Transfer and Pumps end markets, is focused on the safe handling of critical fluids
across the retail fueling, chemical, hygienic and industrial end markets.
• Our Refrigeration & Food Equipment segment, serving the Refrigeration and Food Equipment end markets, is a provider
of innovative and energy efficient equipment and systems serving the commercial refrigeration and food service
industries.
92
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Segment financial information and a reconciliation of segment results to consolidated results follows:
Revenue:
Energy
Engineered Systems
Fluids
Refrigeration & Food Equipment
Intra-segment eliminations
Total consolidated revenue
Earnings from continuing operations:
Segment earnings:
Energy
Engineered Systems
Fluids
Refrigeration & Food Equipment
Total segments
Corporate expense / other (1)
Net interest expense
Earnings before provision for income taxes and discontinued operations
Provision for taxes
Earnings from continuing operations
Operating margins:
Energy
Engineered Systems
Fluids
Refrigeration & Food Equipment
Total Segments
Earnings from continuing operations
Depreciation and amortization:
Energy
Engineered Systems
Fluids
Refrigeration & Food Equipment
Corporate
Consolidated total
Capital expenditures:
Energy
Engineered Systems
Fluids
Refrigeration & Food Equipment
Corporate
Consolidated total
Years Ended December 31,
2013
2012
2014
$ 2,017,239
2,385,965
1,430,566
1,921,189
(2,231)
$ 7,752,728
$ 1,853,853
2,177,970
1,236,838
1,887,840
(1,405)
$ 7,155,096
$ 1,788,295
2,143,687
1,087,526
1,607,602
(462)
$ 6,626,648
$
$
$
$
$
$
461,815
386,998
251,639
238,734
1,339,186
117,800
127,179
1,094,207
316,067
778,140
22.9%
16.2%
17.6%
12.4%
17.3%
10.0%
111,956
61,946
60,903
68,701
3,682
307,188
66,998
29,749
34,319
33,510
1,457
166,033
$
$
$
$
$
$
459,649
347,497
224,523
267,307
1,298,976
132,336
120,654
1,045,986
248,459
797,527
24.8%
16.0%
18.2%
14.2%
18.2%
11.1%
99,075
59,058
48,812
67,228
3,860
278,033
60,756
29,145
21,868
27,173
2,752
141,694
$
$
$
$
$
$
466,801
319,704
182,544
223,397
1,192,446
140,112
121,269
931,065
280,990
650,075
26.1%
14.9%
16.8%
13.9%
18.0%
9.8%
87,921
60,670
41,381
37,295
2,667
229,934
65,520
25,314
22,655
30,863
2,150
146,502
(1) Certain expenses are maintained at the corporate level and not allocated to the segments. These expenses include executive and
functional compensation costs, non-service pension costs, non-operating insurance expenses, and various administrative expenses
relating to the corporate headquarters.
93
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Selected financial information by market segment (continued):
Total assets at December 31:
Energy
Engineered Systems
Fluids
Refrigeration & Food Equipment
Corporate (2)
Total assets - continuing operations
Assets from discontinued operations
Consolidated total
2014
2,645,567
2,348,684
1,414,387
1,494,121
860,455
8,763,214
327,171
9,090,385
$
2013
1,901,200
2,224,519
1,390,777
1,540,295
1,019,327
8,076,118
2,779,063
$ 10,855,181
$
$
(2) Corporate assets are principally cash and cash equivalents. Also included in corporate assets is an asset of $25,800 and $75,591 in
2014 and 2013, respectively, that represents the overfunded plan status of the U.S. defined benefit plan. Additionally, included in
corporate assets in 2013 is a $16,250 note receivable related to proceeds from the sale of ECT. Refer to Note 4 Disposed and
Discontinued Operations and Note 15 Employee Benefit Plans, respectively, for additional information.
United States
Europe
Other Americas
Asia
Other
Consolidated total
Revenue
Years Ended December 31,
2013
$ 4,202,434
1,112,279
803,741
607,873
428,769
$ 7,155,096
2012
$ 3,977,925
1,082,210
744,192
574,140
248,181
$ 6,626,648
2014
$ 4,617,813
1,251,625
794,966
686,511
401,813
$ 7,752,728
Long-Lived Assets
At December 31,
2014
599,688
136,599
39,971
42,775
18,036
837,069
$
$
2013
528,001
153,564
47,374
43,516
15,394
787,849
$
$
Revenue is attributed to regions based on the location of the Company’s customer, which in some instances is an intermediary
and not necessarily the end user. Long-lived assets are comprised of net property, plant and equipment. The Company’s businesses
are based primarily in the United States of America, Europe, and Asia. The Company’s businesses serve thousands of customers,
none of which accounted for more than 10% of consolidated revenue.
94
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
18. Earnings per Share
The following table sets forth a reconciliation of the information used in computing basic and diluted earnings per share:
Years Ended December 31,
2013
2012
2014
Earnings from continuing operations
(Loss) earnings from discontinued operations, net
Net earnings
Basic earnings per common share:
Earnings from continuing operations
(Loss) earnings from discontinued operations, net
Net earnings
Weighted average shares outstanding
Diluted earnings per common share:
Earnings from continuing operations
(Loss) earnings from discontinued operations, net
Net earnings
$
$
$
$
$
$
$
$
778,140
(2,905)
775,235
$
$
797,527
205,602
1,003,129
4.67
$
(0.02) $
$
4.65
4.66
1.20
5.86
$
$
$
$
$
650,075
160,995
811,070
3.58
0.89
4.47
166,692,000
171,271,000
181,551,000
4.61
$
(0.02) $
$
4.59
4.60
1.18
5.78
$
$
$
3.53
0.88
4.41
Weighted average shares outstanding
168,842,000
173,547,000
183,993,000
The following table is a reconciliation of the share amounts used in computing earnings per share:
Weighted average shares outstanding - Basic
Dilutive effect of assumed exercise of employee stock options and SARs
and vesting of performance shares and restricted shares
Weighted average shares outstanding - Diluted
Years Ended December 31,
2013
171,271,000
2014
166,692,000
2012
181,551,000
2,150,000
168,842,000
2,276,000
173,547,000
2,442,000
183,993,000
Diluted per share amounts are computed using the weighted-average number of common shares and, if dilutive, potential common
shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the
exercise of stock options and SARs, and vesting of performance shares and restricted shares, as determined using the treasury
stock method. For the year ended December 31, 2014 the weighted average number of anti-dilutive potential common shares
excluded from the calculation above totaled 38,789. There were no anti-dilutive potential common shares excluded from the
above calculation for the years ended December 31, 2013 and 2012.
19. Stockholders' Equity
The Company has the authority to issue up to 100,000 shares of $100 par preferred stock and up to 500,000,000 shares of $1.00
par common stock. None of the preferred stock has been issued. As of December 31, 2014 and 2013, 255,892,502 and 255,320,345
shares of common stock were issued, and the Company had 92,880,644 and 85,413,416 treasury shares, held at cost, respectively.
95
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Share Repurchases
Share repurchases were as follows:
Shares repurchased in the open market
Shares repurchased from holders of employee stock options
Total shares repurchased
Years Ended December 31,
2014
7,467,228
—
7,467,228
2013
6,005,880
5,951
6,011,831
2012
12,314,795
86,303
12,401,098
Average price paid per share
$
80.50
$
76.16
$
60.38
In May 2012, the Board of Directors renewed its standing authorization of the Company's share repurchase program, on terms
consistent with its prior five-year authorization which expired at that time. This renewal authorized the repurchase of up to
10,000,000 shares of the Company's common stock during the five-year period ending May 2017. The Company repurchased
3,870,248 shares under this authorization during 2014 for an average share price of $79.71. As of December 31, 2014, the
approximate number of shares still available for repurchase under the May 2012 share repurchase authorization was 38,041.
This authorization was canceled and replaced in January 2015 with a new standing share repurchase authorization approved by
the Board of Directors, whereby the Company may repurchase up to 15,000,000 shares of its common stock over the following
three years.
In November 2012, the Board of Directors approved a $1.0 billion share repurchase program authorizing repurchases of the
Company's common shares over the following 12 to 18 months. In 2014, the Company completed this share repurchase program
through an accelerated share repurchase transaction, whereby Dover paid $292,565 on March 10, 2014 to receive a variable
number of shares on incremental dates through March 31, 2014. The Company repurchased 3,596,980 shares under this transaction
for an average share price of $81.06.
20. Quarterly Data (Unaudited)
Quarter
2014
First
Second
Third
Fourth
2013
First
Second
Third
Fourth
Revenue
Gross
Profit
$ 1,802,570
1,962,636
2,009,575
1,977,947
$ 7,752,728
$
707,859
768,100
774,422
723,868
$ 2,974,249
$ 1,681,540
1,836,981
1,850,653
1,785,922
$ 7,155,096
$
653,847
720,994
724,041
679,709
$ 2,778,591
Continuing Operations
Per
Share -
Basic
Per
Share -
Diluted
Earnings
Net Earnings
Per
Share -
Basic
Per
Share -
Diluted
Net
Earnings
$
$
$
$
$
$
170,041
210,581
225,683
171,835
778,140
160,267
247,988
217,045
172,227
797,527
$
$
1.00
1.26
1.36
1.04
4.67
0.92
1.45
1.27
1.01
4.66
$
$
0.99
1.25
1.34
1.03
4.61
0.91
1.43
1.26
1.00
4.60
$
$
160,138
213,959
231,844
169,294
775,235
$
210,003
330,049
269,114
193,963
$ 1,003,129
$
$
0.94
1.29
1.40
1.03
4.65
1.21
1.93
1.58
1.14
5.86
0.93
1.27
1.38
1.02
4.59
1.20
1.91
1.56
1.13
5.78
96
Table of Contents
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2014, 2013 and 2012
(In thousands)
Allowance for Doubtful Accounts
Year Ended December 31, 2014
Balance at
Beginning
of Year
Acquired by
Purchase or
Merger
Charged
to Cost
and
Expense
(A)
Accounts
Written
Off
Balance at
End of
Year
Other
Allowance for Doubtful Accounts
Year Ended December 31, 2013
Allowance for Doubtful Accounts
Year Ended December 31, 2012
$
$
17,203
1,201
4,730
(3,524)
(716) $
18,894
17,005
—
5,869
(5,427)
(244) $
17,203
Allowance for Doubtful Accounts
56
(A) Net of recoveries on previously reserved or written-off balances.
18,757
$
3,810
(5,138)
(480) $
17,005
Deferred Tax Valuation Allowance
Year Ended December 31, 2014
Balance at
Beginning
of Year
Acquired by
Purchase or
Merger
Additions Reductions
Other
Balance at
End of
Year
Deferred Tax Valuation Allowance $
14,063
Year Ended December 31, 2013
Deferred Tax Valuation Allowance $
17,275
Year Ended December 31, 2012
Deferred Tax Valuation Allowance $
20,396
—
—
—
133,431
(6,242)
— $ 141,252
—
—
(3,212)
— $
14,063
(3,121)
— $
17,275
LIFO Reserve
Year Ended December 31, 2014
LIFO Reserve
Year Ended December 31, 2013
LIFO Reserve
Year Ended December 31, 2012
LIFO Reserve
Balance at
Beginning
of Year
Acquired by
Purchase or
Merger
Charged
to Cost
and
Expense
Reductions
Other
Balance at
End of
Year
$
$
$
50,705
53,374
53,327
—
—
—
4,166
(4,102)
— $
50,769
—
47
(2,669)
— $
50,705
—
— $
53,374
97
Table of Contents
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s Chief
Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures as defined
in Rule 13a-15(e) under the Exchange Act were effective as of December 31, 2014 to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange Commission rules and forms, and (ii) accumulated
and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Controls
During the fourth quarter of 2014, there were no changes in the Company’s internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations Over Internal Controls
The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the Company’s assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are
being made only in accordance with authorizations of the Company’s management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the Company’s assets that could have a material effect on the financial statements.
Management’s report on the effectiveness of the Company’s internal control over financial reporting is included in Item 8 of
this Form 10-K. Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect
that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls
can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of
the effectiveness of controls in future periods is subject to the risk that those internal controls may become inadequate because
of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
ITEM 9B. OTHER INFORMATION
Not applicable.
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Table of Contents
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information with respect to the directors and the board committees of the Company required to be included pursuant to this
Item 10 will be included in the 2015 Proxy Statement that will be filed with the Securities and Exchange Commission pursuant
to Rule 14a-6 under the Exchange Act in accordance with applicable SEC deadlines, and is incorporated in this Item 10 by
reference.
As set forth below is a list of the members of our Board of Directors as of February 13, 2015.
Robert W. Cremin2,3
Retired President & Chief Executive Officer, Esterline Technologies Corporation
Jean-Pierre M. Ergas2,3
Managing Partner, Ergas Ventures, LLC
Peter T. Francis2
Managing Member, Mukilteo Investment Management Company
Kristiane C. Graham2,3
Private Investor
Michael F. Johnston1
Retired Chief Executive Officer, Visteon Corporation
Robert A. Livingston
President & Chief Executive Officer, Dover Corporation
Richard K. Lochridge2
Retired President, Lochridge & Company, Inc.
Bernard G. Rethore1
Chairman of the Board, Emeritus of Flowserve Corporation
Michael B. Stubbs1
Managing Member of S.O.G. Investors, LLC
Stephen M. Todd1
Former Global Vice Chairman, Assurance Professional Practice of Ernst & Young Global Limited
Stephen K. Wagner1,3
Former Senior Advisor, Center for Corporate Governance, Deloitte & Touche LLP
Mary A. Winston1
Executive Vice President & Chief Financial Officer, Family Dollar Stores, Inc.
1 Members of Audit Committee
2 Members of Compensation Committee
3 Members of Governance & Nominating Committee
The information with respect to the executive officers of the Company required to be included pursuant to this Item 10 is included
under the caption “Executive Officers of the Registrant” in Part I of this Form 10-K and is incorporated in this Item 10 by
reference.
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Table of Contents
The information with respect to Section 16(a) reporting compliance required to be included in this Item 10 will be included in
our 2015 Proxy Statement and is incorporated in this Item 10 by reference.
The Company has adopted a code of ethics that applies to its chief executive officer and senior financial officers. A copy of this
code of ethics can be found on our website at www.dovercorporation.com. In the event of any amendment to, or waiver from,
the code of ethics, we will publicly disclose the amendment or waiver by posting the information on our website.
ITEM 11. EXECUTIVE COMPENSATION
The information with respect to executive compensation and the compensation committee required to be included pursuant to
this Item 11 will be included in our 2015 Proxy Statement and is incorporated in this Item 11 by reference.
ITEM 12. SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
The information regarding security ownership of certain beneficial owners and management that is required to be included
pursuant to this Item 12 will be included in our 2015 Proxy Statement and is incorporated in this Item 12 by reference.
Equity Compensation Plans
The Equity Compensation Plan Table below presents information regarding the our equity compensation plans at December 31,
2014:
(a)
(b)
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights (1)
Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
8,012,322
—
8,012,322
$
$
54.55
—
54.55
(c)
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected
in Column (a)) (2)
13,687,703
—
13,687,703
Plan Category
Equity compensation plans approved by stockholders
Equity compensation plans not approved by stockholders
Total
(1) Column (a) includes shares issuable pursuant to outstanding restricted stock and performance share awards under the
Company's 2012 Equity and Cash Incentive Plan (the "2012 Plan") and the 2005 Equity and Cash Incentive Plan. Performance
shares are subject to satisfaction of the applicable performance criteria over a three-year performance period. Restricted
stock and performance share awards are not reflected in the weighted exercise price in column (b) as these awards do not
have an exercise price.
(2) Column (c) consists of shares available for future issuance under the Company's 2012 Equity and Cash Incentive Plan (the
"2012 Plan"). Under the 2012 Plan, the Company may grant options, SARs, restricted stock or restricted stock units,
performance share awards, director shares, or deferred stock units. Under the 2012 Plan, the number of shares available for
issuance will be reduced (i) by one share for each share issued pursuant to options or SARs and (ii) by three shares for each
share of stock issued pursuant to restricted stock, restricted stock unit, performance share, director share, or deferred stock
unit awards.
As of December 31, 2014, equity securities have been authorized for issuance to employees and/or non-employee directors
under the 2012 Plan and its predecessor plan, the 2005 Plan. Although the 2005 Plan has expired and no further awards may be
granted under the Plan, there remain outstanding options , stock-settled appreciation rights, and performance share awards under
the 2005 Plan, which are reflected in Column (a) of the table.
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Table of Contents
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information with respect to any director independence, related party transaction policies, and any reportable transaction,
business relationship, or indebtedness between the Company and the beneficial owners of more than 5% of the Common Stock,
the directors or nominees for director of the Company, the executive officers of the Company, or the members of the immediate
families of such individuals that are required to be included pursuant to this Item 13 is included in the 2015 Proxy Statement
and is incorporated in this Item 13 by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information with respect to the Company’s relationship with its independent registered public accounting firm and fees paid
thereto required to be included pursuant to this Item 14 is included in the 2015 Proxy Statement and is incorporated in this Item
14 by reference.
The information with respect to audit committee pre-approval policies and procedures required to be included pursuant to this
Item 14 is included in the 2015 Proxy Statement and is incorporated in this Item 14 by reference.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
a) The following documents are filed as part of this report:
PART IV
(1) Financial Statements. The financial statements are set forth under “Item 8. Financial Statements and Supplementary
Data” of this Form 10-K.
(2) Schedules. The following financial statement schedule is set forth under “Item 8. Financial Statements and Supplementary
Data” of this Form 10-K. All other schedules have been omitted because they are not required, are not applicable or the
required information is included in the financial statements or the notes thereto.
•
Schedule II – Valuation and Qualifying Accounts
(3) Exhibits. The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this
Form 10-K. The exhibits will be filed with the SEC but will not be included in the printed version of the Annual Report
to Shareholders.
101
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized.
Signatures
DOVER CORPORATION
/s/ Robert A. Livingston
Robert A. Livingston
President and Chief Executive Officer
Date: February 13, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been
signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Each of the
undersigned, being a director or officer of Dover Corporation (the “Company”), hereby constitutes and appoints Robert A.
Livingston, Brad M. Cerepak and Ivonne M. Cabrera, and each of them (with full power to each of them to act alone), his or
her true and lawful attorney-in-fact and agent for him or her and in his or her name, place and stead in any and all capacities, to
sign the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 under the Securities Exchange
Act of 1934, as amended, and any and all amendments thereto, and to file the same with all exhibits thereto and other documents
in connection therewith with the Securities and Exchange Commission and any other appropriate authority, granting unto such
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing required
and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he or
she might or could do if personally present, hereby ratifying and confirming all that such attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
Signature
Title
Date
/s/ Robert W. Cremin
Robert W. Cremin
/s/ Robert A. Livingston
Robert A. Livingston
/s/ Brad M. Cerepak
Brad M. Cerepak
/s/ Raymond T. McKay, Jr.
Raymond T. McKay, Jr.
/s/ Jean-Pierre M. Ergas
Jean-Pierre M. Ergas
/s/ Peter T. Francis
Peter T. Francis
Chairman, Board of Directors
February 13, 2015
Chief Executive Officer,
President and Director
(Principal Executive Officer)
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
February 13, 2015
February 13, 2015
Vice President, Controller
(Principal Accounting Officer)
February 13, 2015
February 13, 2015
February 13, 2015
Director
Director
102
Table of Contents
Signature
/s/ Kristiane C. Graham
Kristiane C. Graham
/s/ Michael F. Johnston
Michael F. Johnston
/s/ Richard K. Lochridge
Richard K. Lochridge
/s/ Bernard G. Rethore
Bernard G. Rethore
/s/ Michael B. Stubbs
Michael B. Stubbs
/s/ Stephen M. Todd
Stephen M. Todd
/s/ Stephen K. Wagner
Stephen K. Wagner
/s/ Mary A. Winston
Mary A. Winston
Date
February 13, 2015
February 13, 2015
February 13, 2015
February 13, 2015
February 13, 2015
February 13, 2015
February 13, 2015
February 13, 2015
Title
Director
Director
Director
Director
Director
Director
Director
Director
103
Table of Contents
EXHIBIT INDEX
(2.1) Separation and Distribution Agreement, dated February 28, 2014, by and between the Company and Knowles
Corporation, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed March 3, 2014 (SEC File
No. 001-04018), is incorporated by reference.
(3)(i) Fourth Restated Certificate of Incorporation of the Company, filed as Exhibit 3(i)(a) to the Company’s Current
Report on Form 8-K filed May 6, 2014 (SEC File No. 001-04018), is incorporated by reference.
(3)(ii) Restated By-Laws of the Company (as amended and restated as of May 1, 2014), filed as Exhibit 3(ii)(a) to the
Company’s Current Report on Form 8-K filed May 6, 2014 (SEC File No. 001-04018), are incorporated by
reference.
(4.1) Indenture, dated as of June 8, 1998 between the Company and The First National Bank Chicago, as trustee, filed
as Exhibit 4.1 to the Company's Current Report on Form 8-K filed June 12, 1998 (SEC File No. 001-04018), is
incorporated by reference.
(4.2) Form of 6.65% Debentures due June 1, 2028 ($200,000,000 aggregate principal amount), filed as Exhibit 4.4 to
the Company's Current Report on Form 8-K filed June 12, 1998 (SEC File No. 001-04018), is incorporated by
reference.
(4.3) Indenture, dated as of February 8, 2001 between the Company and BankOne Trust Company, N.A., as trustee,
filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed February 13, 2001 (SEC File
No. 001-04018), is incorporated by reference.
(4.4) First Supplemental Indenture, dated as of October 13, 2005, among the Company, J.P. Morgan Trust Company,
National Association, as original trustee, and The Bank of New York, as trustee, filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K filed October 13, 2005 (SEC File No. 001-04018), is incorporated by
reference.
(4.5) Form of 4.875% Notes due October 15, 2015 ($300,000,000 aggregate principal amount), filed as Exhibit 4.2 to
the Company's Current Report on Form 8-K filed October 13, 2005 (SEC File No. 001-04018), is incorporated
by reference.
(4.6) Form of 5.375% Debentures due October 15, 2035 ($300,000,000 aggregate principal amount), filed as
Exhibit 4.3 to the Company's Current Report on Form 8-K filed October 13, 2005 (SEC File No. 001-04018), is
incorporated by reference.
(4.7) Second Supplemental Indenture, dated as of March 14, 2008, between the Company and The Bank of New York,
as trustee, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed March 14, 2008 (SEC File
No. 001-04018), is incorporated by reference.
(4.8) Form of Global Note representing the 5.45% Notes due March 15, 2018 ($350,000,000 aggregate principal
amount), filed as Exhibit 4.2 to the Company's Current Report on Form 8-K filed March 14, 2008 (SEC File
No. 001-04018), is incorporated by reference.
(4.9) Form of Global Note representing 6.60% Notes due March 15, 2038 ($250,000,000 aggregate principal amount),
filed as Exhibit 4.3 to the Company's Current Report on Form 8-K filed March 14, 2008 (SEC File
No. 001-04018), is incorporated by reference.
(4.10) Third Supplemental Indenture, dated as of February 22, 2011, between the Company and The Bank of New York
Mellon, as trustee, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed February 22, 2011
(SEC File No. 001-04018), is incorporated by reference.
(4.11) Form of 4.300% Notes due March 1, 2021 ($450,000,000 aggregate principal amount), filed as Exhibit 4.2 to the
Company's Current Report on Form 8-K filed February 22, 2011 (SEC File No. 001-04018), is incorporated by
reference.
(4.12) Form of 5.375% Notes due March 1, 2041 ($350,000,000 aggregate principal amount), filed as Exhibit 4.3 to the
Company's Current Report on Form 8-K filed February 22, 2011 (SEC File No. 001-04018), is incorporated by
reference.
(4.13) Fourth Supplemental Indenture, dated as of December 2, 2013, between the Company and The Bank of New
York Mellon, as trustee and The Bank of New York Mellon, London Branch, as paying agent, filed as Exhibit 4.1
to the Company's Current Report on Form 8-K filed December 3, 2013 (SEC File No. 001-04018), is
incorporated by reference.
(4.14) Form of Global Note representing the 2.125% Notes due 2020 (€300,000,000 aggregate principal amount)
(included as Exhibit A to the Fourth Supplemental Indenture), filed as Exhibit 4.2 to the Company's Current
Report on Form 8-K filed December 3, 2013 (SEC File No. 001-04018), is incorporated by reference.
The Company agrees to furnish to the Securities and Exchange Commission upon request, a copy of any
instrument with respect to long-term debt under which the total amount of securities authorized does not exceed
10 percent of the total consolidated assets of the Company.
Table of Contents
(10.1) Dover Corporation Senior Executive Change-in-Control Severance Plan, filed as Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the year ended December 31, 2010 (SEC File No. 001-04018), is incorporated
by reference.*
(10.2) Amendment No. 1 to the Dover Corporation Senior Executive Change-in-Control Severance Plan, filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2012 (SEC
File No. 001-04018), is incorporated by reference. *
(10.3) Dover Corporation Executive Officer Annual Incentive Plan, as amended and restated as of January 1, 2009, filed
as Exhibit 10.2 to the Company's Current Report on Form 8-K filed May 13, 2009 (SEC File No. 001-04018), is
incorporated by reference.*
(10.4) Dover Corporation Deferred Compensation Plan, as amended and restated as of January 1, 2009, filed as Exhibit
10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008 (SEC File No.
001-04018), is incorporated by reference.*
(10.5) First Amendment and Second Amendment to the Dover Corporation Deferred Compensation Plan, as amended
and restated as of January 1, 2009, filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 2013 (SEC File No. 001-04018), is incorporated by reference.*
(10.6) Third Amendment, adopted on July 31, 2014 and effective as of January 1, 2014, to the Dover Corporation
Deferred Compensation Plan, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
period ended September 30, 2014 (SEC File No. 001-04018), is incorporated by reference.*
(10.7) Amendment No. 1 to the Dover Corporation 1995 Incentive Stock Option Plan And 1995 Cash Performance
Program (as amended effective May 4, 2006 with respect to any awards then outstanding). (1)*
(10.8) Dover Corporation 2005 Equity and Cash Incentive Plan, amended and restated as of January 1, 2009, filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 13, 2009 (SEC File No. 001-04018), is
incorporated by reference.*
(10.9) Amendment No. 1 to the Dover Corporation 2005 Equity and Cash Incentive Plan (Amended and Restated as of
January 1, 2009). (1) *
(10.10) Amendment No. 1 to the Dover Corporation 2012 Equity and Cash Incentive Plan, filed as Exhibit 10.25 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2013 (SEC File No. 001-04018), is
incorporated by reference.*
(10.11) Form of award grant letter for SSAR grants made under the 2005 Equity and Cash Incentive Plan, filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K for the period ended December 31, 2011(SEC File
No. 001-04018), is incorporated by reference.*
(10.12) Form of award grant letter for cash performance awards made under the 2005 Equity and Cash Incentive Plan,
filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the period ended December 31, 2011
(SEC File No. 001-04018), is incorporated by reference.*
(10.13) Form of award grant letter for performance share awards made under the 2005 Equity and Cash Incentive Plan,
filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the period ended December 31, 2011
(SEC File No. 001-04018), is incorporated by reference.*
(10.14) Form of award grant letter for restricted stock awards made under the 2005 Equity and Cash Incentive Plan, filed
as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the period ended December 31, 2010 (SEC
File No. 001-04018), is incorporated by reference.*
(10.15) Dover Corporation Pension Replacement Plan (formerly the Supplemental Executive Retirement Plan), as
amended and restated as of January 1, 2010, filed as Exhibit 10.11 to the Company's Annual Report on Form 10-
K for the year ended December 31, 2009 (SEC File No. 001-04018), is incorporated by reference.*
(10.16) First Amendment to the Dover Corporation Pension Replacement Plan, as amended and restated as of January 1,
2010, filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended September 30,
2013 (SEC File No. 001-04018), is incorporated by reference.*
(10.17) Dover Corporation Executive Severance Plan, filed as Exhibit 10.17 to the Company's Annual Report on Form
10-K for the period ended December 31, 2010 (SEC File No. 001-04018), is incorporated by reference.*
(10.18) Amendment No. 1 to the Executive Severance Plan, filed as Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 2012 (SEC File No. 001-04018), is incorporated by reference. *
(10.19) Amendment No. 1 to the Executive Employee Supplemental Retirement Agreement with Robert A. Livingston,
Jr., filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed March 3, 2010 (SEC File No.
001-04018), is incorporated by reference.*
(10.20) Dover Corporation 2012 Equity and Cash Incentive Plan, effective as of May 3, 2012, filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30, 2012 (SEC File No. 001-04018), is
incorporated by reference.*
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(10.21) Amendment No. 1 to the Dover Corporation 2012 Equity and Cash Incentive Plan, filed as Exhibit 10.25 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2013 (SEC File No. 001-04018), is
incorporated by reference.*
(10.22) Amendment Number 2, adopted and effective as of August 6, 2014, to the Dover Corporation 2012 Equity and
Cash Incentive Plan, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period
ended September 30, 2014 (SEC File No. 001-04018), is incorporated by reference.*
(10.23) Form of award grant letter for SSAR grants made under the Dover Corporation 2012 Equity and Cash Incentive
Plan, filed as Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the year ended December 31,
2012 (SEC File No. 001-04018), is incorporated by reference.*
(10.24) Form of award grant letter for SSAR grants made under the Dover Corporation 2012 Equity and Cash Incentive
Plan, filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31,
2014 (SEC File No. 001-04018), is incorporated by reference.*
(10.25) Form of award grant letter for SSAR grants made under the Dover Corporation 2012 Equity and Cash Incentive
Plan. (1) *
(10.26) Form of award grant letter for cash performance awards made under the Dover Corporation 2012 Equity and
Cash Incentive Plan, filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2012 (SEC File No. 001-04018), is incorporated by reference.*
(10.27) Form of award grant letter for cash performance awards made under the Dover Corporation 2012 Equity and
Cash Incentive Plan. (1) *
(10.28) Form of award grant letter for performance share awards made under the Dover Corporation 2012 Equity and
Cash Incentive Plan, filed as Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2012 (SEC File No. 001-04018), is incorporated by reference.*
(10.29) Form of award grant letter for performance share awards made under the Dover Corporation 2012 Equity and
Cash Incentive Plan, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended
March 31, 2014 (SEC File No. 001-04018), is incorporated by reference.*
(10.30) Form of award grant letter for performance share awards made under the Dover Corporation 2012 Equity and
Cash Incentive Plan. (1) *
(10.31) Form of Restricted Stock Unit Award Letter under the Dover Corporation 2012 Equity and Cash Incentive Plan,
filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2014
(SEC File No. 001-04018), is incorporated by reference.*
(10.32) Form of Restricted Stock Unit Award Letter under the Dover Corporation 2012 Equity and Cash Incentive Plan.
(1) *
(10.33) Five-Year Credit Agreement dated as of November 10, 2011 by and among the Company, the Borrowing
Subsidiaries party thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A as Administrative Agent;
and Bank of America, N.A., and Wells Fargo Bank National Association, as Syndication Agents, J.P. Morgan
Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as Joint
Lead Arrangers and Joint Bookrunners, filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the period ended December 31, 2011, is incorporated by reference.
(10.34) First Amendment dated as of June 21, 2013 to the Five-Year Credit Agreement dated as of November 10, 2011 by
and among the Company, the Borrowing Subsidiaries party thereto, the lenders party thereto and JPMorgan
Chase Bank, N.A., as administrative agent, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-
Q for the period ended June 30, 2013 (SEC File No. 001-04018), is incorporated by reference.
(10.35) Employee Matters Agreement, dated February 28, 2014, by and between the Company and Knowles Corporation,
filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 3, 2014 (SEC File No.
001-04018), is incorporated by reference.
(10.36) Tax Matters Agreement, dated February 28, 2014, by and between the Company and Knowles Corporation, filed
as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 3, 2014 (SEC File No. 001-04018), is
incorporated by reference.
(21) Subsidiaries of Dover. (1)
(23) Consent of Independent Registered Public Accounting Firm. (1)
(24) Power of Attorney (included in signature page). (1)
(31.1) Certification pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934, as amended, signed and dated
by Brad M. Cerepak. (1)
(31.2) Certification pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934, as amended, signed and dated
by Robert A. Livingston. (1)
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(32) Certification pursuant to 18 U.S.C. Section 1350, signed and dated by Robert A. Livingston and Brad M.
Cerepak. (1)
(101) The following materials from Dover Corporation's Annual Report on Form 10-K for the year ended December
31, 2014 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of
Earnings, (ii) Consolidated Statements of Comprehensive Earnings (iii) Consolidated Balance Sheets, (iv)
Consolidated Statements of Stockholders' Equity, (v) Consolidated Statement of Cash Flows, and (vi) Notes to
the Consolidated Financial Statements. (1)
* Executive compensation plan or arrangement.
(1) Filed herewith.
Dover Corporation
3005 Highland Parkway
Downers Grove, IL 60515
www.dovercorporation.com