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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand our results of operations and financial condition for the years ended December 31, 2022, 2021 and 2020. The MD&A should be read in conjunction with our Consolidated Financial Statements and Notes included in Item 8 of this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed elsewhere in this Form 10-K, particularly in Item 1A. "Risk Factors" and in the "Special Note Regarding Forward-Looking Statements" preceding Part I of this Form 10-K.

Throughout this 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 7 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 Corporation is a diversified global manufacturer and solutions provider delivering innovative equipment and components, consumable supplies, aftermarket parts, software and digital solutions and support services.

For the year ended December 31, 2022, consolidated revenue was $8.5 billion, an increase of $0.6 billion or 7.6%, as compared to the prior year. This growth included organic revenue growth of 8.8% driven by solid underlying demand and our ability to produce and ship despite supply chain constraints and ongoing labor availability issues, as well as 4.2% acquisition-related growth, partially offset by an unfavorable impact from foreign currency translation of 3.9% and 1.5% impact from dispositions. Overall, customer pricing favorably impacted revenue by approximately 6.9% for the year compared to 2.8% in the prior year.

Within our Engineered Products segment, revenue increased $262.8 million, or 14.8%, from the prior year, reflecting a broad-based organic revenue growth of 16.8% and acquisition-related growth of 0.7%, partially offset by an unfavorable foreign currency translation of 2.7%. The organic revenue growth was primarily driven by robust demand in our key end-markets, most notably in our vehicle service and industrial automation businesses, along with strategic pricing initiatives that more than offset significant inflationary cost headwinds in this segment.

Our Clean Energy & Fueling segment revenue increased $230.4 million, or 14.0%, from prior year, reflecting acquisition-related growth of 18.1%, partially offset by an unfavorable impact from foreign currency translation of 3.8% and an organic decline of 0.3%. The organic revenue decline was primarily driven by reduced year-over-year demand in above ground retail fueling driven by customer construction delays in North America, roll-off of EMV-related demand and overall caution among operators in Europe and Asia as a result of the weakening macroeconomic environment.

Our Imaging & Identification segment revenue decreased $39.6 million, or 3.4%, from the prior year, comprised of an unfavorable impact from foreign currency translation of 6.5%, partially offset by organic growth of 2.9% and acquisition-related growth of 0.2%. The organic revenue growth was primarily driven by solid activity in our marking and coding business, as underlying demand for our printers, spare parts, services and consumables remained positive.

Our Pumps & Process Solutions segment revenue increased $19.6 million, or 1.1%, from the prior year, attributable to an organic growth of 4.1% and acquisition-related growth of 1.3%, partially offset by an unfavorable impact from foreign currency translation of 4.3%. The organic revenue growth was principally driven by pricing initiatives, along with continued strength in our core non-COVID-19 biopharma platform, industrial pumps, plastics and polymer processing solutions, and bearings and compression components businesses which all grew revenue driven by solid end market demand and strong backlogs.

Our Climate & Sustainability Technologies segment revenue increased $129.5 million, or 8.1%, from the prior year, reflecting an organic revenue growth of 18.5%, offset by a disposition-related decline of 7.5% and an unfavorable impact

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from foreign currency translation of 2.9%. The organic growth was driven by robust demand across all of our end-markets, along with strategic pricing initiatives that more than offset inflationary cost headwinds. Our beverage packaging equipment, heat exchanger, and retail refrigeration businesses all experienced broad-based growth from prior year.

From a geographic perspective, organic revenue for the U.S., our largest market, grew 9.5%, while revenue in Europe, Asia, and Other Americas grew 11.7%, 7.2%, and 6.9%, respectively. All other geographic markets declined 11.3% organically year over year. Three of our five segments had increased sales in North America, Europe, Asia, and Latin America as global demand continued to improve from easing of COVID-19 restrictions since the prior year.

Gross profit was $3.1 billion for the year ended December 31, 2022, an increase of $93.8 million, or 3.2%, as compared to the prior year. The increase was primarily due to pricing initiatives, which started in 2021, organic revenue growth, and favorable product mix, partially offset by increased material and logistics costs. Gross profit margin decreased to 36.0% for the year ended December 31, 2022 compared to 37.6% for the prior year. For further discussion related to our consolidated and segment results, see "Consolidated Results of Operations" and "Segment Results of Operations," respectively, within MD&A.

Bookings decreased 11.1% over the prior year to $8.3 billion for the year ended December 31, 2022. This included an organic bookings decline of 10.0%, an unfavorable impact due to foreign currency translation of 3.1% and a 1.5% decline due to dispositions, partially offset by an increase of 3.5% in acquisition-related bookings. Bookings decreased organically across four of our five segments, driven primarily by the easing of supply chain disruptions resulting in normalization of order to delivery lead-times to pre-pandemic levels for most of our segments. Overall, our book-to-bill decreased from the prior year to 0.98. Backlog as of December 31, 2022 was $3.0 billion, down from $3.2 billion in the prior year.Backlog as of December 31, 2022 included $1.1 billion, $0.7 billion, $0.7 billion, $0.3 billion, and $0.2 billion in the Climate & Sustainability Technologies, Engineered Products, Pumps & Process Solutions, Clean Energy & Fueling, and Imaging & Identification segments, respectively. Backlog remains elevated compared to historical levels and is expected to decrease due to normalizing lead-times and return to historical order patterns. See definition of bookings, organic bookings, book-to-bill and backlog within "Segment Results of Operations."

During the year ended December 31, 2022, we executed restructuring and other costs programs to further optimize operations. Restructuring and other costs of $39.0 million included restructuring charges of $30.5 million and other costs of $8.5 million. The expenses were primarily due to headcount reductions and facility consolidations resulting from restructuring programs initiated in 2021 and 2022, as well as non-cash foreign currency translation losses due to substantial liquidation of businesses from certain Latin America countries in our Climate & Sustainability Technologies segment.

During the year ended December 31, 2022, we made a total of three business acquisitions totaling $312.9 million, net of cash acquired and subject to contingent consideration. See Note 3 — Acquisitions in the Consolidated Financial Statements in Item 8 of this Form 10-K for further details regarding the businesses acquired during the year.

During 2022, the Company received a total of 3,892,295 shares upon completion of the accelerated share repurchase agreement (the "ASR Agreement") for $500 million. The total number of shares ultimately repurchased under the ASR Agreement was based on the volume-weighted average share price of Dover's common stock during the calculation period of the ASR Agreement, less a discount, which was $128.46 over the term of the ASR Agreement.

During the year ended December 31, 2022, the Company purchased, exclusive of the ASR Agreement, 641,428 shares of its common stock for a total cost of $85 million, or $132.52 per share. As of December 31, 2022, 15,283,326 shares remain authorized for repurchase under the November 2020 share repurchase authorization. For the 67th consecutive year, we increased our annual dividend per share and paid a total of $287.6 million in dividends to our shareholders in 2022.

COVID-19

The COVID-19 outbreak and associated counter-acting measures implemented by governments and businesses around the world, as well as subsequent accelerated and robust recovery in global business activity, have increased uncertainty in the global business environment and led to supply chain disruptions and shortages in global markets for commodities, logistics and labor, as well as input cost inflation.

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While activity in most of the end markets we serve has improved since 2020, the demand in certain businesses such as textile printing, industrial winch and bearings and compression components is expected to take longer to recover to pre-pandemic levels, although continued improvement is expected in 2023. The uncertain recovery in demand has had business impacts, including increased material cost inflation (principally steel), labor availability issues and logistics costs increases. Some of our businesses have also been impacted by supplier component input availability issues. We cannot predict the ultimate impact from the COVID-19 pandemic and associated countermeasures on customer demand, our logistics costs, suppliers or the labor market.

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

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CONSOLIDATED RESULTS OF OPERATIONS

Years Ended December 31, % / Point Change

Net earnings per common share - diluted $ 7.42 $ 7.74 $ 4.70 (4.1) % 64.7 %

*nm: not meaningful

Revenue

For the year ended December 31, 2022, revenue increased $0.6 billion, or 7.6% to $8.5 billion compared with 2021, reflecting organic growth of 8.8% driven by solid underlying demand and our ability to produce and ship despite supply chain constraints and ongoing labor availability issues. Acquisition-related growth increased by 4.2% led by our Clean Energy & Fueling segment, offset by an unfavorable foreign currency translation impact of 3.9% and disposition-related decline of 1.5%. Overall, customer pricing favorably impacted revenue by 6.9% for the year ended December 31, 2022.

For the year ended December 31, 2021, revenue increased $1.2 billion, or 18.3% to $7.9 billion compared with 2020, reflecting an organic growth of 15.3%, driven by strong demand across all our segments reflecting robust macro-trends. Acquisition-related growth increased by 1.3% led by our Clean Energy & Fueling and Imaging & Identification segments, partially offset by a 0.2% decrease from dispositions mainly due to the sale of our Unified Brands ("UB") business within Climate & Sustainability Technologies segment. Revenue also increased due to favorable foreign currency translation impact of 1.9%. Overall, customer pricing favorably impacted revenue by 2.8% for the year ended December 31, 2021.

Gross Profit

For the year ended December 31, 2022, gross profit increased $93.8 million, or 3.2%, to $3.1 billion compared with 2021, primarily due to organic revenue growth, partially offset by increased material and logistics costs. Gross profit margin decreased 160 basis points to 36.0% as compared to the prior year reflecting a shift in operating mix driven by biopharma and subdued above ground retail fueling performance returning to historical levels, partially offset by growth in CO2 refrigeration systems and engineered products.

For the year ended December 31, 2021, gross profit increased $495.8 million, or 20.0% to $3.0 billion compared with 2020, primarily due to organic revenue growth, benefits from pricing and productivity initiatives and restructuring actions, partially offset by increased material, labor and logistics costs as well as production inefficiencies caused by component and labor availability constraints. Gross profit margin increased 60 basis points to 37.6% as compared to the prior year due to benefits from pricing and product mix, productivity and restructuring actions.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2022, decreased $4.1 million, or 0.2% to $1.7 billion compared with 2021, primarily due to lower variable compensation expense, partially offset by higher travel and marketing expenses. As a percentage of revenue, selling, general and administrative expenses decreased 160 basis points to 19.8%, reflecting an increase in the revenue base.

Selling, general and administrative expenses for the year ended December 31, 2021, increased $147.2 million, or 9.6% to $1.7 billion compared with 2020, due to higher labor and acquisition-related costs and lower discretionary spend in the prior year partially offset by lower restructuring costs of $11.8 million. As a percentage of revenue, selling, general and administrative expenses decreased 170 basis points in 2021 to 21.4%, reflecting an increase in the revenue base.

Research and development costs, including qualifying engineering costs, are expensed when incurred and amounted to $163.3 million, $157.8 million and $142.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. These costs as a percent of revenue were 1.9%, 2.0% and 2.1% for the years December 31, 2022, 2021 and 2020, respectively.

Non-Operating Items

Interest Expense, net

For the year ended December 31, 2022, interest expense, net of interest income, increased $10.1 million, or 10.0%, to $112.0 million compared with 2021 primarily due to increased commercial paper borrowings and higher average interest rates since the prior year.

For the year ended December 31, 2021, interest expense, net of interest income, decreased $6.5 million, or 6.0%, to $101.9 million compared with 2020 primarily due to borrowings against our unsecured revolving credit facility and commercial paper in 2020 to ensure liquidity during height of pandemic-related impacts.

Gain on Dispositions

There was one immaterial disposition in 2022.

On December 1, 2021, we completed the sale of UB, a wholly owned subsidiary of Dover. We recognized a total consideration of $229.0 million. This sale resulted in a pre-tax gain on disposition of $181.6 million included within the consolidated statements of earnings and within the Climate & Sustainability Technologies segment for the year ended December 31, 2021. The sale did not represent a strategic shift that had a major effect on operations and financial results and, therefore, did not qualify for presentation as a discontinued operation. Additionally, included in this line item was a $24.7 million gain related to the disposition of our equity method investment in Race Winning Brands ("RWB") during the year ended December 31, 2021.

Refer to Note 4 — Dispositions in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information on disposed and discontinued operations.

Other Income, net

For the years ended December 31, 2022, 2021 and 2020, other income, net was $20.2 million, $14.9 million and $11.9 million, respectively. For the year ended December 31, 2022, other income increased compared to 2021 primarily due to increased earnings from our equity method investments, partially offset by deferred compensation plan investment losses resulting from market volatility in 2022. For the year ended December 31, 2021, other income increased compared to 2020 primarily due to transition services in connection with our sale of UB, certain non-income tax credits, and investment income, partially offset by a $12.1 million other than temporary impairment charge related to an equity method investment in 2021.

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Income Taxes

Our businesses have a global presence with 43%, 40% and 45% of our pre-tax earnings in 2022, 2021 and 2020, respectively, generated in foreign jurisdictions. Foreign earnings are generally subject to local country tax rates that differ from the 21.0% U.S. statutory tax rate. Our effective foreign tax rate is typically lower than the U.S. statutory tax rate.

Our effective tax rate was 17.3% for the year ended December 31, 2022, compared to 19.8% and 18.8% for the years ended December 31, 2021 and December 31, 2020, respectively. The 2022 rate was primarily driven by favorable audit resolutions, including a reduction to income taxes previously recorded related to the Tax Cut and Jobs Act, and the 2021 and 2020 rates were primarily driven by favorable audit resolutions and the tax benefit of share award exercises.

See Note 14 — Income Taxes in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional details.

Net Earnings

For the year ended December 31, 2022, net earnings decreased $58.4 million, or 5.2%, to $1,065.4 million, or $7.42 per share, compared with net earnings of $1,123.8 million, or $7.74 per share, for the year ended December 31, 2021. Earnings decreased due to the prior year earnings being favorably impacted by the gains on disposition of UB and our equity method investment in RWB compared to one immaterial disposition in 2022. Excluding these gains, earnings increased due to pricing initiatives, which started in 2021, organic revenue growth, and favorable product mix, partially offset by increased material, logistics and labor costs.

For the year ended December 31, 2021, net earnings increased $440.4 million, or 64.4%, to $1,123.8 million, or $7.74 per share, compared with net earnings of $683.5 million, or $4.70 per share, for the year ended December 31, 2020. Earnings increased due to organic revenue growth, favorable pricing actions and product mix and productivity actions including benefits of restructuring actions. Additionally, earnings were favorably impacted by the gains on disposition of UB and our equity method investment in RWB. These benefits more than offset increases in material and logistics costs, most notably steel and ocean and air freight costs, higher labor costs as well as productivity shortfalls resulting from labor constraints and supply chain disruption.

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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. During the year ended December 31, 2022, the segment measure of profit and loss, used by the Company's Chief Operating Decision Maker to evaluate our operating segment performance, was changed to segment earnings from segment earnings (EBIT) defined as earnings before corporate expenses/other, interest expense, interest income and provision for income taxes. Segment earnings is defined as earnings before purchase accounting expenses, restructuring and other costs, loss (gain) on dispositions, corporate expenses/other, interest expense, interest income and provision for income taxes. Accordingly, we have updated our segment earnings for the years ended December 31, 2021 and 2020 to conform to the new presentation. Refer to Note 19 — Segment Information in the Consolidated Financial Statements in Item 8 of this Form 10-K and see "Non-GAAP Disclosures" at the end of this Item 7 for further details.

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

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

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

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

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

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Engineered Products

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

Years Ended December 31, % Change

Operational metrics:

Components of revenue growth:

Acquisitions 0.7 % 0.6 %

Foreign currency translation (2.7) % 1.6 %

Total revenue growth 14.8 % 16.3 %

2022 Versus 2021

Engineered Products segment revenue for the year ended December 31, 2022 increased $262.8 million, or 14.8% compared to the prior year, comprised of a broad-based organic revenue growth of 16.8% and acquisition-related growth of 0.7%, partially offset by an unfavorable foreign currency translation of 2.7%. Overall, customer pricing favorably impacted revenue by approximately 10.4% in 2022 compared to 4.2% in the prior year.

The organic revenue growth was primarily driven by robust demand across all of our key end-markets, most notably in our vehicle service, waste handling, industrial automation, aerospace and defense, and industrial winch and hoist businesses, along with strategic pricing initiatives that more than offset inflationary cost headwinds. Despite the strong organic growth, shipments continued to be challenged by supply chain constraints, most notably in our waste handling business. We expect organic growth rates in 2023 to remain strong, but at levels below the growth we saw in 2022.

Engineered Products segment earnings for the year ended December 31, 2022 increased $68.7 million, or 24.7%, compared to the prior year. Segment margin increased to 17.0% from 15.6% in the prior year driven by increased volumes, customer pricing actions, and productivity gains, partially offset by higher material, labor and logistics costs as well as an unfavorable impact from foreign currency translation.

Bookings for the year ended December 31, 2022 decreased 5.2% compared to the prior year, comprised primarily of organic decline of 4.7% and an unfavorable impact from foreign currency translation of 1.8%, offset by acquisition-related growth of 1.3%. The organic bookings decline was driven primarily by the easing of supply chain disruptions resulting in shortened order to delivery lead-times and customers returning to more traditional order patterns, most notably in our vehicle service business. Segment book-to-bill was 0.98. Backlog decreased 8.3% compared to the prior year.

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2021 Versus 2020

Engineered Products segment revenue for the year ended December 31, 2021 increased $249.6 million, or 16.3% compared to the prior year, comprised of a broad-based organic revenue growth of 14.1%, a favorable foreign currency translation of 1.6%, and acquisition-related growth of 0.6%. Overall, customer pricing favorably impacted revenue by approximately 4.2% in 2021.

The organic revenue growth was primarily driven by robust demand across all of our key end-markets, most notably in our vehicle service and industrial automation businesses, and strategic pricing initiatives that partially offset inflationary headwinds. Despite the strong organic growth and record high backlog levels, certain shipments in our waste handling and vehicle service groups were deferred to future quarters as a result of supply chain and labor availability constraints with the most significant impact in the fourth quarter of 2021.

Engineered Products segment earnings for the year ended December 31, 2021 increased $12.7 million, or 4.8%, compared to the prior year. The increase was primarily driven by conversion on increased volumes, benefits from restructuring actions, and favorable impact from foreign currency translation, partially offset by higher material and logistics costs, most notably steel and ocean and air freight costs, as well as plant productivity shortfalls resulting from supply chain disruption and higher labor costs. Segment margin decreased from 17.3% to 15.6% as compared to the prior year.

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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, as well as facilities where cryogenic gases are produced, stored or consumed.

Years Ended December 31, % Change

Operational metrics:

Components of revenue growth (decline):

Organic growth (decline) (0.3) % 5.8 %

Foreign currency translation (3.8) % 2.2 %

Total revenue growth 14.0 % 11.6 %

2022 Versus 2021

Clean Energy & Fueling segment revenue for the year ended December 31, 2022 increased $230.4 million, or 14.0%, compared to the prior year, attributable to acquisition-related growth of 18.1%, partially offset by an unfavorable impact from foreign currency translation of 3.8% and an organic decline of 0.3%. Acquisition-related growth was driven by the acquisition of RegO, Acme Cryogenics and LIQAL, which were completed in 2021. Overall, customer pricing favorably impacted revenue by approximately 6.0% in 2022 compared to 2.3% in the prior year.

The organic revenue decline was primarily driven by reduced year-over-year demand in above ground retail fueling driven by customer construction delays in North America, roll-off of EMV-related demand and overall caution among operators in Europe and Asia as a result of the weakening macroeconomic environment. This was mostly offset by solid demand in our below ground retail fueling, fluid transfer solutions and vehicle wash solutions business, along with pricing actions aimed at mitigating material and logistics cost inflation. In light of market conditions, we have made and will continue to make proactive adjustments to our cost structure through restructuring and other programs to align with current demand trends. We expect organic growth rates to remain restrained in the early part of 2023, but show improvement as we move through 2023.

Clean Energy & Fueling segment earnings for the year ended December 31, 2022 increased $25.8 million, or 7.9%, compared to the prior year. The increase was primarily driven by pricing, productivity initiatives, cost actions in above ground fueling, and the favorable impact from acquisitions, which more than offset the unfavorable impact to earnings from foreign currency translation, reduced volumes in above ground retail fueling, and increased material, logistics and labor costs. Segment margin decreased to 18.8% from 19.9% in the prior year.

Bookings for the year ended December 31, 2022 increased 4.5% compared to the prior year, reflecting acquisition-related growth of 15.9%, partially offset by an organic decline of 8.8% and an unfavorable impact from foreign currency translation of 2.6%. The organic bookings decline was primarily driven by improving lead-times and return to historical order patterns

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throughout the segment, as well as the decrease in demand in above ground retail fueling. Segment book-to-bill was 0.97. Backlog decreased 18.6% as compared to the prior year.

2021 Versus 2020

Clean Energy & Fueling segment revenue for the year ended December 31, 2021 increased $171.9 million, or 11.6%, compared to the prior year, attributable to organic growth of 5.8%, acquisition-related growth of 3.6%, and a favorable impact from foreign currency translation of 2.2%. Acquisition-related growth was driven by the acquisition of ICS, AvaLAN and LIQAL. The acquisitions of RegO and Acme Cryogenics late in the fourth quarter had an immaterial impact to the segment's results. Overall, customer pricing favorably impacted revenue by approximately 2.3% in 2021.

The organic revenue growth was primarily driven by solid demand in our North America and EMEA retail fueling and vehicle wash businesses, along with pricing actions aimed at mitigating material, logistics and labor cost inflation. Growth in this segment was hampered by supply chain and labor availability challenges, both within our and our customers' operations, that intensified in the second half of the year, impacting our ability to ship some customer orders.

Clean Energy & Fueling segment earnings for the year ended December 31, 2021 increased $37.0 million, or 12.7%, compared to the prior year. The increase was primarily driven by conversion on organic revenue growth, pricing initiatives, productivity actions, and a favorable impact from acquisitions, partially offset by material and labor cost inflation. Segment margin increased to 19.9% from 19.7% in the prior year.

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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.

Years Ended December 31, % Change

Operational metrics:

Components of revenue growth (decline):

Organic growth 2.9 % 8.0 %

Acquisitions 0.2 % 1.3 %

Foreign currency translation (6.5) % 2.8 %

Total revenue growth (decline) (3.4) % 12.1 %

2022 Versus 2021

Imaging & Identification segment revenue for the year ended December 31, 2022 decreased $39.6 million, or 3.4% compared to the prior year, comprised of an unfavorable impact from foreign currency translation of 6.5%, partially offset by organic growth of 2.9% and acquisition-related growth of 0.2%. Overall, customer pricing favorably impacted revenue by approximately 4.1% in 2022 compared to 0.9% in the prior year.

The organic revenue growth was primarily driven by solid activity in our marking and coding business, as underlying demand for our printers, spare parts, services and consumables remains positive, along with the favorable impact from pricing actions aimed at mitigating material and logistics cost inflation. We also saw improvements in component availability as we moved through the second half of 2022. We expect demand in our marking and coding business to remain constructive in 2023. New textile printer sales remain impacted by high energy prices and macro uncertainty in textile producing regions.

Imaging & Identification segment earnings for the year ended December 31, 2022 increased $1.2 million, or 0.4%, compared to the prior year. This increase was driven by pricing initiatives, organic revenue growth, productivity actions, and product mix, partially offset by the unfavorable impact to earnings from foreign currency translation, and increased material, logistics and labor costs. As a result, segment margin increased to 23.9% from 22.9% in the prior year.

Segment bookings for the year ended December 31, 2022 decreased 3.0% compared to the prior year, reflecting an unfavorable impact from foreign currency translation of 5.8%, partially offset by organic growth of 2.6% and acquisition-related growth of 0.2%. The organic increase was primarily driven by solid demand for new equipment, spare parts, services and consumables in our marking and coding business. Segment book-to-bill was 1.03. Backlog increased 9.8% compared to the prior year.

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2021 Versus 2020

Imaging & Identification segment revenue for the year ended December 31, 2021 increased $125.2 million, or 12.1% compared to the prior year, comprised of organic growth of 8.0%, a favorable impact from foreign currency translation of 2.8%, and acquisition-related growth of 1.3%. Acquisition-related growth was driven by the acquisitions of Solaris in the third quarter of 2020 and Blue Bite in the second quarter of 2021. Overall, customer pricing favorably impacted revenue by approximately 0.9% in 2021.

The organic revenue growth was driven by both our marking and coding business, and our digital textile printing business. Our marking and coding business delivered solid growth in new equipment and associated services and consumables, as well as serialization software sales. Our digital textile printing business experienced demand recovery in 2021 compared to 2020 when demand for printed textiles was significantly reduced due to the impact of COVID-19 restrictions on the global apparel industry. While 2021 global apparel retail volumes improved from 2020, volumes had not yet returned to pre-pandemic levels and continue to be impacted by local business and travel restrictions, as well as work-from-home policies which resulted in reduced apparel demand.

Imaging & Identification segment earnings for the year ended December 31, 2021 increased $42.9 million, or 19.1%, compared to the prior year. This increase was driven by conversion on organic revenue growth, pricing initiatives and the benefits from productivity initiatives and restructuring actions, partially offset by material and labor cost inflation. As a result, segment margin increased to 22.9% from 21.6% in the prior year.

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Pumps & Process Solutions

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

Years Ended December 31, % Change

Operational metrics:

Components of revenue growth:

Organic growth 4.1 % 26.6 %

Acquisitions 1.3 % 0.6 %

Foreign currency translation (4.3) % 1.9 %

Total revenue growth 1.1 % 29.1 %

2022 Versus 2021

Pumps & Process Solutions segment revenue for the year ended December 31, 2022 increased $19.6 million, or 1.1%, compared to the prior year, attributable to organic growth of 4.1% and acquisition-related growth of 1.3%, partially offset by an unfavorable impact from foreign currency translation of 4.3%. Acquisition-related growth was driven by the acquisitions of AMN DPI and Malema in 2022. Overall, customer pricing favorably impacted revenue by approximately 3.9% in 2022 compared to 1.8% in the prior year.

The organic revenue growth was driven by pricing initiatives, along with continued strength in our core non-COVID-19 biopharma platform, industrial pumps, plastics and polymer processing solutions, and bearings and compression components businesses, which all grew revenue driven by solid end market demand and strong backlogs. Revenue from shipments of single-use pumps and connectors used in biopharmaceutical production processes declined in 2022, as biopharmaceutical manufacturers reduced orders for components used in COVID-19 vaccine production and repurposed inventory purchased for the COVID-19 vaccine production towards production of non-COVID-19 therapies. While underlying demand for non-COVID-19 related biologic therapies remains on a positive trajectory in the biopharmaceutical market, we expect our delivery volumes to remain muted in early 2023 as customers work through component inventories. Improvement in shipments is expected as we move through 2023 as customer component inventories normalize and growth in non-COVID-19 related bioproduction remains robust.

Pumps & Process Solutions segment earnings for the year ended December 31, 2022 decreased $42.6 million, or 7.4%, compared to the prior year. The decrease was primarily driven by the impact of reduced revenues relating to single use components used in COVID-19 vaccine production, along with material and labor cost inflation and foreign currency translation headwinds. This was partially offset by pricing initiatives, conversion on increased revenues in industrial pumps, plastics and polymer processing solutions, and bearings and compression components, productivity actions, and restructuring benefits. Segment margin decreased to 30.8% from 33.7% in the prior year.

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Bookings for the year ended December 31, 2022 decreased 15.5% compared to the prior year, reflecting an organic decline of 12.8% and an unfavorable impact from foreign currency translation of 3.8%, partially offset by acquisition-related growth of 1.1%. The organic bookings decline was driven by a decrease in orders for biopharmaceutical components used in COVID-19 vaccine production, partially offset by continued strong order intake in our plastics and polymer processing solutions and bearings and compression components businesses. Segment book-to-bill was 0.99. Backlog decreased 0.4% compared to the prior year.

2021 Versus 2020

Pumps & Process Solutions segment revenue for the year ended December 31, 2021 increased $384.6 million, or 29.1%, compared to the prior year, attributable to organic growth of 26.6%, a favorable impact from foreign currency translation of 1.9%, and acquisition-related growth of 0.6%. Acquisition-related growth was primarily driven by the acquisition of Quantex and one other immaterial acquisition. Overall, customer pricing favorably impacted revenue by approximately 1.8% in 2021.

The organic revenue growth was primarily driven by robust demand in the biopharma and hygienic markets, where we saw strong demand for single use pumps and connectors used in biopharmaceutical production processes. Our industrial pumps and our plastics and polymer processing solutions businesses also contributed to top-line growth responding to strong end market demand, despite experiencing supply chain constraints and customer delivery challenges that accelerated in the second half of the year. Revenue in bearings and compression components saw solid growth amidst an ongoing recovery in their end market demand.

Pumps & Process Solutions segment earnings for the year ended December 31, 2021 increased $226.9 million, or 65.1%, compared to the prior year. This increase was predominantly the result of strong conversion on revenue growth, favorable product mix, pricing initiatives, and productivity actions, partially offset by material and labor cost inflation, and investments in growth. Segment margin increased to 33.7% from 26.3% in the prior year.

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Climate & Sustainability Technologies

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

Years Ended December 31, % Change

Operational metrics:

Components of revenue growth:

Dispositions (7.5) % (1.1) %

Foreign currency translation (2.9) % 1.3 %

Total revenue growth 8.1 % 22.2 %

2022 Versus 2021

Climate & Sustainability Technologies segment revenue for the year ended December 31, 2022 increased $129.5 million, or 8.1%, compared to the prior year, reflecting an organic revenue growth of 18.5%, offset by disposition-related decline of 7.5% and an unfavorable impact from foreign currency translation of 2.9%. Overall, customer pricing favorably impacted revenue by approximately 9.2% in 2022 compared to 4.1% in the prior year.

The organic revenue growth was principally driven by robust demand across all of our end-markets, along with pricing initiatives that more than offset inflationary cost headwinds. Beverage packaging equipment revenues increased substantially from prior year, driven by continued favorable macro trends in the global beverage industry, which include beverage innovations and producers increasingly shifting to highly recyclable aluminum cans for environmental sustainability and merchandising benefits offered by modern aluminum containers. Our heat exchanger business experienced strong growth across all regions, fueled by regulation-driven heat pump demand in Europe, robust demand in Asia, and strengthening commercial HVAC and industrial markets globally. Retail refrigeration experienced broad-based growth, driven by increased remodel activity with key supermarket customers and growing demand for our environmentally friendly natural refrigerant systems in both Europe and the U.S. We expect organic growth rates in 2023 to remain strong, but at levels below the growth we saw in 2022.

Climate & Sustainability Technologies segment earnings for the year ended December 31, 2022 increased $69.0 million, or 37.2%, compared to the prior year. Segment margin increased to 14.6% from 11.5% in the prior year driven by increased volumes, favorable business mix and customer pricing actions, partially offset by increased material and logistics costs, most notably metals and freight, increased energy and labor costs, and plant productivity shortfalls resulting from supply chain disruption.

Bookings for the year ended December 31, 2022 decreased 28.4% compared to the prior year, reflecting organic decline of 19.7%, a disposition-related decline of 6.1%, and an unfavorable impact from foreign currency translation of 2.6%. The organic bookings decline includes a $74.0 million reversal of an order slated for 2023 completion in our beverage can-

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making business due to customer financing limitations, along with the easing of supply chain disruption, resulting in improved order to delivery lead-times and a return to more traditional customer order patterns, most notably in retail refrigeration. Segment book-to-bill was 0.96. Backlog decreased 9.0% over the prior year, principally driven by our aluminum can-making equipment business.

2021 Versus 2020

Climate & Sustainability Technologies segment revenue for the year ended December 31, 2021 increased $292.1 million, or 22.2%, compared to the prior year, reflecting an organic revenue growth of 22.0% and a favorable impact from foreign currency translation of 1.3%, partially offset by a disposition-related decline of 1.1%. Overall, customer pricing favorably impacted revenue by approximately 4.1% in 2021.

The organic revenue growth was principally driven by robust demand across all of our end-markets. Beverage packaging equipment revenues increased substantially from prior year, driven by continued favorable macro trends in the global beverage industry, which include beverage innovations and producers increasingly shifting to highly recyclable aluminum cans for environmental sustainability and merchandising benefits offered by modern aluminum cans. Our heat exchanger business experienced strong growth across all regions, fueled by regulation-driven heat pump demand in Europe, robust demand in Asia, and strengthening commercial HVAC and industrial markets globally. Retail refrigeration experienced broad-based growth, driven by increased remodel activity with key supermarket customers and growing demand for our environmentally friendly natural refrigerant systems in both Europe and the U.S. Prior to the sale of UB in the fourth quarter of 2021, commercial foodservice equipment revenues improved over the prior year, as many key restaurant chain customers resumed store investment programs once government mandated COVID-19 restrictions eased in 2021.

Climate & Sustainability Technologies segment earnings for the year ended December 31, 2021 increased $59.4 million, or 47.1%, compared to the prior year. Segment margin increased to 11.5% from 9.6% in the prior year due to increased volumes, favorable mix, improved operational efficiencies and benefits from prior restructuring programs; partially offset by increased material and logistics costs, most notably metals, and plant productivity shortfalls resulting from supply chain disruption, most notably from intermittent shortages of insulation foam materials throughout the year, and labor availability constraints, most significantly in our retail refrigeration business.

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Reconciliation of Segment Earnings to Net Earnings

Years Ended December 31,

Net earnings:

Segment earnings:

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

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

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

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

Restructuring and Other Costs (Benefits)

Restructuring and other costs (benefits) are not presented in our segment earnings because these costs are excluded from the segment operating performance measure reviewed by management. During the year ended December 31, 2022, restructuring charges of $30.5 million were primarily due to headcount reductions and facility consolidations resulting from restructuring programs initiated in 2021 and 2022, including non-cash foreign currency translation losses due to substantial liquidation of businesses. Other costs (benefits), net of $8.5 million, were primarily due to an asset impairment in our Engineered Products segment and write-off of assets in connection with an exit from certain Latin America countries in our Climate & Sustainability Technologies segment. These restructuring and other charges were recorded in cost of goods and services and selling, general and administrative expenses in the consolidated statement of earnings. Additional programs beyond the scope of the announced programs may be implemented during 2023 with related restructuring charges.

We recorded the following restructuring and other costs for the year ended December 31, 2022:

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During the year ended December 31, 2021, restructuring and other activities included restructuring charges of $26.7 million and other (benefits) costs of $11.7 million. Restructuring expense was incurred in response to demand conditions, asset charges related to a product line exit, as well as broad-based operational efficiency initiatives focusing on footprint consolidation and IT centralization. Other (benefits) costs were comprised primarily of $12.1 million other than temporary impairment charge related to an equity method investment and a $6.1 million write-off of assets in connection with an exit from certain Latin America countries in our Climate & Sustainability Technologies segment, offset by a $9.1 million payment received for previously incurred restructuring costs related to a product line exit ($7.3 million is classified within costs of goods and services and $1.8 million within selling, general and administrative expenses) within our Engineering Products segment and $3.3 million of gains on sales of assets as a result of restructuring actions in our Pumps & Process Solutions segment. These restructuring and other charges were recorded in cost of goods and services and selling, general and administrative expenses in the consolidated statement of earnings.

We recorded the following restructuring and other costs (benefits) for the year ended December 31, 2021:

During the year ended December 31, 2020, restructuring and other activities included restructuring charges of $44.5 million and other costs of $7.0 million. Restructuring expense was comprised primarily of new actions executed in response to lower demand driven by COVID-19 as well as continuing broad-based selling, general and administrative expense reduction initiatives and broad-based operational efficiency initiatives focusing on footprint consolidation, and operational optimization and IT centralization. Other costs were comprised primarily of charges related to the restructuring actions and asset charges, principally due to a $3.6 million write off of assets, partially offset by a $1.7 million gain on sale of assets 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 consolidated statement of earnings.

We recorded the following restructuring and other costs for the year ended December 31, 2020:

See Note 11 — Restructuring Activities in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional details regarding our recent restructuring activities.

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Purchase Accounting Expenses

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

Years Ended December 31,

Purchase accounting expenses

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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 consolidated statements of cash flows:

Years Ended December 31,

Net cash flows provided by (used in):

Operating Activities

Cash provided by operating activities for the year ended December 31, 2022 decreased compared to 2021. This decrease was primarily driven by higher investments in working capital to support business growth and higher compensation payouts. Additionally, estimated tax payments increased from 2021 to 2022, including a $43.5 million income tax payment in 2022 related to the gain on sale of Unified Brands in Q4 2021 and a $13.4 million tax payment in 2022 related to an internal reorganization.

Cash provided by operating activities for the year ended December 31, 2021 increased compared to 2020. This increase was primarily driven higher earnings net of non-cash adjustments and increases to accrued expenses, partially offset by our investment in working capital of $307.1 million.

Pension and Other Post-Retirement Activity: Total cash used in conjunction with pension plans during 2022 was $12.9 million, including contributions to our international pension plans and payments of benefits under our non-qualified supplemental pension plans.

The funded status of our U.S. qualified defined benefit pension plan is dependent upon many factors, including returns on invested assets, the level of market interest rates and the level of funding. We contribute cash to our plans at our discretion, subject to applicable regulations and minimum contribution requirements. Due to the overfunded status of this plan, the Company did not make contributions in 2022, 2021 or 2020 and does not expect to make contributions in the near term.

Our international pension plans are located in regions where often it is not economically advantageous to pre-fund the plans due to local regulations. Total cash payments, which include contributions and direct benefit payments to nonfunded plans, to ongoing international defined benefit pension plans in 2022, 2021 and 2020 totaled $9.1 million, $8.1 million and $7.3 million, respectively. In 2023, we expect to make cash payments of approximately $7.1 million related to our non-U.S. plans.

Our non-qualified supplemental pension plans are funded through Company assets as benefits are paid. In 2022, 2021 and 2020 a total of $3.8 million, $6.3 million, and $12.3 million in benefits were paid under these plans, respectively. See Note 17 — Employee Benefit Plans in the Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion regarding our post-retirement plans. In 2023, we expect to make cash payments of approximately $7.4 million to our non-qualified U.S. plans.

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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 from December 31, 2021 by $350.3 million, or 23.9%, to $1.8 billion at December 31, 2022, which reflected an increase in accounts receivable of $169.4 million, an increase in inventory of $175.5 million and a decrease in accounts payable of $5.4 million. These amounts include the effects of acquisitions and foreign currency translation. Overall, working capital was higher in 2022 primarily due to increases in accounts receivable on timing of order shipments and higher balances of raw materials and components inventory. We carried elevated levels of working capital in 2022 due to high customer demand and to ensure supply of inputs due to supply chain dislocations. With supply chains improving in the second half of 2022, we began reducing inventory balances, and continue to focus on improving working capital management.

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

Outstanding payments related to SCF programs are recorded within accounts payable in our consolidated balance sheets. As of December 31, 2022 and 2021, amounts due to financial institutions for suppliers using SCF were approximately $156.3 million and $211.0 million, respectively. SCF related payments are classified as a reduction to cash flows from operations. Amounts paid to SCF financial institutions were approximately $882.5 million during the year ended December 31, 2022, $825.0 million during the year ended December 31, 2021, and $605.0 million during the year ended December 31, 2020.

Investing Activities

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

•Acquisitions: In 2022, we deployed $312.9 million, to acquire three businesses. In comparison, we acquired nine businesses in 2021 for an aggregate purchase price of approximately $1,112.1 million, excluding contingent consideration of up to $13.0 million. Total acquisition spend in 2020 was $335.8 million and was comprised of six businesses. See Note 3 — Acquisitions in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information with respect to recent acquisitions.

•Proceeds from sale of businesses: In 2022, we had one immaterial disposition. Cash proceeds of $275.0 million in 2021 was due to the sale of UB within the Climate & Sustainability Technologies segment and the sale of our RWB equity method investment within the Engineered Products segment. In 2020, we generated cash proceeds of $15.4 million due to the sale of AMS Chino.

•Capital spending: Capital expenditures, primarily to support growth initiatives, productivity and new product launches, were $221.0 million in 2022, $171.5 million in 2021 and $165.7 million in 2020. Our capital expenditures

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increased $49.5 million and $5.8 million in 2022 and 2021, respectively, in line with our plan to support growth capacity, digitization, innovation, and productivity.

We anticipate that capital expenditures and any additional acquisitions we make in 2023 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 2023 to range from $185.0 million to $195.0 million.

Financing Activities

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

•Repurchase of common stock, including accelerated share repurchase program: During 2022, the Company received a total of 3,892,295 shares upon completion of the accelerated share repurchase agreement (the "ASR Agreement") for $500 million. The total number of shares ultimately repurchased under the ASR Agreement was based on the volume-weighted average share price of Dover's common stock during the calculation period of the ASR Agreement, less a discount, which was $128.46 over the term of the ASR Agreement. During the year ended December 31, 2022, we repurchased, exclusive of the ASR Agreement, 641,428 shares of common stock at a total cost of $85 million. During the year ended December 31, 2021, we repurchased 182,951 shares of common stock at a total cost of $21.6 million. During the year ended December 31, 2020, we repurchased 979,165 shares of common stock at a total cost of $106.3 million.

•Commercial paper and other short-term borrowings, net: During 2022, we received net proceeds of $629.9 million from commercial paper and other short-term borrowings, primarily used to fund our accelerated share repurchase transaction and to fund a portion of our acquisitions. During 2021, we received net proceeds of $105.0 million from commercial paper borrowings to fund a portion of our acquisitions. During 2020, we used $84.7 millionto pay off commercial paper borrowings.

•Dividend payments: Total dividend payments to common shareholders were $287.6 million in 2022, $286.9 million in 2021 and $284.3 million in 2020. Our dividends paid per common share increased 1% to $2.01 per share in 2022 compared to $1.99 per share in 2021, which represents the 67th consecutive year that our dividend per share has increased. The number of common shares outstanding decreased from 2021 to 2022 as share repurchases exceeded share issuances.

•Payments to settle employee tax obligations: Payments to settle tax obligations on share exercises were $14.6 million, $41.9 million and $28.5 million in 2022, 2021 and 2020, respectively. The decrease from 2021 to 2022 is primarily due to the decrease in the number of shares exercised and a decrease in the average stock price compared to the prior year.

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 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.

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

Years Ended December 31,

Free cash flow as a percentage of revenue 6.9 % 11.9 % 14.1 %

Free cash flow as a percentage of net earnings 54.9 % 84.0 % 137.4 %

For 2022, we generated free cash flow of $584.8 million, representing 6.9% of revenue and 54.9% of net earnings. Free cash flow in 2021 was $944.4 million, or 11.9% of revenue and 84.0% of earnings. Free cash flow in 2020 was $939.1 million, or 14.1% of revenue and 137.4% of earnings. Free cash flow decreased from 2021 to 2022 due to lower operating cash flow and increased capital expenditures compared to the prior year. The decrease in operating cash flow was primarily a result of investments in working capital to support business growth and higher compensation payouts compared to the prior year. Additionally, the year ended December 31, 2022 includes a $43.5 million income tax payment related to the gain on sale of Unified Brands in the fourth quarter of 2021 and a $13.4 million tax payment in 2022 related to an internal reorganization. The 2021 increase in free cash flow compared to 2020 reflects higher cash flow provided by operations, partially offset by higher investments in capital expenditures compared to the prior year.

Capitalization

We use commercial paper borrowings for general corporate purposes, including the funding of acquisitions and the repurchase of our common stock. As of December 31, 2022, we maintained a $1 billion five-year unsecured revolving credit facility (the "Credit Agreement") with a syndicate of banks, which expires on October 4, 2024. This facility is used primarily as liquidity back-up for Dover's commercial paper program and for general corporate purposes.

The Company may elect to have loans under the Credit Agreement which bear interest at a base rate plus a specified applicable margin. Under this facility, we are required to pay a facility fee and to maintain an interest coverage ratio of consolidated EBITDA to consolidated net interest expense of not less than 3.0 to 1. We were in compliance with this covenant and our other long-term debt covenants at December 31, 2022 and had a coverage ratio of 15.3 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 material long-term debt maturity is in 2025.

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

At December 31, 2022, our cash and cash equivalents totaled $380.9 million, of which approximately $261.4 million was held outside the United States. At December 31, 2021, our cash and cash equivalents totaled $385.5 million, of which $257.5 million was held outside the United States. Cash and cash equivalents 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.

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

Net debt to net capitalization 43.5 % 39.5 % 43.4 %

Our net debt to net capitalization ratio increased to 43.5% at December 31, 2022 compared to 39.5% at December 31, 2021. Net debt increased $558.5 million primarily due to an increase in commercial paper borrowings used to fund our accelerated share repurchase transaction and a portion of our acquisitions during the year. Stockholders' equity increased for the period as a result of current earnings of $1,065.4 million, offset by $287.6 million of dividends paid, $585.0 million in share repurchases and a loss in accumulated other comprehensive income of $112.2 million, primarily due to the unfavorable impact of foreign currency fluctuations.

Our net debt to net capitalization ratio decreased to 39.5% at December 31, 2021 compared to 43.4% at December 31, 2020. The decrease in this ratio was driven primarily by the increase in stockholders' equity of $803.8 million for the period as a result of increase in current earnings of $1,123.8 million, offset by $286.9 million of dividends paid and $21.6 million in share repurchases. Net debt increased $143.2 million during the period primarily due to a decrease of $127.6 million in cash and cash equivalents and an increase in total debt as a result of an increase in commercial paper.

Our ability to obtain debt financing at comparable risk-based interest rates is partly a function of our existing cash flow-to-debt and debt-to-capitalization levels as well as our current credit standing. Set forth below are our credit ratings, as of December 31, 2022, which were independently developed by the respective credit agencies. The Moody's rating and outlook were issued in December 2018, and the Standard & Poor's rating was issued in December 2017 and the outlook was most recently revised in May 2021. The ratings and outlooks from both agencies were affirmed in 2022.

Short-Term Rating Long-Term Rating Outlook

Moody's P-2 Baa1 Stable

Standard & Poor's A-2 BBB+ Stable

As of December 31, 2022, we had approximately $180.3 million outstanding in letters of credit, surety bonds, and performance and other guarantees with financial institutions, which primarily 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, the probability of which we believe is remote.

Our estimate of future interest payments on long-term debt is $1,038.0 million based on the interest rates in effect as of December 31, 2022.

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. See Note 7 — Leases in the Consolidated

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Financial Statements in Item 8 of this Form 10-K for additional details on 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.

Financial Instruments and Risk Management

The diverse nature of our businesses' activities necessitates the management of various financial and market risks, including those related to changes in interest rates, foreign currency exchange rates and commodity prices. We periodically use derivative financial instruments to manage some of these risks. We do not hold or issue derivative instruments for trading or speculative purposes. We are exposed to credit loss in the event of nonperformance by counterparties to our financial instrument contracts; however, nonperformance by these counterparties is considered unlikely as our policy is to contract with highly-rated, diversified counterparties.

Interest Rate Exposure

As of December 31, 2022, and for the years ended December 31, 2022, 2021, and 2020, we did not have any open interest rate swap contracts; however, we may in the future enter into interest rate swap agreements to manage our exposure to interest rate changes. We issue commercial paper, which exposes us to changes in variable interest rates; however, maturities are typically three months or less so a change in rates over this period would not have a material impact on our pre-tax earnings.

We consider our current risk related to market fluctuations in interest rates to be minimal since our debt is largely long-term and fixed in nature. Generally, the fair market value of fixed-interest rate debt will increase as interest rates fall and decrease as interest rates rise. A 100 basis point increase in market interest rates would decrease the 2022 year-end fair value of our long-term debt by approximately $165.0 million. However, since we have no plans to repurchase our outstanding fixed-rate instruments before their maturities, the impact of market interest rate fluctuations on our long-term debt does not affect our results of operations or financial position.

Foreign Currency Exposure

We conduct business in various non-U.S. countries, including Canada, substantially all of the European countries, Mexico, Brazil, China, India and other Asian countries. Therefore, we have foreign currency risk relating to receipts from customers, payments to suppliers and intercompany transactions denominated in foreign currencies. We will occasionally use derivative financial instruments to offset such risks, when it is believed that the exposure will not be limited by our normal operating and financing activities. We have formal policies to mitigate risk in this area by using fair value and/or cash flow hedging programs.

Changes in the value of the currencies of the countries in which we operate affect our results of operations, financial position and cash flows when translated into U.S. dollars, our reporting currency. The strengthening of the U.S. dollar could result in unfavorable translation effects as the results of foreign operations are translated into U.S. dollars. We have generally accepted the exposure to exchange rate movements relative to our investment in non-U.S. operations. We may, from time to time, for a specific exposure, enter into fair value hedges.

Additionally, we have designated the €600 million and €500 million of euro-denominated notes issued November 9, 2016 and November 4, 2019, respectively, as a hedge of our net investment in euro-denominated operations. Due to the high degree of effectiveness between the hedging instruments and the exposure being hedged, fluctuations in the value of the euro-denominated debt due to exchange rate changes are offset by changes in the net investment. Accordingly, changes in the value of the euro-denominated debt are recognized in the cumulative translation adjustment section of other comprehensive income to offset changes in the value of the net investment in euro-denominated operations. Due to the fluctuations of the euro relative to the U.S. dollar, the U.S. dollar equivalent of this debt increases or decreases, resulting in the recognition of a pre-tax gain of $80.3 million, $94.0 million and loss of $119.3 million in other comprehensive income for the years ended December 31, 2022, 2021, and 2020 respectively.

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Commodity Price Exposure

Some of our businesses are exposed to volatility in the prices of certain commodities, such as aluminum, steel, copper and various precious metals, among others. Our primary exposure to commodity pricing volatility relates to the use of these materials in purchased component parts or the purchase of raw materials. Markets for multiple raw materials saw significant cost increases throughout 2021 and into 2022, which we partially offset through price increases and other levers. In some cases, we maintain longer-term index based contracts on raw materials and component parts and centrally drive an ongoing effort to minimize risk proactively. However, we are prone to exposure as these contracts expire.

Critical Accounting Estimates

Revenue Recognition

Description

The majority of our revenue is generated through the manufacture and sale of a broad range of specialized products and components, with revenue recognized upon transfer of title and risk of loss, which is generally upon shipment. In limited cases, our revenue arrangements with customers require delivery, installation, testing, certification, or other promises to deliver goods or services that may impact the timing or pattern of revenue recognized. The remainder of our revenue is recognized over time, which is primarily related to services performed and specialized goods manufactured.

Judgments and uncertainties involved in the estimate

A significant level of judgment is involved in the identification of performance obligations for contracts with multiple-element arrangements and the allocation of the transaction price based on the relative stand-alone selling price. The identification requires judgment to identify all distinct goods or services and also the appropriate timing of revenue recognition for each distinct good or service based on the transfer of control to the customer. We estimate the relative stand-alone selling price for performance obligations if not directly observable. A significant level of judgment is also involved in the selection of the appropriate method to recognize revenue over time.

Effect if actual results differ from assumptions

To the extent the judgments and estimates used or the method selected to recognize revenue over time differ or change in a future period, a change to revenue and the related assets and liabilities could impact our financial position or results of operations. The judgments, estimates, and methods used have been applied consistently over the last three fiscal years.

Valuation of Acquired Intangible Assets

Description

Intangible assets represent a significant portion of our consolidated balance sheet as a result of current and past acquisitions. Intangible assets primarily include customer intangibles, trademarks, unpatented technologies, and patents. The fair value of acquired intangible assets is determined using widely accepted valuation techniques, and the Company may engage third-party appraisal firms to assist with the determination of fair values of significant intangible assets. The valuation of intangible assets is performed at the time of acquisition and may change during the acquisition measurement period until the valuation is finalized. The fair value of finite-lived intangible assets is subsequently amortized over the estimated useful life.

Judgments and uncertainties involved in the estimate

The significant assumptions used in the valuation of customer intangibles include future cash flows, customer attrition rate, and discount rate. The significant assumptions for the valuation of trademarks include future revenues, royalty rate, and discount rate. The significant assumptions for the valuation of unpatented technologies and patents include future revenues, obsolescence rate, royalty rate, and discount rate. The assumptions and estimates used in the valuation of these intangible assets are based on several factors, including historical experience with similar businesses and industries and information obtained from operating company management.

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Effect if actual results differ from assumptions

While we believe the assumptions used in our valuation of intangible assets are reasonable and representative of expected results, actual results may differ from these assumptions. While the assumptions used for each acquisition are dependent on the acquired company, the assumptions have been applied using a consistent methodology over the last three fiscal years.

Goodwill Impairment

Description

Goodwill is the difference between the consideration transferred and the fair value of net assets acquired. Goodwill is tested for impairment on an annual basis during the fourth quarter, or more frequently when indicators of impairment exist, or when a change in the composition of reporting units for goodwill occurs for other reasons, such as a disposition or a change in segments. The impairment test involves a comparison of the fair value of each reporting unit with its carrying value. Fair value reflects the price a potential market participant would be willing to pay for the reporting unit in an arms-length transaction.

Judgments and uncertainties involved in the estimate

The significant assumptions in the fair value analysis of goodwill are the estimated future cash flows and the discount rate. The determination of future cash flows involves significant judgment and is primarily driven by forecasted revenue growth rates and EBITDA margins for the reporting unit. These assumptions are developed based on the reporting unit’s expected future performance, which considers historical performance. We use a discount rate commensurate with the inherent risks in our internally developed forecasts of future cash flows. The discount rate may also fluctuate due to market conditions such as rising interest rates.

Effect if actual results differ from assumptions

While we believe the assumptions used in our annual impairment analysis are reasonable and representative of expected results and reflective of a market participant, actual results may differ from these assumptions. The methodology used for the goodwill impairment test has remained consistent over the last three fiscal years.

Valuation of Pension Benefit Obligation

Description

The pension benefit obligation is actuarially determined in accordance with GAAP and is impacted by assumptions used to estimate the obligation, namely the discount rate. Annually, we review the actuarial assumptions used and compare the assumptions to third-party benchmarks to ensure that the selected assumptions accurately account for our future pension benefit obligations.

Judgments and uncertainties involved in the estimate

Our discount rate assumptions are determined by developing a yield curve based on high quality corporate bonds with maturities matching the plans’ expected benefit payment streams. The plans’ expected cash flows are then discounted by the resulting year-by-year spot rates. The 2022 weighted-average discount rate used to measure our pension benefit obligations ranged from 3.57% to 5.55%, a general increase from the 2021 rates, which ranged from 1.18% to 2.95%, due to increased market interest rates over this period.

Effect if actual results differ from assumptions

A 25-basis point decrease in the discount rates used for these plans would have increased pension benefit obligations by approximately $15.6 million from the amount recorded at December 31, 2022. The methodology used for the valuation of the pension benefit obligation has remained consistent over the last three fiscal years.

Recoverability of Deferred Income Tax Assets and Unrecognized Tax Benefits

Description

We operate in and are subject to income taxes in various jurisdictions and are subject to ongoing audits by federal, state, and non-U.S. tax authorities. Significant judgment is required in determining the realizability of deferred tax assets and evaluating unrecognized tax benefits.

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We have significant amounts of deferred tax assets that are evaluated for recoverability and valued accordingly. Management evaluates the realizability of deferred income tax assets for each jurisdiction in which the Company operates. We record valuation allowances to reduce the carrying value of deferred tax assets to amounts that we expect are more likely than not to be realized.

The provision for unrecognized tax benefits provides a recognition threshold and measurement attribute for determining the financial statement tax benefits taken or expected to be taken in a tax return and disclosure requirements regarding uncertainties in income tax positions. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

Judgments and uncertainties involved in the estimate

In assessing the adequacy of a recorded valuation allowance, we consider all positive and negative evidence, including the scheduled reversal of deferred tax liabilities, historical and projected future taxable income, and tax planning strategies. Additionally, significant judgment is required in the identification and measurement of unrecognized tax benefits. Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with our various filing positions.

Effect if actual results differ from assumptions

Although we believe that our judgments and estimates are reasonable, actual results could differ and result in additional tax expense or benefit. If we determine a valuation allowance should be recognized to reduce the carrying value of a deferred tax asset or a liability for an unrecognized tax benefit needs to be recorded, the adjustment would result in a change to tax expense in the period such determination is made. We have not made any material changes in the process we use to assess valuation allowances and unrecognized tax benefits over the last three fiscal years.

Contingencies

Description

Liabilities are established for environmental and legal contingencies at both the business and corporate levels. A significant amount of judgment and the use of estimates are required to quantify our ultimate exposure in these matters.

Judgments and uncertainties involved in the estimate

The valuation of liabilities for these contingencies is reviewed on a quarterly basis to ensure that we have accrued the proper level of expense. The liability balances are adjusted to account for changes in circumstances for ongoing issues and the establishment of additional liabilities for emerging issues. Estimates used in the valuations include the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and currently accrued to-date and consider the availability and extent of insurance coverage. Such liability balances contain uncertainties due to new developments regarding the facts and circumstances of each proceeding, changes in applicable laws and regulations, and other future events and decisions by third parties that may impact the ultimate resolution of a proceeding.

Effect if actual results differ from assumptions

Although we believe that the amount accrued to-date is adequate, future changes in circumstances could impact these determinations, and we may be exposed to a material loss. For example, to the extent we prevail in matters for which a liability has been established or are required to pay amounts in excess of our established liability, our contingent liability in a given financial statement period could be materially affected. However, the Company does not believe that it is 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.

Recent Accounting Standards

See Note 1 — Description of Business and Summary of Significant Accounting Policies in the Consolidated Financial Statements in Item 8 of this Form 10-K for a discussion of recent accounting pronouncements and recently adopted accounting standards.

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Non-GAAP Disclosures

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

We believe the net debt to net capitalization ratio and free cash flow are important measures of liquidity. Net debt to net capitalization is helpful in evaluating our capital structure and the amount of leverage we employ. Free cash flow and free cash flow ratios provide both management and investors a measurement of cash generated from operations that is available to fund acquisitions, pay dividends, repay debt and repurchase our common stock. Free cash flow as a percentage of revenue equals free cash flow divided by revenue. Free cash flow as a percentage of net earnings equals free cash flow divided by net earnings. We believe that reporting adjusted working capital provides a meaningful measure of liquidity by showing changes caused by operational results. We believe that reporting organic revenue growth, which excludes the impact of foreign currency exchange rates and the impact of acquisitions and divestitures, provides a useful comparison of our revenue performance and trends between periods.

Reconciliations and comparisons of GAAP to non-GAAP measures can be found above in this Item 7, MD&A.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this section is incorporated by reference to the section, "Financial Instruments and Risk Management", included within the MD&A in Item 7.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND

FINANCIAL STATEMENT SCHEDULE

Page

58 Management's Report on Internal Control Over Financial Reporting

59 Report of Independent Registered Public Accounting Firm (PCAOB ID 238)

61 Consolidated Statements of Earnings

62 Consolidated Statements of Comprehensive Earnings

63 Consolidated Balance Sheets

64 Consolidated Statements of Stockholders' Equity

65 Consolidated Statements of Cash Flows

66 Notes to Consolidated Financial Statements

70 Note 2 - Revenue

73 Note 3 - Acquisitions

78 Note 4 - Dispositions

79 Note 5 - Inventories, net

79 Note 6 - Property, Plant and Equipment, net

79 Note 7 - Leases

81 Note 8 - Credit Losses

82 Note 9 - Goodwill and Other Intangible Assets

83 Note 10 - Accrued Expenses and Other Liabilities

84 Note 11 - Restructuring Activities

86 Note 12 - Borrowings

87 Note 13 - Financial Instruments

89 Note 14 - Income Taxes

92 Note 15 - Equity and Cash Incentive Program

95 Note 16 - Commitments and Contingent Liabilities

96 Note 17 - Employee Benefit Plans

102 Note 18 - Accumulated Other Comprehensive Earnings (Loss)

103 Note 19 - Segment Information

106 Note 20 - Earnings per Share

106 Note 21 - Shareholder's Equity

(All other schedules are not required and have been omitted)

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MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).

The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2022. In making this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).

Based on its assessment under the criteria set forth in Internal Control — Integrated Framework (2013), management concluded that, as of December 31, 2022, the Company's internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

The effectiveness of the Company's internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Dover Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Dover Corporation and its subsidiaries (the "Company") as of December 31, 2022 and 2021, and the related consolidated statements of earnings, of comprehensive earnings, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

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company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Test

As described in Notes 1 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $4.669 billion as of December 31, 2022. Management performs its goodwill impairment test annually in the fourth quarter, or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired, when some portion but not all of a reporting unit is disposed of or classified as held for sale, or when a change in the composition of reporting units occurs for other reasons. When performing the impairment test, management estimates the fair value of each reporting unit using the income-based valuation method, which involves significant judgment. Under the income-based valuation method, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. Management uses internal forecasts to estimate future cash flows, which are based on historical performance and future estimated results.

The principal considerations for our determination that performing procedures relating to the goodwill impairment test is a critical audit matter are there was significant judgment by management when developing the fair value measurement of each reporting unit, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and in evaluating management’s estimate of fair value of the reporting units, specifically related to revenue growth in the estimated future cash flows. In addition, the nature and extent of audit effort required to address the matter was a consideration.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment test, including controls over the determination of revenue growth in the estimated future cash flows. These procedures also included, among others, testing the appropriateness of the discounted cash flow model, assessing results of sensitivities over the assumptions in the discounted cash flow model, and testing the reasonableness of significant assumptions used by management, specifically revenue growth. When testing revenue growth, we evaluated whether the assumptions were reasonable by (i) understanding management’s process to develop the estimated future cash flows, (ii) comparing management’s forecasted revenue growth to current and prior period performance and (iii) comparing management’s forecasted revenue growth to external market and/or industry data.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

We have served as the Company's auditor since 1995.

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DOVER CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

Years Ended December 31,

Net earnings per share:

Weighted average shares outstanding:

See Notes to Consolidated Financial Statements

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DOVER CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

Years Ended December 31,

Other comprehensive earnings (loss), net of tax

Foreign currency translation adjustments:

Reclassification of foreign currency translation losses to earnings 5,915 — —

Pension and other postretirement benefit plans:

Changes in fair value of cash flow hedges:

Net gains reclassified into earnings (3,732) (4,871) (632)

See Notes to Consolidated Financial Statements

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DOVER CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

ASSETS

Current assets:

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Stockholders' equity:

Preferred stock - $100 par value; 100,000 shares authorized; none issued — —

See Notes to Consolidated Financial Statements

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DOVER CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except per share amounts)

Stock-based compensation expense — 25,026 — — — 25,026

Other comprehensive earnings, net of tax — — — 62,772 — 62,772

Stock-based compensation expense — 31,111 — — — 31,111

Other comprehensive loss, net of tax — — — (798) — (798)

Stock-based compensation expense — 30,821 — — — 30,821

Other comprehensive loss, net of tax — — — (112,171) — (112,171)

See Notes to Consolidated Financial Statements

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DOVER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Years Ended December 31,

Operating Activities:

Adjustments to reconcile net earnings to cash provided by operating activities:

Investing Activities:

Proceeds from sale of property, plant and equipment 6,061 7,070 7,207

Financing Activities:

Supplemental information - cash paid during the year for:

See Notes to Consolidated Financial Statements

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DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Dover Corporation ("Dover" or "Company") is a diversified global manufacturer and solutions provider delivering innovative equipment and components, consumable supplies, aftermarket parts, software and digital solutions and support services. The Company's businesses are based primarily in the United States and Europe with manufacturing and other operations throughout the world. The Company operates through five business segments that are structured around similar business models, go-to market strategies and manufacturing practices: Engineered Products, Clean Energy & Fueling, Imaging & Identification, Pumps & Process Solutions and Climate & Sustainability Technologies. For additional information on the Company's segments, see Note 19 — Segment Information.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The results of operations of acquired businesses are included from the dates of acquisitions.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying disclosures. These estimates may be adjusted due to changes in future economic, industry, or customer financial conditions, as well as changes in technology or demand. Estimates are used for, but not limited to, allowances for doubtful accounts receivable, net realizable value of inventories, restructuring reserves, warranty reserves, pension and post-retirement plans, stock-based compensation, useful lives for depreciation and amortization of long-lived assets including finite-lived intangibles, future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets, deferred tax assets, unrecognized tax benefits and contingencies. Actual results may ultimately differ from these estimates, although management does not believe such differences would materially affect the consolidated financial statements in any individual year. Estimates and assumptions are periodically reviewed and the effects of changes in these estimates and assumptions are reflected in the Consolidated Financial Statements in the period that they are determined.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, demand deposits and short-term investments, which are highly liquid in nature and have original maturities at the time of purchase of three months or less. The carrying value of cash and cash equivalents approximates fair value.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recorded at face amounts less an allowance for credit losses. The allowance is an estimate based on historical collection experience, current and future economic and market conditions and a review of the current status of each customer's trade accounts receivable. Management evaluates the aging of the accounts receivable balances and the financial condition of its customers and all other forward-looking information that is reasonably available to estimate the amount of accounts receivable that may not be collected in the future and records the appropriate provision. See Note 8 — Credit Losses for additional information.

Inventories

Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) basis, or net realizable value. An immaterial portion of domestic inventories is stated at cost, determined on the last-in, first-out (LIFO) basis, which is less than net realizable value.

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DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Property, Plant and Equipment

Property, plant and equipment includes the historical cost of land, buildings, machinery and equipment, purchased software, finance lease assets and significant improvements to existing plant and equipment or, in the case of acquisitions, the fair value of acquired assets. Expenditures for maintenance, repairs and minor renewals are expensed as incurred. When property or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the gain or loss realized on disposition is reflected in earnings. The Company depreciates its assets on a straight-line basis over their estimated useful lives as follows: buildings and improvements 5 to 31.5 years; machinery and equipment 3 to 15 years; furniture and fixtures 3 to 7 years; vehicles 3 to 7 years; and software 3 to 10 years.

Derivative Financial Instruments

The Company uses derivative financial instruments to hedge its exposures to various risks, including foreign currency exchange rate risk. The Company does not enter into derivative financial instruments for speculative purposes and does not have a material portfolio of derivative financial instruments. Derivative financial instruments used for hedging purposes must be designated and effective as a hedge of the identified risk exposure at inception of the contract. The Company recognizes all derivatives as either assets or liabilities on the consolidated balance sheet and measures those instruments at fair value. For derivatives designated as hedges of the fair value of assets or liabilities, the changes in fair value of both the derivatives and of the hedged items are recorded in current earnings. For derivatives designated as cash flow hedges, the change in the fair value of the derivatives is recorded as a component of other comprehensive earnings and subsequently recognized in net earnings when the hedged items impact earnings.

Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over the fair value of net assets acquired. Goodwill and certain other intangible assets deemed to have indefinite lives (primarily trademarks) are not amortized. For goodwill, impairment tests are required at least annually, or more frequently if events or circumstances indicate that it may be impaired, when some portion but not all of a reporting unit is disposed of or classified as assets held for sale, or when a change in the composition of reporting units occurs for other reasons, such as a change in segments. Based on its current organizational structure, the Company identified reporting units for which cash flows are determinable and to which goodwill was allocated.

The Company performs its goodwill impairment test annually in the fourth quarter at the reporting unit level. A quantitative test is used to determine existence of goodwill impairment and the amount of the impairment loss at the reporting unit level. The quantitative test compares the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses an income-based valuation method, determining the present value of estimated future cash flows, to estimate the fair value of a reporting unit. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Factors used in the impairment analysis require significant judgment, and actual results may differ from assumed and estimated amounts. The Company uses its own market assumptions including internal projections of future cash flows, discount rates and other assumptions considered reasonable in the analysis and reflective of market participant assumptions. These forecasts are based on historical performance and future estimated results. The discount rates utilized are based on a capital asset pricing model and published relevant industry rates, which take into consideration the risks and uncertainties inherent to the reporting units and in the internally developed forecasts. See Note 9 — Goodwill and Other Intangible Assets for further discussion of the Company's annual goodwill impairment test and results. No impairment of goodwill was required for the years ended December 31, 2022, 2021, or 2020.

The Company uses an income-based valuation method to annually test its indefinite-lived intangible assets for impairment. The fair value of the intangible asset is compared to its carrying value. This method uses the Company's own market assumptions, which are considered reasonable. Any excess of carrying value over the estimated fair value is recognized as an impairment loss.No impairment of indefinite-lived intangible assets was required for the years ended December 31, 2022, 2021, or 2020.

Other intangible assets with determinable lives primarily consist of customer intangibles, unpatented technologies, patents and trademarks. The other intangible assets are amortized over their estimated useful lives, ranging from 5 to 20 years.

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DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Long-lived assets (including definite-lived intangible assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, such as a significant sustained change in the business climate. If an indicator of impairment exists for any grouping of assets, an estimate of undiscounted future cash flows is prepared and compared to its carrying value. If an asset group is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset group over its fair value, as determined by an estimate of discounted future cash flows.

Leases

The Company determines if an arrangement is a lease at inception of a contract. The Company has operating and finance leases for corporate offices, manufacturing plants, research and development facilities, shared services facilities, vehicle fleets and certain office and manufacturing equipment. Operating lease right-of-use ("ROU") assets are included in other assets and deferred charges and operating lease liabilities are included in other accrued expenses and other liabilities in the consolidated balance sheet. Finance lease ROU assets are included in property, plant and equipment, and the related lease liabilities are included in other accrued expenses and other liabilities in the consolidated balance sheet. Leases with an initial term of 12 months or less are not recorded in the balance sheet.

The Company accounts for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or lease liabilities. These are expensed as incurred and recorded as variable lease expense.

ROU assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the net present value of fixed lease payments over the lease term. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. ROU assets also include any advance lease payments made and exclude lease incentives. As most of the Company's operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Finance lease agreements include an interest rate that is used to determine the present value of future lease payments. Fixed operating lease expense and finance lease depreciation expense are recognized on a straight-line basis over the lease term.

Restructuring Accruals

The Company takes actions to reduce headcount, close facilities, or otherwise exit operations. Such restructuring activities at an operation are recorded when management has committed to an exit or reorganization plan and when termination benefits are probable and can be reasonably estimated based on circumstances at the time the restructuring plan is approved by management or when termination benefits are communicated. Exit costs may include contractual terminations and asset impairments as a result of an approved restructuring plan. The accrual of both severance and exit costs requires the use of estimates. Though the Company believes that its estimates accurately reflect the anticipated costs, actual results may be different from the original estimated amounts.

Foreign Currency

Assets and liabilities of non-U.S. subsidiaries, where the functional currency is not the U.S. dollar, have been translated at year-end exchange rates and profit and loss accounts have been translated using weighted-average monthly exchange rates. Foreign currency translation gains and losses are included in the consolidated statements of comprehensive earnings as a component of other comprehensive earnings (loss). Assets and liabilities of an entity that are denominated in currencies other than an entity's functional currency are re-measured into the functional currency using end of period exchange rates, where applicable to certain balances. Gains and losses related to these re-measurements are recorded within the consolidated statements of earnings as a component of other income, net. Gains and losses arising from intercompany foreign currency transactions that are of a long-term investment in nature are reported in the same manner as translation adjustments.

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DOVER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Revenue Recognition

The majority of the Company's revenue is generated through the manufacture and sale of a broad range of specialized products and components, with revenue recognized upon transfer of control, title and risk of loss, which is generally upon shipment. Service revenue represents less than 5% of total revenue and is recognized as the services are performed. In limited cases, revenue arrangements with customers require delivery, installation, testing, certification, or other acceptance provisions to be satisfied before revenue is recognized. The Company includes shipping costs billed to customers in revenue and the related shipping costs in cost of goods and services.

Stock-Based Compensation

The principal awards issued under the Company's stock-based compensation plans include non-qualified stock appreciation rights ("SARs"), restricted stock units ("RSUs") and performance share awards ("PSAs"). The cost for such awards is measured at the grant date based on the fair value of the award. At the time of grant, the Company estimates forfeitures, based on historical experience, in order to estimate the portion of the award that will ultimately vest. The value of the portion of the award that is expected to ultimately vest is recognized as expense on a straight-line basis, generally over the explicit service period of three years (except for retirement-eligible employees) and is included in selling, general and administrative expenses in the consolidated statements of earnings. Expense for awards granted to retirement-eligible employees is recorded over the period from the date of grant through the date the employee first becomes eligible to retire and is no longer required to provide service. See Note 15 — Equity and Cash Incentive Program for additional information related to the Company's stock-based compensation.

Income Taxes

The provision for income taxes includes federal, state, local and non-U.S. taxes. Tax credits, primarily for research and experimentation, are recognized as a reduction of the provision for income taxes in the year in which they are available for tax purposes. Deferred taxes are provided using enacted rates on the future tax consequences of temporary differences. Temporary differences include the differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis and the tax benefit of carryforwards. A valuation allowance is established for deferred tax assets for which it is more likely than not that some portion or all of the deferred tax benefit will not be realized. In assessing the need for a valuation allowance, management considers all available evidence, including the future reversal of existing taxable temporary differences, taxable income in carryback periods, prudent and feasible tax planning strategies and estimated future taxable income. The valuation allowance can be affected by changes to tax regulations, interpretations and rulings, changes to enacted statutory tax rates and changes to future taxable income estimates.

Tax benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position in consideration of applicable tax statutes and related interpretations and precedents. Tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized on ultimate settlement.

Research and Development Costs

Research and development costs, including qualifying engineering costs, are expensed when incurred and amounted to $163,300 in 2022, $157,826 in 2021 and $142,101 in 2020. These costs as a percent of revenue were 1.9% in 2022, 2.0% in 2021 and 2.1% in 2020. Research and development costs are reported within selling, general and administrative expenses in the consolidated statements of earnings.

Advertising Costs

Advertising costs are expensed when incurred and amounted to $25,905 in 2022, $23,685 in 2021 and $21,375 in 2020. Advertising costs are reported within selling, general and administrative expenses in the consolidated statements of earnings.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Risk, Retention, Insurance

The Company's insurance programs contain various deductibles that, based on the Company's experience, are typical and customary for a company of its size and risk profile. The Company does not consider any of the deductibles to represent a material risk to the Company. The Company generally maintains insurance policies with deductibles for claims and liabilities related primarily to workers' compensation, health and welfare claims, general liability, product and automobile liability, cybersecurity risks, property damage and business interruption resulting from certain events. The Company accrues for claim exposures that are probable of occurrence and can be reasonably estimated.

Recent Accounting Pronouncements

Recently Issued Accounting Standards

The following accounting standards updates ("ASU"), issued by the Financial Accounting Standards Board ("FASB"), will, or are expected to, result in a change in practice and/or have a financial impact to the Company's Consolidated Financial Statements:

In September 2022, the FASB issued ASU No. 2022-04 Liabilities-Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations. The amendments in this update require a buyer in a supplier finance program to disclose information about the program's nature, activity during the period, changes from period to period, and potential magnitude. The guidance will become effective January 1, 2023 and early adoption is permitted. Management is currently evaluating the impact of adopting this ASU on the Company's Consolidated Financial Statements.

Recently Adopted Accounting Standards

In October 2021, the FASB issued ASU No. 2021-08 Business Combinations (Topic 805)-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. Under current guidance, the acquirer generally recognizes such contract assets and contract liabilities at fair value on the acquisition date. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in this update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. The Company early adopted the guidance as of January 1, 2022, which did not have a material impact on the Company's Consolidated Financial Statements.

In March 2020 and January 2021, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU No. 2021-01, Reference Rate Reform, Scope, respectively. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 as an update to ASU No. 2020-04. These updates provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform, including expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in these updates are elective and are effective upon issuance for all entities. The Company adopted the guidance, which did not have a material impact on the Company's Consolidated Financial Statements.

2. Revenue

Revenue from contracts with customers

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

Disaggregation of Revenue

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 19 — Segment Information for revenue by segment and geographic location.

Performance Obligations

A majority of the Company's contracts have a single performance obligation which represents, in most cases, the equipment or product being sold to the customer. Some contracts include multiple performance obligations such as a product and the related installation, extended warranty, software and digital solutions, and/or maintenance services. These contracts require judgment in determining the number of performance obligations.

The Company has elected to use the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component if it is expected, at contract inception, that the period between when the Company transfers a promised good or service to a customer, and when the customer pays for that good or service, will be one year or less. Thus, the Company may not consider an advance payment to be a significant financing component, if it is received less than one year before product completion.

The majority of the Company's contracts offer assurance-type warranties in connection with the sale of a product to a customer. Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Such warranties do not represent a separate performance obligation.

The Company may also offer service-type warranties that provide services to the customer, in addition to the assurance that the product complies with agreed-upon specifications. If a warranty is determined to be a service-type warranty, it represents a distinct service and is treated as a separate performance obligation.

Estimates are used to determine the amount of variable consideration in contracts, the standalone selling price among separate performance obligations and the measure of progress for contracts where revenue is recognized over time. The Company reviews and updates these estimates regularly.

Some contracts with customers include variable consideration primarily related to volume rebates. The Company estimates variable consideration at the most likely amount to determine the total consideration which the Company expects to be entitled. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company's estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available.

For contracts with multiple performance obligations, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The Company uses an observable price to determine the standalone selling price for separate performance obligations or a cost plus margin approach when one is not available.

Over 95% of the Company's performance obligations are 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 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

For revenue recognized over time, there are two types of methods for measuring progress and both are relevant to the Company: (1) input methods and (2) output methods. Although this may vary by business, input methods generally are based on costs incurred relative to estimated total costs. Output methods generally are based on a measurement of progress, such as milestone achievement. The businesses use the method and measure of progress that best depicts the transfer of control to the customer of the goods or services to date relative to the remaining goods or services promised under the contract.

Transaction Price Allocated to the Remaining Performance Obligations

At December 31, 2022, we estimated that $296,698 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 63.1% of our unsatisfied (or partially unsatisfied) performance obligations as revenue in 2023, with the remaining balance to be recognized in 2024 and thereafter.

Remaining consideration, including variable consideration, from contracts with customers is included in the amounts presented in the preceding paragraph and pertains to contracts with multiple performance obligations, extended warranties on products and multi-year agreements, which are typically recognized as the performance obligation is satisfied.

The Company applied the standard's practical expedient that permits the omission of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed.

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers:

Contract assets primarily relate to the Company's right to consideration for work completed but not billed at the reporting date and are recorded in prepaid and other current assets in the consolidated balance sheets. Contract assets are transferred to receivables when the right to consideration becomes unconditional. Contract liabilities relate to advance consideration received from customers or advance billings for which revenue has not been recognized. Current contract liabilities are recorded in deferred revenue and non-current contract liabilities are recorded in other liabilities in the consolidated balance sheets. Contract liabilities are reduced when the associated revenue from the contract is recognized. The increase in current contract liabilities presented above primarily relates to advance payments received from customers.

The revenue recognized during 2022 and 2021 that was included in the contract liabilities at the beginning of the respective periods amounted to $196,891 and $163,546, respectively.

Contract Costs

Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included within cost of goods and services in the consolidated statements of earnings.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share data and where otherwise indicated)

3. Acquisitions

2022

During the year ended December 31, 2022, the Company acquired three businesses in separate transactions for total consideration of $312,855, net of cash acquired and inclusive of measurement period adjustments. Of these transactions, one includes additional consideration contingent on achieving certain financial performance targets. These businesses were acquired to complement and expand upon existing operations within the Pumps & Process Solutions segment. The goodwill recorded as a result of these acquisitions represents the economic benefits expected to be derived from product line expansions and operational synergies. The goodwill is non-deductible for U.S. income tax purposes for these acquisitions.

Malema

On July 1, 2022, the Company acquired 99.7% of the equity interests in Malema Engineering Corporation and its related foreign entities ("Malema"), a designer and manufacturer of flow measurement and control instruments serving customers in the biopharmaceutical, semiconductor and industrial sectors, for $223,462, net of cash acquired and inclusive of the impact of measurement period adjustments discussed below, subject to contingent consideration. During the fourth quarter of 2022, the Company acquired the remaining 0.3% of equity interests in Malema. The Malema acquisition expands the Company's biopharma single-use production offering within the Pumps & Process Solutions segment. The contingent consideration is based upon meeting certain financial performance targets for each twelve-month period over the next two years from March 31, 2022, with a maximum potential payout of $50,000. No value is attributed to the current estimated fair value of contingent earn-out liability, which will be reassessed quarterly during the performance periods. In connection with this acquisition, the Company recorded goodwill of $153,082 and intangible assets of $64,000 for customer intangibles, $16,000 for patents, and $4,000 for trademarks. The fair value for 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 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 significantly during the measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed, and the related tax balances. During the year ended December 31, 2022, the Company recorded measurement period adjustments primarily related to its preliminary treatment of certain liabilities. These adjustments are based on facts and circumstances that existed, but were not known, as of the acquisition date which resulted in an increase in goodwill of $1,381.

The following presents the preliminary allocation of purchase price to the assets acquired and liabilities assumed under the Malema acquisition, based on their estimated fair values at acquisition date:

Total

Current assets, net of cash acquired $ 8,985