Quarterly Report (10-q)

Date : 10/17/2019 @ 10:56AM
Source : Edgar (US Regulatory)
Stock : Dover Corp (DOV)
Quote : 108.71  -0.43 (-0.39%) @ 9:02PM
Dover share price Chart
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Last $ 108.71 ◊ 0.00 (0.00%)

Quarterly Report (10-q)

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

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission File Number: 1-4018
DOV-20190930_G1.JPG
(Exact name of registrant as specified in its charter)
Delaware 53-0257888
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
3005 Highland Parkway  
Downers Grove, Illinois
60515
(Address of principal executive offices) (Zip Code)
(630) 541-1540
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock DOV New York Stock Exchange
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  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes   No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12-b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-Acelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes   No  
The number of shares outstanding of the Registrant’s common stock as of October 10, 2019 was 145,266,386.



Dover Corporation
Form 10-Q
Table of Contents

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Item 1. Financial Statements

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

  Three Months Ended September 30,     Nine Months Ended September 30,   
  2019 2018 2019 2018
Revenue $ 1,825,345    $ 1,747,403    $ 5,360,808    $ 5,183,168   
Cost of goods and services 1,151,857    1,100,883    3,391,185    3,268,583   
Gross profit 673,488    646,520    1,969,623    1,914,585   
Selling, general and administrative expenses 390,775    426,445    1,195,875    1,290,246   
Loss on assets held for sale —    —    46,946    —   
Operating earnings 282,713    220,075    726,802    624,339   
Interest expense 31,410    31,192    94,972    98,957   
Interest income (1,263)   (2,060)   (3,098)   (6,680)  
Other income, net (5,364)   (2,073)   (11,059)   (6,641)  
Earnings before provision for income taxes 257,930    193,016    645,987    538,703   
Provision for income taxes 51,924    35,711    136,191    105,533   
Earnings from continuing operations    206,006    157,305    509,796    433,170   
Loss from discontinued operations, net    —    —    —    (4,472)  
Net earnings    $ 206,006    $ 157,305    $ 509,796    $ 428,698   
Earnings per share from continuing operations:
Basic $ 1.42    $ 1.07    $ 3.51    $ 2.87   
Diluted $ 1.40    $ 1.05    $ 3.47    $ 2.82   
Loss per share from discontinued operations:
Basic $ —    $ —    $ —    $ (0.03)  
Diluted $ —    $ —    $ —    $ (0.03)  
Net earnings per share:
Basic $ 1.42    $ 1.07    $ 3.51    $ 2.84   
Diluted $ 1.40    $ 1.05    $ 3.47    $ 2.79   
Weighted average shares outstanding:
Basic 145,372    147,344    145,276    151,177   
Diluted 147,051    149,457    147,053    153,429   
 

See Notes to Condensed Consolidated Financial Statements



1

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

  Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Net earnings $ 206,006    $ 157,305    $ 509,796    $ 428,698   
Other comprehensive (loss) earnings, net of tax  
Foreign currency translation adjustments:
Foreign currency translation losses (50,865)   (13,567)   (41,143)   (26,418)  
Reclassification of foreign currency translation losses to earnings —    —    25,339    —   
Total foreign currency translation adjustments (50,865)   (13,567)   (15,804)   (26,418)  
Pension and other post-retirement benefit plans:
Amortization of actuarial losses included in net periodic pension cost 127    402    379    3,409   
Amortization of prior service costs included in net periodic pension cost 539    704    1,623    2,699   
Total pension and other post-retirement benefit plans 666    1,106    2,002    6,108   
Changes in fair value of cash flow hedges:
Unrealized net gains (losses) arising during period 545    (1,449)   (223)   2,019   
Net losses (gains) reclassified into earnings 577    364    (69)   (347)  
Total cash flow hedges 1,122    (1,085)   (292)   1,672   
Other comprehensive loss, net of tax    (49,077)   (13,546)   (14,094)   (18,638)  
Comprehensive earnings $ 156,929    $ 143,759    $ 495,702    $ 410,060   


See Notes to Condensed Consolidated Financial Statements

2

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

  September 30, 2019 December 31, 2018
Assets   
Current assets:       
Cash and cash equivalents    $ 340,532    $ 396,221   
Receivables, net of allowances of $32,340 and $28,469    1,269,150    1,231,859   
Inventories    816,563    748,796   
Prepaid and other current assets    159,747    126,878   
Total current assets    2,585,992    2,503,754   
Property, plant and equipment, net    820,582    806,497   
Goodwill    3,760,428    3,677,328   
Intangible assets, net    1,080,130    1,134,256   
Other assets and deferred charges    422,169    243,936   
Total assets $ 8,669,301    $ 8,365,771   
Liabilities and Stockholders' Equity
Current liabilities:       
Notes payable    $ 182,700    $ 220,318   
Accounts payable    952,708    969,531   
Accrued compensation and employee benefits    225,515    212,666   
Accrued insurance    101,677    97,600   
Other accrued expenses    338,529    313,452   
Federal and other income taxes    24,173    13,854   
Total current liabilities    1,825,302    1,827,421   
Long-term debt    2,908,729    2,943,660   
Deferred income taxes    333,886    339,325   
Noncurrent income tax payable 54,304    54,304   
Other liabilities    529,438    432,395   
Stockholders' equity:       
Total stockholders' equity    3,017,643    2,768,666   
Total liabilities and stockholders' equity    $ 8,669,301    $ 8,365,771   


See Notes to Condensed Consolidated Financial Statements





3

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

  Common stock $1 par value Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive (loss) earnings Total stockholders' equity
Balance at June 30, 2019    $ 258,315    $ 873,034    $ (5,947,562)   $ 7,979,597    $ (208,113)   $ 2,955,271   
Net earnings    —    —    —    206,006    —    206,006   
Dividends paid ($0.49 per share)   —    —    —    (71,342)   —    (71,342)  
Common stock issued for the exercise of share-based awards    111    (7,913)   —    —    —    (7,802)  
Stock-based compensation expense    —    7,876    —    —    —    7,876   
Common stock acquired    —    —    (23,280)   —    —    (23,280)  
Other comprehensive loss, net of tax    —    —    —    —    (49,077)   (49,077)  
Other, net    —    (8)   —    (1)   —    (9)  
Balance at September 30, 2019    $ 258,426    $ 872,989    $ (5,970,842)   $ 8,114,260    $ (257,190)   $ 3,017,643   


  Common stock $1 par value Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive (loss) earnings Total stockholders' equity
Balance at June 30, 2018    $ 257,394    $ 787,132    $ (5,682,016)   $ 7,657,860    $ (179,779)   $ 2,840,591   
Net earnings    —    —    —    157,305    —    157,305   
Dividends paid ($0.48 per share)   —    —    —    (70,804)   —    (70,804)  
Common stock issued for the exercise of share-based awards    381    (23,622)   —    —    —    (23,241)  
Stock-based compensation expense    —    5,443    —    —    —    5,443   
Common stock acquired    —    —    (147,794)   —    —    (147,794)  
Other comprehensive loss, net of tax    —    —    —    —    (13,546)   (13,546)  
Other, net    —    (20)   —    —    —    (20)  
Balance at September 30, 2018    $ 257,775    $ 768,933    $ (5,829,810)   $ 7,744,361    $ (193,325)   $ 2,747,934   



See Notes to Condensed Consolidated Financial Statements

















4

DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
  Common stock $1 par value Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive (loss) earnings Total stockholders' equity
Balance at December 31, 2018    $ 257,822    $ 886,016    $ (5,947,562)   $ 7,815,486    $ (243,096)   $ 2,768,666   
Net earnings    —    —    —    509,796    —    509,796   
Dividends paid ($1.45 per share)   —    —    —    (211,072)   —    (211,072)  
Common stock issued for the exercise of share-based awards    604    (29,615)   —    —    —    (29,011)  
Stock-based compensation expense    —    24,493    —    —    —    24,493   
Common stock acquired    —    —    (23,280)   —    —    (23,280)  
Other comprehensive loss, net of tax    —    —    —    —    (14,094)   (14,094)  
Other, net    —    (7,905)   —    50    —    (7,855)  
Balance at September 30, 2019    $ 258,426    $ 872,989    $ (5,970,842)   $ 8,114,260    $ (257,190)   $ 3,017,643   


  Common stock $1 par value Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive (loss) earnings Total stockholders' equity
Balance at December 31, 2017    $ 256,992    $ 942,485    $ (5,077,039)   $ 8,455,501    $ (194,759)   $ 4,383,180   
Adoption of ASU 2018-02
—    —    —    12,856    (12,856)   —   
Cumulative catch-up adjustment related to Adoption of Topic 606
—    —    —    175    —    175   
Net earnings    —    —    —    428,698    —    428,698   
Dividends paid ($1.42 per share)   —    —    —    (213,126)   —    (213,126)  
Separation of Apergy    —    —    —    (939,743)   32,928    (906,815)  
Common stock issued for the exercise of share-based awards    783    (45,226)   —    —    —    (44,443)  
Stock-based compensation expense    —    16,590    —    —    —    16,590   
Common stock acquired    —    (140,000)   (752,771)   —    —    (892,771)  
Other comprehensive loss, net of tax    —    —    —    —    (18,638)   (18,638)  
Other, net    —    (4,916)   —    —    —    (4,916)  
Balance at September 30, 2018    $ 257,775    $ 768,933    $ (5,829,810)   $ 7,744,361    $ (193,325)   $ 2,747,934   



See Notes to Condensed Consolidated Financial Statements
















5

DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
  Nine Months Ended September 30,   
  2019 2018
Operating Activities:    
Net earnings $ 509,796    $ 428,698   
Adjustments to reconcile net earnings to cash from operating activities:
Loss from discontinued operations, net —    4,472   
Loss on assets held for sale 46,946    —   
Depreciation and amortization 202,294    206,018   
Stock-based compensation expense 24,493    15,846   
Other, net (6,107)   (13,946)  
Cash effect of changes in assets and liabilities:
Accounts receivable, net (67,603)   (119,687)  
Inventories (74,412)   (130,351)  
Prepaid expenses and other assets (29,336)   (34,604)  
Accounts payable (3,875)   87,898   
Accrued compensation and employee benefits (5,908)   (17,101)  
Accrued expenses and other liabilities (3,833)   (8,169)  
Accrued and deferred taxes, net (8,357)   (390)  
Net cash provided by operating activities 584,098    418,684   
Investing Activities:       
Additions to property, plant and equipment (137,276)   (134,556)  
Acquisitions, net of cash acquired (215,687)   (68,557)  
Proceeds from sale of property, plant and equipment 2,838    4,681   
Proceeds from sale of businesses 24,218    2,069   
Other (10,150)   (13,762)  
Net cash used in investing activities (336,057)   (210,125)  
Financing Activities:       
Cash received from Apergy, net of cash distributed —    689,643   
Repurchase of common stock
(23,280)   (892,771)  
Change in commercial paper and notes payable (37,650)   67,617   
Dividends paid to stockholders (211,072)   (213,126)  
Payments to settle employee tax obligations on exercise of share-based awards (29,011)   (44,443)  
Repayment of long-term debt —    (350,000)  
Other (1,417)   (6,233)  
Net cash used in financing activities (302,430)   (749,313)  
Cash Flows from Discontinued Operations       
Net cash provided by operating activities of discontinued operations —    15,790   
Net cash used in investing activities of discontinued operations —    (23,705)  
Net cash used in discontinued operations    —    (7,915)  
Effect of exchange rate changes on cash and cash equivalents (1,300)   3,982   
Net decrease in cash and cash equivalents    (55,689)   (544,687)  
Cash and cash equivalents at beginning of period 396,221    753,964   
Cash and cash equivalents at end of period $ 340,532    $ 209,277   


See Notes to Condensed Consolidated Financial Statements

6

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

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

On May 9, 2018, the Company completed a pro-rata distribution of the common stock of Apergy Corporation ("Apergy") to the Company's shareholders of record as of the close of business on April 30, 2018. Apergy holds entities conducting upstream energy businesses previously included in the Energy segment. As discussed in Note 5 - Discontinued and Disposed Operations, the Apergy businesses met the criteria to be reported as discontinued operations because the spin-off is a strategic shift in business that has a major effect on the Company's operations and financial results. Therefore, the Company is reporting the historical results of Apergy, including the results of operations and cash flows as discontinued operations for all periods presented herein. Subsequent to the spin-off of Apergy, effective the second quarter of 2018, the Company is aligned into three reportable segments. See Note 18 — Segment Information for additional information regarding the segments, including segment results for the three and nine months ended September 30, 2019 and 2018. Unless otherwise noted, the accompanying Notes to the Consolidated Financial Statements have all been revised to reflect the effect of the separation of Apergy and all prior year balances have been revised accordingly to reflect continuing operations only.

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

2. Spin-off of Apergy Corporation

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

The following is a summary of the assets and liabilities transferred to Apergy as part of the separation on May 9, 2018:
Assets:
Cash and cash equivalents $ 10,357   
Current assets 462,620   
Non-current assets 1,438,760   
$ 1,911,737   
Liabilities:
Current liabilities $ 185,354   
Non-current liabilities 119,568   
$ 304,922   
Net assets distributed to Apergy Corporation $ 1,606,815   
Less: Cash received from Apergy Corporation 700,000   
Net distribution to Apergy Corporation $ 906,815   

7

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

3. Revenue

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

Revenue from contracts with customers is disaggregated by end markets, segments and geographic location, as it best depicts the nature and amount of the Company’s revenue.

8

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The following table presents revenue disaggregated by end market and segment:
Three Months Ended September 30,     Nine Months Ended September 30,   
  2019 2018 2019 2018
Printing & Identification $ 287,157    $ 283,232    $ 848,056    $ 865,588   
Industrials 414,634    388,302    1,237,427    1,180,561   
Total Engineered Systems segment 701,791    671,534    2,085,483    2,046,149   
Fueling & Transport 411,769    367,617    1,175,405    1,050,276   
Pumps (1)
169,678    167,542    523,730    503,157   
Process Solutions 171,599    154,906    486,568    458,396   
Total Fluids segment 753,046    690,065    2,185,703    2,011,829   
Refrigeration 313,908    328,281    905,084    937,168   
Food Equipment 56,427    57,933    185,368    189,047   
Total Refrigeration & Food Equipment segment 370,335    386,214    1,090,452    1,126,215   
Intra-segment eliminations 173    (410)   (830)   (1,025)  
Total Consolidated Revenue $ 1,825,345    $ 1,747,403    $ 5,360,808    $ 5,183,168   
(1) Finder Pompe S.r.l was sold on April 2, 2019.

The following table presents revenue disaggregated by geography based on the location of the Company's customer:
Three Months Ended September 30,     Nine Months Ended September 30,   
  2019 2018 2019 2018
United States $ 1,002,349    $ 922,261    $ 2,883,147    $ 2,707,470   
Europe 376,601    369,479    1,184,520    1,158,891   
Asia 229,210    219,645    623,838    633,280   
Other Americas 150,257    166,182    466,591    467,523   
Other 66,928    69,836    202,712    216,004   
Total $ 1,825,345    $ 1,747,403    $ 5,360,808    $ 5,183,168   

At September 30, 2019, we estimated that $81.6 million in revenue is expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. We expect to recognize approximately 58% of our unsatisfied (or partially unsatisfied) performance obligations as revenue through 2020, with the remaining balance to be recognized in 2021 and thereafter.

The following table provides information about contract assets and contract liabilities from contracts with customers:
  September 30, 2019 December 31, 2018 At Adoption
Contract assets $ 13,924    $ 9,330    $ 11,932   
Contract liabilities - current 39,656    36,461    48,268   
Contract liabilities - non-current 9,121    9,382    9,916   
The revenue recognized during the nine months ended September 30, 2019 and 2018 that was included in contract liabilities at the beginning of the period amounted to $25,977 and $37,579, respectively.




9

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

2019 Acquisitions

During the nine months ended September 30, 2019, the Company acquired three businesses in separate transactions for total consideration of $216,398, net of cash acquired and including contingent consideration. These businesses were acquired to complement and expand upon existing operations within the Fluids segment. The goodwill recorded as a result of these acquisitions represents the economic benefits expected to be derived from product line expansions and operational synergies. The goodwill is deductible for U.S. income tax purposes for these acquisitions.

On May 7, 2019, the Company acquired the assets of the All-Flo Pump Company, Limited business ("All-Flo"), a growing manufacturer of specialty pumps for $39,954. The All-Flo acquisition strengthens Dover's position in the growing market for air-operated double-diaphragm pumps within the Pumps end market of the Fluids segment.

On January 25, 2019, the Company acquired the assets of Belanger, Inc. ("Belanger"), a leading full-line car wash equipment manufacturer for $175,350, net of cash acquired. The Belanger acquisition strengthens Dover's position in the vehicle wash business within the Fueling & Transport end market of the Fluids segment.

One other immaterial acquisition was completed during the nine months ended September 30, 2019, which included contingent consideration, within the Fluids segment.

The following presents the preliminary allocation of purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at acquisition date:
Total   
Current assets, net of cash acquired $ 14,353   
Property, plant and equipment 1,030   
Goodwill 119,363   
Intangible assets 91,980   
Other assets and deferred charges 20   
Current liabilities (10,348)  
Net assets acquired $ 216,398   

The amounts assigned to goodwill and major intangible asset classifications were as follows:
Amount allocated Useful life (in years)
Goodwill $ 119,363    na
Customer intangibles 68,500    9 - 13
Patents 16,000    9
Trademarks 7,480    15
$ 211,343   

2018 Acquisitions

During the nine months ended September 30, 2018, the Company acquired two businesses in separate transactions for total consideration of $68,557, net of cash acquired. These businesses were acquired to complement and expand upon existing operations within the Fluids and Refrigeration & Food Equipment segments. The goodwill recorded as a result of these acquisitions reflects the benefits expected to be derived from product line expansions and operational synergies. The goodwill is non-deductible for U.S. federal income tax purposes for these acquisitions.

On January 2, 2018, the Company acquired 100% of the voting stock of Ettlinger Group ("Ettlinger"), within the Fluids segment for $53,218, net of cash acquired. In connection with this acquisition, the Company recorded goodwill of $36,493 and intangible assets of $19,907, primarily related to customer intangibles. The intangible assets are being amortized over 8 to 15 years.



10

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
On January 12, 2018, the Company acquired 100% of the voting stock of Rosario Handel B.V. ("Rosario"), within the Refrigeration & Food Equipment segment for total consideration of $15,339, net of cash acquired. In connection with this
acquisition, the Company recorded goodwill of $10,402 and a customer intangible asset of $4,149. The customer intangible asset is being amortized over 10 years.

Pro Forma Information

The following unaudited pro forma information illustrates the impact of 2019 and 2018 acquisitions on the Company’s revenue and earnings from operations for the three and nine months ended September 30, 2019 and 2018, respectively.
The unaudited pro forma information assumes that the 2019 and 2018 acquisitions had taken place at the beginning of the prior year, 2018 and 2017, respectively. Unaudited pro forma earnings are adjusted to reflect the comparable impact of additional depreciation and amortization expense, net of tax, resulting from the fair value measurement of intangible and tangible assets relating to the year of acquisition.

The unaudited pro forma effects for the three and nine months ended September 30, 2019 and 2018 were as follows:
  Three Months Ended September 30,     Nine Months Ended September 30,   
  2019 2018 2019 2018
Revenue:       
As reported    $ 1,825,345    $ 1,747,403    $ 5,360,808    $ 5,183,168   
Pro forma    1,825,510    1,764,397    5,369,686    5,233,912   
Earnings from continuing operations:   
As reported    $ 206,006    $ 157,305    $ 509,796    $ 433,170   
Pro forma    206,091    159,122    512,679    440,603   
Basic earnings per share from continuing operations:   
As reported    $ 1.42    $ 1.07    $ 3.51    $ 2.87   
Pro forma    1.42    1.08    3.53    2.91   
Diluted earnings per share from continuing operations:   
As reported    $ 1.40    $ 1.05    $ 3.47    $ 2.82   
Pro forma    1.40    1.06    3.49    2.87   

5. Disposed and Discontinued Operations

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

Disposed Operations

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

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

On April 2, 2019, Dover completed the sale of Finder to Aturia, which generated total cash proceeds of $24,218, of which $2,245 was received on March 29, 2019. The Finder business is included in the results of the Fluids segment. The sale does not represent a strategic shift that will have a major effect on operations and financial results and, therefore, did not qualify for presentation as a discontinued operation.

There were no dispositions during the nine months ended September 30, 2018.

11

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

There were no discontinued operations for the three and nine months ending September 30, 2019.

In 2018, the Apergy businesses, as discussed in Note 2, met the criteria to be reported as discontinued operations because the spin-off was a strategic shift in business that has a major effect on the Company's operations and financial results. Therefore, the results of discontinued operations for the three and nine months ended September 30, 2018 include the historical results of Apergy prior to its distribution on May 9, 2018. The three and nine months ended September 30, 2018 included costs incurred by Dover to complete the spin-off of Apergy amounting to $0 and $46,384, respectively, reflected in selling, general and administrative expenses in discontinued operations. See Note 2 — Spin-off of Apergy Corporation for further information.

Summarized results of the Company's discontinued operations were as follows:

  Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018   
Revenue $ —    $ 403,688   
Cost of goods and services —    254,205   
Gross profit —    149,483   
Selling, general and administrative expenses —    144,114   
Operating earnings —    5,369   
Other expense, net —    349   
Earnings from discontinued operations before taxes —    5,020   
Provision for income taxes —    9,492   
Loss from discontinued operations, net of tax $ —    $ (4,472)  

6. Inventories
  September 30, 2019 December 31, 2018
Raw materials $ 470,088    $ 439,616   
Work in progress 169,639    154,878   
Finished goods 289,779    265,722   
Subtotal 929,506    860,216   
Less reserves (112,943)   (111,420)  
Total $ 816,563    $ 748,796   

7. Property, Plant and Equipment, net
  September 30, 2019 December 31, 2018
Land    $ 48,935    $ 53,623   
Buildings and improvements    512,985    529,982   
Machinery, equipment and other    1,635,444    1,555,345   
Property, plant and equipment, gross 2,197,364    2,138,950   
Accumulated depreciation    (1,376,782)   (1,332,453)  
Property, plant and equipment, net $ 820,582    $ 806,497   

Depreciation expense totaled $32,145 and $32,514 for the three months ended September 30, 2019 and 2018, respectively. For the nine months ended September 30, 2019 and 2018, depreciation expense was $97,364 and $97,625, respectively.
12

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
8. Leases
The Company adopted ASC Topic 842 - Leases as of January 1, 2019, using the transition method per ASU No. 2018-11 issued on July 2018 wherein entities were allowed to initially apply the new leases standard at adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Accordingly, all periods prior to January 1, 2019 were presented in accordance with the previous ASC Topic 840 - Leases, and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC Topic 842 resulted in an increase to total assets and liabilities due to the recording of operating lease right-of-use assets ("ROU") and operating lease liabilities of approximately $163 million, as of January 1, 2019. Finance leases were not impacted by the adoption of ASC Topic 842, as finance lease liabilities and the corresponding ROU assets were already recorded in the balance sheet under the previous guidance, ASC Topic 840. The adoption did not materially impact the Company’s Consolidated Statements of Earnings or Cash Flows.

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

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

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

The components of lease costs were as follows:
  Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Operating Lease Costs:
Fixed $ 13,557    $ 38,520   
Variable 1,634    5,274   
Short-term 3,998    13,736   
Total* $ 19,189    $ 57,530   
* Finance lease cost and sublease income were immaterial.
Supplemental cash flow information were as follows:
13

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
  Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 13,836    $ 39,237   
Operating cash flows from finance leases 107    326   
Financing cash flows from finance leases 490    1,430   
Total $ 14,433    $ 40,993   
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases 9,632    28,566   
Finance leases 460    827   
Total $ 10,092    $ 29,393   

Supplemental balance sheet information related to leases were as follows:
  September 30, 2019
Operating Leases:
Right of use assets:
   Other assets and deferred charges $ 151,655   
Lease liabilities:
   Other accrued expenses $ 41,719   
   Other liabilities 117,595   
Total operating lease liabilities $ 159,314   
Finance Leases:
Right of use assets:
   Property, plant and equipment, net (1)
$ 8,678   
Lease liabilities:
   Other accrued expenses $ 1,601   
   Other liabilities 7,939   
Total financing lease liabilities $ 9,540   
(1) Finance lease assets are recorded net of accumulated depreciation of $4,203.

The aggregate future lease payments for operating and finance leases as of September 30, 2019 were as follows:
Operating Finance
2019 (excluding the nine months ending September 30, 2019)
$ 12,410    $ 523   
2020 43,000    2,069   
2021 33,983    1,962   
2022 24,536    1,651   
2023 16,018    1,219   
Thereafter 46,931    3,925   
Total lease payments 176,878    11,349   
Less: Interest (17,564)   (1,809)  
Present value of lease liabilities $ 159,314    $ 9,540   

The aggregate future lease payments for operating and capital leases as of December 31, 2018 were as follows:
14

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
  Operating Capital
2019 $ 49,009    $ 1,802   
2020 38,620    1,748   
2021 29,396    1,687   
2022 21,767    1,392   
2023 13,994    952   
Thereafter 42,087    3,802   
Total $ 194,873    $ 11,383   

Average lease terms and discount rates were as follows:
  September 30, 2019
Weighted-average remaining lease term (years)
Operating leases 5.8
Finance leases 6.2
Weighted-average discount rate
Operating leases 3.3%   
Finance leases 4.2%   

9. Goodwill and Other Intangible Assets
The changes in the carrying value of goodwill by reportable operating segments were as follows:
  Engineered Systems Fluids Refrigeration & Food Equipment Total
Balance at December 31, 2018 $ 1,623,660    $ 1,507,602    $ 546,066    $ 3,677,328   
Acquisitions —    119,363    —    119,363   
Disposition of business —    (4,739)   —    (4,739)  
Foreign currency translation (18,082)   (12,855)   (587)   (31,524)  
Balance at September 30, 2019 $ 1,605,578    $ 1,609,371    $ 545,479    $ 3,760,428   

During the nine months ended September 30, 2019, the Company recorded additions of $119,363 to goodwill as a result of the acquisitions with the Fluids segment discussed in Note 4 — Acquisitions. During the nine months ended September 30, 2019, the Company disposed of $4,739 of the Fluids segment goodwill as a result of the sale of a business as discussed in Note 5 — Disposed and Discontinued Operations.


15

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The Company’s definite-lived and indefinite-lived intangible assets by major asset class were as follows:
September 30, 2019 December 31, 2018
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying Amount
Amortized intangible assets:
Customer intangibles $ 1,401,618    $ 687,947    $ 713,671    $ 1,395,742    $ 645,305    $ 750,437   
Trademarks 216,706    81,503    135,203    214,774    72,305    142,469   
Patents 159,291    132,294    26,997    144,302    128,254    16,048   
Unpatented technologies 153,528    95,583    57,945    155,380    85,560    69,820   
Distributor relationships 81,215