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, including a number of financial measures that are not defined under accounting principles generally accepted in the United States of America ("GAAP"). Please see "Non-GAAP Disclosures" at the end of this Item 2 for further detail on these financial measures. We believe these measures provide investors with important information that is useful in understanding our business results and trends. Reconciliations 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 to the 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, software, solutions and services enabling safe and reliable storage, transport and dispensing of traditional and clean fuels (including liquefied natural gas, hydrogen, and electric vehicle charging), cryogenic gases, and other hazardous substances along the supply chain, and safe and efficient operation of convenience retail, retail fueling and vehicle wash establishments.

• Our Imaging & Identification segment supplies precision marking and coding, 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, textile and other end-markets.

• Our Pumps & Process Solutions segment manufactures specialty pumps and flow meters, highly engineered precision components for rotating and reciprocating machines, fluid connecting solutions and plastics and polymer processing equipment, serving single-use biopharmaceutical production, diversified industrial manufacturing, chemical production, plastics and 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, components and parts for the commercial refrigeration, equipment and systems, heating and cooling and beverage can-making equipment markets.

In the first quarter of 2023, revenue was $2.1 billion, which increased $27.1 million, or 1.3%, as compared to the first quarter of 2022. This was driven by organic revenue growth of 2.9% and acquisition-related revenue growth of 0.9%, partially offset by an unfavorable impact from foreign currency translation of 2.5%. Pricing initiatives continued in the quarter to offset the impact of higher commodity costs, component parts inflation and higher energy, freight and logistics costs.

The 2.9% organic revenue growth for the first quarter of 2023 was broad-based across most of our businesses based on solid underlying demand and the recovery in global supply chains. The Engineered Products segment had organic revenue growth of 3.4% primarily as a result of segment-wide pricing actions to recover increased material and logistics costs, and strong demand in our waste handling business as large national waste haulers and municipal governments invest to upgrade their refuse collection vehicle fleets and implement our leading digital technologies to improve waste collection process efficiencies. The

Clean Energy & Fueling segment had organic revenue decline of 2.6% principally due to reduced year-over-year demand in above ground retail fueling equipment driven by expected roll-off of EMV-related demand, customer construction related delays, and overall caution among operators. The Imaging & Identification segment experienced organic revenue growth of 8.2% driven by pricing initiatives and solid activity in our marking and coding business, as underlying demand for our printers, spare parts, services and consumables remains positive. The Pumps & Process Solutions segment had organic revenue decline of 7.1%, as biopharmaceutical manufacturers reduced orders for components used in COVID-19 vaccine production and repurposed inventory purchased for the COVID-19 vaccine production toward production of non-COVID-19 therapies. This decline was partially offset by pricing initiatives, along with continued strength in thermal connectors, industrial pumps, plastics and polymer processing solutions, and bearings and compression components businesses, which saw revenue growth driven by solid end market demand and strong backlogs. The Climate & Sustainability Technologies segment posted organic revenue growth of 16.2%, driven by strong demand across many of our key end markets combined with price actions implemented to principally recover increased material and logistics costs.

From a geographic perspective, organic revenue for the U.S., our largest market, increased 2.6% in the first quarter of 2023. Organic revenue for Other Americas increased 16.8%. Asia and Europe decreased 3.9% and 0.3%, respectively.

Bookings were $2.0 billion for the three months ended March 31, 2023, a decrease of $207.5 million, or 9.2% compared to the prior year comparable quarter. Included in this result was organic decline of 7.6%, an unfavorable impact from foreign currency translation of 2.6%, partially offset by acquisition-related growth of 1.0%. The organic bookings decline was driven primarily by lead time normalization across the portfolio as supply chains improve as well as $90.0 million in order de-bookings in Climate & Sustainability Technologies related to a major retail refrigeration customer’s strategic decision to temporarily pause its new store expansion program. Despite the year-over-year decline, new bookings grew sequentially in the quarter. Book-to-bill was above one in four out of five segments, with Climate & Sustainability Technologies falling below one primarily due to the aforementioned order de-bookings as well as order timing in beverage can-making equipment.

Backlog as of March 31, 2023 was $3.0 billion, a decrease from $3.4 billion in the prior year. See definition of bookings and backlog within "Segment Results of Operations".

Restructuring and other costs for the three months ended March 31, 2023 was $14.1 million which included restructuring charges of $12.5 million and other costs of $1.6 million. Restructuring and other costs were primarily related to headcount reductions and exit costs in the Clean Energy & Fueling segment. These programs were initiated in 2022 and 2023 and were undertaken in light of current market conditions. See Note 7 — Restructuring Activities in the condensed consolidated financial statements in Item 1 of this Form 10-Q for further details.

CONSOLIDATED RESULTS OF OPERATIONS

			Three Months Ended March 31,
(dollars in thousands, except per share figures)			2023						2022						% / Point Change
Revenue			$	2,079,023					$	2,051,901					1.3		%
Cost of goods and services			1,332,004						1,308,707						1.8		%
Gross profit			747,019						743,194						0.5		%
Gross profit margin			35.9		%				36.2		%				(0.3)
Selling, general and administrative expenses			432,414						443,843						(2.6)		%
Selling, general and administrative expenses as a percent of revenue			20.8		%				21.6		%				(0.8)
Operating earnings			314,605						299,351						5.1		%
Interest expense			34,214						26,552						28.9		%
Interest income			(2,091)						(775)						169.8		%
Other income, net			(3,808)						(2,129)						nm*
Earnings before provision for income taxes			286,290						275,703						3.8		%
Provision for income taxes			57,716						49,550						16.5		%
Effective tax rate			20.2		%				18.0		%				2.2
Net earnings			228,574						226,153						1.1		%
Net earnings per common share - diluted			$	1.63					$	1.56					4.5		%

• nm - not meaningful

Revenue

Revenue for the three months ended March 31, 2023 increased $27.1 million, or 1.3%, from the prior year comparable quarter. Results included organic revenue growth of 2.9%, primarily led by our Engineered Products and Climate & Sustainability Technologies segments, and acquisition-related revenue growth of 0.9%, primarily driven by our Pumps & Process Solutions segment. This growth was partially offset by an unfavorable impact from foreign currency translation of 2.5%. Customer pricing favorably impacted revenue by approximately 5.1% in the first quarter of 2023 compared to 6.0% in the prior year comparable quarter.

Gross Profit

Gross profit for the three months ended March 31, 2023 increased $3.8 million, or 0.5%, while gross profit margin decreased 30 basis points to 35.9%, from the prior year comparable quarter. Gross profit margin decreased due to product mix across the company's businesses, partially offset by pricing initiatives which continued into 2023.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2023 decreased $11.4 million, or 2.6%, from the prior year comparable quarter, primarily due to lower insurance claims, gain on sale of fixed assets, and lower variable compensation expense, partially offset by increased restructuring costs. As a percentage of revenue, selling, general and administrative expenses decreased 80 basis points as compared to the prior year comparable quarter to 20.8% due to an increase in revenue.

Research and development costs, including qualifying engineering costs, are expensed when incurred and amounted to $38.0 million and $40.7 million for the three months ended March 31, 2023 and 2022, respectively. These costs as a percent of revenue were 1.8% and 2.0% for the three months ended March 31, 2023 and 2022, respectively.

Other income, net

Other income, net includes non-service pension benefit, deferred compensation plan investments gain or loss, earnings or charges from equity method investments, foreign exchange gain or loss, and various other items. Other income, net for the three months ended March 31, 2023 increased $1.7 million from the prior year comparable periods due to various immaterial items.

Income Taxes

The effective tax rates for the three months ended March 31, 2023 and 2022 were 20.2% and 18.0%, respectively. The increase in the effective tax rate for the three months ended March 31, 2023 relative to the prior year comparable quarter was primarily driven by favorable audit resolutions in 2022.

Net earnings

Net earnings for the three months ended March 31, 2023 increased 1.1% to $228.6 million, or $1.63 diluted earnings per share, from $226.2 million, or $1.56 diluted earnings per share, in the prior year comparable quarter. The increase in net earnings is mainly attributable to productivity initiatives and customer pricing actions, partially offset by increased material and labor costs and unfavorable impact from foreign currency translation.

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. We evaluate our operating segment performance based on segment earnings as defined in Note 14 — Segment Information in the condensed consolidated financial statements in Item 1 of this Form 10-Q. 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 provides a wide range of equipment, components, software, solutions and services to the 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)						2023						2022						% Change
Revenue						$	497,549					$	487,647					2.0		%
Segment earnings						$	84,275					$	71,130					18.5		%
Segment margin						16.9 %						14.6 %
Operational metrics:
Bookings						$	536,472					$	541,035					(0.8)		%
Backlog						$	755,442					$	830,135					(9.0)		%
Components of revenue growth:
Organic growth																		3.4		%
Foreign currency translation																		(1.4)		%
Total revenue growth																		2.0		%

First Quarter 2023 Compared to the First Quarter 2022

Engineered Products segment revenue for the first quarter of 2023 increased $9.9 million, or 2.0%, as compared to the first quarter of 2022, comprised primarily of organic growth of 3.4%, partially offset by an unfavorable impact from foreign currency translation of 1.4%. Customer pricing favorably impacted revenue in the first quarter of 2023 by approximately 4.1% compared to 10.8% in the prior year comparable quarter.

The organic revenue growth was primarily driven by segment-wide pricing actions to recover increased material and logistics costs, as well as strong demand and improved chassis availability in our waste handling business as large national waste haulers and municipal governments invest to upgrade their refuse collection vehicle fleets and implement our leading digital technologies to improve waste collection process efficiencies. Our industrial automation and aerospace and defense businesses experienced modest organic declines, primarily related to timing of programs with key automotive and defense customers. We anticipate organic revenue growth to continue into the second quarter driven by a healthy backlog position and strong order demand trends in several of our key end markets, most notably waste handling and industrial automation.

Engineered Products segment earnings increased $13.1 million, or 18.5%, compared to the first quarter of 2022. The increase was primarily driven by continued customer pricing actions and improved productivity, partially offset by higher labor costs, as well as an unfavorable impact from foreign currency translation. As a result, segment margin increased to 16.9% from 14.6% as compared to the prior year comparable quarter.

Bookings decreased 0.8% for the segment, comprised of an unfavorable impact from foreign currency translation of 1.7%, partially offset by organic growth of 0.9%. The organic bookings growth was driven by strong demand in our waste handling, industrial automation and industrial winch and hoist businesses, partially offset by a reduction in vehicle lift business primarily driven by normalization of lead times. Segment book-to-bill was 1.08. Backlog decreased 9.0% compared to the prior year comparable period, primarily related to supply chain improvements resulting in the normalization of customer delivery lead times and market demand in our vehicle lift business.

Clean Energy & Fueling

Our Clean Energy & Fueling segment provides components, equipment, software, solutions and services enabling safe and reliable storage, transport and dispensing of traditional and clean fuels (including liquefied natural gas, hydrogen, and electric vehicle charging), cryogenic gases, and other hazardous substances along the supply chain, and safe and efficient operation of convenience retail, retail fueling and vehicle wash establishments.

						Three Months Ended March 31,
(dollars in thousands)						2023						2022						% Change
Revenue						$	430,729					$	458,395					(6.0)		%
Segment earnings						$	73,605					$	72,962					0.9		%
Segment margin						17.1 %						15.9 %
Operational metrics:
Bookings						$	454,526					$	501,491					(9.4)		%
Backlog						$	337,116					$	426,342					(20.9)		%
Components of revenue decline:
Organic decline																		(2.6)		%
Foreign currency translation																		(3.4)		%
Total revenue decline																		(6.0)		%

First Quarter 2023 Compared to the First Quarter 2022

Clean Energy & Fueling segment revenue for the first quarter of 2023 decreased $27.7 million, or 6.0%, as compared to the first quarter of 2022, comprised of an unfavorable impact from foreign currency translation of 3.4%, and an organic decline of 2.6%. Customer pricing favorably impacted revenue in the first quarter of 2023 by approximately 4.5% compared to 2.9% in the prior year comparable quarter.

The organic revenue decline was primarily driven by reduced year-over-year demand in above ground retail fueling equipment due to the expected roll-off of EMV-related demand, customer construction related delays, and overall caution among operators, and was partially offset by solid demand in fluid transfer solutions, clean energy components for LPG and H2 applications, and vehicle wash solutions, along with pricing actions aimed at mitigating material and logistics cost inflation. We expect organic growth rates in the second quarter to remain constrained due to the continued recovery in above-ground retail fueling equipment, with year-over-year improvement expected in the second half of the year.

Clean Energy & Fueling segment earnings increased $0.6 million, or 0.9%, over the prior year comparable quarter. The increase was primarily driven by pricing actions, productivity initiatives and the benefit from restructuring actions taken in the second half of 2022 in response to reduced volumes in our above ground retail fueling business. These actions more than offset the unfavorable impacts of material and labor cost inflation, organic volume declines and foreign currency translation. Segment margin increased to 17.1% from 15.9% in the prior year comparable quarter.

Overall bookings decreased 9.4% as compared to the prior year comparable quarter, driven by an organic decline of 6.1% and an unfavorable impact from foreign currency translation of 3.3%. The organic bookings decline was primarily driven by reduced year-over-year demand in above ground retail fueling equipment. Segment book-to-bill was 1.06. Backlog decreased 20.9% as compared to the prior year comparable period as lead times have normalized with the improvement in global supply chains.

Imaging & Identification

Our Imaging & Identification segment supplies precision marking and coding, 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, textile and other end-markets.

						Three Months Ended March 31,
(dollars in thousands)						2023						2022						% Change
Revenue						$	283,091					$	272,255					4.0		%
Segment earnings						$	68,315					$	58,598					16.6		%
Segment margin						24.1 %						21.5 %
Operational metrics:
Bookings						$	290,712					$	307,104					(5.3)		%
Backlog						$	236,215					$	243,411					(3.0)		%
Components of revenue growth:
Organic growth																		8.2		%
Foreign currency translation																		(4.2)		%
Total revenue growth																		4.0		%

First Quarter 2023 Compared to the First Quarter 2022

Imaging & Identification segment revenue for the first quarter of 2023 increased $10.8 million, or 4.0%, as compared to the first quarter of 2022, comprised of organic growth of 8.2%, which was partially offset by an unfavorable impact from foreign currency translation of 4.2%. Customer pricing favorably impacted revenue in the first quarter of 2023 by approximately 6.7% compared to 1.9% in the prior year comparable quarter.

The organic revenue growth was primarily driven by pricing initiatives and solid activity in our marking and coding business, as underlying demand for our printers, spare parts, services and consumables remains positive, and we expect growth in our marking and coding business to remain positive into the second quarter. Demand in our textile printing business has continued to be impacted by high energy prices and macro uncertainty in textile producing regions.

Imaging & Identification segment earnings increased $9.7 million, or 16.6%, over the prior year comparable quarter. This increase was primarily driven by pricing initiatives, organic revenue growth, and productivity actions, which more than offset negative impacts from material and labor cost inflation and foreign currency translation. Segment margin increased to 24.1% from 21.5% in the prior year comparable quarter.

Overall bookings decreased 5.3% as compared to the prior year comparable quarter, reflecting an unfavorable impact from foreign currency translation of 3.5%, and an organic decline of 1.8%. The organic bookings decline was primarily driven by the timing of orders in our serialization software business. Segment book-to-bill was 1.03. Backlog decreased 3.0% as compared to the prior year comparable period.

Pumps & Process Solutions

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

						Three Months Ended March 31,
(dollars in thousands)						2023						2022						% Change
Revenue						$	413,881					$	435,195					(4.9)		%
Segment earnings						$	115,244					$	146,617					(21.4)		%
Segment margin						27.8 %						33.7 %
Operational metrics:
Bookings						$	464,297					$	459,790					1.0		%
Backlog						$	742,890					$	704,935					5.4		%
Components of revenue decline:
Organic decline																		(7.1)		%
Acquisitions																		4.4		%
Foreign currency translation																		(2.2)		%
Total revenue decline																		(4.9)		%

First Quarter 2023 Compared to the First Quarter 2022

Pumps & Process Solutions segment revenue for the first quarter of 2023 decreased $21.3 million, or 4.9%, as compared to the first quarter of 2022, driven by an organic decline of 7.1%, and an unfavorable impact from foreign currency translation of 2.2%, partially offset by acquisition-related growth of 4.4%. Acquisition-related growth was primarily driven by the acquisition of Malema Engineering Corporation and Witte Pumps & Technology GmbH. Customer pricing favorably impacted revenue in the first quarter of 2023 by approximately 4.9% compared to 3.6% in the prior year comparable quarter.

The organic revenue decline was primarily driven by reduced shipments for components used in COVID-19 vaccine production and biopharmaceutical manufacturers repurposing inventory purchased for the COVID-19 vaccine production toward production of non-COVID-19 therapies. This decline was partially offset by pricing initiatives, along with continued strength in industrial pumps, thermal connectors, plastics and polymer processing solutions and bearings and compression components businesses, which saw revenue growth driven by solid end market demand and strong backlogs. Underlying demand remains positive in our core biopharmaceutical platform and we anticipate sales of biopharma products to begin to increase in the second half of the year as customers deplete significant inventories built up in prior years.

Pumps & Process Solutions segment earnings decreased $31.4 million, or 21.4%, over the prior year comparable quarter. The decrease was primarily driven by the impact of reduced revenues relating to biopharmaceutical components along with foreign currency translation headwinds. This was partially offset by pricing initiatives, conversion on increased revenues in industrial pumps, plastics and polymer processing solutions and bearings and compression components, productivity actions and restructuring benefits. Segment margin decreased to 27.8% from 33.7% from the prior year comparable quarter mainly due to business mix within the segment.

Overall bookings increased 1.0% as compared to the prior year comparable quarter driven by acquisition-related growth of 4.8%, partially offset by an unfavorable impact from foreign currency translation of 2.6% and an organic decline of 1.2%. The organic bookings decline was driven by a decrease in orders for biopharmaceutical components, partially offset by continued strong order intake in our industrial pumps, thermal connectors, plastics and polymer processing solutions and bearings and compression components businesses. Segment book-to-bill was 1.12. Backlog increased 5.4% compared to the prior year comparable period.

Climate & Sustainability Technologies

Our Climate & Sustainability Technologies segment is a provider of innovative and energy-efficient equipment, components and parts for the commercial refrigeration, equipment and systems, heating and cooling and beverage can-making equipment markets.

						Three Months Ended March 31,
(dollars in thousands)						2023						2022						% Change
Revenue						$	455,325					$	399,078					14.1		%
Segment earnings						$	73,778					$	53,609					37.6		%
Segment margin						16.2 %						13.4 %
Operational metrics:
Bookings						$	300,014					$	444,852					(32.6)		%
Backlog						$	899,379					$	1,218,155					(26.2)		%
Components of revenue growth:
Organic growth																		16.2		%
Foreign currency translation																		(2.1)		%
Total revenue growth																		14.1		%

First Quarter 2023 Compared to the First Quarter 2022

Climate & Sustainability Technologies segment revenue increased $56.2 million, or 14.1%, as compared to the first quarter of 2022, reflecting organic revenue growth of 16.2%, and partially offset by an unfavorable impact from foreign currency translation of 2.1%. Customer pricing favorably impacted revenue in the first quarter of 2023 by approximately 5.9% compared to 9.2% in the prior year comparable quarter, reflecting actions to recover higher costs.

The organic revenue growth was driven by strong demand across many of our key end markets combined with pricing actions implemented to recover increased material and logistics costs. Our heat exchanger business continues to experience strong growth as regulation-driven efforts to shift from fossil fuel to electric energy in Europe drive robust demand for heat pump applications, as well as strong global commercial HVAC and industrial markets. Beverage can-making business revenues experienced solid growth, driven by strong backlog levels and secular trends in the global beverage industry as producers shift from plastic and glass packaging to aluminum cans for environmental sustainability and merchandising benefits offered by modern aluminum cans. Retail refrigeration revenue also increased from the prior year, driven by customer pricing actions, healthy remodel activity with large supermarket chains, and growing demand for natural refrigerant systems. We anticipate organic revenue growth to continue at modest levels in the second quarter driven by continued strong heat exchanger demand partially offset by the near term impact of order de-bookings related to a major retail refrigeration customer’s strategic decision to temporarily pause its new store expansion program and timing of projects in our beverage can-making business.

Climate & Sustainability Technologies segment earnings increased $20.2 million, or 37.6%, as compared to the first quarter of 2022. Segment margin increased to 16.2% from 13.4% in the prior year comparable quarter. The segment earnings increase was driven by customer pricing actions, increased volumes and benefits from productivity initiatives, partially offset by higher material and labor costs.

Bookings in the first quarter of 2023 decreased 32.6% from the prior year comparable quarter, reflecting organic decline of 30.6% and an unfavorable impact from foreign currency translation of 2.0%. The organic bookings decline was principally driven by improving lead times, timing of large beverage equipment projects, and $90.0 million in order de-bookings discussed above. Segment book-to-bill for the first quarter of 2023 was 0.66. Backlog decreased 26.2% over the prior year comparable period, but remains at healthy and elevated levels reflecting constructive demand across several key end markets within the segment.

Reconciliation of Segment Earnings to Net Earnings

			Three Months Ended March 31,
(dollars in thousands)			2023						2022
Net earnings:
Segment earnings:
Engineered Products			$	84,275					$	71,130
Clean Energy & Fueling			73,605						72,962
Imaging & Identification			68,315						58,598
Pumps & Process Solutions			115,244						146,617
Climate & Sustainability Technologies			73,778						53,609
Total segment earnings			415,217						402,916
Purchase accounting expenses (1)			42,679						53,286
Restructuring and other costs (2)			14,053						10,552
Loss on dispositions (3)			—						194
Corporate expense / other (4)			40,072						37,404
Interest expense			34,214						26,552
Interest income			(2,091)						(775)
Earnings before provision for income taxes			286,290						275,703
Provision for income taxes			57,716						49,550
Net earnings			$	228,574					$	226,153

(1) Purchase accounting expenses are primarily comprised of amortization of intangible assets and charges related to fair value step-ups for acquired inventory sold during the period.

(2) Restructuring and other costs relate to actions taken for employee reductions, facility consolidations and site closures, product line exits, and other asset charges.

(3) Loss on dispositions includes working capital adjustments related to dispositions.

(4) Certain expenses are maintained at the corporate level and not allocated to the segments. These expenses include executive and functional compensation costs, non-service pension costs, non-operating insurance expenses, shared business services and digital overhead costs, deal-related expenses and various administrative expenses relating to the corporate headquarters.

Restructuring and Other Costs (Benefits)

Restructuring and other costs (benefits) are not presented in our segment earnings because these costs are excluded from the segment operating performance measure reviewed by management. During the three months ended March 31, 2023 restructuring and other activities include restructuring charges of $12.5 million and other costs (benefits) of $1.6 million. Restructuring expenses for the three months ended March 31, 2023 were primarily related to headcount reductions and exit costs in the Clean Energy & Fueling segment. These programs were initiated in 2022 and 2023 and were undertaken in light of current market conditions. Other costs (benefits), net for the three months ended March 31, 2023 was comprised primarily of $1.1 million for product line rationalization in the Clean Energy & Fueling segment. These restructuring and other charges were recorded in cost of goods and services and selling, general and administrative expenses in the condensed consolidated statement of earnings. Additional programs beyond the scope of the announced programs may be implemented during 2023 with related restructuring charges.

We recorded the following restructuring and other costs (benefits) for the three months ended March 31, 2023:

			Three Months Ended March 31, 2023
(dollars in thousands)			Engineered Products						Clean Energy & Fueling						Imaging & Identification						Pumps & Process Solutions						Climate & Sustainability Technologies						Corporate						Total
Restructuring			$	539					$	10,144					$	339					$	1,326					$	242					$	(114)					$	12,476
Other costs (benefits), net			25						1,068						353						(47)						172						6						1,577
Restructuring and other costs (benefits)			$	564					$	11,212					$	692					$	1,279					$	414					$	(108)					$	14,053

During the three months ended March 31, 2022, restructuring and other activities included restructuring charges of $8.2 million and other costs (benefits), 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 restructuring and other 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 restructuring and other costs (benefits) 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			$	457					$	196					$	1,191					$	685					$	5,716					$	(88)					$	8,157
Other costs (benefits), net			52						(6)						186						1						2,117						45						2,395
Restructuring and other costs (benefits)			$	509					$	190					$	1,377					$	686					$	7,833					$	(43)					$	10,552

Purchase Accounting Expenses

Purchase accounting expenses primarily relate to amortization of acquired assets and charges related to fair value step-ups for acquired inventory sold during the period. These expenses are not presented in our segment earnings because they are excluded from the segment operating performance measure reviewed by management. These expenses reconcile to segment earnings as follows:

			Three Months Ended March 31,
(dollars in thousands)			2023						2022
Purchase accounting expenses
Engineered Products			$	5,804					$	4,815
Clean Energy & Fueling 1			19,567						31,330
Imaging & Identification			5,606						5,692
Pumps & Process Solutions			6,877						6,591
Climate & Sustainability Technologies			4,825						4,858
Total			$	42,679					$	53,286
1 Purchase accounting expenses in our Clean Energy and Fueling segment decreased by $11,763 for the three months ended March 31, 2023 from the prior year comparable period, which included $12,097 of charges related to fair value step-ups for inventory from the acquisition of RegO and Acme Cryogenics in Q4 2021.

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, repurchase 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 from Operations (in thousands)			2023						2022
Net cash flows provided by (used in):
Operating activities			$	241,284					$	23,683
Investing activities			(43,556)						(46,963)
Financing activities			(306,565)						(75,204)

Operating Activities

Cash flow from operating activities for the three months ended March 31, 2023 increased compared to March 31, 2022. This increase was primarily driven by improvements in the cash flows related to working capital.

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 liquidity by showing changes caused by operational results. The following table provides a calculation of adjusted working capital:

Adjusted Working Capital (in thousands)						March 31, 2023						December 31, 2022
Accounts receivable						$	1,460,970					$	1,516,871
Inventories						1,405,416						1,366,608
Less: Accounts payable						1,039,162						1,068,144
Adjusted working capital						$	1,827,224					$	1,815,335

Adjusted working capital increased by $11.9 million, or 0.7%, in the quarter ended March 31, 2023, which reflected an increase of $38.8 million in inventory and a decrease in accounts payable of $29.0 million, partially offset by a decrease of $55.9 million in accounts receivable. Inventories increased to support business growth and seasonality trends. The change in accounts payable and accounts receivable reflect the timing of payments and collections.

Investing Activities

Cash flow from investing activities is generally derived from cash outflows for capital expenditures and acquisitions, offset by proceeds from sales of business, property, plant and equipment. During the three months ended March 31, 2023, the majority of the activity in investing activities was comprised of capital spending. Our capital expenditures decreased $2.0 million during the three months ended March 31, 2023 compared to the three months ended March 31, 2022. We estimate capital expenditures in 2023 to range from $185.0 million to $195.0 million.

We anticipate that capital expenditures and any acquisitions we make through the remainder of 2023 will be funded from available cash and internally generated funds and, if necessary, through the issuance of commercial paper, borrowings from revolving credit facilities or by accessing the public debt or equity markets.

Financing Activities

Our cash flow from financing activities generally relates to the use of cash for repurchases of our common stock and payment of dividends, offset by borrowing activity. The majority of financing activity was attributed to the following:

*•*Commercial paper and other short-term borrowings, net: During the three months ended March 31, 2023, we used $221.2 million to pay off commercial paper borrowings. During the three months ended March 31, 2022, we received net proceeds of $7.8 million from commercial paper borrowings.

• Dividend payments: Total dividend payments to common shareholders were $70.8 million during the three months ended March 31, 2023, as compared to $72.2 million during the same period in 2022. Our dividends paid per common share increased 1.0% to $0.505 during the three months ended March 31, 2023 compared to $0.50 during the same period in 2022. The number of common shares outstanding decreased in the comparative periods due to share repurchase activity throughout 2022.

*•*Payments to settle employee tax obligations: Payments to settle tax obligations from the exercise of share-based awards increased $2.9 million compared to the prior year period, primarily due to an increase 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 liquidity because it provides management and investors a measurement of cash generated from operations that may be 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)			2023						2022
Cash flow provided by operating activities			$	241,284					$	23,683
Less: Capital expenditures			(48,375)						(50,381)
Free cash flow			$	192,909					$	(26,698)
Cash flow from operating activities as a percentage of revenue			11.6		%				1.2		%
Cash flow from operating activities as a percentage of net earnings			105.6		%				10.5		%
Free cash flow as a percentage of revenue			9.3		%				(1.3)		%
Free cash flow as a percentage of net earnings			84.4		%				(11.8)		%

For the three months ended March 31, 2023, we generated free cash flow of $192.9 million, representing 9.3% of revenue and 84.4% of net earnings. Free cash flow for the three months ended March 31, 2023 increased $219.6 million, compared to March 31, 2022, due to higher operating cash flow, primarily as a result of improvements in working capital 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, 2023, we maintained a $1.0 billion five-year unsecured revolving credit facility (the "Credit Agreement") with a syndicate of banks which expires on October 4, 2024. The Company uses the Credit Agreement principally as liquidity back-up for our commercial paper program and for general corporate purposes.

At the Company's election, loans under the Credit Agreement will bear interest at a base rate plus an applicable margin. The Credit Agreement requires the Company to pay a facility fee and imposes various restrictions on the Company such as, among other things, a requirement 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 all covenants in the Credit Agreement and our other long-term debt covenants at March 31, 2023 and had an interest coverage ratio of 14.6 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.

On April 6, 2023, the Company entered into a new $1 billion five-year unsecured revolving credit facility, which has substantially similar terms to the existing Credit Agreement, and a $500 million 364-day unsecured revolving credit facility. The new five-year credit facility replaced the existing Credit Agreement. See Note 18 — Subsequent Events in the condensed consolidated financial statements in Item 1 of this Form 10-Q for additional details.

We also have a current shelf registration statement filed with the SEC 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, 2023, our cash and cash equivalents totaled $272.4 million, of which approximately $246.8 million was held outside the United States. At December 31, 2022, our cash and cash equivalents totaled $380.9 million, of which approximately $261.4 million was held outside the United States. Cash and cash equivalents are held primarily in bank deposits with highly rated banks. We regularly hold cash in excess of near-term requirements in bank deposits or invest the funds in government money market instruments or short-term investments, 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, 2023						December 31, 2022
Commercial paper						$	513,900					$	734,936
Other						667						836
Total short-term borrowings						$	514,567					$	735,772
Long-term debt						2,961,362						2,942,513
Total debt						3,475,929						3,678,285
Less: Cash and cash equivalents						(272,426)						(380,868)
Net debt						3,203,503						3,297,417
Add: Stockholders' equity						4,460,561						4,286,366
Net capitalization						$	7,664,064					$	7,583,783
Net debt to net capitalization						41.8		%				43.5		%

Our net debt to net capitalization ratio decreased to 41.8% at March 31, 2023 compared to 43.5% at December 31, 2022. Net debt decreased $93.9 million during the period primarily due to a decrease in commercial paper borrowings, partially offset by lower cash and cash equivalents. Stockholders' equity increased for the period as a result of current earnings of $228.6 million and other comprehensive earnings of $17.1 million, primarily due to the favorable impact of foreign currency fluctuations, partially offset by $70.8 million of dividends paid.

Operating cash flow and access to capital markets are expected to satisfy our various cash flow requirements, including acquisitions, capital expenditures, purchase obligations, and lease obligations. Acquisition spending and/or share repurchases could potentially increase our debt.

We believe that existing sources of liquidity are adequate to meet anticipated funding needs at current risk-based interest rates for the foreseeable future.

Critical Accounting 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 17 — 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 17 — 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 Note 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, as amended. 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", "continue", "guidance", "estimates", "suggest", "will", "plan", "should", "would", "could", "forecast" 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, and assumptions, including those described in our Annual Report on Form 10-K for the year ended December 31, 2022. Factors that could cause actual results to differ materially from current expectations include, among other things: general economic conditions and conditions in the particular markets in which we operate; supply chain constraints and labor shortages that could result in production stoppages, inflation in material input costs and freight logistics; the impacts of COVID-19 or other future pandemics on the global economy and on our customers, suppliers, employees, business and cash flows; 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 restructurings, productivity initiatives and other cost reduction actions; the impact of legal compliance risks and litigation, including with respect to product quality and safety, cybersecurity and privacy; and 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, 2022. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

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. 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, and organic revenue growth are not financial measures under GAAP and should not be considered as a substitute for cash flows from operating activities, debt or equity, working capital or revenue as determined in accordance with GAAP, and they may not be comparable to similarly titled measures reported by other companies. 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 provides a meaningful measure of liquidity by showing changes caused by operational results. 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.

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