Dover 10-Q 2021-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the transition period from to

Commission File Number: 1-4018

(Exact name of registrant as specified in its charter)

(630) 541-1540

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12-b-2 of the Exchange Act .

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The number of shares outstanding of the Registrant’s common stock as of October 12, 2021 was 143,984,653.

Dover Corporation

Form 10-Q

Table of Contents

DOVER CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

(Unaudited)

See Notes to Condensed Consolidated Financial Statements

DOVER CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

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Refer to the section below entitled "Special Notes Regarding Forward-Looking Statements" for a discussion of factors that could cause our actual results to differ from the forward-looking statements contained below and throughout this quarterly report.

Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), we refer to measures used by management to evaluate performance as well as liquidity, including a number of financial measures that are not defined under accounting principles generally accepted in the United States of America ("GAAP"). We believe these measures provide investors with important information that is useful in understanding our business results and trends. Explanations within this MD&A provide more details on the use and derivation of these measures.

OVERVIEW

Dover is a diversified global manufacturer and solutions provider delivering innovative equipment and components, consumable supplies, aftermarket parts, software and digital solutions, and support services through five operating segments: Engineered Products, Fueling Solutions, Imaging & Identification, Pumps & Process Solutions, and Refrigeration & Food Equipment. The Company's entrepreneurial business model encourages, promotes and fosters deep customer engagement and collaboration, which has led to Dover's well-established and valued reputation for providing superior customer service and industry-leading product innovation. Unless the context indicates otherwise, references herein to "Dover," "the Company," and words such as "we," "us," or "our" include Dover Corporation and its consolidated subsidiaries.

Dover's five operating segments are as follows:

• Our Engineered Products segment is a provider of a wide range of products, software and services that have broad customer applications across a number of markets, including aftermarket vehicle service, solid waste handling, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing.

• Our Fueling Solutions segment is focused on providing components, equipment and software and service solutions enabling safe transport of fuels and other hazardous fluids along the supply chain, as well as the safe and efficient operation of retail fueling and vehicle wash establishments.

• Our Imaging & Identification segment supplies precision marking and coding, product traceability and digital textile printing equipment, as well as related consumables, software and services.

• Our Pumps & Process Solutions segment manufactures specialty industrial pumps, fluid handling components, plastics and polymer processing equipment, single use pumps, flow meters and connectors for biopharma and other hygienic applications, and highly engineered components for rotating and reciprocating machines.

• Our Refrigeration & Food Equipment segment is a provider of innovative and energy-efficient equipment and systems that serve the commercial refrigeration, heating and cooling and food equipment markets.

In the third quarter of 2021, revenue was $2.0 billion, which increased $270.0 million, or 15.4%, as compared to the third quarter of 2020. This was driven by organic revenue growth of 13.2%, a favorable impact from foreign currency translation of 1.1%, and acquisition-related revenue growth of 1.1%.

The 13.2% organic revenue growth for the third quarter of 2021 was broad-based across our segments as market conditions and demand improved from the adverse impact of COVID-19 in the prior year. The Engineered Products segment had organic revenue growth of 14.2% primarily as a result of strength in our waste handling, vehicle services and industrial automation businesses, whereas our aerospace and defense business declined year-over-year due to in part to supplier component input constraints and labor availability. The Fueling Solutions segment had organic revenue growth of 3.0% driven by growth in retail fueling in North American and EMEA, as well as strength in vehicle wash solutions. The Imaging & Identification segment experienced organic revenue growth of 7.4% driven by increased demand in marking and coding and digital textile printing end markets. The Pumps & Process Solutions segment had organic revenue growth of 24.6% reflecting strong demand in biopharma pumps and connectors, and industrial pumps, and recovery in bearings and compression components. The Refrigeration & Food Equipment segment posted organic revenue growth of 16.0% across all end markets, principally driven

by robust activity in can-shaping, heat exchangers. Our food service equipment and retail refrigeration end markets, while delivering growth in the quarter, was impacted by supplier component input constraints and labor availability.

From a geographic perspective, in the third quarter, organic revenue for the U.S., our largest market, increased 15.7%. Organic revenue in Asia and Europe grew 4.6% and 15.5%, respectively. This organic growth was largely broad-based, with all our segments posting increased sales in North America, Europe, Asia and Latin America, as global demand continued to improve after the impact of operational and economic headwinds of COVID-19 experienced in the prior year.

Bookings were $2.3 billion for the three months ended September 30, 2021, an increase of $490.9 million, or 27.2% compared to the prior year comparable period. Included in this result was organic growth of 24.8%, a favorable impact from foreign currency translation of 1.3%, and acquisition-related bookings growth of 1.1%. Bookings grew organically in all five segments primarily as a result of strong demand and order intake in most end markets compared to the adverse global impact of COVID-19 in the prior year.

Backlog as of September 30, 2021 was $2.8 billion, an increase from $1.6 billion in the prior year and $200 million from the second quarter of 2021. See definition of bookings and backlog within "Segment Results of Operations".

During the three months ended September 30, 2021, we acquired two businesses in separate transactions for a total consideration of $90.0 million, net of cash acquired. We acquired 100% of the voting stock of CDS Visual, a leading provider of 3D visualization solutions tailored for industrial applications, for $29.3 million, net of cash acquired. The CDS Visual acquisition extends the Company's offering of customer-facing digital capabilities and its results will be reported as part the Engineered Products segment. We also acquired 100% of the voting stock of Espy, a manufacturer of advanced electronic radio frequency sensor systems, for $60.6 million, net of cash acquired. The Espy acquisition strengthens the Company's offering of complete signal intelligence systems with integrated software within the Engineered Products segment.

Rightsizing benefit of $3.2 million included restructuring costs of $4.8 million and other benefits of $8.0 million for the three months ended September 30, 2021. Restructuring costs related to actions initiated in 2020 and 2021 in response to demand conditions, asset charges related to a product line exit, and broad-based operational efficiency initiatives focusing on footprint consolidation and IT centralization. See Note 9 — Restructuring Activities for further details. Other rightsizing benefits are comprised primarily of a $9.1 million payment received for previously incurred restructuring costs related to a product line exit, partially offset by $1.0 million of restructuring related costs pertaining to broad-based operational efficiency initiatives focusing on footprint consolidation and IT centralization.

Subsequent to the third quarter of 2021, on October 11, 2021, we entered into a definitive agreement to sell its Unified Brands business, which is part of the Refrigeration & Food Equipment segment, to Electrolux Professional AB for approximately $244 million, on a cash free and debt free basis, subject to customary pos

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There has been no significant change in our exposure to market risk during the nine months ended September 30, 2021. For a discussion of our exposure to market risk, refer to Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2021.

During the third quarter of 2021, there were no changes in the Company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

See Part I, Notes to Condensed Consolidated Financial Statements, Note 14 — Commitments and Contingent Liabilities.

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

a.Not applicable.

b.Not applicable.

c.In November 2020, the Company's Board of Directors approved a new standing share repurchase authorization, whereby the Company may repurchase up to 20 million shares beginning on January 1, 2021 through December 31, 2023. No share repurchases were made under the November 2020 authorization during the three months ended September 30, 2021. As of September 30, 2021, the number of shares still available for repurchase under the November 2020 share repurchase authorization was 19,817,049.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Not applicable.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.