Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, Clean Energy & Fueling, Imaging & Identification, Pumps & Process Solutions, and Climate & Sustainability Technologies. 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 provides a wide range of equipment, components, software, solutions and services for vehicle aftermarket, waste handling, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing end-markets.

• Our Clean Energy & Fueling segment provides components, equipment, and software and service solutions enabling safe transport of traditional and clean fuels and other hazardous substances along the supply chain, as well as the safe and efficient operation of convenience retail, retail fueling and vehicle wash establishments.

• Our Imaging & Identification segment supplies precision marking and coding, packaging intelligence, product traceability, brand protection and digital textile printing equipment, as well as related consumables, software and services to the global packaged and consumer goods, pharmaceutical, industrial manufacturing, fashion and apparel and other end-markets.

• Our Pumps & Process Solutions segment manufactures specialty pumps and flow meters, fluid connecting solutions, plastics and polymer processing equipment, and highly-engineered precision components for rotating and reciprocating machines serving single-use biopharmaceutical production, diversified industrial manufacturing, polymer processing, midstream and downstream oil and gas and other end-markets.

• Our Climate & Sustainability Technologies segment is a provider of innovative and energy-efficient equipment and systems that serve the commercial refrigeration, heating and cooling and beverage container-making equipment markets.

In the first quarter of 2022, revenue was $2.1 billion, which increased $184.0 million, or 9.9%, as compared to the first quarter of 2021. This was driven by organic revenue growth of 9.3% and acquisition-related revenue growth of 4.4%, partially offset by an unfavorable impact from foreign currency translation of 2.2% and disposition-related decline of 1.6%.

The 9.3% organic revenue growth for the first quarter of 2022 was broad-based across most of our businesses based on solid underlying demand and our ability to produce and ship despite supply chain constraints, input inflation, and unforecasted production interruptions. The Engineered Products segment had organic revenue growth of 14.6% primarily as a result of strength in our waste handling, vehicle services, industrial automation, and industrial winch and hoist businesses, whereas our aerospace and defense business declined year-over-year driven by constrained labor availability and supply chain disruptions. The Clean Energy & Fueling segment organic revenue remained flat as growth within our North America retail fueling, fluid transfer solutions and vehicle wash solutions businesses was offset by shipping constraints driven by supply chain and labor

availability challenges, and un-forecasted production interruptions. The Imaging & Identification segment experienced organic revenue decline of 1.1% driven by sourced component shortages and logistics headwinds that impacted shipment volumes in the core marking and coding market and a prolonged recovery in the digital textile printing end market. The Pumps & Process Solutions segment had organic revenue growth of 12.6% reflecting strong demand in biopharma and hygienic markets for pumps and connectors, industrial pumps, polymer processing, and continued recovery in bearings and compression components. The Climate & Sustainability Technologies segment posted organic revenue growth of 17.4%, driven by robust demand in retail refrigeration, can-shaping, and heat exchangers.

From a geographic perspective, organic revenue for the U.S., our largest market, increased 9.0% in the first quarter of 2022. Organic revenue in Asia and Europe grew 18.9% and 5.8%, respectively. Most of our businesses experienced broad-based increases in revenues, however, there remain operational challenges and a difficult backdrop in Eastern Europe and China.

Bookings were $2.3 billion for the three months ended March 31, 2022, a decrease of $80.4 million, or 3.4% compared to the prior year comparable period. Included in this result was organic decline of 4.3%, an unfavorable impact from foreign currency translation of 2.1%, disposition-related decline of 1.4%, and acquisition-related bookings growth of 4.4%. The bookings decline was driven primarily by a difficult comparable quarter in the prior year. Book-to-bill was above 1.00 for all five segments in the quarter, a reflection of strong demand conditions and order intake in most end markets.

Backlog as of March 31, 2022 was $3.4 billion, an increase from $2.2 billion in the prior year. See definition of bookings and backlog within "Segment Results of Operations".

Rightsizing costs of $10.6 million included restructuring costs of $8.2 million and other costs of $2.4 million for the three months ended March 31, 2022. Restructuring costs relate to actions initiated in 2021, which includes non-cash foreign currency translation losses due to the substantial liquidation of businesses in certain Latin America countries. See Note 8 — Restructuring Activities in the Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for further details. Other rightsizing costs include a $2.1 million write-off of assets in connection with an exit from certain Latin America countries in our Climate & Sustainability Technologies segment.

Subsequent to the first quarter of 2022, on April 6, 2022, the Company completed the acquisition of certain intellectual property assets related to electric refuse collection vehicles for approximately $9.75 million, plus potential contingent consideration of up to $20 million. These assets will be included in the Engineered Products segment. See Note 20 — Subsequent Events in the Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for further details.

COVID-19 Update

The COVID-19 outbreak and associated counteracting measures implemented by governments and businesses around the world, as well as subsequent accelerated recovery in global business activity, have increased uncertainty in the global business environment and led to supply chain disruptions and shortages in global markets for commodities, logistics and labor, as well as input cost inflation. Currently our expectation is that the impact of material cost inflation, labor constraints and logistics constraints and to some extent supplier component input availability will continue throughout 2022.

The public health situation, continued global response measures and corresponding impacts on various markets remain fluid and uncertain and may lead to sudden changes in trajectory and outlook. We are actively monitoring the government-imposed restrictions and their potential impact on global trade. We will continue to proactively respond to the situation and may take further actions that alter our business activity as may be required by governmental authorities, or that we determine are in the best interests of our employees and operations.

CONSOLIDATED RESULTS OF OPERATIONS

									Three Months Ended March 31,
(dollars in thousands, except per share data)																					2022						2021						% Change
Revenue																					$	2,051,901					$	1,867,901					9.9		%
Cost of goods and services																					1,308,707						1,146,353						14.2		%
Gross profit																					743,194						721,548						3.0		%
Gross profit margin																					36.2		%				38.6		%				(2.4)
Selling, general and administrative expenses																					443,843						408,998						8.5		%
Selling, general and administrative expenses as a percent of revenue																					21.6		%				21.9		%				(0.3)
Operating earnings																					299,351						312,550
Interest expense																					26,552						26,823						(1.0)		%
Interest income																					(775)						(680)						14.0		%
Other income, net																					(2,129)						(2,843)						nm*
Earnings before provision for income taxes																					275,703						289,250						(4.7)		%
Provision for income taxes																					49,550						56,481						(12.3)		%
Effective tax rate																					18.0		%				19.5		%				(1.5)
Net earnings																					226,153						232,769						(2.8)		%
Net earnings per common share - diluted																					$	1.56					$	1.61					(3.1)		%

• nm - not meaningful

Revenue

Revenue for the three months ended March 31, 2022 increased $184.0 million, or 9.9%, from the prior year comparable quarter. Results included organic revenue growth of 9.3%, primarily led by our Engineered Products, Pumps & Process Solutions, and Climate & Sustainability Technologies segments. Acquisition-related revenue growth of 4.4%, was slightly offset by an unfavorable impact from foreign currency translation of 2.2% and disposition-related decline of 1.6%. Customer pricing favorably impacted revenue by approximately 6.0% in the first quarter of 2022.

Gross Profit

Gross profit for the three months ended March 31, 2022 increased $21.6 million, or 3.0%, but gross profit margin decreased 240 basis points to 36.2%, from the prior year comparable quarter. Our pricing initiatives which started in 2021 and into 2022 offset increased material, labor and logistics costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2022 increased $34.8 million, or 8.5%, from the prior year comparable quarter, primarily due to higher labor costs, restructuring charges, and acquisition-related amortization expense. As a percentage of revenue, selling, general and administrative expenses decreased 30 basis points to 21.6% due to an increase in the revenue base.

Research and development costs, including qualifying engineering costs, are expensed when incurred and amounted to $40.7 million and $41.2 million for the three months ended March 31, 2022 and 2021, respectively. These costs as a percent of revenue were 2.0% and 2.2% for the three months ended March 31, 2022 and 2021, respectively.

Other income, net

Other income, net for the three months ended March 31, 2022 decreased $0.7 million from the prior year comparable period primarily due to various immaterial items.

Income Taxes

The effective tax rates for the three months ended March 31, 2022 and 2021 were 18.0% and 19.5%, respectively. The decrease in the effective tax rate for the three months ended March 31, 2022 relative to the prior year comparable quarter was primarily driven by favorable audit resolutions.

Net earnings

Net earnings for the three months ended March 31, 2022 decreased 2.8% to $226.2 million, or $1.56 diluted earnings per share, from $232.8 million, or $1.61 diluted earnings per share, in the prior year comparable quarter. The decrease in net earnings is mainly attributable to material, logistics and labor cost inflation, higher restructuring charges, and acquisition-related amortization expenses, partially offset by organic revenue growth, favorable pricing initiatives, and the benefits from productivity and cost reduction actions.

Rightsizing Activities, which includes Restructuring and Other Costs

During the three months ended March 31, 2022, rightsizing activities included restructuring charges of $8.2 million, and other costs, net, of $2.4 million. Restructuring expense for the three months ended March 31, 2022 was comprised primarily of the result of restructuring programs initiated in 2021, which includes non-cash foreign currency translation losses due to the substantial liquidation of businesses in certain Latin America countries. Other costs (benefits), net for the three months ended March 31, 2022 was comprised primarily of a $2.1 million write-off of assets in connection with an exit from certain Latin America countries in our Climate & Sustainability Technologies segment. These rightsizing charges were recorded in cost of goods and services and selling, general and administrative expenses in the Condensed Consolidated Statement of Earnings.

We recorded the following rightsizing costs for the three months ended March 31, 2022:

			Three Months Ended March 31, 2022
(dollars in thousands)			Engineered Products						Clean Energy & Fueling						Imaging & Identification						Pumps & Process Solutions						Climate & Sustainability Technologies						Corporate						Total
Restructuring (GAAP)			$	457					$	196					$	1,191					$	685					$	5,716					$	(88)					$	8,157
Other costs (benefits), net			52						(6)						186						1						2,117						45						2,395
Rightsizing (Non-GAAP)			$	509					$	190					$	1,377					$	686					$	7,833					$	(43)					$	10,552

During the three months ended March 31, 2021, rightsizing activities included restructuring charges of $6.4 million and other benefits of $2.3 million. Restructuring expense was comprised primarily of new actions initiated in 2020 in response to lower demand conditions, asset charges related to a product line exit and broad-based operational efficiency initiatives focusing on footprint consolidation and IT centralization. Other benefits were comprised primarily of gain on sale of assets of $2.0 million and $1.3 million in our Pumps & Process Solutions and Climate & Sustainability Technologies segments, respectively, as a result of restructuring actions, partially offset by $1.0 million of restructuring related costs. These rightsizing charges were recorded in cost of goods and services and selling, general and administrative expenses in the Condensed Consolidated Statement of Earnings.

We recorded the following rightsizing costs for the three months ended March 31, 2021:

			Three Months Ended March 31, 2021
(dollars in thousands)			Engineered Products						Clean Energy & Fueling						Imaging & Identification						Pumps & Process Solutions						Climate & Sustainability Technologies						Corporate						Total
Restructuring (GAAP)			$	3,991					$	49					$	690					$	(17)					$	1,061					$	661					$	6,435
Other costs, net			28						9						(8)						(1,989)						(1,099)						786						(2,273)
Rightsizing (Non-GAAP)			$	4,019					$	58					$	682					$	(2,006)					$	(38)					$	1,447					$	4,162

SEGMENT RESULTS OF OPERATIONS

The summary that follows provides a discussion of the results of operations of each of our five reportable operating segments (Engineered Products, Clean Energy & Fueling, Imaging & Identification, Pumps & Process Solutions, and Climate & Sustainability Technologies). Each of these segments is comprised of various product and service offerings that serve multiple markets. See Note 16 — Segment Information in the Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for a reconciliation of segment revenue and earnings to our consolidated revenue and net earnings. For further information, see "Non-GAAP Disclosures" at the end of this Item 2.

Additionally, we use the following operational metrics in monitoring the performance of the business. We believe the operational metrics are useful to investors and other users of our financial information in assessing the performance of our segments:

• Bookings represent total orders received from customers in the current reporting period. This metric is an important measure of performance and an indicator of revenue order trends.

• Organic bookings represent total orders received from customers in the current reporting period excluding the impact of foreign currency exchange rates and the impact of acquisitions and dispositions. This metric is an important measure of performance and an indicator of revenue order trends.

• Backlog represents an estimate of the total remaining bookings at a point in time for which performance obligations have not yet been satisfied. This metric is useful as it represents the aggregate amount we expect to recognize as revenue in the future.

• Book-to-bill is a ratio of the amount of bookings received from customers during a period divided by the amount of revenue recorded during that same period. This metric is a useful indicator of demand.

Engineered Products

Our Engineered Products segment is a provider of a wide range of equipment, components, software, solutions and services for vehicle aftermarket, waste handling, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing end-markets.

												Three Months Ended March 31,
(dollars in thousands)																								2022						2021						% Change
Revenue																								$	487,647					$	428,127					13.9		%
Segment earnings (EBIT)																								$	66,134					$	68,779					(3.8)		%
Depreciation and amortization																								11,699						14,047						(16.7)		%
Segment EBITDA																								$	77,833					$	82,826					(6.0)		%
Segment margin																								13.6%						16.1%
Segment EBITDA margin																								16.0%						19.3%
Other measures:
Bookings																								$	541,035					$	528,310					2.4		%
Backlog																								$	830,135					$	562,557					47.6		%
Components of revenue growth:
Organic growth																																				14.6		%
Acquisitions																																				1.2		%
Foreign currency translation																																				(1.9)		%
																																				13.9		%

First Quarter 2022 Compared to the First Quarter 2021

Engineered Products segment revenue for the first quarter of 2022 increased $59.5 million, or 13.9%, as compared to the first quarter of 2021, comprised primarily of organic growth of 14.6%, acquisition-related growth of 1.2%, and an unfavorable impact from foreign currency translation of 1.9%. Customer pricing favorably impacted revenue in the first quarter of 2022 by approximately 10.8% compared to 0.6% in the prior year comparable quarter. Pricing was higher than in prior quarters reflecting actions to recover increasing costs.

The organic revenue growth was most notable in our waste handling, vehicle service, industrial automation, and industrial winch and hoist businesses. Our aerospace and defense business was down year-over-year driven by constrained labor availability and supply chain disruptions, which negatively impacted shipments. Despite the strong organic growth and record high backlog levels for the segment, shipments continue to be challenged by supply chain and labor availability constraints.

Engineered Products segment earnings decreased $2.6 million, or 3.8%, compared to the first quarter of 2021. The decrease was primarily driven by material and labor cost inflation as well as an unfavorable foreign currency translation, partially offset by pricing initiatives and conversion on increased volumes. As a result, segment operating margin decreased 250 basis points to 13.6% from 16.1% as compared to the prior year quarter.

Bookings increased 2.4% for the segment, comprised primarily of organic growth of 3.4%, acquisition-related growth of 0.5%, and an unfavorable impact from foreign currency translation of 1.5%. The organic bookings growth was broad-based, most notably in our vehicle service, waste handling, and industrial automation businesses. Segment book-to-bill was 1.11. Backlog increased 47.6% compared to the prior year comparable quarter.

Clean Energy & Fueling

Our Clean Energy & Fueling segment is focused on providing components, equipment, and software and service solutions enabling safe transport of traditional and clean fuels and other hazardous substances along the supply chain, as well as the safe and efficient operation of convenience retail, retail fueling and vehicle wash establishments.

												Three Months Ended March 31,
(dollars in thousands)																								2022						2021						% Change
Revenue																								$	458,395					$	389,678					17.6		%
Segment earnings (EBIT)																								$	41,442					$	66,480					(37.7)		%
Depreciation and amortization																								27,699						19,269						43.7		%
Segment EBITDA																								$	69,141					$	85,749					(19.4)		%
Segment margin																								9.0%						17.1%
Segment EBITDA margin																								15.1%						22.0%
Other measures:
Bookings																								$	501,491					$	422,668					18.6		%
Backlog																								$	426,342					$	238,822					78.5		%
Components of revenue growth:
Organic growth																																				0.2		%
Acquisitions																																				19.4		%
Foreign currency translation																																				(2.0)		%
																																				17.6		%

First Quarter 2022 Compared to the First Quarter 2021

Clean Energy & Fueling segment revenue for the first quarter of 2022 increased $68.7 million, or 17.6%, as compared to the first quarter of 2021, comprised of acquisition-related growth of 19.4%, organic growth of 0.2%, and an unfavorable impact from foreign currency translation of 2.0%. Acquisition-related growth was driven by the acquisitions of AvaLAN Wireless Systems Incorporated, Liqal BV, Acme Cryogenics, and RegO. Customer pricing favorably impacted revenue by approximately 2.9% in the first quarter.

Organic revenue remained flat for the Clean Energy & Fueling segment, as organic revenue growth within our North America retail fueling, fluid transfer solutions and vehicle wash solutions businesses was offset by shipping constraints driven by supply chain and labor availability challenges, and un-forecasted production interruptions. The plant returned to normal operations after one week. Additionally, reduced demand for Europay, Mastercard, and Visa ("EMV") compliant equipment following the compliance deadline in the second quarter of 2021 impacted revenues as compared to the first quarter of 2021.

Clean Energy & Fueling segment earnings decreased $25.0 million, or 37.7%, over the prior year comparable quarter. The decrease was primarily driven by material, logistics and labor cost inflation, along with the significant impact of acquisition-related depreciation and amortization, including inventory step-up, from recently completed acquisitions, as well as un-forecasted production interruptions. This decrease was partially offset by a favorable impact to earnings from pricing actions to offset inflation. Segment margin decreased to 9.0% from 17.1% in the prior year quarter.

Overall bookings increased 18.6% as compared to the prior year comparable quarter, driven by acquisition-related growth of 23.1% and partially offset by an organic decline of 2.7% and an unfavorable impact from foreign currency translation of 1.8%. The organic bookings decline was primarily driven by a decrease in demand for EMV compliant equipment following the compliance deadline in the second quarter of 2021. Segment book-to-bill was 1.09. Backlog increased 78.5% as compared to the prior year comparable quarter, driven in large part by the acquisitions completed in 2021.

Imaging & Identification

Our Imaging & Identification segment supplies precision marking and coding, packaging intelligence, product traceability, brand protection and digital textile printing equipment, as well as related consumables, software and services to the global packaged and consumer goods, pharmaceutical, industrial manufacturing, fashion and apparel and other end-markets.

												Three Months Ended March 31,
(dollars in thousands)																								2022						2021						% Change
Revenue																								$	272,255					$	284,328					(4.2)		%
Segment earnings (EBIT)																								$	51,529					$	56,992					(9.6)		%
Depreciation and amortization																								9,189						9,593						(4.2)		%
Segment EBITDA																								$	60,718					$	66,585					(8.8)		%
Segment margin																								18.9%						20.0%
Segment EBITDA margin																								22.3%						23.4%
Other measures:
Bookings																								$	307,104					$	293,614					4.6		%
Backlog																								$	243,411					$	198,556					22.6		%
Components of revenue decline:
Organic decline																																				(1.1)		%
Acquisitions																																				0.4		%
Foreign currency translation																																				(3.5)		%
																																				(4.2)		%

First Quarter 2022 Compared to the First Quarter 2021

Imaging & Identification segment revenue for the first quarter of 2022 decreased $12.1 million, or 4.2%, as compared to the first quarter of 2021, comprised of an unfavorable impact from foreign currency translation of 3.5% and an organic decline of 1.1%, partially offset by acquisition-related growth of 0.4%. Acquisition-related growth was driven by the acquisition of Blue Bite LLC. Customer pricing favorably impacted revenue by approximately 1.9% in the first quarter.

The organic revenue decline was driven by sourced component shortages and logistics headwinds in our marking and coding business, along with reduced activity in our digital textile printing business due to a prolonged recovery in global retail apparel markets, and was partially offset by strength in our serialization software. The decline in revenue was further impacted as areas within Asia experienced regional lockdowns due to COVID-19 in March. We expect deliveries in our marking and coding business to improve as the year progresses as component shortages dissipate and underlying demand for our printers and consumables remains strong. We continue to believe our digital textile business is favorably positioned to gain from a longer-term transition from analog to digital printing by our customers, but global apparel retail markets continue to be impacted by local business and travel restrictions, as well as work-from-home policies in some regions.

Imaging & Identification segment earnings decreased $5.5 million, or 9.6%, over the prior year comparable quarter. This decrease was primarily driven by lower organic revenues along with material and labor cost inflation, partially offset by pricing initiatives, productivity actions, and the favorable impact from restructuring actions. Segment margin decreased to 18.9% from 20.0% in the prior year comparable quarter.

Overall bookings increased 4.6% as compared to the prior year comparable quarter, reflecting organic growth of 7.7%, acquisition-related growth of 0.4%, and an unfavorable impact from foreign currency translation of 3.5%. Organic bookings growth was driven by solid demand for new equipment and associated services and consumables, as well as serialization software sales in our marking and coding business. Segment book-to-bill was 1.13. Backlog increased 22.6% as compared to the prior year quarter.

Pumps & Process Solutions

Our Pumps & Process Solutions segment manufactures specialty pumps and flow meters, fluid connecting solutions, plastics and polymer processing equipment, and highly-engineered precision components for rotating and reciprocating machines serving single-use biopharmaceutical production, diversified industrial manufacturing, polymer processing, midstream and downstream oil and gas and other end-markets.

												Three Months Ended March 31,
(dollars in thousands)																								2022						2021						% Change
Revenue																								$	435,195					$	394,377					10.3		%
Segment earnings (EBIT)																								$	139,340					$	123,645					12.7		%
Depreciation and amortization																								16,890						16,926						(0.2)		%
Segment EBITDA																								$	156,230					$	140,571					11.1		%
Segment margin																								32.0%						31.4%
Segment EBITDA margin																								35.9%						35.6%
Other measures:
Bookings																								$	459,790					$	551,365					(16.6)		%
Backlog																								$	704,935					$	539,097					30.8		%
Components of revenue growth:
Organic growth																																				12.6		%
Acquisitions																																				0.3		%
Foreign currency translation																																				(2.6)		%
																																				10.3		%

First Quarter 2022 Compared to the First Quarter 2021

Pumps & Process Solutions segment revenue for the first quarter of 2022 increased $40.8 million, or 10.3%, as compared to the first quarter of 2021, comprised of organic growth of 12.6%, acquisition-related growth of 0.3%, and an unfavorable impact from foreign currency translation of 2.6%. Acquisition-related growth was primarily driven by the acquisition of Quantex Arc Limited and one other immaterial acquisition. Customer pricing favorably impacted revenue by approximately 3.6% in the first quarter.

The organic revenue growth was driven by increased revenue in biopharma and hygienic markets for single-use pumps and connectors used in biopharmaceutical production processes, driven by a strong backlog position entering 2022. Our industrial pumps and our plastics and polymer processing solutions businesses also contributed to top-line growth on strong end market demand, despite continued supply chain and customer delivery challenges exacerbated by the Russia-Ukraine crisis and COVID-related lockdowns in China. Revenue in bearings and compression components saw strong growth amidst continued recovery in end market demand. We expect growth to continue in our core biopharma platform; however, we expect COVID-driven biopharma revenue to normalize as the year progresses due to the slowdown in COVID-19 vaccine demand and production.

Pumps & Process Solutions segment earnings increased $15.7 million, or 12.7%, over the prior year comparable quarter. The increase was primarily driven by conversion on revenue growth, pricing initiatives, and productivity actions, partially offset by material and labor cost inflation, and investments in growth. Segment margin increased to 32.0% from 31.4% from the prior year comparable quarter.

Overall bookings decreased 16.6% as compared to the prior year comparable quarter, reflecting an organic decline of 14.0%, an unfavorable impact from foreign currency translation of 2.9%, and acquisition-related increases of 0.3%. The organic bookings decline was driven by a decrease in orders for biopharma and hygienic components used in COVID-19 vaccine production, but partially offset by strong order intake in bearings and compression components. Segment book-to-bill was 1.06. Backlog increased 30.8% compared to the prior year comparable quarter, driven by strong demand seen across product lines throughout 2021.

Climate & Sustainability Technologies

Our Climate & Sustainability Technologies segment is a provider of innovative and energy-efficient equipment and systems that serve the commercial refrigeration, heating and cooling and beverage container-making equipment markets.

												Three Months Ended March 31,
(dollars in thousands)																								2022						2021						% Change
Revenue																								$	399,078					$	372,077					7.3		%
Segment earnings (EBIT)																								$	40,396					$	38,117					6.0		%
Depreciation and amortization																								11,353						12,096						(6.1)		%
Segment EBITDA																								$	51,749					$	50,213					3.1		%
Segment margin																								10.1%						10.2%
Segment EBITDA margin																								13.0%						13.5%
Other measures:
Bookings																								$	444,852					$	537,326					(17.2)		%
Backlog																								$	1,218,155					$	677,309					79.9		%
Components of revenue growth:
Organic growth																																				17.4		%
Dispositions																																				(8.2)		%
Foreign currency translation																																				(1.9)		%
																																				7.3		%

First Quarter 2022 Compared to the First Quarter 2021

Climate & Sustainability Technologies segment revenue increased $27.0 million, or 7.3%, as compared to the first quarter of 2021, reflecting organic revenue growth of 17.4%, partially offset by a disposition-related decline of 8.2% and an unfavorable impact from foreign currency translation of 1.9%. Customer pricing favorably impacted revenue in the first quarter of 2022 by approximately 9.2% compared to 0.3% in the prior year comparable quarter. Pricing was higher than in prior quarters reflecting actions to recover increasing costs, as discussed below.

The organic revenue growth was driven by robust demand across all our key end-markets. Retail refrigeration revenues increased substantially from the prior year, driven by robust remodel programs with key supermarket customers and strong growth for our natural refrigerant systems in both Europe and the beverage equipment revenues experienced strong growth, driven by continued favorable macro trends in the global beverage industry as producers shift from plastic and glass packaging to aluminum containers for environmental sustainability and merchandising benefits offered by modern aluminum containers. Our heat exchanger business experienced healthy growth across all regions, fueled by regulation-driven heat pump demand in Europe, robust demand in Asia and strengthening commercial HVAC and industrial markets globally.

Climate & Sustainability Technologies segment earnings increased $2.3 million, or 6.0%, as compared to the first quarter of 2021. Segment margin decreased to 10.1% from 10.2% in the prior year comparable quarter. The earnings increase was driven by increased volumes, favorable business mix, and customer pricing actions, partially offset by increased material and logistics costs, most notably metals and freight, and plant productivity shortfalls resulting from supply chain disruption and increased labor costs.

Bookings in the first quarter of 2022 decreased 17.2% from the prior year comparable quarter, reflecting organic decline of 9.4%, a disposition-related decline of 6.2%, and an unfavorable impact from foreign currency translation of 1.6%. The organic bookings decline was principally driven by a challenging comparable quarter in the prior year, especially in retail refrigeration. Segment book-to-bill for the first quarter of 2022 was 1.11. Backlog increased 79.9% over the prior year comparable quarter, reflective of the improving outlook across all businesses within the segment.

FINANCIAL CONDITION

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Significant factors affecting liquidity are: cash flows generated from operating activities, capital expenditures, acquisitions, dispositions, dividends, repurchases of outstanding shares, adequacy of available commercial paper and bank lines of credit, and the ability to attract long-term capital with satisfactory terms. We generate substantial cash from the operations of our businesses and remain in a strong financial position, with sufficient liquidity available for reinvestment in existing businesses and strategic acquisitions.

Cash Flow Summary

The following table is derived from our Condensed Consolidated Statements of Cash Flows:

			Three Months Ended March 31,
Cash Flows (dollars in thousands)			2022						2021
Net Cash Flows Provided By (Used In):
Operating activities			$	23,683					$	177,184
Investing activities			(46,963)						(29,572)
Financing activities			(75,204)						(124,239)

Operating Activities

Cash provided by operating activities for the three months ended March 31, 2022 decreased approximately $153.5 million compared to the comparable period in 2021. This decrease was primarily driven by higher compensation payouts in 2022 compared to 2021, as well as higher investments in inventory to support business and backlog growth, and also to mitigate potential inventory constraints given the continuing disrupted and constrained supply chain.

Adjusted Working Capital: We believe adjusted working capital (a non-GAAP measure calculated as accounts receivable, plus inventory, less accounts payable) provides a meaningful measure of our operational results by showing changes caused solely by revenue. The following table provides a reconciliation of adjusted working capital to the most directly comparable GAAP measure:

Adjusted Working Capital (dollars in thousands)						March 31, 2022						December 31, 2021
Accounts receivable						$	1,446,670					$	1,347,514
Inventories						1,322,347						1,191,095
Less: Accounts payable						1,136,553						1,073,568
Adjusted working capital						$	1,632,464					$	1,465,041

Adjusted working capital increased from December 31, 2021 by $167.4 million, or 11.4%, to $1.6 billion at March 31, 2022, which reflected an increase of $99.2 million in accounts receivable and $131.2 million in inventory, partially offset by an increase in accounts payable of $63.0 million. These amounts include the effects of acquisitions and foreign currency translation. Accounts receivable increased compared to the prior year as a result of higher revenue. Inventories increased to support business and backlog growth, and to also mitigate potential inventory constraints due to supply chain disruptions and constraints. These factors also led to an increase in accounts payable.

We facilitate the opportunity for suppliers to participate in voluntary supply chain financing ("SCF") programs with participating financial institutions. Participating suppliers have the ability to sell receivables due from us to SCF financial institutions at the discretion of both the suppliers and the SCF financial institutions, at no economic impact to the Company. The Company and our suppliers agree on commercial terms, including payment terms, for the goods and services we procure regardless of whether the supplier participates in SCF. For participating suppliers, our responsibility is limited to making all payments to the SCF financial institutions on the terms originally negotiated with the supplier, irrespective of whether the supplier elects to sell receivables to the SCF financial institution. The SCF financial institution pays the supplier on the invoice due date for any invoices that were not previously sold by the supplier to the SCF financial institution. Thus, suppliers using SCF have additional potential flexibility in managing their liquidity by accelerating, at their option and cost, collection of receivables due from Dover.

Outstanding payments related to SCF programs are recorded within accounts payable in our consolidated balance sheets. As of March 31, 2022 and December 31, 2021, amounts due to financial institutions for suppliers using SCF were approximately $140 million and $211 million, respectively. SCF-related payments are classified as a reduction to cash flows from operations. During the three months ended March 31, 2022 and 2021, amounts paid to SCF financial institutions were approximately $225 million and $108 million, respectively.

Investing Activities

Cash used in investing activities is derived from cash outflows for capital expenditures, offset by proceeds from sales of property, plant and equipment. For the three months ended March 31, 2022 and 2021, we used cash in investing activities of $47.0 million and $29.6 million, respectively, primarily driven by the $19.1 million increase in our capital expenditures during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. We expect full year 2022 capital expenditures to be approximately $200-$220 million.

We anticipate that capital expenditures and any acquisitions we make through the remainder of 2022 will be funded from available cash and internally generated funds and through the issuance of commercial paper, use of lines of credit or public or private debt markets, as necessary.

Financing Activities

Our cash flow from financing activities generally relates to the use of cash for purchases of our common stock and payment of dividends, offset by net borrowing activity. For the three months ended March 31, 2022 and 2021, we used cash totaling $75.2 million and $124.2 million, respectively, for financing activities, with the activity primarily attributable to the following:

• Repurchase of common stock: We did not repurchase any shares during the three months ended March 31, 2022. During the three months ended March 31, 2021, we used $21.6 million to repurchase 182,951 shares.

*•*Commercial paper and notes payable: During the three months ended March 31, 2022 we received net proceeds of $7.8 million from commercial paper borrowings. During the three months ended March 31, 2021 we did not borrow or have proceeds from commercial paper or notes payable.

• Dividend payments: Dividends paid to shareholders during the three months ended March 31, 2022 totaled $72.2 million as compared to $71.3 million during the same period in 2021. Our dividends paid per common share increased 1.0% to $0.50 during the three months ended March 31, 2022 compared to $0.495 during the same period in 2021.

*•*Payments to settle employee tax obligations: Payments to settle tax obligations from the exercise of share-based awards declined $20.4 million compared to the prior year period, primarily due to the decrease in the number of shares exercised.

Liquidity and Capital Resources

Free Cash Flow

In addition to measuring our cash flow generation and usage based upon the operating, investing and financing classifications included in the Condensed Consolidated Statements of Cash Flows, we also measure free cash flow (a non-GAAP measure) which represents net cash provided by operating activities minus capital expenditures. We believe that free cash flow is an important measure of operating performance because it provides management and investors a measurement of cash generated from operations that is available for mandatory payment obligations and investment opportunities, such as funding acquisitions, paying dividends, repaying debt and repurchasing our common stock.

The following table reconciles our free cash flow to cash flow provided by operating activities:

			Three Months Ended March 31,
Free Cash Flow (dollars in thousands)			2022						2021
Cash flow provided by operating activities			$	23,683					$	177,184
Less: Capital expenditures			(50,381)						(31,260)
Free cash flow			$	(26,698)					$	145,924
Cash flow from operating activities as a percentage of revenue			1.2		%				9.5		%
Cash flow from operating activities as a percentage of net earnings			10.5		%				76.1		%
Free cash flow as a percentage of revenue			(1.3)		%				7.8		%
Free cash flow as a percentage of net earnings			(11.8)		%				62.7		%

For the three months ended March 31, 2022, we generated cash flow from operating activities of $23.7 million, representing 1.2% of revenue and 10.5% of net earnings, and we used free cash flow of $26.7 million, representing 1.3% of revenue and 11.8% of net earnings. Free cash flow for the three months ended March 31, 2022 decreased $172.6 million compared to the prior year period, due to lower operating cash flow primarily as a result of higher compensation payments, increase in inventory, and higher investments in capital expenditures compared to the prior year.

Capitalization

We use commercial paper borrowings for general corporate purposes, including the funding of acquisitions and the repurchase of our common stock. As of March 31, 2022, we maintained a $1.0 billion five-year unsecured revolving credit facility (the "Credit Agreement") with a syndicate of banks with an expiration date of October 4, 2024. The Credit Agreement is used as liquidity back-up for our commercial paper program and for general corporate purposes.

Under the Credit Agreement, we are required to pay a facility fee and to maintain an interest coverage ratio of consolidated EBITDA to consolidated net interest expense of not less than 3.0 to 1.0. We were in compliance with this covenant and our other long-term debt covenants at March 31, 2022 and had an interest coverage ratio of 17.7 to 1. We are not aware of any potential impairment to our liquidity and expect to remain in compliance with all of our debt covenants. Additionally, our earliest long-term debt maturity is in 2025.

We also have a current shelf registration statement filed with the Securities and Exchange Commission that allows for the issuance of additional debt securities that may be utilized in one or more offerings on terms to be determined at the time of the offering. Net proceeds of any offering would be used for general corporate purposes, including repayment of existing indebtedness, capital expenditures and acquisitions.

At March 31, 2022, our cash and cash equivalents totaled $290.0 million, of which $238.2 million was held outside the United States. At December 31, 2021, our cash and cash equivalents totaled $385.5 million, of which $257.5 million was held outside the United States. Cash and cash equivalents in excess of near-term requirements are invested in highly liquid investment-grade money market instruments, short-term investments, or bank deposits, which consist of investment-grade time deposits with original maturity dates at the time of purchase of no greater than three months.

We utilize the net debt to net capitalization calculation (a non-GAAP measure) to assess our overall financial leverage and capacity and believe the calculation is useful to investors for the same reason. Net debt represents total debt minus cash and cash equivalents. Net capitalization represents net debt plus stockholders' equity. The following table provides a reconciliation of net debt to net capitalization to the most directly comparable GAAP measures:

Net Debt to Net Capitalization Ratio (dollars in thousands)						March 31, 2022						December 31, 2021
Short-term borrowings						$	680					$	702
Commercial paper						112,800						105,000
Notes payable						$	113,480					$	105,702
Long-term debt						$	2,981,922					$	3,018,714
Total debt						3,095,402						3,124,416
Less: Cash and cash equivalents						(289,984)						(385,504)
Net debt						2,805,418						2,738,912
Add: Stockholders' equity						4,329,776						4,189,528
Net capitalization						$	7,135,194					$	6,928,440
Net debt to net capitalization						39.3		%				39.5		%

Our net debt to net capitalization ratio decreased to 39.3% at March 31, 2022 compared to 39.5% at December 31, 2021. Net debt increased $66.5 million during the period primarily due to a decrease in cash and cash equivalents, partially offset by a decrease in long-term debt as a result of foreign currency translation on euro-denominated notes. Stockholders' equity increased $140.2 million primarily as a result of earnings during the period, partially offset by dividends paid and exercises of share-based awards.

Operating cash flow, existing capacity of our Credit Agreement and access to capital markets are expected to satisfy our various cash flow requirements, including acquisitions, capital expenditures, purchase obligations, lease obligations, and share repurchases.

Critical Accounting Policies and Estimates

Our Condensed Consolidated Financial Statements and related public financial information are based on the application of GAAP which requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our public disclosures, including information regarding contingencies, risk and our financial condition. We believe our use of estimates and underlying accounting assumptions conform to GAAP and are consistently applied. We review valuations based on estimates for reasonableness on a consistent basis.

Recent Accounting Standards

See Note 19 — Recent Accounting Pronouncements in the Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q. The adoption of recent accounting standards as included in Note 19 — Recent Accounting Pronouncements in the Condensed Consolidated Financial Statements has not had, and is not expected to have, a significant impact on our revenue, earnings or liquidity.

Special Notes Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, especially MD&A, contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this document other than statements of historical fact are statements that are, or could be deemed, "forward-looking" statements. Some of these statements may be indicated by words such as "may", "anticipate", "expect", "believe", "intend", "guidance", "estimates", "suggest", "will", "plan", "should", "would", "could", "forecast", "headwind", "tailwind" and other words and terms that use the future tense or have a similar meaning. Forward-looking statements are based on current expectations and are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control. Factors that could cause actual results to differ materially from current expectations include, among other things, the impacts of COVID-19 or other future pandemics on the global economy and on our customers, suppliers, employees, business and cash flows, supply chain constraints and labor shortages that could result in production stoppages, inflation in material input costs and freight logistics, other general economic conditions and conditions in the particular markets in which we operate, changes in customer demand

and capital spending, competitive factors and pricing pressures, our ability to develop and launch new products in a cost-effective manner, changes in law, including the effect of tax laws and developments with respect to trade policy and tariffs, our ability to identify and complete acquisitions and integrate and realize synergies from newly acquired businesses, the impact of interest rate and currency exchange rate fluctuations, capital allocation plans and changes in those plans, including with respect to dividends, share repurchases, investments in research and development, capital expenditures and acquisitions, our ability to derive expected benefits from restructuring, productivity initiatives and other cost reduction actions, changes in material costs or the supply of input materials, the impact of legal compliance risks and litigation, including with respect to product quality and safety, cybersecurity and privacy, our ability to capture and protect intellectual property rights, and various other factors that are described in our periodic reports filed with or furnished to the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2021. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

The Company may, from time to time, post financial or other information on its website, www.dovercorporation.com. The website is for informational purposes only and is not intended for use as a hyperlink. The Company is not incorporating any material on its website into this report.

Non-GAAP Disclosures

In an effort to provide investors with additional information regarding our results as determined by GAAP, we also disclose non-GAAP information which we believe provides useful information to investors. Segment EBITDA, segment EBITDA margin, free cash flow, free cash flow as a percentage of revenue, free cash flow as a percentage of net earnings, net debt, net capitalization, net debt to net capitalization ratio, adjusted working capital, organic revenue growth and rightsizing costs are not financial measures under GAAP and should not be considered as a substitute for earnings, cash flows from operating activities, debt or equity, working capital, revenue or restructuring costs as determined in accordance with GAAP, and they may not be comparable to similarly titled measures reported by other companies.

We believe that segment EBITDA and segment EBITDA margin are useful to investors and other users of our financial information in evaluating ongoing operating profitability as they exclude the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to our competitors. Segment EBITDA is calculated by adding back depreciation and amortization expense to segment earnings, which is the most directly comparable GAAP measure. We do not present segment net income because corporate expenses, interest and taxes are not allocated at a segment level. Segment EBITDA margin is calculated as segment EBITDA divided by segment revenue.

We believe the net debt to net capitalization ratio and free cash flow are important measures of liquidity. Net debt to net capitalization is helpful in evaluating our capital structure and the amount of leverage we employ. Free cash flow and free cash flow ratios provide both management and investors a measurement of cash generated from operations that is available to fund acquisitions, pay dividends, repay debt and repurchase our common stock. Free cash flow as a percentage of revenue equals free cash flow divided by revenue. Free cash flow as a percentage of net earnings equals free cash flow divided by net earnings. We believe that reporting adjusted working capital, which is calculated as accounts receivable, plus inventory, less accounts payable, provides a meaningful measure of our operational results by showing the changes caused solely by revenue. We believe that reporting organic revenue growth, which excludes the impact of foreign currency exchange rates and the impact of acquisitions and divestitures, provides a useful comparison of our revenue performance and trends between periods. We believe that reporting rightsizing costs, which include restructuring and other charges, is important as it enables management and investors to better understand the financial impact of our broad-based cost reduction and operational improvement initiatives.

Reconciliations of non-GAAP measures can be found above in this Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations.