Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND

FINANCIAL STATEMENT SCHEDULE

Page
50	Management's Report on Internal Control Over Financial Reporting
51	Report of Independent Registered Public Accounting Firm
52	Consolidated Statements of Earnings
53	Consolidated Statements of Comprehensive Earnings
54	Consolidated Balance Sheets
55	Consolidated Statements of Stockholders' Equity
56	Consolidated Statements of Cash Flows
57	Notes to Consolidated Financial Statements
95	Financial Statement Schedule - Schedule II, Valuation and Qualifying Accounts

(All other schedules are not required and have been omitted)

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, 2016. 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, 2016, 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, 2016, management has excluded all companies acquired in purchase business combinations during 2016. The Company is currently assessing the control environments of these acquisitions. The following companies were acquired in purchase business combinations during 2016: Tokheim Group S.A.S., Fairbanks Environmental LTD, ProGauge, Alliance Wireless Technologies, Inc., Ravaglioli S.p.A. Group and Wayne Fueling Systems, Ltd. These companies are wholly-owned by the Company and their revenue for the year ended December 31, 2016 represents approximately 5.1% of the Company’s consolidated total revenue for the same period and their assets represent approximately 5.8% of the Company’s consolidated total assets as of December 31, 2016.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

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, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. In addition, 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, 2016, 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 included in Item 8, management has excluded Tokheim Group S.A.S., Fairbanks Environmental LTD, ProGauge, Alliance Wireless Technologies, Inc., Ravaglioli S.p.A. Group, and Wayne Fueling Systems Ltd. from its assessment of internal control over financial reporting as of December 31, 2016 because these companies were acquired by the Company in purchase business combinations during 2016. We have also excluded these companies from our audit of internal control over financial reporting. These companies are wholly-owned subsidiaries by the Company whose total assets and total revenues represent 5.8% and 5.1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2016.

/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 10, 2017

DOVER CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share figures)

	Years Ended December 31,
	2016				2015				2014
Revenue	$	6,794,342			$	6,956,311			$	7,752,728
Cost of goods and services	4,322,373				4,388,167				4,778,479
Gross profit	2,471,969				2,568,144				2,974,249
Selling, general and administrative expenses	1,757,523				1,647,382				1,758,765
Operating earnings	714,446				920,762				1,215,484
Interest expense	136,401				131,676				131,689
Interest income	(6,759		)		(4,419		)		(4,510		)
Other income, net	(7,930		)		(7,105		)		(5,902		)
Gain on sale of businesses	(96,598		)		—				—
Earnings before provision for income taxes and discontinued operations	689,332				800,610				1,094,207
Provision for income taxes	180,440				204,729				316,067
Earnings from continuing operations	508,892				595,881				778,140
Earnings (losses) from discontinued operations, net	—				273,948				(2,905		)
Net earnings	$	508,892			$	869,829			$	775,235
Earnings per share from continuing operations:
Basic	$	3.28			$	3.78			$	4.67
Diluted	$	3.25			$	3.74			$	4.61
Earnings (loss) per share from discontinued operations:
Basic	$	—			$	1.74			$	(0.02	)
Diluted	$	—			$	1.72			$	(0.02	)
Net earnings per share:
Basic	$	3.28			$	5.52			$	4.65
Diluted	$	3.25			$	5.46			$	4.59
Weighted average shares outstanding:
Basic	155,231				157,619				166,692
Diluted	156,636				159,172				168,842
Dividends paid per common share	$	1.72			$	1.64			$	1.55

See Notes to Consolidated Financial Statements

DOVER CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

	Years Ended December 31,
	2016				2015				2014
Net earnings	$	508,892			$	869,829			$	775,235
Other comprehensive (loss) earnings, net of tax
Foreign currency translation adjustments:
Foreign currency translation losses	(106,526		)		(117,302		)		(144,643		)
Reclassification of foreign currency translation losses (gains) to earnings	823				(3,092		)		(6,300		)
Total foreign currency translation adjustments	(105,703		)		(120,394		)		(150,943		)
Pension and other postretirement benefit plans:
Actuarial (losses) gains	(7,928		)		4,492				(60,766		)
Prior service (cost) credit	(776		)		4,171				(354		)
Amortization of actuarial losses included in net periodic pension cost	5,683				10,280				5,792
Amortization of prior service costs included in net periodic pension cost	4,397				4,993				5,617
Total pension and other postretirement benefit plans	1,376				23,936				(49,711		)
Changes in fair value of cash flow hedges:
Unrealized net gains (losses)	144				(328		)		(137		)
Net losses (gains) reclassified into earnings	415				(108		)		(107		)
Total cash flow hedges	559				(436		)		(244		)
Other	(985		)		1,252				939
Other comprehensive loss, net of tax	(104,753		)		(95,642		)		(199,959		)
Comprehensive earnings	$	404,139			$	774,187			$	575,276

See Notes to Consolidated Financial Statements

DOVER CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	December 31, 2016				December 31, 2015
Assets
Current assets:
Cash and cash equivalents	$	349,146			$	362,185
Receivables, net of allowances of $22,015 and $18,050	1,265,201				1,120,490
Inventories	870,487				802,895
Prepaid and other current assets	104,357				133,440
Total current assets	2,589,191				2,419,010
Property, plant and equipment, net	945,670				854,269
Goodwill	4,562,677				3,737,389
Intangible assets, net	1,802,923				1,413,223
Other assets and deferred charges	215,530				182,185
Total assets	$	10,115,991			$	8,606,076
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of long-term debt	$	414,550			$	151,122
Accounts payable	830,318				650,880
Accrued compensation and employee benefits	226,440				223,039
Accrued insurance	96,062				99,642
Other accrued expenses	332,595				235,971
Federal and other income taxes	40,353				6,528
Total current liabilities	1,940,318				1,367,182
Long-term debt	3,206,637				2,603,655
Deferred income taxes	710,173				575,709
Other liabilities	459,117				414,955
Stockholders' equity:
Preferred stock - $100 par value; 100,000 shares authorized; none issued	—				—
Common stock - $1 par value; 500,000,000 shares authorized; 256,537,535 and 256,112,943 shares issued at December 31, 2016 and 2015	256,538				256,113
Additional paid-in capital	946,755				928,409
Retained earnings	7,927,795				7,686,642
Accumulated other comprehensive loss	(359,326		)		(254,573		)
Treasury stock, at cost: 101,109,186 shares at both December 31, 2016 and 2015	(4,972,016		)		(4,972,016		)
Total stockholders' equity	3,799,746				3,644,575
Total liabilities and stockholders' equity	$	10,115,991			$	8,606,076

See Notes to Consolidated Financial Statements

DOVER CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

	Common Stock $1 Par Value				Additional Paid-In Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Earnings (Loss)				Total Stockholders' Equity
Balance at December 31, 2013	$	255,320			$	871,575			$	(3,771,758	)		$	7,954,536			$	67,723			$	5,377,396
Net earnings	—				—				—				775,235				—				775,235
Dividends paid	—				—				—				(258,487		)		—				(258,487		)
Separations of Knowles	—				—				—				(1,396,502		)		(26,695		)		(1,423,197		)
Common stock issued for the exercise of share-based awards	573				(16,497		)		—				—				—				(15,924		)
Tax benefit from the exercise of share-based awards	—				15,110				—				—				—				15,110
Stock-based compensation expense	—				31,628				—				—				—				31,628
Common stock acquired	—				(983		)		(600,094		)		—				—				(601,077		)
Other comprehensive loss, net of tax	—				—				—				—				(199,959		)		(199,959		)
Balance at December 31, 2014	255,893				900,833				(4,371,852		)		7,074,782				(158,931		)		3,700,725
Net earnings	—				—				—				869,829				—				869,829
Dividends paid	—				—				—				(257,969		)		—				(257,969		)
Common stock issued for the exercise of share-based awards	220				(3,782		)		—				—				—				(3,562		)
Tax benefit from the exercise of share-based awards	—				661				—				—				—				661
Stock-based compensation expense	—				30,697				—				—				—				30,697
Common stock acquired	—				—				(600,164		)		—				—				(600,164		)
Other comprehensive loss, net of tax	—				—				—				—				(95,642		)		(95,642		)
Balance at December 31, 2015	256,113				928,409				(4,972,016		)		7,686,642				(254,573		)		3,644,575
Net earnings	—				—				—				508,892				—				508,892
Dividends paid	—				—				—				(267,739		)		—				(267,739		)
Common stock issued for the exercise of share-based awards	425				(16,125		)		—				—				—				(15,700		)
Tax benefit from the exercise of share-based awards	—				4,964				—				—				—				4,964
Stock-based compensation expense	—				21,015				—				—				—				21,015
Other comprehensive loss, net of tax	—				—				—				—				(104,753		)		(104,753		)
Other	—				8,492				—				—				—				8,492
Balance at December 31, 2016	$	256,538			$	946,755			$	(4,972,016	)		$	7,927,795			$	(359,326	)		$	3,799,746

See Notes to Consolidated Financial Statements

DOVER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended December 31,
	2016				2015				2014
Operating Activities of Continuing Operations
Net earnings	$	508,892			$	869,829			$	775,235
Adjustments to reconcile net earnings to cash from operating activities:
(Earnings) loss from discontinued operations, net	—				(273,948		)		2,905
Depreciation and amortization	360,739				327,089				307,188
Stock-based compensation	21,015				30,697				31,628
Gain on sale of businesses	(96,598		)		—				—
Provision for losses on accounts receivable (net of recoveries)	10,641				5,946				4,730
Deferred income taxes	(79,414		)		(5,916		)		(33,866		)
Employee benefit plan expense	26,492				34,253				34,627
Contributions to employee benefit plans	(25,691		)		(21,942		)		(24,232		)
Other, net	(34,718		)		(2,258		)		(21,813		)
Cash effect of changes in assets and liabilities (excluding effects of acquisitions, dispositions and foreign exchange):
Accounts receivable	(44,649		)		37,916				(87,207		)
Inventories	25,858				63,129				(63,717		)
Prepaid expenses and other assets	2,589				(7,401		)		(18,527		)
Accounts payable	58,695				42,925				60,176
Accrued compensation and employee benefits	(12,596		)		(71,090		)		(17,731		)
Accrued expenses and other liabilities	45,371				(19,765		)		40,955
Accrued taxes	95,349				(60,405		)		(40,187		)
Net cash provided by operating activities of continuing operations	861,975				949,059				950,164
Investing Activities of Continuing Operations
Additions to property, plant and equipment	(165,205		)		(154,251		)		(166,033		)
Acquisitions (net of cash and cash equivalents acquired)	(1,561,737		)		(567,843		)		(802,254		)
Proceeds from sale of property, plant and equipment	17,749				14,604				14,373
Proceeds from sale of businesses	206,407				689,314				191,348
Settlement of net investment hedge	—				(17,752		)		—
Other	(1,057		)		1,350				(19,991		)
Net cash used in investing activities of continuing operations	(1,503,843		)		(34,578		)		(782,557		)
Financing Activities of Continuing Operations
Cash received from Knowles Corporation, net of cash distributed	—				—				359,955
Proceeds from long-term debt	656,399				394,300				—
Proceeds from exercise of share-based awards, including tax benefits	8,431				4,024				20,337
Change in commercial paper and notes payable, net	254,834				(327,000		)		251,500
Repayment of long-term debt	(2,017		)		(300,048		)		(6,566		)
Dividends to stockholders	(268,339		)		(257,969		)		(258,487		)
Purchase of common stock	—				(600,164		)		(601,077		)
Payments for employee tax obligations upon exercise of share-based awards	(15,700		)		(5,029		)		(21,151		)
Net cash provided by (used in) financing activities of continuing operations	633,608				(1,091,886		)		(255,489		)
Cash Flows from Discontinued Operations
Net cash (used in) provided by operating activities of discontinued operations	—				(113,946		)		25,760
Net cash used in investing activities of discontinued operations	—				(1,984		)		(19,753		)
Net cash (used in) provided by discontinued operations	—				(115,930		)		6,007
Effect of exchange rate changes on cash and cash equivalents	(4,779		)		(26,061		)		(40,426		)
Net decrease in cash and cash equivalents	(13,039		)		(319,396		)		(122,301		)
Cash and cash equivalents at beginning of year	362,185				681,581				803,882
Cash and cash equivalents at end of year	$	349,146			$	362,185			$	681,581
Supplemental information - cash paid during the year for:
Income taxes	$	170,394			$	346,382			$	372,446
Interest	$	131,184			$	128,151			$	128,412

See Notes to Consolidated Financial Statements

DOVER CORPORATION

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 ("Dover" or "Company") is a diversified global manufacturer delivering innovative equipment and components, specialty systems, consumable supplies, software and digital solutions and support services. 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 16 — 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 acquired businesses are included from the dates of acquisitions. As discussed in Note 3 — Disposed and Discontinued Operations, the Company reported certain businesses that were held for sale at December 31, 2014, as discontinued operations. The results of operations and cash flows of these businesses, as well as the results of Knowles Corporation ("Knowles") prior to the spin-off on February 28, 2014, 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 for, but not limited to, 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. The carrying value of cash and cash equivalents approximate fair value.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at face amounts less an allowance for doubtful accounts. The allowance is an estimate based on historical collection experience, current economic and market conditions and a review of the current status of each customer's trade accounts receivable. Management evaluates the aging of the accounts receivable balances, the financial condition of its customers, 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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Property, Plant and Equipment

Property, plant and equipment includes the historical cost of land, buildings, machinery and equipment, purchased software and significant improvements to existing plant and equipment or, in the case of acquisitions, a fair market value appraisal of assets. 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.

Derivative Financial 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 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 price over the fair value of net assets acquired. Goodwill and certain other intangible assets deemed to have indefinite lives (primarily trademarks) are not amortized. For goodwill, impairment tests are required at least annually, or more frequently if events or circumstances indicate that it may be impaired, or when some portion but not all of a reporting unit is disposed of or assets held for sale. Based on its current organizational structure, the Company identified nine reporting units for which cash flows are determinable and to which goodwill may be allocated.

The Company performs its goodwill impairment test annually in the fourth quarter at the reporting unit level. Recoverability of goodwill is measured at the reporting unit level and determined using a two-step process. The first step compares the fair value of a reporting unit with its carrying amount, including goodwill. We use an income-based valuation method, determining the present value of future cash flows, to estimate the fair value of a reporting unit. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and as a result, the second step of the impairment test is unnecessary. Factors used in the impairment analysis require significant judgment, and actual results may differ from assumed and estimated amounts. The Company uses its own market assumptions including internal projections of future cash flows, discount rates and other assumptions considered reasonable and inherent in the analysis. These forecasts are based on historical performance and future estimated results. The discount rates used in these analyses vary by reporting unit and are based on a capital asset pricing model and published relevant industry rates. We use discount rates commensurate with the risks and uncertainties inherent to each reporting unit and in our internally developed forecasts.

The second step of the goodwill impairment test, if needed, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. See Note 6 — Goodwill and Other Intangible Assets for further discussion of the Company's annual goodwill impairment test and results.

The Company uses an income-based valuation method to test its indefinite-lived intangible assets for impairment, at least annually. The fair value of the intangible asset is compared to its carrying value. This method uses the Company’s own market assumptions considered reasonable and inherent in the analysis. Any excess of carrying value over the estimated fair value is recognized as an impairment loss. No impairment of indefinite-lived intangible assets was required for the years ended December 31, 2016, 2015, or 2014.

Other intangible assets with determinable lives consist primarily of customer intangibles, unpatented technologies, patents and trademarks. These other intangibles are amortized over their estimated useful lives, ranging from 5 to 15 years.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Long-lived assets (including definite-lived intangible assets) 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.

Restructuring Accruals

From time to time, the Company takes actions to reduce headcount, close facilities, or otherwise exit operations. Such restructuring activities at an operation are recorded when management has committed to an exit or reorganization plan and when termination benefits are probable and can be reasonably estimated based on circumstances at the time the restructuring plan is approved by management. Exit costs include future minimum lease payments on vacated facilities and other contractual terminations. In addition, asset impairments may be recorded as a result of an approved restructuring plan. The accrual of both severance and exit costs requires the use of estimates. Though the Company believes that its estimates accurately reflect the anticipated costs, actual results may be different from the original estimated amounts.

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 monthly exchange rates. Foreign currency translation gains and losses are included in the Consolidated Statements of Comprehensive Earnings as a component of 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 Consolidated Statements of Earnings as a component of Other income, net. Gains and losses arising from intercompany foreign currency transactions that are of a long-term investment in nature are reported in the same manner as translation adjustments.

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. The Company includes shipping costs billed to customers in revenue and the related shipping costs in cost of goods and services.

Stock-Based Compensation

The principal awards issued under the Company’s stock-based compensation plans include non-qualified stock appreciation rights ("SARs"), restricted stock units and performance share awards. The cost for such awards is measured at the grant date based on the fair value of the award. 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. 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, general and administrative expenses 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 12 — Equity and Cash Incentive Program for additional information related to the Company’s stock-based compensation.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

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 United States. 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 $104,479 in 2016, $115,037 in 2015 and $118,411 in 2014.

Advertising Costs

Advertising costs are expensed when incurred and amounted to $35,859 in 2016, $37,527 in 2015 and $38,882 in 2014.

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 $0.8 million per occurrence effective January 1, 2016, 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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Recent Accounting Pronouncements

Recently Issued Accounting Standards

In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU requires entities to recognize the income tax consequences of many intercompany asset transfers at the transaction date. The seller and buyer will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other than inventory. The tax consequences were previously deferred until the asset is sold to a third party or recovered through use. This guidance will be effective for the Company on January 1, 2018. The Company is currently evaluating this guidance and the impact it will have on its Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. This guidance will be effective for the Company on January 1, 2018. The Company does not expect the adoption of this ASU to have a material impact on its Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as the classification of related matters in the statement of cash flows. This guidance will be effective for the Company on January 1, 2017. The Company does not expect the adoption of this ASU to have a material impact on its Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amends existing guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. This ASU also provides clarifications surrounding the presentation of the effects of leases in the income statement and statement of cash flows. This guidance will be effective for the Company on January 1, 2019. The Company is currently evaluating this guidance and the impact it will have on its Consolidated Financial Statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 340): Simplifying the Measurement of Inventory. Under this guidance, entities utilizing the FIFO or average cost method should measure inventory at the lower of cost or net realizable value, whereas net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU will be effective for the Company on January 1, 2017. The Company does not expect the adoption of this ASU to have a material impact on its Consolidated Financial Statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), 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 guidance will be effective for the Company on January 1, 2018. The FASB has also issued the following standards which clarify ASU 2014-09 and have the same effective date as the original standard: ASU 2016-20, Technical Corrections and Improvements to Topic 606, ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients, ASU 2016-10, Identifying Performance Obligations and Licensing and ASU 2016-08, Principal versus Agent Considerations.

The Company commenced its assessment of ASU 2014-09 during the second half of 2015 and developed a project plan to guide the implementation. This project plan includes analyzing the ASU’s impact on the Company's contract portfolio, comparing its historical accounting policies and practices to the requirements of the new guidance and identifying potential differences from applying the requirements of the new guidance to its contracts. The Company is also in the process of drafting an updated

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

accounting policy, evaluating new disclosure requirements and identifying and implementing appropriate changes to its business processes, systems and controls to support recognition and disclosure under the new guidance. The Company expects to adopt this new guidance using the modified retrospective method that will result in a cumulative effect adjustment as of the date of adoption. The Company is currently evaluating this guidance and the impact it will have on its Consolidated Financial Statements.

Recently Adopted Accounting Standards

In March 2016, the FASB issued ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting (Topic 323), which eliminates the requirement to retrospectively apply equity method accounting when an entity increases ownership or influence in a previously held investment. The Company early adopted this guidance at December 31, 2016, which requires prospective application of equity method accounting treatment when the Company obtains significant influence over an investee during the period. The adoption of this ASU did not have a material impact to the Company’s Consolidated Financial Statements.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. Under this guidance the cumulative impact of purchase accounting adjustments arising during the one year measurement period from the date of acquisition will be recognized, in full, in the period identified. This guidance was effective for the Company on January 1, 2016 and applied prospectively to adjustments arising after that date. The adoption of this ASU did not have a material impact to the Company’s Consolidated Financial Statements.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. Under this guidance, debt issuance costs related to a recognized debt liability are required to be presented in the balance sheet as a direct reduction from the carrying amount of the related debt, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this guidance. The Company adopted this guidance January 1, 2016. As a result of adoption, debt issuance costs of $13,687 were reclassified from Prepaid and other current assets and Other assets and deferred charges to reduce Long-term-debt as of December 31, 2015.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances, such as the existence of substantial doubt. The Company is required to evaluate going concern uncertainties at each annual and interim reporting period, considering the entity’s ability to continue as a going concern within one year after the issuance date. This guidance was effective for the Company on December 31, 2016. The adoption of this ASU did not have an impact to the Company’s Consolidated Financial Statements.

2. Acquisitions

2016

During 2016, the Company acquired six businesses in separate transactions for total consideration of $1,562 million, net of cash acquired. The businesses were acquired to complement and expand upon existing operations within the Engineered Systems and Fluids segments. The goodwill identified by these acquisitions reflects the benefits expected to be derived from product line expansion and operational synergies.

On December 9, 2016, the Company acquired Wayne Fueling Systems Ltd., a provider of fuel dispensing, payment systems and monitoring and optimization software, for approximately $792,244, net of cash acquired. In connection with this acquisition, the Company recorded goodwill of $482,445 and intangible assets of $300,042, primarily related to customer intangibles and trademarks. The goodwill is non-deductible for U.S. federal income tax purposes. The intangible assets are being amortized over 11 to 15 years. The pro forma effects of this acquisition on the Company’s operations are disclosed in this footnote.

The Company also completed other acquisitions for total consideration of $769,493, net of cash acquired during the year. These acquisitions were completed primarily to complement and expand upon existing operations within the Fluids and Engineered Services segments. In connection with these acquisitions, the Company recorded goodwill of $425,868 and intangible assets of $321,609, primarily consisting of customer intangibles and trademarks. The intangible assets are being amortized over 4 to 15 years. The pro forma effects of these acquisitions on the Company’s operations are disclosed in this footnote.

DOVER CORPORATION

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, 2016.

Date	Type	Company / Product Line Acquired	Location (Near)	Segment
January 7	Stock	Tokheim Group S.A.S.	Dundee, UK	Fluids
Manufacturer of fuel dispensers, retail automation systems and payment solutions.
May 25	Stock	Fairbanks Environmental LTD	Skelmersdale, UK	Fluids
Provider of monitoring and optimization software and tools centered around fuel management and on-site services.
June 13	Stock	ProGauge	Milan, Italy	Fluids
Provider of automatic tank gauge solutions, including a variety of tank probes, consoles and related software and calibration services for service stations to measure and monitor fuel tank levels.
September 23	Stock	Alliance Wireless Technologies, Inc.	Houston, Texas	Engineered Systems
Provider of mobile vision and safety monitoring technology for fleet management.
October 3	Stock	Ravaglioli S.p.A. Group	Bologna, Italy	Engineered Systems
Provider of automotive service equipment, including automotive lifts, tire and wheel service equipment and diagnostic equipment for cars, trucks, commercial vehicles and motorbikes.
December 9	Stock	Wayne Fueling Systems Ltd.	Austin, Texas	Fluids
Provider of fuel dispensing, payment systems and monitoring and optimization software for retail and commercial fuel stations.

The following presents the allocation of acquisition costs to the assets acquired and liabilities assumed, based on their estimated fair values:

	Total
Current assets, net of cash acquired	$	364,018
Property, plant and equipment	154,762
Goodwill	908,313
Intangible assets	621,651
Other assets	21,402
Current liabilities assumed	(276,675		)
Other liabilities assumed	(231,734		)
Net assets acquired	$	1,561,737

The amounts assigned to goodwill and major intangible asset classifications by segment for the 2016 acquisitions are as follows:

	Engineered Systems				Fluids				Total				Average Useful life (in years)
Goodwill - non deductible	$	126,140			$	782,173			$	908,313			n/a
Customer intangibles	98,182				316,116				414,298				8-14
Trademarks	12,012				88,507				100,519				11-15
Patents	13,682				23,000				36,682				7-11
Other intangibles and assets	528				69,624				70,152				4-11
	$	250,544			$	1,279,420			$	1,529,964

The Company has substantially completed the purchase price allocations for the 2016 acquisitions. 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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

The Consolidated Statements of Earnings include the results of these businesses from the dates of acquisition. The aggregate revenue and pre-tax losses of the 2016 acquisitions included in the Company’s 2016 consolidated revenue and earnings totaled $343,700 and $11,300, respectively.

2015

During 2015, the Company acquired four businesses for an aggregate consideration of $567,843, net of cash acquired. A summary of the acquisitions made during 2015 is as follows:

Date	Type	Company / Product Line Acquired	Location (Near)	Segment
January 22	Asset	Gemtron	Vincennes, Indiana	Refrigeration & Food Equipment
Manufacturer of refrigeration doors and door systems serving convenience stores, supermarkets, drugstores, buying clubs, foodservice equipment and other retail environments.
October 22	Stock	JK Group	Novedrate, Italy	Engineered Systems
Manufacturer and provider of innovative digital inks and consumables serving the textile printing market.
October 30	Asset/Stock	Gala Industries	Eagle Rock, Virginia	Fluids
Manufacturer of underwater pellet processing systems and solutions to the plastics compounding industry.
October 30	Asset/Stock	Reduction Engineering Scheer	Kent, Ohio	Fluids
Manufacturer of plastic pelletizers and pulverizers for the polymer industry.

The following presents the allocation of acquisition costs to the assets acquired and liabilities assumed, based on their estimated fair values:

	Total
Current assets, net of cash acquired	$	76,323
Property, plant and equipment	38,849
Goodwill	315,701
Intangible assets	229,829
Other assets	1,934
Current liabilities assumed	(31,814		)
Other liabilities assumed	(62,979		)
Net assets acquired	$	567,843

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Pro Forma Information

The following unaudited pro forma results of operations reflect the 2016 acquisitions as if they had occurred on January 1, 2015 and the 2015 acquisitions as if they had occurred on January 1, 2014. The pro-forma information is not necessarily indicative of the results that actually would have occurred nor does it indicate future operating results. The supplemental pro forma earnings reflect adjustments to earnings from continuing operations as reported in the Consolidated Statements of Earnings to exclude $11,439 of nonrecurring expense related to the fair value adjustments to acquisition-date inventory (after-tax) and $14,674 of acquisition-related costs (after-tax) from the year ended December 31, 2016. The supplemental pro forma earnings for the 2015 period were similarly adjusted for 2015 acquisitions charges as if incurred at the beginning of 2014. The 2016 and 2015 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 2016 and 2015 acquisitions.

	Years Ended December 31,
	2016				2015
Revenue from continuing operations:
As reported	$	6,794,342			$	6,956,311
Pro forma	7,473,048				8,130,560
Earnings from continuing operations:
As reported	$	508,892			$	595,881
Pro forma	555,968				627,196
Basic earnings per share from continuing operations:
As reported	$	3.28			$	3.78
Pro forma	3.58				3.98
Diluted earnings per share from continuing operations:
As reported	$	3.25			$	3.74
Pro forma	3.55				3.94

3. Disposed and Discontinued Operations

Disposed Businesses

2016

On February 17, 2016, the Company completed the sale of Texas Hydraulics, a custom manufacturer of fluid power components. within the Fluids segment. The Company received gross proceeds of $47,300. In connection with the sale of Texas Hydraulics, the Company recorded a gain of $11,853 reported in Gain on sale of businesses in the Consolidated Statement of Earnings.

On November 1, 2016, the Company completed the sale of Tipper Tie, a global supplier of processing and clip packaging machines within the Refrigeration & Food Equipment segment. The Company received gross proceeds of $158,887. In connection with the sale of Tipper Tie, the Company recorded a gain of $85,035 reported in Gain on sale of businesses in the Consolidated Statement of Earnings.

2015

During the fourth quarter of 2015, the Company completed the sale of the walk-in cooler business of Hillphoenix within the Refrigeration and Food Equipment segment. The gain on sale recorded was immaterial.

Management evaluates Dover's businesses periodically and may from time to time sell or discontinue certain operations for various reasons. These disposals in 2016 and 2015 did not represent strategic shifts in operations and, therefore, did not qualify for presentation as a discontinued operation.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Discontinued Operations

The results of operations and financial position of the following businesses have been reclassified to discontinued operations for all periods presented:

•	Datamax O'Neil in 2015

•	Sargent Aerospace in 2015

•	DEK International in 2014

•	Knowles Corporation in February 2014

Summarized results of the Company’s discontinued operations are as follows:

	Years Ended December 31,
	2015				2014
Revenue	$	72,869			$	568,991
Gain (loss) on sale, including impairments, net of tax	$	265,550			$	(3,691	)
Earnings from operations before taxes	8,222				13,611
Benefit (provision) for income taxes	176				(12,825		)
Earnings from operations, net of tax	8,398				786
Earnings (loss) from discontinued operations, net of tax	$	273,948			$	(2,905	)

2015

On March 2, 2015, the Company completed the sale of Datamax O'Neil for total proceeds of $185,000, which resulted in a net gain on sale of $87,781. On April 24, 2015, the Company completed the sale of Sargent Aerospace for total proceeds of $500,000, which resulted in a net gain on sale of $177,769. The Company paid approximately $110,500 of taxes relating to the net gain on sale of these businesses which is reflected in the Consolidated Statements of Cash Flows of within cash flows from discontinued operations. These businesses were previously included in the results of the Engineered Systems segment and were reclassified to discontinued operations in the fourth quarter of 2014 in connection with their impending sale.

The net earnings from operations for 2015 of $8,398 include after-tax earnings of $9,209 for those businesses classified as discontinued operations. Also reflected in this amount is a pension settlement charge of $810, net of tax, attributable to lump sum payments made to Sargent Aerospace participants in Dover's qualified defined benefit pension plan.

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 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 Corporation ("Knowles") participants in Dover's qualified defined benefit pension plan.

2014 Spin-off of Knowles Corporation

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

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Knowles incurred $100,000 of borrowings under its revolving credit facility and $300,000 of borrowings under its term loan facility to finance a cash payment of $400,000 to Dover immediately prior to the distribution. Dover received total net cash of $359,955 upon separation. 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.

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

4. Inventories

The components of inventories were as follows:

	December 31, 2016				December 31, 2015
Raw materials	$	428,286			$	333,551
Work in progress	138,652				135,624
Finished goods	409,314				443,032
Subtotal	976,252				912,207
Less reserves	(105,765		)		(109,312		)
Total	$	870,487			$	802,895

At December 31, 2016 and 2015, approximately 16% and 18%, respectively, of the Company's total inventories were accounted for using the LIFO method.

5. Property, Plant and Equipment, net

The components of property, plant and equipment, net were as follows:

	December 31, 2016				December 31, 2015
Land	$	68,575			$	55,567
Buildings and improvements	597,523				546,809
Machinery, equipment and other	1,802,832				1,772,031
Property, plant and equipment, gross	2,468,930				2,374,407
Total accumulated depreciation	(1,523,260		)		(1,520,138		)
Property, plant and equipment, net	$	945,670			$	854,269

Total depreciation expense was $175,495, $167,516 and $152,079 for the years ended December 31, 2016, 2015 and 2014, respectively.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

6. Goodwill and Other Intangible Assets

Goodwill

The changes in the carrying value of goodwill by reportable operating segments were as follows:

	Energy				Engineered Systems				Fluids				Refrigeration & Food Equipment				Total
Goodwill	$	1,048,735			$	1,280,769			$	669,633			$	562,981			$	3,562,118
Accumulated impairment loss	—				(10,591		)		(59,970		)		—				(70,561		)
Balance at January 1, 2015	$	1,048,735			$	1,270,178			$	609,663			$	562,981			$	3,491,557
Acquisitions	—				238,618				73,251				3,832				315,701
Purchase price adjustments	8,604				—				—				—				8,604
Disposition of business	—				(19,128		)		—				(3,749		)		(22,877		)
Foreign currency translation and other	(10,159		)		(15,804		)		(27,169		)		(2,464		)		(55,596		)
Balance at December 31, 2015	1,047,180				1,473,864				655,745				560,600				3,737,389
Acquisitions	—				126,140				782,173				—				908,313
Purchase price adjustments	—				363				4,860				768				5,991
Disposition of business	—				(9,615		)		—				(25,252		)		(34,867		)
Foreign currency translation and other	(1,406		)		(23,536		)		(29,270		)		63				(54,149		)
Balance at December 31, 2016	$	1,045,774			$	1,567,216			$	1,413,508			$	536,179			$	4,562,677

During 2016 and 2015, the Company recognized additions of $908,313 and $315,701, respectively, to goodwill as a result of acquisitions as discussed in Note 2 — Acquisitions. Due to the inherent difficulty of estimating the initial purchase price allocation of recent acquisitions and the time needed to finalize the balance sheets of acquired companies, the Company will continue to refine its estimates of fair value to more accurately allocate purchase price; any such revisions are not expected to be significant. During 2016 and 2015, the Company recorded adjustments totaling $5,991 and $8,604, respectively, as a result of the finalization of purchase price allocation to assets acquired and liabilities assumed related to acquisitions completed in 2015 and 2014.

During 2016 and 2015, the Company derecognized $34,867 and $22,877, respectively, of goodwill as a result of disposition of businesses as discussed in Note 3 — Disposed and Discontinued Operations. The Company allocated goodwill upon disposal based upon the fair value of the disposed business relative to the remaining entities in its reporting unit.

Annual impairment testing

The Company performed its annual goodwill impairment test during the fourth quarter of 2016 using a discounted cash flow analysis as discussed in Note 1 — Description of Business and Summary of Significant Accounting Policies. The Company performed step one of the annual goodwill impairment test for each of its nine reporting units, concluding that the fair values of all of its reporting units were in excess of their carrying values. As such, step two of the impairment test was not required. As previously noted, the fair values of each of the Company’s reporting units was determined using a discounted cash flow analysis which includes management’s current assumptions as to future cash flows and long-term growth rates. The discount rates used in these analyses varied by reporting unit and were based on a capital asset pricing model and published relevant industry rates. We used discount rates commensurate with the risks and uncertainties inherent to each reporting unit and in our internally developed forecasts. Discount rates used in our 2016 reporting unit valuations ranged from 9.0% to 10.5%.

Although all nine reporting units passed step one of the impairment test, two of the Company's reporting units within the Energy segment had the lowest headroom compared to the other reporting units. The aggregate goodwill balance for these two reporting units were $959.0 million. The Company experienced an overall decline within the Energy segment resulting in lower estimated cash flows, impacted by lower oil prices and the resulting economic pressures within the oil and gas industry. These two reporting units had fair values in excess of their carrying values of 49% and 33%.

While the Company believes the assumptions used in the 2016 impairment analysis are reasonable and representative of expected results, if market conditions worsen or persist for an extended period of time, an impairment of goodwill or assets may occur.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

The Company will continue to monitor the long-term outlook and forecasts, including estimated future cash flows, for these businesses and the impact on the carrying value of goodwill and assets in 2017.

Intangible Assets

The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets:

	December 31, 2016												December 31, 2015
	Gross Carrying Amount				Accumulated Amortization				Net				Gross Carrying Amount				Accumulated Amortization				Net
Amortized intangible assets:
Customer intangibles	$	1,942,974			$	718,135			$	1,224,839			$	1,567,048			$	595,635			$	971,413
Trademarks	246,619				56,455				190,164				150,926				45,536				105,390
Patents	157,491				119,828				37,663				150,570				112,399				38,171
Unpatented Technologies	155,752				64,648				91,104				137,919				56,495				81,424
Distributor Relationships	113,463				44,914				68,549				64,614				37,610				27,004
Drawings & Manuals	37,744				23,114				14,630				34,232				15,760				18,472
Other	31,632				21,184				10,448				23,923				18,168				5,755
Total amortized intangibles	2,685,675				1,048,278				1,637,397				2,129,232				881,603				1,247,629
Unamortized intangible assets:
Trademarks	165,526				—				165,526				165,594				—				165,594
Total intangible assets	$	2,851,201			$	1,048,278			$	1,802,923			$	2,294,826			$	881,603			$	1,413,223

The Company recorded $621,651 from acquired intangible assets during 2016. See Note 2 — Acquisitions.

Total amortization related to the Company's intangible assets was $185,244, $159,573 and $155,109, for the years ended December 31, 2016, 2015 and 2014, respectively. Estimated future amortization expense related to intangible assets held at December 31, 2016 is as follows:

	Estimated Amortization
2017	$	188,903
2018	187,235
2019	177,942
2020	170,607
2021	166,350

7. Other Accrued Expenses and Other Liabilities

The following table details the major components of Other accrued expenses:

	December 31, 2016				December 31, 2015
Warranty	$	48,648			$	41,502
Unearned/deferred revenue	42,000				28,072
Taxes other than income	33,298				25,180
Accrued rebates and volume discounts	41,378				26,489
Accrued interest	30,819				30,262
Accrued commissions (non-employee)	12,528				10,949
Restructuring and exit costs	11,926				13,991
Other (none of which are individually significant)	111,998				59,526
Total current liabilities	$	332,595			$	235,971

DOVER CORPORATION

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):

	December 31, 2016				December 31, 2015
Defined benefit and other post-retirement benefit plans	$	196,268			$	195,095
Unrecognized tax benefits	84,894				79,992
Deferred compensation	73,694				74,665
Warranty	36,349				2,964
Legal and environmental	30,330				30,032
Unearned/deferred revenue	12,526				12,437
Restructuring and exit	421				—
Other (none of which are individually significant)	24,635				19,770
Total noncurrent liabilities	$	459,117			$	414,955

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. Additionally, in 2016 the Company recorded a warranty accrual of $23,150 related to a product recall. See Note 13 — Commitments and Contingent Liabilities for further details. The changes in the carrying amount of product warranties were as follows:

	Years Ended December 31,
	2016				2015				2014
Balance, beginning of year	$	44,466			$	49,388			$	42,924
Provision for warranties	68,566				51,392				60,833
Settlements made	(35,638		)		(55,715		)		(56,746		)
Other adjustments, including acquisitions and currency translation	7,603				(599		)		2,377
Balance, end of year	$	84,997			$	44,466			$	49,388

8. Restructuring Activities

The Company initiated various restructuring programs and incurred severance and other restructuring costs by segment as follows:

	Years Ended December 31,
	2016				2015				2014
Energy	$	18,497			$	30,763			$	7,549
Engineered Systems	3,080				13,302				6,624
Fluids	16,905				4,879				3,784
Refrigeration & Food Equipment	928				5,848				24,897
Corporate	756				412				1,954
Total	$	40,166			$	55,204			$	44,808
These amounts are classified in the Consolidated Statements of Earnings as follows:
Cost of goods and services	$	14,744			$	21,194			$	19,690
Selling, general and administrative expenses	25,422				34,010				25,118
Total	$	40,166			$	55,204			$	44,808

The restructuring charges of $40,166 incurred in 2016 relate to restructuring programs designed to better align the Company's operations with current market conditions through targeted facility consolidations, headcount reductions and other measures to further optimize operations. The Company expects the programs currently underway to be substantially completed in the next 12 to 18 months. Additional programs may be implemented during 2017 with related restructuring charges.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

The $40,166 of restructuring charges incurred during 2016 included the following programs:

•	The Energy segment incurred restructuring charges of $18,497 related to various programs across the segment focused on workforce reductions and field service consolidations. These programs were initiated to better align cost base with the significantly lower demand environment.

•	The Engineered Systems segment recorded $3,080 of restructuring charges relating to headcount reductions across various businesses primarily related to optimization of administrative functions within Printing & Identification and U.S. manufacturing consolidation within Industrials.

•	The Fluids segment recorded $16,905 of restructuring charges principally related to headcount reductions and facility consolidations at various businesses across the segment.

•	The Refrigeration & Food Equipment segment recorded restructuring charges of $928, primarily related to headcount reductions.

Restructuring expenses incurred in 2015 and 2014 also included targeted facility consolidations at certain businesses and actions taken to optimize the Company's cost structure.

The following table details the Company’s severance and other restructuring accrual activities:

	Severance				Exit				Total
Balance at January 1, 2014	$	2,876			$	2,466			$	5,342
Restructuring charges	23,532				21,276				44,808
Payments	(10,092		)		(5,750		)		(15,842		)
Other, including foreign currency translation	(958		)		(11,329		)	(1)	(12,287		)
Balance at December 31, 2014	15,358				6,663				22,021
Restructuring charges	32,148				23,056				55,204
Payments	(38,003		)		(12,322		)		(50,325		)
Other, including foreign currency translation	1,533				(14,442		)	(1)	(12,909		)
Balance at December 31, 2015	11,036				2,955				13,991
Restructuring charges	30,199				9,967				40,166
Payments	(28,346		)		(7,548		)		(35,894		)
Other, including foreign currency translation	(1,981		)		(3,935		)	(1)	(5,916		)
Balance at December 31, 2016	$	10,908			$	1,439			$	12,347

(1)	Other activity in exit reserves primarily represents the non-cash write-off of inventory and property, plant and equipment in connection with certain facility closures.

The restructuring accrual balances at December 31, 2016 primarily reflects restructuring plans initiated during the year, as well as ongoing lease commitment obligations for facilities closed in prior periods.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

9. Borrowings and Lines of Credit

Borrowings consist of the following:

	December 31, 2016				December 31, 2015
Short-term:
Current portion of long-term debt	$	6,950			$	122
Commercial paper	407,600				151,000
Total short-term debt	$	414,550			$	151,122

	December 31, 2016				December 31, 2015
Long-term:
5.45% 10-year notes due March 15, 2018	$	349,588			$	349,258
2.125% 7-year notes due December 1, 2020 (euro-denominated)	313,370				328,592
4.30% 10-year notes due March 1, 2021	449,891				449,865
3.150% 10-year notes due November 15, 2025	397,259				396,951
1.25% 10-year notes due November 9, 2026 (euro-denominated)	621,326				—
6.65% 30-year debentures due June 1, 2028	199,586				199,552
5.375% 30-year debentures due October 15, 2035	297,003				296,844
6.60% 30-year notes due March 15, 2038	248,124				248,036
5.375% 30-year notes due March 1, 2041	346,147				345,989
Other	829				2,255
Total long-term debt	3,223,123				2,617,342
Unamortized debt issuance costs	(16,486		)		(13,687		)
Total long-term debt, net of debt issuance costs	$	3,206,637			$	2,603,655

The long-term borrowings presented above are net of unamortized discounts of $18,832 and $13,951 at December 31, 2016 and 2015, 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 the Company 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 adopted ASU 2015-03 Interest - Imputation of Interest (Subtopic 835-30) effective January 1, 2016, which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct reduction of the carrying amount of the related debt. Upon adoption, the Company reclassified $13,687 from Prepaid and other current assets and Other assets and deferred charges to Long-term debt in the Consolidated Balance Sheet to reflect this guidance in the comparable balance as of December 31, 2015.

On November 9, 2016, the Company issued €600,000 of 1.25% euro-denominated notes due 2026. The proceeds of $656,399 from the sale of the notes, net of discounts and issuance costs, were used for payment of a portion of the purchase price of the acquisition of Wayne.

The Company maintains a $1.0 billion five-year unsecured committed revolving credit facility (the "Credit Agreement") with a syndicate of banks which expires on November 10, 2020. At the Company's election, loans under the Credit Agreement will bear interest at a base rate plus an applicable margin. 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 consolidated EBITDA to consolidated net interest expense of not less than 3.0 to 1. The Company was in compliance with this covenant and other long-term debt covenants at December 31, 2016 and had a coverage ratio of 9.4 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 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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

On September 16, 2016, the Company entered into a $500 million unsecured term loan facility (the “Term Loan Agreement”) with a syndicate of banks. The Company did not draw down on the Term Loan Agreement, and on November 14, 2016, voluntarily terminated the Term Loan Agreement.

As of December 31, 2016, the Company had approximately $140.9 million outstanding in letters of credit and guarantees with financial institutions, which expire at various dates in 2017 through 2021. 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.

Interest expense and income for the years ended December 31, 2016, 2015 and 2014 were as follows:

	Years Ended December 31,
	2016				2015				2014
Interest expense	$	136,401			$	131,676			$	131,689
Interest income	(6,759		)		(4,419		)		(4,510		)
Interest expense, net	$	129,642			$	127,257			$	127,179

The weighted average interest rate for short-term commercial paper borrowings was 0.6%, 0.2% and 0.1% for 2016, 2015 and 2014, respectively.

As of December 31, 2016, the future maturities of long-term debt were as follows:

	Future Maturities
2017	$	6,950
2018	350,357
2019	—
2020	313,370
2021	449,891
2022 and thereafter	2,109,505
Total	$	3,230,073

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

10. Financial Instruments

Derivatives

The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations. 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, 2016 and 2015, the Company had contracts with U.S. dollar equivalent notional amounts of $59,932 and $37,735, respectively, to exchange foreign currencies, principally the Chinese Yuan, Pound Sterling, U.S. Dollar, Swedish Krona, Euro, Canadian Dollar, Japanese Yen and Swiss Franc. The Company believes it is probable that all forecasted cash flow transactions will occur.

In addition, the Company had outstanding contracts at December 31, 2016 and 2015 with a total notional amount of $56,189 and $51,369, respectively, that are not designated as hedging instruments. These instruments are used to reduce the Company's exposure for operating receivables and payables that are denominated in non-functional currencies.

The following table sets forth the fair values of derivative instruments held by the Company as of December 31, 2016 and 2015 and the balance sheet lines in which they are recorded:

	Fair Value Asset (Liability)
	December 31, 2016				December 31, 2015				Balance Sheet Caption
Foreign currency forward	$	1,058			$	170			Prepaid and other current assets
Foreign currency forward	(705		)		(452		)		Other accrued expenses

The amount of gains or losses from hedging activity recorded in earnings is not significant and the amount of unrealized gains and losses from cash flow hedges 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.

The Company has designated the €300,000 and €600,000 of euro-denominated notes issued December 4, 2013 and November 9, 2016, respectively, as a hedge of a portion of its net investment in euro-denominated operations. Changes in the value of the euro-denominated debt are recognized in foreign currency translation adjustments within other comprehensive earnings (loss) of the Consolidated Statements of Comprehensive Earnings to offset changes in the value of the net investment in euro-denominated operations. Additionally, the Company's floating-to-floating cross currency swap agreement in exchange for swiss francs matured on October 15, 2015, and was also designated as a hedge of a portion of our net investment in non-U.S. operations. Changes in the value of the euro-denominated debt and the Swiss Franc cross-currency swap, resulting from exchange rate differences are offset by changes in the net investment due to the high degree of effectiveness between the hedging instruments and the exposure being hedged.

Amounts recognized in Other comprehensive earnings (loss) for the gains (losses) on its net investment hedges were as follows:

	2016				2015				2014
Gain on euro-denominated debt	$	53,791			$	35,458			$	47,630
(Loss)/gain on swiss franc cross-currency swap	—				(2,185		)		8,149
Total gain on net investment hedges before tax	53,791				33,273				55,779
Tax expense	(18,827		)		(11,646		)		(19,523		)
Gain on net investment hedges, net of tax	$	34,964			$	21,627			$	36,256

Fair Value Measurements

Accounting Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosures," establishes a hierarchy for measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015 were as follows:

	December 31, 2016				December 31, 2015
	Level 2				Level 2
Assets:
Foreign currency cash flow hedges	$	1,058			$	170
Liabilities:
Foreign currency cash flow hedges	705				452

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 fair value 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, 2016 and 2015 was $3,534,553 and $2,880,734, respectively, compared to the carrying value of $3,206,637 and $2,603,655, respectively. The estimated fair value of long-term debt is based on quoted market prices for similar instruments and is, therefore, classified as Level 2 within the fair value hierarchy. The carrying values of cash equivalents, trade receivables, accounts payable and notes payable are reasonable estimates of their fair values as of December 31, 2016 and 2015 due to the short-term nature of these instruments.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

11. 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:

	Years Ended December 31,
	2016				2015				2014
Domestic	$	420,546			$	530,268			$	789,689
Foreign	268,786				270,342				304,518
Total	$	689,332			$	800,610			$	1,094,207

Income tax expense (benefit) relating to continuing operations for the years ended December 31, 2016, 2015 and 2014 is comprised of the following:

	Years Ended December 31,
	2016				2015				2014
Current:
U.S. federal	$	139,117			$	115,130			$	231,939
State and local	21,213				11,706				8,434
Foreign	85,273				79,982				97,037
Total current	245,603				206,818				337,410
Deferred:
U.S. federal	(14,438		)		19,238				7,386
State and local	(1,232		)		(3,433		)		11,250
Foreign	(49,493		)		(17,894		)		(39,979		)
Total deferred	(65,163		)		(2,089		)		(21,343		)
Total expense	$	180,440			$	204,729			$	316,067

DOVER CORPORATION

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 tax rate are as follows:

	Years Ended December 31,
	2016			2015			2014
U.S. federal income tax rate	35.0	%		35.0	%		35.0	%
State and local taxes, net of federal income tax benefit	1.9			1.6			1.3
Foreign operations tax effect	(7.1	)		(4.3	)		(3.7	)
Research and experimentation tax credits	(0.6	)		(0.4	)		(0.3	)
Domestic manufacturing deduction	(2.2	)		(3.0	)		(3.0	)
Foreign tax credits	(0.1	)		(2.4	)		0.4
Branch income (losses)	0.3			(0.2	)		(0.7	)
Release of valuation allowance	—			—			(0.6	)
Other	(1.0	)		(0.7	)		0.5
Effective tax rate from continuing operations	26.2	%		25.6	%		28.9	%

The tax effects of temporary differences that give rise to future deferred tax assets and liabilities are as follows:

	December 31, 2016				December 31, 2015
Deferred Tax Assets:
Accrued compensation, principally postretirement and other employee benefits	$	121,909			$	133,000
Accrued expenses, principally for state income taxes, interest and warranty	40,256				42,213
Net operating loss and other carryforwards	325,721				210,396
Inventories, principally due to reserves for financial reporting purposes and capitalization for tax purposes	15,730				12,329
Accounts receivable, principally due to allowance for doubtful accounts	8,337				4,937
Accrued insurance	6,483				4,365
Long-term liabilities, principally warranty, environmental and exit cost	5,273				4,509
Other assets	(18,872		)		(36,576		)
Total gross deferred tax assets	504,837				375,173
Valuation allowance	(289,642		)		(171,365		)
Total deferred tax assets, net of valuation allowances	215,195				203,808
Deferred Tax Liabilities:
Intangible assets, principally due to different tax and financial reporting bases and amortization lives	(814,242		)		(699,876		)
Property, plant and equipment, principally due to differences in depreciation	(74,713		)		(56,872		)
Accounts receivable	(10,086		)		(8,236		)
Total gross deferred tax liabilities	(899,041		)		(764,984		)
Net deferred tax liability	$	(683,846	)		$	(561,176	)
Classified as follows in the Consolidated Balance Sheets:
Other assets and deferred charges	$	26,327			$	14,533
Deferred income taxes	(710,173		)		(575,709		)
	$	(683,846	)		$	(561,176	)

As of December 31, 2016, the Company had non-U.S loss carryforwards of $1,198 million primarily resulting from restructuring undertaken to effect the Knowles spin-off and non-operating activities. The entire balance of the non-U.S. losses as of December 31, 2016 is available to be carried forward, with $187 million of these losses beginning to expire during the years 2017 through 2036. The remaining $1,011 million of such losses can be carried forward indefinitely.

The Company has $84.2 million and $104.8 million of state tax loss carryforwards as of December 31, 2016 and 2015, respectively, that are available for use by the Company between 2017 and 2036.

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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

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, 2016, 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., federal, 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 $18.9 million. The Company is no longer subject to examinations of its federal income tax returns for years through 2012. All significant state, local and international matters have been concluded for years through 2009. The Company believes adequate provision has been made for all income tax uncertainties.

The following table is a reconciliation of the beginning and ending balances of the Company’s unrecognized tax benefits:

	Continuing				Discontinued				Total
Unrecognized tax benefits at January 1, 2014	$	65,226			$	13,214			$	78,440
Additions based on tax positions related to the current year	11,751				14				11,765
Additions for tax positions of prior years	1,065				499				1,564
Reductions for tax positions of prior years	(5,782		)		(265		)		(6,047		)
Settlements	(843		)		(155		)		(998		)
Lapse of statutes	(5,050		)		(2,585		)		(7,635		)
Unrecognized tax benefits at December 31, 2014	66,367				10,722				77,089
Additions based on tax positions related to the current year	17,131				—				17,131
Additions for tax positions of prior years	2,900				—				2,900
Reductions for tax positions of prior years (1)	(17,135		)		—				(17,135		)
Settlements	(1,153		)		—				(1,153		)
Lapse of statutes	(12,744		)		—				(12,744		)
Unrecognized tax benefits at December 31, 2015	55,366				10,722				66,088
Additions based on tax positions related to the current year	7,929				—				7,929
Additions for tax positions of prior years	9,076				—				9,076
Reductions for tax positions of prior years	(3,067		)		—				(3,067		)
Settlements	(3,106		)		—				(3,106		)
Lapse of statutes	(6,605		)		—				(6,605		)
Unrecognized tax benefits at December 31, 2016	$	59,593		(2)	$	10,722		(3)	$	70,315

(1)	The settlement of certain income tax examinations of 2011 and 2012 tax years (in the year ended December 31, 2015) resulted in a significant decrease in unrecognized tax benefits.

(2)

If recognized, the net amount of potential tax benefits that would impact the Company’s effective tax rate is $55.3 million. During the years ended December 31, 2016, 2015 and 2014, the Company recorded expense (income) of $0.7 million, $(4.3) million and $(1.3) million, respectively, as a component of provision for income taxes related to the accrued interest and penalties on unrecognized tax benefits. The Company had accrued interest and penalties of $14.6 million at December 31, 2016 and $13.9 million at December 31, 2015, which are not included in the above table.

(3)	The Company had recorded $10.7 million of unrecognized tax benefits related to operations previously classified as discontinued operations. Upon disposal of the discontinued operations, these unrecognized tax benefits were transferred to continuing operations. If recognized, the potential tax benefits will be recorded in continuing operations.

12. 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 adoption of the 2012 Plan, no additional awards could 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 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 SARs are exercised. The period during which SARs are exercisable is fixed by the Company’s Compensation Committee at the time of grant. Generally, the SARs vest after three years of service and expire at the end of ten years.

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 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, general and administrative expenses. The following table summarizes the Company’s compensation expense relating to all stock-based incentive plans:

	Years Ended December 31,
	2016				2015				2014
Pre-tax compensation expense	$	21,015			$	30,697			$	31,628
Tax benefit	(7,399		)		(10,877		)		(11,201		)
Total stock-based compensation expense, net of tax	$	13,616			$	19,820			$	20,427

The Company recognized net tax benefits of $4,964, $661 and $15,110 during 2016, 2015 and 2014, respectively, for the exercise of SARs, stock options, restricted stock awards, restricted stock unit awards and performance share awards. 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.

SARs

In 2016, 2015 and 2014, the Company issued SARs covering 1,346,354, 1,144,529 and 1,043,734 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:

	2016				2015				2014
Risk-free interest rate	1.05		%		1.51		%		1.70		%
Dividend yield	3.09		%		2.24		%		1.98		%
Expected life (years)	4.6				5.1				5.3
Volatility	26.17		%		27.19		%		30.81		%
Grant price	$	57.25			$	73.28			$	82.51
Fair value at date of grant	$	9.25			$	14.55			$	19.84		(1)

(1)	Updated to reflect the modification of grants issued prior to 2014 in connection with the separation of Knowles.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

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 awards is based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of activity relating to SARs granted under the 2012 Plan and the predecessor plans for the year ended December 31, 2016 is as follows:

	SARs
	Number of Shares			Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)
Outstanding at January 1, 2016	7,810,593			$	57.32
Granted	1,346,354			57.25
Forfeited / expired	(400,942	)		68.67
Exercised	(1,502,178	)		46.15
Outstanding at December 31, 2016	7,253,827			59.00				5.9
Exercisable at December 31, 2016	4,326,534			$	51.98			4.3

The following table summarizes information about outstanding SARs at December 31, 2016:

		SARs Outstanding													SARs Exercisable
Range of Exercise Prices		Number of Shares			Weighted Average Exercise Price				Weighted Average Remaining Life in Years		Aggregate Intrinsic Value				Number of Shares			Weighted Average Exercise Price				Weighted Average Remaining Life in Years		Aggregate Intrinsic Value
$25.96 - $37.79		1,319,998			$	33.99			2.6		$	54,043			1,319,998			$	33.99			2.6		$	54,043
$40.54 - $58.69		3,084,531			$	57.67			6.3		53,247				1,879,310			$	57.94			4.7		31,698
$63.33 - $82.51		2,849,298			$	72.02			7.1		14,383				1,127,226			$	63.36			6.1		12,836
		7,253,827									$	121,673			4,326,534									$	98,577

Unrecognized compensation expense related to SARs not yet exercisable was $8,846 at December 31, 2016. This cost is expected to be recognized over a weighted average period of 1.6 years.

Other information regarding the exercise of SARs and stock options is listed below:

	2016				2015				2014
SARs
Fair value of SARs that became exercisable	$	24,843			$	25,380			$	26,796
Aggregate intrinsic value of SARs exercised	$	34,916			$	14,560			$	51,813
Stock Options
Cash received by Dover for exercise of stock options	$	—			$	1,468			$	5,227
Aggregate intrinsic value of options exercised	$	—			$	1,649			$	8,614

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Performance Share Awards

Performance share awards granted are expensed over the three-year requisite performance and service period. Awards become vested if (1) the Company achieves certain specified internal metrics 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 2016, 2015 and 2014, the Company issued performance shares covering 79,561, 61,611 and 58,206 shares, respectively. The performance share awards granted in these years are considered performance condition awards as attainment is based on Dover's performance relative to established internal metrics. The fair value of these awards was determined using Dover's closing stock price on the date of grant. The expected attainment of the internal metrics for these awards is analyzed each reporting period, and the related expense is adjusted 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 fair value and average attainment used in determining compensation cost of the performance shares issued in 2016, 2015 and 2014 are as follows for the year ended December 31, 2016:

	Performance shares
	2016				2015				2014
Fair value per share at date of grant	$	57.25			$	73.28			$	82.51
Average attainment rate reflected in expense	1.20		%		0		%		11.55		%

A summary of activity for performance share awards for the year ended December 31, 2016 is as follows:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2016	116,060			$	77.61
Granted	79,561			57.25
Forfeited	(28,126	)		70.29
Vested	(45,329	)		82.51
Unvested at December 31, 2016	122,166			$	65.29

Unrecognized compensation expense related to unvested performance shares as of December 31, 2016 was $38, which will be recognized over a weighted average period of 2.0 years.

Restricted Stock Units

The Company also has restricted stock authorized for grant (as part of the 2005 and 2012 Plans). Under these Plans 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 249,263, 145,545 and 131,719 of restricted stock units in 2016, 2015 and 2014, respectively.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

A summary of activity for restricted stock units for the year ended December 31, 2016 is as follows:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2016	254,572			$	75.07
Granted	249,263			57.25
Forfeited	(38,391	)		63.96
Vested	(128,898	)		73.81
Unvested at December 31, 2016	336,546			$	64.74

Unrecognized compensation expense relating to unvested restricted stock as of December 31, 2016 was $6,478, which will be recognized over a weighted average period of 1.7 years.

Directors' Shares

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,
	2016			2015			2014
Aggregate shares granted	21,023			21,205			17,331
Shares deferred	(11,882	)		(11,196	)		(8,904	)
Shares withheld to satisfy tax obligations	—			—			(210	)
Net shares issued	9,141			10,009			8,217

13. Commitments and Contingent Liabilities

Lease Commitments

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 $90,138, $84,801 and $87,149 for the years ended December 31, 2016, 2015 and 2014, 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, 2016 are as follows:

	Operating				Capital
2017	$	61,638			$	3,122
2018	53,454				1,901
2019	37,733				1,333
2020	25,567				1,089
2021	17,897				955
Thereafter	58,782				5,230
Total	$	255,071			$	13,630

Guarantees

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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Product Recall

During the fourth quarter of 2016, the Company determined that there was a quality issue with a product component part in the Fluids segment and voluntarily reported this issue to the U.S. Consumer Product Safety Commission (“CPSC”). The Company is finalizing a plan to announce a voluntary recall of the product in conjunction with the CPSC. Based on the currently available information, at December 31, 2016, the Company recorded a warranty accrual of $23,150 in Other liabilities in the Consolidated Balance Sheet to cover the estimated costs of the recall. For the year ended December 31, 2016, the charge is reflected in Cost of goods and services in the Consolidated Statements of Earnings.

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 relatively insignificant 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, 2016 and 2015, the Company has reserves totaling $29,959 and $30,595, respectively, for environmental and other matters, including private party claims for exposure to hazardous substances, that are probable and estimable.

The Company and certain of its subsidiaries are also parties to a number of other legal proceedings incidental to their businesses. These proceedings primarily involve claims by private parties alleging injury arising out of use of the Company’s products, 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. The Company has reserves for other legal matters that are probable and estimable, and at December 31, 2016 and 2015, these reserves were 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.

14. 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 $34,665, $32,281 and $34,263 for the years ended December 31, 2016, 2015 and 2014, 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 separation of Knowles in 2014, the Company offered one-time lump sum payments 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 $10,279 in 2014.

The Company also maintains other post-retirement benefit plans which cover approximately 445 participants, approximately 421 of whom are eligible for medical benefits. These plans are closed to new entrants. The supplemental and other post retirement benefit plans are supported by the general assets of the Company.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Obligations and Funded Status

The following tables summarize the consolidated balance sheets impact, including the benefit obligations, assets and funded status associated with the Company's significant defined benefit and other post-retirement benefit plans at December 31, 2016 and 2015.

	Qualified Defined Benefits																Non-Qualified Supplemental Benefits								Other Post-Retirement Benefits
	U.S. Plan								Non-U.S. Plans
	2016				2015				2016				2015				2016				2015				2016				2015
Change in benefit obligation:
Benefit obligation at beginning of year	$	527,667			$	575,576			$	245,986			$	265,023			$	125,311			$	137,999			$	10,885			$	13,943
Service cost	13,913				15,661				5,590				6,613				2,959				3,739				52				163
Interest cost	23,046				23,163				5,593				5,885				5,268				5,063				403				512
Plan participants' contributions	—				—				1,223				1,555				—				—				102				417
Benefits paid	(32,341		)		(51,126		)		(7,870		)		(8,399		)		(16,643		)		(12,845		)		(767		)		(1,148		)
Actuarial loss (gain)	2,980				(33,199		)		22,909				(5,018		)		(6,449		)		(8,645		)		(2,343		)		(785		)
Business (dispositions) acquisitions	—				—				(4,420		)		(106		)		—				—				4,367				—
Amendments	—				—				—				(5,063		)		—				—				—				(1,049		)
Settlements and curtailments	—				(2,942		)		(3,262		)		(2,753		)		—				—				—				(1,168		)
Currency translation and other	34				534				(22,266		)		(11,751		)		—				—				(436		)		—
Benefit obligation at end of year	535,299				527,667				243,483				245,986				110,446				125,311				12,263				10,885
Change in plan assets:
Fair value of plan assets at beginning of year	552,817				601,376				159,436				163,510				—				—				—				—
Actual return on plan assets	42,088				2,567				10,317				2,369				—				—				—				—
Company contributions	—				—				8,383				8,366				16,643				12,845				665				731
Plan participants' contributions	—				—				1,223				1,555				—				—				102				417
Benefits paid	(32,341		)		(51,126		)		(7,870		)		(8,399		)		(16,643		)		(12,845		)		(767		)		(1,148		)
Business (dispositions) acquisitions	—				—				(3,967		)		—				—				—				—				—
Settlements and curtailments	—				—				(3,262		)		(2,753		)		—				—				—				—
Currency translation	—				—				(15,746		)		(5,212		)		—				—				—				—
Fair value of plan assets at end of year	562,564				552,817				148,514				159,436				—				—				—				—
Funded (Unfunded) status	$	27,265			$	25,150			$	(94,969	)		$	(86,550	)		$	(110,446	)		$	(125,311	)		$	(12,263	)		$	(10,885	)
Amounts recognized in the consolidated balance sheets consist of:
Assets and Liabilities:
Other assets and deferred charges	$	27,265			$	25,150			$	706			$	2,064			$	—			$	—			$	—			$	—
Accrued compensation and employee benefits	—				—				(1,235		)		(1,433		)		(20,032		)		(27,361		)		(849		)		(921		)
Other liabilities (deferred compensation)	—				—				(94,440		)		(87,181		)		(90,414		)		(97,950		)		(11,414		)		(9,964		)
Total assets and liabilities	27,265				25,150				(94,969		)		(86,550		)		(110,446		)		(125,311		)		(12,263		)		(10,885		)
Accumulated Other Comprehensive Loss (Earnings):
Net actuarial losses (gains)	103,410				110,163				73,023				59,953				(15,565		)		(9,678		)		(1,921		)		(1,347		)
Prior service cost (credit)	1,482				2,215				(3,925		)		(4,095		)		18,187				24,454				43				(999		)
Net asset at transition, other	—				—				(56		)		(52		)		—				—				—				—
Deferred taxes	(36,712		)		(39,333		)		(15,719		)		(13,569		)		(920		)		(5,173		)		598				762
Total accumulated other comprehensive loss (earnings), net of tax	68,180				73,045				53,323				42,237				1,702				9,603				(1,280		)		(1,584		)
Net amount recognized at December 31,	$	95,445			$	98,195			$	(41,646	)		$	(44,313	)		$	(108,744	)		$	(115,708	)		$	(13,543	)		$	(12,469	)
Accumulated benefit obligations	$	512,707			$	498,899			$	231,903			$	232,924			$	101,286			$	114,817

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

The Company’s net unfunded status at December 31, 2016 and 2015 includes net liabilities of $94,969 and $86,550, 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.

The accumulated benefit obligation for all defined benefit pension plans was $845,896 and $846,640 at December 31, 2016 and 2015, respectively. Pension plans with accumulated benefit obligations in excess of plan assets consist of the following at December 31, 2016 and 2015:

	2016				2015
Projected benefit obligation (PBO)	$	346,710			$	333,994
Accumulated benefit obligation (ABO)	325,969				311,300
Fair value of plan assets	140,589				120,069

Net Periodic Benefit Cost

Components of the net periodic benefit cost were as follows:

Defined Benefit Plans

	Qualified Defined Benefits																								Non-Qualified Supplemental Benefits
	U.S. Plan												Non-U.S. Plans (1)
	2016				2015				2014				2016				2015				2014				2016				2015				2014
Service cost	$	13,913			$	15,661			$	13,801			$	5,590			$	6,613			$	6,027			$	2,959			$	3,739			$	3,320
Interest cost	23,046				23,163				25,204				5,593				5,885				8,222				5,268				5,063				6,148
Expected return on plan assets	(38,793		)		(41,571		)		(41,594		)		(7,830		)		(7,990		)		(8,498		)		—				—				—
Amortization of:
Prior service cost (credit)	733				897				1,083				(397		)		89				107				6,266				6,927				7,775
Recognized actuarial loss (gain)	6,437				12,620				8,289				2,658				2,647				903				(560		)		286				(428		)
Transition obligation	—				—				—				4				4				4				—				—				—
Settlement and curtailment loss (gain) (2)	—				810				10,279				1,103				(184		)		(45		)		—				—				—
Other	35				—				—				—				—				6				—				—				—
Total net periodic benefit cost	$	5,371			$	11,580			$	17,062			$	6,721			$	7,064			$	6,726			$	13,933			$	16,015			$	16,815

(1)	Net periodic benefit cost for non-U.S. plans includes $55 of expense for the year ended December 31, 2014, relating to plans sponsored by Knowles that were distributed as part of the separation on February 28, 2014.

(2)	The $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.

Other Post-Retirement Benefits

	2016				2015				2014
Service cost	$	52			$	163			$	249
Interest cost	403				512				627
Amortization of:
Prior service cost (credit)	7				(372		)		(409		)
Recognized actuarial loss (gain)	5				(30		)		54
Other	—				(679		)		233
Total net periodic cost (benefit)	$	467			$	(406	)		$	754

The one-time benefit of $679 in 2015 relates to the shutdown of certain plant locations, as well as changes to future benefits for certain retirees.

DOVER CORPORATION

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 2017 are as follows:

	Qualified Defined Benefits								Non-Qualified Supplemental Benefits				Other Post-Retirement Benefits
	U.S. Plan				Non-U.S. Plans
Amortization of:
Prior service cost (credit)	$	427			$	(408	)		$	4,411			$	7
Recognized actuarial loss (gain)	5,582				3,303				(1,192		)		(161		)
Transition obligation	—				4				—				—
Total	$	6,009			$	2,899			$	3,219			$	(154	)

Assumptions

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												Non-Qualified Supplemental Benefits						Other Post-Retirement Benefits
	U.S. Plan						Non-U.S. Plans
	2016			2015			2016			2015			2016			2015			2016			2015
Discount rate	4.10	%		4.40	%		2.06	%		2.32	%		3.90	%		3.90	%		6.49	%	(1)	4.00	%
Average wage increase	4.00	%		4.00	%		2.34	%		2.25	%		4.50	%		4.50	%		na			na
Ultimate medical trend rate	na			na			na			na			na			na			5.00	%		5.00	%

(1)	The 2016 post-retirement benefit discount rate reflects the acquisition of a plan in Brazil.

The weighted average assumptions used in determining the net periodic benefit cost were as follows:

	Qualified Defined Benefits																		Non- Qualified Supplemental Benefits									Other Post-Retirement Benefits
	U.S. Plan									Non-U.S. Plans
	2016			2015			2014			2016			2015			2014			2016			2015			2014			2016			2015			2014
Discount rate	4.40	%		4.05	%		4.90	%		2.32	%		2.31	%		3.53	%		4.18	%		3.96	%		4.77	%		4.00	%		3.75	%		4.45	%
Average wage increase	4.00	%		4.00	%		4.00	%		2.25	%		2.50	%		2.86	%		4.50	%		4.50	%		4.50	%		na			na			na
Expected return on plan assets	7.25	%		7.75	%		7.75	%		4.95	%		4.85	%		5.35	%		na			na			na			na			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 other post-retirement benefit measurement purposes, a 9.2% annual rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rates) was assumed for 2017. The rate was assumed to decrease gradually to 5.4% 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 other post-retirement benefit obligation as of December 31, 2016 by $658 and $(554), respectively, and would have a negligible impact on the net post-retirement benefit cost for 2016.

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

DOVER CORPORATION

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 net return over time from the asset allocation strategy of 7.25%.

The Company’s actual and target weighted average asset allocation for our U.S. Corporate Pension Plan was as follows:

	2016			2015			Current Target
Equity securities	57	%		57	%		58	%
Fixed income	35	%		33	%		35	%
Real estate and other	8	%		10	%		7	%
Total	100	%		100	%		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 4.95% in 2016, 4.85% in 2015 and 5.35% in 2014.

The fair values of both U.S. and non-U.S. pension plan assets by asset category within the fair value hierarchy (as defined in Note 10 — Financial Instruments) were as follows:

	U.S. Plan
	December 31, 2016												December 31, 2015
	Level 1				Level 2				Total Fair Value				Level 1				Level 2				Total Fair Value
Common stocks	$	161,426			$	—			$	161,426			$	157,796			$	—			$	157,796
Mutual funds	43,272				—				43,272				39,159				—				39,159
Fixed income investments:
Corporate bonds	—				60,638				60,638				—				59,964				59,964
Government securities	5,901				109,888				115,789				47,426				74,953				122,379
Interest-bearing cash and short-term investments	11,200				—				11,200				6,751				—				6,751
Total investments at fair value	221,799				170,526				392,325				251,132				134,917				386,049
Investments measured at net asset value*
Collective trusts	—				—				124,456				—				—				124,128
Real estate investments	—				—				45,494				—				—				42,391
Cash and cash equivalents	—				—				289				—				—				249
Total investments	$	221,799			$	170,526			$	562,564			$	251,132			$	134,917			$	552,817

• In accordance with Fair Value Measurement Topic 820 (Subtopic 820-10), certain investments that are measured at fair value using the net asset value per share (or its equivalent) were not classified in the fair value hierarchy.

The Company had no level 3 U.S. Plan assets at December 31, 2016 and 2015.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

	Non-U.S. Plans
	December 31, 2016																December 31, 2015
	Level 1				Level 2				Level 3				Total Fair Value				Level 1				Level 2				Level 3				Total Fair Value
Common stocks	$	25,037			$	—			$	—			$	25,037			$	23,113			$	—			$	—			$	23,113
Fixed income investments	—				53,210				—				53,210				—				48,523				—				48,523
Common stock funds	—				46,565				—				46,565				—				45,058				—				45,058
Collective funds	—				—				—				—				—				23,978				—				23,978
Real estate funds	—				—				8,626				8,626				—				—				8,904				8,904
Cash and cash equivalents	104				—				—				104				829				—				—				829
Other	—				4,599				10,373				14,972				—				9,031				—				9,031
Total	$	25,141			$	104,374			$	18,999			$	148,514			$	23,942			$	126,590			$	8,904			$	159,436

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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 2015 and 2016 due to the following:

	Level 3
Balance at January 1, 2015	$	9,976
Actual return on plan assets:
Relating to assets still held at December 31, 2015	116
Purchases	5,629
Sales	(6,817		)
Balance at December 31, 2015	8,904
Actual return on plan assets:
Relating to assets sold during the period	16
Relating to assets still held at December 31, 2016	238
Business acquisition	4,941
Purchases	6,490
Sales	(1,590		)
Balance at December 31, 2016	$	18,999

There were no significant transfers between Level 1 and Level 2 investments during 2016 or 2015.

Future Estimates

Benefit Payments

Estimated future benefit payments to retirees, which reflect expected future service, are as follows:

	Qualified Defined Benefits								Non-Qualified Supplemental Benefits				Other Post-Retirement Benefits
	U.S. Plan				Non-U.S. Plans
2017	$	35,717			$	6,445			$	20,428			$	873
2018	37,748				6,478				6,762				890
2019	37,233				6,673				9,401				909
2020	40,553				6,759				7,054				935
2021	41,433				7,563				14,671				934
2022 - 2026	194,653				42,412				30,670				4,955

Contributions

In 2017, the Company expects to contribute approximately $6.5 million to its non-U.S. plans and currently does not expect to contribute to its U.S. plans. In 2017, the Company expects to fund benefit payments of approximately $5.6 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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

15. Other Comprehensive Earnings (Loss)

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

Year Ended December 31, 2016	Pre-tax				Tax				Net of tax
Foreign currency translation adjustments	$	(86,876	)		$	(18,827	)		$	(105,703	)
Pension and other postretirement benefit plans	5,936				(4,560		)		1,376
Changes in fair value of cash flow hedges	860				(301		)		559
Other	(1,119		)		134				(985		)
Total other comprehensive loss	$	(81,199	)		$	(23,554	)		$	(104,753	)

Year Ended December 31, 2015	Pre-tax				Tax				Net of tax
Foreign currency translation adjustments	$	(108,748	)		$	(11,646	)		$	(120,394	)
Pension and other postretirement benefit plans	35,727				(11,791		)		23,936
Changes in fair value of cash flow hedges	(671		)		235				(436		)
Other	1,423				(171		)		1,252
Total other comprehensive loss	$	(72,269	)		$	(23,373	)		$	(95,642	)

Year Ended December 31, 2014	Pre-tax				Tax				Net of tax
Foreign currency translation adjustments	$	(131,420	)		$	(19,523	)		$	(150,943	)
Pension and other postretirement benefit plans	(70,705		)		20,994				(49,711		)
Changes in fair value of cash flow hedges	(375		)		131				(244		)
Other	1,067				(128		)		939
Total other comprehensive (loss) earnings	$	(201,433	)		$	1,474			$	(199,959	)

The components of Accumulated other comprehensive earnings (loss) are as follows:

	December 31, 2016				December 31, 2015
Cumulative foreign currency translation adjustments	$	(240,981	)		$	(135,278	)
Pension and other postretirement benefit plans	(121,925		)		(123,301		)
Changes in fair value of cash flow hedges and other	3,580				4,006
	$	(359,326	)		$	(254,573	)

Total comprehensive earnings were as follows:

	Years Ended December 31,
	2016				2015				2014
Net earnings	$	508,892			$	869,829			$	775,235
Other comprehensive loss	(104,753		)		(95,642		)		(199,959		)
Comprehensive earnings	$	404,139			$	774,187			$	575,276

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Amounts reclassified from accumulated other comprehensive earnings (loss) to earnings (loss) during the year ended December 31, 2016, 2015 and 2014 were as follows:

	Years Ended December 31,
	2016				2015				2014
Pension and other postretirement benefit plans:
Amortization of actuarial losses	$	8,544			$	15,527			$	8,822
Amortization of prior service costs	6,609				7,541				8,556
Total before tax	15,153				23,068				17,378
Tax expense	(5,073		)		(7,768		)		(5,969		)
Net of tax	$	10,080			$	15,300			$	11,409
Cash flow hedges:
Net losses (gains) reclassified into earnings	$	638			$	(166	)		$	(164	)
Tax (expense) benefit	(223		)		58				57
Net of tax	$	415			$	(108	)		$	(107	)

The Company recognizes net periodic benefit cost, which includes amortization of net actuarial losses and prior service costs, in both Selling, general and administrative expenses and Cost of goods and services in the Consolidated Statements of Earnings, depending on the functional area of the underlying employees included in the plans.

Cash flow hedges consist mainly of foreign currency forward contracts. The Company recognizes the realized gains and losses on its cash flow hedges in the same line item as the hedged transaction, such as Revenue, Cost of goods and services, or Selling, general and administrative expenses in the Consolidated Statements of Earnings.

16. Segment Information

The Company's businesses are aligned around its key end markets to focus better on growth strategies and provide increased opportunities to leverage Dover's scale and capitalize on productivity initiatives. Operating segments are defined as the components of an enterprise for which separate financial information is available and regularly evaluated by the entity's chief operating decision maker, or decision-making group, in making resource allocation decisions. Based on this guidance, the Company has four operating segments which are also its reportable segments as follows:

•	The 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 and automation markets.

•	The 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 fast-moving consumer goods, digital textile printing, vehicle service, environmental solutions and industrials end markets.

•	The 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, oil and gas and industrial end markets.

•	The Refrigeration & Food Equipment segment is a provider of innovative and energy efficient equipment and systems serving the commercial refrigeration and food equipment end markets.

DOVER CORPORATION

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:

	Years Ended December 31,
	2016				2015				2014
Revenue:
Energy	$	1,108,438			$	1,483,680			$	2,017,239
Engineered Systems	2,366,283				2,342,913				2,385,965
Fluids	1,700,574				1,399,273				1,430,566
Refrigeration & Food Equipment	1,620,339				1,731,430				1,921,189
Intra-segment eliminations	(1,292		)		(985		)		(2,231		)
Total consolidated revenue	$	6,794,342			$	6,956,311			$	7,752,728
Earnings from continuing operations:
Segment earnings: (1)
Energy	$	55,336			$	173,190			$	461,815
Engineered Systems	391,829				376,961				386,998
Fluids	200,921				262,117				251,639
Refrigeration & Food Equipment	283,628				221,299				238,734
Total segment earnings	931,714				1,033,567				1,339,186
Corporate expense / other (2)	112,740				105,700				117,800
Interest expense	136,401				131,676				131,689
Interest income	(6,759		)		(4,419		)		(4,510		)
Earnings before provision for income taxes and discontinued operations	689,332				800,610				1,094,207
Provision for income taxes	180,440				204,729				316,067
Earnings from continuing operations	$	508,892			$	595,881			$	778,140
Segment margins:
Energy	5.0		%		11.7		%		22.9		%
Engineered Systems	16.6		%		16.1		%		16.2		%
Fluids	11.8		%		18.7		%		17.6		%
Refrigeration & Food Equipment	17.5		%		12.8		%		12.4		%
Total Segments	13.7		%		14.9		%		17.3		%
Earnings from continuing operations	7.5		%		8.6		%		10.0		%
Depreciation and amortization:
Energy	$	131,420			$	141,779			$	111,956
Engineered Systems	73,947				59,914				61,946
Fluids	85,224				56,078				60,903
Refrigeration & Food Equipment	65,017				66,074				68,701
Corporate	5,131				3,244				3,682
Consolidated total	$	360,739			$	327,089			$	307,188
Capital expenditures:
Energy	$	32,938			$	33,692			$	66,998
Engineered Systems	31,121				37,109				29,749
Fluids	62,368				45,605				34,319
Refrigeration & Food Equipment	23,651				33,511				33,510
Corporate	15,127				4,334				1,457
Consolidated total	$	165,205			$	154,251			$	166,033

(1)	Segment earnings includes non-operating income and expense directly attributable to the segments. Non-operating income and expense includes gain on sale of businesses and other income, net.

(2)	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.

DOVER CORPORATION

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:	2016				2015
Energy	$	2,209,230			$	2,369,600
Engineered Systems	3,002,629				2,741,594
Fluids	3,134,838				1,529,333
Refrigeration & Food Equipment	1,324,037				1,482,315
Corporate (3)	445,257				483,234
Consolidated total	$	10,115,991			$	8,606,076

(3)	The significant portion of corporate assets are principally cash and cash equivalents.

	Revenue												Long-Lived Assets
	Years Ended December 31,												At December 31,
	2016				2015				2014				2016				2015
United States	$	3,910,733			$	4,270,061			$	4,617,813			$	640,802			$	622,892
Europe	1,261,232				1,059,413				1,251,625				211,238				150,950
Other Americas	594,838				637,533				794,966				28,288				32,137
Asia	675,995				626,761				686,511				56,614				38,826
Other	351,544				362,543				401,813				8,728				9,464
Consolidated total	$	6,794,342			$	6,956,311			$	7,752,728			$	945,670			$	854,269

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.

17. 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,
	2016				2015				2014
Earnings from continuing operations	$	508,892			$	595,881			$	778,140
Earnings (losses) from discontinued operations, net	—				273,948				(2,905		)
Net earnings	$	508,892			$	869,829			$	775,235
Basic earnings per common share:
Earnings from continuing operations	$	3.28			$	3.78			$	4.67
Earnings (losses) from discontinued operations, net	$	—			$	1.74			$	(0.02	)
Net earnings	$	3.28			$	5.52			$	4.65
Weighted average shares outstanding	155,231,000				157,619,000				166,692,000
Diluted earnings per common share:
Earnings from continuing operations	$	3.25			$	3.74			$	4.61
Earnings (losses) from discontinued operations, net	$	—			$	1.72			$	(0.02	)
Net earnings	$	3.25			$	5.46			$	4.59
Weighted average shares outstanding	156,636,000				159,172,000				168,842,000

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

The following table is a reconciliation of the share amounts used in computing earnings per share:

	Years Ended December 31,
	2016			2015			2014
Weighted average shares outstanding - Basic	155,231,000			157,619,000			166,692,000
Dilutive effect of assumed exercise of employee stock options and SARs and vesting of performance shares and restricted shares	1,405,000			1,553,000			2,150,000
Weighted average shares outstanding - Diluted	156,636,000			159,172,000			168,842,000

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 years ended December 31, 2016, 2015 and 2014, the weighted average number of anti-dilutive potential common shares excluded from the calculation above totaled 6,799, 25,313 and 38,789, respectively.

18. 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. There were no issuances of preferred stock. As of December 31, 2016 and 2015, the Company issued 256,537,535 and 256,112,943 shares of common stock and had 101,109,186 treasury shares, held at cost, respectively.

Share Repurchases

In January 2015, the Board of Directors approved a new standing share repurchase authorization, whereby the Company may repurchase up to 15,000,000 shares of its common stock over the following three years. This plan replaced all previously authorized repurchase programs. The Company did not purchase any shares under this program in 2016. During the year ended December 31, 2015, the Company purchased 8,228,542 shares of its common stock under this authorization at a total cost of $600,164, or $72.94 per share. As of December 31, 2016, the number of shares still available for repurchase under the January 2015 share repurchase authorization was 6,771,458.

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.

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 at a total cost of $308,512, or $79.71 per share.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

19. Quarterly Data (Unaudited)

	Continuing Operations																				Net Earnings
Quarter	Revenue				Gross Profit				Earnings				Per Share - Basic				Per Share - Diluted				Net Earnings				Per Share - Basic				Per Share - Diluted
2016
First	$	1,622,273			$	589,264			$	99,356			$	0.64			$	0.64			$	99,356			$	0.64			$	0.64
Second	1,686,345				631,213				118,290				0.76				0.76				118,290				0.76				0.76
Third	1,707,763				631,788				130,084				0.84				0.83				130,084				0.84				0.83
Fourth	1,777,961				619,704				161,162				1.04				1.03				161,162				1.04				1.03
	$	6,794,342			$	2,471,969			$	508,892			$	3.28			$	3.25			$	508,892			$	3.28			$	3.25
2015
First	$	1,715,501			$	627,159			$	117,190			$	0.72			$	0.72			$	209,510			$	1.30			$	1.28
Second	1,758,628				654,568				155,634				0.98				0.97				332,396				2.10				2.07
Third	1,787,582				672,608				186,483				1.20				1.19				186,098				1.20				1.19
Fourth	1,694,600				613,809				136,574				0.88				0.87				141,825				0.92				0.91
	$	6,956,311			$	2,568,144			$	595,881			$	3.78			$	3.74			$	869,829			$	5.52			$	5.46

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2016, 2015 and 2014

(In thousands)

Allowance for Doubtful Accounts		Balance at Beginning of Year				Charged to Cost and Expense (A)			Accounts Written Off			Other			Balance at End of Year
Year Ended December 31, 2016		$	18,050			10,641			(6,039	)		(637	)		$	22,015
Year Ended December 31, 2015		$	18,894			5,946			(5,665	)		(1,125	)		$	18,050
Year Ended December 31, 2014		$	17,203			4,730			(3,524	)		485			$	18,894
(A) Net of recoveries on previously reserved or written-off balances.
Deferred Tax Valuation Allowance		Balance at Beginning of Year				Additions			Reductions			Other			Balance at End of Year
Year Ended December 31, 2016		$	171,365			118,277			—			—			$	289,642
Year Ended December 31, 2015		$	141,252			30,113			—			—			$	171,365
Year Ended December 31, 2014		$	14,063			133,431			(6,242	)		—			$	141,252
LIFO Reserve		Balance at Beginning of Year				Charged to Cost and Expense			Reductions			Other			Balance at End of Year
Year Ended December 31, 2016		$	35,835			686			(6,896	)		—			$	29,625
Year Ended December 31, 2015		$	50,769			221			(15,155	)		—			$	35,835
Year Ended December 31, 2014		$	50,705			4,166			(4,102	)		—			$	50,769