DOVER Corp: Form 10-Q for the period ended Jun 30, 2024

Refer to the section below entitled "Special Note 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, 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, fluid transfer connectors, highly engineered precision components, instruments and digital controls for rotating and reciprocating machines, polymer processing equipment, serving single-use biopharmaceutical production, diversified industrial manufacturing applications, chemical production, plastics and polymer processing, midstream and downstream oil and gas, clean energy markets, thermal management, food and beverage, semiconductor production and medical applications 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, heating and cooling and beverage can-making equipment end-markets.

In the second quarter of 2024, revenue was $2.2 billion, which increased $0.1 billion, or 3.7%, as compared to the second quarter of 2023. This was driven by organic revenue growth of 4.8% and acquisition-related revenue growth of 2.1%, partially offset by disposition-related decline of 2.6% and an unfavorable impact from foreign currency translation of 0.6%. Strong results were driven by excellent production performance and strong shipment rates on robust orders received.

The 4.8% organic revenue growth for the second quarter of 2024 was driven by our Engineered Products, Imaging & Identification and Clean Energy & Fueling segments which grew 20.2%, 6.9%, and 2.3%, respectively. The growth was partially offset by the Pumps & Process Solutions and Climate & Sustainability Technologies segments which declined 3.1% and 2.3%, respectively. For further information, see "Segment Results of Operations" within this Item 2.

From a geographic perspective, organic revenue for the U.S., our largest market, increased 11.4% in the second quarter of 2024 compared to the prior year comparable quarter driven by strong demand in our waste handling business and retail and refrigeration equipment and services. Organic revenue increased for Other Americas by 17.6%, and decreased for Asia and Europe by 8.5% and 3.8%, respectively.

Bookings were $2.2 billion for the three months ended June 30, 2024, an increase of $0.3 billion, or 15.0% compared to the prior year comparable quarter. Included in this result was organic growth of 16.1% and acquisition-related growth of 2.1%, partially offset by disposition-related decline of 2.7% and an unfavorable impact from foreign currency translation of 0.5%. The organic bookings growth was primarily driven by positive demand trends and order timing.

Restructuring and other costs for the three months ended June 30, 2024 were $11.6 million which included restructuring charges of $9.1 million and other costs of $2.5 million. Restructuring and other costs were generally related to exit costs and headcount reductions across all segments. For further discussion related to our restructuring and other costs, see "Restructuring and Other Costs (Benefits)," within this Item 2.

In July 2024, the Company completed two business acquisitions for approximately $436.0 million, subject to post-closing adjustments, plus potential contingent consideration of up to approximately $14.0 million. In addition, the Company entered into a definitive agreement to sell Environmental Solutions Group ("ESG"), for approximately $2.0 billion on a cash-free and debt-free basis, subject to customary post-closing adjustments. The transaction is expected to close before year-end 2024, subject to customary closing conditions, including receipt of regulatory approvals. See Note 20 — Subsequent Events in the condensed consolidated financial statements in Item 1 of this Form 10-Q for further details.

CONSOLIDATED RESULTS OF OPERATIONS

(dollars in thousands, except per share figures)

* nm - not meaningful

Revenue

Revenue for the three months ended June 30, 2024 increased $0.1 billion, or 3.7%, from the prior year comparable quarter. The increase in revenue was driven by organic revenue growth of 4.8% and acquisition-related growth of 2.1%, partially offset by disposition-related decline of 2.6% and an unfavorable impact from foreign currency translation of 0.6%. Customer pricing favorably impacted revenue by approximately 2.0% in the second quarter of 2024 and by 4.5% in the prior year comparable quarter.

Revenue for the six months ended June 30, 2024 increased $0.1 billion, or 2.2%, from the prior year comparable period. The increase primarily reflects an acquisition-related growth of 2.1% and organic revenue growth of 1.8%. This growth was partially offset by a disposition-related decline of 1.3% and an unfavorable impact from foreign currency translation of 0.4%. Customer pricing favorably impacted revenue by approximately 1.8% for the six months ended June 30, 2024, and by 4.8% in the prior year comparable period.

Gross Profit

Gross profit for the three months ended June 30, 2024 increased $62.7 million, or 8.3%, and gross profit margin increased 160 basis points to 37.7%, versus the prior year comparable quarter. Gross profit margin increased driven by volume leverage and mix, pricing and productivity actions.

Gross profit for the six months ended June 30, 2024 increased $73.0 million, or 4.8%, and gross profit margin increased by 100 basis points to 37.0%, from the prior year comparable period. Gross profit margin increased driven by pricing and productivity actions.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2024 increased $17.9 million, or 4.1%, from the prior year comparable quarter, primarily driven by increased employee compensation and benefits and acquisition-related amortization costs. As a percentage of revenue, selling, general and administrative expenses increased 10 basis points as compared to the prior year comparable quarter to 20.8%.

Selling, general and administrative expenses for the six months ended June 30, 2024 increased $48.6 million, or 5.6%, from the prior year comparable period, primarily driven by increased employee compensation and benefits and acquisition-related amortization costs, partially offset by lower restructuring costs. Selling, general and administrative expenses as a percentage of revenue increased 70 basis points as compared to the prior year comparable period to 21.4% driven by a higher rate of increase in selling, general and administrative expenses compared to revenue.

Research and development costs, including qualifying engineering costs, are expensed when incurred and amounted to $40.6 million and $39.3 million for the three months ended June 30, 2024 and 2023, respectively, and $80.6 million and $77.3 million, for the six months ended June 30, 2024 and 2023, respectively. The costs as a percentage of revenue are 1.9% for the three and six months ended June 30, 2024 and 2023.

Gain on Disposition

Gain on disposition of $529.3 million for the six months ended June 30, 2024 was due to the sale of the De-Sta-Co business on March 31, 2024 and includes net post-closing adjustments of $0.7 million recorded during the three months ended June 30, 2024. See Note 4 — Dispositions in the condensed consolidated financial statements in Item 1 of this Form 10-Q for further details.

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 and six months ended June 30, 2024 increased $6.2 million and increased $8.8 million, respectively, from the comparable prior period driven by various immaterial items.

Income Taxes

The effective tax rates for the three months ended June 30, 2024 and 2023 were 20.2% and 19.3%, respectively. The increase in the effective tax rate for the three months ended June 30, 2024 relative to the prior year comparable quarter was primarily driven by favorable audit resolutions in the prior year.

The effective tax rates for the six months ended June 30, 2024 and 2023 were 20.7% and 19.7%, respectively. The increase in the effective tax rate for the six months ended June 30, 2024 relative to the prior year comparable period was primarily driven by the gain on the sale of De-Sta-Co.

The Company is monitoring the changes in tax laws resulting from the Organization for Economic Cooperation and Development’s multi-jurisdictional plan of action to address base erosion and profit shifting. We do not expect this to have a material impact on our effective tax rate.

See Note 12 — Income Taxes in the condensed consolidated financial statements in Item 1 of this Form 10-Q for additional details.

Net earnings

Net earnings for the three months ended June 30, 2024 increased 16.3% to $281.8 million, or $2.04 diluted earnings per share, from $242.2 million, or $1.72 diluted earnings per share, in the prior year comparable quarter. The increase in net earnings is driven by increased revenue primarily driven by pricing initiatives and increased demand, partially offset by a higher provision for income taxes.

Net earnings for the six months ended June 30, 2024 increased 94.1% to $914.0 million, or $6.57 diluted earnings per share, from $470.8 million, or $3.35 diluted earnings per share, in the prior year comparable period. The increase in net earnings is driven by the after-tax gain on the sale of De-Sta-Co of $414.5 million.

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 16 — Segment Information in the condensed consolidated financial statements in Item 1 of this Form 10-Q.

We report organic revenue growth, which excludes the impact of foreign currency exchange rates and the impact of acquisitions and divestitures. 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 and exclude de-bookings related to orders received in prior periods, if any. This metric is an important measure of performance and an indicator of order trends.
• Organic bookings represent bookings 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.
• 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, aerospace and defense, industrial winch and hoist, and fluid dispensing end-markets.

(dollars in thousands)

Second Quarter 2024 Compared to the Second Quarter 2023

Engineered Products revenue for the second quarter of 2024 increased $41.2 million, or 8.7%, as compared to the second quarter of 2023, driven by organic growth of 20.2%, partially offset by a disposition-related decline of 11.3% and an unfavorable impact from foreign currency translation of 0.2%. The disposition-related decline was due to the divestiture of De-Sta-Co in the first quarter of 2024. Customer pricing favorably impacted revenue by approximately 2.1% in the second quarter of 2024 and in the prior year comparable quarter.

The organic revenue growth was primarily driven by continued robust demand in our waste handling business as national and regional waste haulers continue to upgrade their refuse collection vehicle fleets and implement our leading digital technologies to drive efficiencies in waste collection. We also saw increased revenue in our vehicle service business driven by increasing demand in Europe and improved production performance, along with continued solid demand trends in our aerospace and defense business. We expect positive organic growth trends to continue in the second half of 2024 on the back of robust customer demand in waste handling, growth in aerospace and defense, and improving demand conditions and production performance in our vehicle service business.

Engineered Products segment earnings increased $28.2 million, or 38.6%, compared to the second quarter of 2023. The increase was primarily driven by organic volume increases, favorable price versus cost dynamics, and productivity initiatives, partially offset by disposition impacts. As a result, segment margin increased to 19.7% from 15.4% as compared to the prior year comparable quarter.

Bookings increased 18.9% for the segment, driven by organic growth of 29.3%, partially offset by a disposition-related decline of 10.3% and an unfavorable impact from foreign currency translation of 0.1%. The organic bookings growth was broad-based, but most notable in our waste handling, vehicle service, and aerospace and defense businesses. Segment book-to-bill was 1.13.

Engineered Products revenue for the six months ended June 30, 2024 increased $86.7 million, or 8.9%, compared to the prior year comparable period. This was comprised of organic revenue growth of 14.6%, a disposition-related decline of 5.5% and an unfavorable impact from foreign currency translation of 0.2%. The organic revenue growth was driven by robust demand in our waste handling business, improved production performance and increased demand in our vehicle service business and solid demand trends in our aerospace and defense business. Customer pricing favorably impacted revenue by approximately 1.8% and by 3.0% in the prior year comparable period.

Segment earnings for the six months ended June 30, 2024 increased $47.9 million, or 30.4%, as compared to the 2023 comparable period. The increase was primarily driven by organic volume increases, favorable price versus cost dynamics, and productivity initiatives, partially offset by disposition impacts and an unfavorable impact from foreign currency translation. Segment margin increased to 19.4% from 16.2% as compared to the prior year comparable period.

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.

(dollars in thousands)

Second Quarter 2024 Compared to the Second Quarter 2023

Clean Energy & Fueling revenue for the second quarter of 2024 increased $21.8 million, or 5.0%, as compared to the second quarter of 2023, driven by acquisition-related growth of 3.0%, organic growth of 2.3% and an unfavorable foreign currency translation of 0.3%. Customer pricing favorably impacted revenue in the second quarter of 2024 by approximately 3.2% and by 4.8% in the prior year comparable quarter.

The organic revenue growth was primarily driven by pricing initiatives, clean energy solutions, and strong demand in North America and Latin America above ground retail fueling equipment, partially offset by volume headwinds in the fluid transfer solutions business. We expect continued organic growth in the second half of the year driven by strong demand in North America above ground retail fueling equipment and the clean energy solutions business.

Clean Energy & Fueling segment earnings increased $3.9 million, or 4.7%, over the prior year comparable quarter. The increase was primarily driven by strategic pricing and cost actions, partially offset by inflationary impacts. Segment margin remained flat compared to prior year comparable quarter.

Overall bookings increased 0.4% as compared to the prior year comparable quarter, driven by acquisition growth of 2.4%, partially offset by an organic decline of 1.6% and an unfavorable impact from foreign currency translation of 0.4%. The organic bookings decline was primarily due to order timing in above ground retail fueling equipment and fluid transfer solutions. Segment book-to-bill was 0.95.

Clean Energy & Fueling segment revenue increased $36.2 million, or 4.1%, as compared to the six months ended June 30, 2023, attributable to acquisition-related growth of 2.4% and organic growth of 1.9%, partially offset by an unfavorable impact from foreign currency translation of 0.2%. Organic revenue was higher in the first six months of the year compared with the prior year comparable period, driven by pricing actions and above ground retail fueling equipment, partially offset by lower volume in fluid transfer solutions and below ground retail fueling businesses. Customer pricing favorably impacted revenue by approximately 3.0% and by approximately 4.7% in the prior year comparable period.

Clean Energy & Fueling segment earnings remained flat, for the six months ended June 30, 2024. Pricing actions and productivity initiatives were offset by lower volume and inflationary costs. Segment margin decreased to 17.3% from 18.0% in the prior year comparable period, mainly due to revenue mix.

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.

(dollars in thousands)

Second Quarter 2024 Compared to the Second Quarter 2023

Imaging & Identification revenue for the second quarter of 2024 increased $15.7 million, or 5.8%, as compared to the second quarter of 2023, comprised of organic growth of 6.9% and acquisition-related growth of 0.7%, partially offset by an unfavorable impact from foreign currency translation of 1.8%. Customer pricing favorably impacted revenue in the second quarter of 2024 by approximately 2.8% and by approximately 6.0% in the prior year comparable quarter.

The organic revenue growth was primarily driven by pricing actions, serialization software, and strong consumables and aftermarket sales. We expect continued favorable organic growth in the second half of the year driven by pricing and increased demand for marking and coding equipment, particularly in the United States and Latin America.

Imaging & Identification segment earnings increased $14.5 million, or 23.6%, over the prior year comparable quarter. This increase was primarily driven by pricing initiatives, higher volume and cost controls, partially offset by an unfavorable impact from foreign currency translation. Segment margin increased to 26.4% from 22.6% in the prior year comparable quarter.

Overall bookings increased 10.1% as compared to the prior year comparable quarter, reflecting organic growth of 11.1% and acquisition-related growth of 1.0%, partially offset by an unfavorable impact from foreign currency translation of 2.0%. The organic bookings growth was primarily driven by order intake and timing in marking and coding and digital textile printing businesses. Segment book-to-bill was 1.00.

Imaging & Identification segment revenue increased $9.4 million, or 1.7%, as compared to the six months ended June 30, 2023, attributable to organic growth of 2.6% and acquisition-related growth of 0.5%, partially offset by an unfavorable impact from foreign currency translation of 1.4%. The organic revenue growth was primarily driven by pricing initiatives, partially offset by weaker demand in our digital textile printing business. Customer pricing favorably impacted revenue by approximately 3.2% and by approximately 6.4% in the prior year comparable period.

Imaging & Identification segment earnings increased $16.1 million, or 12.4%, for the six months ended June 30, 2024 over the prior year comparable period. The increase was primarily driven by pricing initiatives and cost controls, partially offset by the unfavorable impact of foreign currency translation. Segment margin increased to 25.8% from 23.4% in the prior year comparable period.

Pumps & Process Solutions

Our Pumps & Process Solutions segment manufactures specialty pumps and flow meters, fluid transfer connectors, highly engineered precision components, instruments and digital controls for rotating and reciprocating machines, polymer processing equipment, serving single-use biopharmaceutical production, diversified industrial manufacturing applications, chemical production, plastics and polymer processing, midstream and downstream oil and gas, clean energy markets, thermal management, food and beverage, semiconductor production and medical applications and other end-markets.

(dollars in thousands)

Second Quarter 2024 Compared to the Second Quarter 2023

Pumps & Process Solutions revenue for the second quarter of 2024 increased $11.6 million, or 2.5%, as compared to the second quarter of 2023, driven by acquisition-related growth of 6.0%, partially offset by organic decline of 3.1% and an unfavorable impact from foreign currency translation of 0.4%. Acquisition-related growth was driven by the acquisition of FW Murphy Production Controls business ("FW Murphy") in the fourth quarter of 2023. Customer pricing favorably impacted revenue in the second quarter of 2024 by approximately 1.8% and by approximately 5.1% in the prior year comparable quarter.

The organic revenue decline was primarily due to decreased revenue in our plastics and polymer processing solutions business, partially offset by increased revenue in our precision components business and increased demand for connectors used in bioprocessing and high performance computing and data center applications. We expect overall revenue to trend favorably in the second half of the year driven by the FW Murphy acquisition, positive demand trends in bioprocessing and recent specification wins for thermal connectors in liquid cooling for high performance computing and data center applications. We expect this to be partially offset by slower expected demand in our polymer processing equipment business.

Pumps & Process Solutions segment earnings increased $7.9 million, or 6.1%, over the prior year comparable quarter. The increase was driven by the favorable impact from the FW Murphy acquisition, along with the positive impact of pricing initiatives and productivity actions, partially offset by a negative impact from lower volume. Segment margin increased to 28.8% from 27.8% from the prior year comparable quarter driven by productivity initiatives and favorable portfolio mix.

Overall bookings increased 17.0% as compared to the prior year comparable quarter with organic growth of 10.5% and acquisition-related growth of 6.9%, partially offset by an unfavorable impact from foreign currency translation of 0.4%. The organic bookings growth was primarily driven by positive demand trends in connectors, supported by improving customer sentiment in bioprocessing along with recent specification wins in high performance computing applications. Segment book-to-bill was 0.97.

Pumps & Process Solutions segment revenue increased $63.5 million, or 7.2%, as compared to the six months ended June 30, 2023, attributable to acquisition-related growth of 6.7% for the acquisition of FW Murphy and organic growth of 0.5%. The organic growth was primarily driven by pricing initiatives, increased revenue in precision components and single-use components used in biopharmaceutical manufacturing, partially offset by our polymer processing equipment business. Customer pricing favorably impacted revenue by approximately 1.6% and by approximately 5.0% in the prior year comparable period.

Pumps & Process Solutions segment earnings increased $11.4 million, or 4.6%, for the six months ended June 30, 2024 over the prior year comparable period. The increase was driven by the favorable impact from the FW Murphy acquisition, pricing initiatives and productivity, partially offset by lower volume. Segment margin decreased to 27.1% from 27.8% from 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, heating and cooling and beverage can-making equipment end-markets.

(dollars in thousands)

Second Quarter 2024 Compared to the Second Quarter 2023

Climate & Sustainability Technologies revenue decreased $12.3 million, or 2.7%, as compared to the second quarter of 2023, reflecting organic revenue decline of 2.3% and an unfavorable impact from foreign currency translation of 0.8%, partially offset by acquisition-related growth of 0.4%. Customer pricing favorably impacted revenue in the second quarter of 2024 by approximately 0.3% and by approximately 5.3% in the prior year comparable quarter.

The organic revenue decline was primarily due to near-term, transient slowing in heat exchanger demand in Europe due to HVAC OEMs efforts to reduce component inventories, as well as continued headwinds in new beverage can-making equipment sales as customers pivot from new equipment investment to scaling production and expanding utilization of recent capacity additions. This was partially offset by increased demand for retail refrigeration equipment and services, including the growing demand for low-global warming potential ("GWP") CO2 refrigerant systems. We expect organic revenue declines to continue into the second half of the year as continued growth in demand for retail refrigeration equipment is more than offset by year-over-year reductions in sales of beverage can-making equipment and heat exchangers in Europe. Despite continued year-over-year headwinds, we do expect demand in heat exchangers to improve sequentially from the first half of 2024 to the second half of 2024.

Climate & Sustainability Technologies segment earnings increased $3.1 million, or 4.0%, as compared to the second quarter of 2023. The segment earnings increase was primarily driven by favorable retail refrigeration mix, productivity and cost actions, partially offset by the negative impact from lower volumes in heat exchangers and beverage can-making equipment, as well as the unfavorable impact from foreign currency translation. Segment margin increased to 18.1% from 16.9% in the prior year comparable quarter.

Bookings in the second quarter of 2024 increased 30.7% from the prior year comparable quarter, reflecting organic growth of 31.6% and acquisition-related growth of 0.1%, partially offset by an unfavorable impact from foreign currency translation of 1.0%. The organic bookings growth was principally driven by favorable demand trends across retail refrigeration, including continued strong demand for low-GWP CO2 refrigerant systems. This was partially offset by temporary reductions in heat exchanger demand in Europe. Segment book-to-bill was 0.93.

Climate & Sustainability Technologies segment revenue decreased $103.3 million, or 11.4%, compared to the six months ended June 30, 2023, reflecting an organic revenue decline of 11.4%, and an unfavorable foreign currency translation impact of 0.5%, partially offset by an acquisition-related growth of 0.5%. The organic revenue decline for the six months ended June 30, 2024 was due to near-term, transient slowing in heat exchanger demand in Europe due to HVAC OEMs efforts to reduce component inventories, as well as continued headwinds in new beverage can-making equipment sales as customers pivot from new equipment investment to scaling production and expanding utilization of recent capacity additions. This was partially offset by increased demand for retail refrigeration equipment and services, including the growing demand for low-GWP CO2 refrigerant systems. Customer pricing unfavorably impacted revenue by approximately 0.2% and favorably impacted revenue by 5.6% in the prior year comparable period.

Climate & Sustainability Technologies segment earnings decreased $20.0 million, or 13.3%, for the six months ended June 30, 2024, as compared to the prior year comparable period. Segment margin decreased to 16.2% from 16.6% in the prior year comparable period. The earnings decrease was due to lower volumes in heat exchangers and beverage can-making equipment, partially offset by increased retail refrigeration volumes, productivity initiatives and cost reduction actions.

Reconciliation of Segment Earnings to Net Earnings

(in thousands)

(1) Purchase accounting expenses are primarily comprised of amortization of acquired intangible assets.

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

(3) Loss (gain) on disposition due to the sale of De-Sta-Co in the Engineered Products segment.

(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 are not presented in our segment earnings because these costs are excluded from the segment operating performance measure reviewed by management. During the three and six months ended June 30, 2024, we incurred restructuring charges of $9.1 million and $27.8 million and other costs, net of $2.5 million and $8.5 million. Restructuring charges for the three months ended June 30, 2024 were primarily related to exit costs and headcount reductions across all segments. Restructuring charges for the six months ended June 30, 2024 were primarily related to product line exit costs and headcount reductions in the Climate & Sustainability Technologies, Clean Energy & Fueling and Pumps & Process Solutions segments. These restructuring programs were initiated in 2023 and 2024 and the Company will continue to make proactive adjustments to its cost structure to align with current demand trends. Other costs, net of $8.5 million for the six months ended June 30, 2024, were primarily due to a non-cash asset impairment charge 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. Additional programs beyond the scope of the announced programs may be implemented during 2024 with related restructuring charges.

We recorded the following restructuring and other costs for the three and six months ended June 30, 2024:

(in thousands)

34

(in thousands)

Restructuring and other costs for the three and six months ended June 30, 2023 included restructuring charges of $16.4 million and $28.9 million, respectively, and other costs, net of $1.7 million and $3.3 million, respectively. Restructuring charges for the three and six months ended June 30, 2023 were primarily related to headcount reductions and exit costs in the Clean Energy & Fueling, Engineered Products and Pumps & Process Solutions segments. These restructuring programs were initiated in 2022 and 2023 and were undertaken in light of current market conditions. Other costs, net of $2.0 million within the Clean Energy & Fueling segment for the six months ended June 30, 2023 were primarily due to product line rationalization. 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 for the three and six months ended June 30, 2023:

(in thousands)

(in thousands)

Purchase Accounting Expenses

Purchase accounting expenses primarily relate to amortization of acquired intangible assets. 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:

(in thousands)

35

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:

Operating Activities

Cash flow from operating activities for the six months ended June 30, 2024 decreased by $66.3 million compared to June 30, 2023, primarily due to tax payments related to the gain from the De-Sta-Co divestiture.

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 increased by $125.5 million, or 7.4%, in the six months ended June 30, 2024, which reflected an increase of $127.9 million in accounts receivable, net, an increase of $13.4 million in inventory, net and an increase in accounts payable of $15.8 million. These amounts include the effects of acquisitions, dispositions and foreign currency translation. The change in accounts receivable and payable reflect the timing of payments and collections. The increase in inventories is driven by production planning ahead of higher expected shipment volumes in the next several quarters.

Investing Activities

Cash flow from investing activities is derived from cash inflows from proceeds from disposition, partially offset by cash outflows for acquisitions and capital expenditures. The majority of the activity in investing activities was comprised of the following:

• Proceeds from disposition: During the six months ended June 30, 2024, we received net proceeds of $674.7 million from the sale of De-Sta-Co within the Engineered Products segment. There were no proceeds from disposition during the six months ended June 30, 2023.
• Acquisitions: During the six months ended June 30, 2024, we deployed approximately $144.9 million, net, to acquire Transchem Group and Bulloch Technologies, Inc. within the Clean Energy & Fueling segment and one other immaterial acquisition within the Imaging & Identification segment. In comparison, during the six months ended June 30, 2023, there were no acquisitions.
• Capital spending: Capital expenditures decreased $3.1 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, in line with our planned capital expenditures for the year.

We anticipate that capital expenditures and any additional acquisitions we make through the remainder of 2024 will be funded from available cash and internally generated funds and, if necessary, through the issuance of commercial paper, or by accessing the public debt or equity markets. We estimate capital expenditures in 2024 to range from $160.0 million to $170.0 million.

Financing Activities

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

• Repurchase of common stock, including prepayment under accelerated share repurchase program: During the six months ended June 30, 2024, we used $500 million to repurchase 2,569,839 shares on March 1, 2024, under an accelerated share repurchase transaction. During the six months ended June 30, 2023, we repurchased no shares. See Note 17 — Stockholders' Equity in the condensed consolidated financial statements in Item 1 of this Form 10-Q for further details.
• Commercial paper and other short-term borrowings, net: During the six months ended June 30, 2024, we used $257.8 million to pay off commercial paper borrowings, with net proceeds received from the sale of De-Sta-Co. During the six months ended June 30, 2023, we used $289.6 million to pay off commercial paper borrowings.
• Dividend payments: Total dividend payments to common shareholders were $141.6 million during the six months ended June 30, 2024, as compared to $141.5 million during the same period in 2023. Our dividends paid per common share increased 1.0% to $1.02 during the six months ended June 30, 2024 compared to $1.01 during the same period in 2023.

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:

For the six months ended June 30, 2024, we generated free cash flow of $284.9 million, representing 6.7% of revenue and 31.2% of net earnings. Free cash flow for the six months ended June 30, 2024, decreased $63.2 million, compared to June 30, 2023, primarily due to tax payments related to the gain from the De-Sta-Co divestiture. The decreases in cash flow from operating activities and free cash flow as percentages of net earnings are due primarily to the gain on sale of De-Sta-Co. The Company made tax payments of $56.0 million related to the De-Sta-Co gain during the six months ended June 30, 2024. The remainder of the tax payments on the De-Sta-Co gain will be paid in quarterly installments throughout 2024.

Capitalization

We use commercial paper borrowings for general corporate purposes, including the funding of acquisitions and the repurchase of our common stock. As of June 30, 2024, we maintained $1.0 billion five-year and $500.0 million 364-day unsecured revolving credit facilities (together, the "Credit Agreements") with a syndicate of banks which expire April 6, 2028 and April 3, 2025, respectively. The Credit Agreements are designated as a liquidity back-stop for the Company's commercial paper program and also are available for general corporate purposes.

At the Company's election, loans under the Credit Agreements will bear interest at a base rate plus an applicable margin. The Credit Agreements require the Company to pay facility fees and impose 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. The Company was in compliance with all covenants in the Credit Agreements and other long-term debt covenants at June 30, 2024 and had an interest coverage ratio of consolidated EBITDA to consolidated net interest expense of 20.1 to 1. We are not aware of any potential impairment to our liquidity and expect to remain in compliance with all of our debt covenants. Additionally, our earliest long-term debt maturity is in 2025.

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

At June 30, 2024, our cash and cash equivalents totaled $328.8 million, of which approximately $297.6 million was held outside the United States. At December 31, 2023, our cash and cash equivalents totaled $398.6 million, of which approximately $269.6 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.

On March 31, 2024, the Company completed the sale of the De-Sta-Co business for total consideration, net of cash transferred, of $674.7 million. Of the total consideration, $63.0 million was received upon finalization of closing activities in India and China, which occurred during the second quarter. See Note 4 — Dispositions in the condensed consolidated financial statements in Item 1 of this Form 10-Q for further details.

In July 2024, the Company completed two business acquisitions for approximately $436.0 million, subject to post-closing adjustments, plus potential contingent consideration of up to approximately $14.0 million. In addition, the Company entered into a definitive agreement to sell ESG for approximately $2.0 billion on a cash-free and debt-free basis, subject to customary post-closing adjustments. The transaction is expected to close before year-end 2024, subject to customary closing conditions, including receipt of regulatory approvals. See Note 20 — Subsequent Events in the condensed consolidated financial statements in Item 1 of this Form 10-Q for further details.

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, including cash held for sale. Net capitalization represents net debt plus stockholders' equity. The following table provides a calculation of net debt to net capitalization from the most directly comparable GAAP measures:

Our net debt to net capitalization ratio decreased to 34.6% at June 30, 2024 compared to 37.3% at December 31, 2023. Net debt decreased $201.5 million during the period primarily due to net proceeds from the sale of De-Sta-Co that were used to reduce our commercial paper borrowings and a decrease in long-term debt. Stockholders' equity increased for the period as a result of current earnings of $914.0 million, partially offset by share repurchases under the ASR program.

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

Special 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, 2023. 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 natural or human induced disasters, acts of war, terrorism, international conflicts, and public health crises 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, 2023. 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 (http://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 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.

There has been no significant change in our exposure to market risk during the six months ended June 30, 2024. For a discussion of our exposure to market risk, refer to Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2024.

During the second quarter of 2024, there were no changes in the Company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.