Dover 10-Q 2022-06-30

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 June 30, 2022

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 July 14, 2022 was 143,549,312.

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, 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 can-making equipment markets.

In the second quarter of 2022, revenue was $2.2 billion, which increased $127.0 million, or 6.3%, as compared to the second quarter of 2021. This was driven by organic revenue growth of 7.5% and acquisition-related revenue growth of 4.1%, partially offset by an unfavorable impact from foreign currency translation of 3.6% and disposition-related decline of 1.7%. Pricing initiatives continued in the quarter to offset the impact of higher commodity costs, principally steel, component parts inflation, and higher freight and logistics costs.

The 7.5% organic revenue growth for the second 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 cost inflation, and unforecasted production interruptions. The Engineered Products segment had organic revenue growth of 18.6% primarily as a result of pricing initiatives as well as strength in our waste handling, vehicle services, industrial automation, and industrial winch and hoist businesses, whereas our aerospace and defense business declined organically year-over-year driven by supply chain constraints and program timing. The Clean Energy & Fueling segment had organic revenue decline of 1.1% principally due to

reduced year-over-year demand in North America for Europay, Mastercard, and Visa ("EMV") compliant equipment following the compliance deadline in the second quarter of 2021, mostly offset by solid demand in our North America below ground retail fueling, fluid transfer solutions and vehicle wash solutions businesses, along with pricing initiatives. The Imaging & Identification segment experienced organic revenue decline of 0.9% driven by sourced logistics headwinds and continued component shortages due to COVID-19 related lockdowns in China in our marking and coding business, partially offset by growth in our serialization and brand management software. The Pumps & Process Solutions segment had organic revenue growth of 6.8%, driven by pricing initiatives, along with continued strength in our core non-COVID-19 biopharma platform, industrial pumps, plastics and polymer processing solutions, and bearings and compression components businesses, partially offset by lower shipments for single-use pumps and connectors used in biopharmaceutical production processes for the COVID-19 vaccine. The Climate & Sustainability Technologies segment posted organic revenue growth of 11.4%, reflective of pricing initiatives combined with strong demand in retail refrigeration, can-making, and heat exchangers.

From a geographic perspective, organic revenue for the U.S., our largest market, increased 12.5% in the second quarter of 2022. Organic revenue in Europe and Asia grew 11.8% and 0.4%, respectively. Revenue growth in Asia was negatively impacted by COVID-19 driven lockdowns in China in the quarter, which have since eased. Other Americas declined by 17.7% organically in the quarter.

Bookings were $2.1 billion for the three months ended June 30, 2022, a decrease of $270.3 million, or 11.4% compared to the prior year comparable period. Included in this result was organic decline of 9.9%, an unfavorable impact from foreign currency translation of 2.9%, disposition-related decline of 1.8%, and acquisition-related growth of 3.2%. The organic bookings decline was driven primarily by a $74.0 million order reversal due to customer financing limitations in our beverage can-making business, a decrease in orders for biopharmaceutical components used in COVID-19 vaccine production, and declines in our vehicle service and waste handling businesses principally related to higher year-over-year comparables and timing of orders in waste handling. This was partially offset by solid demand in our marking and coding business.

Backlog as of June 30, 2022 was $3.3 billion, an increase from $2.6 billion in the prior year. See definition of bookings and backlog within "Segment Results of Operations".

Restructuring and other costs of $7.9 million included restructuring charges of $4.3 million and other costs of $3.6 million for the three months ended June 30, 2022. Restructuring and other costs were primarily due to headcount reductions and facility consolidations resulting from restructuring programs initiated in 2021 and 2022, and asset write-downs. See Note 8 — Restructuring Activities in the Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for further details.

Subsequent to the second quarter of 2022, on July 1, 2022, the Company completed the acquisition of Malema Engineering Corporation ("Malema"), a designer and manufacturer of flow

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There has been no significant change in our exposure to market risk during the six months ended June 30, 2022. 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, 2021.

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 June 30, 2022.

During the second quarter of 2022, 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 Note 13 — Commitments and Contingent Liabilities in the Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.

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, 2021.

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

a.Not applicable.

b.Not applicable.

c.The table below presents shares of Dover stock that we acquired during the quarter.

(1) 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. The Company repurchased 641,428 shares under the November 2020 authorization during the three months ended June 30, 2022. As of June 30, 2022, the number of shares still available for repurchase under the November 2020 share repurchase authorization was 19,175,621.

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.