10-Q 1 dov-20220331.htm 10-Q dov-20220331
DOVER 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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 March 31, 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
dov-20220331_g1.jpg
(Exact name of registrant as specified in its charter)
Delaware53-0257888
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
  
3005 Highland Parkway 
Downers Grove, Illinois
60515
(Address of principal executive offices)(Zip Code)
(630) 541-1540
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockDOVNew York Stock Exchange
1.250% Notes due 2026DOV 26New York Stock Exchange
0.750% Notes due 2027DOV 27New York Stock Exchange
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    .
Large Accelerated Filer
Accelerated Filer
Emerging Growth Company
Non-Accelerated Filer
Smaller Reporting Company
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 April 14, 2022 was 144,163,424.



Dover Corporation
Form 10-Q
Table of Contents
Page
 
 
 
 
  
 




Item 1. Financial Statements

DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
 Three Months Ended March 31,
 20222021
Revenue$2,051,901 $1,867,901 
Cost of goods and services1,308,707 1,146,353 
Gross profit743,194 721,548 
Selling, general and administrative expenses443,843 408,998 
Operating earnings299,351 312,550 
Interest expense26,552 26,823 
Interest income(775)(680)
Other income, net(2,129)(2,843)
Earnings before provision for income taxes275,703 289,250 
Provision for income taxes49,550 56,481 
Net earnings$226,153 $232,769 
Net earnings per share:
Basic$1.57 $1.62 
Diluted$1.56 $1.61 
Weighted average shares outstanding:
Basic144,087 143,765 
Diluted145,329 144,938 
 

See Notes to Condensed Consolidated Financial Statements


1

DOVER CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In thousands)
(Unaudited)
 Three Months Ended March 31,
 20222021
Net earnings$226,153 $232,769 
Other comprehensive (loss) earnings, net of tax
Foreign currency translation adjustments:
Foreign currency translation losses(21,653)(12,971)
Reclassification of foreign currency translation losses to earnings5,915  
Total foreign currency translation adjustments (net of $(8,431) and $(10,492) tax provision, respectively)
(15,738)(12,971)
Pension and other post-retirement benefit plans:
Amortization of actuarial losses included in net periodic pension cost360 2,374 
Amortization of prior service costs included in net periodic pension cost221 208 
Total pension and other post-retirement benefit plans (net of $(208) and $(773) tax provision, respectively)
581 2,582 
Changes in fair value of cash flow hedges:
Unrealized net gains arising during period1,964 4,324 
Net gains reclassified into earnings(1,576)(1,411)
Total cash flow hedges (net of $(112) and $(871) tax provision, respectively)
388 2,913 
Other comprehensive (loss) earnings, net of tax(14,769)(7,476)
Comprehensive earnings$211,384 $225,293 


See Notes to Condensed Consolidated Financial Statements

2

DOVER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 March 31, 2022December 31, 2021
ASSETS
Current assets:  
Cash and cash equivalents$289,984 $385,504 
Receivables, net1,446,670 1,347,514 
Inventories, net1,322,347 1,191,095 
Prepaid and other current assets173,483 137,596 
Total current assets3,232,484 3,061,709 
Property, plant and equipment, net960,130 957,310 
Goodwill4,526,137 4,558,822 
Intangible assets, net1,311,688 1,359,522 
Other assets and deferred charges470,608 466,264 
Total assets$10,501,047 $10,403,627 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:  
Notes payable$113,480 $105,702 
Accounts payable1,136,553 1,073,568 
Accrued compensation and employee benefits203,416 302,978 
Deferred revenue245,274 227,549 
Accrued insurance101,157 101,448 
Other accrued expenses328,992 347,097 
Federal and other income taxes118,050 91,999 
Total current liabilities2,246,922 2,250,341 
Long-term debt2,981,922 3,018,714 
Deferred income taxes369,107 364,117 
Noncurrent income tax payable48,376 48,385 
Other liabilities524,944 532,542 
Stockholders' equity:  
Total stockholders' equity4,329,776 4,189,528 
Total liabilities and stockholders' equity$10,501,047 $10,403,627 


See Notes to Condensed Consolidated Financial Statements

















3


DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except per share data)
(Unaudited)
 Common stock $1 par valueAdditional paid-in capitalRetained earningsAccumulated other comprehensive lossTreasury stockTotal stockholders' equity
Balance at December 31, 2021$259,457 $857,636 $9,445,245 $(154,052)$(6,218,758)$4,189,528 
Net earnings— — 226,153 — — 226,153 
Dividends paid ($0.50 per share)
— — (72,203)— — (72,203)
Common stock issued for the exercise of share-based awards116 (10,162)— — — (10,046)
Stock-based compensation expense— 11,113 — — — 11,113 
Other comprehensive loss, net of tax— — — (14,769)— (14,769)
Balance at March 31, 2022$259,573 $858,587 $9,599,195 $(168,821)$(6,218,758)$4,329,776 

 Common stock $1 par valueAdditional paid-in capitalRetained earningsAccumulated other comprehensive lossTreasury stockTotal stockholders' equity
Balance at December 31, 2020$258,982 $868,882 $8,608,284 $(153,254)$(6,197,121)$3,385,773 
Net earnings— — 232,769 — — 232,769 
Dividends paid ($0.495 per share)
— — (71,344)— — (71,344)
Common stock issued for the exercise of share-based awards356 (30,809)— — — (30,453)
Stock-based compensation expense— 11,521 — — — 11,521 
Common stock acquired— — — — (21,637)(21,637)
Other comprehensive loss, net of tax— — — (7,476)— (7,476)
Other, net— (9)— — — (9)
Balance at March 31, 2021$259,338 $849,585 $8,769,709 $(160,730)$(6,218,758)$3,499,144 



See Notes to Condensed Consolidated Financial Statements





4

DOVER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months Ended March 31,
 20222021
Operating Activities:  
Net earnings$226,153 $232,769 
Adjustments to reconcile net earnings to cash from operating activities:
Depreciation and amortization79,003 73,806 
Stock-based compensation expense11,113 11,521 
Reclassification of foreign currency translation losses to earnings5,915  
Other, net(5,593)(9,031)
Cash effect of changes in assets and liabilities:
Accounts receivable, net(97,220)(116,320)
Inventories(136,722)(75,421)
Prepaid expenses and other assets(23,524)(22,005)
Accounts payable58,484 63,766 
Accrued compensation and employee benefits(98,602)(34,894)
Accrued expenses and other liabilities(1,463)22,945 
Accrued and deferred taxes, net6,139 30,048 
Net cash provided by operating activities23,683 177,184 
Investing Activities:  
Additions to property, plant and equipment(50,381)(31,260)
Proceeds from sale of property, plant and equipment3,177 5,845 
Other241 (4,157)
Net cash used in investing activities(46,963)(29,572)
Financing Activities:  
Repurchase of common stock
 (21,637)
Borrowings in commercial paper and notes payable, net7,778  
Dividends paid to stockholders(72,203)(71,344)
Payments to settle employee tax obligations on exercise of share-based awards(10,046)(30,453)
Other(733)(805)
Net cash used in financing activities(75,204)(124,239)
Effect of exchange rate changes on cash and cash equivalents2,964 64 
Net (decrease) increase in cash and cash equivalents(95,520)23,437 
Cash and cash equivalents at beginning of period385,504 513,075 
Cash and cash equivalents at end of period$289,984 $536,512 


See Notes to Condensed Consolidated Financial Statements
5

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)

1. Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim periods and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America ("GAAP") for complete financial statements. These unaudited interim Condensed Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes for Dover Corporation ("Dover" or the "Company") for the year ended December 31, 2021, included in the Company's Annual Report on Form 10-K filed with the SEC on February 11, 2022. The year-end Condensed Consolidated Balance Sheet was derived from audited financial statements. 

The accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. The Condensed Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair statement of results for these interim periods. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year.

2. Revenue

A majority of the Company’s revenue is short cycle in nature with shipments within one year from order. A small portion of the Company’s revenue derives from contracts extending over one year. The Company's payment terms generally range between 30 to 90 days and vary by the location of businesses, the type of products manufactured to be sold and the volume of products sold, among other factors.
Over 95% of the Company’s revenue is recognized at a point in time rather than over time as the Company completes its performance obligations. Specifically, revenue is recognized when control transfers to the customer, typically upon shipment or completion of installation, testing, certification, or other substantive acceptance provisions required under the contract. Less than 5% of the Company’s revenue is recognized over time and relates to the sale of equipment or services in which the Company transfers control of a good or service over time and the customer simultaneously receives and consumes the benefits provided by the Company's performance as the Company performs, or our performance creates or enhances an asset the customer controls as the asset is created or enhanced, or our performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for its performance to date plus a reasonable margin.

Revenue from contracts with customers is disaggregated by segment and geographic location, as they best depict the nature and amount of the Company’s revenue. See Note 16 — Segment Information for further details for revenue by segment and geographic location.
At March 31, 2022, we estimated that $303 million in revenue is expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. We expect to recognize approximately 80% of our unsatisfied (or partially unsatisfied) performance obligations as revenue through 2023, with the remaining balance to be recognized in 2024 and thereafter.

The following table provides information about contract assets and contract liabilities from contracts with customers:
 March 31, 2022December 31, 2021December 31, 2020
Contract assets$14,359 $11,440 $15,020 
Contract liabilities - current245,274 227,549 184,845 
Contract liabilities - non-current27,985 21,513 13,921 

The revenue recognized during the three months ended March 31, 2022 and 2021 that was included in contract liabilities at the beginning of the period, inclusive of adjustments, amounted to $104,008 and $104,617, respectively.

6

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
3. Acquisitions

2022 Acquisitions

There were no acquisitions during the three months ended March 31, 2022.

2021 Acquisitions

There were no acquisitions during the three months ended March 31, 2021.

RegO

On December 28, 2021, the Company acquired 100% of the voting stock of ECI Holding Company, LLC ("RegO"), a provider of highly-engineered components and services that facilitate the production, storage, and distribution of cryogenic gases, for $624,693, net of cash acquired and inclusive of the impact of measurement period adjustments discussed below. In connection with this acquisition, the Company recorded goodwill of $154,445 deductible for income tax purposes and $118,075 non-deductible for income tax purposes. The Company also recorded intangible assets of $173,000 for customer intangibles, $40,000 for patents, and $21,000 for trademarks. The fair value of customer intangibles at the acquisition date was determined using the multi-period excess earnings method under the income approach. The fair value measurements of intangible assets are based on significant unobservable inputs and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates and discount rates. The fair value of assets acquired also includes trade receivables of $34,283. The gross amount is $34,612, of which $329 is expected to be uncollectible. The fair values of the assets acquired and liabilities assumed, and the related tax balances, are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change during the measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed, and the related tax balances. During the three months ended March 31, 2022, the Company recorded measurement period adjustments primarily related to its preliminary estimates of deferred taxes and property, plant and equipment. These adjustments are based on facts and circumstances that existed as of the acquisition date which resulted in a decrease in goodwill of $4,456.

The following presents the updated preliminary allocation of purchase price, net of cash acquired of $10,382, to the assets acquired and liabilities assumed under the RegO acquisition, based on their estimated fair values at their acquisition dates:
Total
Accounts receivable$34,283 
Inventories77,775 
Other current assets2,958 
Property, plant and equipment52,873 
Goodwill272,520 
Intangible assets234,000 
Other assets and deferred charges884 
Current liabilities(20,152)
Non-current liabilities(30,448)
Net assets acquired$624,693 

The amounts assigned to goodwill and major intangible asset classifications were as follows:
Amount allocatedUseful life
(in years)
Goodwill - tax deductible$154,445 na
Goodwill - non-deductible118,075 na
Customer intangibles173,000 15
Patents40,000 12
Trademarks21,000 16
$506,520 
7

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)

Acme Cryogenics

On December 16, 2021, the Company acquired 100% of the voting stock of Acme Cryo Intermediate Inc. ("Acme Cryogenics"), a provider of highly-engineered components and services that facilitate the production, storage, and distribution of cryogenic gases, for $292,285, net of cash acquired and inclusive of the impact of measurement period adjustments discussed below. In connection with this acquisition, the Company recorded goodwill of $167,269 non-deductible for income tax purposes. The Company also recorded intangible assets of $99,000 for customer intangibles, $21,800 for unpatented technology and $6,500 for trademarks. The fair value of customer intangibles at the acquisition date was determined using the multi-period excess earnings method under the income approach. The fair value measurements of intangible assets are based on significant unobservable inputs and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates and discount rates. The fair value of assets acquired also includes trade receivables of $14,677. The gross amount is $14,912, of which $235 is expected to be uncollectible. The fair values of the assets acquired and liabilities assumed, and the related tax balances, are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change during the measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed, and the related tax balances. During the three months ended March 31, 2022, the Company recorded measurement period adjustments primarily related to changes in net working capital. These adjustments are based on facts and circumstances that existed as of the acquisition date which resulted in a decrease in goodwill of $1,940.

The following presents the updated preliminary allocation of purchase price to the assets acquired and liabilities assumed under the Acme Cryogenics acquisition, based on their estimated fair values at acquisition date:
Total
Current assets, net of cash acquired$30,184 
Property, plant and equipment8,640 
Goodwill167,269 
Intangible assets127,300 
Other assets and deferred charges5,057 
Current liabilities(9,085)
Non-current liabilities(37,080)
Net assets acquired$292,285 

The amounts assigned to goodwill and major intangible asset classifications were as follows:
Amount allocatedUseful life
(in years)
Goodwill - non-deductible$167,269 na
Customer intangibles99,000 15
Unpatented technologies21,800 12
Trademarks6,500 16
$294,569 


4. Inventories, net
 March 31, 2022December 31, 2021
Raw materials$750,559 $671,195 
Work in progress291,601 271,659 
Finished goods413,721 377,800 
Subtotal1,455,881 1,320,654 
Less reserves(133,534)(129,559)
Total$1,322,347 $1,191,095 

8

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
5. Property, Plant and Equipment, net
 March 31, 2022December 31, 2021
Land$64,746 $63,656 
Buildings and improvements586,083 582,314 
Machinery, equipment and other1,829,690 1,816,473 
Property, plant and equipment, gross2,480,519 2,462,443 
Accumulated depreciation(1,520,389)(1,505,133)
Property, plant and equipment, net$960,130 $957,310 

Depreciation expense totaled $37,812 and $38,194 for the three months ended March 31, 2022 and 2021, respectively.

6. Credit Losses

The Company is exposed to credit losses primarily through sales of products and services. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on the aging of the accounts receivable balances and other historical and forward-looking information on the financial condition of customers. Balances are written off when determined to be uncollectible.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.
20222021
Beginning Balance, December 31 of the Prior Year$40,126 $40,474 
Provision for expected credit losses, net of recoveries1,185 112 
Amounts written off charged against the allowance(603)(973)
Other, including foreign currency translation(387)28 
Ending balance, March 31$40,321 $39,641 

7. Goodwill and Other Intangible Assets

The changes in the carrying value of goodwill by reportable operating segments were as follows:
 Engineered ProductsClean Energy & FuelingImaging & IdentificationPumps & Process SolutionsClimate & Sustainability TechnologiesTotal
Balance at December 31, 2021$723,283 $1,427,691 $1,106,202 $792,839 $508,807 $4,558,822 
Measurement period adjustments (6,233)   (6,233)
Foreign currency translation(3,821)(6,243)(11,741)(4,141)(506)(26,452)
Balance at March 31, 2022$719,462 $1,415,215 $1,094,461 $788,698 $508,301 $4,526,137 

During the three months ended March 31, 2022, the Company recorded measurement period adjustments that reduced goodwill by $6,233, principally related to deferred taxes, working capital adjustments, and property, plant and equipment for 2021 acquisitions within the Clean Energy & Fueling segment.

9

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The Company’s definite-lived and indefinite-lived intangible assets by major asset class were as follows:
March 31, 2022December 31, 2021
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying Amount
Amortized intangible assets:
Customer intangibles$1,817,332 $930,841 $886,491 $1,829,492 $909,776 $919,716 
Trademarks261,857 121,672 140,185 263,367 116,633 146,734 
Patents205,312 140,374 64,938 205,910 140,327 65,583 
Unpatented technologies219,562 126,163 93,399 221,239 123,464 97,775 
Distributor relationships82,745 55,706 27,039 84,204 55,260 28,944 
Drawings and manuals26,816 26,816  27,792 27,303 489 
Other21,316 18,355 2,961 22,347 18,775 3,572 
Total2,634,940 1,419,927 1,215,013 2,654,351 1,391,538 1,262,813 
Unamortized intangible assets:
Trademarks96,675 — 96,675 96,709 — 96,709 
Total intangible assets, net$2,731,615 $1,419,927 $1,311,688 $2,751,060 $1,391,538 $1,359,522 

For the three months ended March 31, 2022 and 2021, amortization expense was $41,191 and $35,612, respectively, including acquisition-related intangible amortization of $40,799 and $35,173, respectively.

8. Restructuring Activities

The Company's restructuring charges by segment were as follows:
 Three Months Ended March 31,
 20222021
Engineered Products$457 $3,991 
Clean Energy & Fueling196 49 
Imaging & Identification1,191 690 
Pumps & Process Solutions685 (17)
Climate & Sustainability Technologies5,716 1,061 
Corporate(88)661 
Total$8,157 $6,435 
These amounts are classified in the Condensed Consolidated Statements of Earnings as follows:
Cost of goods and services$207 $3,907 
Selling, general and administrative expenses7,950 2,528 
Total$8,157 $6,435 

The restructuring expenses of $8,157 incurred during the three months ended March 31, 2022 were primarily the result of restructuring programs initiated in 2021 in response to demand conditions and broad-based operational efficiency initiatives focusing on footprint consolidation and IT centralization.

The $8,157 of restructuring charges incurred during the first quarter of 2022 primarily included the following items:
The Engineered Products segment recorded $457 of restructuring charges related primarily to headcount reduction.

The Clean Energy & Fueling segment recorded $196 of restructuring charges primarily due to headcount reductions.

The Imaging & Identification segment recorded $1,191 of restructuring charges related primarily to exit costs and asset charges.

10

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
The Pumps & Process Solutions segment recorded $685 of restructuring charges related primarily to headcount reductions and asset charges.

The Climate & Sustainability Technologies segment recorded $5,716 of restructuring charges related primarily to non-cash foreign currency translation losses due to the substantial liquidation of businesses in certain Latin America countries.

The Company’s severance and exit accrual activities were as follows:
 SeveranceExitTotal
Balance at December 31, 2021$10,730 $3,067 $13,797 
Restructuring charges778 7,379 
(1)
8,157 
Payments(3,132)(795)(3,927)
Other, including foreign currency translation(114)(6,703)
(1)
(6,817)
Balance at March 31, 2022$8,262 $2,948 $11,210 
(1) Other activity includes non-cash foreign currency translation losses recorded as restructuring charges due to the substantial liquidation of businesses in certain Latin America countries.

9. Borrowings

Borrowings consisted of the following:

 March 31, 2022December 31, 2021
Short-term:
Short-term borrowings$680 $702 
Commercial paper112,800 105,000 
Notes payable$113,480 $105,702 
 
Carrying amount (1)
PrincipalMarch 31, 2022December 31, 2021
Long-term
3.15% 10-year notes due November 15, 2025
$400,000 $397,558 $397,389 
1.25% 10-year notes due November 9, 2026 (euro-denominated)
600,000 653,913 674,217 
0.750% 8-year notes due November 4, 2027 (euro denominated)
500,000 544,357 561,293 
6.65% 30-year debentures due June 1, 2028
$200,000 199,381 199,356 
2.950% 10-year notes due November 4, 2029
$300,000 297,123 297,029 
5.375% 30-year debentures due October 15, 2035
$300,000 296,621 296,559 
6.60% 30-year notes due March 15, 2038
$250,000 248,194 248,166 
5.375% 30-year notes due March 1, 2041
$350,000 344,775 344,705 
Total long-term debt$2,981,922 $3,018,714 
(1) Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discounts were
$14.4 million and $15.1 million as of March 31, 2022 and December 31, 2021, respectively. Total deferred debt issuance costs were $12.1 million and $12.5 million as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022, the Company 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 its 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 a minimum interest coverage ratio of consolidated EBITDA to consolidated net interest expense of not less than 3.0 to 1. As of March 31, 2022 and December 31, 2021, there were no borrowings under the Credit Agreement.

The Company was in compliance with all covenants in the Credit Agreement and other long-term debt covenants at March 31, 2022 and had an interest coverage ratio of consolidated EBITDA to consolidated net interest expense of 17.7 to 1.



11

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
Letters of Credit and other Guarantees

As of March 31, 2022, the Company had approximately $149.7 million outstanding in letters of credit, surety bonds, and performance and other guarantees which expire on various dates through 2029. These letters of credit and bonds are primarily issued as security for insurance, warranty and other performance obligations. In general, we would only be liable for the amount of these guarantees in the event of default in the performance of our obligations.

10. Financial Instruments

Derivatives

The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations and certain commodity risks. In order to manage these risks, the Company has hedged portions of its forecasted sales and purchases to occur within the next twelve months that are denominated in non-functional currencies, with currency forward contracts designated as cash flow hedges. At March 31, 2022 and December 31, 2021, the Company had contracts with total notional amounts of $169,157 and $180,929, respectively, to exchange currencies, principally euro, pound sterling, Swedish krona, Canadian dollar, Chinese yuan, and Swiss franc. The Company believes it is probable that all forecasted cash flow transactions will occur.

In addition, the Company had outstanding contracts with a total notional amount of $97,921 and $108,736 as of March 31, 2022 and December 31, 2021, respectively, that are not designated as hedging instruments. These instruments are used to reduce the Company's exposure for operating receivables and payables that are denominated in non-functional currencies. Gains and losses on these contracts are recorded in other income, net in the Condensed Consolidated Statements of Earnings.

The following table sets forth the fair values of derivative instruments held by the Company as of March 31, 2022 and December 31, 2021 and the balance sheet lines in which they are recorded:
Fair Value Asset (Liability)
March 31, 2022December 31, 2021Balance Sheet Caption
Foreign currency forward$3,822 $2,825 Prepaid and other current assets
Foreign currency forward(229)(433)Other accrued expenses

For a cash flow hedge, the change in estimated fair value of a hedging instrument is recorded in accumulated other comprehensive (loss) earnings as a separate component of the Condensed Consolidated Statements of Stockholders' Equity and is reclassified into revenues and cost of goods and services in the Condensed Consolidated Statements of Earnings during the period in which the hedged transaction is settled. The amount of gains or losses from hedging activity recorded in earnings is not significant, and the amount of unrealized gains and losses from cash flow hedges that are expected to be reclassified to earnings in the next twelve months is not significant; therefore, additional tabular disclosures are not presented. There are no amounts excluded from the assessment of hedge effectiveness, and the Company's derivative instruments that are subject to credit risk contingent features were not significant.

The Company is exposed to credit loss in the event of nonperformance by counterparties to the financial instrument contracts held by the Company; however, nonperformance by these counterparties is considered unlikely as the Company’s policy is to contract with highly-rated, diversified counterparties.

The Company has designated the €500,000 and €600,000 of euro-denominated notes issued November 4, 2019 and November 9, 2016, respectively, as hedges of a portion of its net investment in euro-denominated operations. Changes in the value of the euro-denominated debt are recognized in foreign currency translation adjustments within other comprehensive earnings of the Condensed Consolidated Statements of Comprehensive Earnings to offset changes in the value of the net investment in euro-denominated operations.

12

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
Amounts recognized in other comprehensive earnings for the gains (losses) on net investment hedges were as follows:
Three Months Ended March 31,
20222021
Gain on euro-denominated debt$37,748 $46,433 
Tax expense(8,431)(10,492)
Net gain on net investment hedges, net of tax$29,317 $35,941 

Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021:
March 31, 2022December 31, 2021
Level 2Level 2
Assets:
Foreign currency cash flow hedges$3,822 $2,825 
Liabilities:
Foreign currency cash flow hedges229 433 

The estimated fair value of long-term debt at March 31, 2022 and December 31, 2021, was $3,167,903 and $3,440,501, respectively. The estimated fair value of long-term debt is based on quoted market prices for similar instruments and is, therefore, classified as Level 2 within the fair value hierarchy.

The carrying values of cash and cash equivalents, trade receivables, accounts payable and notes payable are reasonable estimates of their fair values as of March 31, 2022 and December 31, 2021 due to the short-term nature of these instruments.

11. 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 period was primarily driven by favorable audit resolutions.

Dover and its subsidiaries file tax returns in the U.S., including various state and local returns, and in other foreign jurisdictions. We believe adequate provision has been made for all income tax uncertainties. The Company is routinely audited by taxing authorities in its filing jurisdictions, and a number of these audits are currently underway. The Company believes that within the next twelve months uncertain tax positions may be resolved and statutes of limitations will expire, which could result in a decrease in the gross amount of unrecognized tax benefits of approximately zero to $30.6 million.

13

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
12. Equity Incentive Program

The Company typically makes its annual grants of equity awards pursuant to actions taken by the Compensation Committee of the Board of Directors at its regularly scheduled first quarter meeting. During the three months ended March 31, 2022, the Company issued stock-settled appreciation rights ("SARs") covering 327,940 shares, performance share awards of 40,087 and restricted stock units ("RSUs") of 71,961.

The Company uses the Black-Scholes option pricing model to determine the fair value of each SAR on the date of grant. Expected volatilities are based on Dover's stock price history, including implied volatilities from traded options on Dover stock. The Company uses historical data to estimate SAR exercise and employee termination patterns within the valuation model. The expected life of SARs granted is derived from the output of the option valuation model and represents the average period of time that SARs granted are expected to be outstanding. The interest rate for periods within the contractual life of the SARs is based on the U.S. Treasury yield curve in effect at the time of grant.

The assumptions used in determining the fair value of the SARs awarded during the respective periods were as follows:
SARs
 20222021
Risk-free interest rate1.86 %0.59 %
Dividend yield1.25 %1.62 %
Expected life (years)5.45.5
Volatility29.46 %30.49 %
Grant price
$160.21$122.73
Fair value per share at date of grant
$42.07$29.08

The performance share awards granted in 2022 and 2021 are market condition awards as attainment is based on Dover's performance relative to its peer group (companies listed under the S&P 500 Industrials sector) for the relevant performance period. The performance period and vesting period for these awards is three years. These awards were valued on the date of grant using the Monte Carlo simulation model (a binomial lattice-based valuation model) and are generally recognized ratably over the vesting period, and the fair value is not subject to change based on future market conditions. The assumptions used in determining the fair value of the performance shares granted in the respective periods were as follows:
Performance Shares
20222021
Risk-free interest rate1.68 %0.19 %
Dividend yield1.25 %1.62 %
Expected life (years)2.92.9
Volatility31.10 %31.90 %
Grant price$160.21$122.73
Fair value per share at date of grant$196.40$148.29

The Company also has granted RSUs, and the fair value of these awards was determined using Dover's closing stock price on the date of grant.

14

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)

Stock-based compensation is reported within selling, general and administrative expenses in the Condensed Consolidated Statements of Earnings. The following table summarizes the Company’s compensation expense relating to all stock-based incentive plans:
 Three Months Ended March 31,
 20222021
Pre-tax stock-based compensation expense$11,113 $11,521 
Tax benefit(1,115)(1,222)
Total stock-based compensation expense, net of tax$9,998 $10,299 

13. Commitments and Contingent Liabilities

Litigation

Certain of the Company’s subsidiaries are involved in legal proceedings relating to the cleanup of waste disposal sites identified under federal and state statutes that provide for the allocation of such costs among "potentially responsible parties." In each instance, the extent of the Company’s liability appears to be very small in relation to the total projected expenditures and the number of other "potentially responsible parties" involved and is anticipated to be immaterial to the Company. In addition, certain of the Company’s subsidiaries are involved in ongoing remedial activities at certain current and former plant sites, in cooperation with regulatory agencies, and appropriate estimated liabilities have been established. At March 31, 2022 and December 31, 2021, these estimated liabilities for environmental and other matters, including private party claims for exposure to hazardous substances that are probable and estimable, were not significant.

The Company and certain of its subsidiaries are also parties to a number of other legal proceedings incidental to their businesses. These proceedings primarily involve claims by private parties alleging injury arising out of use of the Company’s products, patent infringement, employment matters, and commercial disputes. Management and legal counsel, at least quarterly, review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and currently accrued to-date, and the availability and extent of insurance coverage. The Company has estimated liabilities for legal matters that are probable and estimable, and at March 31, 2022 and December 31, 2021, these estimated liabilities were not significant. While it is not possible at this time to predict the outcome of these legal actions, in the opinion of management, based on the aforementioned reviews, the Company is not currently involved in any legal proceedings which, individually or in the aggregate, could have a material effect on its financial position, results of operations, or cash flows.

Warranty Accruals

Estimated warranty program claims are provided for at the time of sale of the Company's products. Amounts provided for are based on historical costs and adjusted for new claims and are included within other accrued expenses and other liabilities in the Condensed Consolidated Balance Sheet. The changes in the carrying amount of product warranties through March 31, 2022 and 2021, were as follows:
 20222021
Beginning Balance, December 31 of the Prior Year$48,568 $51,088 
Provision for warranties16,052 18,897 
Settlements made(15,485)(17,760)
Other adjustments, including acquisitions and currency translation255 (839)
Ending balance, March 31$49,390 $51,386 

15

DOVER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated) (Unaudited)
14. Employee Benefit Plans

Retirement Plans

The Company sponsors qualified defined benefit pension plans covering certain employees of the Company and its subsidiaries, although the U.S. qualified and non-qualified defined benefit plans are closed to new entrants. The plans’ benefits are generally based on years of service and employee compensation. The Company also provides to certain management employees, through non-qualified plans, supplemental retirement benefits in excess of qualified plan limits imposed by federal tax law.

The tables below set forth the components of the Company’s net periodic (income) expense relating to retirement benefit plans. The service cost component is recognized within selling, general and administrative expenses and cost of goods and services, depending on the functional area of the underlying employees included in the plans, and the non-operating components of pension costs are included within other income, net in the Condensed Consolidated Statements of Earnings.

Qualified Defined Benefits
 Three Months Ended March 31,
 U.S. PlanNon-U.S. Plans
 2022202120222021
Service cost $1,426 $1,784