Please help with the following questions related to the attached financial statements:

• -Compute current ratio and quick ratio for 2015 and 2014. What do these ratios tell us about Parker?s liquidity?

• -DoesParkerappeartohaveanysignificantproblemwithcollectabilityoftradeaccountsreceivable?Explain.
• -What type of asset is the most material component of Plant and Equipment?
• -DoesParkerhaveasignificantamountofleasecommitmentsnotincludedonthebalancesheet?Explain.
• -What are the amounts of research and development expense for 2015, 2014, and 2013? Comment on any apparent pattern.

Financial Statements CONSOLIDATED STATEMENT OF INCOME (DOLL A RS IN THOUSA NDS, E XCEPT PER SH A RE A MOUNTS) 2015 2014 2013 $12,711,744 9,655,245 $13,215,971 10,188,227 $13,015,704 10,086,675 For the years ended June 30, Net Sales Cost of sales Gross profit Selling, general and administrative expenses Goodwill and intangible asset impairment (Note 7) Interest expense Other (income), net Loss (gain) on disposal of assets (Note 2) 3,056,499 1,544,746 118,406 (43,374) 4,481 3,027,744 1,633,992 188,870 82,566 (25,513) (408,891) 2,929,029 1,554,973 91,552 (18,198) (10,299) Income before income taxes Income taxes (Note 4) 1,432,240 419,687 1,556,720 515,302 1,311,001 362,217 Net Income Less: Noncontrolling interest in subsidiaries' earnings 1,012,553 413 1,041,418 370 948,784 357 $ 1,012,140 $ 1,041,048 $ 948,427 Basic earnings per share $ 7.08 $ 6.98 $ 6.36 Diluted earnings per share $ 6.97 $ 6.87 $ 6.26 Net Income Attributable to Common Shareholders Earnings per Share Attributable to Common Shareholders (Note 5) The accompanying notes are an integral part of the financial statements. CONSOLIDATED STATEMENT OF COMPREHENSIV E INCOME 2015 2014 $ 1,012,553 413 $ 1,041,418 370 1,012,140 1,041,048 For the years ended June 30, Net Income Less: Noncontrolling interests in subsidiaries' earnings Net income attributable to common shareholders Other comprehensive income (loss), net of tax Foreign currency translation adjustment (net of tax of $(30,923), $4,692 and $1,239 in 2015, 2014 and 2013) Retirement benefits plan activity (net of tax of $88,547, $(54,473) and $(195,884) in 2015, 2014 and 2013) Other (net of tax of $(101) in 2015, 2014 and 2013) Other comprehensive income (loss) Less: Other comprehensive (loss) for noncontrolling interests The accompanying notes are an integral part of the financial statements. 24 948,784 357 948,427 192,925 (149,710) (303) 91,182 205 325,066 204 (915,369) 284,312 306,296 (915,120) $ 2013 $ (765,356) (249) Other comprehensive income (loss) attributable to common shareholders Total Comprehensive Income Attributable to Common Shareholders (DOLL A RS IN THOUSA NDS) 97,020 (23) (18,974) (1,771) 284,335 308,067 $ 1,325,383 $ 1,256,494 BUSINESS SEGMENT INFORM ATION 2015 (DOLL A RS IN THOUSA NDS) 2014 2013 By Geographic Area (d) 2015 2014 2013 $ 7,891,571 4,820,173 $ 7,853,603 5,362,368 $ 7,844,552 5,171,152 $12,711,744 $13,215,971 $13,015,704 $ $ $ Net Sales: Diversified Industrial: North America International Aerospace Systems Net Sales: $ 5,715,742 4,741,376 2,254,626 $ 5,693,527 5,287,916 2,234,528 $ 5,637,657 5,110,332 2,267,715 $ 12,711,744 $13,215,971 $ 13,015,704 Long-Lived Assets: North America International Segment Operating Income: Diversified Industrial: North America International Aerospace Systems North America International $ 955,501 583,937 298,994 $ 946,493 572,476 271,238 $ 908,719 602,480 280,286 856,947 807,075 $ 1,664,022 861,300 962,994 $ 1,824,294 871,958 936,282 $ 1,808,240 Total segment operating income Corporate administration 1,838,432 215,396 1,790,207 181,926 1,791,485 185,767 Income before interest expense and other Interest expense Other expense (income) The accounting policies of the business segments are the same as those described in the Significant Accounting Policies footnote except that the business segment results are prepared on a basis that is consistent with the manner in which the Company's management disaggregates financial information for internal review and decision-making. 1,623,036 118,406 72,390 1,608,281 82,566 (31,005) 1,605,718 91,552 203,165 (a) Includes an investment in a joint venture in which ownership is 50 percent or less and in which the Company does not have operating control (2015 - $251,365; 2014 - $263,246). Income before income taxes $ 1,432,240 $ 1,556,720 $ 1,311,001 $ 8,765,468 1,375,913 2,153,656 $ 9,501,837 1,359,130 2,413,395 $ 9,388,027 1,139,967 2,012,904 $12,295,037 $13,274,362 $12,540,898 $ 190,580 18,427 6,520 $ 189,832 23,261 3,247 $ 312,392 20,838 7,105 $ 215,527 $ 216,340 $ 340,335 $ 174,102 19,509 9,165 $ 187,347 19,193 8,425 $ 187,014 19,498 7,210 $ 202,776 $ 214,965 $ 213,722 Assets: Diversified Industrial Aerospace Systems (a) Corporate (b) Property Additions (c): Diversified Industrial Aerospace Systems Corporate (b) Corporate assets are principally cash and cash equivalents, marketable securities and other investments, domestic deferred income taxes, deferred compensation plan assets, headquarters facilities and the major portion of the Company's domestic data processing equipment. (c) Includes the value of net plant and equipment at the date of acquisition of acquired companies (2013 - $74,439). (d) Net sales are attributed to countries based on the location of the selling unit. North America includes the United States, Canada and Mexico. No country other than the United States represents greater than 10 percent of consolidated sales. Long-lived assets are comprised of plant and equipment based on physical location. Depreciation: Diversified Industrial Aerospace Systems Corporate 25 CONSOLIDATED BAL ANCE SHEET (DOLL A RS IN THOUSA NDS) 2015 2014 $ 1,180,584 733,490 1,620,194 364,534 1,300,459 241,684 142,147 $ 1,613,555 573,701 1,858,176 388,437 1,371,681 129,837 136,193 Total Current Assets Plant and equipment (Note 1) Less: Accumulated depreciation 5,583,092 4,862,611 3,198,589 6,071,580 5,152,591 3,328,297 Investments and other assets (Note 1) Intangible assets, net (Notes 1 and 7) Goodwill (Notes 1 and 7) 1,664,022 1,091,805 1,013,439 2,942,679 1,824,294 1,018,781 1,188,282 3,171,425 $12,295,037 $13,274,362 $ $ June 30, Assets Current Assets Cash and cash equivalents (Note 1) Marketable securities and other investments (Note 1) Trade accounts receivable, net (Note 1) Non-trade and notes receivable (Note 1) Inventories (Note 6) Prepaid expenses Deferred income taxes (Notes 1 and 4) Total Assets Liabilities and Equity Current Liabilities Notes payable and long-term debt payable within one year (Notes 8 and 9) Accounts payable, trade Accrued payrolls and other compensation Accrued domestic and foreign taxes Other accrued liabilities 223,142 1,092,138 409,762 140,295 484,793 816,622 1,252,040 453,321 223,611 507,202 Total Current Liabilities Long-term debt (Note 9) Pensions and other postretirement benefits (Note 10) Deferred income taxes (Notes 1 and 4) Other liabilities 2,350,130 2,723,960 1,699,197 77,967 336,214 3,252,796 1,508,142 1,346,224 94,819 409,573 Total Liabilities 7,187,468 6,611,554 Equity (Note 11) Shareholders' Equity Serial preferred stock, $.50 par value, authorized 3,000,000 shares; none issued Common stock, $.50 par value, authorized 600,000,000 shares; issued 181,046,128 shares in 2015 and 2014 Additional capital Retained earnings Accumulated other comprehensive (loss) Treasury shares at cost: 42,487,389 in 2015 and 32,143,315 in 2014 90,523 622,729 9,841,885 (1,738,618) (3,712,232) 90,523 595,498 9,174,189 (823,498) (2,377,284) Total Shareholders' Equity Noncontrolling interests 5,104,287 3,282 6,659,428 3,380 Total Equity 5,107,569 6,662,808 $12,295,037 $13,274,362 Total Liabilities and Equity The accompanying notes are an integral part of the financial statements. 26 CONSOLIDATED STATEMENT OF CASH FLOWS For the years ended June 30, Cash Flows From Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization Goodwill and intangible asset impairment Stock incentive plan compensation Deferred income taxes Foreign currency transaction (gain) loss Loss on disposal of assets Gain on sale of businesses Net gain on deconsolidation Loss on sale of marketable securities Changes in assets and liabilities, net of effects from acquisitions: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable, trade Accrued payrolls and other compensation Accrued domestic and foreign taxes Other accrued liabilities Pensions and other postretirement benefits Other liabilities Net cash provided by operating activities Cash Flows From Investing Activities Acquisitions (less cash acquired of $8,332 in 2015, $1,780 in 2014 and $33,932 in 2013) Capital expenditures Proceeds from disposal of assets Proceeds from sale of businesses Net proceeds from deconsolidation Purchase of marketable securities and other investments Maturities and sales of marketable securities and other investments Other (DOLL A RS IN THOUSA NDS) 2015 2014 2013 $1,012,553 $ 1,041,418 $ 948,784 202,776 114,715 96,093 18,865 (77,784) 14,953 (6,420) 3,817 214,965 121,737 188,870 103,161 (74,139) 5,398 2,997 (412,612) 213,722 121,902 84,996 (1,368) 19,497 2,746 (14,637) 143,179 (70,377) (116,561) 20,976 (86,750) (12,657) (66,870) (46,633) 156,859 1,207 (99,144) (3,816) 58,117 (79,158) 92,927 20,840 86,745 (23,480) 99,569 43,498 (21,206) 98,518 (47,451) (16,007) (66,082) (45,771) (17,054) (62,728) (16,691) 9,765 1,301,941 1,387,893 1,190,935 (18,618) (215,527) 19,655 37,265 (1,747,333) (17,593) (216,340) 14,368 202,498 (624,880) (621,144) (265,896) 25,047 73,515 1,391,396 (46,001) (4,454) (21,367) Net cash used in investing activities Cash Flows From Financing Activities Proceeds from exercise of stock options Payments for common shares Tax benefit from stock incentive plan compensation Acquisition of noncontrolling interests (Payments for) proceeds from notes payable, net Proceeds from long-term borrowings Payments for long-term borrowings Dividends paid (579,163) (646,401) (809,845) 3,355 (1,398,446) 23,429 (815,171) 1,483,015 (537) (340,389) 8,013 (204,043) 33,732 (515,387) 748 (2,934) (278,244) 32,204 (258,007) 66,030 (1,091) 1,319,524 3,768 (331,245) (255,009) Net cash (used in) provided by financing activities Effect of exchange rate changes on cash (1,044,744) (111,005) (958,115) 48,766 576,174 (14,169) Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year (432,971) 1,613,555 (167,857) 1,781,412 943,095 838,317 Cash and cash equivalents at end of year $1,180,584 $1,613,555 $1,781,412 Supplemental Data: Cash paid during the year for: Interest Income taxes $ 105,202 515,350 $ $ 77,144 472,369 88,084 311,988 The accompanying notes are an integral part of the financial statements. 27 CONSOLIDATED STATEMENT OF EQUIT Y Balance June 30, 2012 Common Stock Additional Capital Retained Earnings $90,523 $640,249 $ 7,787,175 Net income Other comprehensive income (loss) Dividends paid Stock incentive plan activity Acquisition activity Shares purchased at cost Balance June 30, 2013 (34,678) 3,181 (254,283) (60,049) $(2,205,532) Noncontrolling Interests $ 9,215 357 (1,771) (726) 188,423 (4,020) (257,177) $90,523 $ 608,752 $8,421,270 $ (1,107,833) $(2,274,286) $ 1,041,048 (13,254) $90,523 $ 595,498 (278,222) (9,907) $ 9,174,189 97,002 (200,000) $ (823,498) $(2,377,284) $ 1,012,140 (340,132) (4,312) 3,380 413 (249) (257) (915,120) 27,231 3,055 370 (23) (22) 284,335 58,630 (5) (1,393,578) $90,523 $ 622,729 $9,841,885 The accompanying notes are an integral part of the financial statements. 28 $(1,415,900) Treasury Shares 308,067 Net income Other comprehensive (loss) Dividends paid Stock incentive plan activity Liquidation activity Shares purchased at cost Balance June 30, 2015 Accumulated Other Comprehensive (Loss) 948,427 Net income Other comprehensive income (loss) Dividends paid Stock incentive plan activity Shares purchased at cost Balance June 30, 2014 (DOLL A RS IN THOUSA NDS) $(1,738,618) $ (3,712,232) $ 3,282 Total $ 4,905,730 948,784 306,296 (255,009) 93,696 (839) (257,177) $ 5,741,481 1,041,418 284,312 (278,244) 73,841 (200,000) $6,662,808 1,012,553 (915,369) (340,389) 81,549 (5) (1,393,578) $ 5,107,569 Notes to Consolidated Financial Statements (DOLL A RS IN THOUSA NDS, E XCEPT PER SH A RE A MOUNTS) NOTE 1. Significant Accounting Policies The significant accounting policies followed in the preparation of the accompanying consolidated financial statements are summarized below. NATURE OF OPERATIONS - The Company is a leading worldwide diversified manufacturer of motion and control technologies and systems, providing precision engineered solutions for a wide variety of mobile, industrial and aerospace markets. The Company evaluates performance based on segment operating income before corporate and administrative expenses, interest expense and income taxes. The Diversified Industrial Segment is an aggregation of several business units, which manufacture motion-control and fluid power system components for builders and users of various types of manufacturing, packaging, processing, transportation, agricultural, construction, and military vehicles and equipment. Diversified Industrial Segment products are marketed primarily through field sales employees and independent distributors. The Diversified Industrial North American operations have manufacturing plants and distribution networks throughout the United States, Canada and Mexico and primarily service North America. The Diversified Industrial International operations provide Parker products and services to 47 countries throughout Europe, Asia Pacific, Latin America, the Middle East and Africa. The Aerospace Systems Segment produces hydraulic, fuel, pneumatic and electro-mechanical systems and components, which are utilized on virtually every domestic commercial, military and general aviation aircraft and also performs a vital role in naval vessels and land-based weapons systems. This Segment serves original equipment and maintenance, repair and overhaul customers worldwide. Aerospace Systems Segment products are marketed by field sales employees and are sold directly to manufacturers and end-users. been rendered, the price to the customer is fixed and determinable and collectibility is reasonably assured, which is generally at the time the product is shipped. Shipping and handling costs billed to customers are included in net sales and the related costs in cost of sales. Taxes collected from customers and remitted to governmental authorities are excluded from revenue. The Company enters into long-term contracts primarily for the production of aerospace products. For financial statement purposes, revenues are primarily recognized using the percentage-of-completion method. The extent of progress toward completion is primarily measured using the units-of-delivery method. Unbilled costs on these contracts are included in inventory. Progress payments are netted against the inventory balances. The Company estimates costs to complete long-term contracts for purposes of evaluating and establishing contract reserves. Adjustments to cost estimates are made on a consistent basis and a contract reserve is established when the estimated costs to complete a contract exceed the expected contract revenues. LONG-TERM CONTRACTS - CASH - Cash equivalents consist of short-term highly liquid investments, with a three-month or less maturity, carried at cost plus accrued interest, which are readily convertible into cash. Consist of short-term highly liquid investments, with stated maturities of greater than three months from the date of purchase, carried at cost plus accrued interest, and investments classified as available-for-sale, which are carried at fair value with unrealized gains and losses recorded in accumulated other comprehensive (loss). Gains and losses on available-for-sale investments are calculated based on the first-in, first-out method. The Company has the ability to liquidate the availablefor-sale investments after giving appropriate notice to the issuer. MARKETABLE SECURITIES AND OTHER INVESTMENTS - Trade accounts receivable are initially recorded at their net collectible amount and are generally recorded at the time the revenue from the sales transaction is recorded. Receivables are written off to bad debt primarily when, in the judgment of the Company, the receivable is deemed to be uncollectible due to the insolvency of the debtor. Allowance for doubtful accounts was $9,284 and $16,040 at June 30, 2015 and June 30, 2014, respectively. TRADE ACCOUNTS RECEIVABLE, NET - See the table of Business Segment Information on page 25 for further disclosure of business segment information. There are no individual customers to whom sales are more than four percent of the Company's consolidated sales. Due to the diverse group of customers throughout the world, the Company does not consider itself exposed to any concentration of credit risks. The Company manufactures and markets its products throughout the world. Although certain risks and uncertainties exist, the diversity and breadth of the Company's products and geographic operations mitigate the risk that adverse changes with respect to any particular product and geographic operation would materially affect the Company's operating results. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. USE OF ESTIMATES - The consolidated financial statements include the accounts of all majority-owned domestic and foreign subsidiaries. All intercompany transactions and profits have been eliminated in the consolidated financial statements. The Company does not have off-balance sheet arrangements. Within the Business Segment Information, intersegment and interarea sales have been eliminated. BASIS OF CONSOLIDATION - REVENUE RECOGNITION - Revenue is recognized when persuasive evidence of an arrangement exists, product has shipped and the risks and rewards of ownership have transferred or services have NON-TRADE AND NOTES RECEIVABLE - The non-trade and notes receivable caption in the Consolidated Balance Sheet is comprised of the following components: 2015 2014 Notes receivable Reverse repurchase agreements Accounts receivable, other $ 90,470 113,558 160,506 $ 117,400 54,772 216,265 Total $364,534 $388,437 June 30, Reverse repurchase agreements are collateralized lending arrangements and have a maturity longer than three months from the date of purchase. The Company does not record an asset or liability for the collateral associated with the reverse repurchase agreements. PLANT, EQUIPMENT AND DEPRECIATION - Plant and equipment are recorded at cost and are depreciated principally using the straight-line method for financial reporting purposes. Depreciation rates are based on estimated useful lives of the assets, generally 40 years for buildings, 15 years for land improvements and building equipment, seven to 10 years for machinery and equipment, and three to eight years for vehicles and office equipment. Improvements, which extend the useful life of property, are capitalized, and maintenance and repairs are expensed. The Company reviews plant and equipment for impairment whenever events or changes in circumstances indicate that their carrying value 29 may not be recoverable. When plant and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the appropriate accounts and any gain or loss is included in current income. in a currency other than the local currency of the entity involved are included within cost of goods sold caption in the Consolidated Statement of Income and were $(77,784), $5,398 and $22,380, in 2015, 2014 and 2013, respectively. The plant and equipment caption in the Consolidated Balance Sheet is comprised of the following components: SUBSEQUENT EVENTS - 2015 2014 Land and land improvements Buildings and building equipment Machinery and equipment Construction in progress $ 294,537 1,457,650 3,017,011 93,413 $ 326,008 1,535,634 3,210,172 80,777 Total $4,862,611 $5,152,591 June 30, INVESTMENTS AND OTHER ASSETS - Investments in joint-venture companies in which ownership is 50 percent or less and in which the Company does not have operating control are stated at cost plus the Company's equity in undistributed earnings and amounted to $315,989 and $324,610 at June 30, 2015 and June 30, 2014, respectively. A significant portion of the underlying net assets of the joint ventures are related to goodwill. The Company's share of earnings from these investments were immaterial to the Company's results of operations. GOODWILL - The Company conducts a formal impairment test of goodwill on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Intangible assets primarily include patents, trademarks and customer lists and are recorded at cost and amortized on a straight-line method. Patents are amortized over the shorter of their remaining useful or legal life. Trademarks are amortized over the estimated time period over which an economic benefit is expected to be received. Customer lists are amortized over a period based on anticipated customer attrition rates. The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. INTANGIBLE ASSETS - Income taxes are provided based upon income for financial reporting purposes. Deferred income taxes arise from temporary differences in the recognition of income and expense for tax purposes. Tax credits and similar tax incentives are applied to reduce the provision for income taxes in the year in which the credits arise. The Company recognizes accrued interest related to unrecognized tax benefits in income tax expense. Penalties, if incurred, are recognized in income tax expense. INCOME TAXES - In the ordinary course of business the Company warrants its products against defect in design, materials and workmanship over various time periods. The warranty accrual at June 30, 2015 and 2014 is immaterial to the financial position of the Company and the change in the accrual during 2015, 2014 and 2013 was immaterial to the Company's results of operations and cash flows. PRODUCT WARRANTY - Assets and liabilities of foreign subsidiaries are translated at current exchange rates, and income and expenses are translated using weighted-average exchange rates. The effects of these translation adjustments, as well as gains and losses from certain intercompany transactions, are reported in the accumulated other comprehensive (loss) component of shareholders' equity. Such adjustments will affect net income only upon sale or liquidation of the underlying foreign investments, which is not contemplated at this time. Exchange (gains) losses from transactions FOREIGN CURRENCY TRANSLATION - 30 The Company has evaluated subsequent events that have occurred through the date of filing of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2015. No subsequent events occurred that required adjustment to or disclosure in these financial statements. In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-07, \"Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).\" ASU 2015-07 removes the requirement to categorize all investments within the fair value hierarchy for which the fair value is measured using the net asset value per share practical expedient and to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. During the fourth quarter of 2015, the Company adopted ASU 2015-07. The changes resulting from the adoption of ASU 2015-07, including revising the prior year presentation, are reflected in the retirement benefits and financial instruments disclosures within Note 10 and Note 15 to the Consolidated Financial Statements, respectively. The adoption of ASU 2015-07 did not affect the Company's results of operations, statement of financial position or statement of cash flows. RECENT ACCOUNTING PRONOUNCEMENTS - In April 2015, the FASB issued ASU 2015-03, \"Interest - Imputation of Interest.\" ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in the ASU. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company does not expect ASU 2015-03 will have a material impact on its statement of financial position or financial statement disclosures. In May 2014, the FASB issued ASU 2014-09, \"Revenue from Contracts with Customers.\" ASU 2014-09 requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration that a company expects to be entitled to in exchange for the goods or services. To achieve this principle, a company must apply five steps including identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when (or as) the company satisfies the performance obligations. Additional quantitative and qualitative disclosure to enhance the understanding about the nature, amount, timing, and uncertainty of revenue and cash flows is also required. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company has not yet determined the effect that ASU 2014-09 will have on its results of operations, statement of financial position or financial statement disclosures. NOTE 2. Acquisitions, Deconsolidation of Subsidiary and Divestitures During 2015, the Company completed four acquisitions whose aggregate sales for their most recent fiscal year prior to acquisition were approximately $27 million. Total purchase price for the four acquisitions was approximately $27 million in cash. ACQUISITIONS - During 2014, the Company completed three acquisitions whose aggregate sales for their most recent fiscal year prior to acquisition were approximately $14 million. Total purchase price for the three acquisitions was approximately $19 million in cash. During 2013, the Company completed eight acquisitions whose aggregate sales for their most recent fiscal year prior to acquisition were approximately $484 million. Total purchase price for the eight acquisitions was approximately $621 million in cash and $114 million in assumed debt. The results of operations for all acquisitions are included as of the respective dates of acquisition. The initial purchase price allocation and subsequent purchase price adjustments for acquisitions in 2015, 2014 and 2013 are presented below. Some of the 2015 acquisitions are still subject to purchase price adjustments. 2015 Assets: Accounts receivable Inventories Prepaid expenses Deferred income taxes Plant and equipment Intangible and other assets Goodwill Liabilities and equity: Notes payable Accounts payable, trade Accrued payrolls and other compensation Accrued domestic and foreign taxes Other accrued liabilities Long-term debt Pensions and other postretirement benefits Deferred income taxes Other liabilities Noncontrolling interests Net assets acquired 2014 954 2,184 57 189 11,211 5,646 3,195 $ 91,668 93,915 4,672 (1,713) 74,439 280,001 317,879 30,198 23,436 860,861 2,689 915 11,920 46,596 243 263 12,099 777 5,267 1 3,864 7,073 16,805 102,122 2,604 800 2,125 39,214 689 1,074 11,580 5,843 239,717 $ 18,618 $17,593 $621,144 $ 7,656 3,099 91 5 1,123 7,794 10,430 $ 2013 During 2014, the Company and GE Aviation, a non-related party, finalized a joint venture in which the Company sold a 50 percent equity interest in one of its whollyowned subsidiaries. The sale of the 50 percent equity interest in the wholly-owned subsidiary resulted in a loss of control of the subsidiary, and therefore it was deconsolidated from the Company's financial statements during 2014. DECONSOLIDATION OF SUBSIDIARY - The Company recognized a pre-tax gain of $413 million on the deconsolidation, measured as the fair value of the consideration received for the 50 percent equity interest in the former subsidiary and the fair value of the retained investment less the carrying amount of the former subsidiary's net assets. Approximately $186 million of the pre-tax gain is attributable to the remeasurement of the retained investment in the former subsidiary to its current fair value. The gain is reflected in the loss (gain) on disposal of assets caption in the Consolidated Statement of Income and the other expense (income) caption in the Business Segment Information. DIVESTITURES - During 2013, the Company completed several divestitures, the primary ones being the automotive businesses of its Mobile Climate Systems division and its Turkey refrigeration components business. The Company recorded a net pre-tax gain during 2013 of approximately $18 million related to these divestitures. The gain is reflected in the loss (gain) on disposal of assets caption in the Consolidated Statement of Income. NOTE 3. Charges Related to Business Realignment To structure its businesses in light of current and anticipated customer demand, the Company incurred business realignment charges in 2015, 2014 and 2013. Business realignment charges by business segment are as follows: Diversified Industrial Aerospace Systems 2015 2014 2013 $30,882 967 $101,524 925 $12,234 Work force reductions by business segment are as follows: Diversified Industrial Aerospace Systems 2015 2014 2013 668 21 1,581 44 725 The charges primarily consist of severance costs related to plant closures as well as general work force reductions implemented by various operating units throughout the world, with the majority of charges relating to realignment activities in Europe. Also in 2015, $458 of severance costs for 18 people were included in the Corporate administration caption in the Business Segment Information. In addition, $2,399 and $1,331 of fixed asset write-downs were recognized during 2015 and 2014, respectively, in connection with plant closures in the Diversified Industrial Segment and are reflected in the other expense (income) caption in the Business Segment Information. During 2013, $1,918 of severance costs for 98 people were recognized in connection with the Company's divestiture of its Turkey refrigeration components business and is reflected in the other expense (income) caption in the Business Segment Information. The Company believes the realignment actions taken will positively impact future results of operations, but will have no material effect on liquidity and sources and uses of capital. The business realignment charges are presented in the Consolidated Statement of Income as follows: Cost of sales Selling, general and administrative expenses Loss (gain) on disposal of assets 2015 2014 2013 $19,419 $63,575 $8,354 12,888 2,399 38,874 1,331 3,880 1,918 As of June 30, 2015, approximately $17 million in severance payments have been made relating to charges incurred during 2015, the remainder of which are expected to be paid by June 30, 2016. Severance payments relating to prior-year actions are being made as required. Remaining severance payments related to current-year and prior-year actions of approximately $34 million are primarily reflected within the other accrued liabilities caption in the Consolidated Balance Sheet. Additional charges may be recognized in future periods related to the realignment actions described above, the timing and amount of which are not known at this time. 31 NOTE 4. Income Taxes Income before income taxes was derived from the following sources: United States Foreign 2015 2014 2013 $ 779,782 652,458 $ 1,115,010 441,710 $ 653,622 657,379 $1,432,240 $1,556,720 $1,311,001 2014 2013 Income taxes include the following: 2015 Federal Current Deferred Foreign Current Deferred State and local Current Deferred $ 185,761 28,108 $ 377,404 (45,643) $ 167,350 26,523 189,826 (11,208) 168,177 (28,016) 176,739 (28,472) 25,235 1,965 43,860 (480) 19,496 581 $ 419,687 $ 515,302 $ 362,217 A reconciliation of the Company's effective income tax rate to the statutory Federal rate follows: Statutory Federal income tax rate State and local income taxes Goodwill and intangible asset impairment Tax related to international activities Cash surrender value of life insurance Federal manufacturing deduction Research tax credit Other Effective income tax rate 2015 2014 2013 35.0% 1.1 35.0% 1.8 35.0% 1.0 4.5 (4.5) (5.6) (5.8) (0.1) (0.9) (0.7) (1.6) (0.8) 0.2 (1.0) (0.3) (0.4) (1.0) (1.1) 0.2 29.3% 33.1% 27.6% Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities. The differences comprising the net deferred taxes shown on the Consolidated Balance Sheet at June 30 were as follows: 2015 2014 Retirement benefits Other liabilities and reserves Long-term contracts Stock-based incentive compensation Loss carryforwards Unrealized currency exchange gains and losses Inventory Foreign tax credit carryforward Depreciation and amortization Valuation allowance $ 614,127 127,838 49,929 66,015 316,994 $ 550,034 128,848 46,006 64,267 340,676 Net deferred tax asset $ 343,045 $ 305,612 Change in net deferred tax asset: Provision for deferred tax Items of other comprehensive (loss) Acquisitions and other $ (18,865) 57,523 (1,225) $ 74,139 (49,882) 6,539 Total change in net deferred tax $ $ 30,796 32 25,182 18,668 51,875 (571,107) (348,837) (17,218) 16,659 29,965 (531,258) (330,006) 37,433 As of June 30, 2015, the Company has recorded deferred tax assets of $316,994 resulting from $1,112,078 in loss carryforwards. A valuation allowance of $305,825 related to the loss carryforwards has been established due to the uncertainty of their realization. Of this valuation allowance, $279,850 relates to non-operating entities whose loss carryforward utilization is considered to be remote. Some of the loss carryforwards can be carried forward indefinitely; others can be carried forward from three to 20 years. In addition, a valuation allowance of $24,181 related to future deductible items has been established due to the uncertainty of their realization. These future deductible items are recorded in the other liabilities and reserves line in the table above. Provision has not been made for additional U.S. or foreign taxes on undistributed earnings of certain international operations as those earnings will continue to be reinvested. It is not practicable to estimate the additional taxes, including applicable foreign withholding taxes, that might be payable on the eventual remittance of such earnings. Accumulated undistributed earnings reinvested in international operations amounted to approximately $3,000,000 at June 30, 2015. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2015 2014 2013 Balance July 1 Additions for tax positions related to current year Additions for tax positions of prior years Reductions for tax positions of prior years Reductions for settlements Reductions for expiration of statute of limitations Effect of foreign currency translation $164,813 $107,440 $109,735 6,090 7,752 10,285 14,989 55,136 10,719 (6,945) (1,359) (1,856) (20,683) (4,266) (6,251) (5,005) (437) Balance June 30 $145,688 (27,008) 2,705 2,087 $164,813 $107,440 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $83,471, $71,898 and $60,876 as of June 30, 2015, 2014 and 2013, respectively. If recognized, a significant portion of the gross unrecognized tax benefits as of June 30, 2015 would be offset against an asset currently recorded in the Consolidated Balance Sheet. The accrued interest related to the gross unrecognized tax benefits, excluded from the amounts above, was $9,514, $8,198 and $5,184 as of June 30, 2015, 2014 and 2013, respectively. It is reasonably possible that within the next 12 months, the amount of gross unrecognized tax benefits could be reduced by up to approximately $100,000 as a result of the revaluation of existing uncertain tax positions arising from developments in the examination process or the closure of tax statutes. Any increase in the amount of unrecognized tax benefits within the next 12 months is expected to be insignificant. The Company and its subsidiaries file income tax returns in the United States and in various foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company is open to assessment of its federal income tax returns by the U.S. Internal Revenue Service for fiscal years after 2011. The Company is also open to assessment for all significant state, local and foreign jurisdictions for fiscal years after 2006. NOTE 5. Earnings Per Share NOTE 7. Basic earnings per share are computed using the weighted-average number of common shares outstanding during the year. Diluted earnings per share are computed using the weighted-average number of common shares and common share equivalents outstanding during the year. Common share equivalents represent the dilutive effect of outstanding stock-based awards. The computation of net income per share was as follows: 2015 Numerator: Net income attributable to common shareholders Denominator: Basic - weighted-average common shares Increase in weightedaverage common shares from dilutive effect of stock-based awards 2014 2013 $1,012,140 $1,041,048 $948,427 142,925,327 149,099,448 149,218,257 The changes in the carrying amount of goodwill are as follows: Balance June 30, 2013 2,344,655 2,369,774 Diluted - weighted-average common shares, assuming exercise of stock-based awards 145,112,150 151,444,103 151,588,031 $ $ 7.08 6.97 $ $ 6.98 6.87 $ $ 6.36 6.26 Diversified Industrial Segment Aerospace Systems Segment Total $3,125,175 $98,340 $3,223,515 Acquisitions Impairment Foreign currency translation and other Balance June 30, 2014 3,195 (140,334) 3,195 (140,334) 84,688 361 85,049 $ 3,072,724 $ 98,701 $ 3,171,425 Acquisitions Divestitures Foreign currency translation and other Balance June 30, 2015 2,186,823 Basic earnings per share Diluted earnings per share Goodwill and Intangible Assets 10,430 (4,757) (234,352) $2,844,045 10,430 (4,757) (67) (234,419) $98,634 $2,942,679 Acquisitions represent the original goodwill allocation, purchase price adjustments and final adjustments to the purchase price allocation for the acquisitions during the measurement period subsequent to the applicable acquisition dates. The Company's previously reported results of operations and financial position would not be materially different had the goodwill adjustments recorded during 2015 and 2014 been reflected in the same reporting period that the initial purchase price allocations for those acquisitions were made. Inventories valued on the LIFO cost method were approximately 32 percent of total inventories in 2015 and 30 percent of total inventories in 2014. The current cost of these inventories exceeds their valuation determined on the LIFO basis by $206,233 in 2015 and $208,291 in 2014. Progress payments of $34,820 in 2015 and $61,958 in 2014 are netted against inventories. In 2014, the Company made a decision to restructure and change the strategic direction of its Worldwide Energy Products Division (EPD). The Company calculated the fair value of EPD using assumptions reflecting the Company's updated strategic direction for this reporting unit, the results of which indicated that the carrying value of EPD exceeded its fair value. As a result, the Company estimated the implied fair value of EPD's goodwill, which resulted in a non-cash impairment charge of $140,334. The impairment charge is reflected in the goodwill and intangible asset impairment caption in the Consolidated Statement of Income and in the other expense (income) caption in the Business Segment Information. The fair value of EPD was calculated using both a discounted cash flow analysis and estimated fair market values of comparable businesses with each valuation method having equal weight. Fair value calculated using a discounted cash flow analysis is classified within level 3 of the fair value hierarchy and requires several assumptions including a risk-adjusted interest rate and future sales and operating margin levels. The inventories caption in the Consolidated Balance Sheet is comprised of the following components: The Company's annual impairment tests performed in 2015, 2014 and 2013 resulted in no impairment loss being recognized. For 2015, 2014 and 2013, 1.1 million, 1.2 million and 1.3 million common shares, respectively, subject to stock-based awards were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive. NOTE 6. Inventories Inventories are stated at the lower of cost or market. The majority of domestic inventories are valued by the last-in, first-out (LIFO) cost method and the balance of the Company's inventories are valued by the first-in, first-out cost method. 2015 2014 Finished products Work in process Raw materials $ 526,708 688,727 85,024 $ 532,968 732,294 106,419 Total $1,300,459 $1,371,681 June 30, Intangible assets are amortized on a straight-line method over their legal or estimated useful life. The gross carrying value and accumulated amortization for each major category of intangible asset at June 30 are as follows: 2015 Gross Carrying Amount 2014 Accumulated Gross Carrying Amortization Amount Accumulated Amortization Patents Trademarks Customer lists and other $ 149,066 355,108 $ 88,540 172,187 $ 160,030 391,268 $ 86,708 174,114 1,369,380 599,388 1,481,560 583,754 Total $1,873,554 $860,115 $2,032,858 $844,576 33 During 2015, the Company acquired intangible assets, either individually or as part of a group of assets, with an initial purchase price allocation and weighted-average life as follows: Purchase Price Allocation WeightedAverage Life Patents Trademarks Customer lists and other $ 2,642 1,093 12 years 14 years 11,797 16 years Total $15,532 15 years Total intangible amortization expense in 2015, 2014 and 2013 was $109,887, $118,782 and $118,516, respectively. Estimated intangible amortization expense for the five years ending June 30, 2016 through 2020 is $100,289, $95,756, $90,872, $83,257 and $75,588, respectively. Intangible assets are evaluated for impairment whenever events or circumstances indicate that the undiscounted net cash flows to be generated by their use over their expected useful lives and eventual disposition may be less than their net carrying value. In 2014, in connection with the goodwill impairment review of EPD discussed above, the Company determined that certain intangible assets of EPD, primarily trademarks and customer lists, were impaired resulting in the recognition of a non-cash impairment charge of $43,664. The impairment charge is reflected in the goodwill and intangible asset impairment caption in the Consolidated Statement of Income and in the other expense (income) caption in the Business Segment Information. The fair value of EPD's intangible assets were determined using an income approach for the individual intangible assets. Fair value calculated using an income approach is classified within level 3 of the fair value hierarchy and requires several assumptions including future sales and operating margins expected to be generated from the use of the individual intangible asset. NOTE 8. Financing Arrangements The Company has a line of credit totaling $2,000,000 through a multi-currency revolving credit agreement with a group of banks, all of which was available at June 30, 2015. The credit agreement expires in October 2017; however, the Company has the right to request a oneyear extension of the expiration date on an annual basis, which request may result in changes to the current terms and conditions of the credit agreement. Advances from the credit agreement can be used for general corporate purposes, including acquisitions, and for the refinancing of existing indebtedness. The credit agreement requires the payment of an annual facility fee, the amount of which would increase in the event the Company's credit ratings are lowered. Although a lowering of the Company's credit ratings would likely increase the cost of future debt, it would not limit the Company's ability to use the credit agreement nor would it accelerate the repayment of any outstanding borrowings. The Company is currently authorized to sell up to $1,850,000 of short-term commercial paper notes. No commercial paper notes were outstanding at June 30, 2015 and $816,100 were outstanding at June 30, 2014. In addition to commercial paper notes, notes payable includes shortterm lines of credit and borrowings from foreign banks. At June 30, 2015, the Company had $62,548 in lines of credit from various foreign banks, none of which was outstanding at June 30, 2015. Most of these agreements are renewed annually. The weighted-average interest rate on notes payable during both 2015 and 2014 was 0.2 percent. 34 The Company's foreign locations in the ordinary course of business may enter into financial guarantees through financial institutions which enable customers to be reimbursed in the event of nonperformance by the Company. The Company's credit agreements and indentures governing certain debt agreements contain various covenants, the violation of which would limit or preclude the use of the applicable agreements for future borrowings, or might accelerate the maturity of the related outstanding borrowings covered by the applicable agreements. At the Company's present rating level, the most restrictive covenant contained in the credit agreements and the indentures provides that the ratio of secured debt to net tangible assets be less than 10 percent. As of June 30, 2015, the Company does not have any secured debt outstanding. The Company is in compliance with all covenants. NOTE 9. Debt June 30, Domestic: Fixed rate medium-term notes 3.30% to 6.55%, due 2018-2045 Foreign: Bank loans, including revolving credit 1% to 11.75%, due 2016 Euro bonds 4.125%, due 2016 Japanese Yen credit facility JPY Libor plus 55 bps, due 2017 Other long-term debt, including capitalized leases Total long-term debt Less: Long-term debt payable within one year Long-term debt, net 2015 2014 $2,675,000 $1,175,000 322 222,820 322 273,860 48,960 59,220 236 2,947,102 1,508,638 223,142 496 $2,723,960 $1,508,142 Principal amounts of long-term debt payable in the five years ending June 30, 2016 through 2020 are $223,142, $48,960, $450,000, $100,000 and $0, respectively. During 2015, the Company issued $500,000 aggregate principal amount of ten-year medium-term notes, $500,000 aggregate principal amount of twenty-year medium-term notes and $500,000 aggregate principal amount of thirty-year medium-term notes. The ten-year medium-term notes are due in a balloon payment in November 2024 and carry an interest rate of 3.30 percent. The twenty-year mediumterm notes are due in a balloon payment in November 2034 and carry an interest rate of 4.20 percent. The thirty-year medium-term notes are due in a balloon payment in November 2044 and carry an interest rate of 4.45 percent. Interest payments are due semi-annually. Debt issuance costs for all medium-term notes issued were approximately $15,018 and will be amortized over the term of the notes. The Company used a portion of the net proceeds from the notes issuance to repay outstanding commercial paper borrowings. Future minimum rental commitments as of June 30, 2015, under non-cancelable operating leases, which expire at various dates, are as follows: 2016 - $76,433; 2017 - $53,066; 2018 - $32,781; 2019 - $17,935; 2020 - $12,976 and after 2020 - $42,851. LEASE COMMITMENTS - Rental expense in 2015, 2014 and 2013 was $125,657, $131,948 and $133,478, respectively. NOTE 10. Retirement Benefits PENSIONS - The Company has noncontributory defined benefit pension plans covering eligible employees, including certain employees in foreign countries. Plans for most salaried employees provide pay-related benefits based on years of service. Plans for hourly employees generally provide benefits based on flat-dollar amounts and years of service. The Company also has arrangements for certain key employees which provide for supplemental retirement benefits. In general, the Company's policy is to fund these plans based on legal requirements, tax considerations, local practices and investment opportunities. The Company also sponsors defined contribution plans and participates in governmentsponsored programs in certain foreign countries. A summary of the Company's defined benefit pension plans follows: Benefit cost 2015 2014 2013 99,929 190,999 $ 107,519 174,152 Service cost $ 97,960 Interest cost 176,556 Special termination cost 21,174 Expected return on (218,938) plan assets Amortization of prior service cost 9,437 Amortization of unrecognized actuarial loss 152,664 Amortization of initial 17 net obligation $ 19 22 Net periodic benefit cost $ 238,291 $ 285,320 (226,884) $ 238,870 Change in benefit obligation (211,694) 14,644 14,472 159,584 200,849 2015 2014 Benefit obligation at beginning of year Service cost Interest cost Special termination cost Actuarial loss Benefits paid Plan amendments Foreign currency translation and other $ 4,749,447 97,960 176,556 21,174 237,896 (261,473) 3,033 (156,890) $ 4,382,563 99,929 190,999 277,098 (286,066) (3,503) 88,427 Benefit obligation at end of year $ 4,867,703 $ 4,749,447 Change in plan assets Fair value of plan assets at beginning of year Actual gain on plan assets Employer contributions Benefits paid Foreign currency translation and other $ 3,499,274 51,514 62,852 (261,473) (113,860) Fair value of plan assets at end of year $ 3,238,307 $ 3,499,274 Funded status $(1,629,396) $(1,250,173) $ 3,096,616 469,984 146,237 (286,066) 72,503 Amounts recognized on the Consolidated Balance Sheet Other accrued liabilities Pensions and other postretirement benefits $ (31,206) $.....(11,333) (1,598,190) (1,238,840) Net amount recognized $(1,629,396) $(1,250,173) During the fourth quarter of 2015, the Company initiated a voluntary retirement program under which certain participants in its U.S. qualified defined benefit pension plan were offered enhanced retirement benefits. As a result of the program, the Company incurred an increase in its net pension benefit cost of $21,174. During 2015 and 2014, the Company offered lump-sum distributions to certain participants in its U.S. qualified defined benefit plan. Included in benefits paid in 2015 and 2014 is $81,496 and $110,000, respectively, related to participants who elected to receive lump-sum distributions. No settlement charges were required to be recognized for the lump-sum distribution offerings. The estimated amount of net actuarial loss, prior service cost and transition obligation that will be amortized from accumulated other comprehensive (loss) into net periodic benefit pension cost in 2016 is $166,683, $7,176 and $16, respectively. The accumulated benefit obligation for all defined benefit plans was $4,451,047 and $4,258,743 at June 30, 2015 and 2014, respectively. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $4,761,438, $4,352,369 and $3,129,803, respectively, at June 30, 2015, and $4,691,350, $4,206,557 and $3,443,515, respectively, at June 30, 2014. The projected benefit obligation and fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets were $4,821,675 and $3,188,293, respectively, at June 30, 2015, and $4,709,493 and $3,459,097, respectively, at June 30, 2014. The Company expects to make cash contributions of approximately $278 million to its defined benefit pension plans in 2016, the majority of which relate to its U.S. qualified defined benefit plan. Estimated future benefit payments in the five years ending June 30, 2016 through 2020 are $225,953, $244,912, $209,742, $241,699 and $258,332, respectively and $1,325,348 in the aggregate for the five years ending June 30, 2021 through June 30, 2025. The assumptions used to measure net periodic benefit cost for the Company's significant defined benefit plans are: U.S. defined benefit plans Discount rate Average increase in compensation Expected return on plan assets Non-U.S. defined benefit plans Discount rate Average increase in compensation Expected return on plan assets 2015 2014 2013 4.05% 4.52% 3.91% 5.12% 5.13% 5.21% 7.5% 8.0% 8.0% 0.9 to 4.2% 1.5 to 4.59% 1.75 to 4.7% 2.0 to 5.0% 2.0 to 6.0% 2.0 to 6.0% 1.0 to 6.25% 1.0 to 6.25% 1.0 to 6.4% The assumptions used to measure the benefit obligation for the Company's significant defined benefit plans are: Amounts recognized in Accumulated Other Comprehensive (Loss) Net actuarial loss Prior service cost Transition obligation $ 1,639,010 32,126 103 $ 1,434,645 37,137 143 Net amount recognized $ 1,671,239 $ 1,471,925 The presentation of the amounts recognized on the Consolidated Balance Sheet and in accumulated other comprehensive (loss) is on a debit (credit) basis and excludes the effect of income taxes. U.S. defined benefit plans Discount rate Average increase in compensation Non-U.S. defined benefit plans Discount rate Average increase in compensation 2015 2014 4.19% 5.14% 4.05% 5.12% 0.7 to 6.0% 2.0 to 5.5% 0.9 to 4.2% 2.0 to 5.0% 35 The discount rate assumption is based on current rates of high-quality long-term corporate bonds over the same estimated time period that benefit payments will be required to be made. The expected return on plan assets assumption is based on the weighted-average expected return of the various asset classes in the plans' portfolio. The asset class return is developed using historical asset return performance as well as current market conditions such as inflation, interest rates and equity market performance. The weighted-average allocation of the majority of the assets related to defined benefit plans is as follows: 2015 Equity securities Debt securities Other investments 2014 41% 47% 12% 42% 48% 10% 100% 100% The weighted-average target asset allocation as of June 30, 2015 is 41 percent equity securities, 47 percent debt securities and 12 percent other investments. The investment strategy for the Company's worldwide defined benefit pension plan assets focuses on achieving prudent actuarial funding ratios while maintaining acceptable levels of risk in order to provide adequate liquidity to meet immediate and future benefit requirements. This strategy requires investment portfolios that are broadly diversified across various asset classes and external investment managers. Assets held in the U.S. defined benefit plans account for approximately 71 percent of the Company's total defined benefit plan assets. The Company's overall investment strategy with respect to the Company's U.S. defined benefit plans is to opportunistically migrate from its traditional mix between growth seeking assets (primarily consisting of global public equities in developed and emerging countries and hedge fund of fund strategies) and income generating assets (primarily consisting of high quality bonds, both domestic and global, emerging market bonds, high yield bonds and Treasury Inflation Protected Securities) to an allocation more heavily weighted toward income generating assets. Over time, long duration fixed income assets are being added to the portfolio. These securities are highly correlated with the Company's pension liabilities and will serve to hedge a portion of the Company's interest rate risk. The fair values of pension plan assets at June 30, 2015 and at June 30, 2014, by asset class, are as follows: June 30,2015 Cash and cash equivalents $ 75,015 Equity securities U.S. based companies 299,321 Non-U.S. based companies 203,199 Fixed income securities Corporate bonds 165,226 Government issued securities 143,697 Mutual funds Equity funds 149,383 Fixed income 135,949 funds Mutual funds measured at 5,564 net asset value Common/ Collective trusts Equity funds 77,429 Fixed income 46,184 funds Common/ Collective trusts measured at net asset 1,635,135 value Limited Partnerships measured at net asset 290,904 value Miscellaneous 11,301 Total 36 Quoted Prices In Active Markets (Level 1) $3,238,307 $ 75,015 Significant Other Significant Observable Unobservable Inputs Inputs (Level 2) (Level 3) $ $ 299,321 203,199 77,224 88,002 90,785 52,912 149,383 135,949 77,429 46,184 11,301 $1,154,489 $152,215 $ June 30,2014 Quoted Prices In Active Markets (Level 1) Cash and cash equivalents $ 46,297 $ 45,976 Equity securities U.S. based companies 346,145 346,145 Non-U.S. based companies 220,911 220,911 Fixed income securities Corporate bonds 234,719 101,227 Government issued securities 161,131 101,083 Mutual funds Equity funds 191,301 191,301 Fixed income funds 189,375 189,375 Mutual funds measured at net asset value 35,279 Common/ Collective trusts Equity funds 85,461 85,461 Fixed income funds 48,649 48,649 Common/ Collective trusts measured at net asset value 1,630,292 Limited Partnerships 777 777 Limited Partnerships measured at net asset value 288,236 Miscellaneous 20,701 Total $3,499,274 $1,330,905 Significant Other Significant Observable Unobservable Inputs Inputs (Level 2) (Level 3) $ 321 $ 133,492 60,048 20,701 $214,562 $ Cash and cash equivalents, which include repurchase agreements and other short-term investments, are valued at cost, which approximates fair value. Equity securities are valued at the closing price reported on the active market on which the individual securities are traded. U.S. based companies include Company stock with a fair value of $154,660 as of June 30, 2015 and $167,157 as of June 30, 2014. Fixed income securities are valued using both market observable inputs for similar assets that are traded on an active market and the closing price on the active market on which the individual securities are traded. Mutual funds are valued using the closing market price reported on the active market on which the fund is traded or at net asset value per share and primarily consist of equity and fixed income funds. The equity funds primarily provide exposure to U.S. and international equities, real estate and commodities. The fixed income funds primarily provide exposure to high-yield securities and emerging market fixed income instruments. Mutual funds measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are being presented in the tables above to permit a reconciliation of the fair value hierarchy to the Consolidated Balance Sheet. Common/Collective trusts primarily consist of equity and fixed income funds and are valued using the closing market price reported on the active market on which the fund is traded or at net asset value per share. Common/Collective trust investments can be redeemed daily and without restriction. Redemption of the entire investment balance generally requires a 30-day notice period. The equity funds provide exposure to large, mid and small cap U.S. equities, international large and small cap equities and emerging market equities. The fixed income funds provide exposure to U.S., international and emerging market debt securities. Common/Collective trusts measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are being presented in the tables above to permit a reconciliation of the fair value hierarchy to the Consolidated Balance Sheet. Limited Partnerships primarily consist of hedge funds valued using a net asset value per share and provide exposure to a variety of hedging strategies including long/short equity, relative value, event driven and global macro. Limited Partnership investments can be redeemed daily and without restriction. Redemption of the entire investment balance generally requires a 30-day notice period. Limited Partnerships measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are being presented in the tables above to permit a reconciliation of the fair value hierarchy to the Consolidated Balance Sheet. Miscellaneous primarily includes real estate funds, insurance contracts held in the asset portfolio of the Company's non-U.S. defined benefit pension plans, and net payables for securities purchased but not settled in the asset portfolio of the Company's U.S. defined benefit pension plans. Insurance contracts are valued at the present value of future cash flows promised under the terms of the insurance contracts. The primary investment objective of equity securities and equity funds, within both the mutual fund and common/collective trust asset class, is to obtain capital appreciation in an amount that at least equals various market-based benchmarks. The primary investment objective of fixed income securities and fixed income funds, within both the mutual fund and common/collective trust asset class, is to provide for a constant stream of income while preserving capital. The primary investment objective of limited partnerships is to achieve capital appreciation through an investment program focused on specialized investment strategies. The primary investment objective of insurance contracts, included in the miscellaneous asset class, is to provide a stable rate of return over a specified period of time. The Company sponsors an employee stock ownership plan (ESOP) as part of its existing savings and investment 401(k) plan. The ESOP is available to eligible domestic employees. Company matching contributions, up to a maximum of four percent of an employee's annual compensation, are recorded as compensation expense. Prior to August 1, 2014, Company stock was used to match employee contributions. Effective August 1, 2014, participants may direct company matching contributions to any investment option within the savings and investment 401(k) plan. EMPLOYEE SAVINGS PLAN - Shares held by ESOP Company matching contributions 2015 2014 2013 8,407,858 8,944,697 9,686,238 $63,914 $63,441 $61,067 In addition to shares within the ESOP, as of June 30, 2015, employees have elected to invest in 2,408,854 shares of common stock within a company stock fund of the savings and investment 401(k) plan. 37 The Company has a retirement income account (RIA) within the employee savings plan. The Company makes a cash contribution to the participant's RIA each year, the amount of which is based on the participant's age and years of service. Participants do not contribute to the RIA. The Company recognized $29,570, $25,247 and $22,046 in expense related to the RIA in 2015, 2014 and 2013, respectively. The Company provides postretirement medical and life insurance benefits to certain retirees and eligible dependents. Most plans are contributory, with retiree contributions adjusted annually. The plans are unfunded and pay stated percentages of covered medically necessary expenses incurred by retirees, after subtracting payments by Medicare or other providers and after stated deductibles have been met. For most plans, the Company has established cost maximums to more effectively control future medical costs. The Company has reserved the right to change these benefit plans. OTHER POSTRETIREMENT BENEFITS - Certain employees are covered under benefit provisions that include prescription drug coverage for Medicare eligible retirees. The impact of the subsidy received under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 on the Company's other postretirement benefits was immaterial. The Company recognized $4,340, $4,478 and $4,930 in expense related to other postretirement benefits in 2015, 2014 and 2013, respectively. Change in benefit obligation 2015 2014 The assumptions used to measure the net periodic benefit cost for postretirement benefit obligations are: 2015 Discount rate Current medical cost trend rate Ultimate medical cost trend rate (P