Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND

FINANCIAL STATEMENT SCHEDULE

Page
51	Management's Report on Internal Control Over Financial Reporting
52	Report of Independent Registered Public Accounting Firm
54	Consolidated Statements of Earnings
55	Consolidated Statements of Comprehensive Earnings
56	Consolidated Balance Sheets
57	Consolidated Statements of Stockholders' Equity
58	Consolidated Statements of Cash Flows
59	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, 2017. 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, 2017, 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.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 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:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Dover Corporation and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of earnings, comprehensive earnings, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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.

Definition and Limitations of Internal Control over Financial Reporting

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.

Chicago, Illinois
February 9, 2018

We have served as the Company's auditor since 1995.

DOVER CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share figures)

	Years Ended December 31,
	2017				2016				2015
Revenue	$	7,830,436			$	6,794,342			$	6,956,311
Cost of goods and services	4,940,059				4,322,373				4,388,167
Gross profit	2,890,377				2,471,969				2,568,144
Selling, general and administrative expenses	1,975,932				1,757,523				1,647,382
Operating earnings	914,445				714,446				920,762
Interest expense	145,208				136,401				131,676
Interest income	(8,502		)		(6,759		)		(4,419		)
Gain on sale of businesses	(203,138		)		(96,598		)		—
Other expense (income), net	7,034				(7,930		)		(7,105		)
Earnings before provision for income taxes and discontinued operations	973,843				689,332				800,610
Provision for income taxes	162,178				180,440				204,729
Net earnings from continuing operations	811,665				508,892				595,881
Earnings from discontinued operations, net	—				—				273,948
Net earnings	$	811,665			$	508,892			$	869,829
Earnings per share from continuing operations:
Basic	$	5.21			$	3.28			$	3.78
Diluted	$	5.15			$	3.25			$	3.74
Earnings per share from discontinued operations:
Basic	$	—			$	—			$	1.74
Diluted	$	—			$	—			$	1.72
Net earnings per share:
Basic	$	5.21			$	3.28			$	5.52
Diluted	$	5.15			$	3.25			$	5.46
Weighted average shares outstanding:
Basic	155,685				155,231				157,619
Diluted	157,744				156,636				159,172
Dividends paid per common share	$	1.82			$	1.72			$	1.64

See Notes to Consolidated Financial Statements

DOVER CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

	Years Ended December 31,
	2017				2016				2015
Net earnings	$	811,665			$	508,892			$	869,829
Other comprehensive earnings (loss), net of tax
Foreign currency translation adjustments:
Foreign currency translation gains (losses)	143,064				(106,526		)		(117,302		)
Reclassification of foreign currency translation losses (gains) to earnings	3,992				823				(3,092		)
Total foreign currency translation adjustments	147,056				(105,703		)		(120,394		)
Pension and other postretirement benefit plans:
Actuarial gains (losses)	12,439				(7,928		)		4,492
Prior service credit (cost)	3,136				(776		)		4,171
Amortization of actuarial losses included in net periodic pension cost	5,267				5,683				10,280
Amortization of prior service costs included in net periodic pension cost	3,007				4,397				4,993
Settlement and curtailment impact	(2,462		)		—				—
Total pension and other postretirement benefit plans	21,387				1,376				23,936
Changes in fair value of cash flow hedges:
Unrealized net (losses) gains	(1,801		)		144				(328		)
Net (gains) losses reclassified into earnings	(590		)		415				(108		)
Total cash flow hedges	(2,391		)		559				(436		)
Other	(1,485		)		(985		)		1,252
Other comprehensive earnings (loss), net of tax	164,567				(104,753		)		(95,642		)
Comprehensive earnings	$	976,232			$	404,139			$	774,187

See Notes to Consolidated Financial Statements

DOVER CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	December 31, 2017				December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	753,964			$	349,146
Receivables, net of allowances of $39,232 and $22,015	1,385,567				1,265,201
Inventories	878,635				870,487
Prepaid and other current assets	188,954				104,357
Total current assets	3,207,120				2,589,191
Property, plant and equipment, net	999,772				945,670
Goodwill	4,591,912				4,562,677
Intangible assets, net	1,609,927				1,802,923
Other assets and deferred charges	248,922				215,530
Total assets	$	10,657,653			$	10,115,991
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of long-term debt	$	581,102			$	414,550
Accounts payable	979,446				830,318
Accrued compensation and employee benefits	258,394				226,440
Accrued insurance	101,910				96,062
Other accrued expenses	356,099				332,595
Federal and other income taxes	21,242				40,353
Total current liabilities	2,298,193				1,940,318
Long-term debt	2,986,702				3,206,637
Deferred income taxes	438,841				710,173
Other liabilities	550,737				459,117
Stockholders' equity:
Preferred stock - $100 par value; 100,000 shares authorized; none issued	—				—
Common stock - $1 par value; 500,000,000 shares authorized; 256,992,261 and 256,537,535 shares issued at December 31, 2017 and 2016	256,992				256,538
Additional paid-in capital	942,485				946,755
Retained earnings	8,455,501				7,927,795
Accumulated other comprehensive loss	(194,759		)		(359,326		)
Treasury stock, at cost: 102,168,868 and 101,109,186 shares at December 31, 2017 and 2016	(5,077,039		)		(4,972,016		)
Total stockholders' equity	4,383,180				3,799,746
Total liabilities and stockholders' equity	$	10,657,653			$	10,115,991

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, 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
Net earnings	—				—				—				811,665				—				811,665
Dividends paid	—				—				—				(283,959		)		—				(283,959		)
Common stock issued for the exercise of share-based awards	454				(18,897		)		—				—				—				(18,443		)
Stock-based compensation expense	—				26,528				—				—				—				26,528
Common stock acquired	—				—				(105,023		)		—				—				(105,023		)
Other comprehensive earnings, net of tax	—				—				—				—				164,567				164,567
Other	—				(11,901		)		—				—				—				(11,901		)
Balance at December 31, 2017	$	256,992			$	942,485			$	(5,077,039	)		$	8,455,501			$	(194,759	)		$	4,383,180

See Notes to Consolidated Financial Statements

DOVER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended December 31,
	2017				2016				2015
Operating Activities of Continuing Operations
Net earnings	$	811,665			$	508,892			$	869,829
Adjustments to reconcile net earnings to cash from operating activities:
Earnings from discontinued operations, net	—				—				(273,948		)
Depreciation and amortization	394,240				360,739				327,089
Stock-based compensation	26,528				21,015				30,697
Gain on sale of businesses	(203,138		)		(96,598		)		—
Provision for losses on accounts receivable (net of recoveries)	11,295				10,641				5,946
Deferred income taxes	(170,859		)		(79,414		)		(5,916		)
Employee benefit plan expense	13,238				26,492				34,253
Contributions to employee benefit plans	(20,464		)		(25,691		)		(21,942		)
Other, net	(52,108		)		(34,718		)		(2,258		)
Cash effect of changes in assets and liabilities (excluding effects of acquisitions, dispositions and foreign exchange):
Accounts receivable	(104,706		)		(44,649		)		37,916
Inventories	(12,557		)		25,858				63,129
Prepaid expenses and other assets	(11,136		)		2,589				(7,401		)
Accounts payable	124,051				58,695				42,925
Accrued compensation and employee benefits	29,059				(12,596		)		(71,090		)
Accrued expenses and other liabilities	(34,234		)		45,371				(19,765		)
Accrued taxes	20,685				95,349				(60,405		)
Net cash provided by operating activities of continuing operations	821,559				861,975				949,059
Investing Activities of Continuing Operations
Additions to property, plant and equipment	(196,735		)		(165,205		)		(154,251		)
Acquisitions (net of cash and cash equivalents acquired)	(36,031		)		(1,561,737		)		(567,843		)
Proceeds from sale of property, plant and equipment	15,322				17,749				14,604
Proceeds from sale of businesses	372,666				206,407				689,314
Settlement of net investment hedge	—				—				(17,752		)
Other	21,151				(1,057		)		1,350
Net cash provided by (used in) investing activities of continuing operations	176,373				(1,503,843		)		(34,578		)
Financing Activities of Continuing Operations
Proceeds from long-term debt	—				656,399				394,300
Proceeds from exercise of share-based awards, including tax benefits	—				8,431				4,024
Change in commercial paper and notes payable, net	(183,194		)		254,834				(327,000		)
Repayment of long-term debt	—				(2,017		)		(300,048		)
Dividends to stockholders	(283,959		)		(268,339		)		(257,969		)
Purchase of common stock	(105,023		)		—				(600,164		)
Payments for employee tax obligations upon exercise of share-based awards	(18,443		)		(15,700		)		(5,029		)
Other	(4,120		)		—				—
Net cash (used in) provided by financing activities of continuing operations	(594,739		)		633,608				(1,091,886		)
Cash Flows from Discontinued Operations
Net cash used in operating activities of discontinued operations	—				—				(113,946		)
Net cash used in investing activities of discontinued operations	—				—				(1,984		)
Net cash used in discontinued operations	—				—				(115,930		)
Effect of exchange rate changes on cash and cash equivalents	1,625				(4,779		)		(26,061		)
Net increase (decrease) in cash and cash equivalents	404,818				(13,039		)		(319,396		)
Cash and cash equivalents at beginning of year	349,146				362,185				681,581
Cash and cash equivalents at end of year	$	753,964			$	349,146			$	362,185
Supplemental information - cash paid during the year for:
Income taxes	$	337,987			$	170,394			$	346,382
Interest	$	140,863			$	131,184			$	128,151

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: Engineered Systems, Fluids, Refrigeration & Food Equipment and Energy. For additional information on the Company’s segments, see Note 17 — Segment Information.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The results of operations of acquired businesses are included from the dates of acquisitions. As discussed in Note 4 — Disposed and Discontinued Operations, the Company reported certain businesses as discontinued operations for the year ended December 31, 2015. The results of operations and cash flows of these businesses have been separately reported as discontinued operations in 2015.

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 consolidated 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 and 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 net realizable value, determined on the first-in, first-out (FIFO) basis, or cost. 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 10 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 classified as assets held for sale. Based on its current organizational structure, the Company identified ten 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. A quantitative test is used to determine existence of goodwill impairment and the amount of the impairment loss at the reporting unit level. The quantitative test compares the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses an income-based valuation method, determining the present value of estimated 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 not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. 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. The Company uses discount rates commensurate with the risks and uncertainties inherent to each reporting unit and in the internally developed forecasts. See Note 7 — 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 annually test its indefinite-lived intangible assets for impairment. 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, 2017, 2016, or 2015.

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

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

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 or when termination benefits are communicated. 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 expense (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 13 — 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.

On December 22, 2017, the U.S. bill commonly referred to as the Tax Cuts and Jobs Act (“Tax Reform Act”) was enacted, which significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The Tax Reform Act also provided for a one-time deemed repatriation of post-1986 undistributed foreign subsidiary earnings and profits (“E&P”) through the year ended December 31, 2017. The Global Intangible Low-Taxed Income ("GILTI") provisions of the Tax Reform Act require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company expects that it will be subject to incremental U.S. tax on GILTI income beginning in 2018, due to expense allocations required by the U.S. foreign tax credit rules. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2017.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. The Company has recognized the provisional tax impacts related to deemed repatriated earnings and the benefit for the revaluation of deferred tax assets and liabilities, and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The final impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act. In accordance with SAB 118 the financial reporting impact of the Tax Reform Act will be completed in the fourth quarter of 2018.

Research and Development Costs

Research and development costs, including qualifying engineering costs, are expensed when incurred and amounted to $124,986 in 2017, $104,479 in 2016 and $115,037 in 2015.

Advertising Costs

Advertising costs are expensed when incurred and amounted to $34,589 in 2017, $35,859 in 2016 and $37,527 in 2015.

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 and automobile liability claims up to $5.0 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

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

Recent Accounting Pronouncements

Recently Issued Accounting Standards

The following standards, issued by the Financial Accounting Standards Board ("FASB"), will, or are expected to, result in a change in practice and/or have a financial impact to the Company’s Consolidated Financial Statements:

In August 2017, the FASB issued Accounting Standards Update ("ASU") 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU provides new guidance about income statement classification and eliminates the requirement to separately measure and report hedge ineffectiveness. The entire change in fair value for qualifying hedge instruments included in the effectiveness will be recorded in other comprehensive income (OCI) and amounts deferred in OCI will be reclassified to earnings in the same income statement line item in which the earnings effect of the hedged item is reported. The guidance is effective for interim and annual periods for the Company on January 1, 2019, with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its Consolidated Financial Statements.

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU changes the income statement presentation of defined benefit and post-retirement benefit plan expense by requiring separation between operating expense (the service cost component of net periodic benefit expense) and non-operating expense (all other components of net periodic benefit expense, including interest cost, amortization of prior service cost, curtailments and settlements, etc.). The operating expense component is reported with similar compensation costs while the non-operating components are reported outside of operating income. The guidance is effective for interim and annual periods 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 January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the definition of a business, which clarifies the definition of a business and assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under this guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or group of similar assets), the assets acquired would not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The amended guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in FASB guidance for revenue recognition. This guidance is effective for interim and annual periods 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 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 is 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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

During the second half of 2017, the Company developed a project plan to guide the implementation of ASU 2016-02. The Company made progress on this plan including surveying the Company’s businesses, assessing the Company’s portfolio of leases and compiling a central repository of active leases. The Company has also selected a lease accounting software solution to support the new reporting requirements and made progress on its configuration and the initial design of the future lease process. While the Company has not yet completed its evaluation of the impact the new lease accounting guidance will have on its Consolidated Financial Statements, the Company expects to recognize right of use assets and liabilities for its operating leases in the Consolidated Balance Sheet upon adoption.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance 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 is effective for the Company on January 1, 2018.

The Company commenced its assessment of ASU 2014-09 during the second half of 2015 and developed a project plan to guide the implementation. The Company has completed the project including analyzing the ASU’s impact on the Company's contract portfolio, surveying the Company's businesses and discussing the various revenue streams, completing contract reviews, comparing its historical accounting policies and practices to the requirements of the new guidance, identifying potential differences from applying the requirements of the new guidance to its contracts and updating and providing training on its accounting policy. The Company has completed the process of evaluating controls and new disclosure requirements and identifying and implementing appropriate changes to its business processes and systems to support recognition and disclosure under the new guidance. The Company will 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’s adoption of this ASU will not have a material impact on its Consolidated Financial Statements.

Recently Adopted Accounting Standards

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amended guidance simplifies the accounting for goodwill impairment for all entities by eliminating the requirement to perform a hypothetical purchase price allocation. A goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill. The Company early adopted this guidance on January 1, 2017 as its annual impairment test is performed after January 1, 2017. The adoption of this ASU did not have a material impact on the Company's 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. The adoption of the new standard resulted in the recognition of excess tax benefits in the Company's provision for income taxes within the Consolidated Statements of Earnings rather than paid-in capital of $8,365 for the year ended December 31, 2017. Additionally, the Consolidated Statement of Cash Flows now present excess tax benefits as an operating activity, adjusted prospectively. Finally, the Company elected to continue to estimate forfeitures based on historical data and recognizes forfeiture compensation expense over the vesting period of the award. The Company adopted this guidance on January 1, 2017.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 340): Simplifying the Measurement of Inventory. Under this guidance, entities utilizing the first-in first-out ("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,

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

less reasonably predictable costs of completion, disposal and transportation. The Company adopted this guidance on January 1, 2017. The adoption of this ASU did not have a material impact to the Company's Consolidated Financial Statements.

2. Planned Spin-off of Certain Energy Businesses

On December 7, 2017, Dover announced that its Board of Directors had approved a plan to spin-off its upstream energy businesses within the Dover Energy segment, collectively, the “Wellsite” business, through a U.S. tax-free spin-off to shareholders. The Company expects to complete the separation in May of 2018, subject to the satisfaction or waiver of certain customary conditions. The Company incurred $15,300 of costs associated with the transaction which were reported in Selling, general and administrative expenses in the Consolidated Statement of Earnings. These transaction costs primarily relate to professional fees associated with preparation of regulatory filings and separation activities within finance, legal and information system functions. Upon separation, the historical results of Wellsite will be presented as discontinued operations as it represents a strategic shift in operations with a material impact to the Consolidated Financial Statements.

3. Acquisitions

2017

During the year ended December 31, 2017, the Company acquired three businesses in separate transactions for total consideration of $43,142, net of cash acquired and including contingent consideration. The businesses were acquired to complement and expand upon existing operations within the Engineered Systems and Energy segments. The goodwill identified by these acquisitions reflects the benefits expected to be derived from product line expansion and operational synergies.

On April 5, 2017, the Company purchased 100% of the voting stock of Caldera Graphics S.A.S. ("Caldera") within the Engineered Systems segment for $32,857, net of cash acquired and including contingent consideration. In connection with this acquisition, the Company recorded goodwill of $27,174 and intangible assets of $8,169, primarily related to customer intangibles. The goodwill is non-deductible for U.S. federal income tax purposes. The intangible assets are being amortized over 7 to 15 years.

The Company also completed other acquisitions within the Energy and Engineered Systems segments for total consideration of $10,285, net of cash acquired, during the year. In connection with these acquisitions, the Company recorded goodwill of $8,059 and customer intangible assets of $4,538. The intangible assets are being amortized over 9 years.

The pro forma effects of these acquisitions on the Company’s operations are disclosed in this footnote.

2016

During the year ended December 31, 2016, the Company acquired six businesses in separate transactions for total consideration of $1,561,737. During the measurement period, the Company recorded working capital adjustments which resulted in final net cash consideration of $1,554,448.

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 initially 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 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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

2015

During 2015, the Company acquired four businesses for total consideration of $567,843, net of cash acquired. These acquisitions were completed primarily to complement and expand upon existing operations within the Fluids, Engineered Systems and Refrigeration & Food Equipment segments.

The pro forma effects of these acquisitions on the Company’s operations are disclosed in this footnote.

Pro Forma Information

The following unaudited pro forma results of operations reflect the 2017 acquisitions as if they had occurred on January 1, 2016 and the 2016 acquisitions as if they had occurred on January 1, 2015. 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 nonrecurring expense related to the fair value adjustments to acquisition-date inventory (after-tax) and acquisition-related costs (after-tax) from the year ended December 31, 2017. These adjustments were not material in 2017. The supplemental pro forma earnings for the 2016 period were similarly adjusted for 2016 acquisitions charges as if incurred at the beginning of 2015. The 2017 and 2016 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 2017 and 2016 acquisitions.

	Years Ended December 31,
	2017				2016
Revenue:
As reported	$	7,830,436			$	6,794,342
Pro forma	7,841,835				7,494,468
Earnings:
As reported	$	811,665			$	508,892
Pro forma	812,490				550,176
Basic earnings per share:
As reported	$	5.21			$	3.28
Pro forma	5.22				3.54
Diluted earnings per share:
As reported	$	5.15			$	3.25
Pro forma	5.15				3.51

4. Disposed and Discontinued Operations

Disposed Businesses

2017

On November 1, 2017, the Company completed the sale of the consumer and industrial winch business of Warn Industries, Inc. ("Warn"), a wholly owned subsidiary of the Company, for total consideration of $250,283. The Company recognized a pre-tax gain on sale of $116,932. The Company retained the automotive business of Warn within the Industrials platform of the Engineered Systems segment.

On February 14, 2017, the Company completed the sale of Performance Motorsports International ("PMI"), a wholly owned subsidiary of the Company that manufactures pistons and other engine related components serving the motorsports and powersports markets. Total consideration for the transaction was $147,313, including cash proceeds of $118,706. The Company recognized a pre-tax gain on sale of $88,402 and recorded a 25% equity method investment at fair value of $18,607 as well as a subordinated note receivable of $10,000.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Other immaterial dispositions completed during the year were recorded as a net pre-tax loss of $2,196. Gains and losses recorded from the sale of businesses were reported in the Gain on sale of businesses line in the Consolidated Statements of Earnings.

2016

On February 17, 2016, the Company completed the sale of Texas Hydraulics, a custom manufacturer of fluid power components within the Engineered Systems segment. The Company received gross proceeds of $47,300 and in connection with the sale of Texas Hydraulics, the Company recorded a pre-tax gain of $11,853.

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 with the sale and recorded a pre-tax gain of $85,035.

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. The disposals in 2017, 2016 and 2015 did not represent strategic shifts in operations and, therefore, did not qualify for presentation as a discontinued operation, unless otherwise noted.

Discontinued Operations

The results of operations and financial position of Datamax O'Neil and Sargent Aerospace have been reclassified to discontinued operations in 2015.

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

	Year Ended December 31,
	2015
Revenue	$	72,869
Gain on sale, including impairments, net of tax	265,550
Earnings from operations before taxes	8,222
Benefit for income taxes	176
Earnings from operations, net of tax	8,398
Earnings from discontinued operations, net of tax	$	273,948

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 within cash flows from discontinued operations in the Consolidated Statements of Cash Flows. These businesses 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.

5. Inventories

The components of inventories were as follows:

	December 31, 2017				December 31, 2016
Raw materials	$	445,417			$	428,286
Work in progress	139,175				138,652
Finished goods	418,818				409,314
Subtotal	1,003,410				976,252
Less reserves	(124,775		)		(105,765		)
Total	$	878,635			$	870,487

At December 31, 2017 and 2016, approximately 15% and 16%, respectively, of the Company's total inventories were accounted for using the LIFO method.

6. Property, Plant and Equipment, net

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

	December 31, 2017				December 31, 2016
Land	$	68,476			$	68,575
Buildings and improvements	616,282				597,523
Machinery, equipment and other	1,919,113				1,802,832
Property, plant and equipment, gross	2,603,871				2,468,930
Total accumulated depreciation	(1,604,099		)		(1,523,260		)
Property, plant and equipment, net	$	999,772			$	945,670

Total depreciation expense was $191,285, $175,495 and $167,516 for the years ended December 31, 2017, 2016 and 2015, respectively.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

7. Goodwill and Other Intangible Assets

Goodwill

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

	Engineered Systems				Fluids				Refrigeration & Food Equipment				Energy				Total
Goodwill	$	1,484,455			$	715,715			$	560,600			$	1,047,180			$	3,807,950
Accumulated impairment loss	(10,591		)		(59,970		)		—				—				(70,561		)
Balance at January 1, 2016	$	1,473,864			$	655,745			$	560,600			$	1,047,180			$	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	(23,536		)		(29,270		)		63				(1,406		)		(54,149		)
Balance at December 31, 2016	1,567,216				1,413,508				536,179				1,045,774				4,562,677
Acquisitions	30,180				—				—				5,053				35,233
Purchase price adjustments	6,826				(35,939		)		—				—				(29,113		)
Disposition of business	(79,113		)		—				(296		)		—				(79,409		)
Foreign currency translation	60,288				36,890				816				4,530				102,524
Balance at December 31, 2017	$	1,585,397			$	1,414,459			$	536,699			$	1,055,357			$	4,591,912

During 2017 and 2016, the Company recognized additions of $35,233 and $908,313, respectively, to goodwill as a result of acquisitions as discussed in Note 3 — 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 2017 and 2016, the Company recorded adjustments totaling $(29,113) and $5,991, respectively, as a result of the finalization of purchase price allocation to assets acquired and liabilities assumed related to acquisitions completed in 2016 and 2015.

During 2017 and 2016, the Company derecognized $79,409 and $34,867, respectively, of goodwill as a result of the disposition of businesses as discussed in Note 4 — 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 tests goodwill for impairment annually in the fourth quarter of each year and whenever events or circumstances indicate an impairment may have occurred. In the first quarter of 2017, the Company re-aligned its reporting units after acquiring four companies in the retail fueling market in 2016, increasing its reporting units from nine to ten. The Company performed the goodwill impairment test for the three reporting units within the Fluids segment before and after the realignment, concluding that the fair values of the reporting units were in excess of their carrying values.

The Company performed its annual goodwill impairment test during the fourth quarter of 2017 using a discounted cash flow analysis as discussed in Note 1 — Description of Business and Summary of Significant Accounting Policies. The Company performed a quantitative goodwill impairment test for each of its ten reporting units, concluding that the fair values of all of its reporting units were substantially in excess of their carrying values. 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. The Company used discount rates commensurate with the risks and uncertainties inherent to each reporting unit and in our internally developed forecasts. Discount rates used in the 2017 reporting unit valuations ranged from 8.5% to 10.0%.

While the Company believes the assumptions used in the 2017 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.

Intangible Assets

The Company's definite-lived and indefinite-lived intangible assets by major asset class were as follows and reflect the divestiture

of Warn and acquired intangibles in 2017:

	December 31, 2017												December 31, 2016
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Amortized intangible assets:
Customer intangibles	$	1,977,776			$	836,102			$	1,141,674			$	1,942,974			$	718,135			$	1,224,839
Trademarks	253,934				76,344				177,590				246,619				56,455				190,164
Patents	160,237				130,771				29,466				157,491				119,828				37,663
Unpatented technologies	162,613				80,984				81,629				155,752				64,648				91,104
Distributor relationships	85,794				32,092				53,702				113,463				44,914				68,549
Drawings & manuals	35,806				22,876				12,930				37,744				23,114				14,630
Other	34,106				21,570				12,536				31,632				21,184				10,448
Total	2,710,266				1,200,739				1,509,527				2,685,675				1,048,278				1,637,397
Unamortized intangible assets:
Trademarks	100,400				—				100,400				165,526				—				165,526
Total intangible assets, net	$	2,810,666			$	1,200,739			$	1,609,927			$	2,851,201			$	1,048,278			$	1,802,923

The Company recorded $12,707 of acquired intangible assets in 2017. See Note 3 — Acquisitions.

Amortization expense was $202,955, $185,244 and $159,573, including acquisition-related intangible amortization of $201,695, $183,835 and $157,849, for the years ended December 31, 2017, 2016 and 2015, respectively.

Estimated future amortization expense related to intangible assets held at December 31, 2017 is as follows:

	Estimated Amortization
2018	$	193,566
2019	186,346
2020	175,119
2021	167,253
2022	152,105

8. Other Accrued Expenses and Other Liabilities

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

	December 31, 2017				December 31, 2016
Warranty	$	54,337			$	48,648
Unearned/deferred revenue	52,755				42,000
Taxes other than income	38,408				33,298
Accrued rebates and volume discounts	37,711				41,378
Restructuring and exit costs	33,864				11,926
Accrued interest	31,073				30,819
Accrued commissions (non-employee)	13,139				12,528
Other (none of which are individually significant)	94,812				111,998
Total current liabilities	$	356,099			$	332,595

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, 2017				December 31, 2016
Defined benefit and other post-retirement benefit plans	$	198,623			$	196,268
Income tax payable - deemed repatriation tax	108,497				—
Unrecognized tax benefits	84,452				84,894
Deferred compensation	78,065				73,694
Legal and environmental	34,105				30,330
Unearned/deferred revenue	9,916				12,526
Warranty	8,135				36,349
Other (none of which are individually significant)	28,944				25,056
Total other liabilities	$	550,737			$	459,117

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, a warranty accrual related to a product recall was $6,613 and $23,150, at December 31, 2017 and 2016, respectively. See Note 14 — Commitments and Contingent Liabilities for further details. The changes in the carrying amount of product warranties were as follows:

	Years Ended December 31,
	2017				2016				2015
Beginning Balance, December 31 of the Prior Year	$	84,997			$	44,466			$	49,388
Provision for warranties	57,472				68,566				51,392
Settlements made	(73,164		)		(35,638		)		(55,715		)
Other adjustments, including acquisitions and currency translation	(6,833		)		7,603				(599		)
Ending Balance, December 31	$	62,472			$	84,997			$	44,466

9. Restructuring Activities

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

	Years Ended December 31,
	2017				2016				2015
Engineered Systems	$	11,847			$	3,080			$	13,302
Fluids	15,737				16,905				4,879
Refrigeration & Food Equipment	14,070				928				5,848
Energy	7,751				18,497				30,763
Corporate	9,775				756				412
Total	$	59,180			$	40,166			$	55,204
These amounts are classified in the Consolidated Statements of Earnings as follows:
Cost of goods and services	$	22,990			$	14,744			$	21,194
Selling, general and administrative expenses	36,190				25,422				34,010
Total	$	59,180			$	40,166			$	55,204

The restructuring charges of $59,180 incurred in 2017, includes $45,812 related to rightsizing restructuring programs designed primarily to better align the Company's cost structure in preparation for the Wellsite separation. The Company also executed restructuring programs to better align its operations with current market conditions through headcount reductions, targeted facility consolidations, product exits and other measures to further optimize operations. The Company expects the programs currently underway to be substantially completed in the next 12 months. Additional programs may be implemented during 2018 with related restructuring charges.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The $59,180 of restructuring charges incurred during 2017 included the following programs:

•	The Engineered Systems segment recorded $11,847 of restructuring charges related to programs across the segment focused on headcount reductions and various site and product line moves and exits to lower ongoing operating expenses.

•	The Fluids segment recorded $15,737 of restructuring charges as a result of programs and projects across the segment, principally related to headcount reductions and facility consolidations, principally focused on achieving acquisition integration benefits.

•	The Refrigeration & Food Equipment segment recorded restructuring charges of $14,070, related to headcount reductions, facility consolidations and product line exits, primarily within its Refrigeration business to improve margin performance.

•	The Energy segment incurred restructuring charges of $7,751 related to various programs across the segment focused on facility consolidations, product line exits and workforce reductions.

•	Corporate recorded $9,775 of restructuring charges primarily related to headcount reductions, corporate office consolidation and a shared facility exit in South America.

Restructuring expenses incurred in 2016 and 2015 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, 2015	$	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
Restructuring charges	32,378				26,802				59,180
Payments	(17,298		)		(6,685		)		(23,983		)
Other, including foreign currency translation	(1,033		)		(12,688		)	(1)	(13,721		)
Balance at December 31, 2017	$	24,955			$	8,868			$	33,823

(1)	Other activity in exit reserves primarily represents the non-cash write-off of certain long-lived assets and inventory in connection with certain facility closures and product exits.

The restructuring accrual balances at December 31, 2017 primarily reflects restructuring plans initiated during the year, inclusive of rightsizing-related restructuring and 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)

10. Borrowings and Lines of Credit

Borrowings consist of the following:

	December 31, 2017				December 31, 2016
Short-term:
Current portion of long-term and short-term borrowings	$	350,402			$	6,950
Commercial paper	230,700				407,600
Notes payable and current maturities of long-term debt	$	581,102			$	414,550

					Carrying amount (1)
	Principal				December 31, 2017				December 31, 2016
Long-term:
5.45% 10-year notes due March 15, 2018	$	350,000			$	349,918			$	349,502
2.125% 7-year notes due December 1, 2020 (euro-denominated)	€	300,000			354,349				311,851
4.30% 10-year notes due March 1, 2021	$	450,000			448,831				448,458
3.150% 10-year notes due November 15, 2025	$	400,000			394,695				394,042
1.25% 10-year notes due November 9, 2026 (euro-denominated)	€	600,000			701,058				616,893
6.65% 30-year debentures due June 1, 2028	$	200,000			198,954				198,830
5.375% 30-year debentures due October 15, 2035	$	300,000			295,561				295,316
6.60% 30-year notes due March 15, 2038	$	250,000			247,713				247,593
5.375% 30-year notes due March 1, 2041	$	350,000			343,600				343,323
Other					2,034				1,969
Total long-term debt					3,336,713				3,207,777
Less long-term debt current portion					(350,011		)		(1,140		)
Net long-term debt					$	2,986,702			$	3,206,637

(1)	Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discounts were

$17.6 million and $18.8 million as of December 31, 2017, and December 31, 2016, respectively. Total deferred debt issuance costs were $14.9 million and $16.5 million as of December 31, 2017, and December 31, 2016, respectively.

The discounts are being amortized to interest expense using the effective interest method over the life of the issuances.

On March 15, 2018, the outstanding 5.45% notes with a principal value of $350.0 million will mature. These notes have been classified as a current maturity of long-term debt as of December 31, 2017.

On November 9, 2016, the Company issued €600 million of 1.25% euro-denominated notes due 2026. The proceeds of $656.4 million 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 greater than or equal to 3.0 to 1. The Company was in compliance with all covenants in the Credit Agreement and other long-term debt covenants at December 31, 2017 and had a coverage ratio of 11.4 to 1.0. The Company primarily uses this facility as liquidity back-up for its commercial paper program and has not drawn down any loans under the facility and does not anticipate doing so. The Company generally uses commercial paper borrowings for general corporate purposes, funding of acquisitions and the repurchases of its common stock.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Letters of Credit

As of December 31, 2017, the Company had approximately $135.4 million outstanding in letters of credit and guarantees with financial institutions, which expire at various dates in 2018 through 2039. These letters of credit are primarily maintained as security for insurance, warranty and other performance obligations. In general, the Company would only be liable for the amount of these guarantees in the event of default in the performance of its obligations, the probability of which is believed to be remote.

As of December 31, 2017, the future maturities of long-term debt were as follows:

	Future Maturities
2018	$	350,011
2019	1,943
2020	354,349
2021	448,831
2022	—
2023 and thereafter	2,181,579
Total	$	3,336,713

11. Financial Instruments

Derivatives

The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations. In order to manage this risk the Company has hedged portions of its forecasted sales and purchases, which occur within the next twelve months and are denominated in non-functional currencies, with currency forward or collar contracts designated as cash flow hedges. At December 31, 2017 and 2016, the Company had contracts with U.S. dollar equivalent notional amounts of $115,580 and $59,932, respectively, to exchange foreign currencies, principally the Pound Sterling, Chinese Yuan, Swedish Krona, Euro, Canadian Dollar, and Swiss Franc. The Company believes it is probable that all forecasted cash flow transactions will occur.

In addition, the Company had outstanding contracts at December 31, 2017 and 2016 with a total notional amount of $59,952 and $56,189, respectively, that are not designated as hedging instruments. These instruments are used to reduce the Company's exposure to operating receivables and payables that are denominated in non-functional currencies. Gains and losses on these contracts are recorded in Other expense (income), net in the Consolidated Statements of Earnings.

The following table sets forth the fair values of derivative instruments held by the Company as of December 31, 2017 and 2016 and the balance sheet lines in which they are recorded:

	Fair Value Asset (Liability)
	December 31, 2017				December 31, 2016				Balance Sheet Caption
Foreign currency forward	$	358			$	1,058			Prepaid/Other assets
Foreign currency forward	(2,243		)		(705		)		Other accrued expenses

For a cash flow hedge, the effective portion of the change in estimated fair value of a hedging instrument is recorded in Other comprehensive earnings (loss), net of tax as a separate component of the Consolidated Statements of Stockholders' Equity and is reclassified into Cost of goods and services in the Consolidated Statements of Earnings during the period in which the hedged transaction is recognized. 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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company is exposed to credit loss in the event of nonperformance by counterparties to the financial instrument contracts held by the Company; however, nonperformance by these counterparties is considered unlikely as the Company’s policy is to contract with highly-rated, diversified counterparties.

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:

	2017				2016				2015
(Loss)/gain on euro-denominated debt	$	(125,262	)		$	53,791			$	35,458
Loss on swiss franc cross-currency swap	—				—				(2,185		)
Total (loss)/gain on net investment hedges before tax	(125,262		)		53,791				33,273
Tax benefit/(expense)	43,842				(18,827		)		(11,646		)
(Loss)/gain on net investment hedges, net of tax	$	(81,420	)		$	34,964			$	21,627

Fair Value Measurements

Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value 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, 2017 and 2016 were as follows:

	December 31, 2017				December 31, 2016
	Level 2				Level 2
Assets:
Foreign currency cash flow hedges	$	358			$	1,058
Liabilities:
Foreign currency cash flow hedges	2,243				705

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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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, 2017 and 2016 was $3,324,776 and $3,534,553, respectively, compared to the carrying value of $2,986,702 and $3,206,637, 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, 2017 and 2016 due to the short-term nature of these instruments.

12. Income Taxes

Income taxes have been based on the following components of Earnings before provision for income taxes and discontinued operations in the Consolidated Statements of Earnings:

	Years Ended December 31,
	2017				2016				2015
Domestic	$	620,908			$	420,546			$	530,268
Foreign	352,935				268,786				270,342
Total	$	973,843			$	689,332			$	800,610

Income tax expense (benefit) relating to continuing operations for the years ended December 31, 2017, 2016 and 2015 is comprised of the following:

	Years Ended December 31,
	2017				2016				2015
Current:
U.S. federal	$	277,979			$	139,117			$	115,130
State and local	24,444				21,213				11,706
Foreign	47,152				85,273				79,982
Total current	349,575				245,603				206,818
Deferred:
U.S. federal	(187,365		)		(14,438		)		19,238
State and local	(3,514		)		(1,232		)		(3,433		)
Foreign	3,482				(49,493		)		(17,894		)
Total deferred	(187,397		)		(65,163		)		(2,089		)
Total expense	$	162,178			$	180,440			$	204,729

Differences between the effective income tax rate and the U.S. federal income statutory tax rate are as follows:

	Years Ended December 31,
	2017			2016			2015
U.S. federal income tax rate	35.0	%		35.0	%		35.0	%
State and local taxes, net of federal income tax benefit	1.3			1.9			1.6
Foreign operations tax effect	(6.5	)		(7.1	)		(4.3	)
Domestic manufacturing deduction	(2.0	)		(2.2	)		(3.0	)
Foreign tax credits	—			(0.1	)		(2.4	)
Changes in tax law	(5.6	)		(1.4	)		—
Disposition of businesses	(3.8	)		(0.6	)		—
Other (1)	(1.7	)		0.7			(1.3	)
Effective tax rate from continuing operations	16.7	%		26.2	%		25.6	%

(1)	Research and experimentation tax credits and branch income differences have been collapsed into Other for all periods presented.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

	December 31, 2017				December 31, 2016
Deferred Tax Assets:
Accrued compensation, principally postretirement and other employee benefits	$	69,428			$	121,909
Accrued expenses, principally for state income taxes, interest and warranty	21,251				40,256
Net operating loss and other carryforwards	269,892				325,721
Inventories, principally due to reserves for financial reporting purposes and capitalization for tax purposes	11,640				15,730
Accounts receivable, principally due to allowance for doubtful accounts	6,747				8,337
Accrued insurance	1,264				6,483
Long-term liabilities, principally warranty, environmental and exit costs	7,107				5,273
Other assets	(23,396		)		(18,872		)
Total gross deferred tax assets	363,933				504,837
Valuation allowance	(238,668		)		(289,642		)
Total deferred tax assets, net of valuation allowances	125,265				215,195
Deferred Tax Liabilities:
Intangible assets, principally due to different tax and financial reporting bases and amortization lives	(488,012		)		(814,242		)
Property, plant and equipment, principally due to differences in depreciation	(47,549		)		(74,713		)
Accounts receivable	(4,654		)		(10,086		)
Total gross deferred tax liabilities	(540,215		)		(899,041		)
Net deferred tax liability	$	(414,950	)		$	(683,846	)
Classified as follows in the Consolidated Balance Sheets:
Other assets and deferred charges	$	23,891			$	26,327
Deferred income taxes	(438,841		)		(710,173		)
	$	(414,950	)		$	(683,846	)

As of December 31, 2017, the Company had non-U.S loss carryforwards of $963.6 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, 2017 is available to be carried forward, with $129.2 million of these losses beginning to expire during the years 2018 through 2037. The remaining $834.4 million of such losses can be carried forward indefinitely.

The Company has $82.4 million and $84.2 million of state tax loss carryforwards as of December 31, 2017 and 2016, respectively that are available for use by the Company between 2018 and 2037.

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.

On December 22, 2017, the Tax Reform Act was enacted which permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the reduction in the U.S. corporate income tax rate, the Company revalued its ending net deferred tax liabilities as of December 31, 2017 and recognized a provisional tax benefit of $172.0 million. The Tax Reform Act also imposed a tax for a one-time deemed repatriation of post-1986 unremitted foreign E&P through the year ended December 31, 2017. The Company recorded provisional tax expense related to the deemed repatriation of $115.0 million payable over eight years. The Company plans to make cash distributions to the U.S from non-U.S. subsidiaries of up to an estimated $450.0 million, and consequently has recorded $11.0 million of anticipated local withholding tax expense associated with these planned distributions. The GILTI provisions of the Tax Reform Act require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company expects that it will be subject to incremental U.S. tax on GILTI income beginning in 2018, due to expense allocations required by the U.S. foreign tax credit rules. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2017.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

On December 22, 2017, the SEC staff issued SAB 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. In accordance with the SAB 118 guidance, the Company has recognized the provisional tax impacts related to deemed repatriated earnings and the benefit for the revaluation of deferred tax assets and liabilities in its consolidated financial statements for the year ended December 31, 2017. The final impact may differ from these provisional amounts, possibly materially, due to, among other things, issuance of additional regulatory guidance, changes in interpretations and assumptions the Company has made, and actions the Company may take as a result of the Tax Reform Act. In accordance with SAB 118 the financial reporting impact of the Tax Reform Act will be completed in the fourth quarter of 2018.

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 $14.1 million. The Company is no longer subject to examinations of its federal income tax returns for prior years through 2013. All significant state, local and international matters have been concluded for prior years through 2012. 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:

	Total
Unrecognized tax benefits at January 1, 2015	$	77,089
Additions based on tax positions related to the current year	17,131
Additions for tax positions of prior years	2,900
Reductions for tax positions of prior years (1)	(17,135		)
Cash settlements	(1,153		)
Lapse of statutes	(12,744		)
Unrecognized tax benefits at December 31, 2015	66,088
Additions based on tax positions related to the current year	7,929
Additions for tax positions of prior years	9,076
Reductions for tax positions of prior years	(3,067		)
Cash settlements	(3,106		)
Lapse of statutes	(6,605		)
Unrecognized tax benefits at December 31, 2016	70,315
Additions based on tax positions related to the current year	14,466
Additions for tax positions of prior years	4,105
Reductions for tax positions of prior years	(9,653		)
Cash settlements	(954		)
Lapse of statutes	(10,245		)
Unrecognized tax benefits at December 31, 2017 (2)	$	68,034

(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 $59.2 million. During the years ended December 31, 2017, 2016 and 2015, the Company recorded expense (income) of $(0.5) million, $0.7 million and $(4.3) 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 $16.5 million at December 31, 2017 and $14.6 million at December 31, 2016, which are not included in the above table.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

13. Equity and Cash Incentive Program

The Company's share-based awards are typically granted annually at its regularly scheduled first quarter Compensation Committee meeting. Beginning in 2013, these awards were made pursuant to the terms of the Company's 2012 Equity and Cash Incentive Plan (the "2012 Plan"), which was approved by shareholders on May 3, 2012. This plan replaced the 2005 Equity and Cash Incentive Plan (the "2005 Plan"), which would have otherwise terminated according to its terms on January 31, 2015 and the 1996 Non-Employee Directors Stock Compensation Plan (the "Directors Plan"), which would have otherwise terminated according to its terms on December 31, 2012. Upon 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.

Stock-based compensation costs are reported within Selling, general and administrative expenses in the Consolidated Statements of Earnings. The following table summarizes the Company’s compensation expense relating to all stock-based incentive plans:

	Years Ended December 31,
	2017				2016				2015
Pre-tax compensation expense	$	26,528			$	21,015			$	30,697
Tax benefit	(9,261		)		(7,399		)		(10,877		)
Total stock-based compensation expense, net of tax	$	17,267			$	13,616			$	19,820

On January 1, 2017, the Company adopted ASU 2016-09, Compensation: Stock Compensation (Topic 718). See Note 1 — Description of Business and Summary of Significant Accounting Policies. The adoption of the new standard resulted in the recognition of excess tax benefits in the Company's provision for income taxes within the Consolidated Statements of Earnings rather than paid-in capital of $8,365 for the year-ended December 31, 2017. The Company recognized net tax benefits of $4,964 and $661 during 2016 and 2015, 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 2017, 2016 and 2015, the Company issued SARs covering 1,028,116, 1,346,354 and 1,144,529 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:

	2017				2016				2015
Risk-free interest rate	1.80		%		1.05		%		1.51		%
Dividend yield	2.27		%		3.09		%		2.24		%
Expected life (years)	4.6				4.6				5.1
Volatility	21.90		%		26.17		%		27.19		%
Grant price	$	79.28			$	57.25			$	73.28
Fair value at date of grant	$	12.63			$	9.25			$	14.55

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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

A summary of activity relating to SARs granted under the 2012 Plan and the predecessor plans for the year ended December 31, 2017 is as follows:

	SARs
	Number of Shares			Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)
Outstanding at January 1, 2017	7,253,827			$	59.00
Granted	1,028,116			79.28
Forfeited / expired	(240,859	)		69.36
Exercised	(1,467,105	)		54.54
Outstanding at December 31, 2017	6,573,979			62.78				5.8
Exercisable at December 31, 2017	3,640,841			$	57.65			4.0

The following table summarizes information about outstanding SARs at December 31, 2017:

		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		927,723			$	33.98			1.8		$	62,170			929,840			$	33.98			1.8		$	62,170
$40.54 - $58.69		2,301,826			$	57.67			5.8		99,723				1,188,436			$	58.06			3.7		50,903
$63.33 - $82.51		3,344,430			$	74.30			7.0		89,274				1,522,565			$	71.77			5.6		44,446
		6,573,979									$	251,167			3,640,841									$	157,519

Unrecognized compensation expense related to SARs not yet exercisable was $8,428 at December 31, 2017. 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:

	2017				2016				2015
SARs
Fair value of SARs that became exercisable	$	16,006			$	24,843			$	25,380
Aggregate intrinsic value of SARs exercised	$	44,646			$	34,916			$	14,560
Stock Options
Cash received by Dover for exercise of stock options	$	—			$	—			$	1,468
Aggregate intrinsic value of options exercised	$	—			$	—			$	1,649

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.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In 2017, 2016 and 2015, the Company issued performance shares covering 57,958, 79,561 and 61,611 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 Selling, general and administrative expenses in the Consolidated Statements of Earnings in the period of change.

The fair value and average attainment used in determining compensation cost of the performance shares issued in 2017, 2016 and 2015 are as follows for the year ended December 31, 2017:

	Performance shares
	2017				2016				2015
Fair value per share at date of grant	$	79.28			$	57.25			$	73.28
Average attainment rate reflected in expense	147.81		%		20.99		%		3.33		%

A summary of activity for performance share awards for the year ended December 31, 2017 is as follows:

	Number of Shares			Weighted Average Grant-Date Fair Value
Unvested at January 1, 2017	122,166			$	65.29
Granted	57,958			79.28
Forfeited	(6,123	)		69.41
Vested	(49,534	)		73.28
Unvested at December 31, 2017	124,467			$	65.80

Unrecognized compensation expense related to unvested performance shares as of December 31, 2017 was $3,270, which will be recognized over a weighted average period of 1.9 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 three-year period, and restrictions lapse proportionately over the three-year period. The Company granted 174,203, 249,263 and 145,545 of restricted stock units in 2017, 2016 and 2015, respectively. The fair value of these awards was determined using Dover's closing stock price on the date of grant.

A summary of activity for restricted stock units for the year ended December 31, 2017 is as follows:

	Number of Shares			Weighted Average Grant-Date Fair Value
Unvested at January 1, 2017	336,546			$	64.74
Granted	174,203			79.28
Forfeited	(27,590	)		71.16
Vested	(149,273	)		69.01
Unvested at December 31, 2017	333,886			$	70.06

Unrecognized compensation expense relating to unvested restricted stock units as of December 31, 2017 was $12,416, which will be recognized over a weighted average period of 1.6 years.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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,
	2017			2016			2015
Aggregate shares granted	16,231			21,023			21,205
Shares deferred	(11,337	)		(11,882	)		(11,196	)
Net shares issued	4,894			9,141			10,009

14. 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 $93,015, $90,138 and $84,801 for the years ended December 31, 2017, 2016 and 2015, 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, 2017 are as follows:

	Operating				Capital
2018	$	72,220			$	3,454
2019	53,878				2,951
2020	38,691				1,448
2021	26,947				1,212
2022	21,793				1,150
Thereafter	57,185				5,062
Total	$	270,714			$	15,277

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.

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”). During the first quarter of 2017, the Company announced a voluntary recall of the product in collaboration with the CPSC. 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. At December 31, 2017, the warranty accrual was $6,613 and was included in Other accrued expenses. The reduction in the warranty accrual was due to settlements made of $9,337 and a reduction of $7,200 to reflect the remaining estimated costs of the recall. The $7,200 adjustment was recorded in Costs of goods and services in the Consolidated Statement of Earnings for the year ended December 31, 2017.

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,

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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, 2017 and 2016, the Company has reserves totaling $35,353 and $29,959, respectively, for environmental and other matters, including private party claims for exposure to hazardous substances, that are probable and estimable.

The Company and some 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, 2017 and 2016, 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 effect on its financial position, results of operations, or cash flows.

15. Employee Benefit Plans

The Company offers defined contribution retirement plans which cover the majority of its U.S. employees, as well as employees in certain other countries. The Company’s expense relating to defined contribution plans was $41,919, $34,665 and $32,281 for the years ended December 31, 2017, 2016 and 2015, 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 would 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 impacted plans. The Company also announced that effective January 1, 2024, the plans would be frozen to any future benefit accruals.

The Company also maintains other post-retirement benefit plans which cover approximately 431 participants, approximately 411 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, 2017 and 2016.

	Qualified Defined Benefits																Non-Qualified Supplemental Benefits								Other Post-Retirement Benefits
	U.S. Plan								Non-U.S. Plans
	2017				2016				2017				2016				2017				2016				2017				2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	535,299			$	527,667			$	243,483			$	245,986			$	110,446			$	125,311			$	12,263			$	10,885
Service cost	12,083				13,913				5,688				5,590				2,473				2,959				68				52
Interest cost	21,718				23,046				5,263				5,593				4,076				5,268				783				403
Plan participants' contributions	—				—				1,237				1,223				—				—				—				102
Benefits paid	(38,490		)		(32,341		)		(8,528		)		(7,870		)		(11,576		)		(16,643		)		(917		)		(767		)
Actuarial loss (gain)	35,446				2,980				8,812				22,909				593				(6,449		)		946				(2,343		)
Business acquisitions (dispositions)	—				—				1,810				(4,420		)		—				—				—				4,367
Amendments	364				—				—				—				—				—				(4,646		)		—
Settlements and curtailments	(32		)		—				—				(3,262		)		—				—				—				—
Currency translation and other	1				34				20,423				(22,266		)		—				—				98				(436		)
Benefit obligation at end of year	566,389				535,299				278,188				243,483				106,012				110,446				8,595				12,263
Change in plan assets:
Fair value of plan assets at beginning of year	562,564				552,817				148,514				159,436				—				—				—				—
Actual return on plan assets	93,766				42,088				15,849				10,317				—				—				—				—
Company contributions	—				—				7,971				8,383				11,576				16,643				917				665
Plan participants' contributions	—				—				1,237				1,223				—				—				—				102
Benefits paid	(38,490		)		(32,341		)		(8,528		)		(7,870		)		(11,576		)		(16,643		)		(917		)		(767		)
Business dispositions	—				—				—				(3,967		)		—				—				—				—
Settlements and curtailments	—				—				—				(3,262		)		—				—				—				—
Currency translation	—				—				10,491				(15,746		)		—				—				—				—
Fair value of plan assets at end of year	617,840				562,564				175,534				148,514				—				—				—				—
Funded (Unfunded) status	$	51,451			$	27,265			$	(102,654	)		$	(94,969	)		$	(106,012	)		$	(110,446	)		$	(8,595	)		$	(12,263	)
Amounts recognized in the consolidated balance sheets consist of:
Assets and Liabilities:
Other assets and deferred charges	$	51,451			$	27,265			$	1,002			$	706			$	—			$	—			$	—			$	—
Accrued compensation and employee benefits	—				—				(1,484		)		(1,235		)		(17,450		)		(20,032		)		(706		)		(849		)
Other liabilities (deferred compensation)	—				—				(102,172		)		(94,440		)		(88,562		)		(90,414		)		(7,889		)		(11,414		)
Total assets and liabilities	51,451				27,265				(102,654		)		(94,969		)		(106,012		)		(110,446		)		(8,595		)		(12,263		)
Accumulated Other Comprehensive Loss (Earnings):
Net actuarial losses (gains)	79,288				103,410				69,490				73,023				(13,780		)		(15,565		)		(748		)		(1,921		)
Prior service cost (credit)	1,344				1,482				(3,500		)		(3,925		)		13,777				18,187				84				43
Net asset at transition, other	—				—				(60		)		(56		)		—				—				—				—
Deferred taxes	(30,777		)		(36,712		)		(14,982		)		(15,719		)		83				(920		)		322				598
Total accumulated other comprehensive loss (earnings), net of tax	49,855				68,180				50,948				53,323				80				1,702				(342		)		(1,280		)
Net amount recognized at December 31,	$	101,306			$	95,445			$	(51,706	)		$	(41,646	)		$	(105,932	)		$	(108,744	)		$	(8,937	)		$	(13,543	)
Accumulated benefit obligations	$	547,278			$	512,707			$	264,766			$	231,903			$	96,612			$	101,286

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, 2017 and 2016 includes net liabilities of $102,654 and $94,969, 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 $908,656 and $845,896 at December 31, 2017 and 2016, respectively. Pension plans with accumulated benefit obligations in excess of plan assets consist of the following at December 31, 2017 and 2016:

	2017				2016
Projected benefit obligation (PBO)	$	372,559			$	346,710
Accumulated benefit obligation (ABO)	349,735				325,969
Fair value of plan assets	162,890				140,589

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
	2017				2016				2015				2017				2016				2015				2017				2016				2015
Service cost	$	12,083			$	13,913			$	15,661			$	5,688			$	5,590			$	6,613			$	2,473			$	2,959			$	3,739
Interest cost	21,718				23,046				23,163				5,263				5,593				5,885				4,076				5,268				5,063
Expected return on plan assets	(39,812		)		(38,793		)		(41,571		)		(7,417		)		(7,830		)		(7,990		)		—				—				—
Amortization of:
Prior service cost (credit)	427				733				897				(425		)		(397		)		89				4,411				6,266				6,927
Recognized actuarial loss (gain)	5,582				6,437				12,620				3,506				2,658				2,647				(1,192		)		(560		)		286
Transition obligation	—				—				—				4				4				4				—				—				—
Settlement and curtailment loss (gain)	76				—				810				678				1,103				(184		)		—				—				—
Other	—				35				—				—				—				—				—				—				—
Net periodic benefit expense	$	74			$	5,371			$	11,580			$	7,297			$	6,721			$	7,064			$	9,768			$	13,933			$	16,015

Other Post-Retirement Benefits

	2017				2016				2015
Service cost	$	68			$	52			$	163
Interest cost	783				403				512
Amortization of:
Prior service cost (credit)	7				7				(372		)
Recognized actuarial (gain) loss	(161		)		5				(30		)
Settlement and curtailment gain	(4,598		)		—				—
Other	—				—				(679		)
Net periodic (benefit) expense	$	(3,901	)		$	467			$	(406	)

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. The curtailment gain in 2017 relates primarily to the impact of an amendment to the post-retirement plan in Brazil.

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 2018 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)	$	346			$	(441	)		$	3,852			$	13
Recognized actuarial loss (gain)	7,725				3,094				(1,020		)		(30		)
Transition obligation	—				4				—				—
Total	$	8,071			$	2,657			$	2,832			$	(17	)

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
	2017			2016			2017			2016			2017			2016			2017				2016
Discount rate	3.65	%		4.10	%		1.94	%		2.06	%		3.57	%		3.90	%		3.50	%	(1	)	6.49	%
Average wage increase	4.00	%		4.00	%		2.33	%		2.34	%		4.50	%		4.50	%		na				na
Ultimate medical trend rate	na			na			na			na			na			na			2.33	%			5.00	%

(1) In 2017, the medical plan in Brazil was amended which resulted in elimination of the benefit obligation. Thus, the 2017 post-retirement benefit discount rate does not reflect the plan in Brazil which had a higher discount rate than other plans.

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
	2017			2016			2015			2017			2016			2015			2017			2016			2015			2017			2016			2015
Discount rate	4.10	%		4.40	%		4.05	%		2.06	%		2.32	%		2.31	%		3.97	%		4.18	%		3.96	%		6.49	%		4.00	%		3.75	%
Average wage increase	4.00	%		4.00	%		4.00	%		2.34	%		2.25	%		2.50	%		4.50	%		4.50	%		4.50	%		na			na			na
Expected return on plan assets	7.25	%		7.25	%		7.75	%		4.73	%		4.95	%		4.85	%		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 3.50% annual rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rates) was assumed for 2018. The rate was assumed to decrease gradually to 2.30% 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, 2017 by $105 and $(105), respectively, and would have a negligible impact on the net post-retirement benefit cost for 2017.

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

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

for overseeing the management of the investments of the plans’ assets and otherwise ensuring that the plans’ investment programs 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:

	2017			2016			Current Target
Equity securities	57	%		57	%		58	%
Fixed income	33	%		35	%		35	%
Real estate and other	10	%		8	%		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 4.73% in 2017, 4.95% in 2016 and 4.85% in 2015.

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 11 — Financial Instruments) were as follows:

	U.S. Qualified Defined Benefits Plan
	December 31, 2017												December 31, 2016
	Level 1				Level 2				Total Fair Value				Level 1				Level 2				Total Fair Value**
Common stocks	$	—			$	—			$	—			$	161,426			$	—			$	161,426
Mutual funds	—				—				—				43,272				—				43,272
Fixed income investments:
Corporate bonds	—				74,509				74,509				—				60,638				60,638
Government securities	2,766				130,774				133,540				5,901				109,888				115,789
Interest-bearing cash and short-term investments	1,222				—				1,222				1,248				—				1,248
Total investments at fair value	3,988				205,283				209,271				211,847				170,526				382,373
Investments measured at net asset value*
Collective funds	—				—				352,481				—				—				124,456
Real estate investments	—				—				48,294				—				—				45,494
Short-term investment funds	—				—				7,794				—				—				10,241
Total investments	$	3,988			$	205,283			$	617,840			$	211,847			$	170,526			$	562,564

• 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) as a practical expedient were not classified in the fair value hierarchy. These are included to permit reconciliation of the fair value hierarchy to the aggregate pension plan assets.

** Revisions were made to the fair value leveling hierarchies in the above tables as of December 31, 2016. The non-U.S. changes were from

(i): level 3 to levels 2 and 1 and (ii): level 2 to level 1 and investments measured at net asset value. The U.S. change was from level 1 to investments measured at net asset value. The valuation techniques were unchanged and the amounts revised were not material to the prior annual period.

The Company had no level 3 U.S. Plan assets at December 31, 2017 and 2016.

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

	Non-U.S. Plans
	December 31, 2017																December 31, 2016
	Level 1				Level 2				Level 3				Total Fair Value				Level 1				Level 2				Level 3				Total Fair Value**
Common stocks	$	28,761			$	—			$	—			$	28,761			$	34,139			$	—			$	—			$	34,139
Fixed income investments	—				29,612				—				29,612				—				15,628				—				15,628
Mutual funds	34,075				4,642				—				38,717				31,203				3,972				—				35,175
Cash and cash equivalents	4,633				—				—				4,633				3,465				—				—				3,465
Other	—				3,088				4,592				7,680				—				2,370				4,354				6,724
Total investments at fair value	$	67,469			$	37,342			$	4,592			$	109,403			$	68,807			$	21,970			$	4,354			$	95,131
Investments measured at net asset value*
Collective funds	—				—				—				61,648				—				—				—				49,357
Other	—				—				—				4,483				—				—				—				4,026
Total	$	67,469			$	37,342			$	4,592			$	175,534			$	68,807			$	21,970			$	4,354			$	148,514

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.

Mutual funds are categorized as either Level 1, 2 or Net Asset Value (the "NAV") as a practical expedient depending on the nature of the observable inputs. Collective trusts and real estate investment funds are valued using NAV as a practical expedient 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 methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The availability of observable data is monitored by plan management to assess appropriate classification of financial instruments within the fair value hierarchy. Depending upon the availability of such inputs, specific securities may transfer between levels. In such instances, the transfer is reported at the end of the reporting period.

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 2016 and 2017, due to the following:

	Level 3**
Balance at January 1, 2016	$	—
Business acquisition	4,354
Balance at December 31, 2016	4,354
Actual return on plan assets:
Relating to assets sold during the period	28
Relating to assets still held at December 31, 2017	280
Sales	(456		)
Foreign currency translation	386
Balance at December 31, 2017	$	4,592

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
2018	$	38,772			$	7,719			$	17,760			$	719
2019	38,243				7,584				8,055				704
2020	41,251				8,287				6,417				689
2021	41,666				9,372				15,189				663
2022	40,844				9,984				11,038				649
2023 - 2027	189,701				54,987				26,452				2,882

Contributions

In 2018, the Company expects to contribute approximately $3.5 million to its non-U.S. plans and currently does not expect to contribute to its U.S. plans.

16. Other Comprehensive Earnings (Loss)

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

Year Ended December 31, 2017	Pre-tax				Tax				Net of tax
Foreign currency translation adjustments	$	103,214			$	43,842			$	147,056
Pension and other postretirement benefit plans	28,784				(7,397		)		21,387
Changes in fair value of cash flow hedges	(3,678		)		1,287				(2,391		)
Other	(1,687		)		202				(1,485		)
Total other comprehensive earnings (loss)	$	126,633			$	37,934			$	164,567

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Year Ended December 31, 2016	Pre-tax				Tax				Net of tax
Foreign currency translation adjustments	$	(86,876	)		$	(18,827	)		$	(105,703	)
Pension and other post-retirement 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	)

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

	December 31, 2017				December 31, 2016
Cumulative foreign currency translation adjustments	$	(93,925	)		$	(240,981	)
Pension and other postretirement benefit plans	(100,538		)		(121,925		)
Changes in fair value of cash flow hedges and other	(296		)		3,580
	$	(194,759	)		$	(359,326	)

Total comprehensive earnings (loss) were as follows:

	Years Ended December 31,
	2017				2016				2015
Net earnings	$	811,665			$	508,892			$	869,829
Other comprehensive earnings (loss)	164,567				(104,753		)		(95,642		)
Comprehensive earnings	$	976,232			$	404,139			$	774,187

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, 2017, 2016 and 2015 were as follows:

	Years Ended December 31,
	2017				2016				2015
Pension and other postretirement benefit plans:
Amortization of actuarial losses	$	7,735			$	8,544			$	15,527
Amortization of prior service costs and transition obligation	4,424				6,609				7,541
Settlement and curtailment	(3,844		)		—				—
Total before tax	8,315				15,153				23,068
Tax benefit	(2,503		)		(5,073		)		(7,768		)
Net of tax	$	5,812			$	10,080			$	15,300
Cash flow hedges:
Net (gains) losses reclassified into earnings	$	(908	)		$	638			$	(166	)
Tax expense (benefit)	318				(223		)		58
Net of tax	$	(590	)		$	415			$	(108	)

The Company recognizes net periodic benefit cost, which includes amortization of net actuarial losses, prior service costs and transition obligation, 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.

17. Segment Information

The Company's businesses are aligned around its key end markets to better focus on growth strategies, 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 and evaluating performance. Based on this guidance, the Company has four operating segments, which are also its reportable segments, as follows:

•	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, consumables and components serving the fast-moving consumer goods, digital textile printing, vehicle service, environmental solutions and industrials end markets.

•

The Fluids segment, serving the Fueling & Transport, Pumps and Hygienic & Pharma end markets, is focused on the safe handling of critical fluids across the retail fueling, chemical, hygienic, oil and gas and industrial end markets. In the first quarter of 2017, we aligned our financial reporting around these key end markets to provide more detailed information after acquiring four companies in the retail fueling market in 2016.

•	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.

•	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.

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,
	2017				2016				2015
Revenue:
Engineered Systems	$	2,576,288			$	2,366,283			$	2,342,913
Fluids	2,250,830				1,700,574				1,399,273
Refrigeration & Food Equipment	1,599,105				1,620,339				1,731,430
Energy	1,406,201				1,108,438				1,483,680
Intra-segment eliminations	(1,988		)		(1,292		)		(985		)
Total consolidated revenue	$	7,830,436			$	6,794,342			$	6,956,311
Earnings:
Segment earnings: (1)
Engineered Systems	$	590,430			$	391,829			$	376,961
Fluids	305,108				200,921				262,117
Refrigeration & Food Equipment	193,822				283,628				221,299
Energy	188,427				55,336				173,190
Total segment earnings	1,277,787				931,714				1,033,567
Corporate expense / other (2)	167,238				112,740				105,700
Interest expense	145,208				136,401				131,676
Interest income	(8,502		)		(6,759		)		(4,419		)
Earnings before provision for income taxes	973,843				689,332				800,610
Provision for income taxes	162,178				180,440				204,729
Net earnings	$	811,665			$	508,892			$	595,881
Segment margins:
Engineered Systems	22.9		%		16.6		%		16.1		%
Fluids	13.6		%		11.8		%		18.7		%
Refrigeration & Food Equipment	12.1		%		17.5		%		12.8		%
Energy	13.4		%		5.0		%		11.7		%
Total Segments	16.3		%		13.7		%		14.9		%
Net earnings	10.4		%		7.5		%		8.6		%
Depreciation and amortization:
Engineered Systems	$	81,419			$	73,947			$	59,914
Fluids	120,120				85,224				56,078
Refrigeration & Food Equipment	57,207				65,017				66,074
Energy	130,996				131,420				141,779
Corporate	4,498				5,131				3,244
Consolidated total	$	394,240			$	360,739			$	327,089
Capital expenditures:
Engineered Systems	$	35,028			$	31,121			$	37,109
Fluids	81,080				62,368				45,605
Refrigeration & Food Equipment	32,541				23,651				33,511
Energy	40,061				32,938				33,692
Corporate	8,025				15,127				4,334
Consolidated total	$	196,735			$	165,205			$	154,251

(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 expense (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. For the year ended December 31, 2017, one-time transaction costs associated with the Wellsite spin-off were $15.3 million.

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:	2017				2016
Engineered Systems	$	2,985,920			$	3,002,629
Fluids	3,163,767				3,134,838
Refrigeration & Food Equipment	1,284,117				1,324,037
Energy	2,250,721				2,209,230
Corporate (3)	973,128				445,257
Consolidated total	$	10,657,653			$	10,115,991

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

	Revenue												Long-Lived Assets
	Years Ended December 31,												At December 31,
	2017				2016				2015				2017				2016
United States	$	4,424,030			$	3,910,733			$	4,270,061			$	658,109			$	640,802
Europe	1,504,798				1,261,232				1,059,413				238,942				211,238
Other Americas	735,368				594,838				637,533				40,334				28,288
Asia	774,918				675,995				626,761				57,016				56,614
Other	391,322				351,544				362,543				5,371				8,728
Consolidated total	$	7,830,436			$	6,794,342			$	6,956,311			$	999,772			$	945,670

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, Europe and Asia. The Company’s businesses serve thousands of customers, none of which accounted for more than 10% of consolidated revenue.

18. Earnings per Share

The following table sets forth a reconciliation of the information used in computing basic and diluted earnings per share:

	Years Ended December 31,
	2017				2016				2015
Net earnings from continuing operations	$	811,665			$	508,892			$	595,881
Earnings from discontinued operations, net	—				—				273,948
Net earnings	$	811,665			$	508,892			$	869,829
Basic earnings per common share:
Net earnings from continuing operations	$	5.21			$	3.28			$	3.78
Earnings from discontinued operations, net	$	—			$	—			$	1.74
Net earnings	$	5.21			$	3.28			$	5.52
Weighted average basic shares outstanding	155,685,000				155,231,000				157,619,000
Diluted earnings per common share:
Net earnings from continuing operations	$	5.15			$	3.25			$	3.74
Earnings from discontinued operations, net	$	—			$	—			$	1.72
Net earnings	$	5.15			$	3.25			$	5.46
Weighted average diluted shares outstanding	157,744,000				156,636,000				159,172,000

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,
	2017			2016			2015
Weighted average shares outstanding - Basic	155,685,000			155,231,000			157,619,000
Dilutive effect of assumed exercise of SARs and vesting of performance shares and RSUs	2,059,000			1,405,000			1,553,000
Weighted average shares outstanding - Diluted	157,744,000			156,636,000			159,172,000

Diluted earnings per share amounts are computed using the weighted average number of common shares outstanding and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of SARs and vesting of performance shares and RSUs, as determined using the treasury stock method. For the years ended December 31, 2017, 2016 and 2015, the weighted average number of anti-dilutive potential common shares excluded from the calculation above totaled 79,756, 6,799 and 25,313, respectively.

19. Stockholders' Equity

The Company has the authority to issue up to 100,000 shares of $100 par preferred stock and up to 500,000,000 shares of $1.00 par common stock. There were no issuances of preferred stock. As of December 31, 2017 and 2016, the Company issued 256,992,261 and 256,537,535 shares of common stock and had 102,168,868 and 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 could repurchase up to 15,000,000 shares of its common stock over the following three years. This plan replaced all previously authorized repurchase programs. During the years ended December 31, 2017 and 2015, the Company purchased 1,059,682 and 8,228,542 shares of its common stock under this authorization at a total cost of $105,023 and $600,164, or $99.11 and $72.94 per share, respectively. The Company did not purchase any shares under this program in 2016. As of December 31, 2017, the number of shares available for repurchase under the January 2015 share repurchase authorization was 5,711,776.

20. Quarterly Data (Unaudited)

													Net Earnings
Quarter	Revenue				Gross Profit				Earnings				Per Share - Basic				Per Share - Diluted
2017
First	$	1,813,372			$	661,175			$	172,247			$	1.11			$	1.09
Second	1,993,351				749,446				164,058				1.05				1.04
Third	2,006,275				744,333				178,912				1.15				1.14
Fourth	2,017,438				735,423				296,448				1.90				1.88
	$	7,830,436			$	2,890,377			$	811,665			$	5.21			$	5.15
2016
First	$	1,622,273			$	589,264			$	99,356			$	0.64			$	0.64
Second	1,686,345				631,213				118,290				0.76				0.76
Third	1,707,763				631,788				130,084				0.84				0.83
Fourth	1,777,961				619,704				161,162				1.04				1.03
	$	6,794,342			$	2,471,969			$	508,892			$	3.28			$	3.25

DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

21. Subsequent Events

Subsequent to December 31, 2017, the Company acquired two companies in stock purchases. On January 2, 2018, the Company acquired Ettlinger Group, a leading manufacturer of filtering solutions for the plastics recycling industry, for €50.0 million (approximately $60.0 million). On January 12, 2018, the Company acquired Rosario Handel B.V., a manufacturer of decorator and base coating machinery used in the production of beverage, food and aerosol cans for €13.5 million (approximately $16.2 million). These acquisitions enhance the Company's ability to serve its respective markets within the Dover Fluids and Refrigeration & Food Equipment segments.

In February 2018, the Company's Board of Directors approved a new standing share repurchase authorization, whereby the Company may repurchase up to 20 million shares of its common stock through December 31, 2020. This share repurchase authorization replaces the previous share repurchase authorization which expired on January 9, 2018.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2017, 2016 and 2015

(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, 2017		$	22,015			11,295			(5,588	)		11,510			$	39,232
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
(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, 2017		$	289,642			—			(50,974	)		—			$	238,668
Year Ended December 31, 2016		$	171,365			118,277			—			—			$	289,642
Year Ended December 31, 2015		$	141,252			30,113			—			—			$	171,365
LIFO Reserve		Balance at Beginning of Year				Charged to Cost and Expense			Reductions			Other			Balance at End of Year
Year Ended December 31, 2017		$	29,625			2,884			(4,382	)		—			$	28,127
Year Ended December 31, 2016		$	35,835			686			(6,896	)		—			$	29,625
Year Ended December 31, 2015		$	50,769			221			(15,155	)		—			$	35,835