UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 20202023
Commission File Number: 1-4018
Dover Corporation
(Exact name of registrant as specified in its charter)
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| Delaware | | 53-0257888 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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| 3005 Highland Parkway |
| Downers Grove, Illinois 60515 |
| (Address of principal executive offices) |
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Registrant's telephone number: (630) 541-1540 |
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| Securities registered pursuant to Section 12(b) of the Act: |
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Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
| Common Stock, par value $1 | DOV | New York Stock Exchange |
| 1.250% Notes due 2026 | DOV 26 | New York Stock Exchange |
| 0.750% Notes due 2027 | DOV 27 | New York Stock Exchange |
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| Securities registered pursuant to Section 12(g) of the Act: |
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| None |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company”company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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| Large accelerated filer | ☑ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company | ☐ |
| | | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report. Yes ☑ No o
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the close of business on June 30, 20202023 was $13,862,183,340.$20,558,274,097. The registrant’sregistrant's closing price as reported on the New York Stock Exchange-Composite Transactions for June 30, 20202023 was $96.56$147.65 per share. The number of outstanding shares of the registrant’sregistrant's common stock as of February 2, 2021January 29, 2024 was 143,649,247.139,896,670.
Documents Incorporated by Reference: Part III — Certain Portions of the Proxy Statement for Annual Meeting of Shareholders to be held on May 7, 20213, 2024 (the “2021"2024 Proxy Statement”Statement").
Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K, especially "Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations," contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements in this document other than statements of historical fact are statements that are, or could be deemed, “forward-looking”"forward-looking" statements. Some of these statements may be indicated by words such as “may”"may", “anticipate”"anticipate", “expect”"expect", believe”"believe", “intend”"intend", “guidance”"continue", “estimates”"guidance", “suggest”"estimates", “will”"suggest", “plan”"will", “should”"plan", “would”"should", “could”"would", “forecast”"could", "forecast" and other words and terms that use the future tense or have a similar meaning. Forward-looking statements are based on current expectations and are subject to numerous important risks, uncertainties, and assumptions, and other factors, some of which are beyond the Company’s control.including those described in Item 1A, "Risk Factors" in this Annual Report on Form 10-K. Factors that could cause actual results to differ materially from current expectations include, among other things,things: general economic conditions and conditions in the particular markets in which we operate; supply chain constraints and labor shortages that could result in production stoppages, inflation in material input costs and freight logistics; the impacts of COVID-19,natural or other future pandemics,human-induced disasters, acts of war, terrorism, international conflicts, and public health crises on the global economy and on our customers, suppliers, employees, business and cash flows, other general economic conditions and conditions in the particular markets in which we operate,flows; changes in customer demand and capital spending,spending; competitive factors and pricing pressures,pressures; our ability to develop and launch new products in a cost-effective manner,manner; changes in law, including the effect of tax laws and developments with respect to trade policy and tariffs,tariffs; our ability to identify and complete acquisitions and integrate and realize synergies from newly acquired businesses,businesses; the impact of interest rate and currency exchange rate fluctuations,fluctuations; capital allocation plans and changes in those plans, including with respect to dividends, share repurchases, investments in research and development, capital expenditures and acquisitions, changes in material costs or the supply of input materials,acquisitions; our ability to derive expected benefits from restructurings, productivity initiatives and other cost reduction actions; the impact of legal compliance risks and litigation, including with respect to product quality and safety, cybersecurity with respect to IT systems and digital solutions and privacy,privacy; and our ability to capture and protect intellectual property rights. Certain of these risksrights, and uncertaintiesvarious other factors that are described in more detail in Item 1A. "Risk Factors" of this Annual Report on Form 10-K.our periodic reports filed with or furnished to the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.otherwise, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
In this Annual Report on Form 10-K, 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"). We include reconciliations to provide more details on the use and derivation of these financial measures. Please see "Non-GAAP Disclosures" at the end of Item 7 for further detail.
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
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 through five operating segments: Engineered Products, Clean Energy & Fueling, Solutions, Imaging & Identification, Pumps & Process Solutions, and RefrigerationClimate & Food Equipment.Sustainability Technologies. Unless the context indicates otherwise, references herein to "Dover," "the Company," and words such as "we," "us," or "our" include Dover Corporation and its consolidated subsidiaries. Dover was incorporated in 1947 in the State of Delaware and became a publicly traded company in 1955. Dover is headquartered in Downers Grove, Illinois and currently employs approximately 23,000over 25,000 people worldwide.
Dover's five segments are structured around businesses with similar business models, go-to-market strategies, product categories, and manufacturing practices. This structure enablesincreases management efficiency and better aligns Dover’sDover's operations with its strategic initiatives and capital allocation priorities, and provides greater transparency about our performance to external stakeholders. Dover's five operating and reportable segments are as follows:
•Our Engineered Products segment is a provider ofprovides a wide range of products,equipment, components, software, solutions and services that have broad customer applications across a number of markets, includingto the vehicle aftermarket, vehicle service, solid waste handling, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing.dispensing end-markets.
•Our Clean Energy & Fueling Solutions segment is focused on providingprovides components, equipment, software, solutions and software and service solutionsservices 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 fluidssubstances along the supply chain, as well as theand safe and efficient operation of convenience retail, retail fueling and vehicle wash establishments.
•Our Imaging & Identification segmentsegment supplies precision marking and coding, product traceability, brand protection and digital textile printing equipment, as well as related consumables, software and services.services to the global packaged and consumer goods, pharmaceutical, industrial manufacturing, textile and other end-markets.
•Our Pumps & Process Solutions segment manufactures specialty pumps and flow meters, highly engineered precision components, specialized instrumentation and digital controls for rotating and reciprocating machines, fluid handling components,connecting solutions and plastics and polymer processing equipment, single use pumps, flow metersserving single-use biopharmaceutical production, diversified industrial manufacturing, chemical production, plastics and connectors,polymer processing, midstream and highly engineered components for rotatingdownstream oil and reciprocating machines.gas, energy transition, thermal management applications and other end-markets.
•Our RefrigerationClimate & Food EquipmentSustainability Technologies segment is a provider of innovative and energy-efficient equipment, components and systems that serveparts for the commercial refrigeration, heating and cooling and foodbeverage can-making equipment markets.end-markets.
Spin-off of Energy Businesses
On May 9, 2018, we completed the spin-off of Apergy Corporation ("Apergy") to our shareholders. Apergy consists of the upstream energy businesses previously included in our former Energy segment. The transaction was completed through the pro rata distribution of 100% of the common stock of Apergy to Dover's shareholders of record as of the close of business on April 30, 2018. Each Dover shareholder received one share of Apergy common stock for every two shares of Dover common stock held as of the record date. Apergy changed its name to ChampionX Corporation on June 3, 2020. For more details, see Note 2 — Spin-off of Apergy Corporation in the Consolidated Financial Statements in Item 8 of this Form 10-K.
COVID-19
On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus ("COVID-19") a pandemic. The COVID-19 outbreak and associated counter-acting measures implemented by governments around the world, as well as increased business uncertainty, had an adverse impact on our financial results beginning late in the first quarter. To help mitigate the financial impact, we executed temporary cost savings measures, reduced our capital spending for the year, initiated restructuring actions and proactively managed our working capital. Activity in many of the end-markets we serve has sequentially improved since the second quarter of 2020 and we expect that improvement trend to continue for most of our businesses in 2021, though uncertainty remains. Despite the impact of COVID-19 to our business in 2020, we remained committed to our management philosophy, company goals and our business strategy. For more
details on the impact of COVID-19 to our business see Item 7. Management's Discussion and Analysis in this Form 10-K.
Management Philosophy
Dover is committed to steadily creatingsteady shareholder value creation through a combination of sustained long-term profitable growth, operational excellence, superior free cash flow generation and productive capital re-deployment while adhering to a conservative financial policy. Dover seeks to be a leader in a diverse set of growing markets where customers are loyal to trusted partners and suppliers, and value product performance and differentiation driven by superior engineering, manufacturing precision, total solution development and excellent supply chain performance. Our businesses are long-time leaders in their respective markets and are known for their innovation, engineering capability and customer service excellence. We aim to continue growing our businesses from this strong foundation.
Our operating structure of five business segments allows for a differentiated acquisition focus consistent with our portfolio and capital allocation priorities. We believe our business segment structure, alsocoupled with value-creating functional expertise at our lean corporate center, presents opportunities to identify and capture operating synergies, such as global sourcing and supply chain integration, centralized shared services, andcross-pollination of manufacturing best practices, and further advances the development of our executive talent. Our executive management team sets strategic direction, initiatives and goals, develops effective incentive structures, provides oversight of strategy execution and achievement of these goals for our business segments, and with oversight from our Board of Directors, makes capital allocation decisions, including with respect to organic investment initiatives, major capital projects, acquisitions, divestitures, and the return of capital to our shareholders.
WeOur goal is to foster an operating culture with high ethical and performance standards that values accountability, rigor, trust, inclusion, respect and open communications, designed to allow individual growth and operational effectiveness. We are also committed to creatingincreasing our focus on maintaining sustainable business practices that protect the environment,reduce environmental impact, and through the development ofdeveloping products that help our customers meet their sustainability goals.
Company Goals
We are committed to driving superior shareholder returns through three key tenets of our corporate strategy.
First, we are committed to achieving organic sales growth above that of gross domestic product (GDP+ or 3%(4% to 5%6% annually on average) over a long-term business cycle, absent prolonged adverse economic conditions, complemented by growth through strategic acquisitions.
Second, we continue to focus on improving returns on capital, as well as segment and corporate earnings margin by enhancing our operational capabilities and making investments across the organization in software andgrowth capacity expansion, digital applications,capabilities, automation, operations management, information technology ("IT"), shared services (including Dover Business Services and theour India Innovation Center), and talent.We also focus on continuous, effective cost management and productivity initiatives, such as automation and digitally-supported manufacturing, supply chain optimization, automation and productivity capital expenditures, e-commerce and digital go-to-market, restructuring, product complexity reduction, improved footprint utilization, strategic pricing and portfolio management.
Third, we aim to generate strong and growinggrowth in free cash flow and earnings per share through strong earnings performance, productivity improvements and active working capital management.management, which is enhanced by opportunistic divestitures allowing for concentration on growing our core platforms. Dover prioritizes deploying free cash flow towards high-return and high-confidence organic reinvestments aimed at growing, improving and strengthening our businesses, as well as through inorganic investments that synergistically enhance the quality of our portfolio. Dover’sDover's value creation strategy is supported by a financial policy that includes a prudent approach to financial leverage, and a disciplined approach to capital allocation that allows for a balance between reinvestment and return of capital to shareholders through growing dividends and opportunistic share repurchases.
We support achievement of these goals by (1) aligning management compensation with strategic and financial objectives, (2) actively managing our portfolio to increase enterprise scale, improve business mix over time to markets with secular growth characteristics, and pursue acquisitions that fit the characteristics of an ideal Dover business and (3) investing in talent development programs.
Characteristics of a Dover Business
OurFor over 65 years, Dover has successfully and profitably operated a diversified portfolio of high-quality businesses generally operate in strategically attractive nicheserving a wide variety of industrial and business-to-business end markets with supportive long-termdifferent business models. We believe this diversity is a strength of our portfolio, providing Dover with multiple avenues for organic and inorganic growth, trends, favorable supplylower cyclicality, and demand landscapes, mature and incrementally improving technologies and highly loyal customers, suppliers or channel partners. Ourthe ability to extract synergies of common ownership. While we expect our portfolio to remain diversified, we also strive to shape the portfolio over time to increase common attractive attributes across our businesses.
Dover is adept at operating businesses have consistently enjoyed a customer base that chooses products primarily based on performance. In many instances,within two core operating models:
•Component Businesses: Many of our businesses produce critical equipment or components tothat represent a small portion of a larger system by cost. For example, our industrial and biopharma pumps, biopharma connectors, engineered bearings and compression components, clean energy components, and heat exchangers are all part of larger systems built or employed by our customers. Such components typically serve demanding applications where value-in-use and costs and risks of switching far exceed the cost of the productcomponent itself. Our products tend to have meaningful replacement, consumable or aftermarket demand due, in part, to
•Equipment with Aftermarket Opportunity: Many of our businesses produce complex and highly engineered equipment and systems that require a significant and predictable volume of parts, consumables, software and services over their life cycle. For example, our marking and coding equipment, plastics and polymer processing equipment, aluminum can-making equipment, and refuse collection vehicles all derive a significant share of revenue and profits from sale of consumables, parts and services into their large installed base because they play a specialized role in customer applications.base. Recurring demand, which includes parts, consumables, services and software, represents approximately 30%31% of our revenue.
We see the following commonalities characterizing the majority of Dover businesses:
•Attractive Markets: Our businesses increasingly complement our componentgenerally operate in strategically attractive niche industrial markets with proven and well-understood long-term growth trends, favorable customer and supplier landscapes, mature and incrementally improving technologies with opportunities for technological differentiation, and highly loyal customers, suppliers or channel partners.
•Leading Positions: Our businesses are long-time leaders in their respective markets and have consistently enjoyed customer bases that choose products primarily based on their performance, track record, safety and compliance.
•Digital Opportunity: Our equipment offerings with
and components are often complemented by value-added digital solutions (such asapplications, including connected products, sensors, digital controls and software)industry-specific software that create new sources of value tofor our customers and allow Dovercustomers.
•Attractive Financial Profile: Our businesses to drive growth and increase relevance with our customers. Dover businesses also exhibit attractive financial profiles, characterized by predictable, stable revenue, low capital intensity, strong cash-flow and sustainable returns on invested capital well in excess of our cost of capital.
Business Strategy
Dover seeks to create value for shareholders by combining the global scale and capabilities, as well as access to capital, of a diversified industrial enterprise with the agility and entrepreneurial dynamism of niche manufacturing businesses. To achieve our stated goals, we are focused on executing the following pillars of Dover’sDover's business strategy:
Capturing growth potential in our end-markets and adjacenciesadjacent market segments
Dover’s business segments are focused on building enduring competitive advantages and leadership positions in markets that we believe are positioned for sustained future growth. We believe that our businesses are among the top suppliers in most markets and niches that we serve (as defined by customer applications, geographies or products), which positions us well to capture future growth. We capitalize on our engineering, technology and design expertise, and maintain an intense focus on meeting the needs of our customers and on adding significant, and often new, value to their operations through superior product performance, safety, and reliability, and a commitment to aftermarket support. We cultivate and maintain an entrepreneurial culture to enable business agility, and continuously innovate to address our customers’customers' needs, to help them win in the markets they serve.
In particular, our businesses are well-positioned to capitalize onon: growing industrial manufacturing and trade volumes, adoption of digital technologies,volumes; an increased global focus on digitization and automation in industrial processes; increasing requirements for sustainability, safety, energy efficiency and consumer product safety,safety; and growth of the middle class and consumption in emerging economies.
•Our Engineered Products segment is capitalizing on global infrastructure investment, secular growth in waste generation and the increasing sophistication and automation of waste collection operations, and increasing global car parc, average car age and annual miles driven, as well as increasing digitization and sensorization of modern vehicles.vehicles, as well as growing defense spending related to signal intelligence and electronic warfare.
•Our Clean Energy & Fueling Solutions segment benefits from the worldwide growth in environmental safety and compliance regulations, new infrastructure build-out in emerging economies, transition to clean energy products such as liquefied natural gas and hydrogen, growth in demand for cryogenic gases and electric vehicle charging, consolidation in the convenience retail sector, increased sophistication and digitization of convenience stores and fuel retailing, as well as a secular growth in automated vehicle wash systems and solutions (over manual and do-it-yourself washing).
•Our Imaging & Identification segment leverages its unique product offering containing equipment, consumables, software and services to address market needs and requirements, including conversion to digital textile printing, increased demand for product traceability and brand protection, and consumer product safety.
•Our Pumps & Process Solutions segment is focused onon: capturing growth in its installed base andbase; the growing sophistication of fluid transfer and rotating machinery components, within the chemical,instrumentation, and digital controls; growth in virgin and recycled plastics and polymer, industrial, midpolymers production; growth in biological drug production and downstream oilthe shift toward single-use manufacturing processes; and energy transition investments into wind power, hydrogen compression, and carbon capture.
•Our Climate & gas, biopharma and hygienic markets as well as globalizing brands across geographies while expanding sales channels and engineering support. Our Refrigeration & Food EquipmentSustainability Technologies segment is responding to our customers’customers' demand for increased energy efficiency and sustainability in food retail merchandising solutions, including refrigeration systems using CO2 refrigerant, as well as increasing demand for sustainable heating and cooling solutions, including heat pumps, and sustainability-driven growing global demand for aluminum beverage cans.
We aim to growcapture growth by making organic investments in capacity expansion, automation and productivity improvement, research and development, developing new products and technologies, improving digital capabilities and expanding our geographic coverage,coverage. We pursue a disciplined and pursuing disciplined strategic approach to acquisitions that willaiming to enhance the quality and attractiveness of our portfolio over time and position Dover for long-term growth. We evaluate acquisition opportunities across the portfolio where we see the greatest runway for value-creating inorganic capital deployment. We continually evaluate how our assets and capabilities can position Doverus to grow in markets adjacent to our core businesses (for example, new applications, geographies, product segments or adjacent technologies) where Doverwe can be advantaged.
In addition to product innovation, we planaim to growcapture growth by developing digital technologies. Our Boston-based Dover Digital Labs serves as the company-wide hub for our digital initiative. We have continued to invest in this facility and our team of software developers, data scientists, and product managers to enhance our digital capability.capabilities. The Digital Labs team is driving digital transformation across our businesses along the following threein four areas: (i) enhancing the customer experience through more efficient and streamlined digital customer interfaces that make it easy to do businessbusiness with Dover companies; (ii) developing and improving acquired and organically built connected and software-as-a-service ("SaaS") products, that combine sensors, software, and machine learning augmented solutions built to integrate and work with Dover's core equipment and component offerings in our end-markets; andartificial intelligence; (iii) driving increased efficiency, safety and quality in our manufacturing operations by employing cutting-edge automation through "connected factory" and “digital factory” solutions."data quality" programs; and (iv) ensuring security of digital products. We believe that the Digital Labs center enhances the effectiveness ofLabs’ contributions in these areas enable us to add significant value to our products and fuels ourto capture commercial growth strategy.opportunities. By leveraging a central resource for Commercial Excellence, Industry 4.0, Industrial Internet of Things ("IIoT") and connected product initiatives,our software products, we are able to leverage efficiency of support infrastructure,capture efficiencies in our digital transformation efforts, improve product security, and offer better efficiency in providing support and engineering for our software and sensor integration engineeringconnected products to keep our projects cost-competitive.
Improving profitability and return on invested capital
We are committed to generating sustainable returns on invested capital well above the cost of capital across all of our businesses. We continually evaluate and pursue opportunities to improve efficiency, margin and return on capital. We are intensely focused on driving operational excellence across our businesses. We have implemented numerous productivity initiatives to maximize our efficiency, such as supply chain integration, shared services, lean manufacturing principles and production automation, footprint optimization, and product complexity reduction, as well as workplace safety initiatives to help ensure the health and welfare of our employees. Our businesses place a strong emphasis on continual product quality improvement and new product development to better serve customers and to facilitate expansion into new products and geographic markets.
We also focus on our margin expansion program,initiatives designed to reduce our selling, general and administrative cost base and rationalize our manufacturing and supply chain footprint across the portfolio. We continually expand initiatives to extract productivity gains across the businesses and realize savings. Our margin expansion initiatives are focused on four core enterprise capabilities: (1) leverage our Digital Labs team to enhance our internal and market-facing digital capabilities, (2) improve utilization and optimization of our manufacturing footprint through centralized resources and investment, (3) further centralize shared services under Dover Business Services, and (4) invest in our India Innovation Center shared services.
Dover Digital.Our Dover Digital Labs consists of a team of approximately 100150 software developers, data scientists, manufacturing engineers and product managers who provide digital capabilities to enhance the customer experience, develop connected industrial products and artificial intelligence based models that are embedded in SaaS offerings provided to customers by our operating companies, drive automation and efficiency inside our factories through digital technologies and in our business processes.processes and focus on the security of our digital products. Our Dover Digital leadershipLabs team has built common platforms which we have begun deployingare being deployed on customer facing applications to make it easier to discover, find, configure, buy and obtain service on products and services from Dover companies. The Dover Digital Labs teamIt has also deployed shared IIoT capability sosuch that many of Dover's products are remotely configurable and monitored, enabling our businesses to sell aftermarket parts and offer remote diagnostic services.
In 2019, we began to coordinate and oversee operations management from theDover Operational Excellence. Our corporate center of excellence. This team comprised of a small groupis composed of functional experts in operational optimization, lean manufacturing, automation, EHS (Environment, Health, and Safety) and complex project management. This team works closely with our businesses to drive execution excellence in our operational initiatives and best-in-class processes, standards and measurement tools to identify, prioritize and monitor execution of operational improvement initiatives. The operations center of excellence hasWith expertise in health and safety, supply chain management, lean operations, project management, and advanced manufacturing and automation. Weautomation, we continue to focus on initiatives to improve operational efficiency and enhance and solidify the continuous improvement programs embedded in our businesses' day-to-day operations, such as significant production automationoperations. In 2022, we established our advanced manufacturing center of excellence and footprint consolidation projects.expanded it again into 2023.
Dover Business Services. We continue to invest in Dover Business Services shared service centers, consisting of a team of more than 300 people,approximately 600 professionals, to provide important transactional and value-added services to our businesses in the areas of finance, IT and human resources.businesses. Our shared service model allows us to leverage scale across Dover, increase process efficiencies through technology and specialization, and reduce risk through centralized controls. Our shared service centers serve our businessescreate value by freeing resources normallywithin our businesses that would otherwise be dedicated to transactional services to allow those resourcesand allowing them to focus on customers, markets and product excellence. We expect to continue driving efficiencies through Dover Business Services as we increase the level of service centralization across the portfolio.
India Innovation Center. Our India Innovation Center has a team of approximately 500 people800 engineers and IT professionals that our businesses canrely on to leverage for product engineering, digital solutions development, data &and information management, research &and development, and intellectual property services. The scale and expertise of this team allows our businesses to access resources with capabilities and expertise across many disciplines that would be unaffordablemore costly to them as stand-alone companies, and allows for concurrent engineering on time sensitive projects.
Additionally, we focus on improving marginsWe have been steadily investing in the build out and returns by rigorously capturing synergies from our acquisitionsdeployment of the above four enterprise capabilities in the past several years, including investing over $38.6 million in capital expenditures during 2019-2023, and providing best-in-class corporatesignificantly expanding the staff of experts and support and services through a lean corporate center.personnel in key centers of excellence globally.
Disciplined capital allocation and continuous portfolio enhancement
We are focused on the most efficient allocation of capital to maximize returns on investment. To do this, we prioritizeutilize organic reinvestment to grow and strengthen our existing businesses. We plan to make average annual investments in capital spending of approximately 2% - 4% of revenue with a focus on internal projects designed to expand our market participation develop new productsand manufacturing capacity, drive further adoption of e-commerce and digital capabilities, and improve productivity. WeIn addition, we seek to deploy capital infor acquisitions in attractive growth areas across our five segments. Dover focuses primarily on bolt-on acquisitions, applying strict selection criteria of market attractiveness (including growth, maturity,market landscape, and performance-based competition), business fit (including sustained leading position, revenue visibility, and favorable customer value-add versus switching cost or risk) and financial return profile (accretive(including accretive growth and margins and double-digit return on invested capital). We opportunistically divest businesses where we see limited runway for future value creation in line withrelative to our aspirations, or where market and business fundamentals change and no longer fitsuit our criteria of business attractiveness and portfolio fit. Finally, we have consistently returned cash to shareholders by paying dividends, which have increased annually over each of the last 6568 years. We undertake opportunistic share repurchases as part of our capital allocation strategy. We employ a prudent financial policy to support our capital allocation strategy, which includes maintaining an investment grade credit rating.
Portfolio Development
Acquisitions
Our acquisition program has two key elements. As a first priority, we seek to acquire attractive add-on businesses with a strong fit that enhance our existing franchises either by increasing their reach and customer access, by broadening their product mix or by enhancing technological capabilitycapabilities and customer value-add. Second, in the right circumstances, we may strategically pursue larger, stand-alone businesses that complement our existing businesses or provide a path for us to pursue growth in near adjacencies. With all our acquisitions, we seek businesses that are leaders in their markets or niches, have a strong track record for innovation, offer differentiated solutions, clearly complement our businesses, and have a solid organic growth profile and attractive and sustainable returns, and offer significant synergy potential to generate double-digit return on capital within three years after the acquisition is completed.
Over the past three years (2018(2021 through 2020)2023), we have spent approximately $620.7 million to purchase eleven businesses. During 2020, we acquired six businesses for an aggregate consideration of $335.8 million, net of cash acquired. Consistent with our acquisition program, we acquired these businesses to complement and expand upon existing operations within the Engineered Products, Fueling Solutions, Imaging & Identification, and Pumps & Process Solutions segments. During 2019, we acquired three businesses for an aggregate consideration of $216.4 million,$2.0 billion, net of cash acquired and including contingent consideration. We acquired these businessesconsideration, to complement and expand upon existing operations within the Fueling Solutions and Pumps & Process Solutions segments. During 2018, we acquired two businesses for an aggregate purchase price of $68.6 million, net of cash acquired, within the Pumps & Process Solutions and Refrigeration & Food Equipment segments.fourteen businesses. For more details, regarding acquisitions completed over the past three years, see Note 43 — Acquisitions in the Consolidated Financial Statements in Item 8 of this Form 10-K.
Our future growth depends in large part on finding and acquiring successful businesses that expand the scope of our offerings and make us an even more important supplier to our customers. While we expect to generate annual organic revenue growth above that of 3% - 5%gross domestic product (4% to 6% annually on average) over a long-term business cycle absent extraordinary adverse economic conditions, our success in consistently growing the portfolio is also dependent on the ability to acquire and integrate businesses successfully within our existing structure. To track post-merger integration and accountability, we utilize an internal scorecard and well-defined processes to help ensure expected synergies are realized and value is created.
Dispositions
WeFrom time to time, we have sold or divested some of our businesses based on changes in specific market outlook, structural changes in financial performance, value-creation potential, or for other strategic considerations, which includedinclude an effort to reduce our exposure to cyclical markets or focus on our higher margin growth spaces. Most of our efforts to streamline and improve the portfolio to less cyclical and higher growth businesses were completed in 2018 with the Apergy spin-off.spaces.
Going forward, we recognize that some businesses in Dover’sDover's portfolio may have a greater value-creation potential if owned by another parent with a larger presence and focus on a given niche. We pragmatically consider such opportunities as part of our ongoing portfolio management and review processes, and execute divestitures if the value created is determined to be at an appropriate premium to the value of such business to Dover and allowsthe divestitures allow Dover shareholders to participate in the future value-creation potential from a change in ownership.ownership, including through the redeployment of divestiture proceeds into attractive add-on businesses in higher priority end-markets or through opportunistic return of capital to shareholders.
During 2021, we completed the past three years (2018 through 2020) we have sold businessessales of Unified Brands ("UB"), a wholly owned subsidiary of the Company within the Climate & Sustainability Technologies segment and Race Winning Brands ("RWB"), an equity method investment within the Engineered Products segment for aggregate cash consideration of $43.6$275.0 million. During 20202022 and 2019, we completed the sales of the Chino, California branch of The AMS Group ("AMS Chino") in the Refrigeration & Food Equipment segment and Finder Pompe S.r.l. ("Finder") within the Pumps & Process Solutions segment, respectively. During 2018,2023, there were no other material dispositions aside fromdispositions.
On October 11, 2023, we entered into a definitive agreement to sell De-Sta-Co, an operating company within the spin-offEngineered Products segment, for approximately $680.0 million enterprise value, subject to customary post-closing adjustments. The transaction is expected to close in the first quarter of Apergy as previously discussed. 2024, subject to customary closing conditions, including receipt of regulatory approvals.
The financial position and results of operations for Apergy have been presented as discontinued operations for all periods presented. Theaforementioned disposals in 2020 and 2019 did not represent strategic shifts in operations and, therefore, did not qualify for presentation as discontinued operations.
For more details, see Note 54 — Discontinued and Disposed OperationsDispositions in the Consolidated Financial Statements in Item 8 of this Form 10-K.
Business Segments
As noted previously, Dover's five segments are structured around businesses with similar business models, go-to-market strategies and manufacturing practices. This structure enablespractices and product categories which increases management efficiency and better aligns Dover’sDover's operations with its strategic initiatives and capital allocation priorities, and provides greater transparency about our performance to external stakeholders. This structure increases management efficiency and better aligns Dover’s operations with its strategic initiatives and capital allocation priorities across its businesses. Dover's five operating and reportable segments are as follows: Engineered Products, Clean Energy & Fueling, Solutions, Imaging & Identification, Pumps & Process Solutions and RefrigerationClimate & Food Equipment.Sustainability Technologies. For financial information about our segments and geographic areas, see Note 2019 — Segment Information in the Consolidated Financial Statements in Item 8 of this Form 10-K.
Engineered Products
Our Engineered Products segment provides a wide range of products,equipment, components, software, solutions and services that have broad customer applications across a number of markets, including: solid waste handling, aftermarket vehicle service, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing. Our waste handling business is a leading North American supplier of equipment, software and services for the refuse collection industry and for on-site processing and compaction of trash and recyclable materials. Our vehicle service business provides products, software and services used primarily in vehicle repair and maintenance, including light and heavy-duty vehicle lifts, wheel service equipment, vehicle diagnostics and vehicle collision repair solutions. The businesses in theOur industrial automation market providebusiness provides a wide range of modular automation components including manual clamps, power clamps, rotary and linear mechanical indexers, conveyors, pick and place units, glove ports and manipulators, as well as end-of-arm robotic grippers, slides and end effectors. Our industrial winch and hoist business provides a range of winches, hoists, bearings, drives, and electric monitoring systems for infrastructure and other industrial markets. The segment alsoOur aerospace and defense business supplies radio frequency and microwave filters and switches, as well as signal intelligence solutions, to enable secure communications in aerospace and defense applications, and benchtopapplications. The segment also includes bench top soldering and fluid dispensing solutions in electronics and industrial product assembly.assembly markets.
Our Engineered Products segment's products are manufactured primarily in the U.S., Europe and Asia and are sold throughout the world directly and through a network of distributors.
Clean Energy & Fueling Solutions
Our Clean Energy & Fueling Solutions segment provides components, equipment and software, and service solutions enabling safe storage, transport, handling and dispensing of clean and traditional fuels, cryogenic gases and other hazardous fluids, along the supply chain, as well as safe and efficient operation of retail fueling and vehicle wash establishments across the globe. Among solutions supplied by the segment are fuel dispensers,dispensing equipment and components for gasoline, compressed natural gas (CNG), liquefied natural gas (LNG) and hydrogen (H2) fueling sites, electric vehicle charging stations, payment systems, hardware and underground containment systems, vehicle wash systems, as well as asset tracking, monitoring and operational optimization software. Additionally, Fueling Solutions supplies components used for the transfer of fuels and other critical liquids across the supply chain.
Our Clean Energy & Fueling Solutions segment's products are manufactured primarily in the United States,North America, Europe, China, BrazilAsia, and CanadaSouth America and are sold throughout the world directly and through a network of distributors.
Imaging & Identification
The companies in our Imaging & Identification segment are global suppliers of precision marking and coding, packaging intelligence, product traceability, and brand protection, and digital textile printing equipment and solutions, as well as related consumables, software and services. The Imaging & Identification segmentOur marking and coding businesses primarily designsdesign and manufacturesmanufacture equipment and consumables used for printing variable information (such as bar coding ofcodes, dates, and serial numbers) on fast-moving consumer goods, providesprovide serialization solutions for pharmaceutical customers, and developsdevelop supply chain traceability solutions capitalizing on expanding food and product safety, supply chain traceability and brand protection requirements, and growth in emerging markets.requirements. In addition, our businesses serving the apparel and textile printing market develop, manufacture and sell equipment, software, consumables and service solutions used in digital textile, soft signage and specialty materials markets. These businesses are benefiting from a secular shift from analog to digital printing resulting from growing demand for “fast fashion”,due to comparative advantages in customization of garments and more customized and complex fashion designs, as well as increasing environmental sustainability requirements (digital(the digital printing process is significantly more environment-friendlyenvironmentally friendly due to lower water consumption). Businesses within this segment leverage digital printing capabilities and operate business models that involve initial equipment and software sales followed by significant consumable, software and service aftermarket revenue streams.
Our Imaging & Identification segment's products are manufactured primarily in the United States,North America, Europe and Asia and are sold throughout the world directly and through a network of distributors.
Pumps & Process Solutions
The businesses in our Pumps & Process Solutions segment manufacture specialty pumps, fluid handling components,single-use pumps, connectors and flow meters, plastics and polymers processing equipment, and highly-engineered components, specialized instrumentation and digital controls for rotating and reciprocating machines.machinery. The segment’ssegment's products are used in a wide variety of markets, including plastics and polymers processing, chemicals production, food/sanitary, biopharma, medical, transportation, petroleum refining, natural gas compression, power generation and general industrial applications. Our specialty pumps and componentsThe products in this segment are generally used in demanding and specialized operating environments with high performance requirements. Businesses within this segment share the following commonalities: thetheir products are predominantly components or small piecesparts of larger equipment that are part of largeand production systems with componentsour products often specified by end customers or regulations, there isthey participate in markets with a diverse and fragmented customer base and where there is a significant demand for aftermarket demandequipment and parts from a large installed base, and the route-to-market is a mix of distribution and direct sales.
Our Pumps & Process Solutions segment's products are manufactured primarily in the United States,North America, Europe, Mexico and Asia and are sold throughout the world directly and through a network of distributors and original equipment manufacturers ("OEMs").manufacturers.
RefrigerationClimate & Food EquipmentSustainability Technologies
Our RefrigerationClimate & Food EquipmentSustainability Technologies segment is a provider of innovative and energy-efficient equipment and systems that serve the commercial refrigeration, heating and cooling, and foodaluminum can-making equipment markets.end-markets. Our refrigeration business manufactures refrigeration systems (including environmentally friendly systems like CO2), refrigeration display cases and commercial glass refrigerator and freezer doors for food retail and industrial applications. Our heat exchanger business manufactures energy-efficient brazed plate heat exchangers used for residential climate control applications, including heat pumps, as well as industrial heating and cooling and residential climate control. Other businessesapplications. The other business in this segment designdesigns and manufacture commercial food service equipmentmanufactures machinery and can-shaping machinery.associated spare parts used for aluminum can-making, along with providing turnkey can line solutions. The majority of the products that are manufactured or serviced by the RefrigerationClimate & Food EquipmentSustainability Technologies segment are used by the retail food industry, including supermarkets, “big-box”"big-box" retail and convenience stores, the commercial/industrial refrigeration industry, institutional and commercial food service, food production markets and beverage can-shapingcan-making industries.
Our RefrigerationClimate & Food EquipmentSustainability Technologies segment's products are manufactured primarily in North America, Europe and Asia and are sold globally, directly and through a network of distributors.
Raw Materials
We use a wide variety of raw materials, primarily metals and semi-processed or finished components, which are generally available from a number of sources. As a result, shortages or the loss of any single supplier havehas not had, and areis not likely to have, a material impact on operating profits.profits at the consolidated level. While the required raw materials are generally available, commodity pricing can be volatile, particularly for various grades of steel, copper, aluminum and select other commodities. Although cost increases in commodities may be recovered through increased prices to customers, our operating results are exposed to such
fluctuations. We attempt to control such costs through fixed-priceindex based contracts with suppliers and customers and various other programs, such as our global supply chain activities.
Markets for multiple raw materials saw significant volatility and supply chain disruptions throughout 2021 into 2023. Although most commodity and logistics costs have returned to historical norms, volatility is still a risk due to economic uncertainties and supply side dynamics. Additionally, supply chain disruptions have stabilized, but there are still components with long lead times and scarcity of supply. These situations could still negatively impact profitability of some businesses as we were required to seek alternative sources of supply at higher costs or interrupt our normal manufacturing process flow leading to less efficient output and cost.
Research and Development
Our businesses invest to develop innovative new products, as well as to upgrade and improve existing products, to satisfy customer needs, including demand for energy-efficient products designed to help customers meet sustainability goals, expand revenue opportunities domestically and internationally,geographically, maintain or extend competitive advantages, improve product reliability and reduce production costs.
Our Imaging & Identification segment expends significant effort in research and development because the rate of product development by their customers is often quite high. Our businesses that develop product identification, and printing equipment and software solutions believe that their customers expect a continuing rate of product innovation, performance improvement and performance andreduction in total cost of ownership improvement.ownership. The result has been downward pricing trends that can only be mitigated with the continuous developmentintroduction of innovative product solutions in a market where product life cycles generally average less than seven years.
Our Clean Energy & Fueling Solutions segment invests in research and development to advance innovative traditional and alternative fuel dispensing equipment and components, payment platforms, fuel site asset management and connectivity solutions, and IIoT-enabled cloud-based connected solutions for retail and commercial fleet fueling settings.settings, components for high-criticality cryogenic gas storage and transportation applications, including hydrogen and liquefied natural gas. These technology investments align with our customer’scustomer's needs and our commitment to delivering to our customers opportunities for operational cost reductions, increased sales, and an enhanced customer experience for their customers through a combination of intelligent fueling and retail solutions.
Our Pumps & Process Solutions segment invests in research and development for new product introduction and custom solutions to drive volume and share in both existing markets and newer/faster growth markets – such as single-use biopharmaceutical manufacturing and liquid cooling of high performance electronics. These investments will allow us to take advantage of existing growth trends such as vaccine production for certain COVID-19 vaccines and also cell and gene therapy applications coming on the market.
Our segments contain manyMany of our businesses that are also involved in important product improvement initiatives. These businesses concentrate on working closely with customers on specific applications, expanding product lines and market applications and continuously improving manufacturing processes. Some of these businesses experience a much more rapid rate of change requiring higher product development capability and products.new product introduction.
OurSimilarly, our businesses invest in research and development to pursue digital strategies based on customer needs and take advantageleverage the capabilities of the cross-company capabilities developed at the Dover Digital Labs center.center to deliver on those digital strategies. For example, Vehicle Services Group, within the Engineered Products segment, launched Mosaic Advanced Diagnostic Technology built in partnershipConstellation, an automated artificial intelligence enabled hail damage detection system with Burke Porter Group and work completed at the Digital Labs. MosaicConstellation is the automotive repair industry’sindustry's first digitally enabled cloud based after-market advanced driver assistance systems (ADAS) sensor calibration technology. Environmental Solutions Group,automated mobile 3D hail damage scanning system that provides a complete workflow system, tracking hail-damaged vehicles from the Engineered Products segment, launched artificial intelligence capabilitiesinitial damage incident, through 3rd Eye Digital Solutionthe claims process and ultimately to use data to improve operations outcomes for waste hauling fleets.vehicle repair.
Human Capital Resources
Our employees are our most valuable asset and are critical to our ability to deliver on our strategic plans. Our success in delivering high quality and innovative products and solutions for our customers and driving operational excellence is only achievable through the talent, expertise, and dedication of our global team. We had approximately 23,000over 25,000 employees worldwide as of December 31, 2020.2023.
Attraction, Development, and Retention
We recognize that attracting, developing and retaining skilled talent and promoting a diverse and inclusive culture are essential to maintaining our leadership positions in the markets we serve. WeWhile our operating companies are the hubs of these activities — an effective model that puts ownership in the businesses and cultures that are the source of opportunities for employees — we are increasingly leveraging the corporate center to drive talent recruitment and development by implementingand consistent human capital management practices across our businesses. This center-led focus is enabling us to make development opportunities available across our enterprise which promotes employee advancement, engagement and retention. We offer employees resources to continuously improve their skills and performance with the goal of further cultivating the diverse, entrepreneurial talent inside our global businesses to fill key positions. We seek people who are proactive and dedicated, demonstrate an ownership mindset and share our
commitment to the pursuit of operational excellence. We continue to make significant investments in talent development and recognize that the growth and development of our employees is essential for our continued success.
Diversity and Inclusion
We view the diversity of our employees as a strength to better serve our customers and communities. We also believe the diversity of our workforce enables us to attract new talent, keeps our employees engaged and productive, and advances innovation from ideas reflecting the broad diversity of our employees' backgrounds, experiences, and perspectives. To that end, we have taken various actions to enhance diversity, including partnering with organizations that can support our efforts to identify and recruit talented and diverse candidates.
We aim to cultivate an inclusive culture that enables employees to feel connected to our business objectives and valued for their contributions. One of the ways in which we seek to promote an inclusive work environment is by supporting our operating companies in establishing employee resource groups. These groups allow for collaboration and serve as an open forum for networking, professional development, and mentoring. We are committed to our efforts to maintain a work environment that is professional, inclusive, and free from discrimination and harassment. To help educate our workforce on the benefits of an inclusive environment, and drive awareness, we have invested in training across the organization focused on diversity and inclusion topics.
Health and Safety
We are committed to providing a healthy environment and safe workplace by operating in accordance with established health and safety protocols across our facilities and maintaining an enhanced health and safety compliance program. As part of our continuous improvement process, we have implemented a global EHS information management system designed to track key metrics and actions pertinent to our health and safety program. This software supports our strategy to proactively reduce hazards thereby further bettering shop floor safety.
Human Capital Investments Related to Strategic Priorities
In line with our strategic priorities, we have additionally invested in the following aspects of human capital resources, to align with our key priorities:resource management, among other areas:
•Dover Digital Labs – We are continuing to leverage our Digital Labs team to improve our digital capabilities. Our team of software developers, data scientists, manufacturing engineers, and product managers drive digital transformation across our businesses by enhancing customer experience, developing connected industrial products, and enabling digital manufacturing.manufacturing and securing our digital products.
•Operational management – Our operations teams, including our management team at the corporate center, continually focuses on improving operational efficiency, such as implementing production automation.
•Health and safety – We are committed to providing a healthy environment and safe workplace by operating in accordance with established health and safety protocols across our facilities while maintaining an enhanced health and safety compliance program. In response to the COVID-19 pandemic, we have modified practices at our manufacturing locations and offices to adhere to guidance from the U.S. Centers for Disease Control and Prevention and local health and governmental authorities in our global network. We have invested at the corporate center to provide oversight, enhance coordination and ensure robust safety protocols are present across our operations. We believe that a healthy and safe workforce is an engaged workforce that is ready and able to contribute to our success.
•Shared services – We invest inare continuing to further centralize shared services under Dover Business Services and our India Innovation Center. Our shared services capabilities include a wide range of functional areas including transactional support, human resources, IT, finance and accounting, engineering and product development. These services enable productivity and growth as well as free up resources at our businesses to focus on customers, markets and product development.
Intellectual Property and Intangible Assets
Our businesses own many patents, trademarks, licenses and other forms of intellectual property, which have been created, registered or acquired over a number of years and, to the extent relevant, expire at various times over a number of years. A large portion of our businesses’businesses' intellectual property consists of patents, unpatented technology and proprietary information constituting trade secrets that we seek to protect in various ways, including confidentiality agreements with employees and suppliers where appropriate. In addition, a significant portion of our intangible assets relate to customer relationships. While our intellectual property and customer relationships are important to our success, the loss or expiration of any of these rights or relationships, or any group of related rights or relationships is not likely to materially affect our results on a consolidated basis. We believe that our commitment to continuous engineering improvements, new product development and improved manufacturing techniques, as well as strong sales, marketing and service efforts, are significant to our general leadership positions in the niche markets we serve.
Customers
We serve thousands of customers, none of which accounted for more than 10% of our consolidated revenue in 2020.2023. Given our diversity of served markets, customer concentrations are not significant. Businesses supplying the environmental solutions, defense, automotive and commercial refrigeration industries tend to deal with a few large customers that are significant within those industries. This also tends to be true for businesses supplying the power generation and chemical industries. In the other markets served, there is usually a much lower concentration of customers, particularly where our companies provide a substantial number of products and services applicable to a broad range of end-use applications.
Seasonality
In general, while our businesses are not highly seasonal, we do tend to have stronger revenue generation in the second half of the year, which is driven by customer capital expenditure timing and seasonal activity patterns in our end-markets. Our businesses serving the retail fueling market tend to increase in the second half of the year based on the historical purchasing patterns of their customers. Our businesses serving the major equipment markets, such as power generation, chemical and processing industries, have longer lead times geared to seasonal, commercial, or consumer demands and customers in these markets tend to delay or accelerate product ordering and delivery to coincide with those market trends which moderates the aforementioned seasonality patterns. Our food retail refrigeration business tends to face higher levels of demand in the second and third quarters as retailers avoid construction and remodeling activity during fall/winter holidays.
Competition
Our competitive environment is complex because of the wide diversity of our products manufactured and the markets served. In general, most of our businesses are market leaders that compete with only a few companies, and the key competitive factors are customer service, product quality, price and innovation. A summary of our key competitors within each of our segments follows:
| | | | | | | | |
| Segment | | Key Competitors |
| | |
| Engineered Products | | Oshkosh Corp. (McNeilus), Tünkers Maschinenbau GmbH, Snap-On Inc. (Challenger Lifts, Car-O-Liner), Hennessey Industries, Oshkosh Corp. (McNeilus), Labrie Enviroquip Group, Geotab Inc., AMCS Group, PACCAR (Braden), Vontier (Hennessey Industries, Inc.) and numerous othersTeledyne |
Clean Energy & Fueling Solutions | | Vontier (Gilbarco Veeder-Root)Veeder-Root, DRB), Tatsuno, Verifone, Franklin Electric, Elaflex, Gardner Denver, Inc.Ingersoll Rand (Emco Wheaton), Dixon Valve & Coupling Company, Professional Datasolutions,PDI Technologies, Inc. (PDI), Salco, Sonny's Enterprises LLC, National Carwash Solutions, Washtec AG |
| Imaging & Identification | | DanaherVeralto Corporation (Videojet), Brother Industries, Ltd. (Domino Printing), Electronics for Imaging (Reggiani), SPG Prints, Konica Minolta, Kornit Digital Ltd. |
| Pumps & Process Solutions | | IDEX Corporation, Ingersoll Rand, Millipore, Danaher Corporation (Pall), Avantor (Masterflex), Nordson Corporation, ITT, SPX Flow Inc. (Waukesha), Ingersoll Rand (Milton Roy, Dosatron), Spirax Sarco Nordson Corporation,(Watson Marlow), Kingsbury, Seko, Ecolab, Millipore, Danaher Corporation (Pall), EnPro Industries (Compressor Products International, Garlock), Hoerbiger Holdings AG, Miba AG, Hillenbrand Inc. (Coperion) |
RefrigerationClimate & Food EquipmentSustainability Technologies | | Panasonic (Hussman Corp.), Alfa Laval, Welbilt Corp, Illinois Tool Works, Middleby Corp.,Danfoss, Stolle Machinery, Crown Holdings |
International
Consistent with our strategic focus on positioning our businesses for growth, we aim to increasegrow our revenue in international markets, particularly in developing economies in Asia, the Middle East, Eastern Europe and South America.
Most of our non-U.S. subsidiaries and affiliates are currently based in China, France, Germany, Italy, Sweden, Switzerland, the United Kingdom, and other locations including Australia, Brazil, Canada, India, Mexico, and the Netherlands.
The following table shows annual revenue derived from customers outside the U.S. as a percentage of total annual revenue for each of the last three years, by segment and in total:
| | Percentage of Non-U.S. Revenue
by Segment |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Percentage of Non-U.S. Revenue
by Segment | | | Percentage of Non-U.S. Revenue
by Segment |
| Years Ended December 31, | | | Years Ended December 31, |
| 2023 | | | 2023 | | 2022 | | 2021 |
| Engineered Products | Engineered Products | 27 | % | | 27 | % | | 30 | % | Engineered Products | 22 | % | | 25 | % | | 27 | % |
| Fueling Solutions | 45 | % | | 52 | % | | 54 | % |
| Clean Energy & Fueling | | Clean Energy & Fueling | 44 | % | | 41 | % | | 45 | % |
| Imaging & Identification | Imaging & Identification | 75 | % | | 77 | % | | 78 | % | Imaging & Identification | 72 | % | | 72 | % | | 75 | % |
| Pumps & Process Solutions | Pumps & Process Solutions | 51 | % | | 49 | % | | 51 | % | Pumps & Process Solutions | 53 | % | | 51 | % | | 53 | % |
| Refrigeration & Food Equipment | 37 | % | | 39 | % | | 38 | % |
| Climate & Sustainability Technologies | | Climate & Sustainability Technologies | 43 | % | | 40 | % | | 37 | % |
| Total percentage of revenue derived from customers outside of the United States | Total percentage of revenue derived from customers outside of the United States | 45 | % | | 47 | % | | 48 | % | Total percentage of revenue derived from customers outside of the United States | 44 | % | | 43 | % | | 46 | % |
Our international operations are subject to certain risks, such as price and exchange rate fluctuations and non-U.S. governmental restrictions, which are discussed further in Item 1A. "Risk Factors." For additional details regarding our non-U.S. revenue, impact of foreign currency exchange rates, and the geographic allocation of the assets, see Management's Discussion and Analysis of our continuing operations, seeFinancial Condition and Results of Operations and Note 2019 — Segment Information to the Consolidated Financial Statements in ItemItems 7 and 8, respectively, of this Form 10-K.
Environmental Matters
Sustainability
We are committed to creating economic value for shareholders by developing products designed to help our customers meet their sustainability goals, run their operations more efficiently and satisfy evolving regulatory and environmental standards. We believe that sustainability-driven innovation in response to customer demand helps us contribute positively to enhanced resource efficiency and waste reduction while presenting a valuable growth opportunity. Aligned with this commitment, in 2021, we announced science-based targets to reduce our greenhouse gas emissions. These targets include an absolute reduction of scope 1 and scope 2 market-based greenhouse gas emissions of 30 percent by 2030, from a 2019 baseline year, and an absolute reduction of scope 3 greenhouse gas emissions of 15 percent by 2030, from a 2019 baseline year.
We highlight key initiatives and performance metrics about our sustainability activities under the “Sustainability”"Sustainability" tab on our website, www.dovercorporation.com.
Other Matters
Our operations are governed by a variety of international, national, state and local environmental laws. We are committed to continued compliance and believe our operations generally are in substantial compliance with these laws. In a few instances, particular plants and businesses have been the subject of administrative and legal proceedings with governmental agencies or private parties relating to the discharge or potential discharge of regulated substances. Where necessary, these matters have been addressed with specific consent orders to achieve compliance.
There have been no material effects upon our earnings and competitive position resulting from our compliance with laws or regulations enacted or adopted relating to the protection of the environment. We are aware of a number of existing or upcoming regulatory initiatives intended to reduce emissions in geographies where our manufacturing and warehouse/distribution facilities are located and have evaluated the potential impact of these regulations on our businesses. We anticipate that direct impacts from regulatory actions will not be significant in the short- to medium-term. We expect the regulatory impacts associated with climate change regulation would be primarily indirect and would result in "pass-through" costs from energy suppliers, suppliers of raw materials and other services related to our operations.
Other Information
We make available free of charge through the "Investor Information" link on our website, www.dovercorporation.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports. We post each of these reports on the website as soon as reasonably practicable after the report is filed with the Securities and Exchange Commission. The information oncontents of our website are not intended to be incorporated by reference into this Form 10-K, and any reference to our website is not incorporated into this Form 10-K.intended to be inactive textual references only.
ITEM 1A. RISK FACTORS
The risk factors discussed in this section should be considered together with information included elsewhere in this Form 10-K and should not be considered the only risks to which we are exposed. In general, we are subject to the same general risks and uncertainties that impact many other industrial companies such as general economic, industry and/or market conditions and growth rates; the impact of natural disasters and their effect on global markets; and changes in laws or accounting rules. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business,businesses, including our results of operations, liquidity and financial condition.
Business and Operational Risks
•The COVID-19 pandemic hasOur businesses or operations may be adversely impacted,affected by natural or human-induced disasters, acts of war, terrorism, international conflicts, and poses risks to, our business, the nature and extent of which are highly uncertain and unpredictable.public health crises.
Our businesses or operations may be adversely affected by natural or human-induced disasters including, but not limited to, earthquakes; tsunamis; floods; hurricanes, cyclones or typhoons; fires; other extreme weather conditions; power or water shortages; telecommunications failures; materials scarcity; terrorist acts, civil unrest, conflicts or wars; and health epidemics or pandemics. The COVID-19 pandemic has disruptedoccurrence of any such event, and the measures taken in response thereto, may disrupt the global economy and adversely impactedimpact our business,operations, including demand for our products across multiple end-markets as well as our supply chain and operations. While we have experienced sequentially improving activityExisting insurance coverage may not provide protection for all of the costs that may arise from such events. Additionally, concerns over the economic impact of such events could cause increased volatility in mostfinancial and other capital markets, adversely impacting our stock price, our ability to access the capital markets, and geographies, the public health situation, global response measures and corresponding impacts on various markets remain fluid and uncertain and may leadour ability to sudden changes in trajectory and outlook. Accordingly, we are currently unable to quantify the full and long-term impact of the pandemic on our results of operations, financial position and cash flows.
We are monitoring the global outbreak of COVID-19 and taking steps to mitigate its risks by working with our customers, employees, suppliers and other stakeholders. Significant portions of our workforce and operations have been impacted by quarantines, government orders and guidance, facility closures, illness, travel restrictions, implementation of precautionary measures and other restrictions. Over the course of the pandemic, we have continued to operate in accordance with established health and safety protocols across our facilities while maintaining an enhanced health and safety compliance program. More specifically, we have modified practices at our manufacturing locations and offices to adhere to guidance from the U.S. Centers for Disease Control and Prevention and local health and governmental authorities in our global network with respect to social distancing, physical separation, personal protective equipment and sanitization, and have restricted the number of employees permitted in common areas at any given time. Further actions may be required as conditions evolve, including if new waves of infection emerge in various parts of the globe or until a vaccine is widely available. In addition, because the pandemic has decreased customer demand in many of our end-markets, some of our businesses have continued to operate at reduced capacity. We cannot predict the number or timing of any future facility closures, the potential for operating at reduced capacity or the size of the workforce that may be impacted by potential labor actions such as furloughs or layoffs.fund liquidity needs.
The COVID-19 pandemic has the potentialimpacts of any such unexpected event are difficult to disrupt our supply chain as a result of shifts in demand, illness, quarantine, travel restrictions or financial hardship. We have been able to procure the critical raw materials and components necessary to continue production of our products,predict but there is no guarantee that we will be able to do so in the future. In addition, we may experience additional adverse impacts on our operational and commercial activities, costs, customer orders and purchases and our collections of accounts receivable, which may be material, and the extent of these adverse impacts on future operational and commercial activities, costs, customer orders and purchases and our collections remains uncertain even if conditions begin to improve.
Furthermore, the pandemic has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates and interest rates. Due to the unprecedented and sustained social and economic consequences of the COVID-19 pandemic on the global economy generally, there is uncertainty around its duration and the timing of recovery. The ultimate significance of the COVID-19 pandemic, including any measures to reduce its spread, on our business will depend on events that are beyond our control and that we cannot predict and could have a material adverse effect on our consolidated
businesses, financial condition, or operations.
•Recessions, adverse market conditions or downturns in the markets we serve could adversely affect our operations.
In the past, our operations have been exposed to volatility due to changes in general economic conditions or consumer preferences, recessions or adverse conditions in the markets we serve. In the future, similar changes could adversely impact overall sales, operating results (including potential impairment charges for goodwill or other long-lived assets) and cash flows. Moreover, during economic downturns we may undertake more extensive restructuring actions, including workforce reductions, global facility consolidations, centralization of certain business support activities, and other cost reduction initiatives, and incur higher costs. As these plans and actions can be complex, the anticipated operational improvements, efficiencies and other benefits might be delayed or not realized. We are unable to determine the impact that recessions, adverse market conditions or downturns will have on our financial position, operating results and cash flows in future periods.
•Increases in labor costs, potential labor disputes and work stoppages or an inability to hire skilled personnel could adversely affect our business.
We have a number of collective bargaining units in the U.S. and various collective labor arrangements outside the U.S. We are subject to potential work stoppages, union and works council campaigns and other labor disputes, any of which could adversely impact our productivity, reputation, results of operations, financial condition and cash flows.
Furthermore, the competition for skilled personnel is often intense in the regions in which our manufacturing facilities are located. A sustained labor shortage or increased turnover rates within our employee base, increases in the salaries and wages paid by competing employers, as a result of general macroeconomic factors or otherwise, could lead to increased costs, such as increased overtime to meet demand and potentially further increase salaries and wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate our manufacturing facilities and overall business. If we are unable to hire and retain employees capable of performing at a high level, our business, financial condition and results of operations could be adversely affected.
•Our reputation, ability to do business and results of operations may be impaired by improper conduct by any of our employees, agents, or business partners.
While we strive to maintain high standards, we cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by our employees, agents, or business partners that would violate the laws of the jurisdictions where we do business, including the laws governing payments to government officials, bribery, fraud, anti-kickback and false claims, competition, export and import compliance, environmental compliance, money laundering and data privacy, as well as the improper use of proprietary information or social media. Any such violations of law or improper actions could: subject us to civil or criminal investigations; lead to substantial civil or criminal, monetary and non-monetary penalties and related shareholder lawsuits; lead to increased costs of compliance; and damage our reputation, our consolidated results of operations, financial condition and cash flows.
•We are subject to risks relating to our existing international operations and expansion into new geographical markets.
In 2020, the COVID-19 pandemic had a greater impact on revenue from international markets compared to the United States, resulting in a greater rate of decline. As a result, approximately 45%Approximately 44% and 43% of our revenues for 2020 as compared to approximately 47% in 20192023 and 2022, respectively, were derived outside the United States. This was mostly in EuropeStates and China.
We will continue to focus on global markets as part of our overall growth strategy andwe expect international sales from outside the United States to continue to represent a significant portion of our revenues. Ourrevenues given our global growth strategy. As a result of our international operations and our global expansion strategy, we are subject to generalvarious risks, related to such operations, including:
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| o | political, social and economic instability and disruptions; |
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| o | government import and export controls, economic sanctions, embargoes or trade restrictions; |
| |
| o | the imposition of duties and tariffs and other trade barriers and retaliatory countermeasures; |
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| o | limitations on ownership and dividend of earnings; |
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| o | transportation delays and interruptions; |
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| o | risk to theft of proprietary information and/or intellectual property; |
| |
| o | labor unrest and current and changing regulatory environments; |
| |
| o | widespread public health crises, such as a pandemic or epidemic; |
| |
| o | increased compliance costs, including costs associated with disclosure requirements and related due diligence; |
| |
| o | the impact of loss of a single-source manufacturing facility; |
| |
| o | difficulties in staffing and managing multi-national operations; |
| |
| o | limitations on our ability to enforce legal rights and remedies; |
| |
| o | potentially adverse tax consequences; and |
| |
| o | access to or control of networks and confidential information due to local government controls and vulnerability of local networks to cyber risks. |
If we are unable to successfully manage the risks associated with expanding our global business or adequately manage operational risks of our existing international operations, the risks could have a material adverse effect on our growth in geographic markets, our reputation, our consolidated results of operations, financial position and cash flows.
•Our operations, businesses, products and productsbusiness strategy are subject to cybersecurity risks.
Although we have several processes and procedures in place designed to manage and mitigate cybersecurity risk, our business is still subject to certain risks.We depend on our own and third party ITinformation systems, including cloud-based systems and managed service providers, to store, process and protect our information and support our business activities. We also use our third party IT systems to support employee data processing for our global work forceworkforce and to support customer business activities, such as transmitting payment information, providing mobile monitoring services, and capturing operational data. Additionally, some of our products contain computerintegrated hardware and software and offer the ability to connect to computer networks. Increasingly,While we have measures in place that are designed to protect these systems, these systems have been and are expected to continue to be the target of cyber attacks. Although we conduct security assessments and
periodic re-assessments of third party partners and other service providers, our customers, including government customers, are requiring cybersecurity protectionssystems may also experience vulnerabilities from third-party or open source software code that may be incorporated into our own or our vendors’ systems. Any prolonged system disruption in our systems or third-party services could negatively impact the coordination of our sales, planning, and mandating cybersecurity standards formanufacturing activities, which could harm our products. business.
Our business has both an increasing reliance on IT systems and an increasing digital footprint as a result of changing technologies, connected devices and digital offerings, as well as expanded remote work policies. If these technologies, systems, products or services are damaged, cease to function properly, are compromised due to employee or third-party contractor error, user error, malfeasance, system errors, or other vulnerabilities, or are subject to cybersecurity attacks, such as those involving denial of service attacks, unauthorized access, malicious software, ransomware, or other intrusions, including by criminals, nation states or insiders, our business may be adversely impacted. The impacts could include production downtimes, operational delays, and other impacts on our operations and ability to provide products and services to our customers; compromise of confidential, proprietary or otherwise protected information, including personal information and customer confidential data; destruction, corruption, or theft of data or intellectual property; manipulation, disruption, or improper use of these technologies, systems, products or services; financial losses from fraudulent transactions, remedial actions, loss of business or potential liability; adverse media coverage; and legal claims or legal proceedings, including regulatory investigations, actions and fines; and damage to our reputation. ThereWe regularly assess our threat landscape and monitor our systems and other technical security controls, maintain information security policies and procedures, including a breach response plan, ensure maintenance of backup and protective systems, and have a team of security personnel managing our efforts and initiatives. However, there has been a rise in the number of cyberattacks targeting confidential business information
generally and in the manufacturing industry specifically, as well as an increase in cyberattacks targeting managed service providers, by both state-sponsored and criminal organizations. Moreover, there has been a rise in the number of cyberattacks that depend on human error or manipulation, including phishing attacks or schemes that use social engineering to gain access to systems or perpetuate wire transfer or other frauds.
These trends increase the likelihood of such events occurring as well as the costs associated with protecting against such attacks.events. It is possible for vulnerabilities in our IT systems to remain undetected for an extended period of time up to and including several years. We attempt to mitigate these risks by employing a number of measures, including employee training, systems monitoring and other technical security controls, vulnerability scanning, risk assessments, a breach response plan, maintenance of backup and protective systems, and security personnel. Not withstandingNotwithstanding those measures, our systems, networks, products and services remain potentially vulnerable to known or unknown cybersecurity attacks and other threats, any of which could have a material adverse effect on our consolidated results of operations, financial condition and cash flows. We and the service providers that we depend on to support our systems and business operations, are regularly the target of, and periodically respond to, cyberattacks, including phishing and denial-of-service attacks, and must continuously monitor and develop our systems to protect our technology infrastructure and data from misappropriation or corruption. In addition,However, a cybersecurity attack could persist for an extended period of time before being detected, and, following detection, it could take considerable time for us to obtain full and reliable information about the extent, amount and type of information compromised. During the course of an investigation, we may not know the full impact of the event and how to remediate it, and actions, decisions and mistakes that are taken or made may further increase the negative effects of the event on our business, results of operations and reputation. While we maintain insurance coverage that is intended to address certain aspects of cybersecurity risks, such insurance coverage may not cover all losses or all types of claims that arise. As cyber threats continue to evolve, cybersecurity and data protection laws and regulations continue to develop in the U.S. and globally, and our business continues to move towards increased online connectivity within our information systems and through more Internet-enabled products and offerings, we expect to expend additional resources to continue to build out our compliance programs, strengthen our information security, data protection and business continuity measures, and investigate and remediate vulnerabilities. For additional information on our cybersecurity risk management, strategy and governance, see Item 1C. "Cybersecurity."
•Unforeseen developments in contingencies such as litigation and product recalls could adversely affect our consolidated results of operations, financial condition and cash flows.
We and certain of our subsidiaries are, and from time to time may become, parties to a number of legal proceedings incidental to our businesses, including alleged injuries arising out of the use of products or exposure to hazardous substances, or claims related to patent infringement, employment matters and commercial disputes. The defense of these lawsuits may require significant expenses and divert management’smanagement's attention, and we may be required to pay damages that could adversely affect our consolidated results of operations, financial condition and cash flows. In addition, any
insurance or indemnification rights that we may have may be insufficient or unavailable to protect us against potential loss exposures.
We may be exposed to product recalls and adverse public relations if our products are alleged to have defects, to cause property damage, to cause injury or illness, or if we are alleged to have violated governmental regulations. A product recall could result in substantial and unexpected expenditures, which would reduce operating profit and cash flow. In addition, a product recall may require significant management attention. Product recalls may hurt the value of our brands and lead to decreased demand for our products. Product recalls also may lead to increased scrutiny by federal, state or international regulatory agencies of our operations and increased litigation and could have a material adverse effect on our consolidated results of operations, financial condition and cash flows.
•Our revenue, operating profits and cash flows could be adversely affected if our businesses are unable to protect or obtain patent and other intellectual property rights.
Our businesses own patents, trademarks, licenses and other forms of intellectual property related to their products and continuously invest in research and development that may result in innovations and general intellectual property rights. Our businesses employ various measures to develop, maintain and protect their intellectual property rights. These measures may not be effective in capturing intellectual property rights, and they may not prevent their intellectual property from being challenged, invalidated, or circumvented, particularly in countries where intellectual property rights are not highly developed or protected. Unauthorized use of our businesses' intellectual property rights could adversely impact the competitive position of our businesses and could have a negative impact on our consolidated results of operations, financial condition and cash flows.
•We could be negatively impacted by environmental, social and governance (ESG) and sustainability matters.
Governments, shareholders, customers, employees and other stakeholders are increasingly focusing on corporate ESG practices and disclosures, and expectations in this area are rapidly evolving and growing. We have announced certain initiatives, including goals, regarding our focus areas, which include greenhouse gas emissions reductions, health and safety, diversity and inclusion, talent attraction and development, and innovation for sustainable products. The criteria by which our ESG practices are assessed may change due to the evolution of the sustainability landscape, which could result in greater expectations of us and may cause us to undertake costly initiatives to satisfy new criteria. Moreover, the increasing attention to sustainability could also result in reduced demand for certain of our products or services and/or reduced profits. If we are unable to respond effectively, investors may conclude that our policies and/or actions with respect to ESG matters are inadequate. If we fail or are perceived to have failed to achieve previously announced initiatives or goals or to accurately disclose our progress on such initiatives or goals, our reputation, business, financial condition and results of operations could be adversely impacted.
Industry Risks
•Increasing product/product, service and price competition by international and domestic competitors, including new entrants, and our inability to introduce new and competitive products could cause our businesses to generate lower revenue, operating profits and cash flows.
Our competitive environment is complex because of the wide diversity of the products that our businesses manufacture and the markets they serve. In general, most of our businesses compete with only a few companies. Our ability to compete effectively depends on how successfully we anticipate and respond to various competitive factors, including new products, digital solutions and support services that may be introduced by competitors, changes in customer preferences, evolving regulations, new business models and technologies and pricing pressures. If our businesses are unable to anticipate their competitors’competitors' developments or identify customer needs and preferences on a timely basis, or successfully introduce new products, digital solutions and support services in response to such competitive factors, or adopt to market changes relating to climate change related policies, they could lose customers to competitors. If our businesses do not compete effectively, we may experience lower revenue, operating profits and cash flows.
•Our operating results depend in part on the timely development and commercialization, and customer acceptance, of new and enhanced products, digital solutions and support services based on technological innovation.
The success of new and improved products, digital solutions and support services depends on their initial and continued acceptance by our customers. Certain of our businesses sell in markets that are characterized by rapid technological changes, frequent new product introductions, changing industry standards and corresponding shifts in customer demand, which may result in unpredictable product transitions, shortened life cycles and increased importance of being first to market. Failure to correctly identify and predict customer needs and preferences, to deliver high quality, innovative and competitive products to the market, to adequately protect our intellectual property rights or to acquire rights to third-party technologies, to provide adequate data security and privacy protections and to stimulate customer demand for, and convince customers to adopt new products, digital solutions and support services could adversely affect our consolidated results of operations, financial condition and cash flows. In addition, we may experience difficulties or delays in the research, development, production or marketing of new products, digital solutions and support services which may prevent us from recouping or realizing a return on the investments required to continue to bring new products and services to market.
•We could lose customers or generate lower revenue, operating profits and cash flows if there are significant increases in the cost of our raw materials or components, or if suppliers are not able to meet our quality and delivery requirements.
We purchase raw materials, sub-assemblies and components for use in our manufacturing operations. Factors such as freight costs, transportation availability, inventory levels, the level of imports, the imposition of duties, tariffs and other trade barriers and general economic conditions may affect the price of these raw materials, sub-assemblies and components. Significant price increases for certain commodities, other raw materials or components could adversely affect operating profits of our businesses. While we generally attempt to mitigate the impact of increased raw material prices by hedging or passing along the increased costs to customers, there may be a time delay between the increased raw material prices and the ability to increase the prices of products, or we may be unable to increase the prices of products due to a competitor’scompetitor's pricing pressure or other factors.
We use a wide range of raw materials and components in our manufacturing operations that come from numerous suppliers. While we believe that sources of supply for raw materials and components are generally adequate, it is difficult to predict what effects of extended lead times or shortages may have in the future. In addition, some of the raw materials and components may be available only from limited or single source suppliers. If a single source or limited source supplier were to cease or interrupt production for any reason or otherwise fail to supply those raw materials or components to us on favorable purchase terms, including at favorable prices, in sufficient quantities and with adequate lead times needed for efficient manufacturing, our ability to meet customer commitments, and satisfy market demands for affected products could be negatively affected. Consequently, a significant price increase inThe disruption of our global supply chain for any reason, including for issues such as COVID-19 or other health epidemics or pandemics, labor disputes, loss of single source or limited source supplier, inability to procure sufficient raw materials, quality control issues, ethical sourcing issues, a supplier's financial distress, natural disasters, looting, vandalism or acts of war or terrorism, trade sanctions or other external factors over which we have no control, could interrupt product supply and, if not effectively managed and remedied, have a shortage in or the unavailability of raw materials or components may result in a loss of customers and adverselymaterial adverse impact on our consolidated results ofbusiness operations, financial condition and cash flows.results of operations.
Legal and Regulatory Risks
•Our businesses are subject to regulation and their profitability and reputation could be adversely affected by domestic and foreign governmental and public policy changes, risks associated with emerging markets, changes in statutory tax rates and unanticipated outcomes with respect to tax audits.
Our businesses’businesses' domestic and international sales and operations must comply with a wide variety of laws, regulations and policies (including environmental, employment and health and safety regulations, data security laws, data privacy laws, export/import laws, tax policies such as export subsidy programs and research and experimentation credits, carbon emission regulations, energy efficiency and design regulations and other similar programs). These laws, regulations and policies are complex, change frequently, have tended to become more stringent over time and may be inconsistent across jurisdictions. Failure to comply (or any alleged or perceived failure to comply) with any of the foregoing could result in civil and criminal, monetary and non-monetary penalties as well as potential damage to our reputation and disruption to our business. We cannot provide assurance that our costs of complying with new and evolving regulatory reporting requirements and current or future laws will not exceed our estimates. In addition, the United Kingdom's exit from the European Union common market and the terms of the UK EU Trade and Cooperation agreement may impact our market access and pricing, compliance with regulatory requirements and ability to hire and maintain personnel. Any of these factors could adversely affect customer demand, our relationships with customers and suppliers, and our business and financial position.
Certain of our businesses have sales or operations in countries, including Brazil, Russia, India and China, and may in the future invest in other countries, any of which may carry high levels of currency, political, compliance, or economic risk. While these risks or the impact of these risks are difficult to predict, any one or more of them could adversely affect our businesses and reputation.
Our effective tax rate is impacted by changes in the mix amongof earnings inamong countries with differing statutory tax rates, changes in the valuation allowance of deferred tax assets and changes in income tax laws. The amount of income taxes and other taxes paid can be adversely impacted by changes in statutory tax rates and laws and are subject to ongoing audits by domestic and internationalgovernmental authorities. If these audits result in assessments different from amounts estimated, then our consolidated results of operations, financial position and cash flows may be adversely affected by unfavorable tax adjustments.
Financial and Strategic Risks
•Our exposure to exchange rate fluctuations on cross-border transactions and the translation of local currency results into U.S. dollars could negatively impact our results of operations.
We conduct business through our subsidiaries in many different countries, and fluctuations in currency exchange rates could have a significant impact on our reported consolidated results of operations, financial condition and cash flows, which are presented in U.S. dollars. Cross-border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign exchange effects. Accordingly, significant changes in currency exchange rates, particularly the Euro,euro, Chinese Renminbi (Yuan)renminbi (yuan), Swedish krona, Pound Sterling,pound sterling, Indian rupee, Singapore dollar, Danish krone, and Canadian dollar, could cause fluctuations in the reported results of our businesses’businesses' operations that could negatively affect our results of operations. Additionally, the strengthening of certain currencies such as the Euroeuro and
U.S. dollar potentially exposes us to competitive threats from lower cost producers in other countries. Our sales are translated into U.S. dollars for reporting purposes. The strengthening of the U.S. dollar could result in unfavorable translation effects as the results of foreign locations are translated into U.S. dollars.
•Our growth and results of operations may be adversely affected if we are unsuccessful in our capital allocation and acquisition program.
We expect to continue our strategy of seeking to acquire value creating add-on businesses that broaden our existing position and global reach as well as, in the right circumstances, strategically pursue larger acquisitions that could have the potential to either complement our existing businesses or allow us to pursue a new platform. However, there can be no assurance that we will be able to continue to find suitable businesses to purchase, that we will be able to acquire such businesses on acceptable terms, or that all closing conditions will be satisfied with respect to any pending acquisition. In addition, we face the risk that a completed acquisition may underperform relative to expectations. We may not achieve the synergies originally anticipated, may become exposed to unexpected liabilities or may not be able to sufficiently integrate completed acquisitions into our current business and growth model. Further, if we fail to allocate our capital appropriately, in respect of either our acquisition program or organic growth in our operations, we could be overexposed in certain markets and geographies and unable to expand into adjacent products or markets. These factors could potentially have an adverse impact on our consolidated results of operations, financial condition and cash flows.
•If the Apergy spin-off, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, we and our shareholders could be subject to significant tax liabilities.
In connection with the spin-off of Apergy, we received a private letter ruling from the Internal Revenue Service (the "IRS Ruling") together with an opinion of McDermott Will & Emery LLP, our tax counsel, substantially to the effect that, among other things, certain transactions to effect the spin-off will qualify as a tax-free reorganization for U.S. federal income tax purposes under Section 368(a)(1)(D) of the Internal Revenue Code (the “Code”), and the distribution will qualify as a tax-free distribution to our shareholders under Section 355 of the Code. The IRS Ruling and the opinion of tax counsel relied on certain facts and assumptions, and certain representations and undertakings from us and Apergy, including those regarding the past and future conduct of certain of our businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not satisfied, we and our shareholders may not be able to rely on the IRS Ruling or the opinion, and could be subject to significant tax liabilities. Notwithstanding the IRS Ruling and the opinion, the IRS could determine on audit that the distribution is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion. In addition, we and Apergy intend for certain related transactions to qualify for tax-free treatment under U.S. federal, state and local tax law and/or foreign tax law.
If the distribution is determined to be taxable for U.S. federal income tax purposes, we and our shareholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities. For example, if the distribution fails to qualify for tax-free treatment, we would, for U.S. federal income tax purposes, be treated as if we had sold the Apergy common stock in a taxable sale for its fair market value, and our shareholders who are subject to U.S. federal income tax would be treated as receiving a taxable distribution in an amount equal to the fair market value of the Apergy common stock received in the distribution. In addition, if certain related transactions fail to qualify for tax-free treatment under U.S. federal, state and local tax law and/or foreign tax law, we could incur significant tax liabilities under U.S. federal, state, local and/or foreign tax law, respectively.
•The indemnification provisions of acquisition and disposition agreements by which we have acquired or sold or disposed of companies may not fully protect us and may result in unexpected liabilities.
Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of those companies before we acquired them. In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities. Similarly, the purchasers of our disposed operations may from time to time agree to indemnify us for operations of such businesses after the closing. We cannot be assured that any of these indemnification provisions will fully protect us, and as a result we may face unexpected liabilities that adversely affect our consolidated results of operations, financial condition and cash flows. In addition, we have retained certain liabilities directly or
through indemnifications made to the buyers of businesses we have sold or disposed against known and unknown contingent liabilities such as tax liabilities and environmental matters.
In connection with the spin-off, Apergy agreed to indemnify us for any losses relating to the conduct of the Apergy business. There can be no assurance that the indemnity agreements will be sufficient to protect us against the full amount of any liabilities that may arise, or that the indemnitors will be able to fully satisfy their indemnification obligations. The failure to receive amounts for which we are entitled to indemnification could adversely affect our results of operations, cash flows and financial condition.
Labor and Employment Risks
•Our reputation, ability to do business and results of operations may be impaired by improper conduct by any of our employees, agents, or business partners.
While we strive to maintain high standards, we cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by our employees, agents, or business partners that would violate United States and/or non-United States laws or fail to protect our confidential information, including the laws governing payments to government officials, bribery, fraud, anti-kickback and false claims, competition, export and import compliance, environmental compliance, money laundering and data privacy, as well as the improper use of proprietary information or social media. Any such violations of law or improper actions could subject us to civil or criminal investigations in the United States and in other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties and related shareholder lawsuits, could lead to increased costs of compliance and could damage our reputation, our consolidated results of operations, financial condition and cash flows.
•If we experience work stoppages, union and works council campaigns and other labor disputes, our productivity and results of operations could be adversely impacted.
We have a number of collective bargaining units in the United States and various foreign collective labor arrangements. We are subject to potential work stoppages, union and works council campaigns and other labor disputes, any of which could adversely impact our productivity, reputation, consolidated results of operations, financial condition and cash flows.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
We continue to face significant and persistent cybersecurity risks and our business has both an increasing reliance on systems and an increasing digital footprint as a result of changing technologies, connected devices and digital offerings, as well as expanded remote work policies. We regularly assess our threat landscape and monitor our systems and other technical security controls, maintain information security policies and procedures, including a breach response plan, ensure maintenance of backup and protective systems, and have a team of security personnel managing our efforts and initiatives. We regularly review our policies, practices, and plans with assistance from third party experts and advisors for certification purposes, including with respect to System and Organization Controls 2 (SOC 2) certifications and Payment Card Industry Data Security Standard (PCI-DSS) certifications where relevant, and leverage third party resources to support our cyber risk defense, monitoring and response processes. We conduct security assessments and periodic re-assessments on third party partners and other service providers with access to information assets of Dover. In addition, we review independent audit reports from key third party partners and other service providers with access to information assets at least annually.
From an operational perspective, we use vulnerability scanning tools to assess potential data security risks. We correlate the results and prioritize any key actions based on threat modeling analysis and monitor any such actions in-progress with the system owners based on assigned timelines for remediation. However, patch and vulnerability management, including for products and information assets, remains a complex and key risk that can lead to exploits, security breaches and service disruption. In addition, our online employees are required to participate in cyber, information security, and privacy training at least annually. We also integrate security measures into our digital products and services.
Our product security efforts are informed in part by industry security standards such as ISA 62443, UL 2000-1, and certain standards from the National Institute of Standards & Technology ("NIST"). As part of our efforts, we conduct risk assessments and prioritize security validation for certain of our products. For example, we conduct security testing and remediation on a risk-based prioritized basis prior to releasing certain products into the market, as well as periodically post-release to discover potential issues in code, firmware, and protocols and to consider potential security patches or future version updates. We have received SOC 2 certifications for some of our products and software offerings and continue to strive to meet similar requirements for other digital offerings.
Our enterprise risk management program, led by a team of senior executives, includes the performance of an annual risk assessment made at the corporate center and operating company levels, and is designed to identify enterprise level risks we may face, including cybersecurity risk at a high level. Each quarter, this team reassesses the identified enterprise risks, the severity of these risks, and the status of efforts to mitigate them. We also engage consultants and other third parties for periodic risk and vulnerability testing and assessment.
We also maintain insurance coverage that is intended to address certain aspects of cybersecurity risks.
Notwithstanding any of these measures, our systems, networks, products and services remain potentially vulnerable to known or unknown cybersecurity attacks and other threats, any of which could have a material adverse effect on our consolidated results of operations, financial condition and cash flows. We have experienced, and will continue to experience, cyber incidents in the normal course of our business. As of the date of this report, we have not identified any risks from cybersecurity threats, including those from any previous cybersecurity incidents, that have materially affected us, our business strategy, results of operation or financial condition. However, there can be no assurances that a cybersecurity threat or incident that could have a material impact on us will not occur in the future. For additional information on the risks we face from cyber security threats, please see the risk factor titled, "Our operations, businesses, products, and business strategy are subject to cybersecurity risks,"in Item 1A. "Risk Factors."
Governance
Our Board has established a risk management process to identify and manage material risks at the enterprise level, including the potential impact of key cybersecurity threats. The full Board meets with the Senior Vice President & Chief Digital Officer (CDO) and our Chief Information Security Officer (CISO) on at least an annual basis to discuss our cybersecurity posture. The Board also periodically receives targeted briefings related to cybersecurity and reviews our incident response capabilities.
Our CDO and CISO work to protect the Company’s information systems from cybersecurity threats and to promptly assist in coordinating a response to any cybersecurity incidents in accordance with the Company’s cybersecurity incident response and recovery plans and processes as described above. The CDO is responsible for corporate-wide data security, and the CISO is responsible for developing, implementing and enforcing security policies to manage our overall cybersecurity risks. The CDO and CISO are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of the cybersecurity incident response and recovery plans and processes, as described above. The CDO and CISO also periodically meet with certain corporate officers, such as the Company’s Chief Financial Officer and General Counsel to review and discuss cybersecurity issues.
The CDO has over 30 years of information technology experience, including at several Fortune 500 companies and including experience with cybersecurity initiatives that address governance, operational practices, cyber-awareness and technology. The CISO has over two decades of information technology risk management experience, including experience with information security testing at several Fortune 500 companies. The CDO holds an undergraduate degree in electrical and electronics engineering, a master’s degree in computer science and a master’s degree in business administration, and the CISO holds an undergraduate degree in electrical and computer engineering.
The CDO and CISO annually brief our full Board of Directors on enterprise-wide cybersecurity risk management and our overall cybersecurity risk environment.
ITEM 2. PROPERTIES
The number, type, location and size of the properties used by our operations as of December 31, 20202023 are shown in the following charts, by segment:
| | Number and nature of facilities | | Square footage (in 000s) |
| Manufacturing | | Warehouse | | Sales / Service | | Total | | Owned | | Leased |
| Number and nature of facilities | | | Number and nature of facilities | | Square footage (in 000s) |
| Manufacturing | | | Manufacturing | | Warehouse | | Sales / Service | | Total | | Owned | | Leased |
| Engineered Products | Engineered Products | 29 | | | 17 | | | 10 | | | 56 | | | 2,855 | | | 1,201 | |
| Fueling Solutions | 30 | | | 10 | | | 24 | | | 64 | | | 1,128 | | | 1,918 | |
| Clean Energy & Fueling | |
| Imaging & Identification | Imaging & Identification | 12 | | | 15 | | | 60 | | | 87 | | | 697 | | | 928 | |
| Pumps & Process Solutions | Pumps & Process Solutions | 38 | | | 7 | | | 24 | | | 69 | | | 3,251 | | | 896 | |
| Refrigeration & Food Equipment | 23 | | | 24 | | | 18 | | | 65 | | | 1,406 | | | 2,633 | |
| Climate & Sustainability Technologies | |
| | Locations | | Expiration dates of leased facilities (in years) |
| North America | | Europe | | Asia | | Other | | Total | | Minimum | | Maximum |
| Locations | | | Locations | | Expiration dates of leased facilities (in years) |
| North America | | | North America | | Europe | | Asia | | Other | | Total | | Minimum | | Maximum |
| Engineered Products | Engineered Products | 34 | | | 14 | | | 5 | | | 1 | | | 54 | | | 1 | | 8 | Engineered Products | 23 | | | 15 | | 15 | | | 3 | | 3 | | | 1 | | 1 | | | 42 | | 42 | | | 1 | | 1 | | 9 |
| Fueling Solutions | 16 | | | 17 | | | 10 | | | 3 | | | 46 | | | 1 | | 12 |
| Clean Energy & Fueling | | Clean Energy & Fueling | 31 | | | 19 | | | 8 | | | 3 | | | 61 | | | 1 | | 11 |
| Imaging & Identification | Imaging & Identification | 10 | | | 36 | | | 22 | | | 1 | | | 69 | | | 1 | | 11 | Imaging & Identification | 9 | | | 28 | | 28 | | | 17 | | 17 | | | 4 | | 4 | | | 58 | | 58 | | | 1 | | 1 | | 10 |
| Pumps & Process Solutions | Pumps & Process Solutions | 31 | | | 17 | | | 8 | | | 4 | | | 60 | | | 1 | | 12 | Pumps & Process Solutions | 34 | | | 19 | | 19 | | | 14 | | 14 | | | 1 | | 1 | | | 68 | | 68 | | | 1 | | 1 | | 11 |
| Refrigeration & Food Equipment | 29 | | | 17 | | | 8 | | | 5 | | | 59 | | | 1 | | 10 |
| Climate & Sustainability Technologies | | Climate & Sustainability Technologies | 16 | | | 11 | | | 9 | | | 2 | | | 38 | | | 1 | | 10 |
Our owned and leased facilities are well-maintained and suitable for our operations.
ITEM 3. LEGAL PROCEEDINGS
See Part II, Item 8, Notes to Consolidated Financial Statements, Note 1716 — Commitments and Contingent Liabilities.Liabilities in the Consolidated Financial Statements in Item 8 of this Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
All of our officers are elected annually at the first meeting of the Board of Directors following our annual meeting of shareholders, and are subject to removal at any time by the Board of Directors. Our executive officers as of February 12, 2021,9, 2024, and their positions with Dover (and, where relevant, prior business experience) for the past five years, are as follows:
| | | | | | | | | | | | | | |
| Name | | Age | | Positions Held and Prior Business Experience |
| Richard J. Tobin | | 5760 | | President and Chief Executive Officer (since May 2018) and Director (since August 2016); of Dover; prior thereto Chief Executive Officer (from 2013 to 2018) of CNH Industrial NV. |
| Kimberly K. Bors | | 6063 | | Senior Vice President and Chief Human Resources Officer (since January 2020) of Dover; prior thereto Senior Vice President and Chief Human Resources Officer of The Mosaic Company (from July 2017 to December 2018); prior thereto Senior Vice President, Human Resources &and Administration for Schneider, North America at Schneider Electric (September 2014 to June 2017). |
| Ivonne M. Cabrera | | 5457 | | Senior Vice President, General Counsel and Secretary (since January 2013) of Dover. |
| Brad M. Cerepak | | 6164 | | Senior Vice President and Chief Financial Officer (since May 2011) of Dover. |
| Girish Juneja | | 5154 | | Senior Vice President and Chief Digital Officer (since May 2017) of Dover; prior thereto Senior Vice President/Chief Technology Officer and General Manager of the Marketplace Solutions Business of Altisource (from January 2014 to April 2017). |
| David J. Malinas | | 46 | | Senior Vice President, Operations (since July 2019) of Dover; prior thereto Senior Vice President and President, Industrial Process for ITT Corporation (from June 2017 to June 2019); prior thereto Vice President and General Manager, Controlled Temperature Technologies Businesses at Thermo Fisher Scientific Inc. ("Thermo Fisher") (from March 2017 to June 2017); prior thereto Vice President, Industrial Segment at Thermo Fisher (from December 2015 to March 2017); prior thereto Vice President and General Manager, Global Chemicals Business Unit (from June 2012 to November 2015) at Thermo Fisher.
Anthony K. Kosinski | | 54 | | Vice President, Tax (since June 2016) of Dover; prior thereto Director, Domestic Tax (June 2003 to June 2016) of Dover. |
| James M. Moran | | 5558 | | Vice President, Treasurer (since November 2015) of Dover; prior thereto Senior Vice President and Treasurer (from June 2013 to August 2015) of Navistar International Corporation (“NIC”("NIC"); prior thereto Vice President and Treasurer (from 2008 to June 2013) of NIC; also served as Senior Vice President and Treasurer of Navistar, Inc. (from June 2013 to August 2015). |
| Ryan W. Paulson | | 4750 | | Vice President &and Controller (from July 2019) of Dover; prior thereto Assistant Controller, Global Consolidations &and Operations Accounting (from August 2017 to July 2019); prior thereto partner at PricewaterhouseCoopers LLP (from July 2012 to June 2017). |
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Dividends
The principal market in which Dover common stock is traded is the New York Stock Exchange.
Holders
The numberAs of January 29, 2024, there were 1,161 holders of record of Dover common stock as of February 2, 2021 was approximately 18,639. This figure includes participants in our domestic 401(k) program.stock.
Securities Authorized for Issuance Under Equity Compensation Plans
Information relating to securities authorized for issuance under our equity compensation plans is contained in Part III, Item 12 of this Form 10-K.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
During the year ended December 31, 2020, under our February 2018 standing share repurchase authorization, which expired on December 31, 2020, the Company purchased 979,165 shares of common stock at a total cost of $106,279 or $108.54 per share.
The total number of shares purchased by month during the fourth quarter of 2020 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value in Thousands) of Shares that May Yet Be Purchased under the Plans or Program |
| Period | | | | February 2018 Program |
| October 1 to October 31 | — | | | $ | — | | | — | | | 7,811,385 | |
| November 1 to November 30 | 392,700 | | | 123.96 | | | 392,700 | | | 7,418,685 | |
| December 1 to December 31 | 37,806 | | | 123.94 | | | 37,806 | | | 7,380,879 | |
| For the Fourth Quarter | 430,506 | | | $ | 123.95 | | | 430,506 | | | 7,380,879 | |
Upon expiration of the February 2018 share repurchase authorization, there were 7,380,879 shares remaining.
In November 2020,August 2023, the Company's Board of Directors approved a new standing share repurchase authorization whereby wethe Company may repurchase up to 20 million shares beginning on January 1, 20212024 through December 31, 2023.2026. This share repurchase authorization replaced the November 2020 share repurchase authorization. Upon expiration of the November 2020 share repurchase authorization on December 31, 2023, 15,283,326 shares remained unused. During the year ended December 31, 2023, there were no share repurchases.
Performance Graph
This performance graph does not constitute soliciting material, is not deemed filed with the Securities and Exchange Commission ("SEC"), and is not incorporated by reference in any of our filings under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date of this Form 10-K and irrespective of any general incorporation language in any such filing, except to the extent we specifically incorporate this performance graph by reference therein.
Comparison of Five-Year Cumulative Total Return +
Dover Corporation, S&P 500 Index, Peer GroupS&P 500 Industrials Index
Total Shareholder Returns
Data Source: Research Data Group, IncInc.
_______________________
+Total return assumes reinvestment of dividends.
This graph assumes $100 invested on December 31, 20152018 in Dover common stock, the S&P 500 indexIndex and a peer group index.the S&P 500 Industrials Index.
The 2020 peer index consists of the following 29 public companies selected by Dover.
| | | | | | | | |
3M Company | Flowserve Corporation | Parker-Hannifin Corp. |
Ametek Inc. | Fortive Corp. | Pentair Plc |
Carlisle Companies Inc. | Honeywell International Inc. | Regal Beloit Corp. |
Colfax Corp. | IDEX Corporation | Rockwell Automation Inc. |
Corning Inc. | Illinois Tool Works Inc. | Snap-on Inc. |
Crane Co. | Ingersoll Rand Inc. | SPX Flow Inc. |
Danaher Corp. | ITT Inc. | Teledyne Technologies Inc. |
Eaton Corporation Plc | Johnson Controls International Plc | Textron Inc. |
Emerson Electric Co. | Lennox International Inc. | The Timken Company |
Enerpac Tool Group Corp. | Nordson Corp. | |
ITEM 6. [RESERVED]
Not required.
ITEM 6. SELECTED FINANCIAL DATA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| in thousands except per share data | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 |
| | | | | | | | | | |
| Revenue | | $ | 6,683,760 | | | $ | 7,136,397 | | | $ | 6,992,118 | | | $ | 6,820,886 | | | $ | 6,043,224 | |
| Earnings from continuing operations | | 683,451 | | | 677,918 | | | 591,145 | | | 746,663 | | | 502,128 | |
| (Loss) earnings from discontinued operations | | — | | | — | | | (20,878) | | | 65,002 | | | 6,764 | |
| Net earnings | | 683,451 | | | 677,918 | | | 570,267 | | | 811,665 | | | 508,892 | |
| | | | | | | | | | |
| Basic earnings (loss) per share: | | | | | | | | | | |
| Continuing operations | | $ | 4.74 | | | $ | 4.67 | | | $ | 3.94 | | | $ | 4.80 | | | $ | 3.23 | |
| Discontinued operations | | — | | | — | | | (0.14) | | | 0.42 | | | 0.04 | |
| Net earnings | | 4.74 | | | 4.67 | | | 3.80 | | | 5.21 | | | 3.28 | |
| | | | | | | | | | |
| Weighted average basic shares outstanding | | 144,050 | | | 145,198 | | | 149,874 | | | 155,685 | | | 155,231 | |
| | | | | | | | | | |
| Diluted earnings (loss) per share: | | | | | | | | | | |
| Continuing operations | | $ | 4.70 | | | $ | 4.61 | | | $ | 3.89 | | | $ | 4.73 | | | $ | 3.21 | |
| Discontinued operations | | — | | | — | | | (0.14) | | | 0.41 | | | 0.04 | |
| Net earnings | | 4.70 | | | 4.61 | | | 3.75 | | | 5.15 | | | 3.25 | |
| | | | | | | | | | |
| Weighted average diluted shares outstanding | | 145,393 | | | 146,992 | | | 152,133 | | | 157,744 | | | 156,636 | |
| | | | | | | | | | |
| Dividends per common share | | $ | 1.97 | | | $ | 1.94 | | | $ | 1.90 | | | $ | 1.82 | | | $ | 1.72 | |
| | | | | | | | | | |
| Capital expenditures | | $ | 165,692 | | | $ | 186,804 | | | $ | 170,994 | | | $ | 170,068 | | | $ | 139,578 | |
| Depreciation and amortization | | 279,051 | | | 272,287 | | | 282,580 | | | 283,278 | | | 249,672 | |
Total assets (1) | | 9,152,074 | | | 8,669,477 | | | 8,365,771 | | | 10,658,359 | | | 10,130,325 | |
| Total long-term debt, including current maturities | | 3,108,829 | | | 2,985,716 | | | 2,943,660 | | | 3,336,713 | | | 3,207,632 | |
All results and data in the table above reflect continuing operations, unless otherwise noted. See Note 4 — Acquisitions and Note 5 — Discontinued and Disposed Operations in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the impact of 2020, 2019 and 2018 acquisitions and disposed and discontinued operations.
(1) Includes assets from discontinued operations
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’sManagement'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 yearsyear ended December 31, 2020, 2019 and 2018.2023. 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. For more information regarding our consolidated results, segment results, and liquidity and capital resources for the year ended December 31, 2022 as compared to the year ended December 31, 2021 refer to Part II Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2022 Annual Report on 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, 2020,2023, consolidated revenue was $6.7$8.4 billion, a decrease of $0.5 billion$70.0 million or 6.3%0.8%, as compared to the prior year. This decline included anThe decrease is due to a 1.5% organic revenue decline of 6.6% driven by COVID-19 and a 0.7% impact from dispositions, partially offset by acquisition-related growth of 1.0%. Overall, customer pricing favorably impacted revenue by approximately 0.7% for the year.
Within our Engineered Products segment, revenue decreased $166.3 million, or 9.8%, from the prior year, reflecting a broad-based organic revenue decline of 10.3%, partially offset by acquisition-related growth of 0.3% and a favorable foreign currency translation of 0.2%. The organic revenue decline was primarily driven by the global economic downturn precipitated by the COVID-19 pandemic. The impact was broad-based across the segment, with the most significant impacts experienced in our waste handling, industrial winch and hoist, industrial automation and fluid dispensing businesses.
Our Fueling Solutions segment revenue decreased $143.9 million, or 8.9%, from prior year, reflecting an organic decline of 8.8% and an unfavorable impact from foreign currency translation of 0.3%0.2%, partially offset by acquisition-related growth of 0.2%0.9%. The 1.5% organic revenue decline was principally driven by the adverse effects of COVID-19 and reduced underground equipment volume in China due to the taperingdecreases of government-mandated infrastructure upgrades.
Our Imaging4.0%, 3.3%, and 1.9% in our Clean Energy & Identification segment revenue decreased $46.3 million, or 4.3%, from the prior year, comprised of organic decline of 7.2% and an unfavorable impact from foreign currency translation of 1.0%, partially offset by acquisition-related growth of 3.9%. The organic revenue decline was primarily driven by the global economic downturn precipitated by the COVID-19 pandemic, which materially impacted our digital textile printing business, as government-mandated clothing and apparel retail closures and widespread practice of working from home reduced demand worldwide for apparel and textiles.
OurFueling, Pumps & Process Solutions, segment revenue decreased $14.5 million, or 1.1%, from the prior year, attributable to an organic decline of 2.3% and a 0.5% decrease from a disposition, partially offset by acquisition-related growth of 1.1% and a favorable impact from foreign currency translation of 0.6%. The organic revenue decline was principally driven by continued weakness in demand for compression components and aftermarket services, as well as continued slower demand for industrial pumps due to pandemic-related disruptions and weaker activity in the energy industry, which was partially offset by strong performance in the biopharma and plastics & polymers markets.
Our Refrigeration & Food Equipment segment revenue decreased $80.5 million, or 5.8%, from the prior year, reflecting an organic revenue decline of 3.0% and a disposition related decline of 2.9%, partially offset by a favorable impact from foreign currency translation of 0.1%. The organic decline was due to the impact of COVID-19 as government actions to contain the spread of the virus as well as atypically high volume of retail grocery sales during the early staged of the pandemic, resulted
in deferred customer orders and operational inefficiencies across the segment.Engineered Products segments, respectively. The decline was partially offset by increased project activity in can-shaping equipment.the Climate & Sustainability Technologies and Imaging & Identification segments which grew 2.4% and 0.2%, respectively. Pricing and productivity initiatives continued during the year to offset the impact of lower volumes across some of the Company's businesses.
From a geographic perspective, organic revenue for the U.S., our largest market, declined 3.1%, while organic revenue3.0% as compared to the prior year. The decrease was primarily due to our Clean Energy & Fueling and Pumps & Process Solutions segments. Revenue in Europe and Asia declined 8.5%5.7% and 13.5%0.2%, respectively, while revenue in Other Americas grew 3.4%. All other geographic markets grew 38.5% organically year over year. Organic revenue in all other geographic markets declined 11.2%. Three out of our five segments experienced declines in U.S. organic sales, while organic sales in the Fueling Solutions and Refrigeration & Food Equipment segments grew 3.8% and 2.3%, respectively. Operational and demand headwinds from the COVID-19 pandemic led to a decline in Europe for four of our five segments, while the Pumps & Process Solutions segment grew 0.7%. The decline in Asia was driven mainly by a reduction in China where our Fueling Solutions segment, our second largest business in China, faced significant headwinds due to the expiration of the government's double-wall upgrade mandate that drove significant activity in prior years, as well as continued slower demand from the local national oil companies.
Gross profit was $2.5$3.1 billion for the year ended December 31, 2020, a decrease2023, an increase of $146.9$21.1 million, or 5.6%0.7%, as compared to the prior year. Gross profit decreased due to lower revenue as productivity initiatives including prior rightsizing programs and cost containment actions were partially offset by increased material costs and inflation and higher restructuring costs. Gross profit margin expandedincreased to 37.0%36.6% for the year ended December 31, 20202023 compared to 36.7%36.0% 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.this Item 7.
Bookings decreased 4.4% over the prior year to $6.9$8.0 billion for the year ended December 31, 2020.2023. This included an organic bookings decline of 4.6%, a 0.6% decline due to dispositions, and an unfavorable impact due to foreign exchange ratecurrency translation of 0.2%0.4%, partially offset by a 1.0%an increase of 0.6% in acquisition-related bookings. Bookings declined organically in four segments primarily as a result of the global impact on customer demand from the COVID-19 pandemic, and increased in our Refrigeration & Food Equipment on the back of positive trends, most significantly in can-shaping, as well as food retail and heat exchanger markets. Overall, our book-to-bill increased from the prior year to 1.04. Backlog as of December 31, 2020 was $1.8 billion, up from $1.5 billion from the prior year. The increase in backlog occurred in the third and fourth quarters of 2020 as order rates sequentially improved after a significant second quarter decline due to COVID-19. Backlog as of December 31, 2020 included $0.5 billion, $0.2 billion, $0.2 billion, $0.4 billion and $0.5 billion in the Engineered Products, Fueling Solutions, Imaging & Identification, Pumps & Process Solutions and Refrigeration & Food Equipment segments, respectively.0.95. See definition of bookings, organic bookings book-to-bill and backlogbook-to-bill within "Segment Results of Operations".of this item 7.
During the year ended December 31, 2020,2023, we executed rightsizingrestructuring and other costs programs to further optimize operations. Rightsizing chargesRestructuring and other costs of $51.5$63.7 million included restructuring charges of $44.5$50.4 million and other costs of $7.0$13.2 million. Restructuring expense was comprised The restructuring expenses were primarily of new actions executedrelated to headcount reductions and exit costs 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. These restructuring charges were broad-based across all segments as well as corporate, with costs incurred of $10.3 million inthe Clean Energy & Fueling, Engineered Products $6.7 million in Fueling Solutions, $5.9 million in Imaging & Identification, $13.4 million inand Pumps & Process Solutions $4.0 millionsegments. These restructuring programs were initiated in Refrigeration & Food Equipment2022 and $4.1 million at Corporate.2023 and were undertaken in light of current market conditions. Other costs were comprised primarily of chargesdue to an asset impairment in our Climate & Sustainability Technologies segment and product line rationalization and footprint reduction in our Clean Energy & Fueling segment. For further discussion related to theour 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 Refrigeration & Food Equipment segment. Additional programs, beyond the scope of the announced programs may be implemented during 2021 with related restructuring charges.
During the year ended December 31, 2020, we made a total of six acquisitions totaling $335.8 million, net of cash acquired. We acquired Sys-Tech Solutions, Inc. ("Systech"), a leading provider of product traceability, regulatory complianceother costs, see "Restructuring and brand-protection software and solutions to pharmaceutical and consumer products manufacturers, for $161.8 million, net of cash acquired, to strengthen the Imaging & Identification segment. We acquired So. Cal. Soft-Pak, Incorporated ("Soft-Pak")Other Costs (Benefits), a leading specialized provider of integrated back office, route management and customer relationship management software solutions to the waste and recycling fleet industry for $45.5 million, net of cash acquired," within the Engineered Products segment. We acquired Em-tec GmbH ("Em-tec"), a leading designer and manufacturer of flow measurement devices that serve a wide array of medical and biopharmaceutical applications for $30.4 million, net of cash acquired, to expand the Pumps & Process Solution segment. We acquired Solaris Laser S.A. ("Solaris"), a global manufacturer of product identification and traceability solutions for $18.7 million, net of cash acquired, to strengthen the Imaging & Identification segment. We acquired Innovative Control Systems, Inc. (“ICS”), a leading provider of car wash controllers, paymentthis Item 7.
terminals, point-of-sale and wash site management software solutions for $77.0During the year ended December 31, 2023, we made two business acquisitions totaling $535.3 million, net of cash acquired to enhance the Fueling Solutions segment.and inclusive of contingent consideration. See Note 43 — Acquisitions in the Consolidated Financial Statements in Item 8 of this Form 10-K for further details regarding the businesses acquired during the year.
On March 6, 2020, we completedOctober 11, 2023, the sale ofCompany entered into a definitive agreement to sell De-Sta-Co, an operating company within the Chino, California branch ofEngineered Products segment, for approximately $680 million enterprise value, subject to customary post-closing adjustments. The AMS Group ("AMS Chino"), a regional aftermarket refrigeration services and solutions provider based in Southern California. The AMS Group was a wholly owned subsidiary, which was part of our Refrigeration & Food Equipment segment. We sold the business for total consideration of $15.4 million and recorded a pre-tax gain on sale of $5.2 million.
During the year ended December 31, 2020, we purchased approximately 1.0 million shares of our common stock for a total cost of $106.3 million, or $108.54 per share. In November 2020, our Board of Directors approved a new standing share repurchase authorization, whereby we may repurchase uptransaction is expected to 20 million shares beginning on January 1, 2021 through December 31, 2023. We also continued our 65 year history of increasing our annual dividend per share and paid a total of $284.3 million in dividends to our shareholders.
COVID-19
The COVID-19 pandemic disrupted the global economy and adversely impacted our business, including demand for our products across multiple end-markets as well as our supply chain and operations.
Our foremost focus as we respond to the pandemic has been on the health and safety of our employees. We have enhanced health and safety measures across our facilities, including modifying practices to adhere to guidance from the U.S. Centers for Disease Control and Prevention and local health and governmental authorities with respect to social distancing, physical separation, personal protective equipment and sanitization. We also restricted the number of employees permitted in common areas at any given time. We enhanced our operational excellence model by memorializing our approach to sanitized manufacturing which includes procedures for dealing with confirmed COVID-19 cases, compliance auditing, and manufacturing line design. We will continue to closely monitor the risks posed by COVID-19 and adjust our practices accordingly.
We consider our companies to be essential suppliers to our customers and business partners as we provide products and services on which our customers and broader society rely upon daily to support crucial functions. Therefore, most of our U.S. and global facilities have remained substantially operational during the outbreak with enhanced safety protocols to protect the well-being of our employees.
In order to help mitigate the negative financial impact caused by the pandemic beginning lateclose in the first quarter we executed a number of temporary cost savings measures across2024, subject to customary closing conditions, including receipt of regulatory approvals. See Note 4 — Dispositions in the portfolio and at our corporate center, including short-term workforce rightsizing actions, adjustments to variable compensation to reflect current conditions, eliminationConsolidated Financial Statements in Item 8 of non-essential travel and reduction of discretionary spending. We also reduced our capital spendingthis Form 10-K for the year, without deferring strategic ongoing initiatives. In addition, we initiated restructuring actions to drive longer-term cost savings and are proactively managing our working capital.further details.
Over the courseIn January 2024, we made two business acquisitions totaling approximately $140.6 million, net of 2020, we experienced sequentially improving activity in most markets and geographies, though demand remains lower than historical averages across markets that we expect will take longercash acquired, plus potential contingent consideration of up to fully recover, like our food equipment and digital textile businesses. However, given sequential improvements in bookings in a majority of our markets late in 2020 and a higher year over year backlog, we expect continued improvement in our financial results in 2021.
The public health situation, 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 areapproximately $33.4 million. See Note 22 — Subsequent Events in the best interestsConsolidated Financial Statements in Item 8 of our employees and operations.
CONSOLIDATED RESULTS OF OPERATIONS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, | | % / Point Change | | |
| (dollars in thousands, except per share figures) | | 2020 | | 2019 | | 2018 | | 2020 vs. 2019 | | | | 2019 vs. 2018 | | |
| Revenue | | $ | 6,683,760 | | $ | 7,136,397 | | $ | 6,992,118 | | (6.3) | % | | | | 2.1 | % | | |
| Cost of goods and services | | 4,209,741 | | 4,515,459 | | 4,432,562 | | (6.8) | % | | | | 1.9 | % | | |
| Gross profit | | 2,474,019 | | 2,620,938 | | 2,559,556 | | (5.6) | % | | | | 2.4 | % | | |
| Gross profit margin | | 37.0 | % | | 36.7 | % | | 36.6 | % | | 0.30 | | | | | 0.10 | | | |
| Selling, general and administrative expenses | | 1,541,032 | | 1,599,098 | | 1,716,444 | | (3.6) | % | | | | (6.8) | % | | |
| Selling, general and administrative expenses as a percent of revenue | | 23.1 | % | | 22.4 | % | | 24.5 | % | | 0.70 | | | | | (2.10) | | | |
| Loss on assets held for sale | | — | | 46,946 | | — | | nm* | | | | nm* | | |
| Operating Earnings | | 932,987 | | 974,894 | | 843,112 | | (4.3) | % | | | | 15.6 | % | | |
| Interest expense | | 111,937 | | 125,818 | | 130,972 | | (11.0) | % | | | | (3.9) | % | | |
| Interest income | | (3,571) | | (4,526) | | (8,881) | | (21.1) | % | | | | (49.0) | % | | |
| Loss on extinguishment of debt | | — | | 23,543 | | — | | nm* | | | | nm* | | |
| Gain on sale of business | | (5,213) | | — | | — | | nm* | | | | nm* | | |
| Other income, net | | (11,900) | | (12,950) | | (4,357) | | (8.1) | % | | | | 197.2 | % | | |
| Earnings before provision for income taxes and discontinued operations | | 841,734 | | 843,009 | | 725,378 | | (0.2) | % | | | | 16.2 | % | | |
| Provision for income taxes | | 158,283 | | 165,091 | | 134,233 | | (4.1) | % | | | | 23.0 | % | | |
| Effective tax rate | | 18.8 | % | | 19.6 | % | | 18.5 | % | | (0.8) | | | | | 1.1 | | | |
| Earnings from continuing operations | | 683,451 | | 677,918 | | 591,145 | | 0.8 | % | | | | 14.7 | % | | |
| Loss from discontinued operations, net | | — | | — | | (20,878) | | nm* | | | | nm* | | |
| Earnings from continuing operations per common share - diluted | | $ | 4.70 | | | $ | 4.61 | | | $ | 3.89 | | | 2.0 | % | | | | 18.5 | % | | |
| | | | | | | | | | | | | | |
| Loss from discontinued operations per common share - diluted | | $ | — | | | $ | — | | | $ | (0.14) | | | nm* | | | | nm* | | |
* nm: not meaningful | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, | | % / Point Change | | |
| (dollars in thousands, except per share figures) | | 2023 | | 2022 | | | | 2023 vs. 2022 | | | | | | |
| Revenue | | $ | 8,438,134 | | $ | 8,508,088 | | | | (0.8) | % | | | | | | |
| Cost of goods and services | | 5,353,501 | | 5,444,532 | | | | (1.7) | % | | | | | | |
| Gross profit | | 3,084,633 | | 3,063,556 | | | | 0.7 | % | | | | | | |
| Gross profit margin | | 36.6 | % | | 36.0 | % | | | | 0.60 | | | | | | | |
| Selling, general and administrative expenses | | 1,718,290 | | 1,684,226 | | | | 2.0 | % | | | | | | |
| Selling, general and administrative expenses as a percent of revenue | | 20.4 | % | | 19.8 | % | | | | 0.60 | | | | | | | |
| | | | | | | | | | | | | | |
| Operating earnings | | 1,366,343 | | 1,379,330 | | | | (0.9) | % | | | | | | |
| Interest expense | | 131,305 | | 116,456 | | | | 12.8 | % | | | | | | |
| Interest income | | (13,496) | | (4,430) | | | | 204.7 | % | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Other income, net | | (21,472) | | (20,201) | | | | 6.3 | % | | | | | | |
| Earnings before provision for income taxes | | 1,270,006 | | 1,287,505 | | | | (1.4) | % | | | | | | |
| Provision for income taxes | | 213,178 | | 222,129 | | | | (4.0) | % | | | | | | |
| Effective tax rate | | 16.8 | % | | 17.3 | % | | | | (0.50) | | | | | | | |
| Net earnings | | $ | 1,056,828 | | $ | 1,065,376 | | | | (0.8) | % | | | | | | |
| | | | | | | | | | | | | | |
| Net earnings per common share - diluted | | $ | 7.52 | | | $ | 7.42 | | | | | 1.3 | % | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Revenue
For the year ended December 31, 2020, revenue decreased $452.6 million, or 6.3% to $6.7 billion compared with 2019, reflecting an organic decline of 6.6% due to lower sales volumes due to pandemic-related impacts in our markets. Acquisition-related growth increased by 1.0% led by our Imaging and Identification and Pumps & Process Solutions segments, partially offset by a 0.7% decrease from dispositions within our Pumps & Process Solutions and Refrigeration & Food Equipment segments. Foreign currency translation had no significant impact to revenueRevenue for the year ended December 31, 2020. Customer pricing favorably impacted revenue by approximately 0.7% in 2020.
For the year ended December 31, 2019, revenue increased $144.32023 decreased $70.0 million, or 2.1%0.8% to $7.1$8.4 billion compared with 2018, reflecting organic growth2022. Organic revenue decline of 3.8%, led by our Fueling Solutions and Engineered Products segments, partially offset by our Refrigeration & Food Equipment segment. Revenue also increased1.5% is primarily due to acquisition-relatedgeneral reduction in our customers' and distribution channels' inventory levels that resulted from lead time normalization and higher inventory carrying costs driven by interest rate increases. Acquisition-related growth of 0.8% fromincreased by 0.9% primarily driven by our Pumps & Process Solutions and Fueling Solutions segments, partiallysegment, offset by an unfavorable impact from foreign currency translation of 2.0%, particularly in our Fueling Solutions and Imaging and Identification segments and a 0.5% impact from dispositions within our Pumps & Process Solutions and Fueling Solutions segments.0.2%. Customer pricing favorably impacted revenue in 2023 by approximately 1.0%3.8% and by 6.9% in 2019.the prior year.
Gross Profit
ForGross profit for the year ended December 31, 2020, gross profit decreased $146.92023, increased $21.1 million, or 5.6%0.7%, to $2.5$3.1 billion compared with 2019,2022, primarily due to lower revenuedriven by positive market conditions in certain secular growth-exposed businesses, as well as pricing, productivity initiatives including prior rightsizing programs and cost containmentrestructuring actions, were partially offset by increased material costs and inflation and higher restructuring costs.lower volumes across some end markets. Gross profit margin expanded 30increased 60 basis points to 37.0%36.6% as compared to the prior year due todriven by benefits from pricing, productivity initiatives and restructuring and cost containment actions. We are managing production at our operating plants aggressively to match demand.actions, partially offset by lower volumes across some of the Company's businesses.
For the year ended December 31, 2019, gross profit increased $61.4 million, or 2.4% to $2.6 billion compared with 2018, primarily due to organic volume growth, pricing actions, and productivity initiatives including the benefits
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended December 31, 2020, decreased $58.12023 increased $34.1 million, or 3.6%2.0% to $1.5$1.7 billion compared with 2019, due to reduction in discretionary spend2022, primarily driven by increased restructuring, employee compensation and benefits from rightsizing actionsand transaction and integration costs, partially offset by higher restructuring costs of $7.7 million and a $3.6 million write-off of assets.lower contract labor costs. As a percentage of revenue, selling, general and administrative expenses increased 7060 basis points in 2020 to 23.1%20.4%, reflecting the decrease in revenue base.
Selling, general and administrative expenses for the year ended December 31, 2019, decreased $117.3 million, or 6.8% to $1.6 billion compared with 2018 primarily due to benefits from rightsizing actions started in 2018 and a decrease in restructuring costs of $23.7 million. As a percentage ofthe revenue selling, general and administrative expenses decreased 210 basis points in 2019 to 22.4%, reflecting the leverage of costs on a higher revenue base and the decrease in expenses.base.
Research and development costs, including qualifying engineering costs, are expensed when incurred and amounted to $142.1 million, $141.0$153.1 million and $143.0$163.3 million for the years ended December 31, 2020, 20192023 and 2018,2022, respectively. These costs as a percent of revenue were 2.1%, 2.0%1.8% and 2.0%1.9% for the years December 31, 2020, 20192023 and 2018,2022, respectively.
Loss on assets held for sale
On March 29, 2019, we entered into a definitive agreement to sell Finder for total consideration of approximately $23.6 million net of estimated selling costs. As of March 31, 2019, Finder met the criteria to be classified as held for sale and based on the total consideration from the sale, net of selling costs, we recorded a loss on the assets held for sale of $46.9 million. The loss was comprised of an impairment on assets held for sale of $21.6 million and foreign currency translation losses reclassified from accumulated other comprehensive losses to current earnings of $25.3 million. We subsequently sold Finder on April 2, 2019, which generated total cash proceeds of $24.2 million.
Non-Operating Items
Interest Expense, net
For the year ended December 31, 2020,2023, interest expense, net of interest income, decreased $12.9increased $5.8 million, or 10.7%5.2%, to $108.4$117.8 million compared with 20192022 primarily due to lowerdriven by increased higher average interest rates on new debt issued in November 2019 of €500 million of 0.750% notes due 2027 and $300 million of 2.950% notes due 2029. The new notes repaidsince the old debt of €300 million of 2.125% notes and $450 million of 4.30% notes, which carried higher interest rates.prior year, partially offset by decreased commercial paper borrowings.
For the year ended December 31, 2019, interest expense,Other Income, net of interest income, decreased $0.8 million, or 0.7%, to $121.3 million compared with 2018 due to the $350 million 5.45% 10-year notes that were paid in March 2018 that resulted in lower outstanding long-term debt and lower interest expense compared to 2018, partially offset by lower interest income.
Loss on extinguishment of debt
On December 4, 2019, the Company extinguished the €300 million of 2.125% notes due 2020 and the $450 million of 4.30% notes due 2021. The Company was required to pay a make whole premium to the bondholders for the early extinguishment of debt, resulting in a loss of $23.5 million.
Gain on sale of business
On March 6, 2020, we sold AMS Chino within the Refrigeration & Food Equipment segment for total consideration of $15.4 million which included a working capital adjustment. A gain of $5.2 million was recognized on this sale. The disposal did not represent a strategic shift in operations and, therefore, did not qualify for presentation as discontinued operations.
There were no dispositions in the year 2019 aside from the sale of Finder as described above, and no significant dispositions in 2018 aside from the spin-off of Apergy, whose results are presented as discontinued operations.
Other income, net
For includes non-service pension benefit, deferred compensation plan investments gain or loss, earnings or charges from equity method investments, foreign exchange gain or loss, and various other items. Other income, net for the years ended December 31, 2020, 20192023 and 2018, other income, net2022, was $11.9 million, $13.0$21.5 million and $4.4$20.2 million, respectively. For the year ended December 31, 2020, other income decreased compared to 2019 primarily due to decreased earnings from our equity method investments and increased foreign exchange losses resulting from the re-measurement and settlement of foreign currency denominated balances. For the year ended December 31, 2019,2023, other income increased compared to 20182022 primarily due todriven by increased non-operational income and increased earnings from our equity method investments, and reduction of non-operating losses from our defined benefit and post-retirement benefit plans.partially offset by the decrease in non-service pension benefit.
Income Taxes
Our businesses have a global presence with 45%, 47%40.5% and 52%43.2% of our pre-tax earnings in 2020, 20192023 and 2018,2022, 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. As a result, for our non-U.S. business locations, our effective foreign tax rate is typically lower than the U.S. statutory tax rate.
Our effective tax rate was 18.8%16.8% for the year ended December 31, 2020,2023, compared to 19.6% and 18.5%17.3% for the yearsyear ended December 31, 2019 and December 31, 2018,2022, respectively. The 2020, 20192023 rate was primarily due to the release of a $69.7 million net valuation allowance against non-U.S. tax loss carryforwards mainly related to an internal reorganization, partially offset by a $30.4 million accrual of withholding taxes on current and 2018 rates were impacted by $22.2 million,$26.6 million, and $24.0 million respectively,future repatriation of favorable net discrete itemscertain foreign earnings. 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.
The Company is monitoring the potential changes in tax benefitlaws resulting from the Organization for Economic Cooperation and Development’s multi-jurisdictional plan of share award exercises.action to address base erosion and profit shifting. We do not expect this to have a material impact on our effective tax rate.
See Note 1514 — Income Taxes in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional details.
Net Earnings from Continuing Operations
For the year ended December 31, 2020,2023, net earnings from continuing operations increased $5.5decreased $8.5 million, or 0.8%, to $683.5 million,$1.1 billion, or $4.70$7.52 per share, compared with net earnings from continuing operations of $677.9 million,$1.1 billion, or $4.61$7.42 per share, for the year ended December 31, 2019. Despite a revenue decline of 6.3%2022. Earnings decreased primarily due to lower volumes across some of the impact of COVID-19, earningsCompany's businesses, increased due to broad-based cost containmentselling, general and administrative expenses, partially offset by customer pricing actions and benefits from productivity and restructuring actions, a loss due to the after-tax extinguishment of debt of $18.4 million in the prior year and a loss on assets held for sale of $46.9 million in the prior year.
initiatives
For the year ended December 31, 2019, earnings from continuing operations increased $86.8 million, or 14.7%, to $677.9 million, or $4.61 per share, compared with earnings from continuing operations of $591.1 million, or $3.89 per share, for the year ended December 31, 2018. Earnings increased due to organic volume growth, pricing actions, and productivity initiatives including the benefits of restructuring actions and cost reduction initiatives. Additionally, after-tax rightsizing costs were lower by $32.9 million in 2019 compared to 2018. These benefits more than offset increases in material costs due, in part, to U.S. Section 232 and 301 tariff exposure, as well as a loss due to the after-tax extinguishment of debt of $18.4 million and a loss on assets held for sale of $46.9 million. Diluted earnings per share also improved due to the benefit of the prior and current year share repurchases.
Discontinued Operations
There were no discontinued operations for the years ended December 31, 2020 and December 31, 2019.
The results of discontinued operations for the year ended December 31, 2018 include the historical results of Apergy prior to its distribution on May 9, 2018. The year ended December 31, 2018 included costs incurred by the Company to complete the spin-off of Apergy amounting to $46.4 million reflected in selling, general and administrative expenses in discontinued operations. Due to lump-sum payments made in 2018 for Apergy participants in the Dover U.S. Pension Plan, non-cash settlement costs of approximately $9.2 million were classified within discontinued operations.
Refer to Note 5 — Discontinued and Disposed Operations in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information on disposed and discontinued operations.
Rightsizing Activities, which includes Restructuring and Other Costs
We recorded the following rightsizing costs for the year ended December 31, 2020:
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| Year Ended December 31, 2020 |
| (dollars in thousands) | Engineered Products | | Fueling Solutions | | Imaging & Identification | | Pumps & Process Solutions | | Refrigeration & Food Equipment | | Corporate | | Total |
| Restructuring (GAAP) | $ | 10,307 | | | $ | 6,681 | | | $ | 5,946 | | | $ | 13,374 | | | $ | 4,015 | | | $ | 4,145 | | | $ | 44,468 | |
| Other costs, net | 1,223 | | | 22 | | | 81 | | | 62 | | | 2,460 | | | 3,156 | | | 7,004 | |
| Rightsizing (non-GAAP) | $ | 11,530 | | | $ | 6,703 | | | $ | 6,027 | | | $ | 13,436 | | | $ | 6,475 | | | $ | 7,301 | | | $ | 51,472 | |
During the year ended December 31, 2020, rightsizing 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 Refrigeration & Food Equipment segment. These rightsizing charges were recorded in cost of goods and services, selling, general and administrative expenses, interest expense, and other income, net in the Consolidated Statement of Earnings. Additional programs, beyond the scope of the announced programs may be implemented during 2021 with related restructuring charges.
We recorded the following rightsizing costs for the year ended December 31, 2019:
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| Year Ended December 31, 2019 |
| (dollars in thousands) | Engineered Products | | Fueling Solutions | | Imaging & Identification | | Pumps & Process Solutions | | Refrigeration & Food Equipment | | Corporate | | Total |
| Restructuring (GAAP) | $ | 3,155 | | | $ | 4,943 | | | $ | 6,426 | | | $ | 5,666 | | | $ | 3,671 | | | $ | 2,961 | | | $ | 26,822 | |
| Other (benefits) costs, net | (5) | | | (58) | | | (76) | | | 462 | | | 2,371 | | | 2,637 | | | 5,331 | |
| Rightsizing (non-GAAP) | $ | 3,150 | | | $ | 4,885 | | | $ | 6,350 | | | $ | 6,128 | | | $ | 6,042 | | | $ | 5,598 | | | $ | 32,153 | |
During the year ended December 31, 2019, rightsizing activities included restructuring charges of $26.8 million and other costs of $5.3 million. Restructuring expense was comprised primarily of broad-based selling, general and administrative expense reduction initiatives and broad-based operational efficiency initiatives focusing on footprint consolidation, operational optimization and IT centralization. Other costs were comprised primarily of other charges related to the restructuring actions. These rightsizing 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 rightsizing costs for the year ended December 31, 2018:
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| Year Ended December 31, 2018 |
| (dollars in thousands) | Engineered Products | | Fueling Solutions | | Imaging & Identification | | Pumps & Process Solutions | | Refrigeration & Food Equipment | | Corporate | | Total |
| Restructuring (GAAP) | $ | 7,158 | | | $ | 15,478 | | | $ | 13,882 | | | $ | 10,266 | | | $ | 3,475 | | | $ | 8,244 | | | $ | 58,503 | |
| Other costs (benefits), net | 128 | | | (146) | | | (1,237) | | | 3,109 | | | 6,474 | | | 5,997 | | | 14,325 | |
| Rightsizing (non-GAAP) | $ | 7,286 | | | $ | 15,332 | | | $ | 12,645 | | | $ | 13,375 | | | $ | 9,949 | | | $ | 14,241 | | | $ | 72,828 | |
During the year ended December 31, 2018, rightsizing activities included restructuring charges of $58.5 million and other costs of $14.3 million. Restructuring expense was comprised primarily of several programs in order to further optimize operations, including 1) alignment of our cost structure in preparation for the Apergy separation, 2) broad-based selling, general and administrative expense reduction initiatives and 3) initiation of footprint consolidation actions. Other costs were comprised primarily of other charges related to the restructuring actions. These rightsizing charges were recorded in cost of goods and services, selling, general and administrative expenses and other income, net in the Consolidated Statement of Earnings.
See Note 12 — Restructuring Activities in the Consolidated Financial Statements in Item 8 of this Form 10-K for additional details regarding our recent restructuring activities.
SEGMENT RESULTS OF OPERATIONS
The summary that follows provides a discussion of the results of operations of each of our five reportable operating and reportable segments (Engineered Products, Clean Energy & Fueling, Solutions, Imaging & Identification, Pumps & Process Solutions and RefrigerationClimate & Food Equipment)Sustainability Technologies). Each of these segments is comprised of various product and service offerings that serve multiple markets. SeeWe evaluate our operating segment performance based on segment earnings as defined in Note 2019 — Segment Information in the Consolidated Financial Statements in Item 8 of this Form 10-K10-K. See "Non-GAAP Disclosures" at the end of this Item 7 for a reconciliationfurther details.
Additionally, we use the following operational metrics in monitoring the performance of segment revenue, earnings and margin to our consolidated revenue, earnings from continuing operations and margin. Segment EBITDA and segment EBITDA margin, which are presented in the segment discussion that follows, are non-GAAP measures and do not purport to be alternatives to segment earnings (EBIT) as a measure of operating performance.business. We believe that these measuresthe operational metrics are useful to investors and other users of our financial information in evaluating ongoing operating profitability as they exclude the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to our competitors. For further information, see "Non-GAAP Disclosures" at the end of this Item 7.
Additionally, we believe the following operational metrics are useful to investors and others users of our financial information in assessing the performance of our segments:
•Bookings represent total orders received from customers in the current reporting period.period and exclude de-bookings related to orders received in prior periods, if any. This metric is an important measure of performance and an indicator of revenue order trends.
•Organic bookings represent total orders received from customers in the current reporting periodbookings excluding the impact of foreign currency exchange rates and the impact of acquisitions and dispositions. TheThis 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.demand trends.
Engineered Products
Our Engineered Products segment is a provider ofprovides a wide range of products,equipment, components, software, solutions and services that have broad customer applications across a number of markets, includingto the vehicle aftermarket, vehicle service, solid waste handling, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing.dispensing end-markets.
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| | | Years Ended December 31, | | % Change |
| (dollars in thousands) | | 2020 | | 2019 | | 2018 | | 2020 vs. 2019 | | 2019 vs. 2018 |
| Revenue | | $ | 1,531,277 | | | $ | 1,697,557 | | | $ | 1,633,147 | | | (9.8) | % | | 3.9 | % |
| | | | | | | | | | |
| Segment earnings (EBIT) | | $ | 238,167 | | | $ | 291,848 | | | $ | 252,368 | | | (18.4) | % | | 15.6 | % |
| Depreciation and amortization | | 42,603 | | | 41,032 | | | 44,995 | | | 3.8 | % | | (8.8) | % |
| Segment EBITDA | | $ | 280,770 | | | $ | 332,880 | | | $ | 297,363 | | | (15.7) | % | | 11.9 | % |
| | | | | | | | | | |
| Segment margin | | 15.6 % | | 17.2 % | | 15.5 % | | | | |
| Segment EBITDA margin | | 18.3 % | | 19.6 % | | 18.2 % | | | | |
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| Other measures: | | | | | | | | | | |
| Bookings | | $ | 1,558,486 | | | $ | 1,708,321 | | | $ | 1,803,555 | | | (8.8) | % | | (5.3) | % |
| Backlog | | $ | 463,701 | | | $ | 452,142 | | | $ | 442,519 | | | 2.6 | % | | 2.2 | % |
| | | | | | | | | | |
| Components of revenue (decline) growth: | | | | | | | | | | |
| Organic (decline) growth | | | | | | | | (10.3) | % | | 5.4 | % |
| Acquisitions | | | | | | | | 0.3 | % | | — | % |
| | | | | | | | | | |
| Foreign currency translation | | | | | | | | 0.2 | % | | (1.5) | % |
| Total revenue (decline) growth | | | | | | | | (9.8) | % | | 3.9 | % |
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| | | Years Ended December 31, | | % Change |
| (dollars in thousands) | | 2023 | | 2022 | | | | 2023 vs. 2022 | | |
| Revenue | | $ | 2,004,587 | | | $ | 2,043,632 | | | | | (1.9) | % | | |
| | | | | | | | | | |
| Segment earnings | | $ | 377,425 | | | $ | 346,519 | | | | | 8.9 | % | | |
| | | | | | | | | | |
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| | | | | | | | | | |
| Segment margin | | 18.8 | % | | 17.0 | % | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Operational metric: | | | | | | | | | | |
| Bookings | | $ | 2,096,772 | | | $ | 2,004,326 | | | | | 4.6 | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Components of revenue decline: | | | | | | | | | | |
| Organic decline | | | | | | | | (1.9) | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Foreign currency translation | | | | | | | | — | % | | |
| Total revenue decline | | | | | | | | (1.9) | % | | |
20202023 Versus 20192022
Engineered Products segment revenue for the year ended December 31, 20202023 decreased $166.3$39.0 million, or 9.8% compared to the prior year, comprised of a broad-based1.9% organic revenue decline of 10.3%, partially offset by acquisition-related growth of 0.3% and a favorable foreign currency translation of 0.2%. Acquisition-related growth was driven by the acquisition of Soft-Pak.decline. Customer pricing favorably impacted revenue in 2023 by approximately 0.3%2.6% and by 10.4% in 2020.the prior year.
The organic revenue decline was primarily driven by the global economic downturn precipitated by the COVID-19 pandemic beginning latedue to lower volumes in our vehicle service business in Europe and Asia, as well as transient disruptions in North America from an ERP upgrade in this business that reduced volumes in the first quarter of 2020. The impact was broad-based across the segment, with the most significant impacts in the year experiencedsecond and third quarter. Our other businesses saw robust demand, including in our waste handling industrial winch and hoist, industrial automation and fluid dispensing businesses. In waste handling, we experienced headwinds in new order activitybusiness as large national waste haulers and municipalities reduced capital budgetsmunicipal governments invest to preserve cash flow,upgrade their refuse collection vehicle fleets and orders for compactionimplement our leading digital technologies to improve waste collection process efficiencies, and recycling solutions remained below prior year levels. Demand for vehicle aftermarket equipment was also subdued duefrom key defense customers in our aerospace and defense business. We expect organic growth to reduced driving mileage and vehicle service demand. Headwinds from the COVID-19 pandemic were more significantbe positive in the first half2024, driven by strong order demand trends in several of the year and persisted, to a lesser extent, into the second half of the year across our businesses. Despite theses headwinds, activity improved sequentially from the second quarter into the second half of the year in a number of businesses,key end markets, most notably in our waste handling and in our aerospace and defense businesses. Additionally, we expect revenue growth in our vehicle service industrial automation, and fluid dispensing businesses, as government mandated restrictions eased and customer demand accelerated. Our aerospace & defense business demonstrated resilience despite the challenges of COVID-19, postingagainst prior year over year revenue growth on the back of stable demand from long-term defense programs.
While market headwinds for capital equipment across some of our businesses persist, we expect that demand for our products will continue to improve sequentially into 2021, as evidenced by strong order rates and a strong backlog in the fourth quarter
of 2020. We also remain confident that the fundamental long-term demand drivers across our end-markets remain constructive, and thus continue to believe in the long-term growth trajectory of the segment.comparable periods.
Engineered Products segment earnings for the year ended December 31, 2020 decreased $53.72023 increased $30.9 million, or 18.4%8.9%, compared to the prior year. This decreaseThe increase included a fourth quarter benefit of $14.4 million as a result of the change from LIFO to FIFO method for an immaterial portion of inventories, customer pricing actions, productivity and cost reduction initiatives, and favorable business mix, partially offset by lower volumes and increased material and labor costs. As a result, segment margin increased to 18.8% from 17.0% in the prior year. 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 additional details regarding the change from LIFO to FIFO.
Bookings for the year ended December 31, 2023 increased 4.6% compared to the prior year, comprised of organic growth of 4.7% and an unfavorable impact from foreign currency translation of 0.1%. The organic bookings growth was primarily driven by robust demand in our waste handling business as large waste haulers upgrade their vehicle fleets. Segment book-to-bill was 1.05.
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.
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| | | Years Ended December 31, | | % Change |
| (dollars in thousands) | | 2023 | | 2022 | | | | 2023 vs. 2022 | | |
| Revenue | | $ | 1,788,277 | | | $ | 1,878,507 | | | | | (4.8) | % | | |
| | | | | | | | | | |
| Segment earnings | | $ | 328,604 | | | $ | 352,993 | | | | | (6.9) | % | | |
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| | | | | | | | | | |
| | | | | | | | | | |
| Segment margin | | 18.4 | % | | 18.8 | % | | | | | | |
| | | | | | | | | | |
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| Operational metric: | | | | | | | | | | |
| Bookings | | $ | 1,745,521 | | | $ | 1,821,025 | | | | | (4.1) | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Components of revenue decline: | | | | | | | | | | |
| Organic decline | | | | | | | | (4.0) | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Foreign currency translation | | | | | | | | (0.8) | % | | |
| Total revenue decline | | | | | | | | (4.8) | % | | |
2023 Versus 2022
Clean Energy & Fueling segment revenue for the year ended December 31, 2023 decreased $90.2 million, or 4.8%, compared to the prior year, attributable to an organic decline of 4.0% and an unfavorable impact from foreign currency translation of 0.8%. Customer pricing favorably impacted revenue in 2023 by approximately 4.3% and by 6.0% in the prior year.
The organic revenue decline was primarily due to reduced year-over-year demand in above ground retail fueling equipment, due to the expected roll-off of EMV-related demand in the first half of the COVID-19 pandemic on customer spending,year, as well as general reduction in our customers' inventory across our distribution channels, as higher interest rates increased its carrying costs. This was partially offset by cost containment initiatives we executed in the year. These initiatives include actions to adjust direct and indirect manufacturing costs to current demand levels, the execution of short-term actions to reduce labor costs, the elimination of non-essential travel, third party and other expenses, the recognition of adjustments to variable compensation to reflect current conditions, the execution of selective structural costpricing actions aimed at streamliningmitigating material cost inflation and strong demand in our businesses,fluid transfer solutions and a detailed reviewhydrogen and re-prioritizationliquefied natural gas clean energy businesses. 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 shipments to remain lower in the first half of all planned investments2024 improving progressively for the remainder of the year.
Clean Energy & Fueling segment earnings for the year ended December 31, 2023 decreased $24.4 million, or 6.9%, compared to the prior year. The decrease was primarily due to reduced organic volumes, unfavorable foreign currency translation, and hiring plans.increased material, logistics and labor costs, partially offset by pricing, productivity initiatives, and the benefits from ongoing restructuring actions. The benefits from these restructuring actions are significant and will carry into 2024. See "Restructuring and Other Costs (Benefits)" section within this Item 7 for further information. Segment margin decreased to 18.4% from 17.2% to 15.6% as compared to18.8% in the prior year.
Bookings for the year ended December 31, 20202023 decreased 8.8%4.1% compared to the prior year, reflecting andue to organic decline of 9.5%, partially offset by acquisition-related growth of 0.4%3.1% and a favorablean unfavorable impact from foreign currency translation of 0.3%1.0%. The organic bookings decline was broad-basedprimarily due to decreased year over year demand in above ground fueling equipment and primarily driven by the global impact on customer demand of the COVID-19 pandemic.vehicle wash solutions as higher interest rates have impacted ability to finance equipment purchases. Segment book-to-bill was 1.02. Backlog increased 2.6% compared to the prior year, with particular strength seen in our vehicle service, industrial automation and aerospace and defense businesses.0.98.
Imaging & Identification
Engineered ProductsOur 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.
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| | | Years Ended December 31, | | % Change |
| (dollars in thousands) | | 2023 | | 2022 | | | | 2023 vs. 2022 | | |
| Revenue | | $ | 1,116,732 | | | $ | 1,123,815 | | | | | (0.6) | % | | |
| | | | | | | | | | |
| Segment earnings | | $ | 272,512 | | | $ | 268,084 | | | | | 1.7 | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Segment margin | | 24.4 | % | | 23.9 | % | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Operational metric: | | | | | | | | | | |
| Bookings | | $ | 1,121,229 | | | $ | 1,154,199 | | | | | (2.9) | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Components of revenue decline: | | | | | | | | | | |
| Organic growth | | | | | | | | 0.2 | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Foreign currency translation | | | | | | | | (0.8) | % | | |
| Total revenue decline | | | | | | | | (0.6) | % | | |
2023 Versus 2022
Imaging & Identification segment revenue for the year ended December 31, 2019 increased $64.42023 decreased $7.1 million, or 3.9%,0.6% compared to the prior year, comprised of broad-based organic growth of 5.4%, partially offset by a 1.5%an unfavorable impact from foreign currency translation. Organic revenuetranslation of 0.8%, partially offset by organic growth was driven by strong activity in the refuse truck and digital solutions product lines within our waste handling business, as well as solid revenue growth in our vehicle service business.of 0.2%. Customer pricing favorably impacted revenue in 2023 by approximately 1.9%5.0% and by 4.1% in 2019.the prior year.
Engineered ProductsThe organic revenue growth was primarily driven by customer pricing and growth in serialization software, partially offset by reduced customer investments in new marking and coding equipment, along with lower textile printer shipments caused by high energy prices and macro uncertainty in textile producing regions. We expect positive organic growth in 2024, driven primarily by customer pricing and increased demand for serialization software, along with a rebound in textile printer demand.
Imaging & Identification segment earnings for the year ended December 31, 20192023 increased $39.5$4.4 million, or 15.6%1.7%, compared to the prior year. This increase was primarily driven by solid conversion onpricing initiatives and productivity actions, partially offset by an unfavorable impact from foreign currency translation, organic volume growth, pricing actions,reductions, and productivity initiatives, including the benefits of rightsizing actionsmaterial and labor cost reduction initiatives, as well as a reduction in rightsizing costs. These benefits more than offset increases in material costs driven by U.S. Section 232 tariffs, most notably commodity cost increases impacting steel, and Section 301 tariffs, along with unfavorable foreign currency translation.inflation. Segment margin increased to 24.4% from 15.5% to 17.2% as compared to23.9% in the prior year.
Bookings for the year ended December 31, 2023 decreased 2.9%, comprised of an organic decline of 2.1% and an unfavorable impact from foreign currency translation of 0.8%. The organic bookings decline was primarily due to reduced order intake for equipment in our marking and coding and digital textile printing businesses. Segment book-to-bill was 1.00.
FuelingPumps & Process Solutions
Our FuelingPumps & Process Solutions segment is focused on providingmanufactures specialty pumps and flow meters, highly engineered precision components, specialized instrumentation and digital controls 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 softwarepolymer processing, midstream and service solutions enabling safe transport of fuelsdownstream oil and gas, energy transition, thermal management applications and other hazardous fluids along the supply chain, as well as the safe and efficient operation of retail fueling and vehicle wash establishments.end-markets.
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| | | Years Ended December 31, | | % Change |
| (dollars in thousands) | | 2023 | | 2022 | | | | 2023 vs. 2022 | | |
| Revenue | | $ | 1,755,691 | | | $ | 1,728,235 | | | | | 1.6 | % | | |
| | | | | | | | | | |
| Segment earnings | | $ | 484,405 | | | $ | 533,018 | | | | | (9.1) | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Segment margin | | 27.6 | % | | 30.8 | % | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Operational metric: | | | | | | | | | | |
| Bookings | | $ | 1,677,115 | | | $ | 1,709,204 | | | | | (1.9) | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Components of revenue growth: | | | | | | | | | | |
| Organic decline | | | | | | | | (3.3) | % | | |
| Acquisitions growth | | | | | | | | 4.4 | % | | |
| | | | | | | | | | |
| Foreign currency translation | | | | | | | | 0.5 | % | | |
| Total revenue growth | | | | | | | | 1.6 | % | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, | | % Change |
| (dollars in thousands) | | 2020 | | 2019 | | 2018 | | 2020 vs. 2019 | | 2019 vs. 2018 |
| Revenue | | $ | 1,476,282 | | | $ | 1,620,177 | | | $ | 1,465,590 | | | (8.9) | % | | 10.5 | % |
| | | | | | | | | | |
| Segment earnings (EBIT) | | $ | 236,974 | | | $ | 231,873 | | | $ | 152,255 | | | 2.2 | % | | 52.3 | % |
| Depreciation and amortization | | 72,803 | | | 75,045 | | | 68,463 | | | (3.0) | % | | 9.6 | % |
| Segment EBITDA | | $ | 309,777 | | | $ | 306,918 | | | $ | 220,718 | | | 0.9 | % | | 39.1 | % |
| | | | | | | | | | |
| Segment margin | | 16.1 % | | 14.3 % | | 10.4 % | | | | |
| Segment EBITDA margin | | 21.0 % | | 18.9 % | | 15.1 % | | | | |
| | | | | | | | | | |
| Other measures: | | | | | | | | | | |
| Bookings | | 1,471,870 | | | 1,613,764 | | | 1,513,019 | | | (8.8) | % | | 6.7 | % |
| Backlog | | 201,521 | | | 205,842 | | | 208,574 | | | (2.1) | % | | (1.3) | % |
| | | | | | | | | | |
| Components of revenue (decline) growth: | | | | | | | | | | |
| Organic (decline) growth | | | | | | | | (8.8) | % | | 10.5 | % |
| Acquisitions | | | | | | | | 0.2 | % | | 3.4 | % |
| Dispositions | | | | | | | | — | % | | (0.4) | % |
| Foreign currency translation | | | | | | | | (0.3) | % | | (3.0) | % |
| Total revenue (decline) growth | | | | | | | | (8.9) | % | | 10.5 | % |
2020 Versus 2019
FuelingPumps & Process Solutions segment revenue for the year ended December 31, 2020 decreased $143.92023 increased $27.5 million, or 8.9%1.6%, compared to the prior year, attributable to acquisition-related growth of 4.4% and a favorable impact from foreign currency translation of 0.5%, partially offset by an organic decline of 8.8%3.3%. Acquisition-related growth was driven by the acquisitions of Witte Pumps & Technology GmbH, Malema Engineering Corporation, and AMN DPI in 2022, along with FW Murphy Production Controls business in the fourth quarter of 2023. Customer pricing favorably impacted revenue by approximately 4.1% in 2023 and by 3.9% in the prior year.
The organic revenue decline was due to reduced shipments for single-use components used in biopharmaceutical manufacturing, as well as a decline in connector demand in core medical and industrial end markets, due to channel and end customer focus on inventory reductions. This was partially offset by customer pricing, along with continued demand strength in thermal connectors, hygienic dosing systems, plastics and polymer processing solutions equipment, and bearings and compression components. We expect segment revenue growth in 2024, mostly driven by the acquisition of FW Murphy, with stable organic revenue performance year-over-year. We expect positive demand trends in connectors supported by recent specification wins in high performance computing applications and improving customer sentiment in bioprocessing, as well as continued solid demand in hygienic dosing systems and bearings and compression components, offset by slower expected demand in our polymer processing equipment business after several very strong years.
Pumps & Process Solutions segment earnings for the year ended December 31, 2023 decreased $48.6 million, or 9.1%, compared to the prior year. The decrease was primarily due to the unfavorable volume and product mix impact of reduced revenues relating to biopharmaceutical components along with labor and material cost increases, partially offset by pricing initiatives and productivity and cost reduction actions. Segment margin decreased to 27.6% from 30.8% in the prior year.
Bookings for the year ended December 31, 2023 decreased 1.9% as compared to the prior year, due to an organic decline of 4.7%, partially offset by acquisition-related growth of 2.8%. The organic bookings decline was due to reduced orders in our polymer processing equipment and biopharmaceutical components businesses, partially offset by continued order strength in hygienic dosing systems, industrial pumps and bearings and compression components, along with specification wins in high performance computing applications in our thermal connector business. Segment book-to-bill was 0.96.
Climate & Sustainability Technologies
Our Climate & Sustainability Technologies segment is a provider of innovative and energy-efficient equipment, components and parts for the commercial refrigeration, heating and cooling and beverage can-making equipment end-markets.
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| | | Years Ended December 31, | | % Change |
| (dollars in thousands) | | 2023 | | 2022 | | | | 2023 vs. 2022 | | |
| Revenue | | $ | 1,778,582 | | | $ | 1,737,724 | | | | | 2.4 | % | | |
| | | | | | | | | | |
| Segment earnings | | $ | 305,380 | | | $ | 254,484 | | | | | 20.0 | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Segment margin | | 17.2 | % | | 14.6 | % | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Operational metric: | | | | | | | | | | |
Bookings(1) | | $ | 1,348,653 | | | $ | 1,669,916 | | | | | (19.2) | % | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Components of revenue growth: | | | | | | | | | | |
| Organic growth | | | | | | | | 2.4 | % | | |
| Acquisitions growth | | | | | | | | 0.2 | % | | |
| | | | | | | | | | |
| Foreign currency translation | | | | | | | | (0.2) | % | | |
| Total revenue growth | | | | | | | | 2.4 | % | | |
(1) For comparability, prior period was revised to exclude non-binding orders and previously disclosed de-bookings. | | |
2023 Versus 2022
Climate & Sustainability Technologies segment revenue for the year ended December 31, 2023 increased $40.9 million, or 2.4%, compared to the prior year, reflecting an organic revenue growth of 2.4%, acquisition-related growth of 0.2%, partially offset by an unfavorable impact from foreign currency translation of 0.2%. Customer pricing favorably impacted revenue in 2023 by approximately 3.7% and by 9.2% in the prior year.
The organic revenue growth was principally driven by strong demand and pricing initiatives in most markets. Our heat exchanger business grew in U.S. commercial HVAC and industrial markets, and growth in Europe as regulation-driven efforts to shift from fossil fuel to electric energy drove demand for heat pump applications. Retail refrigeration revenue also increased from the prior year, driven by customer pricing actions, large system refurbishment programs and growing demand for low-GWP (global warming potential) CO2 refrigerant systems, partially offset by lower shipments in the interest rate sensitive convenience store market. Beverage can-making business revenues modestly decreased from the prior year due to expected year over year revenue reductions beginning in the fourth quarter driven by project timing and reduced demand for beverage can-making equipment as large can-maker customers focus on scaling production and growing utilization of recent capacity additions. We expect overall segment organic revenues to decline in 2024 despite continued growth in retail refrigeration, particularly growth in new natural refrigerant system installations. We anticipate continued headwinds in new beverage can-making equipment as customers reduce near-term capacity investments, and some near-term slowing in heat exchangers driven by HVAC OEMs efforts to reduce component inventories; however, the long-term demand trends for decarbonization of heating remain intact. We expect gradual improvement in volumes into the second half of 2024.
Climate & Sustainability Technologies segment earnings for the year ended December 31, 2023 increased $50.9 million, or 20.0%, compared to the prior year. The segment earnings increase was driven by customer pricing actions, product mix and significant benefits from productivity initiatives, partially offset by higher labor costs. Segment margin increased to 17.2% from 14.6% in the prior year.
Bookings for the year ended December 31, 2023 decreased 19.2% compared to the prior year, reflecting an organic decline of 19.1% and an unfavorable impact from foreign currency translation of 0.3%, partially offset by acquisition-related growth of 0.2%. Customer pricing favorably impacted revenue by approximately 1.0%The organic bookings decline was principally due to moderating demand with key customers in 2020.beverage can-making equipment, transient disruptions from adverse economic conditions for heat exchangers and customer order timing returning to historical seasonal patterns in refrigeration. Segment book-to-bill was 0.76.
The organic revenue decline was principally driven by
Reconciliation of Segment Earnings to Net Earnings
| | | | | | | | | | | | | | | | | | | |
| | | | Years Ended December 31, |
| (dollars in thousands) | | | | | 2023 | | 2022 | | |
| Net earnings: | | | | | | | | | |
| Segment earnings: | | | | | | | | | |
Engineered Products (1) | | | | | $ | 377,425 | | | $ | 346,519 | | | |
| Clean Energy & Fueling | | | | | 328,604 | | | 352,993 | | | |
| Imaging & Identification | | | | | 272,512 | | | 268,084 | | | |
| Pumps & Process Solutions | | | | | 484,405 | | | 533,018 | | | |
| Climate & Sustainability Technologies | | | | | 305,380�� | | | 254,484 | | | |
| Total segment earnings | | | | | 1,768,326 | | | 1,755,098 | | | |
Purchase accounting expenses (2) | | | | | 164,943 | | | 181,103 | | | |
Restructuring and other costs (3) | | | | | 63,673 | | | 38,990 | | | |
Disposition costs (4) | | | | | 1,302 | | | — | | | |
Loss on dispositions (5) | | | | | — | | | 194 | | | |
Corporate expense / other (6) | | | | | 150,593 | | | 135,280 | | | |
| Interest expense | | | | | 131,305 | | | 116,456 | | | |
| Interest income | | | | | (13,496) | | | (4,430) | | | |
| Earnings before provision for income taxes | | | | | 1,270,006 | | | 1,287,505 | | | |
| Provision for income taxes | | | | | 213,178 | | | 222,129 | | | |
| Net earnings | | | | | $ | 1,056,828 | | | $ | 1,065,376 | | | |
(1) Segment earnings include a fourth quarter benefit of $14.4 million as a result of the adverse effectschange from the LIFO method to FIFO method of COVID-19inventory costing for an immaterial portion of inventories. See Note 1 — Description of Business and Summary of Significant Accounting Policies in the measures takenConsolidated Financial Statements in Item 8 of this Form 10-K.
(2) Purchase accounting expenses are primarily comprised of amortization of intangible assets and charges related to reduce its spread globally. The negative impact startedfair value step-ups for acquired inventory sold during the latter part of the first quarter in 2020 with several mandated manufacturing plant shutdowns temporarily disrupting our global operationsperiod.
(3) Restructuring and supply chain, followed by a reduction in customer demand, particularly from vertically-integrated oil & gas companies. Further addingother costs relate to actions taken for headcount reductions, facility consolidations and site closures, product line exits, and other asset charges.
(4) Disposition costs related to the declinesale of De-Sta-Co which is expected to close in organic revenue was reduced underground equipment volume in China dueQ1 2024.
(5) Loss on dispositions includes working capital adjustments related to dispositions.
(6) Certain expenses are maintained at the corporate level and not allocated to the tapering of government-mandated infrastructure upgrades. Additionally, our businesses serving the transportationsegments. These expenses include executive and rail markets experienced slow order rates due to volatile oil pricesfunctional compensation costs, non-service pension costs, non-operating insurance expenses, shared business services and the resulting reduction in capital budgets of vertically-integrated international oil companies. Activity in the vehicle wash market was subdued due to government-mandated shutdowns in the first half of the yeardigital overhead costs, deal-related expenses and slower new capital spending activity by independent operators due to general economic uncertainty. Despite the global decrease in sales, North America was favorably impacted by continued strong demand for Europay, Mastercard, and Visa ("EMV")-compliant equipment throughout the year. Headwinds were also partially offset by robust performance in Mexico duevarious administrative expenses relating to the growing demand in fueling dispenser volume.corporate headquarters.
While we anticipate the tapering of North America EMV volume in 2021 due to the compliance deadline, recent new product introductions, recovery in global market demand and growth in our software and solutions business is expected to provide
growth within the retail fueling markets. Our vehicle wash business is also supported by a healthy backlog of orders given improving recent order activity. Our railRestructuring and transportation market is expected to remain subdued due to the challenging dynamics within the oil and transport industry.Other Costs (Benefits)
Fueling SolutionsRestructuring and other costs are not presented in our segment earnings because these costs are excluded from the segment operating performance measure reviewed by management. During the year ended December 31, 2023, restructuring charges of $50.4 million were primarily related to headcount reductions and exit costs in the Clean Energy & Fueling, Engineered Products and Pumps & Process Solutions segments. These restructuring programs were initiated in 2022 and 2023 and were undertaken in light of current market conditions. Other costs, net of $13.2 million, were primarily due to an asset impairment in our Climate & Sustainability Technologies segment and product line rationalization and footprint reduction in our Clean Energy & Fueling segment. These restructuring and other charges were recorded in cost of goods and services and selling, general and administrative expenses in the consolidated statement of earnings. Additional programs beyond the scope of the announced programs may be implemented during 2024 with related restructuring charges.
We recorded the following restructuring and other costs for the year ended December 31, 2020 increased $5.1 million, or 2.2%, compared to the prior year. The increase was driven by favorable pricing initiatives, restructuring benefits, productivity actions, selling, general and administrative cost containment, and favorable impact from foreign currency translation. These benefits were partially offset by weakened organic volume due to COVID-19. Segment margin increased 180 basis points compared to the prior year.2023:
Bookings for | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2023 |
| (dollars in thousands) | Engineered Products | | Clean Energy & Fueling | | Imaging & Identification | | Pumps & Process Solutions | | Climate & Sustainability Technologies | | Corporate | | Total |
| Restructuring | $ | 9,510 | | | $ | 20,336 | | | $ | 5,918 | | | $ | 7,686 | | | $ | 4,541 | | | $ | 2,444 | | | $ | 50,435 | |
| Other costs, net | 267 | | | 4,330 | | | 1,183 | | | 233 | | | 4,758 | | | 2,467 | | | 13,238 | |
| Restructuring and other costs | $ | 9,777 | | | $ | 24,666 | | | $ | 7,101 | | | $ | 7,919 | | | $ | 9,299 | | | $ | 4,911 | | | $ | 63,673 | |
During the year ended December 31, 2020 decreased 8.8% compared2022, restructuring charges of $30.5 million were primarily due to the prior year, reflecting an organic decline of 8.0%headcount reductions and an unfavorable impactfacility consolidations resulting from restructuring programs initiated in 2021 and 2022, including non-cash foreign currency translation of 1.0%, partially offset by acquisition-related growth of 0.2%. The organic bookings decline was primarily driven by the global impact on customer demand caused by the COVID-19 pandemic, slower demand from vertically-integrated oil companies and prior year bookings reflected increased orders of underground equipment in Chinalosses due to government-mandated site infrastructure upgrade activity that has since tapered. This was partially offset by high order trends for EMV equipmentsubstantial liquidation of businesses. Other costs (benefits), net of $8.5 million, were primarily due to an asset impairment in North America. Segment book to bill was 1.00. Backlog decreased 2.1% as compared to the prior year primarily as a resultour Engineered Products segment and write-off of lower secondassets in connection with an exit from certain Latin America countries in our Climate & Sustainability Technologies segment. These restructuring and third quarter bookings.
2019 Versus 2018
Fueling Solutions segment revenue for the year ended December 31, 2019 increased $154.6 million, or 10.5%, compared to the prior year, attributable to organic growthother charges were recorded in cost of 10.5%goods and acquisition-related growth of 3.4%, partially offset by an unfavorable foreign currency translation impact of 3.0%services and a 0.4% decrease from a disposition. The organic growth was principally driven by continued strong demand in the global retail fueling industry, particularly in the United States, Europe and Asia. Growth was also driven by the acquisition of Belanger. Customer pricing favorably impacted revenue by approximately 1.0% in 2019.
Fueling Solutions segment earnings for the year ended December 31, 2019 increased $79.6 million, or 52.3%, compared to the prior year. The increase was driven by volume leverage, pricing initiatives, productivity actions, acquisitions, and benefits of selling, general and administrative cost reductions realized, as well as decreased rightsizing costs. This growth was partially offset by increased material costs due,expenses in part, to U.S. Section 232 and 301 tariff exposure. Segment margin increased 390 basis points compared to the prior year.consolidated statement of earnings.
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| Year Ended December 31, 2022 |
| (dollars in thousands) | Engineered Products | | Clean Energy & Fueling | | Imaging & Identification | | Pumps & Process Solutions | | Climate & Sustainability Technologies | | Corporate | | Total |
| Restructuring | $ | 3,194 | | | $ | 9,571 | | | $ | 4,702 | | | $ | 4,685 | | | $ | 6,007 | | | $ | 2,321 | | | $ | 30,480 | |
| Other costs (benefits), net | 3,260 | | | (13) | | | 1,740 | | | (2) | | | 3,263 | | | 262 | | | 8,510 | |
| Restructuring and other costs | $ | 6,454 | | | $ | 9,558 | | | $ | 6,442 | | | $ | 4,683 | | | $ | 9,270 | | | $ | 2,583 | | | $ | 38,990 | |
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:
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| | | Years Ended December 31, |
| (dollars in thousands) | | | | | 2023 | | 2022 | | |
| Purchase accounting expenses | | | | | | | | | |
| Engineered Products | | | | | $ | 19,720 | | | $ | 20,617 | | | |
Clean Energy & Fueling (1) | | | | | 78,261 | | | 96,655 | | | |
| Imaging & Identification | | | | | 23,089 | | | 22,179 | | | |
| Pumps & Process Solutions | | | | | 24,278 | | | 22,332 | | | |
| Climate & Sustainability Technologies | | | | | 19,595 | | | 19,320 | | | |
| Total | | | | | $ | 164,943 | | | $ | 181,103 | | | |
(1) Purchase accounting expenses in our Clean Energy & Fueling segment decreased by $18,394 for the year ended December 31, 2023 from the prior year comparable period, which included $18,995 of charges related to fair value step-ups for inventory from the Q4 2021 acquisition of RegO and Acme Cryogenics. |
Imaging & Identification
Our Imaging & Identification segment supplies precision marking and coding, product traceability and digital textile printing equipment, as well as related consumables, software and services.
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| | | Years Ended December 31, | | % Change |
| (dollars in thousands) | | 2020 | | 2019 | | 2018 | | 2020 vs. 2019 | | 2019 vs. 2018 |
| Revenue | | $ | 1,038,178 | | | $ | 1,084,471 | | | $ | 1,109,843 | | | (4.3) | % | | (2.3) | % |
| | | | | | | | | | |
| Segment earnings (EBIT) | | $ | 193,473 | | | $ | 229,484 | | | $ | 198,902 | | | (15.7) | % | | 15.4 | % |
| Depreciation and amortization | | 38,378 | | | 30,530 | | | 30,882 | | | 25.7 | % | | (1.1) | % |
| Segment EBITDA | | $ | 231,851 | | | $ | 260,014 | | | $ | 229,784 | | | (10.8) | % | | 13.2 | % |
| | | | | | | | | | |
| Segment margin | | 18.6 % | | 21.2 % | | 17.9 % | | | | |
| Segment EBITDA margin | | 22.3 % | | 24.0 % | | 20.7 % | | | | |
| | | | | | | | | | |
| Other measures: | | | | | | | | | | |
| Bookings | | $ | 1,065,098 | | | $ | 1,092,915 | | | $ | 1,106,303 | | | (2.5) | % | | (1.2) | % |
| Backlog | | $ | 192,785 | | | $ | 125,775 | | | $ | 118,057 | | | 53.3 | % | | 6.5 | % |
| | | | | | | | | | |
| Components of revenue decline: | | | | | | | | | | |
| Organic (decline) growth | | | | | | | | (7.2) | % | | 1.2 | % |
| Acquisitions | | | | | | | | 3.9 | % | | — | % |
| | | | | | | | | | |
| Foreign currency translation | | | | | | | | (1.0) | % | | (3.5) | % |
| Total revenue decline | | | | | | | | (4.3) | % | | (2.3) | % |
2020 Versus 2019
Imaging & Identification segment revenue for the year ended December 31, 2020 decreased $46.3 million, or 4.3% compared to the prior year, comprised of organic decline of 7.2% and an unfavorable impact from foreign currency translation of 1.0%, partially offset by acquisition-related growth of 3.9%. Acquisition-related growth was driven by the acquisition of Systech in the first quarter and Solaris, which closed in the third quarter. Customer pricing favorably impacted revenue by approximately 0.7% in 2020.
The organic revenue decline was primarily driven by the global economic downturn precipitated by the COVID-19 pandemic beginning late in the first quarter, which materially impacted our digital textile printing business, as government-mandated mobility restrictions forced clothing and apparel retailers to close locations, and resulted in the decline of overall demand for clothing and apparel, as fewer consumers went to schools, offices, restaurants and other gatherings. Digital textile printing activity has improved since the second quarter of the year especially in sportswear and home decor markets, however demand for capital equipment for apparel printing remains slower compared to the prior year as we exit 2020. This dynamic resulted in improving demand from the second quarter to the second half of the year for inks and consumables that are closely linked to current levels of activity, while we experienced a slower recovery in demand for new equipment purchases, as customers remained focused on cash preservation. Our largest business in this segment, marking and coding, posted a modest revenue decline for the year, as we saw solid demand for consumables throughout the year, particularly inks for food and beverage, cleaning supplies, pharmaceuticals and medical supplies, and strong second half growth in demand for equipment, as customers resumed equipment purchases in the second half of 2020 as COVID-19 restrictions eased and marking and coding activity remained solid.
We expect our marking and coding business to remain resilient and anticipate a favorable long-term growth trend, supported by constructive secular trends in demand for product traceability, identification, differentiation, and brand protection solutions. We expect continued sequential improvement in activity in our digital printing business, as printing activity and overall demand for textiles continues to improve. However, uncertainty remains due to the direct impact that the COVID-19 pandemic has had on demand in the clothing and apparel industry. Despite those near-term challenges, we believe we remain favorably positioned to exploit a longer-term transition from analog to digital printing by our customers, and believe some business model shifts within the industry driven by the COVID-19 pandemic may accelerate our customers’ need to shift from analog to digital printing.
Imaging & Identification segment earnings for the year ended December 31, 2020 decreased $36.0 million, or 15.7%, compared to the prior year. This decrease was primarily driven by the impact of continued reduced consumer spending due to COVID-19 on clothing, sports apparel, and other textile products that impact our digital printing customers. Partially offsetting this decrease were continued cost containment initiatives during the year. These initiatives included actions to adjust direct and indirect manufacturing cost to current demand levels, the execution of short-term actions to reduce labor costs, the elimination of non-essential travel, third party and other expenses, the recognition of adjustments to variable compensation to reflect current conditions, the execution of selective structural cost actions aimed at streamlining our business, and a detailed review and re-prioritization of all planned investments and hiring plans. These actions have been taken deliberately and strategically, and have allowed us to rationalize current spending to levels appropriate given near-term market conditions, while preserving our ability to capitalize on long-term secular growth trends. As a result, segment margin decreased from 21.2% to 18.6% as compared to the prior year.
Segment bookings for the year ended December 31, 2020 decreased 2.5% compared to the prior year, reflecting an organic decline of 6.3% and an unfavorable impact from foreign currency translation of 1.0%, partially offset by acquisition-related growth of 4.8%. The organic reduction was primarily the result of a year over year reduction in new orders for equipment and consumables in our digital printing business. Segment book-to-bill was 1.03. Backlog increased 53.3% compared to the prior year driven by the Systech and Solaris acquisitions and strong order intake in marking and coding.
2019 Versus 2018
Imaging & Identification segment revenue for the year ended December 31, 2019 decreased $25.4 million, or 2.3%, compared to the prior year, comprised of organic growth of 1.2% more than offset by an unfavorable impact from foreign currency translation of 3.5%. The organic revenue growth was driven by increased equipment shipments and expanded service revenue in our marking and coding business, along with increased service revenue and increased printer and ink volumes in our digital printing business. The significant foreign currency impact was due to our broad international customer base, in particular in Asia and Europe. Customer pricing favorably impacted revenue by approximately 1.0% in 2019.
Imaging & Identification segment earnings for the year ended December 31, 2019 increased $30.6 million, or 15.4%, compared to the prior year. This increase was primarily driven by productivity initiatives, including the benefits of restructuring actions, favorable pricing, and conversion on revenue growth, as well as reduced rightsizing costs. As a result, segment margin increased from 17.9% to 21.2% as compared to the prior year.
Pumps & Process Solutions
Our Pumps & Process Solutions segment manufactures specialty pumps, fluid handling components, plastics and polymer processing equipment, single use pumps, flow meters and connectors, and highly engineered components for rotating and reciprocating machines.
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| | | Years Ended December 31, | | % Change |
| (dollars in thousands) | | 2020 | | 2019 | | 2018 | | 2020 vs. 2019 | | 2019 vs. 2018 |
| Revenue | | $ | 1,324,003 | | | $ | 1,338,528 | | | $ | 1,331,893 | | | (1.1) | % | | 0.5 | % |
| | | | | | | | | | |
Segment earnings (EBIT) (1) | | $ | 305,276 | | | $ | 240,081 | | | $ | 237,549 | | | 27.2 | % | | 1.1 | % |
| Depreciation and amortization | | 72,191 | | | 67,584 | | | 71,982 | | | 6.8 | % | | (6.1) | % |
Segment EBITDA (1) | | $ | 377,467 | | | $ | 307,665 | | | $ | 309,531 | | | 22.7 | % | | (0.6) | % |
| | | | | | | | | | |
Segment margin (1) | | 23.1 % | | 17.9 % | | 17.8 % | | | | |
Segment EBITDA margin (1) | | 28.5 % | | 23.0 % | | 23.2 % | | | | |
| | | | | | | | | | |
| Other measures: | | | | | | | | | | |
| Bookings | | 1,334,338 | | | 1,393,830 | | | 1,386,875 | | | (4.3) | % | | 0.5 | % |
| Backlog | | 390,238 | | | 353,073 | | | 315,230 | | | 10.5 | % | | 12.0 | % |
| | | | | | | | | | |
| Components of revenue (decline) growth: | | | | | | | | | | |
| Organic (decline) growth | | | | | | | | (2.3) | % | | 3.9 | % |
| Acquisitions | | | | | | | | 1.1 | % | | 0.5 | % |
| Dispositions | | | | | | | | (0.5) | % | | (2.0) | % |
| Foreign currency translation | | | | | | | | 0.6 | % | | (1.9) | % |
| Total revenue (decline) growth | | | | | | | | (1.1) | % | | 0.5 | % |
(1)Segment earnings (EBIT) and segment EBITDA for 2019 include a $46,946 loss on assets held for sale for Finder.
2020 Versus 2019
Pumps & Process Solutions segment revenue for the year ended December 31, 2020 decreased $14.5 million, or 1.1%, compared to the prior year, attributable to organic decline of 2.3% and a 0.5% decrease from a disposition, partially offset by acquisition-related growth of 1.1% and a favorable impact from foreign currency translation of 0.6%. Customer pricing favorably impacted revenue by approximately 1.0% in 2020.
The organic revenue decline was principally driven by continued comparable weakness in demand for compression components and aftermarket services due to lower activity in the North American upstream, midstream and downstream energy sector, as well as continued slower demand for industrial pumps due to pandemic-related disruptions. The decline was offset by strong performance in the biopharma and hygienic markets, as well as robust demand in specialty pumps for defense applications and strong shipments against a significant backlog in the plastics & polymer processing business.
The strong bookings growth in the biopharma and hygienic markets during the fourth quarter of 2020 is expected to continue into 2021 as the underlying robust long-term growth in single-use bioproduction technologies is further supported by demand for COVID-19 related therapies and vaccines. We also expect increasing demand outside the U.S. across the segment and expect modest recovery in the energy industry.
Pumps & Process Solutions segment earnings for the year ended December 31, 2020 increased $65.2 million, or 27.2%, compared to the prior year. Segment earnings for the year ended December 31, 2019 included a loss on assets held for sale for Finder of $46.9 million. Excluding the loss, segment earnings increased as a result of pricing initiatives, productivity
actions, restructuring benefits, and selling, general and administrative cost reductions. These benefits were partially offset by the global impact of COVID-19 on volume and an unfavorable impact from material and inflation costs. Segment margin increased to 23.1% from 17.9% in the prior year, an increase of 520 basis points.
Bookings for the year ended December 31, 2020 decreased 4.3% compared to the prior year, reflecting an organic decline of 4.8% and a disposition related decline of 0.5%, partially offset by acquisition-related growth of 0.7% and a favorable impact from foreign currency translation of 0.3%. The organic bookings decline was primarily driven by the continued COVID-19 global impact on customer demand, as well as a high comparable benchmark from the prior year driven by large government orders, partially offset by growth in the biopharma and hygienic markets. Segment book to bill was 1.01. Backlog increased 10.5% compared to the prior year primarily driven by our biopharma and hygienic markets.
2019 Versus 2018
Pumps & Process Solutionssegment revenue for the year ended December 31, 2019 increased $6.6 million, or 0.5%, compared to the prior year, attributable to organic growth of 3.9% and acquisition-related growth of 0.5%. This increase was partially offset by an unfavorable foreign currency translation impact of 1.9% and a 2.0% decrease from a disposition. The organic growth was principally driven by biopharma and thermal management markets, along with strong continued demand from our OEM customers for rotating and reciprocating machinery components. Customer pricing favorably impacted revenue by approximately 1.4% in 2019.
Pumps & Process Solutions segment earnings for the year ended December 31, 2019 increased $2.5 million, or 1.1%, compared to the prior year. Segment earnings included a loss on assets held for sale for Finder in the first quarter of 2019 of $46.9 million. Segment earnings increased significantly excluding the loss on sale of Finder driven by volume leverage, pricing initiatives, and productivity actions, as well as reduced rightsizing costs. These benefits were partially offset by increased material costs due, in part, to U.S. Section 232 and 301 tariff exposure, inflation costs, and unfavorable product and regional mix. Segment margin increased to 17.9% from 17.8% in the prior year, an increase of 10 basis points.
Refrigeration & Food Equipment
Our Refrigeration & Food Equipment segment is a provider of innovative and energy-efficient equipment and systems that serve the commercial refrigeration, heating and cooling and food equipment markets.
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| | | Years Ended December 31, | | % Change |
| (dollars in thousands) | | 2020 | | 2019 | | 2018 | | 2020 vs. 2019 | | 2019 vs. 2018 |
| Revenue | | $ | 1,316,090 | | | $ | 1,396,617 | | | $ | 1,453,093 | | | (5.8) | % | | (3.9) | % |
| | | | | | | | | | |
Segment earnings (EBIT) (1) | | $ | 102,872 | | | $ | 118,832 | | | $ | 136,119 | | | (13.4) | % | | (12.7) | % |
| Depreciation and amortization | | 46,541 | | | 51,360 | | | 60,477 | | | (9.4) | % | | (15.1) | % |
Segment EBITDA (1) | | $ | 149,413 | | | $ | 170,192 | | | $ | 196,596 | | | (12.2) | % | | (13.4) | % |
| | | | | | | | | | |
Segment margin (1) | | 7.8 % | | 8.5 % | | 9.4 % | | | | |
Segment EBITDA margin (1) | | 11.4 % | | 12.2 % | | 13.5 % | | | | |
| | | | | | | | | | |
| Other measures: | | | | | | | | | | |
| Bookings | | 1,510,499 | | | 1,446,755 | | | 1,474,717 | | | 4.4 | % | | (1.9) | % |
| Backlog | | 510,498 | | | 320,577 | | | 268,991 | | | 59.2 | % | | 19.2 | % |
| | | | | | | | | | |
| Components of revenue decline: | | | | | | | | | | |
| Organic decline | | | | | | | | (3.0) | % | | (2.7) | % |
| Acquisitions | | | | | | | | — | % | | — | % |
| Dispositions | | | | | | | | (2.9) | % | | — | % |
| Foreign currency translation | | | | | | | | 0.1 | % | | (1.2) | % |
| Total revenue decline | | | | | | | | (5.8) | % | | (3.9) | % |
(1)Segment earnings (EBIT) and segment EBITDA for 2020 include a $5,213 gain on the sale of the Chino, California branch of The AMS Group ("AMS Chino") and a $3,640 write-off of assets.
2020 Versus 2019
Refrigeration & Food Equipment segment revenue for the year ended December 31, 2020 decreased $80.5 million, or 5.8%, compared to the prior year, reflecting an organic revenue decline of 3.0%, a disposition related decline of 2.9%, partially offset by a favorable impact from foreign currency translation of 0.1%. Customer pricing favorably impacted revenue by approximately 0.3% in 2020.
The organic revenue decline was principally driven by the impact of COVID-19 on a global basis. Government actions to contain the spread of the virus, such as mandated plant shutdowns and restaurant curtailments, resulted in deferred customer orders and operational inefficiencies across the segment. Many key customers in our retail refrigeration business deferred previously planned projects related to new store construction and existing store remodels to focus on maximizing store uptime and meeting the needs of increased customer buying resulting from more at home consumption as well as restaurant closure mandates. These impacts were incurred most significantly in the first and second quarters and, to a lesser extent, in the third and fourth quarters, with the exception of commercial U.S. foodservice where the impacts lingered throughout the year due to ongoing government restrictions on restaurant operations and closure of many school and conference center kitchens. Some of our businesses experienced a solid recovery in the third and fourth quarters, with organic growth for the segment at 2.6% and 13.2% respectively, driven by increased project activity in can-shaping equipment, a resumption of remodel programs with key retail refrigeration customers, and strengthening heat exchanger demand across all regions.
We expect continued strength in the aluminum can-shaping market driven by two key factors: (1) a secular shift with beverage companies switching from plastic to aluminum containers for environmental and other reasons, and (2) an increase in demand for canned food and beverages due to the recent COVID-19 related consumer shift to more at-home consumption. The increased fourth quarter demand for retail refrigeration products is expected to continue, as the recent wear and tear on our customers' existing assets will drive equipment replacement programs. Commercial foodservice markets remain challenged, with improved activity expected pending the successful rollout of the COVID-19 vaccine and the re-opening of restaurant, school and conference center kitchens.
Refrigeration & Food Equipment segment earnings for the year ended December 31, 2020 decreased $16.0 million, or 13.4%, compared to the prior year. Segment margin decreased to 7.8% from 8.5% in the prior year due to substantially reduced revenues and operational inefficiencies associated with COVID-19, increased restructuring expenses and a $3.6 million write-off of assets. This was partially offset by the $5.2 million gain on sale from the disposition of AMS Chino, a $1.7 million gain on sale of assets, and other broad-based cost reduction activities.
Bookings for the year ended December 31, 2020 increased 4.4% compared to the prior year, reflecting organic growth of 6.5% and a favorable impact from foreign currency translation of 0.2%, partially offset by a 2.3% impact from the disposition of AMS Chino. The organic growth was primarily driven by large project awards for aluminum can-shaping equipment, resumption of key customer remodel programs, as well as customer share wins in retail refrigeration, and robust global demand for brazed-plate heat exchangers, partially offset by ongoing softness in foodservice equipment. Segment book to bill for the full year was 1.15. Backlog increased 59.2% over the prior year, principally driven by our aluminum can-shaping equipment business as well as an increase in our retail refrigeration and heat exchanger businesses.
2019 Versus 2018
Refrigeration & Food Equipment segment revenue for the year ended December 31, 2019 decreased $56.5 million, or 3.9%, compared to the prior year, reflecting an organic revenue decline of 2.7% and an unfavorable impact from foreign currency translation of 1.2%. The organic revenue decrease for the year ended December 31, 2019 was driven principally by reduced new food retail store construction activity with key U.S. retail refrigeration customers, reduced demand for heat exchanger products in Asia, and softer demand from national restaurant chain customers in our foodservice equipment business. These reductions were partially offset by increased project activity for can-shaping equipment and strong growth in the core door case product line within food retail industry which primarily serves store remodel applications. Customer pricing minimally impacted revenue in 2019.
Refrigeration & Food Equipment segment earnings for the year ended December 31, 2019 decreased $17.3 million, or 12.7%, compared to the prior year. Segment margin decreased to 8.5% from 9.4% in the prior year due to reduced volumes, unfavorable business mix in retail refrigeration, volume ramp costs for our door case product line, and costs incurred as a result of plant consolidations at our foodservice equipment business. These reductions were partially offset by improved productivity and benefits from prior year rightsizing actions, as well as reduced rightsizing costs.
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: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 Statementsconsolidated statements of Cash Flows:cash flows:
| | | | Years Ended December 31, |
Cash Flows from Continuing Operations (in thousands) | 2020 | | 2019 | | 2018 |
| | |
| | | Years Ended December 31, |
Cash Flows from Operations (in thousands) | |
| Net cash flows provided by (used in): | |
| Net cash flows provided by (used in): | |
| Net cash flows provided by (used in): | Net cash flows provided by (used in): | | | | | |
| Operating activities | Operating activities | $ | 1,104,810 | | | $ | 945,306 | | | $ | 789,193 | |
| Operating activities | |
| Operating activities | |
| Investing activities | |
| Investing activities | |
| Investing activities | Investing activities | (481,379) | | | (384,255) | | | (245,480) | |
| Financing activities | Financing activities | (506,290) | | | (558,042) | | | (897,838) | |
| Financing activities | |
| Financing activities | |
Operating Activities
Cash provided byflow from operating activities for the year ended December 31, 20202023 increased $159.5by $530.6 million compared to 2019.2022. This increase was primarily driven by improvements in the management of working capital of $89.4 million, payroll tax deferrals under the U.S. CARES Act of $31.6 million and advanced payments received on contracts, partially offset by lower net earnings, excluding the impact of depreciation, amortization, loss on assets held for sale and gain on sale of a business.capital.
Cash provided by operating activities for the year ended December 31, 2019 increased $156.1 million compared to 2018. This increase was driven primarily by higher continuing earnings of $147.0 million, excluding a loss from discontinued operations, depreciation and amortization, a loss on assets held for sale and a loss on extinguishment of debt.
Pension and Other Post-Retirement Activity: Total cash used in conjunction with pension plans during 2020 was $19.8 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 2020, 2019 or 2018 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 contributions to ongoing international defined benefit pension plans in 2020, 2019 and 2018 totaled $7.3 million, $7.2 million and $6.0 million, respectively. In 2021, we expect to contribute approximately $5.2 million to our non-U.S. plans.
Our non-qualified supplemental pension plans are funded through Company assets as benefits are paid. In 2020, 2019 and 2018 a total of $12.3 million, $13.6 million, and $19.4 million in benefits were paid under these plans, respectively. See Note 18 — Employee Benefit Plans in the Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion regarding our post-retirement plans.
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 our operational resultsliquidity by showing changes caused solely by revenue.operational results. The following table provides a calculation of adjusted working capital:
| | | | | | | | | | | | | | | | |
Adjusted Working Capital (dollars in thousands) | | December 31, 2020 | | December 31, 2019 | | |
| Accounts receivable | | $ | 1,137,223 | | | $ | 1,217,190 | | | |
| Inventories | | 835,804 | | | 806,141 | | | |
| Less: Accounts payable | | 853,942 | | | 920,593 | | | |
| Adjusted working capital | | $ | 1,119,085 | | | $ | 1,102,738 | | | |
| | | | | | |
| | | | | | | | | | | | | | | | |
Adjusted Working Capital (in thousands) | | December 31, 2023 | | December 31, 2022 | | |
| Accounts receivable | | $ | 1,432,040 | | | $ | 1,516,871 | | | |
| Inventories | | 1,225,452 | | | 1,366,608 | | | |
| Less: Accounts payable | | 958,542 | | | 1,068,144 | | | |
| Adjusted working capital | | $ | 1,698,950 | | | $ | 1,815,335 | | | |
| | | | | | |
Adjusted working capital increased from December 31, 2019decreased by $16.3$116.4 million, or 1.5%6.4%, to $1.1$1.7 billion at December 31, 2020,2023, which reflected a decrease in accounts receivable of $80.0$84.8 million, an increasea decrease in inventory of $29.7$141.2 million and a decrease in accounts payable of $66.7$109.6 million. These amounts include the effects of acquisitions, dispositions and foreign currency translation. We continue to focus on improving working capital management. Accounts receivable decreased compared to the prior year as a result of lower revenue as well as improved collections. Inventories were generally higher throughout the year as we worked to reduce levels based on lower orders and ended the year higher as compared to 2019. Accounts payable, however, decreased at December 31, 2020 compared to 2019 primarily as a result of lower spendThe decrease in inventories is due to COVID-19.reduced purchasing of inventories as supply chains have normalized. The change in accounts receivable and payable reflect the timing of payments and collections.
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, 2020 and 2019, amounts due to financial institutions for suppliers using SCF were approximately $139 million and $126 million, respectively. SCF related payments are classified as a reduction to cash flows from operations. Amounts paid to SCF financial institutions were approximately $605 million during the years ended December 31, 2020 and 2019, and $552 million for our continuing operations during the year ended December 31, 2018.
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 2020,2023, we deployed $335.8$533.6 million, net of cash acquired, to acquire sixtwo businesses. In comparison, we acquired three businesses in 20192022 for an aggregate purchase price of approximately $215.7 million. Total acquisition spend in 2018 was $68.6$312.9 million, net of cash acquired and was comprisedinclusive of two businesses.measurement period adjustments. See Note 43 — 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 2020, we generated cash proceeds of $15.4 million, due to the sale of AMS Chino within the Refrigeration & Food Equipment segment. Cash proceeds of $24.2 million in 2019 was due to the sale of Finder. In 2018, we generated cash proceeds of $3.9 million primarily due to cash received on a sale in 2017.
•Capital spending: Capital expenditures, primarily to support growth initiatives, productivity and new product launches, were $165.7$192.6 million in 2020, $186.82023 and $221.0 million in 2019 and $171.0 million in 2018.2022. Our capital expenditures decreased $21.1$28.4 million in 2020 compared to 20192023 in line with our reduced capital spending planplanned expenditures for the year as a result of COVID-19, without deferring strategic ongoing initiatives. Our capital expenditures increased $15.8 million in 2019 compared to 2018.year.
We anticipate that capital expenditures and any additional acquisitions we make in 20212024 will be funded from available cash and internally generated funds and, if necessary, through the issuance of commercial paper, or by accessing the public debt or equity markets. We estimate capital expenditures in 2024 to range from $160.0 million to $170.0 million.
Financing Activities
Our cashCash 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:
•Long-term debt, commercial paper and notes payable, net:Repurchase of common stock, including accelerated share repurchase program: During 2020,2023, the Company repurchased no shares. During the year ended December 31, 2022, we used $84.7$85.0 million to pay off commercial paper borrowings. During 2019, we issued €500repurchase 641,428 shares and $500.0 million of 0.750% euro-denominated notes due 2027 and $300 million of 2.950% notes due 2029. The proceeds from the sale of euro-denominated notes of €494.7 million, net of discounts and issuance costs, were used in part to redeem the €300 million 2.125% notes due 2020. The proceeds from the sale of notes of $296.9 million, net of discounts and issuance costs, and the remaining funds from the sale of the euro-denominated notes, were used to fund the redemption of the $450 million 4.30% notes due 2021. The early extinguishment of debt resulted in a pre-tax loss of $23.5 million. Net borrowings decreased by $93.3 million due to the issuance of debt, early extinguishment of debt, and decrease in borrowings from commercial paper. During 2018, we repaid the Company's $350.0 million 5.45% notes, which matured on March 15, 2018, and decreased net borrowings from commercial paper by $10.7 million.repurchase 3,892,295 shares through an accelerated share repurchase transaction.
•RepurchaseCommercial paper and other short-term borrowings, net: During 2023, we paid down $267.5 million of common stock: short term borrowings, primarily commercial paper. During the year ended December 31, 2020,2022, we repurchased 979,165 sharesreceived net proceeds of common stock at a total cost of $106.3 million. The Company suspended share repurchases in the second quarter due$629.9 million from commercial paper and other short-term borrowings used to business uncertainty related to COVID-19. This temporary suspension in share repurchases was lifted during the beginning of the third quarter. During the year ended December 31, 2019, we repurchased 1,343,622 shares of common stock at a total cost of $143.3 million. For the year ended December 31, 2018, we used $45.0 million to repurchase 440,608 shares underpartially fund our January 2015 authorization, which expired on January 9, 2018. Under a share repurchase authorization adopted by the Board of Directors in February 2018, we also repurchased 1,753,768 shares of common stock at a total cost of $150.0 million and used $700 million to repurchase a total of 8,542,566 shares through an accelerated share repurchase transaction which concluded in December 2018. We fundedand the accelerated share repurchase primarily with funds received from Apergy in connection with the consummationacquisition of the Apergy spin-off.Malema.
•Dividend payments: Total dividend payments to common shareholders were $284.3 million in 2020, $282.22023 and $287.6 million in 2019 and $283.6 million in 2018.2022. Our dividends paid per common share increased 2%1% to $1.97$2.03 per share in 20202023 compared to $1.94$2.01 per share in 2019, which represents the 65th consecutive year that our dividend per share has increased. The number of common shares outstanding decreased from 2019 to 2020 due to our share repurchase programs.2022.
•Net Proceeds from the exercise of share-based awards: Payments to settle tax obligations on share exercises were $28.5 million, $37.4 million and $46.3 million in 2020, 2019 and 2018, respectively. The decreases each year is primarily due to the decrease in the number of shares exercised partially offset by an increase in the average stock price compared to the prior year period.
•Cash received from Apergy, net of cash distributed: In connection with the separation of Apergy from Dover on May 9, 2018, Apergy incurred borrowings to fund a one-time cash payment of $700.0 million to Dover in connection with Dover's contribution to Apergy of stock and assets relating to the businesses spun off with Apergy. Dover received net cash of $689.6 million upon separation, which reflects $10.4 million of cash held by Apergy at the time of distribution and retained by it in connection with its separation from Dover.
Cash Flows from Discontinued Operations
There were no cash flows from discontinued operations for the years ended December 31, 2020 and 2019. Our cash flows from discontinued operations for the year ended December 31, 2018 used $14.3 million. These cash flows primarily reflect the operating results of Apergy prior to its separation during the second quarter of 2018. Cash flows used in discontinued
operations for the year ended December 31, 2018 primarily reflects cash payments of spin-off costs of $46.4 million and capital expenditures of $23.7 million, partially offset by cash provided by operations of approximately $55.4 million.
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 Statementsconsolidated statements of Cash Flows,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 operating performanceliquidity because it provides management and investors a measurement of cash generated from operations that may be available for mandatory payment obligations and investment opportunities, such as funding acquisitions, paying dividends, repaying debt and repurchasing our common stock.
The following table reconciles our free cash flow to cash flow provided by operating activities:
| | | |
| | | | Years Ended December 31, | Years Ended December 31, |
Free Cash Flow (dollars in thousands) | Free Cash Flow (dollars in thousands) | 2020 | | 2019 | | 2018 |
| Cash flow provided by operating activities | Cash flow provided by operating activities | $ | 1,104,810 | | | $ | 945,306 | | | $ | 789,193 | |
| Cash flow provided by operating activities | |
| Cash flow provided by operating activities | |
| Less: Capital expenditures | |
| Less: Capital expenditures | |
| Less: Capital expenditures | Less: Capital expenditures | (165,692) | | | (186,804) | | | (170,994) | |
| | Free cash flow | Free cash flow | $ | 939,118 | | | $ | 758,502 | | | $ | 618,199 | |
| | Free cash flow | |
| | Free cash flow | |
| Cash flow from operating activities as a percentage of revenue | |
| Cash flow from operating activities as a percentage of revenue | |
| Cash flow from operating activities as a percentage of revenue | |
| Cash flow from operating activities as a percentage of net earnings | |
| Cash flow from operating activities as a percentage of net earnings | |
| Cash flow from operating activities as a percentage of net earnings | |
| Free cash flow as a percentage of revenue | Free cash flow as a percentage of revenue | 14.1 % | | 10.6 % | | 8.8 % |
| Free cash flow as a percentage of earnings from continuing operations | 137.4 % | | 111.9 % | | 104.6 % |
| Free cash flow as a percentage of revenue | |
| Free cash flow as a percentage of revenue | |
| Free cash flow as a percentage of net earnings | |
| Free cash flow as a percentage of net earnings | |
| Free cash flow as a percentage of net earnings | |
For 2020,2023, we generated free cash flow of $939.1 million,$1.1 billion, representing 14.1%13.6% of revenue and 137.4%108.2% of earnings from continuing operations.net earnings. Free cash flow in 20192022 was $758.5$584.8 million, or 10.6%6.9% of revenue and 111.9%54.9% of earnings from continuing operations.earnings. Free cash flow in 2018 was $618.2 million, or 8.8% of revenue and 104.6% of earningsincreased from continuing operations. The full year increase in 2020 free2022 to 2023 driven by higher operating cash flow, reflects higher cash flow provided by operations primarily due toas a result of improvements in cash flows related to working capital permitted deferrals of tax payments and advanced payments received on contracts, as previously noted, as well as lowera decrease in capital expenditures. The 2019 increase in free cash flowexpenditures compared to 2018 is duethe prior year. Additionally, the year ended December 31, 2022 includes a $43.5 million income tax payment related to higher operating earnings, partially offset by higher capital expenditures.the gain on sale of UB in the fourth quarter of 2021 and a $13.4 million tax payment in 2022 related to an internal reorganization.
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, 2020,2023, we maintained a $1$1.0 billion five-year and $500.0 million 364-day unsecured revolving credit facility (the “Credit Agreement”facilities ("Credit Agreements") with a syndicate of banks which willexpire April 6, 2028 and April 4, 2024, respectively. The five-year credit facility replaced the previous $1.0 billion five-year unsecured revolving credit facility, which was set to expire on October 4, 2024. This2024 and was terminated by the Company upon execution of the current five-year credit facility. We may elect to extend the maturity date of any loans under the 364-day credit facility is used primarilyuntil April 4, 2025, subject to conditions specified therein. The Credit Agreements are designated as a liquidity back-upback-stop for ourthe Company's commercial paper program.
Beginning in early-to-mid-March 2020,program, which was upsized from $1.0 billion to $1.5 billion during the commercial paper market began to experience very high levelssecond quarter of volatility as a result of COVID-19 related uncertainties. Volatility was most pronounced for "Tier-2" issuers, such as Dover,2023, and impacted both market access and pricing. As a result, on March 16, 2020, the Company borrowed $500 million under the Credit Agreement. Proceeds from the borrowing were used to repay all of the Company's outstanding commercial paper andalso are available for general corporate purposes. We subsequently repaid the $500 million in the second quarter using proceeds from commercial paper as volatility in the commercial paper market stabilized and we resumed borrowing commercial paper.
The Company may elect to have loans under the Credit AgreementAgreements which bear interest at a base rate plus a specified applicable margin. Under this facility,these facilities, 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, 20202023 and had a coverage ratio of 11.414.5 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.
On May 6, 2020, we entered into a $450.0 million 364-day revolving credit facility (the "Short-term Credit Agreement") with a syndicate of banks to be used primarily for working capital and general corporate purposes. Effective November 12, 2020, we terminated the aggregate commitments under the Short-term Credit Agreement. We did not undertake any borrowings under this facility prior to termination.
On November 4, 2019, we issued €500 million of 0.750% euro-denominated notes due 2027 and $300 million of 2.950% notes due 2029. On December 4, 2019, proceeds from the aforementioned notes were used to redeem the €300 million 2.125% notes due 2020 and the $450 million 4.30% notes due 2021. Such redemption payments were made on December 4, 2019, which required us to pay a make whole premium to the bondholders, resulting Additionally, our earliest material long-term debt maturity is in a loss of $23.5 million. The remainder of the proceeds were used for general corporate purposes.
On March 15, 2018, the outstanding 5.45% notes with a principal value of $350,000 matured. The repayment of debt was funded in part by borrowings under our commercial paper program and with existing cash balances.
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, 2020,2023, our cash and cash equivalents totaled $513.1$398.6 million, of which approximately $345.9$269.6 million was held outside the United States. At December 31, 2019,2022, our cash and cash equivalents totaled $397.3$380.9 million, of which $273.1$261.4 million was held outside the United States. Cash and cash equivalents are held primarily in bank deposits with highly rated banks. We regularly hold cash in excess of near-term requirements in bank deposits or invest the funds in government money market instruments or short-term investments, which consist of investment grade time deposits with original maturity dates at the time of purchase of no greater than three months.
On October 11, 2023, the Company entered into a definitive agreement to sell De-Sta-Co for approximately $680.0 million enterprise value, subject to customary post-closing adjustments. This transaction is expected to close in the first quarter of 2024. See Note 4 — Dispositions in the Consolidated Financial Statements in Item 8 of this Form 10-K for further details.
In January 2024, we made two business acquisitions totaling approximately $140.6 million, net of cash acquired, plus potential contingent consideration of up to approximately $33.4 million. See Note 22 — Subsequent Events in the Consolidated Financial Statements in Item 8 of this Form 10-K for further details.
We utilize the net debt to net capitalization calculation (a non-GAAP measure) to assess our overall financial leverage and capacity and believe the calculation is useful to investors for the same reason. Net debt represents total debt minus cash and cash equivalents.equivalents, including cash held for sale. Net capitalization represents net debt plus stockholders' equity. The following table provides a reconciliation of net debt to net capitalization to the most directly comparable GAAP measures:
| Net Debt to Net Capitalization Ratio (dollars in thousands) | Net Debt to Net Capitalization Ratio (dollars in thousands) | | December 31, 2020 | | December 31, 2019 | | | December 31, 2018 | |
| Net Debt to Net Capitalization Ratio (dollars in thousands) | |
Net Debt to Net Capitalization Ratio (dollars in thousands) | |
| Commercial paper | Commercial paper | | $ | — | | | $ | 84,700 | | | | $ | 220,318 | | |
| | Commercial paper | |
| Commercial paper | |
| Other | |
| Other | |
| Other | |
| Total short-term borrowings | |
| Total short-term borrowings | |
| Total short-term borrowings | |
| Long-term debt | |
| Long-term debt | |
| Long-term debt | Long-term debt | | 3,108,829 | | | 2,985,716 | | | | 2,943,660 | | |
| Total debt | Total debt | | 3,108,829 | | | 3,070,416 | | | | 3,163,978 | | |
| Less: Cash and cash equivalents | | (513,075) | | | (397,253) | | | | (396,221) | | |
| Total debt | |
| Total debt | |
| Less: Cash and cash equivalents, including cash held for sale | |
| Less: Cash and cash equivalents, including cash held for sale | |
| Less: Cash and cash equivalents, including cash held for sale | |
| Net debt | |
| Net debt | |
| Net debt | Net debt | | 2,595,754 | | | 2,673,163 | | | | 2,767,757 | | |
| Add: Stockholders' equity | Add: Stockholders' equity | | 3,385,773 | | | 3,032,660 | | | | 2,768,666 | | |
| Add: Stockholders' equity | |
| Add: Stockholders' equity | |
| Net capitalization | |
| Net capitalization | |
| Net capitalization | Net capitalization | | $ | 5,981,527 | | | $ | 5,705,823 | | | | $ | 5,536,423 | | |
| Net debt to net capitalization | Net debt to net capitalization | | 43.4 | % | | 46.8 | % | | | 50.0 | % | |
| Net debt to net capitalization | |
| Net debt to net capitalization | |
Our net debt to net capitalization ratio decreased to 43.4%37.3% at December 31, 20202023 compared to 46.8%43.5% at December 31, 2019. The2022. Net debt decreased $253.2 million primarily due to a decrease in this ratio was driven primarily by the increase in stockholders'commercial paper borrowings and greater cash and cash equivalents, including cash held for sale. Stockholders' equity of $353.1 millionincreased for the period as a result of increase in current earnings of $683.5 million,$1.1 billion, offset by $284.3 million of dividends paid and $106.3 million in share repurchases. Net debt decreased $77.4 million during the period primarily due to an increase of $115.8 million in cash and cash equivalents and a reduction in commercial paper, partially offset by an increase in long-term debt as a result of foreign currency translation on our euro-denominated notes.
Our net debt to net capitalization ratio decreased to 46.8% at December 31, 2019 compared to 50.0% at December 31, 2018. The decrease in this ratio was driven primarily by the increase in stockholders' equity of $264.0 million for the period as a result of increase in current earnings of $677.9 million, offset by $143.3 million in share repurchases and $282.2 million of
dividends paid. Net debt decreased $94.6 million during the period primarily due to a reduction in commercial paper, partially offset by a net increase in long-term debt after debt issuances and redemptions in 2019.
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, 2020,2023, 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 2020.2021. The ratings and outlooks from both agencies were affirmed in 2023.
| | | | | | | | | | | | | | | | | |
| Short-Term Rating | | Long-Term Rating | | Outlook |
| Moody's | P-2 | | Baa1 | | Stable |
| Standard & Poor's | A-2 | | BBB+ | | NegativeStable |
| | | | | |
Operating cash flow and access to capital markets are expected to satisfy our various cash flow requirements, including acquisitions and capital expenditures. 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.
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2020,2023, we had approximately $152.5$180.0 million outstanding in letters of credit, surety bonds, and performance and other guarantees with financial institutions, which primarily expire on various dates through 2029.2031. 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 $941.4 million based on the interest rates in effect as of December 31, 2023.
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 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 have also provided typical indemnities in connection with salesbelieve that existing sources of certain businesses and assets, including representations and warranties and related indemnitiesliquidity are adequate to meet anticipated funding needs at current risk-based interest rates for environmental, health and safety, tax and employment matters. We do not have any material liabilities recorded for these indemnifications and are not aware of any claims or other information that would give rise to material payments under such indemnities.the foreseeable future.
A summary of our consolidated contractual obligations and commitments as of December 31, 2020 and the years when these obligations are expected to be due is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Payments Due by Period |
| (in thousands) | | Total | | Less than 1 Year | | 1-3 Years | | 3-5 Years | | More than 5 Years | | Other |
Long-term debt (1) | | $ | 3,108,829 | | | $ | — | | | $ | — | | | $ | 396,716 | | | $ | 2,712,113 | | | $ | — | |
Interest payments (2) | | 1,245,528 | | | 99,900 | | | 199,800 | | | 199,800 | | | 746,028 | | | — | |
| Operating lease obligations | | 199,293 | | | 53,019 | | | 65,046 | | | 38,953 | | | 42,275 | | | — | |
| Purchase obligations | | 60,467 | | | 50,042 | | | 9,825 | | | 400 | | | 200 | | | — | |
| Finance lease obligations | | 12,739 | | | 3,091 | | | 4,826 | | | 2,831 | | | 1,991 | | | — | |
Supplemental benefits (3) | | 69,106 | | | 6,655 | | | 14,126 | | | 13,251 | | | 35,074 | | | — | |
Income tax payable - deemed repatriation tax (4) | | 50,027 | | | 90 | | | 21,893 | | | 28,044 | | | — | | | — | |
Unrecognized tax benefits (5) | | 90,097 | | | — | | | — | | | — | | | — | | | 90,097 | |
| Total obligations | | $ | 4,836,086 | | | $ | 212,797 | | | $ | 315,516 | | | $ | 679,995 | | | $ | 3,537,681 | | | $ | 90,097 | |
_________
| | | | | |
(1) | | See Note 13 — Borrowings and Lines of Credit to the Consolidated Financial Statements. Amounts represent principal payments for all long-term debt, including current maturities, net of unamortized discounts and deferred issuance costs. |
(2) | | Amounts represent estimates of future interest payments on long-term debt using the interest rates in effect at December 31, 2020.
|
(3) | | Amounts represent estimated benefit payments under our unfunded supplemental benefit plans and our unfunded non-U.S. qualified defined benefit plans. See Note 18 — Employee Benefit Plans to the Consolidated Financial Statements. We also expect to contribute approximately $5.2 million to our non-U.S. qualified defined benefit plans in 2021, which amount is not reflected in the above table. |
(4) | | Amounts represent a tax imposed by the Tax Reform Act for a one-time deemed repatriation of unremitted earnings of foreign subsidiaries. |
(5) | | Due to the uncertainty of the potential settlement of future unrecognized tax benefits, we are unable to estimate the timing of the related payments, if any, that will be made subsequent to 2020. This amount does not include the potential indirect benefits resulting from deductions or credits for payments made to other jurisdictions. This amount includes accrued interest and penalties. |
Financial Instruments and Risk Management
The diverse nature of our businesses’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, 20202023, and duringfor the three year period thenyears ended December 31, 2023 and 2022, 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 rate 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 20202023 year-end fair value of our long-term debt by approximately $280.7$155.9 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. We had also designated the €300 million notes due in 2020 as a net investment hedge prior to our redemption of the notes. 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 (loss)loss of $45.8 million and pre-tax gain of $(119.3) million, $22.4 million and $45.2$80.3 million in other comprehensive income for the years ended December 31, 2020, 2019,2023 and 20182022 respectively.
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. When possible,Markets for multiple raw materials saw significant cost increases throughout 2021 and into 2023, which we partially offset through price increases and other levers. In some cases, we maintain long-term fixed pricelonger-term index based contracts on raw materials and component parts; however,parts and centrally drive an ongoing effort to minimize risk proactively. However, we are prone to exposure as these contracts expire.
Critical Accounting Policies and Estimates
Our consolidated financial statements and related financial information are based on the application of U.S. GAAP. The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates, assumptions, judgments and interpretations of accounting principles that affect the amount of assets, liabilities, revenue and expenses on the consolidated financial statements. These estimates also affect supplemental information contained in our disclosures, including information regarding contingencies, risk and our financial condition. The significant accounting policies used in the preparation of our consolidated financial statements are discussed in Note 1 — Description of Business and Summary of Significant Accounting Policies in the Consolidated Financial Statements in Item 8 of this Form 10-K. The accounting assumptions and estimates discussed in the section below are most critical to an understanding of our financial statements because they inherently involve significant judgments and estimates. We believe our use of estimates and underlying accounting assumptions conforms to U.S. GAAP and is consistently applied. We evaluate our critical accounting estimates and judgments on an ongoing basis and update them as necessary. Management has discussed our critical accounting policies and estimates with the audit committee of the Board of Directors.Revenue Recognition
RevenueRecognition - Effective January 1, 2018, we adopted Accounting Standard Codification ("ASC") Topic 606, Revenue from Contracts with Customers. Under ASC Topic 606, a contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance and where payment terms are identified and collectability is probable. Once we enter a contract, it is evaluated to identify performance obligations. For each performance obligation, revenue is recognized as control of promised goods or services transfers to the customer in an amount that reflects the consideration we expect to receive in exchange for those goods or services. The amount of revenue recognized takes into account variable consideration, such as discounts and volume rebates. 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. Service revenue represents less than 5% of our total revenue and is recognized as the services are performed. In limited cases, our revenue arrangements with customers require delivery, installation, testing, certification, or other acceptance provisionspromises to be satisfied beforedeliver goods or services that may impact the timing or pattern of revenue recognized. The remainder of our revenue is recognized.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 include shipping costs billedestimate 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 customersrecognize 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 shipping costs in costassets and liabilities could impact our financial position or results of goodsoperations. The judgments, estimates, and services. See Note 3 — Revenue for further details.methods used have been applied consistently over the last three fiscal years.
Inventories - Inventories are stated at the lowerValuation of cost, determined on the first-in, first-out (FIFO) basis, or net realizable value. An immaterial portion of domestic inventories are stated at cost, determined on the last-in, first-out (LIFO) basis, which is less than market value. Under certain market conditions, estimates and judgments regarding the valuation of inventories are employed by us to properly value inventories.Acquired Intangible Assets
Goodwill and Other Description
Intangible Assets - We haveassets represent a significant goodwill and intangible assets onportion of our consolidated balance sheetssheet 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 and classification of these assetstechniques, and the assignment of useful lives involve significant judgments and the use of estimates. In addition, the testing of goodwill and intangibles for impairment requires significant use of judgment and assumptions, particularly as it relatesCompany may engage third-party appraisal firms to assist with the determination of fair value. Our indefinite-livedvalues of significant intangible assets. The valuation of intangible assets is performed at the time of acquisition and reporting unitsmay 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 testedbased on several factors, including historical experience with similar businesses and reviewedindustries and information obtained from operating company management.
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, 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 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.
When performing an impairment test, weJudgments and uncertainties involved in the estimate
The significant assumptions in the fair value usinganalysis of goodwill are the income-based valuation method. 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-adjustedand the discount rate. We use our internal forecasts to estimateThe determination of future cash flows involves significant judgment and include an estimate of long-term futureis primarily driven by forecasted revenue growth raterates and EBITDA margins for the reporting unit. These assumptions are developed based on our most recent views of the long-term outlook for each reporting unit. Actual results may differ from these estimates. The discount rates used in these analyses vary by reporting unit and are based on a capital asset pricing model and published relevant industry rates.unit’s expected future performance, which considers historical performance. We use a discount ratesrate commensurate with the risks and uncertainties inherent to each reporting unit andrisks in our internally developed forecasts. Discount rates used in our 2020 reporting unit valuations ranged from 8.0%forecasts of future cash flows. The discount rate may also fluctuate due to 9.0%.market conditions such as rising interest rates.
We performed a quantitative goodwill impairment test for each of our 15 reporting units in the fourth quarter of 2020, concluding that the fair values of each reporting unit substantially exceeded its carrying values. As such, no goodwill impairment was recognized. Effect if actual results differ from assumptions
While we believe the assumptions used in the 2020our annual impairment analysis are reasonable and representative of expected results and reflective of a market participant, actual results may differ from expectations.these assumptions. The methodology used for the goodwill impairment test has remained consistent over the last three fiscal years.
Employee
Valuation of Pension Benefit PlansObligation
-
Description
The valuation of our pension benefit obligation is actuarially determined in accordance with GAAP and other post-retirement plans requires the use ofis impacted by assumptions and estimates that are used to develop actuarial valuations of expenses and assets/liabilities. Inherent in these valuations are key assumptions, includingestimate the obligation, namely the discount rates, investment returns, projected salary increases and benefits and mortality rates.rate. Annually, we review the actuarial assumptions used in our pension reporting and compare them with externalthe assumptions to third-party benchmarks to ensure that theythe selected assumptions accurately account for our future pension benefit obligations. Changes
Judgments and uncertainties involved in assumptions and future investment returns could potentially have a material impact on our pension expense and related funding requirements. Our expected long-term rate of return on plan assets is reviewed annually based on actual and forecasted returns, economic trends and and portfolio allocation. the estimate
Our discount rate assumption isassumptions 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. As disclosed in Note 18 — Employee Benefit Plans to the Consolidated Financial Statements, the 2020The 2023 weighted-average discount rate used to measure our qualified definedpension benefit obligations ranged from 0.79%2.80% to 2.65%5.20%, a general decrease from the 20192022 rates, which ranged from 1.18%3.57% to 3.40%. The lower 2020 discount rates5.55%, due to decreases in the U.S. are reflective of decreased market interest ratescorporate bond yields over this period.
Effect if actual results differ from assumptions
A 25 basis25-basis point decrease in the discount rates used for these plans would have increased the post-retirementpension benefit obligations by approximately $35.5$16.6 million from the amount recorded in the consolidated financial statements at December 31, 2020. Our2023. The methodology used for the valuation of the pension expensebenefit 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 also sensitive to changesrequired in determining the expected long-term raterealizability of return on plan assets. A decrease of 25 basis points in the expected long-term rate of return ondeferred tax assets would have increased our defined benefit pension expense by approximately $1.7 million.and evaluating unrecognized tax benefits.
Income Taxes - We have significant amounts of deferred tax assets that are reviewedevaluated for recoverability and valued accordingly. TheseManagement evaluates the realizability of deferred income tax assets are evaluated by using estimatesfor each jurisdiction in which the Company operates. We record valuation allowances to reduce the carrying value of future taxable income streams and the impact ofdeferred tax planning strategies. Reservesassets to amounts that we expect are also estimated, using more likely than not criteria, for federal, state and non-U.S. tax issues. We routinely monitor the potential impact of these situations and believe that we have established the proper reserves. Reservesto be realized.
related to tax accruals and valuations related to deferred tax assets can be impacted by changes in tax codes and rulings (as further described below with respect to U.S. tax law), changes in statutory tax rates and our future taxable income levels. The provision for uncertainunrecognized tax positionsbenefits 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 percent50% likely of being realized upon ultimate settlement. We record interest and penalties related to unrecognized tax benefits as a component of our provision for income taxes.
Risk, Retention, Insurance Judgments and uncertainties involved in the estimate- We have
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 accrualsjudgment is required in the identification and reserves relatedmeasurement 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 self-retained portion ofexposures associated with our risk management program. These accruals require the use of estimates and judgment with regard to risk exposure and ultimate liability. We estimate losses under these programs using actuarial assumptions, our experience and relevant industry data. We review these factors quarterly and consider the current level of accruals and reserves adequate relative to current market conditions and experience.various filing positions.
Contingencies -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 liabilities 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. WhileEstimates 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.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.
Restructuring - We establish liabilities for restructuring activities at an operation 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 we believe that these estimates accurately reflect the anticipated costs, actual results may be different than the estimated amounts.
Disposed and Discontinued Operations - From time to time we sell or discontinue or dispose of certain operations for various reasons. Estimates are used to adjust, if necessary, the assets and liabilities of discontinued operations to their estimated fair value. These estimates include assumptions relating to the proceeds anticipated as a result of the sale. Fair value is established using internal valuation calculations along with market analysis of similar-type entities. The adjustments to fair value of these operations provide the basis for the gain or loss when sold. Changes in business conditions or the inability to sell an operation could potentially require future adjustments to these estimates. As noted previously, in 2019, we recorded an impairment on assets held for sale due to the sale of Finder. In 2020 and 2018, no impairment charges were recorded due to operations sold, discontinued, or disposed.
Stock-Based Compensation - We are required to recognize in our Consolidated Statements of Earnings the expense associated with all share-based payment awards made to employees and directors, including stock appreciation rights ("SARs"), restricted stock units and performance share awards. We use the Black-Scholes valuation model to estimate the fair value of SARs granted to employees. The performance share awards granted in 2020 are market condition awards and we determined the fair value using the Monte Carlo simulation model (a binomial lattice-based valuation model). For information related to the assumptions used, see Note 16 — Equity and Cash Incentive Program to the Consolidated Financial Statements in Item 8 of this Form 10-K.
Recent Accounting Standards
See Note 1 — Description of Business and Summary of Significant Accounting Policies toin the Consolidated Financial Statements in Item 8 of this Form 10-K for a discussion of recent accounting pronouncements and recently adopted accounting standards.
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. Segment EBITDA, segment EBITDA margin, freeFree cash flow, free cash flow as a percentage of revenue, free cash flow as a percentage of net earnings, from continuing operations, net debt, net capitalization, net debt to net capitalization ratio, adjusted working capital, and organic revenue growth and rightsizing costs are not financial measures under GAAP and should not be considered as a substitute for earnings, cash flows from operating activities, debt or equity, working capital revenue or restructuring costsrevenue as determined in accordance with GAAP, and they may not be comparable to similarly titled measures reported by other companies.
We believe that segment EBITDA and segment EBITDA margin are useful to investors and other users of our financial information in evaluating ongoing operating profitability as they exclude the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to our competitors. Segment EBITDA is calculated by adding back depreciation and amortization expense to segment earnings, which is the most directly comparable GAAP measure. We do not present segment net income because corporate expenses are not allocated at a segment level. Segment EBITDA margin is calculated as segment EBITDA divided by segment revenue.
We believe the net debt to net capitalization ratio free cash flow and free cash flow ratios are important measures of liquidity. Net debt to net capitalization ratio 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 from continuing operations equals free cash flow divided by earnings from continuing operations.net earnings. We believe that reporting adjusted working capital which is calculated as accounts receivable, plus inventory, less accounts payable, provides a meaningful measure of our operational resultsliquidity by showing the changes caused solely by revenue.operational results. We believe that reporting organic revenue growth, which excludeexcludes 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. We believe that reporting rightsizing costs, which include restructuring and other charges, is important as it enables management and investors to better understand the financial impact of our broad-based cost reduction, footprint consolidation, IT centralization and operational improvement initiatives.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
(All other schedules are not required and have been omitted)
MANAGEMENT’SMANAGEMENT'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’sCompany's management assessed the effectiveness of the Company’sCompany's internal control over financial reporting as of December 31, 2020.2023. In making this assessment, the Company’sCompany'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, 2020,2023, the Company’sCompany'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’sCompany's internal control over financial reporting as of December 31, 20202023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
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”"Company") as of December 31, 20202023 and 2019,2022, 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, 2020,2023, including the related notes and financial statement schedule listed in the accompanying index for each of the three years in the period ended December 31, 2020 (collectively referred to as the “consolidated"consolidated financial statements”statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2020,2023, 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, 20202023 and 2019,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20202023 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, 2020,2023, 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 Overover 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
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 109 to the consolidated financial statements, the Company’s consolidated goodwill balance was $4.073$4.882 billion as of December 31, 2020.2023. Management performs itsa 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 assets held for sale, or when a change in the composition of reporting units occurs for other reasons. When performingThe quantitative test compares the impairment test, management estimates fair value of eacha reporting unit using thewith its carrying amount, including goodwill. Management uses an income-based valuation method, which involves significant judgment. Under the income-based valuation method, fair value is determined based ondetermining the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. Management uses internal forecasts to estimate the fair value of a reporting unit. As disclosed by management, the significant assumptions in the fair value analysis of goodwill are the estimated future cash flows, which are primarily driven by forecasted revenue growth rates, EBITDA margins, and the discount rate. These assumptions are developed by management based on the reporting unit’s expected future performance, which considers historical performance and future estimated results.performance.
The principal considerations for our determination that performing procedures relating to the goodwill impairment test is a critical audit matter are there was(i) the significant judgment by management when developing the fair value measurementestimate of eachthe reporting unit, which in turn led tounits and (ii) a high degree of auditor judgment, subjectivity, and subjectivityeffort in performing procedures and in evaluating management’s estimate of fair value of the reporting units, specificallysignificant assumption related to forecasted 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.rates for certain reporting units.
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 determinationvaluation of revenue growth in the estimated future cash flows.reporting units. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting units; (ii) evaluating the appropriateness of the discounted cash flow model, assessing resultsincome-based valuation method; (iii) testing the completeness and accuracy of sensitivities over the assumptionsunderlying data used in the discounted cash flow model,income-based valuation method; and testing(iv) evaluating the reasonableness of the significant assumptionsassumption used by management specifically revenue growth. When testing revenue growth, we evaluated whether the assumptions were reasonable by (i) understanding management’s processrelated to develop the estimated future cash flows, (ii) comparing management’s forecasted revenue growth rates for certain reporting units. Evaluating the reasonableness of management’s assumption related to forecasted revenue growth rates for certain reporting units involved considering (i) the current and prior period performance of those reporting units and (iii) comparing management’s(ii) the consistency of those forecasted revenue growth torates with external market and/or industry data.
| | | | | | | | |
| /s/ | PricewaterhouseCoopers LLP | | |
| Chicago, Illinois | | |
February 12, 20219, 2024 | | |
We have served as the Company's auditor since 1995.
DOVER CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)data)
| | | | Years Ended December 31, | | Years Ended December 31, |
| | | 2020 | | 2019 | | 2018 | | 2023 | | 2022 | | 2021 |
| Revenue | Revenue | $ | 6,683,760 | | | $ | 7,136,397 | | | $ | 6,992,118 | |
| Cost of goods and services | Cost of goods and services | 4,209,741 | | | 4,515,459 | | | 4,432,562 | |
| Gross profit | Gross profit | 2,474,019 | | | 2,620,938 | | | 2,559,556 | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | 1,541,032 | | | 1,599,098 | | | 1,716,444 | |
| Loss on assets held for sale | 0 | | | 46,946 | | | 0 | |
| | Operating earnings | |
| Operating earnings | |
| Operating earnings | Operating earnings | 932,987 | | | 974,894 | | | 843,112 | |
| Interest expense | Interest expense | 111,937 | | | 125,818 | | | 130,972 | |
| Interest income | Interest income | (3,571) | | | (4,526) | | | (8,881) | |
| Loss on extinguishment of debt | 0 | | | 23,543 | | | 0 | |
| Gain on sale of a business | (5,213) | | | 0 | | | 0 | |
| | Gain on dispositions | |
| Gain on dispositions | |
| Gain on dispositions | |
| | Other income, net | |
| Other income, net | |
| Other income, net | Other income, net | (11,900) | | | (12,950) | | | (4,357) | |
| Earnings before provision for income taxes | Earnings before provision for income taxes | 841,734 | | | 843,009 | | | 725,378 | |
| Provision for income taxes | Provision for income taxes | 158,283 | | | 165,091 | | | 134,233 | |
| Earnings from continuing operations | 683,451 | | | 677,918 | | | 591,145 | |
| Loss from discontinued operations, net | 0 | | | 0 | | | (20,878) | |
| | Net earnings | Net earnings | $ | 683,451 | | | $ | 677,918 | | | $ | 570,267 | |
| | Earnings per share from continuing operations: | |
| Basic | $ | 4.74 | | | $ | 4.67 | | | $ | 3.94 | |
| Diluted | $ | 4.70 | | | $ | 4.61 | | | $ | 3.89 | |
| Net earnings | |
| | Loss per share from discontinued operations: | |
| Basic | $ | 0 | | | $ | 0 | | | $ | (0.14) | |
| Diluted | $ | 0 | | | $ | 0 | | | $ | (0.14) | |
| Net earnings | |
| | | Net earnings per share: | Net earnings per share: | |
| | Net earnings per share: | |
| | Net earnings per share: | |
| Basic | |
| Basic | |
| Basic | Basic | $ | 4.74 | | | $ | 4.67 | | | $ | 3.80 | |
| Diluted | Diluted | $ | 4.70 | | | $ | 4.61 | | | $ | 3.75 | |
| | Weighted average shares outstanding: | Weighted average shares outstanding: | |
| Weighted average shares outstanding: | |
| Weighted average shares outstanding: | |
| Basic | |
| Basic | |
| Basic | Basic | 144,050 | | | 145,198 | | | 149,874 | |
| Diluted | Diluted | 145,393 | | | 146,992 | | | 152,133 | |
|
See Notes to Consolidated Financial Statements
DOVER CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In thousands)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| Net earnings | $ | 683,451 | | | $ | 677,918 | | | $ | 570,267 | |
| Other comprehensive earnings (loss), net of tax | | | | | |
| Foreign currency translation adjustments: | | | | | |
| Foreign currency translation gains (losses) | 55,450 | | | (5,025) | | | (59,970) | |
| Reclassification of foreign currency translation losses to earnings | 0 | | | 25,339 | | | 0 | |
| Total foreign currency translation adjustments (net of $26,957, $(4,714) and $(9,498) tax benefit (provision), respectively) | 55,450 | | | 20,314 | | | (59,970) | |
| Pension and other postretirement benefit plans: | | | | | |
| Actuarial gains (losses) | 705 | | | 47 | | | (13,107) | |
| Prior service credit (cost) | 828 | | | 1,818 | | | (14,661) | |
| Amortization of actuarial losses included in net periodic pension cost | 6,695 | | | 596 | | | 3,829 | |
| Amortization of prior service costs included in net periodic pension cost | 1,153 | | | 2,141 | | | 2,875 | |
| Settlement and curtailment impact | 18 | | | 806 | | | 9,926 | |
| | | | | |
| Total pension and other postretirement benefit plans (net of $(3,197), $(1,184) and $3,241 tax (provision) benefit, respectively) | 9,399 | | | 5,408 | | | (11,138) | |
| Changes in fair value of cash flow hedges: | | | | | |
| Unrealized net (losses) gains | (1,445) | | | 1,495 | | | 1,158 | |
| Net (gains) losses reclassified into earnings | (632) | | | (147) | | | 1,541 | |
| Total cash flow hedges (net of $607, $(359) and $(717) tax benefit (provision), respectively) | (2,077) | | | 1,348 | | | 2,699 | |
| | | | | |
| Other comprehensive earnings (loss), net of tax | 62,772 | | | 27,070 | | | (68,409) | |
| Comprehensive earnings | $ | 746,223 | | | $ | 704,988 | | | $ | 501,858 | |
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| Net earnings | $ | 1,056,828 | | | $ | 1,065,376 | | | $ | 1,123,818 | |
| Other comprehensive earnings (loss), net of tax | | | | | |
| Foreign currency translation adjustments: | | | | | |
| Foreign currency translation gains (losses) | 38,893 | | | (119,010) | | | (39,819) | |
| Reclassification of foreign currency translation losses to earnings | — | | | 5,915 | | | — | |
| Total foreign currency translation adjustments (net of $10,438, $(17,824) and $(20,976) tax benefit (provision), respectively) | 38,893 | | | (113,095) | | | (39,819) | |
| Pension and other post-retirement benefit plans: | | | | | |
| Actuarial (losses) gains | (14,820) | | | (2,658) | | | 26,960 | |
| Prior service (costs) credit | (53) | | | 1,370 | | | (1,433) | |
| Amortization of actuarial (gains) losses included in net periodic pension cost | (1,982) | | | 1,903 | | | 9,451 | |
| Amortization of prior service costs included in net periodic pension cost | 852 | | | 888 | | | 1,023 | |
| Settlement and curtailment impact | 2,831 | | | 3,688 | | | 1,167 | |
| | | | | |
| Total pension and other post-retirement benefit plans (net of $3,569, $(2,230) and $(9,868) tax benefit (provision), respectively) | (13,172) | | | 5,191 | | | 37,168 | |
| Changes in fair value of cash flow hedges: | | | | | |
| Unrealized net gains (losses) arising during period | 682 | | | (535) | | | 6,724 | |
| Net losses (gains) reclassified into earnings | 1,954 | | | (3,732) | | | (4,871) | |
| Total cash flow hedges (net of $(778), $1,217 and $(532) tax (provision) benefit, respectively) | 2,636 | | | (4,267) | | | 1,853 | |
| | | | | |
| Other comprehensive earnings (loss), net of tax | 28,357 | | | (112,171) | | | (798) | |
| Comprehensive earnings | $ | 1,085,185 | | | $ | 953,205 | | | $ | 1,123,020 | |
See Notes to Consolidated Financial Statements
DOVER CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)data)
| | | | December 31, 2020 | | December 31, 2019 | | December 31, 2023 | | December 31, 2022 |
Assets | | ASSETS | | ASSETS |
| Current assets: | Current assets: | | | | Current assets: | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 513,075 | | | $ | 397,253 | |
| | Receivables, net of allowances of $40,474 and $29,381 | 1,137,223 | | | 1,217,190 | |
| Inventories | 835,804 | | | 806,141 | |
| Receivables, net | |
| Receivables, net | |
| Receivables, net | |
| Inventories, net | |
| Prepaid and other current assets | Prepaid and other current assets | 133,085 | | | 127,846 | |
| | Assets held for sale | |
| Assets held for sale | |
| Assets held for sale | |
| Total current assets | Total current assets | 2,619,187 | | | 2,548,430 | |
| Property, plant and equipment, net | Property, plant and equipment, net | 897,326 | | | 842,318 | |
| Goodwill | Goodwill | 4,072,542 | | | 3,783,347 | |
| Intangible assets, net | Intangible assets, net | 1,083,772 | | | 1,055,014 | |
| Other assets and deferred charges | Other assets and deferred charges | 479,247 | | | 440,368 | |
| | Total assets | Total assets | $ | 9,152,074 | | | $ | 8,669,477 | |
Liabilities and Stockholders' Equity | | Total assets | |
| Total assets | |
| | LIABILITIES AND STOCKHOLDERS' EQUITY | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |
| Current liabilities: | Current liabilities: | | | | Current liabilities: | | | |
| Notes payable | $ | 0 | | | $ | 84,700 | |
| Short-term borrowings | |
| Accounts payable | Accounts payable | 853,942 | | | 920,593 | |
| Accrued compensation and employee benefits | Accrued compensation and employee benefits | 239,750 | | | 226,658 | |
| Deferred revenue | Deferred revenue | 184,845 | | | 104,901 | |
| Accrued insurance | Accrued insurance | 98,954 | | | 98,432 | |
| Other accrued expenses | Other accrued expenses | 343,637 | | | 295,059 | |
| | Federal and other income taxes | Federal and other income taxes | 17,670 | | | 17,748 | |
| Liabilities held for sale | |
| Total current liabilities | Total current liabilities | 1,738,798 | | | 1,748,091 | |
| Long-term debt | Long-term debt | 3,108,829 | | | 2,985,716 | |
| Deferred income taxes | Deferred income taxes | 298,423 | | | 322,036 | |
| Noncurrent income tax payable | Noncurrent income tax payable | 49,937 | | | 52,000 | |
| Other liabilities | Other liabilities | 570,314 | | | 528,974 | |
| | Stockholders' equity: | Stockholders' equity: | | | |
| Preferred stock - $100 par value; 100,000 shares authorized; NaN issued | 0 | | | 0 | |
| Common stock - $1 par value; 500,000,000 shares authorized; 258,981,638 and 258,551,748 shares issued at December 31, 2020 and 2019 | 258,982 | | | 258,552 | |
| Stockholders' equity: | |
| Stockholders' equity: | | | | |
| Preferred stock - $100 par value; 100,000 shares authorized; none issued | |
| Common stock - $1 par value; 500,000,000 shares authorized; 259,841,534 and 259,643,756 shares issued at December 31, 2023 and 2022 | |
| Additional paid-in capital | Additional paid-in capital | 868,882 | | | 869,719 | |
| Retained earnings | Retained earnings | 8,608,284 | | | 8,211,257 | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | (153,254) | | | (216,026) | |
| Treasury stock, at cost: 115,228,597 and 114,249,432 shares at December 31, 2020 and 2019 | (6,197,121) | | | (6,090,842) | |
| Treasury stock, at cost: 119,945,271 and 119,945,271 shares at December 31, 2023 and 2022 | |
| Total stockholders' equity | Total stockholders' equity | 3,385,773 | | | 3,032,660 | |
| Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | $ | 9,152,074 | | | $ | 8,669,477 | |
See Notes to Consolidated Financial Statements
DOVER CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’STOCKHOLDERS' EQUITY
(In thousands, except per share amounts)data)
| | | | Common Stock $1 Par Value | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Earnings (Loss) | | Treasury Stock | | Total Stockholders' Equity | | Common Stock $1 Par Value | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Earnings (Loss) | | Treasury Stock | | Total Stockholders' Equity |
| Balance at December 31, 2017 | $ | 256,992 | | | $ | 942,485 | | | $ | 8,455,501 | | | $ | (194,759) | | | $ | (5,077,039) | | | $ | 4,383,180 | |
| Adoption of ASU 2018-02 | 0 | | | 0 | | | 12,856 | | | (12,856) | | | 0 | | | 0 | |
| Cumulative catch-up adjustment related to Adoption of Topic 606 | 0 | | | 0 | | | 175 | | | 0 | | | 0 | | | 175 | |
| Balance at December 31, 2020 | |
| | Net earnings | Net earnings | 0 | | | 0 | | | 570,267 | | | 0 | | | 0 | | | 570,267 | |
| Dividends paid ($1.90 per share) | 0 | | | 0 | | | (283,570) | | | 0 | | | 0 | | | (283,570) | |
| Separation of Apergy | 0 | | 0 | | (939,743) | | | 32,928 | | | 0 | | | (906,815) | |
| | Net earnings | |
| | Net earnings | |
| Dividends paid ($1.99 per share) | |
| | Common stock issued for the exercise of share-based awards | |
| | Common stock issued for the exercise of share-based awards | |
| | Common stock issued for the exercise of share-based awards | Common stock issued for the exercise of share-based awards | 830 | | | (47,084) | | | 0 | | | 0 | | | 0 | | | (46,254) | |
| | Stock-based compensation expense | Stock-based compensation expense | 0 | | | 24,442 | | | 0 | | | 0 | | | 0 | | | 24,442 | |
| Stock-based compensation expense | |
| Stock-based compensation expense | |
| | Common stock acquired | |
| Common stock acquired | |
| Common stock acquired | Common stock acquired | 0 | | | (24,454) | | | 0 | | | 0 | | | (870,523) | | | (894,977) | |
| Other comprehensive loss, net of tax | Other comprehensive loss, net of tax | 0 | | | 0 | | | 0 | | | (68,409) | | | 0 | | | (68,409) | |
| Other | Other | 0 | | | (9,373) | | | 0 | | | 0 | | | 0 | | | (9,373) | |
| Balance at December 31, 2018 | 257,822 | | | 886,016 | | | 7,815,486 | | | (243,096) | | | (5,947,562) | | | 2,768,666 | |
| Balance at December 31, 2021 | |
| | Net earnings | Net earnings | 0 | | | 0 | | | 677,918 | | | 0 | | | 0 | | | 677,918 | |
| Dividends paid ($1.94 per share) | 0 | | | 0 | | | (282,197) | | | 0 | | | 0 | | | (282,197) | |
| Net earnings | |
| Net earnings | |
| Dividends paid ($2.01 per share) | |
| Common stock issued for the exercise of share-based awards | Common stock issued for the exercise of share-based awards | 730 | | | (38,100) | | | 0 | | | 0 | | | 0 | | | (37,370) | |
| | Stock-based compensation expense | Stock-based compensation expense | 0 | | | 29,702 | | | 0 | | | 0 | | | 0 | | | 29,702 | |
| Stock-based compensation expense | |
| Stock-based compensation expense | |
| | Common stock acquired | 0 | | | 0 | | | 0 | | | 0 | | | (143,280) | | | (143,280) | |
| Other comprehensive earnings, net of tax | 0 | | | 0 | | | 0 | | | 27,070 | | | 0 | | | 27,070 | |
| Other | 0 | | | (7,899) | | | 50 | | | 0 | | | 0 | | | (7,849) | |
| Balance at December 31, 2019 | 258,552 | | | 869,719 | | | 8,211,257 | | | (216,026) | | | (6,090,842) | | | 3,032,660 | |
| Adoption of ASU 2016-13- CECL | 0 | | | 0 | | | (2,112) | | | 0 | | | 0 | | | (2,112) | |
| Common stock acquired, including accelerated share repurchase program | |
| Common stock acquired, including accelerated share repurchase program | |
| Common stock acquired, including accelerated share repurchase program | |
| Other comprehensive loss, net of tax | |
| | Balance at December 31, 2022 | |
| Balance at December 31, 2022 | |
| Balance at December 31, 2022 | |
| | Net earnings | Net earnings | 0 | | | 0 | | | 683,451 | | | 0 | | | 0 | | | 683,451 | |
| Dividends paid ($1.97 per share) | 0 | | | 0 | | | (284,312) | | | 0 | | | 0 | | | (284,312) | |
| Net earnings | |
| Net earnings | |
| Dividends paid ($2.03 per share) | |
| Common stock issued for the exercise of share-based awards | Common stock issued for the exercise of share-based awards | 430 | | | (28,906) | | | 0 | | | 0 | | | 0 | | | (28,476) | |
| | Stock-based compensation expense | Stock-based compensation expense | 0 | | | 25,026 | | | 0 | | | 0 | | | 0 | | | 25,026 | |
| Stock-based compensation expense | |
| Stock-based compensation expense | |
| | Common stock acquired | 0 | | | 0 | | | 0 | | | 0 | | | (106,279) | | | (106,279) | |
| | Other comprehensive earnings, net of tax | |
| | Other comprehensive earnings, net of tax | |
| | Other comprehensive earnings, net of tax | Other comprehensive earnings, net of tax | 0 | | | 0 | | | 0 | | | 62,772 | | | 0 | | | 62,772 | |
| Other | Other | 0 | | | 3,043 | | | 0 | | | 0 | | | 0 | | | 3,043 | |
| Balance at December 31, 2020 | $ | 258,982 | | | $ | 868,882 | | | $ | 8,608,284 | | | $ | (153,254) | | | $ | (6,197,121) | | | $ | 3,385,773 | |
| Balance at December 31, 2023 | |
See Notes to Consolidated Financial Statements
DOVER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| Operating Activities of Continuing Operations | | | | | |
| Net earnings | $ | 683,451 | | | $ | 677,918 | | | $ | 570,267 | |
| Adjustments to reconcile net earnings to cash from operating activities: | | | | | |
| Loss from discontinued operations, net | 0 | | | 0 | | | 20,878 | |
| Loss on assets held for sale | 0 | | | 46,946 | | | 0 | |
| Loss on extinguishment of debt | 0 | | | 23,543 | | | 0 | |
| Depreciation and amortization | 279,051 | | | 272,287 | | | 282,580 | |
| Stock-based compensation | 25,026 | | | 29,702 | | | 23,698 | |
| | | | | |
| Gain on sale of businesses | (5,213) | | | 0 | | | 0 | |
| Provision for losses on accounts receivable (net of recoveries) | 11,171 | | | 5,933 | | | 3,875 | |
| Deferred income taxes | (25,643) | | | (11,966) | | | (35,448) | |
| Employee benefit plan expense | 7,205 | | | 5,844 | | | 11,912 | |
| Other, net | (6,593) | | | (3,652) | | | (6,762) | |
| Cash effect of changes in assets and liabilities (excluding effects of acquisitions, dispositions and foreign exchange): | | | | | |
| Accounts receivable | 122,407 | | | (7,903) | | | (87,573) | |
| Inventories | 10,519 | | | (56,870) | | | (85,052) | |
| Prepaid expenses and other assets | (17,915) | | | (25,797) | | | (7,453) | |
| Accounts payable | (95,636) | | | 12,670 | | | 105,586 | |
| Accrued compensation and employee benefits | 12,277 | | | 15,580 | | | (7,037) | |
| Accrued expenses and other liabilities | 129,916 | | | (7,056) | | | (4,051) | |
| Accrued taxes | (5,412) | | | (10,437) | | | 29,706 | |
| Contributions to employee benefit plans | (19,801) | | | (21,436) | | | (25,933) | |
| Net cash provided by operating activities of continuing operations | 1,104,810 | | | 945,306 | | | 789,193 | |
| Investing Activities of Continuing Operations | | | | | |
| Additions to property, plant and equipment | (165,692) | | | (186,804) | | | (170,994) | |
| Acquisitions (net of cash and cash equivalents acquired) | (335,786) | | | (215,687) | | | (68,557) | |
| Proceeds from sale of property, plant and equipment | 7,207 | | | 4,168 | | | 5,908 | |
| Proceeds from sale of businesses | 15,400 | | | 24,218 | | | 3,937 | |
| | | | | |
| Other | (2,508) | | | (10,150) | | | (15,774) | |
| Net cash used in investing activities of continuing operations | (481,379) | | | (384,255) | | | (245,480) | |
| Financing Activities of Continuing Operations | | | | | |
| Cash received from Apergy, net of cash distributed | 0 | | | 0 | | | 689,643 | |
| Change in commercial paper and notes payable, net | (84,700) | | | (135,650) | | | (10,722) | |
| Proceeds from long-term debt | 0 | | | 847,469 | | | 0 | |
| | | | | |
| Repayment of long-term debt | 0 | | | (805,112) | | | (350,000) | |
| Dividends to stockholders | (284,312) | | | (282,197) | | | (283,570) | |
| Purchase of common stock | (106,279) | | | (143,280) | | | (894,977) | |
| Payments for employee tax obligations upon exercise of share-based awards | (28,476) | | | (37,370) | | | (46,254) | |
| Other | (2,523) | | | (1,902) | | | (1,958) | |
| Net cash used in financing activities of continuing operations | (506,290) | | | (558,042) | | | (897,838) | |
| Cash Flows from Discontinued Operations | | | | | |
| Net cash provided by operating activities of discontinued operations | 0 | | | 0 | | | 9,442 | |
| Net cash used in investing activities of discontinued operations | 0 | | | 0 | | | (23,705) | |
| Net cash used in financing activities of discontinued operations | 0 | | | 0 | | | 0 | |
| Net cash used in discontinued operations | 0 | | | 0 | | | (14,263) | |
| Effect of exchange rate changes on cash and cash equivalents | (1,319) | | | (1,977) | | | 10,645 | |
| Net increase (decrease) in cash and cash equivalents | 115,822 | | | 1,032 | | | (357,743) | |
| Cash and cash equivalents at beginning of year | 397,253 | | | 396,221 | | | 753,964 | |
| Cash and cash equivalents at end of year | $ | 513,075 | | | $ | 397,253 | | | $ | 396,221 | |
| Supplemental information - cash paid during the year for: | | | | | |
| Income taxes | $ | 199,657 | | | $ | 191,084 | | | $ | 135,427 | |
| Interest | 108,119 | | | 126,753 | | | 131,823 | |
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| Operating Activities: | | | | | |
| Net earnings | $ | 1,056,828 | | | $ | 1,065,376 | | | $ | 1,123,818 | |
| Adjustments to reconcile net earnings to cash provided by operating activities: | | | | | |
| | | | | |
| Depreciation and amortization | 317,463 | | | 307,538 | | | 290,123 | |
| Stock-based compensation | 31,465 | | | 30,821 | | | 31,111 | |
| | | | | |
| | | | | |
| Gain on dispositions | — | | | — | | | (206,338) | |
| Provision for losses on accounts receivable (net of recoveries) | 2,881 | | | 5,552 | | | 5,053 | |
| Deferred income taxes | (99,286) | | | (28,138) | | | (48,322) | |
| Employee benefit plan expense | 5,679 | | | 3,096 | | | 11,897 | |
| | | | | |
| | | | | |
| Other, net | (12,385) | | | (18,218) | | | (7,368) | |
| Cash effect of changes in assets and liabilities (excluding effects of acquisitions, dispositions and foreign exchange): | | | | | |
| Accounts receivable | 86,501 | | | (209,021) | | | (201,540) | |
| Inventories | 145,451 | | | (199,033) | | | (297,623) | |
| Prepaid expenses and other assets | 10,158 | | | (3,494) | | | (14,303) | |
| Accounts payable | (104,576) | | | 15,422 | | | 229,334 | |
| Accrued compensation and employee benefits | 4,222 | | | (34,803) | | | 65,482 | |
| Accrued expenses and other liabilities | (75,160) | | | (54,067) | | | 60,734 | |
| Accrued taxes | (16,798) | | | (62,417) | | | 88,190 | |
| Contributions to employee benefit plans | (16,098) | | | (12,890) | | | (14,383) | |
| Net cash provided by operating activities | 1,336,345 | | | 805,724 | | | 1,115,865 | |
| Investing Activities: | | | | | |
| Additions to property, plant and equipment | (192,592) | | | (220,962) | | | (171,465) | |
| Acquisitions, net of cash and cash equivalents acquired | (533,623) | | | (312,855) | | | (1,112,075) | |
| Proceeds from sale of property, plant and equipment | 4,234 | | | 6,061 | | | 7,070 | |
| Proceeds from dispositions | — | | | — | | | 274,982 | |
| Other | (4,649) | | | (13,168) | | | 8,735 | |
| Net cash used in investing activities | (726,630) | | | (540,924) | | | (992,753) | |
| Financing Activities: | | | | | |
| | | | | |
| Change in commercial paper and other short-term borrowings, net | (267,490) | | | 629,891 | | | 105,000 | |
| | | | | |
| | | | | |
| | | | | |
| Dividends paid to stockholders | (284,297) | | | (287,551) | | | (286,896) | |
| Repurchase of common stock, including payment under accelerated share repurchase program | — | | | (585,000) | | | (21,637) | |
| Payments to settle employee tax obligations on exercise of share-based awards | (12,137) | | | (14,637) | | | (41,924) | |
| Other | (4,132) | | | (2,968) | | | (4,423) | |
| Net cash used in financing activities | (568,056) | | | (260,265) | | | (249,880) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Effect of exchange rate changes on cash and cash equivalents | (6,666) | | | (9,171) | | | (803) | |
| Net increase (decrease) in cash and cash equivalents, including cash held for sale | 34,993 | | | (4,636) | | | (127,571) | |
| Cash and cash equivalents at beginning of year | 380,868 | | | 385,504 | | | 513,075 | |
| Cash and cash equivalents, including cash held for sale, at end of year | $ | 415,861 | | | $ | 380,868 | | | $ | 385,504 | |
| Supplemental information - cash paid during the year for: | | | | | |
| Income taxes | $ | 332,192 | | | $ | 354,468 | | | $ | 233,631 | |
| Interest | 126,704 | | | 112,469 | | | 102,139 | |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | 2022 | | 2021 |
| Cash and cash equivalents | $ | 398,561 | | | $ | 380,868 | | | $ | 385,504 | |
| Cash and cash equivalents held for sale | 17,300 | | | — | | | — | |
| Cash and cash equivalents, including cash held for sale | $ | 415,861 | | | $ | 380,868 | | | $ | 385,504 | |
| | | | | |
See Notes to Consolidated Financial Statements
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’sCompany's businesses are based primarily in the United States and Europe with manufacturing and other operations throughout the world. The Company operates through 5five business segments that are structured around similar business models, go-to market strategies and manufacturing practices: Engineered Products, Clean Energy & Fueling, Solutions, Imaging & Identification, Pumps & Process Solutions and RefrigerationClimate & Food Equipment.Sustainability Technologies. For additional information on the Company’sCompany's segments, see Note 2019 — 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. As discussed in Note 5 — Discontinued and Disposed Operations, the Company is reporting the results of operations and cash flows of Apergy prior to the spin-off, as discontinued operations for all periods presented.
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, uncertain incomeunrecognized tax positionsbenefits 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 revisionschanges 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 approximateapproximates fair value.
Accounts Receivable and Allowance for Doubtful AccountsCredit Losses
Accounts receivable are recorded at face amounts less an allowance for doubtful accounts. Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments prospectively. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables.
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 98 — Credit Losses for additional information.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Inventories
Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO)("FIFO") basis, or net realizable value. An immaterial portionAs of domesticDecember 31, 2022 and through the third quarter of 2023, approximately 4% of inventories arewere stated at the lower of cost, determined on the last-in, first-out (LIFO)("LIFO") basis, or market. During the fourth quarter of 2023, the Company changed the method of accounting for these remaining LIFO inventories to FIFO. The Company believes the FIFO method is preferable because it better reflects the current value of inventories in the consolidated balance sheet and results in a uniform method across our businesses, which is less than market value.in turn provides more useful financial information to the Company's investors and creditors.
The change in accounting method, which was effected in the fourth quarter of 2023, did not have a material impact on any prior periods’ consolidated financial statements and therefore, the Company did not apply the change retrospectively. The cumulative effect of the change resulted in a fourth quarter pre-tax benefit of $14,448 ($10,796 after-tax) recognized as a reduction in costs of goods and services within the consolidated statement of earnings for the year ended December 31, 2023 and a corresponding increase in inventories within the consolidated balance sheet as of December 31, 2023.
Property, Plant and Equipment
Property, plant and equipment includes the historical cost of land, buildings, machinery and equipment, purchased and internally developed 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 15 reporting units for which cash flows are determinable and to which goodwill may bewas allocated.
The Company performs its goodwill impairment test annually in the fourth quarter at the reporting unit level.quarter. 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
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
in the analysis and reflective of market participant assumptions.Theseassumptions. These forecasts are based on historical performance and future estimated results. The discount rates used in these analyses vary by reporting unit andutilized are based on a capital asset pricing model and published relevant industry rates. The Company uses discount rates, commensurate withwhich take into consideration the risks and uncertainties inherent to eachthe reporting unitunits and in the internally developed forecasts. See Note 109 — Goodwill and Other Intangible Assets for further discussion of the Company's annual goodwill impairment test and results. NaNNo impairment of goodwill was required for the years ended December 31, 2020, 2019,2023, 2022, or 2018.2021.
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’sCompany's own market assumptions, which are considered reasonable. Any excess of carrying value over the estimated fair value is recognized as an
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
impairment loss. No impairment of indefinite-lived intangible assets was required for the years ended December 31, 2020, 2019,2023, 2022, or 2018.2021.
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.
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 producedprepared 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
Effective January 1, 2019, theThe Company adopted Accounting Standard Codification ("ASC") Topic 842, Leases, which requires the recordingdetermines if an arrangement is a lease at inception of operating lease right-of-use assets ("ROU") and operating lease liabilities. Finance leases were not impacted by the adoption of ASC Topic 842, as finance lease liabilities and the corresponding ROU assets were already recorded in the balance sheet under the previous guidance, ASC Topic 840.
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 has elected the practical expedient to accountaccounts 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. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. 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.
The Company determines if an arrangement is a lease at inception of a contract. Operating lease 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 and equipment, and the related lease liabilities are included in other accrued expenses and other liabilities in the Consolidated Balance Sheet.
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 generally 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.
Supply Chain Financing
The Company facilitates the opportunity for suppliers to participate in a voluntary supply chain financing ("SCF") program with a third-party financial institution. Participating suppliers are paid directly by the SCF financial institution and, in addition, may elect to sell receivables due from the Company to the SCF financial institution for early payment. Thus, participating suppliers have additional potential flexibility in managing their liquidity by accelerating, at their option and cost, the collection of receivables due from the Company.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The Company and its suppliers agree on commercial terms, including payment terms, for the goods and services the Company procures, regardless of whether the supplier participates in SCF. For participating suppliers, the Company’s responsibility is limited to making all payments to the SCF financial institution on the terms originally negotiated with the supplier, irrespective of whether the supplier elects to sell receivables to the SCF financial institution. The Company does not determine the terms or conditions of the arrangement between the SCF financial institution and the Company's suppliers. The SCF financial institution pays the supplier on the invoice due date for any invoices that were not previously sold by the supplier. The agreement between the Company and the SCF financial institution does not require the Company to provide assets pledged as security or other forms of guarantees.
Outstanding payments related to the SCF program are recorded within accounts payable in our consolidated balance sheets. As of December 31, 2023 and December 31, 2022, amounts due to the SCF financial institution were approximately $193,600 and $194,362, respectively.
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.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
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 Statementsconsolidated statements of Comprehensive Earningscomprehensive earnings as a component of other comprehensive earnings (loss). Assets and liabilities of an entity that are denominated in currencies other than an entity’sentity's functional currency are re-measured into the functional currency using end of period exchange rates or historical rates, where applicable to certain balances. Gains and losses related to these re-measurements are recorded within the Consolidated Statementsconsolidated statements of Earningsearnings 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.
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers. Under ASC Topic 606, a contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance and where payment terms are identified and collectability is probable. Once the Company has entered a contract, it is evaluated to identify performance obligations. For each performance obligation, revenue is recognized as control of promised goods or services transfers to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The amount of revenue recognized takes into account variable consideration, such as discounts and volume rebates.
The majority of the Company’sCompany'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 thanapproximately 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’sCompany's stock-based compensation plans include non-qualified stock appreciation rights ("SARs"), restricted stock units ("RSUs") and performance share awards.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 Statementsconsolidated statements of Earnings.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 1615 — Equity and Cash Incentive Program for additional information related to the Company’sCompany's stock-based compensation.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
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.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
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 $142,101$153,111 in 2020, $140,9572023, $163,300 in 20192022 and $143,033$157,826 in 2018.2021. These costs as a percent of revenue were 2.1%1.8% in 2020, 2.0%2023, 1.9% in 20192022 and 2.0% in 2018.2021. Research and development costs are reported within selling, general and administrative expenses in the Consolidated Statementsconsolidated statements of Earnings.earnings.
Advertising Costs
Advertising costs are expensed when incurred and amounted to $21,375$23,860 in 2020, $24,6092023, $25,905 in 20192022 and $26,831$23,685 in 2018.2021. Advertising costs are reported within selling, general and administrative expenses in the Consolidated Statementsconsolidated statements of Earnings.earnings.
Risk, Retention, Insurance
The Company has deductibles for its product and commercial general liability claims up to $5.0 million per occurrence, its workers’ compensation claims up to $0.8 million per occurrence and automobile liability claims up to $1.0 million per occurrence. Third-party insurance provides primary level coverage in excess of these amounts up to certain specified limits. In addition, the Company has excess liability insurance from third-party insurers on both an aggregate and an individual occurrence basis well in excess of the limits of the primary coverage. A worldwide program of property insurance covers the Company’s owned and leased property and business interruption that may occur due to an insured hazard affecting those properties, subject to reasonable deductibles and aggregate limits. The Company’s property and casualtyCompany's insurance programs contain various deductibles that, based on the Company’sCompany'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’workers' compensation, health and welfare claims, general commercial,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. As part of the Company’s risk management program, insurance is maintained to transfer risk beyond the level of self-retention and provide protection on both an individual claim and annual aggregate basis.
Reclassifications – Certain amounts in prior years have been reclassified to conform to the current year presentation.
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’sCompany's Consolidated Financial Statements:
In March 2020,December 2023, the FASB issued ASU No. 2020-04, Reference Rate Reform2023-09 Income Taxes (Topic 848) Facilitation740): Improvements to Income Tax Disclosures, which expands the disclosures required in an entity’s income tax rate reconciliation table and requires disclosure of the Effects of Reference Rate Reform on Financial Reporting. The purpose of this update is to provide optional guidance for a limited time to ease the potential burdenincome taxes paid both in accounting for (or recognizing the effects of) reference rate reform on financial reporting.U.S. and foreign jurisdictions. The amendments provide optional 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 this update are elective and are effective upon issuance for all entities. Managementfiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this ASU and does not expect this update to have a materialdetermine its impact on the Company's Consolidated Financial Statements.disclosures.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendment requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.
In October 2023, the FASB issued ASU No. 2023-06 Disclosure Improvements: Codification Amendments in Response to the Securities and Exchange Commission’s ("SEC") Disclosure Update and Simplification Initiative. The amendments in this update require modification of certain disclosure and presentation requirements for a variety of ASU topics in response to the SEC’s Release No. 33-10532. The effective date for each amended topic in the ASC is the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective. Early adoption is prohibited. The Company does not expect the adoption of this standard to have a material impact on the Company's disclosures.
Recently Adopted Accounting Standards
In June 2016,September 2022, the FASB issued ASU 2016-13, Financial Instruments - Credit LossesNo. 2022-04 Liabilities-Supplier Finance Programs (Topic 326)405-50): MeasurementDisclosure of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. In addition, the FASB issued ASU 2019-04, Codification Improvements to Topic 326 which provides clarity on certain aspects of theSupplier Finance Program Obligations. The amendments in ASU 2016-13.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 Company adopted thisthe guidance when it became effective on January 1, 2020 prospectively. Upon adoption,2023, except for the Company recorded a noncash cumulative effect adjustment to retained earnings of $2.1 million, net of $0.6 million of income taxes, on the opening consolidated balance sheet as ofrollforward requirement, which becomes effective January 1, 2020. See Note 9 — Credit Losses for further details.
In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections. This ASU amends various SEC paragraphs pursuant to the issuance of SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization. One of the changes in the ASU requires a presentation of changes in stockholders’ equity in the form of a reconciliation, either as a separate financial statement or in the notes to the financial statements, for the current and comparative year-to-date interim periods.2024. The Company presented changes in stockholders' equity as separate financial statements for the current and comparative year-to-date interim periods beginning on January 1, 2019. The additional elements of the ASUadoption did not have a material impact on the Company's Consolidated Financial Statements. This guidance was effective immediately upon issuance.consolidated financial statements. See required disclosure within the Supply Chain Financing section of Note 1 — Basis of Presentation.
In August 2018,October 2021, the FASB issued ASU 2018-15, Intangibles-GoodwillNo. 2021-08 Business Combinations (Topic 805)-Accounting for Contract Assets and Other Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.Contract Liabilities from Contracts with Customers. Theamendments in this update align the requirements for capitalizing implementation costs incurredrequire that an acquirer recognize and measure contract assets and contract liabilities acquired in a hosting arrangement that is a service contractbusiness combination in accordance with Topic 606, Revenue from Contracts with Customers, as if the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).acquirer had originated the contracts. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update.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. The Company early adopted the guidance prospectively beginning onas of January 1, 2019. The adoption of this ASU did not have a material impact on the Company's Consolidated Financial Statements.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU provides new guidance about income statement classification and eliminates the requirement to separately measure and report hedge ineffectiveness. The entire change in fair value for qualifying hedge instruments will be recorded in Other Comprehensive Income ("OCI") and amounts deferred in OCI will be reclassified to earnings in the same income statement line item in2022, which the earnings effect of the hedged item is reported. The Company adopted this guidance on January 1, 2019. The adoption of this ASU did not have a material impact on the Company's Consolidated Financial Statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amended existing guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. This ASU also provides clarifications surrounding the presentation of the effects of leases in the income statement and statement of cash flows. In addition, the FASB issued ASU 2018-11, Leases Targeted Improvements, which provides an additional transition method that allows entities to apply the new leases standard at adoption date. The Company elected this new transition method when it adopted ASU 2016-02 on January 1, 2019. Upon adoption on January 1, 2019, total assets and liabilities increased due to the recording of right-of-use assets and lease liabilities amounting to approximately $163 million. See Note 8 — Leases for further details.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
2. Spin-off of Apergy Corporation
On May 9, 2018, Dover completed the distribution of Apergy to its shareholders. The transaction was completed through the pro rata distribution of 100% of the common stock of Apergy to Dover's shareholders of record as of the close of business on April 30, 2018. Each Dover shareholder received one share of Apergy common stock for every two shares of Dover common stock held as of the record date. Apergy changed its name to ChampionX Corporation on June 3, 2020.
The following is a summary of the assets and liabilities transferred to Apergy as part of the separation on May 9, 2018:
| | | | | | | | |
Assets: | | |
Cash and cash equivalents | | $ | 10,357 | |
Current assets | | 462,620 | |
Non-current assets | | 1,438,760 | |
| | $ | 1,911,737 | |
Liabilities: | | |
Current liabilities | | $ | 185,354 | |
Non-current liabilities | | 119,568 | |
| | $ | 304,922 | |
| | |
Net assets distributed to Apergy Corporation | | $ | 1,606,815 | |
Less: Cash received from Apergy Corporation | | 700,000 | |
Net distribution to Apergy Corporation | | $ | 906,815 | |
In connection with the spin-off from the Company, Apergy issued and sold $300.0 million in aggregate principal amount of its 6.375% senior notes due May 2026 in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended, and incurred $415.0 million in borrowings under its new senior secured term loan facility to fund a one-time cash payment of $700.0 million to Dover. Dover received net cash of $689.6 million upon separation, which reflects $10.4 million of cash held by Apergy on the distribution date and retained by it in connection with its separation from Dover. Dover utilized the proceeds from Apergy as the primary source of funding for a 2018 accelerated share repurchase program.
Included within the net assets distributed to Apergy is approximately $33 million of accumulated other comprehensive earnings attributable to Apergy, relating primarily to foreign currency translation gains, offset by unrecognized losses on pension obligations.
The historical results of Apergy, including the results of operations and cash flows, have been reclassified to discontinued operations for the year ended December 31, 2018. See Note 5 — Discontinued and Disposed Operations.
3. Revenue
Revenue from contracts with customers
Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Accordingly, the Company recorded a cumulative catch-up adjustment to retained earnings at January 1, 2018 for $0.2 million. Under ASC Topic 606, a contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance and where payment terms are identified and collectability is probable. Once the Company has entered a contract, it is evaluated to identify performance obligations. For each performance obligation, revenue is recognized as control of promised goods or services transfers to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The amount of revenue recognized takes into account variable consideration, such as discounts and volume rebates.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
A majority of the Company’sCompany's revenue is short cycle in nature with shipments within one year from order. A small portion of the Company’sCompany'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.
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 2019 — Segment Information for revenue by segment and geographic location.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service, or a bundle of goods or services, to the customer, and is the unit of accounting under ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. A majority of the Company’sCompany'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.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
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’sCompany'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.
OverApproximately 95% of the Company’s performance obligations areCompany's revenue is recognized at a point in time, that relate torather than over time, as the manufacture and sale of a broad range of products and components. RevenueCompany 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 thanApproximately 5% of the Company’sCompany's revenue is recognized over time and relates to the sale of equipment or services, including software solutions and services, in which the Company transfers control of a good or service over time and the customer simultaneously receives and consumes the benefits provided by the Company's performance as they are performedthe Company performs, or the Company's performance creates or enhances an asset the customer controls as the assets beingasset is created or engineered to order equipment that have noenhanced, or the Company's performance does not create an asset with an alternative use and in whichto the contract specifiesCompany and the Company has aan enforceable right to payment for its costsperformance to date plus a reasonable marginmargin..
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.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Transaction Price Allocated to the Remaining Performance Obligations
At December 31, 2020,2023, we estimated that $296.8 million$202,762 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 60%48.2% of ourthe Company's unsatisfied (or partially unsatisfied) performance obligations as revenue in 2021,2024, with the remaining balance to be recognized in 20222025 and thereafter.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Remaining consideration, including variable consideration, from contracts with customers is included in the amounts presented abovein the preceding paragraph and pertains to contracts with multiple performance obligations, extended warranties on products and multi-year maintenance 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:
| | | | | 12/31/2020 | | 12/31/2019 | | 12/31/2018 | | | December 31, 2023 | | December 31, 2022 | | December 31, 2021 |
| | Contract assets | Contract assets | | $ | 15,020 | | | $ | 14,894 | | | $ | 9,330 | |
| Contract assets | |
| Contract assets | |
| Contract liabilities - current | Contract liabilities - current | | 184,845 | | | 104,901 | | | 91,561 | |
| Contract liabilities - non-current | Contract liabilities - non-current | | 13,921 | | | 10,921 | | | 11,381 | |
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 Condensed Consolidated Balance Sheet.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 Condensed Consolidated Balance Sheet.consolidated balance sheets. Contract liabilities are reduced when the associated revenue from the contract is recognized. The increase in current contract liability balance as of December 31, 2020 primarily relates to advance payments received on large projects.
In the fourth quarter of 2020, the Company adjusted its prior year balance sheet classification and footnote disclosure related to certain upfront cash consideration received from customers that should have been classified as contract liabilities (included in deferred revenue or other liabilities) rather than customer deposits (included in accounts payable).
The revenue recognized during 20202023 and 20192022 that was included in the contract liabilityliabilities at the beginning of the respective periods inclusive of adjustments, amounted to $99.6 million$238,842 and $85.9 million.$196,891, 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 Condensed Consolidated Statementsconsolidated statements of Earnings.earnings.
Critical Accounting Estimates
3. Acquisitions
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.2023 Acquisitions
Some contracts with customers include variable consideration primarily related to volume rebates. TheDuring the year ended December 31, 2023, the Company estimates variable consideration at the most likely amount to determine theacquired two businesses in separate transactions for total consideration whichof $535,290, net of cash acquired and inclusive of contingent consideration. These businesses were acquired to complement and expand upon existing operations within the Company expectsPumps & Process Solutions and Climate & Sustainability Technologies segments. The goodwill recorded as a result of these acquisitions represents the economic benefits expected to be entitled. Estimated amounts are included in the transaction price to the extent itderived from product line expansions and operational synergies. Goodwill of $224,771 is probable that a significant reversal ofdeductible for income tax purposes and $2,990 is non-deductible for income tax purposes for these acquisitions.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
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.FW Murphy
On December 4, 2023, the Company acquired 100% of the assets, and assumed certain liabilities, of the FW Murphy Production Controls business ("FW Murphy"), a provider of control and optimization solutions for the reciprocating compression industry, for $526,457. The FW Murphy acquisition strengthens the Company's position in compression technologies for natural gas and clean energy applications, and adds complementary offerings within the Pumps & Process Solutions segment. In connection with this acquisition, the Company recorded goodwill of $224,771 and intangible assets of $254,000 for customer intangibles, $11,100 for unpatented technology and $10,400 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 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.
4.
The following presents the preliminary allocation of purchase price to the assets acquired and liabilities assumed in the FW Murphy acquisition, based on their estimated fair values at acquisition date:
| | | | | | | | |
| Total | | | |
| Current assets | $ | 26,564 | | | | |
| | | | |
| | | | |
| | | | |
| Goodwill | 224,771 | | | | |
| Intangible assets | 275,500 | | | | |
| Other assets and deferred charges | 9,508 | | | | |
| Current liabilities | (1,316) | | | | |
| Non-current liabilities | (8,570) | | | | |
| Net assets acquired | $ | 526,457 | | | | |
Other Acquisitions
2020On August 28, 2023, the Company acquired 100% of the equity interests in the Arc Pacific group ("Arc Pacific"), a global supplier of can washers, dry-off, pin and internal bake ovens for the metal packaging industry, for $8,833, net of cash acquired and including contingent consideration. The Arc Pacific acquisition extends the Company's reach into can processing equipment production within the Climate & Sustainability Technologies segment. In connection with this acquisition, the Company recorded goodwill of $2,990 and intangible assets of $7,670, primarily related to customer intangibles.
The amounts assigned to goodwill and major intangible asset classifications for all 2023 acquisitions were as follows:
| | | | | | | | | | | | | | | | | |
| Amount allocated | | Useful life
(in years) |
| Goodwill | $ | 224,771 | | | na |
| Goodwill - non-deductible | 2,990 | | | na |
| Customer intangibles | 259,700 | | | 9 | - | 15 |
| | | |
| Unpatented technology | 12,510 | | | 7 | - | 8 |
| Trademarks | 10,960 | | | 15 |
| | | | | |
| $ | 510,931 | | | | | |
| | | | | |
| | | | | |
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
2022 Acquisitions
During the year ended December 31, 2020,2022, the Company acquired sixthree businesses in separate transactions for total consideration of $335,786,$309,504, net of cash acquired.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 Fueling Solutions, Imaging & Identification, 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 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 by March 31, 2024 with a maximum potential payout of $50,000. As of December 31, 2023, the estimated payout is zero as no payment is expected to be required. 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. During the year ended December 31, 2023 the Company recorded measurement period adjustments primarily related to its 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 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 | |
| Property, plant and equipment | | 2,733 | |
| Goodwill | | 153,082 | |
| Intangible assets | | 84,000 | |
| Other assets and deferred charges | | 1,159 | |
| Current liabilities | | (4,487) | |
| Non-current liabilities | | (22,010) | |
| Net assets acquired | | $ | 223,462 | |
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Other acquisitions
On December 14, 2022, the Company acquired 100% of the equity interests in Witte Pumps & Technology GmbH ("Witte"), a manufacturer of precision gear pumps, for $77,942, net of cash acquired. The Witte acquisition expands the Company's reach into gear pump manufacturing and associated spare parts and services for the chemical, plastics and polymer processing, food and beverage, and pharmaceutical industries within the Pumps & Process Solutions segment. In connection with this acquisition, the Company recorded goodwill of $41,779 and intangible assets of $34,812, primarily related to customer intangibles. The Company recorded measurement period adjustments primarily related to current assets. These adjustments are based on facts and circumstances that existed, but were not known, as of the acquisition date which resulted in a decrease in goodwill of $3,749.
On May 2, 2022, the Company acquired 100% of the equity interests in AMN DPI ("AMN"), a designer and manufacturer of polymer pelletizing tools, for $8,100, net of cash acquired. The AMN acquisition extends the Company's reach into polymer processing equipment production within the Pumps & Process Solutions segment. In connection with this acquisition, the Company recorded goodwill of $1,903 and intangible assets of $5,625, primarily related to customer intangibles.
The following presents, for the two acquisitions other than Malema, the allocation of purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at acquisition date:
| | | | | | | | |
| Total | | | |
| Current assets, net of cash acquired | $ | 28,435 | | | | |
| Property, plant and equipment | 4,222 | | | | |
| Goodwill | 43,682 | | | | |
| Intangible assets | 40,437 | | | | |
| Other assets and deferred charges | 3,580 | | | | |
| Current liabilities | (19,172) | | | | |
| Non-current liabilities | (15,142) | | | | |
| Net assets acquired | $ | 86,042 | | | | |
The amounts assigned to goodwill and major intangible asset classifications for all 2022 acquisitions were as follows:
| | | | | | | | | | | | | | | | | |
| Amount allocated | | Useful life
(in years) |
| | | |
| Goodwill - non-deductible | $ | 196,764 | | | na |
| Customer intangibles | 90,742 | | | 10 | - | 15 |
| Patents | 16,000 | | | 10 |
| Unpatented technology | 10,302 | | | 8 |
| Trademarks | 7,393 | | | 15 |
| | | | | |
| $ | 321,201 | | | | | |
| | | | | |
| | | | | |
2021 Acquisitions
During the year ended December 31, 2021, the Company acquired nine businesses in separate transactions for total consideration of $1,125,786, net of cash acquired of $18,475, including contingent consideration of $13,002 and measurement period adjustments discussed below. These businesses were acquired to complement and expand upon existing operations within the Clean Energy & Fueling, Engineered Products, Imaging & Identification, and Pumps & Process Solutions segments. The goodwill recorded as a result of these acquisitions represents the economic benefits expected to be derived from product line expansions and operational synergies. Goodwill of $200,117 is deductible for income tax purposes and $384,269 is non-deductible for income tax purposes for these acquisitions.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
RegO
On December 30, 2020,28, 2021, the Company acquired 100% of the voting stock of Innovative Control Systems, Inc. (“ICS”ECI Holding Company, LLC ("RegO"), a leading provider of car wash controllers, payment terminals, point-of-salehighly-engineered components and wash site management software solutionsservices that facilitate the production, storage, and distribution of cryogenic gases, for $77,030,$626,618, net of cash acquired.acquired and inclusive of the impact of measurement period adjustments discussed below. The ICSRegO acquisition enhancesstrengthens the Fueling Solutions segment'sCompany's offering for the hydrogen ("H2"), liquefied natural gas ("LNG"), and liquefied petroleum gas ("LPG") applications, as well as Dover's participation in the growing vehicle washattractive cryogenic industrial gases end market and enhances the Company's offerings, business mix and recurring revenue stream with high-value hardware and software solutions critical to vehicle wash workflows and operations. In connection with this acquisition, the Company recorded goodwill of $47,339 and intangible assets of $33,525, primarily related to customer intangibles.
On August 20, 2020, the Company acquired 100% of the voting stock of Solaris Laser S.A. ("Solaris"), a global manufacturer of product identification and traceability solutions for $18,680, net of cash acquired. The Solaris acquisition enhances the Imaging & Identification segment's growing laser technology product line and further strengthens its position as a leading provider of marking and coding equipment and solutions. In connection with this acquisition, the Company recorded goodwill of $12,230 and intangible assets of $3,280, primarily related to unpatented technology.
On April 30, 2020, the Company acquired 100% of the voting stock of Em-tec GmbH ("Em-tec"), a leading designer and manufacturer of flow measurement devices that serve a wide array of medical and biopharmaceutical applications for $30,396, net of cash acquired. The Em-tec acquisition further expands the Company's reach into biopharma and other hygienic applications and enhances its portfolio of flow control technologies within the PumpsClean Energy & Process SolutionsFueling segment. In connection with this acquisition, the Company recorded goodwill of $19,572$170,800 deductible for income tax purposes and $110,363 non-deductible for income tax purposes and intangible assets of $8,344,$173,000 for customer intangibles, $40,000 for patents and $21,000 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 value of assets acquired also includes trade receivables of $33,900. The gross amount is $34,606, of which $706 is expected to be uncollectible. During the year ended December 31, 2022, the Company recorded measurement period adjustments primarily related to customer intangibles.deferred taxes and changes in net working capital. 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 $4,187.
The following presents the allocation of purchase price, net of cash acquired of $10,382, to the assets acquired and liabilities assumed under the RegO acquisition, based on their estimated fair values at acquisition date:
| | | | | | | | |
| Total | | | |
| Accounts receivable | $ | 33,900 | | | | |
| Inventories | 71,529 | | | | |
| Other current assets | 2,958 | | | | |
| Property, plant and equipment | 50,027 | | | | |
| Goodwill | 281,163 | | | | |
| Intangible assets | 234,000 | | | | |
| Other assets and deferred charges | 884 | | | | |
| Current liabilities | (20,150) | | | | |
| Non-current liabilities | (27,693) | | | | |
| Net assets acquired | $ | 626,618 | | | | |
Acme Cryogenics
On February 18, 2020,December 16, 2021, the Company acquired 100% of the voting stock of So. Cal. Soft-Pak, IncorporatedAcme Cryo Intermediate Inc. ("Soft-Pak"Acme Cryogenics"), a leading specialized provider of integrated back office, route managementhighly-engineered components and customer relationship management software solutions toservices that facilitate the wasteproduction, storage, and recycling fleet industrydistribution of cryogenic gases, for $45,500,$292,306, net of cash acquired.acquired and inclusive of the impact of measurement period adjustments discussed below. The Soft-PakAcme Cryogenics acquisition strengthens the digital offeringsCompany's offering for the H2, LNG, and LPG applications, as well as Dover's participation in the attractive cryogenic industrial gases end market within the Engineered ProductsClean Energy & Fueling segment. In connection with this acquisition, the Company recorded goodwill of $33,183$167,291 non-deductible for income tax purposes and intangible assets of $12,800, primarily related to$99,000 for customer intangibles.
On January 24, 2020,intangibles, $21,800 for unpatented technology and $6,500 for trademarks. The fair value for customer intangibles at the Company acquired 100%acquisition date was determined using the multi-period excess earnings method under the income approach. The fair value measurements of the voting stock of Sys-Tech Solutions, Inc. ("Systech"), a leading provider of product traceability, regulatory compliance and brand-protection software and solutions to pharmaceutical and consumer products manufacturers, for $161,830, net of cash acquired. The Systech acquisition strengthens the portfolio of solutions offered by the Imaging & Identification segment. In connection with this acquisition, the Company recorded goodwill of $91,493 and intangible assets are based on significant unobservable inputs and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of $76,100, primarily relatedintangible assets include discounted future cash flows, customer attrition rates and discount rates. The fair value of assets acquired also includes trade receivables of $14,644. The gross amount is $14,912, of which $268 is expected to customer intangibles.
One other immaterial acquisition was completed duringbe uncollectible. During the year ended December 31, 2020, within2022, the Pumps & Process Solutions segment.Company recorded measurement period adjustments primarily related to deferred taxes and changes in net working capital. These adjustments are based on facts and circumstances that existed, but were not known, as of the acquisition date which resulted in a decrease in goodwill of $1,918.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The following presents the allocation of purchase price to the assets acquired and liabilities assumed under the Acme Cryogenics acquisition, based on their estimated fair values at acquisition date:
| | | | | | | | |
| Total | | | |
| Current assets, net of cash acquired | $ | 44,15925,932 | | | | |
| Property, plant and equipment | 8,4248,640 | | | | |
| Goodwill | 205,805167,291 | | | | |
| Intangible assets | 134,049127,300 | | | | |
| Other assets and deferred charges | 12,9865,057 | | | | |
| Current liabilities | (34,803)(7,286) | | | | |
| Non-current liabilities | (34,834)(34,628) | | | | |
| Net assets acquired | $ | 335,786292,306 | | | | |
The amounts assigned to goodwill and major intangible asset classifications were as follows:
| | | | | | | | | | | | | | | | | |
| Amount allocated | | Useful life
(in years) |
| Goodwill - tax deductible | $ | 33,183 | | | na |
| Goodwill - non deductible | $ | 172,622 | | | na |
| Customer intangibles | 103,310 | | | 10 | - | 14 |
| Unpatented technology | 21,125 | | | 5 | - | 9 |
| Trademarks | 9,614 | | | 15 |
| | | | | |
| $ | 339,854 | | | | | |
2019Other acquisitions
During the year ended December 31, 2019,On October 15, 2021, the Company acquired three businesses in separate transactions100% of the voting stock of LIQAL B.V. ("LIQAL"), a turnkey supplier of LNG, hydrogen refueling equipment and solutions, and micro liquefaction solutions, for total consideration of $216,398,$27,701, net of cash acquired and including contingent consideration. These businesses were acquired to complementThe LIQAL acquisition strengthens the Company's offering of LNG and expand upon existing operationshydrogen products and solutions, as well as significant innovation capabilities and proprietary technologies, within the Clean Energy & Fueling Solutionssegment. In connection with this acquisition, the Company recorded goodwill of $23,473 and Pumps & Process Solutions segments.intangible assets of $8,235, primarily related to customer intangibles.
On September 15, 2021, the Company acquired 100% of the voting stock of The Espy Corporation ("Espy"), a manufacturer of advanced electronic radio frequency sensor systems, for $60,457, net of cash acquired. The Espy acquisition strengthens the Company's offering of complete signal intelligence systems with integrated software within the Engineered Products segment. In connection with this acquisition, the Company recorded goodwill recordedof $29,317 and intangible assets of $21,100, primarily related to customer intangibles. The Espy acquisition was treated as a result of these acquisitions represents the economic benefits expected to be derived from product line expansions and operational synergies. The goodwill is deductiblean asset acquisition for U.S. income tax purposes, for these acquisitions.resulting in the goodwill and intangibles being classified as tax deductible.
On May 7, 2019,July 23, 2021, the Company acquired the assets100% of the All-Flo Pump Company, Limited businessvoting stock of CDS Visual, Inc. ("All-Flo"CDS Visual"), a growing manufacturerprovider of specialty pumps3D visualization solutions tailored for $39,954. The All-Flo acquisition strengthens Dover's position in the growing marketindustrial applications, for air-operated double-diaphragm pumps within the Pumps & Process Solutions segment. The Company recorded goodwill of $20,567 and intangible assets of $14,980. The intangible assets are being amortized over 13 to 15 years.
On January 25, 2019, the Company acquired the assets of Belanger, Inc. ("Belanger"), a leading full-line car wash equipment manufacturer for $175,350,$29,147, net of cash acquired. The BelangerCDS Visual acquisition extends the Company's reach of customer-facing digital capabilities within the Engineered Products segment. In connection with this acquisition, the Company recorded goodwill of $20,863 and intangible assets of $9,930, primarily related to technology.
On June 24, 2021, the Company acquired 100% of the voting stock of Blue Bite LLC ("Blue Bite"), a provider of consumer engagement and brand protection software solutions, for $30,143, net of cash acquired and including contingent consideration. The Blue Bite acquisition strengthens Dover's position in the vehicle wash businessCompany's offering of product traceability and authentication solutions within the FuelingImaging & Identification segment. In connection with this acquisition, the Company recorded goodwill of $20,458 and intangible assets of $13,250, primarily related to technology.
On June 23, 2021, the Company acquired 100% of the voting stock of Quantex Arc Limited ("Quantex"), a provider of single-use, recyclable pumps, for $23,747, net of cash acquired and including contingent consideration. The Quantex acquisition enhances the offering of single-use pumps for biopharma and other hygienic applications within the Pumps & Process Solutions segment. In connection with this acquisition, the Company recorded goodwill of $97,898$14,327 and intangible assets of $77,000,$11,034, primarily related to patented technology.
On April 19, 2021, the Company acquired 100% of the voting stock of AvaLAN Wireless Systems Incorporated ("AvaLAN"), a provider of secure wireless communications solutions for the convenience and fuel retail industry, for $34,144, net of cash acquired. The AvaLAN acquisition extends the Company's reach into the systems and software offering within the Clean Energy & Fueling segment. In connection with this acquisition, the Company recorded goodwill of $26,803 and intangible assets of $14,630, primarily related to customer intangibles. The intangible assets are being amortized over 9 to 15 years.
One other immaterial acquisition was completed during the year ended December 31, 2019, which included contingent consideration,2021, within the Pumps & Process Solutions segment.
2018DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The following presents, for the seven acquisitions other than RegO and Acme Cryogenics, the allocation of purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at acquisition date:
| | | | | | | | |
| Total | | | |
| Current assets, net of cash acquired | $ | 12,751 | | | | |
| Property, plant and equipment | 8,272 | | | | |
| Goodwill | 135,932 | | | | |
| Intangible assets | 78,179 | | | | |
| Other assets and deferred charges | 4,485 | | | | |
| Current liabilities | (15,368) | | | | |
| Non-current liabilities | (17,389) | | | | |
| Net assets acquired | $ | 206,862 | | | | |
The amounts assigned to goodwill and major intangible asset classifications for all 2021 acquisitions were as follows:
| | | | | | | | | | | | | | | | | |
| Amount allocated | | Useful life
(in years) |
| Goodwill - tax deductible | $ | 200,117 | | | na |
| Goodwill - non deductible | 384,269 | | | na |
| Customer intangibles | 310,819 | | | 12 | - | 15 |
| Patents | 49,056 | | | 7 | - | 12 |
| Unpatented technology | 44,180 | | | 7 | - | 12 |
| Trademarks | 35,424 | | | 15 | - | 16 |
| | | | | |
| $ | 1,023,865 | | | | | |
DuringPro forma Information (Unaudited)
The following unaudited pro forma results of operations reflect the year ended2021 acquisitions of RegO and Acme Cryogenics as if they had occurred on January 1, 2021. The pro forma information is not necessarily indicative of the results that actually would have occurred, nor does it indicate future operating results of the combined companies. The pro forma earnings are adjusted to reflect the comparable impact of additional depreciation and amortization expense, net of tax, resulting from the fair value measurement of tangible and intangible assets; nonrecurring acquisition-related costs, net of tax, of $5,855; and inventory step-up charges, net of tax, of $15,082. These unaudited pro forma adjustments are based upon purchase price allocations. The actual revenues and earnings for RegO and Acme Cryogenics from the date of acquisition on December 28, 2021 and December 16, 2021, respectively, to December 31, 2018, the Company acquired two businesses in separate transactions for total consideration of $68,557, net of cash acquired. On January 12, 2018, the Company acquired 100% of the voting stock of Rosario Handel B.V. ("Rosario"), within the Refrigeration & Food Equipment segment, for total consideration of $15,339, net of cash acquired. On January 2, 2018, the Company purchased 100% of the voting stock of Ettlinger Group ("Ettlinger"), within the Pumps & Process Solutions segment for $53,218, net of cash acquired.2021 were not material.
| | | | | | | |
| Year Ended December 31, 2021 | | |
| | | |
| Revenue: | | | |
| As reported | $ | 7,907,081 | | | |
| Pro forma (unaudited) | 8,163,185 | | | |
| Earnings: | | | |
| As reported | $ | 1,123,818 | | | |
| Pro forma (unaudited) | 1,145,106 | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
The pro forma effects ofresults for the remaining seven acquisitions in 2021, as well as the acquisitions in 2022 and 2023 are not material to the Company's Consolidated Statements of Earnings.presented as they are not considered material.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
5. Discontinued and Disposed Operations
Discontinued Operations
The Apergy businesses, as discussed in Note 2, met the criteria to be reported as discontinued operations because the spin-off is a strategic shift in business that has a major effect on the Company's operations and financial results. Therefore, the results of discontinued operations for the year ended December 31, 2018 include the historical results of Apergy prior to its distribution on May 9, 2018. The year ended December 31, 2018 included costs incurred by Dover to complete the spin-off of Apergy amounting to $46,384 reflected in selling, general and administrative expenses in discontinued operations. Due to lump-sum payments made in 2018 for Apergy participants of the Dover U.S. Pension Plan, non-cash settlement and curtailment costs of approximately $9,200 were classified within discontinuing operations. See Note 2 — Spin-off of Apergy Corporation and Note 18 — Employee Benefit Plans for further information.
Summarized results of the Company's discontinued operations are as follows:
| | | | | | | | | | | | | | | |
| | | | | | Year Ended December 31, |
| | | | | | | | | 2018 |
Revenue | | | | | | | | | $ | 403,688 | |
Cost of goods and services | | | | | | | | | 254,205 | |
Gross profit | | | | | | | | | 149,483 | |
Selling, general and administrative expenses | | | | | | | | | 147,261 | |
Operating earnings | | | | | | | | | 2,222 | |
Other expense, net | | | | | | | | | 9,048 | |
Loss from discontinued operations before taxes | | | | | | | | | (6,826) | |
Provision for income taxes | | | | | | | | | 14,052 | |
Loss from discontinued operations, net of tax | | | | | | | | | $ | (20,878) | |
| | | | | | | | | |
| | | | | | | | | |
On May 9, 2018, all assets and liabilities of Apergy were spun-off. Therefore, as of December 31, 2020 and December 31, 2019, there were no assets and liabilities classified as discontinued operations.
Disposed Businesses4. Dispositions
Management evaluates Dover's businesses periodically for their strategic fit within its operations and may from time to time sell or discontinue certain operations for various reasons.
20202023
On March 6, 2020,October 11, 2023, the Company completedentered into a definitive agreement to sell De-Sta-Co, an operating company within the Engineered Products segment, for approximately $680,000 enterprise value, subject to customary post-closing adjustments. The transaction is expected to close in the first quarter of 2024, subject to customary closing conditions, including receipt of regulatory approvals. De-Sta-Co met the criteria to be classified as held for sale of the Chino, California branch of The AMS Group ("AMS Chino"), a wholly owned subsidiary of the Company.beginning September 30, 2023. The Company recognized total consideration of $15,400, which included a working capital adjustment. Thisclassified De-Sta-Co's assets and liabilities separately as current assets and current liabilities held for sale resulted in a pre-tax gain on sale of $5,213 included within the Condensed Consolidated Statementsconsolidated balance sheets as of Earnings and within the Refrigeration & Food Equipment Segment for the year ended December 31, 2020. 2023. The Company had no assets or liabilities classified as held for sale as of December 31, 2022.
The following table presents the assets and liabilities associated with the De-Sta-Co business classified as held for sale as of December 31, 2023.
| | | | | | | |
| December 31, 2023 | | |
| Assets held for sale | | | |
| Cash and cash equivalents | $ | 17,300 | | | |
| Receivables, net | 30,442 | | | |
| Inventories, net | 46,159 | | | |
| | | |
| Property, plant and equipment, net | 21,035 | | | |
| Goodwill | 58,897 | | | |
| Other assets held for sale | 18,811 | | | |
| | | |
| Total assets held for sale | $ | 192,644 | | | |
| | | |
| Liabilities held for sale | | | |
| Accounts payable | $ | 20,080 | | | |
| Accrued expenses and deferred revenue | 17,000 | | | |
| Other liabilities held for sale | 27,488 | | | |
| | | |
| | | |
| Total liabilities held for sale | $ | 64,568 | | | |
The sale does not represent a strategic shift that will have a major effect on the Company's operations and financial results and, therefore, did not qualify for presentation as a discontinued operation.
There was one additional immaterial disposition in 2023.
2022
There was one immaterial disposition in 2022.
2021
On December 1, 2021, the Company completed the sale of UB, a wholly owned subsidiary of the Company within the Climate & Sustainability Technologies segment. The Company recognized total consideration of $229,024. This sale resulted in a pre-tax gain on disposition of $181,615 included within the consolidated statements of earnings 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.
2019
On March 29, 2019,November 16, 2021, the Company entered intodisposed RWB, an equity method investment within the Engineered Products segment for a definitive agreement to sell Finder Pompe S.r.l ("Finder"),total consideration of $45,958, resulting in a wholly owned subsidiary, to Gruppo Aturia S.p.A (“Aturia”). Asrecognized gain of March 31, 2019, Finder met the criteria to be classified as held for sale. The Company classified Finder's assets and liabilities separately on$24,723 included within the consolidated balance sheet asstatements of Marchearnings for the year ended December 31, 2019.
Based on the total consideration from the sale, net of selling costs, the Company recorded a loss on the assets held for sale of $46,946 in the Condensed Consolidated Statements of Earnings during the three months ended March 31, 2019. The loss was comprised of an impairment on assets held for sale of $21,607 and $25,339 of foreign currency translation losses reclassified out of accumulated other comprehensive losses.2021.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
On April 2, 2019, Dover completed the sale of Finder to Aturia, which generated total cash proceeds of $24,218. The Finder business was included in the results of the Pumps & Process Solutions segment. The sale does not represent a strategic shift that will have a major effect on operations and financial results and, therefore, did not qualify for presentation as a discontinued operation.
2018
There were no other material dispositions in 2018 aside from the spin-off of Apergy.
6. Inventories
The components of inventories were as follows:
| | | | December 31, 2020 | | December 31, 2019 | | December 31, 2023 | | December 31, 2022 |
| Raw materials | Raw materials | $ | 497,604 | | | $ | 467,912 | |
| Work in progress | Work in progress | 152,360 | | | 162,670 | |
| Finished goods | Finished goods | 304,760 | | | 280,051 | |
| Subtotal | Subtotal | 954,724 | | | 910,633 | |
| Less reserves | Less reserves | (118,920) | | | (104,492) | |
| Total | Total | $ | 835,804 | | | $ | 806,141 | |
At December 31, 2020 and 2019,2022, approximately 4% and 8%, respectively, of the Company's total inventories were accounted for using the LIFO method. During the fourth quarter of 2023, the Company changed the method of accounting for the inventories previously accounted for under LIFO to FIFO. As of December 31, 2023 no inventories are accounted for under the LIFO method. See Note 1 — Description of Business and Summary of Significant Accounting Policies.
6. Property, Plant and Equipment, net
| | | | | | | | | | | |
| | December 31, 2023 | | December 31, 2022 |
| Land | $ | 66,443 | | | $ | 62,495 | |
| Buildings and improvements | 640,654 | | | 620,500 | |
| Machinery, equipment and other | 1,944,470 | | | 1,895,502 | |
| Property, plant and equipment, gross | 2,651,567 | | | 2,578,497 | |
| Accumulated depreciation | (1,619,751) | | | (1,573,672) | |
| Property, plant and equipment, net | $ | 1,031,816 | | | $ | 1,004,825 | |
Depreciation expense totaled $157,347, $148,910 and $147,309 for the years ended December 31, 2023, 2022 and 2021, respectively.
7. Property, PlantLeases
The Company's ROU assets and Equipment, netlease liabilities are discussed in detail in Note 1 — Description of Business and Summary of Significant Accounting Policies.
The components of property, plant and equipment, netlease costs were as follows:
| | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
| Land | $ | 60,287 | | | $ | 56,583 | |
| Buildings and improvements | 570,366 | | | 527,192 | |
| Machinery, equipment and other | 1,772,772 | | | 1,648,354 | |
| Property, plant and equipment, gross | 2,403,425 | | | 2,232,129 | |
| Total accumulated depreciation | (1,506,099) | | | (1,389,811) | |
| Property, plant and equipment, net | $ | 897,326 | | | $ | 842,318 | |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| Operating Lease Costs: | | | | | |
| Fixed | $ | 58,665 | | | $ | 53,428 | | | $ | 54,397 | |
| Variable | 8,318 | | | 7,512 | | | 6,281 | |
| Short-term | 22,392 | | | 22,097 | | | 17,847 | |
Total(1) | $ | 89,375 | | | $ | 83,037 | | | $ | 78,525 | |
| | |
| | | | | |
| | | | | |
| | | | | |
Total depreciation expense was $140,008, $133,340 Finance lease cost and $138,712 for the years ended December 31, 2020, 2019 and 2018, respectively.
8. Leases
The Company adopted ASC Topic 842, Leases as of January 1, 2019, using the transition method per ASU No. 2018-11 wherein entitiessublease income were allowed to initially apply the new leases standard at adoption date. Adoption of ASC Topic 842 resulted in an increase to total assets and liabilities due to the recording of operating lease ROU assets and operating lease liabilities of approximately $163 million, as of January 1, 2019. The adoption did not materially impact the Company’s Consolidated Statements of Earnings or Cash Flows. See Note 1 — Basis of Presentation for further detail on ROU assets and lease liabilities.immaterial.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The components of lease costs were as follows:
| | | | | | | | | | | |
| | Year Ended December 31, 2020 | | Year Ended December 31, 2019 |
| Operating Lease Costs: | | | |
| Fixed | $ | 52,875 | | | $ | 52,317 | |
| Variable | 5,973 | | | 6,584 | |
| Short-term | 18,436 | | | 17,387 | |
Total(1) | $ | 77,284 | | | $ | 76,288 | |
|
| | | |
| | | |
| | | |
(1) Finance lease cost and sublease income were immaterial.
Supplemental cash flow information related to leases was as follows:
| | Years Ended December 31, | | | Years Ended December 31, |
| | | Year Ended December 31, 2020 | | Year Ended December 31, 2019 | | 2023 | | 2022 | | 2021 |
| | Cash paid for amounts included in the measurement of lease liabilities: | Cash paid for amounts included in the measurement of lease liabilities: | | | |
| Cash paid for amounts included in the measurement of lease liabilities: | |
| Cash paid for amounts included in the measurement of lease liabilities: | |
| Operating cash flows for operating leases | |
| Operating cash flows for operating leases | |
| Operating cash flows for operating leases | Operating cash flows for operating leases | $ | 53,903 | | | $ | 53,450 | |
| Operating cash flows for finance leases | Operating cash flows for finance leases | 434 | | 425 | |
| Financing cash flows for finance leases | Financing cash flows for finance leases | 2,523 | | 1,915 | |
| Total | Total | $ | 56,860 | | | $ | 55,790 | |
| Right-of-use assets obtained in exchange for lease obligations: | Right-of-use assets obtained in exchange for lease obligations: | | | |
| Operating leases | Operating leases | $ | 21,381 | | | $ | 41,598 | |
| Operating leases | |
| Operating leases | |
| Financing leases | Financing leases | 3,708 | | 1,542 | |
| Total | Total | $ | 25,089 | | | $ | 43,140 | |
Supplemental balance sheet information related to leases were as follows:
| | | | December 31, 2020 | | December 31, 2019 | | December 31, 2023 | | December 31, 2022 |
| | Operating Leases | Operating Leases | | | |
| Operating Leases | |
| Operating Leases | |
| Right-of-use assets: | Right-of-use assets: | |
| Right-of-use assets: | |
| Right-of-use assets: | |
| Other assets and deferred charges | |
| Other assets and deferred charges | |
| Other assets and deferred charges | Other assets and deferred charges | $ | 170,089 | | | $ | 155,019 | |
| | Lease liabilities: | Lease liabilities: | |
| Lease liabilities: | |
| Lease liabilities: | |
| Other accrued expenses | |
| Other accrued expenses | |
| Other accrued expenses | Other accrued expenses | $ | 48,834 | | | $ | 41,835 | |
| Other liabilities | Other liabilities | 133,989 | | | 121,298 | |
| Total operating lease liabilities | Total operating lease liabilities | $ | 182,823 | | | $ | 163,133 | |
| | Finance Leases | Finance Leases | |
| Right of use assets: | |
| Finance Leases | |
| Finance Leases | |
| Right-of-use assets: | |
| Right-of-use assets: | |
| Right-of-use assets: | |
| Property and equipment, net (1) | $ | 10,388 | | | $ | 9,008 | |
Property, plant and equipment, net (1) | |
| Property, plant and equipment, net (1) | |
| Property, plant and equipment, net (1) | |
| | Lease liabilities: | Lease liabilities: | |
| Lease liabilities: | |
| Lease liabilities: | |
| Other accrued expenses | |
| Other accrued expenses | |
| Other accrued expenses | Other accrued expenses | $ | 2,641 | | | $ | 1,794 | |
| Other liabilities | Other liabilities | 8,709 | | | 8,078 | |
| Total financing lease liabilities | $ | 11,350 | | | $ | 9,872 | |
| Total finance lease liabilities | |
(1) Finance lease right-of-use assets are recorded net of accumulated depreciation of $7,205$10,302 and $4,614$8,017 for the years ended December 31, 20202023 and December 31, 2019,2022, respectively.
The aggregate future lease payments for operating and finance leases as of December 31, 2023 were as follows:
| | | | | | | | | | | |
| | Operating | | Finance |
| 2024 | $ | 55,883 | | | $ | 3,397 | |
| 2025 | 46,650 | | | 2,885 | |
| 2026 | 34,209 | | | 2,249 | |
| 2027 | 28,089 | | | 1,222 | |
| 2028 | 21,688 | | | 118 | |
| Thereafter | 76,345 | | | 26 | |
| Total lease payments | 262,864 | | | 9,897 | |
| Less interest | (41,091) | | | (930) | |
| Present value of lease liabilities | $ | 221,773 | | | $ | 8,967 | |
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The aggregate future lease payments for operating and finance leases as of December 31, 2020 were as follows:
| | | | | | | | | | | |
| | Operating | | Finance |
| 2021 | $ | 53,019 | | | $ | 3,091 | |
| 2022 | 38,561 | | | 2,767 | |
| 2023 | 26,485 | | | 2,059 | |
| 2024 | 21,253 | | | 1,550 | |
| 2025 | 17,700 | | | 1,281 | |
| Thereafter | 42,275 | | | 1,991 | |
| Total lease payments | 199,293 | | | 12,739 | |
| Less: Interest | (16,470) | | | (1,389) | |
| Present value of lease liabilities | $ | 182,823 | | | $ | 11,350 | |
Average lease terms and discount rates were as follows:
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Weighted-average remaining lease term (years) | | | |
| Operating leases | 5.9 | | 5.9 |
| Finance leases | 4.8 | | 5.9 |
| Weighted-average discount rate | | | |
| Operating leases | 2.9% | | 3.2% |
| Finance leases | 3.6% | | 4.1% |
| | | | | | | | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 | | December 31, 2021 |
| Weighted-average remaining lease term (years) | | | | | |
| Operating leases | 7.2 | | 7.8 | | 5.8 |
| Finance leases | 3.0 | | 3.6 | | 4.2 |
| Weighted-average discount rate | | | | | |
| Operating leases | 4.0 | % | | 3.5 | % | | 2.7 | % |
| Finance leases | 3.9 | % | | 3.4 | % | | 3.4 | % |
9.8. Credit Losses
Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments prospectively. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance. Upon adoption, the Company recorded a noncash cumulative effect adjustment to retained earnings of $2.1 million, net of $0.6 million of income taxes, on the opening consolidated balance sheet as of January 1, 2020.
The Company is exposed to credit losses primarily through sales of products and services. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the estimate of amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and other historical and forward-looking information on the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions.customers. Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding the continued impact of the novel coronavirus ("COVID-19") pandemic and determined that the estimate of credit losses was not significantly impacted.
Estimates are used to determine the allowance. It isallowance, based on assessment of anticipated payment and all other historical, current and forward-looking information that is reasonably available.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected. All periods prior to January 1, 2020 are presented in accordance with pre-adoption methodology of incurred loss impairment model.
| | 2023 | | | 2023 | 2022 | 2021 |
| Balance at January 1 | |
| | 2020 | 2019 | 2018 |
| Beginning Balance, January 1, | $ | 29,381 | | $ | 28,469 | | $ | 34,479 | |
| Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings | 2,706 | | 0 | | 0 | |
| Provision for expected credit losses, net of recoveries | |
| Provision for expected credit losses, net of recoveries | |
| Provision for expected credit losses, net of recoveries | Provision for expected credit losses, net of recoveries | 11,171 | | 5,933 | | 3,875 | |
| Amounts written off charged against the allowance | Amounts written off charged against the allowance | (3,863) | | (3,464) | | (9,326) | |
| Other, including dispositions and foreign currency translation | Other, including dispositions and foreign currency translation | 1,079 | | (1,557) | | (559) | |
| Ending balance, December 31 | $ | 40,474 | | $ | 29,381 | | $ | 28,469 | |
| Balance at December 31 | |
10.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
9. Goodwill and Other Intangible Assets
Goodwill
ASC 350, Intangibles - Goodwill and Other Intangibles, provides guidance on an entity's subsequent measurement and recognition of goodwill and other intangibles, including subsequent changes to carrying amounts, including impairment and fair value adjustments. In 2019, in connection with the change in segment structure, the Company changed its reporting units which resulted in a reallocation of $40,394 of goodwill from the Engineered Products segment to the Imaging & Identification segment using the relative fair value approach. See Note 20 — Segment Information for further information.
The changes in the carrying value of goodwill by reportable operating segments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Engineered Products | | Fueling Solutions | | Imaging & Identification | | Pumps & Process Solutions | | Refrigeration & Food Equipment | | Total |
| Goodwill | $ | 689,784 | | | $ | 770,619 | | | $ | 944,468 | | | $ | 796,952 | | | $ | 546,066 | | | $ | 3,747,889 | |
| Accumulated impairment loss | (10,591) | | | 0 | | | 0 | | | (59,970) | | | 0 | | | (70,561) | |
| Balance at January 1, 2019 | 679,193 | | | 770,619 | | | 944,468 | | | 736,982 | | | 546,066 | | | 3,677,328 | |
| Acquisitions | 0 | | | 97,898 | | | 0 | | | 21,614 | | | 0 | | | 119,512 | |
| Reallocation due to reporting unit changes | (40,394) | | | 0 | | | 40,394 | | | 0 | | | 0 | | | 0 | |
| Disposition of business | 0 | | | 0 | | | 0 | | | (4,739) | | | 0 | | | (4,739) | |
| Foreign currency translation | (2,228) | | | 4,864 | | | (7,793) | | | (3,230) | | | (367) | | | (8,754) | |
| Balance at December 31, 2019 | 636,571 | | | 873,381 | | | 977,069 | | | 750,627 | | | 545,699 | | | 3,783,347 | |
| Acquisitions | 33,183 | | | 47,339 | | | 103,723 | | | 21,560 | | | 0 | | | 205,805 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Disposition of business | 0 | | | 0 | | | 0 | | | 0 | | | (2,597) | | | (2,597) | |
| Foreign currency translation | 13,231 | | | 20,253 | | | 36,797 | | | 14,093 | | | 1,613 | | | 85,987 | |
| Balance at December 31, 2020 | $ | 682,985 | | | $ | 940,973 | | | $ | 1,117,589 | | | $ | 786,280 | | | $ | 544,715 | | | $ | 4,072,542 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Engineered Products | | Clean Energy & Fueling | | Imaging & Identification | | Pumps & Process Solutions | | Climate & Sustainability Technologies | | Total |
| Goodwill | $ | 733,874 | | | $ | 1,427,691 | | | $ | 1,106,202 | | | $ | 852,809 | | | $ | 508,807 | | | $ | 4,629,383 | |
Accumulated impairment loss (1) | (10,591) | | | — | | | — | | | (59,970) | | | — | | | (70,561) | |
| Balance at January 1, 2022 | 723,283 | | | 1,427,691 | | | 1,106,202 | | | 792,839 | | | 508,807 | | | 4,558,822 | |
| | | | | | | | | | | |
| Acquisitions | — | | | — | | | — | | | 200,513 | | | — | | | 200,513 | |
| Measurement period adjustments | (286) | | | 2,432 | | | (1,544) | | | 968 | | | — | | | 1,570 | |
| | | | | | | | | | | |
| Foreign currency translation | (10,455) | | | (38,705) | | | (26,399) | | | (14,785) | | | (1,067) | | | (91,411) | |
| Balance at December 31, 2022 | 712,542 | | | 1,391,418 | | | 1,078,259 | | | 979,535 | | | 507,740 | | | 4,669,494 | |
| | | | | | | | | | | |
| Acquisitions | — | | | — | | | — | | | 224,771 | | | 2,990 | | | 227,761 | |
| Measurement period adjustments | — | | | — | | | — | | | (5,103) | | | — | | | (5,103) | |
| Held for sale | (58,897) | | | — | | | — | | | — | | | — | | | (58,897) | |
| Foreign currency translation | 5,736 | | | 17,884 | | | 14,701 | | | 9,368 | | | 743 | | | 48,432 | |
| Balance at December 31, 2023 | $ | 659,381 | | | $ | 1,409,302 | | | $ | 1,092,960 | | | $ | 1,208,571 | | | $ | 511,473 | | | $ | 4,881,687 | |
(1) Accumulated impairment loss as of December 31, 2023 is not subject to foreign currency translation.
During 20202023 and 2019,2022, the Company recognized additions of $205,805$227,761 and $119,512,$200,513, respectively, to goodwill as a result of acquisitions as discussed in Note 43 — Acquisitions. During 2020 and 2019,the year ended December 31, 2023, the Company disposedrecorded measurement period adjustments that decreased goodwill by $5,103, principally related to working capital adjustments for 2022 acquisitions within the Pumps & Process Solutions segment. As noted in Note 4 — Dispositions, the Company classified De-Sta-Co's assets and liabilities separately as current assets and current liabilities held for sale within the consolidated balance sheets as of $2,597 and $4,739, respectively,December 31, 2023. As a result, the Engineered Products segment goodwill balance was reduced by $58,897. There were no dispositions of goodwill as a result of dispositions of businesses as discussed in Note 5 — Discontinued and Disposed Operations. The Company reallocated goodwill upon disposal based upon the fair value of the disposed business relative to the remaining entities in its reporting unit.during 2023 or 2022.
Annual impairment testing
The Company tests goodwill for impairment annually in the fourth quarter of each year, whenever events or circumstances indicate an impairment may have occurred, or when a change in the composition of reporting units occurs for other reasons, such as a change in segments.
The Company performed its annual goodwill impairment test during the fourth quarter of 20202023 using a discounted cash flow analysis as discussed in Note 1 — Description of Business and Summary of Significant Accounting Policies. The Company performed a quantitative goodwill impairment test for each of its reporting units, concluding that the fair values of all of its reporting units were in excess of their carrying values. No impairment of goodwill was required. The discounted cash flow analysis includes management's current assumptions as to future cash flows and long-term growth rates. 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. The discount rate used in the 2023 reporting unit valuations was 10.6%. Further, the Company assessed the current market capitalization, forecasts and the amount of headroom in the 2023 impairment test.
While the Company believes the assumptions used in the 2023 impairment analysis are reasonable and representative of expected results, actual results may differ from expectations.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
performed a quantitative goodwill impairment test for each of its 15 reporting units, concluding that the fair values of all of its reporting units were substantially in excess of their carrying values. No impairment of goodwill was required. As previously noted, the fair values of each of the Company’s reporting units was determined using a discounted cash flow analysis which includes management’s current assumptions as to future cash flows and long-term growth rates. The discount rates used in these analyses varied by reporting unit and were based on a capital asset pricing model and published relevant industry rates. The Company used discount rates commensurate with the risks and uncertainties inherent to each reporting unit and in our internally developed forecasts. Discount rates used in the 2020 reporting unit valuations ranged from 8.0% to 9.0%. In these analyses, the Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of the reporting units. Further, the Company assessed the current market capitalization, forecasts and the amount of headroom in the 2020 impairment test. Refer to "Segment Results of Operations" within Item 7 for further details on the COVID-19 impact to the Company's operations.
While the Company believes the assumptions used in the 2020 impairment analysis are reasonable and representative of expected result, actual results may differ from expectations.
Intangible Assets
The Company's definite-lived and indefinite-lived intangible assets by major asset class were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| Amortized intangible assets: | | | | | | | | | | | |
| Customer intangibles | $ | 1,559,771 | | | $ | 834,798 | | | $ | 724,973 | | | $ | 1,410,636 | | | $ | 714,566 | | | $ | 696,070 | |
| Trademarks | 233,205 | | | 103,907 | | | 129,298 | | | 218,064 | | | 85,791 | | | 132,273 | |
| Patents | 163,299 | | | 141,182 | | | 22,117 | | | 159,376 | | | 133,677 | | | 25,699 | |
| Unpatented technologies | 180,947 | | | 113,404 | | | 67,543 | | | 154,505 | | | 99,276 | | | 55,229 | |
| Distributor relationships | 87,028 | | | 51,611 | | | 35,417 | | | 82,779 | | | 44,202 | | | 38,577 | |
| Drawings & manuals | 29,198 | | | 26,193 | | | 3,005 | | | 27,500 | | | 22,403 | | | 5,097 | |
| Other | 23,901 | | | 19,324 | | | 4,577 | | | 22,355 | | | 16,939 | | | 5,416 | |
| Total | 2,277,349 | | | 1,290,419 | | | 986,930 | | | 2,075,215 | | | 1,116,854 | | | 958,361 | |
| Unamortized intangible assets: | | | | | | | | | | | |
| Trademarks | 96,842 | | | 0 | | | 96,842 | | | 96,653 | | | 0 | | | 96,653 | |
| Total intangible assets, net | $ | 2,374,191 | | | $ | 1,290,419 | | | $ | 1,083,772 | | | $ | 2,171,868 | | | $ | 1,116,854 | | | $ | 1,055,014 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 | | December 31, 2022 |
| | Gross Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Amount | | Accumulated Amortization | | Net Carrying Amount |
| Amortized intangible assets: | | | | | | | | | | | |
| Customer intangibles | $ | 2,138,788 | | | $ | 1,094,053 | | | $ | 1,044,735 | | | $ | 1,881,402 | | | $ | 996,947 | | | $ | 884,455 | |
| Trademarks | 274,711 | | | 147,212 | | | 127,499 | | | 265,466 | | | 132,791 | | | 132,675 | |
| Patents | 206,871 | | | 142,719 | | | 64,152 | | | 219,199 | | | 146,337 | | | 72,862 | |
| Unpatented technologies | 277,198 | | | 159,148 | | | 118,050 | | | 257,428 | | | 137,750 | | | 119,678 | |
| Distributor relationships | 82,031 | | | 63,343 | | | 18,688 | | | 79,622 | | | 57,299 | | | 22,323 | |
| | | | | | | | | | | |
| Other | 24,211 | | | 10,053 | | | 14,158 | | | 46,880 | | | 41,682 | | | 5,198 | |
| Total | 3,003,810 | | | 1,616,528 | | | 1,387,282 | | | 2,749,997 | | | 1,512,806 | | | 1,237,191 | |
| Unamortized intangible assets: | | | | | | | | | | | |
| Trademarks | 96,631 | | | — | | | 96,631 | | | 96,544 | | | — | | | 96,544 | |
| Total intangible assets, net | $ | 3,100,441 | | | $ | 1,616,528 | | | $ | 1,483,913 | | | $ | 2,846,541 | | | $ | 1,512,806 | | | $ | 1,333,735 | |
The Company recorded $134,049$283,170 of acquired intangible assets in 2020.2023. See Note 43 — Acquisitions.Acquisitions for further information. In addition, during the year ended December 31, 2023, the Company acquired certain intellectual property assets through an immaterial asset acquisition. These assets were classified as unpatented technologies and included in the Imaging & Identification segment.
Amortization expense was $139,043, $138,947 and $143,868, including acquisition-related intangible amortization of $137,071, $136,963 and $142,170, forFor the years ended December 31, 2020, 20192023, 2022 and 2018,2021, amortization expense was $160,116, $158,628 and $142,814 respectively. Amortization expense is primarily comprised of acquisition-related intangible amortization.
Estimated future amortization expense related to intangible assets held at December 31, 20202023 for the next five years is as follows:
| | | | | |
| Estimated Amortization |
| 2021 | $ | 139,794 | |
| 2022 | 125,272 | |
| 2023 | 115,224 | |
| 2024 | 110,524 | |
| 2025 | 105,761 | |
| | | | | |
| Estimated Amortization |
| 2024 | $ | 173,935 | |
| 2025 | 170,536 | |
| 2026 | 161,908 | |
| 2027 | 158,340 | |
| 2028 | 126,227 | |
10. Other Accrued Expenses and Other Liabilities
The following table details the major components of other accrued expenses:
| | | | | | | | | | | |
| | December 31, 2023 | | December 31, 2022 |
| | | |
| Operating lease liabilities | $ | 48,790 | | | $ | 42,649 | |
| Accrued rebates and volume discounts | 43,941 | | | 47,660 | |
| Warranty | 43,747 | | | 43,351 | |
| Taxes other than income | 31,439 | | | 33,782 | |
| Restructuring and exit costs | 21,759 | | | 14,510 | |
| Accrued interest | 20,723 | | | 20,591 | |
| Accrued commissions (non-employee) | 15,370 | | | 15,808 | |
| | | |
| | | |
| | | |
| Other | 89,758 | | | 99,986 | |
| Total other accrued expenses | $ | 315,527 | | | $ | 318,337 | |
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
11. Other Accrued Expenses and Other Liabilities
The following table details the major components of other accrued expenses:
| | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
| | | |
Taxes other than income (1) | $ | 52,829 | | | $ | 34,419 | |
| Accrued rebates and volume discounts | 49,929 | | | 43,694 | |
| Operating lease liability | 48,834 | | | 41,835 | |
| Warranty | 45,433 | | | 43,018 | |
| Accrued interest | 20,822 | | | 20,403 | |
| Restructuring and exit costs | 14,913 | | | 16,173 | |
| Accrued commissions (non-employee) | 14,243 | | | 15,916 | |
| | | |
| | | |
| | | |
| Other (none of which are individually significant) | 96,634 | | | 79,601 | |
| Total other accrued expenses | $ | 343,637 | | | $ | 295,059 | |
(1) Taxes other than income as of December 31, 2020 includes a $15.8 million deferral of employment taxes related to the U.S. CARES Act.
The following table details the major components of other liabilities (non-current):
| | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
| Defined benefit and other post-retirement benefit plans | $ | 177,623 | | | $ | 165,150 | |
| | | |
| Operating lease liabilities | 133,989 | | | 121,298 | |
| Unrecognized tax benefits | 90,097 | | | 101,052 | |
| Deferred compensation | 82,814 | | | 78,375 | |
| Legal and environmental | 28,483 | | | 30,514 | |
| Deferred revenue | 13,921 | | | 10,921 | |
| Warranty | 5,655 | | | 6,098 | |
| Deferred employment taxes | 15,783 | | | 0 | |
| Other | 21,949 | | | 15,566 | |
| Total other liabilities | $ | 570,314 | | | $ | 528,974 | |
| | | | | | | | | | | |
| | December 31, 2023 | | December 31, 2022 |
| Operating lease liabilities | $ | 172,983 | | | $ | 165,741 | |
| Defined benefit and other post-retirement benefit plans | 86,066 | | | 92,630 | |
| | | |
| Deferred compensation | 79,268 | | | 82,479 | |
| Unrecognized tax benefits | 27,307 | | | 34,361 | |
| Legal and environmental | 26,991 | | | 30,139 | |
| Deferred revenue | 19,544 | | | 19,879 | |
| Warranty | 7,117 | | | 5,098 | |
| | | |
| Other | 42,696 | | | 44,576 | |
| Total other liabilities | $ | 461,972 | | | $ | 474,903 | |
Warranty
Estimated warranty program claims are provided for at the time of sale. Amounts provided for are based on historical costs and adjusted for new claims. The changes in the carrying amount of product warranties were as follows:
| | Years Ended December 31, | | | Years Ended December 31, |
| | Years Ended December 31, | | 2023 | | 2022 | | 2021 |
| | 2020 | | 2019 | | 2018 |
| Beginning Balance, December 31 of the Prior Year | $ | 49,116 | | | $ | 50,073 | | | $ | 59,403 | |
| Beginning Balance, January 1, | |
| Provision for warranties | Provision for warranties | 60,902 | | | 63,957 | | | 59,176 | |
| Settlements made | Settlements made | (60,853) | | | (63,574) | | | (66,687) | |
| Other adjustments, including acquisitions and currency translation | Other adjustments, including acquisitions and currency translation | 1,923 | | | (1,340) | | | (1,819) | |
| Ending Balance, December 31 | Ending Balance, December 31 | $ | 51,088 | | | $ | 49,116 | | | $ | 50,073 | |
|
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
12.11. Restructuring Activities
The Company initiated variousCompany's restructuring programs and incurred severance and other restructuring costscharges by segment as follows:
| | | | Years Ended December 31, | | Years Ended December 31, |
| | | 2020 | | 2019 | | 2018 | | 2023 | | 2022 | | 2021 |
| Engineered Products | Engineered Products | $ | 10,307 | | | $ | 3,155 | | | $ | 7,158 | |
| Fueling Solutions | 6,681 | | | 4,943 | | | 15,478 | |
| Clean Energy & Fueling | |
| Imaging & Identification | Imaging & Identification | 5,946 | | | 6,426 | | | 13,882 | |
| Pumps & Process Solutions | Pumps & Process Solutions | 13,374 | | | 5,666 | | | 10,266 | |
| Refrigeration & Food Equipment | 4,015 | | | 3,671 | | | 3,475 | |
| Climate & Sustainability Technologies | |
| Corporate | Corporate | 4,145 | | | 2,961 | | | 8,244 | |
| Total | Total | $ | 44,468 | | | $ | 26,822 | | | $ | 58,503 | |
These amounts are classified in the Consolidated Statements of Earnings as follows: | | These amounts are classified in the consolidated statements of earnings as follows: | | These amounts are classified in the consolidated statements of earnings as follows: |
| Cost of goods and services | Cost of goods and services | $ | 18,895 | | | $ | 8,910 | | | $ | 16,921 | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | 25,573 | | | 17,912 | | | 41,582 | |
| | Total | Total | $ | 44,468 | | | $ | 26,822 | | | $ | 58,503 | |
| Total | |
| Total | |
TotalThe restructuring chargesexpenses of $44,468$50,435 incurred during the year ended December 31, 2020,2023 were a result ofprimarily related to headcount reductions and exit costs in the Clean Energy & Fueling, Engineered Products and Pumps & Process Solutions segments. These restructuring programs were initiated in 2022 and 2023 and were undertaken in light of current market conditions. The expected costs related to these announced restructuring programs have been incurred primarily in 2020. Restructuring expense was comprised primarily of new actions executed in responsethrough 2023. However, the Company will continue to lowermake proactive adjustments to its cost structure to align with current demand driven by COVID-19 as well as continuing broad-based selling, generaltrends and administrative expense reduction initiatives and broad-based operational efficiency initiatives focusing on footprint consolidation, and operational optimization and IT centralization. Additionaladditional programs, beyond the scope of the announced programs, may be implemented during 20212024 with related restructuring charges.
The $44,468 of restructuring charges incurred during 2020 included the following programs:
•The Engineered Products segment recorded $10,307 of restructuring charges related to programs across the segment focused on headcount reductions and other asset charges.
•The Fueling Solutions segment recorded $6,681 of restructuring charges principally related to headcount reductions and facility restructuring costs.
•The Imaging & Identification segment recorded $5,946 of restructuring charges principally related to headcount reductions and facility restructuring costs.
•The Pumps & Process Solutions segment recorded $13,374 of restructuring charges principally related to headcount reductions, facility restructuring costs and other asset charges.
•The Refrigeration & Food Equipment segment recorded $4,015, of restructuring charges primarily due to headcount reductions and facility restructuring costs.
•Corporate recorded $4,145 of restructuring charges primarily related to headcount reductions and associated exit costs related to IT centralization initiatives.
Restructuring expenses incurred in 20192022 and 20182021 also included headcount reduction, targeted facility consolidations atreductions, exit costs, asset charges related to a product line exit, and substantial liquidation of businesses in certain businesses and actions taken to optimize the Company's cost structure.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The following table details the Company’sCompany's severance and other restructuringexit accrual activities:activities were as follows:
| | | | | | | | | | | | | | | | | |
| | Severance | | Exit | | Total |
| Balance at January 1, 2018 | $ | 24,955 | | | $ | 6,316 | | | $ | 31,271 | |
| Restructuring charges | 45,146 | | | 13,357 | | | 58,503 | |
| Payments | (43,287) | | | (8,713) | | | (52,000) | |
| Other, including foreign currency translation | (2,530) | | | (7,080) | | (1) | (9,610) | |
| Balance at December 31, 2018 | 24,284 | | | 3,880 | | | 28,164 | |
| Restructuring charges | 20,271 | | | 6,551 | | | 26,822 | |
| Payments | (29,887) | | | (3,383) | | | (33,270) | |
| Other, including foreign currency translation | (917) | | | (4,409) | | (1) | (5,326) | |
| Balance at December 31, 2019 | 13,751 | | | 2,639 | | | 16,390 | |
| Restructuring charges | 25,716 | | | 18,752 | | | 44,468 | |
| Payments | (29,768) | | | (6,035) | | | (35,803) | |
| Other, including foreign currency translation | 848 | | | (10,990) | | (1) | (10,142) | |
| Balance at December 31, 2020 | $ | 10,547 | | | $ | 4,366 | | | $ | 14,913 | |
(1) Other activity in exit reserves primarily represents the non-cash write-off of certain long-lived assets and inventory in connection with certain facility closures and product exits. | | | | | | | | | | | | | | | | | |
| | Severance | | Exit | | Total |
| Balance at January 1, 2021 | $ | 10,547 | | | $ | 4,366 | | | $ | 14,913 | |
| Restructuring charges | 11,561 | | | 15,144 | | | 26,705 | |
| Payments | (10,951) | | | (6,171) | | | (17,122) | |
| Other, including foreign currency translation | (427) | | | (10,272) | | | (10,699) | |
| Balance at December 31, 2021 | 10,730 | | | 3,067 | | | 13,797 | |
| Restructuring charges | 15,388 | | | 15,092 | | | 30,480 | |
| Payments | (13,975) | | | (8,159) | | | (22,134) | |
| Other, including foreign currency translation | (136) | | | (7,497) | | | (7,633) | |
| Balance at December 31, 2022 | 12,007 | | | 2,503 | | | 14,510 | |
| Restructuring charges | 37,433 | | | 13,002 | | | 50,435 | |
| Payments | (31,364) | | | (9,945) | | | (41,309) | |
| Other, including foreign currency translation | 570 | | | (2,447) | | | (1,877) | |
| Balance at December 31, 2023 | $ | 18,646 | | | $ | 3,113 | | | $ | 21,759 | |
The restructuring accrual balances at December 31, 20202023 primarily reflect restructuring plans initiated during the year.
13.12. Borrowings and Lines of Credit
Borrowings consist of the following:
| | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
| Short-term: | | | |
| | | |
| Commercial paper | $ | 0 | | | $ | 84,700 | |
| Notes payable | $ | 0 | | | $ | 84,700 | |
| | | | | | | | | | | |
| | December 31, 2023 | | December 31, 2022 |
| Short-term | | | |
| Commercial paper | $ | 467,600 | | | $ | 734,936 | |
| Other | 682 | | | 836 | |
| | | |
| Short-term borrowings | $ | 468,282 | | | $ | 735,772 | |
| | | | | | | | | | | | | | | | | |
| | | Carrying amount (1) |
| | Principal | | December 31, 2020 | | December 31, 2019 |
| Long-term: | | | | | |
| 3.15% 10-year notes due November 15, 2025 | $ | 400,000 | | | $ | 396,716 | | | $ | 396,042 | |
| 1.25% 10-year notes due November 9, 2026 (euro-denominated) | € | 600,000 | | | 724,310 | | | 658,089 | |
| 0.750% 8-year notes due November 4, 2027 (euro denominated) | € | 500,000 | | | 603,107 | | | 548,008 | |
| 6.65% 30-year debentures due June 1, 2028 | $ | 200,000 | | | 199,255 | | | 199,155 | |
| 2.950% 10-year notes due November 4, 2029 | $ | 300,000 | | | 296,650 | | | 296,270 | |
| 5.375% 30-year debentures due October 15, 2035 | $ | 300,000 | | | 296,309 | | | 296,060 | |
| 6.60% 30-year notes due March 15, 2038 | $ | 250,000 | | | 248,053 | | | 247,939 | |
| 5.375% 30-year notes due March 1, 2041 | $ | 350,000 | | | 344,429 | | | 344,153 | |
| | | | | |
| Total long-term debt | | | $ | 3,108,829 | | | $ | 2,985,716 | |
| | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | |
| | | Carrying amount (1) |
| | Principal | | December 31, 2023 | | December 31, 2022 |
| Long-term | | | | | |
| 3.15% 10-year notes due November 15, 2025 | $ | 400,000 | | | $ | 398,737 | | | $ | 398,063 | |
| 1.25% 10-year notes due November 9, 2026 (euro-denominated) | € | 600,000 | | | 657,628 | | | 631,522 | |
| 0.750% 8-year notes due November 4, 2027 (euro denominated) | € | 500,000 | | | 547,342 | | | 525,654 | |
| 6.65% 30-year debentures due June 1, 2028 | $ | 200,000 | | | 199,557 | | | 199,456 | |
| 2.950% 10-year notes due November 4, 2029 | $ | 300,000 | | | 297,787 | | | 297,408 | |
| 5.375% 30-year debentures due October 15, 2035 | $ | 300,000 | | | 297,058 | | | 296,808 | |
| 6.60% 30-year notes due March 15, 2038 | $ | 250,000 | | | 248,392 | | | 248,279 | |
| 5.375% 30-year notes due March 1, 2041 | $ | 350,000 | | | 345,258 | | | 344,982 | |
| Other | | | — | | | 341 | |
| Total long-term debt | | | $ | 2,991,759 | | | $ | 2,942,513 | |
| | | | | |
| | | | | |
(1) Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discounts were $17.6$10.9 million and $18.9$12.7 million as of December 31, 20202023 and 2019,December 31, 2022, respectively. Total deferred debt issuance costs were $14.4$8.9 million and $16.2$10.7 million as of December 31, 20202023 and 2019,December 31, 2022, respectively.
The discounts are being amortized to interest expense using the effective interest method over the life of the issuances. The deferred issuance costs are amortized on a straight-line basis over the life of the debt.
On November 4, 2019,debt, as this approximates the Company issued €500,000 of 0.750% euro-denominated notes due 2027 and $300,000 of 2.950% notes due 2029. On December 4, 2019, proceeds from the sale of the aforementioned notes were used to redeem the €300,000 2.125% notes due 2020 and $450,000 4.30% notes due 2021. Such redemptions required the Company to pay a make whole premium to the bondholders, resulting in a loss of $23,543. The remainder of the proceeds were used for general corporate purposes.effective interest method.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
As of December 31, 2020,On April 6, 2023, the Company maintainedentered into new $1.0 billion five-year and $500.0 million 364-day unsecured revolving credit facilities ("Credit Agreements") with a syndicate of banks. The new five-year credit facility replaced the previous $1 billion five-year unsecured revolving credit facility, (the “Credit Agreement”) with a syndicate of banks, which expireswas set to expire on October 4, 2024.2024 and was terminated by the Company upon execution of the new five-year credit facility. The lenders' commitments under the five-year and 364-day Credit Agreements will terminate and the loans under the Credit Agreements will mature on April 6, 2028 and April 4, 2024, respectively. The Company may elect to extend the maturity date of any loans under the 364-day credit facility until April 4, 2025, subject to conditions specified therein. The Credit Agreements are designated as a liquidity back-stop for the Company's commercial paper program, which was upsized from $1.0 billion to $1.5 billion during the second quarter of 2023, and also are available for general corporate purposes. At the Company's election, loans under the Credit AgreementAgreements will bear interest at a base rate plus an applicable margin. The Credit Agreement requiresAgreements require the Company to pay a facility feefees and imposesimpose various restrictions on the Company such as, among other things, a requirement to maintain a minimum interest coverage ratio of consolidated EBITDA to consolidated net interest expense of not less than 3.0 to 1. The Company primarily uses this facility as liquidity back-up for its commercial paper program. On March 16, 2020, the Company borrowed $500 millionAs of December 31, 2023 and December 31, 2022, there were no outstanding borrowings under the new Credit Agreement, which was subsequently repaid in full duringAgreements or the second quarter with proceeds from resumed commercial paper borrowings. Proceeds from the Credit Agreement borrowing were used to repay all of the Company's outstanding commercial paper and for general corporate purposes.
On May 6, 2020, the Company entered into a $450.0 million 364-day revolvingprevious five-year credit facility (the "Short-term Credit Agreement") with a syndicate of banks to be used primarily for working capital and general corporate purposes. Effective November 12, 2020, the Company terminated the aggregate commitments under the Short-term Credit Agreement. The Company did not undertake any borrowings under this facility prior to termination.facility.
The Company was in compliance with all covenants in the Credit AgreementAgreements and other long-term debt covenants at December 31, 20202023 and had an interest coverage ratio of consolidated EBITDA to consolidated net interest expense of 11.414.5 to 1.
As of December 31, 2020,2023, the future maturities of long-term debt were as follows:
| | | | | |
| Future Maturities |
| 2021 | $ | 0 | |
| 2022 | 0 | |
| 2023 | 0 | |
| 2024 | 0 | |
| 2025 | 396,716 | |
| 2026 and thereafter | 2,712,113 | |
| Total | $ | 3,108,829 | |
| | | | | |
| Future Maturities |
| 2024 | $ | — | |
| 2025 | 400,000 | |
| 2026 | 660,866 | |
| 2027 | 550,721 | |
| 2028 | 200,000 | |
| 2029 and thereafter | 1,200,000 | |
| Total | $ | 3,011,587 | |
Letters of Credit and other Guarantees
As of December 31, 2020,2023, the Company had approximately $152.5$180.0 million outstanding in letters of credit, surety bonds, and performance and other guarantees with financial institutions, which primarily expire on various dates through 2029.2031. These letters of credit and bonds are primarily issued as security for insurance, warranty and other performance obligations. In general, the Companywe would only be liable for the amount of these guarantees in the event of default in the performance of itsour obligations, the probability of which is believed to be remote.
14.13. Financial Instruments
Derivatives
The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations and certain commodity risks. In order to manage these risks, the Company has hedged portions of its forecasted sales and purchases, which occur within the next twelve months that are denominated in non-functional currencies, with currency forward contracts designated as cash flow hedges. At December 31, 20202023 and 2019,2022, the Company had contracts with U.S. dollar equivalenttotal notional amounts of $173,674$171,425 and $179,580,$184,565, respectively, to exchange foreign currencies, principally the Poundeuro, pound sterling, Chinese yuan, Swedish krona, Euro, Canadian dollar, Chinese yuan, and Swiss franc. The Company believes it is probable that all forecasted cash flow transactions will occur.
In addition, the Company had outstanding contracts at December 31, 2020 and 2019 with a total notional amount of $73,755$84,867 and $79,707,$102,509 as of December 31, 2023 and December 31, 2022, respectively, that are not designated as hedging instruments. These instruments are used to reduce the Company's exposure tofor operating receivables and payables that are denominated in non-functional currencies. Gains and losses on these contracts are recorded in other income, net in the Consolidated Statementsconsolidated statements of Earnings.earnings.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The following table sets forth the fair values of derivative instruments held by the Company as of December 31, 20202023 and 20192022 and the balance sheet lines in which they are recorded:
| | Fair Value Asset (Liability) | |
| December 31, 2020 | | December 31, 2019 | | Balance Sheet Caption |
| Fair Value Asset (Liability) | |
| December 31, 2023 | |
| December 31, 2023 | |
| December 31, 2023 | | | December 31, 2022 | | Balance Sheet Caption |
| Foreign currency forward | Foreign currency forward | $ | 2,325 | | | $ | 2,892 | | | Prepaid and other current assets | Foreign currency forward | $ | 1,675 | | | $ | | $ | 944 | | | Prepaid and other current assets | | Prepaid and other current assets |
| Foreign currency forward | Foreign currency forward | (2,057) | | | (476) | | | Other accrued expenses | Foreign currency forward | (874) | | | (2,760) | | (2,760) | | | Other accrued expenses | | Other accrued expenses |
|
For a cash flow hedge, the change in estimated fair value of a hedging instrument is recorded in accumulated other comprehensive earnings (loss), net of tax as a separate component of the Consolidated Statementsconsolidated statements of Stockholders' Equitystockholders' equity and is reclassified into revenues andor cost of goods and services in the Consolidated Statementsconsolidated statements of Earningsearnings during the period in which the hedged transaction is recognized.settled. The amount of gains or losses from hedging activity recorded in earnings is not significant and the amount of unrealized gains and losses from cash flow hedges that are expected to be reclassified to earnings in the next twelve months, is not significant; therefore, additional tabular disclosures are not presented. There are no amounts excluded from the assessment of hedge effectiveness, and the Company's derivative instruments that are subject to credit risk contingent features were not significant.
The Company is exposed to credit loss in the event of nonperformance by counterparties to the financial instrument contracts held by the Company; however, nonperformance by these counterparties is considered unlikely as the Company’sCompany's policy is to contract with highly-rated, diversified counterparties.
The Company has designated the €600,000 and €500,000 of euro-denominated notes issued November 9, 2016 and November 4, 2019, respectively, as hedges of a portion of its net investment in euro-denominated operations. The Company also designated the 2020 Notes as a net investment hedge prior to the redemption of the notes. Changes in the value of the euro-denominated debt are recognized in foreign currency translation adjustments within other comprehensive earnings (loss) of the Consolidated Statementsconsolidated statements of Comprehensive Earningscomprehensive earnings to offset changes in the value of the net investment in euro-denominated operations. Changes in the value of the euro-denominated debt resulting from exchange rate differences are offset by changes in the net investment due to the high degree of effectiveness between the hedging instruments and the exposure being hedged.
Amounts recognized in other comprehensive earnings (loss) for the gains (losses) on its net investment hedges were as follows:
| | 2020 | | 2019 | | 2018 |
| 2023 | | | 2023 | | 2022 | | 2021 |
| (Loss) gain on euro-denominated debt | (Loss) gain on euro-denominated debt | $ | (119,298) | | | $ | 22,449 | | | $ | 45,230 | |
| | Tax benefit (expense) | Tax benefit (expense) | 26,957 | | | (4,714) | | | (9,498) | |
| | Tax benefit (expense) | |
| | Tax benefit (expense) | |
| Net (loss) gain on net investment hedges, net of tax | Net (loss) gain on net investment hedges, net of tax | $ | (92,341) | | | $ | 17,735 | | | $ | 35,732 | |
Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’sinstrument's categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.
Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The Company'sfollowing table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 20202023 and 2019 were as follows:2022:
| | | December 31, 2020 | | | December 31, 2019 |
| | Level 2 | | | | Level 2 | |
| | | December 31, 2023 | |
| | | December 31, 2023 | |
| | | December 31, 2023 | | | | | December 31, 2022 |
| | | Level 2 | |
| Assets: | |
| Assets: | |
| Assets: | Assets: | | | | | | | |
| Foreign currency cash flow hedges | Foreign currency cash flow hedges | | $ | 2,325 | | | | | $ | 2,892 | | |
| Foreign currency cash flow hedges | |
| Foreign currency cash flow hedges | |
| Liabilities: | |
| Liabilities: | |
| Liabilities: | Liabilities: | | | | | | | |
| Foreign currency cash flow hedges | Foreign currency cash flow hedges | | 2,057 | | | | | 476 | | |
| Foreign currency cash flow hedges | |
| Foreign currency cash flow hedges | |
|
The derivative contracts are measured at fair value using models based on observable market inputs such as foreign currency exchange rates and interest rates; therefore, they are classified within Level 2 of the fair value hierarchy.
In addition to fair value disclosure requirements related to financial instruments carried at fair value, accounting standards require disclosures regarding the fair value of all of the Company’sCompany's financial instruments.
The estimated fair value of long-term debt at December 31, 20202023 and 20192022 was $3,635,673$2,950,401 and $3,322,033,$2,786,862, respectively. The estimated fair value of long-term debt is based on quoted market prices for similar instruments and is, therefore, classified as Level 2 within the fair value hierarchy.
The carrying values of cash and cash equivalents, trade receivables, accounts payable and notes payable are reasonable estimates ofshort-term borrowings approximate their fair values as of December 31, 20202023 and 20192022 due to the short-term nature of these instruments.
15.14. Income Taxes
Income taxes have been based on the following components of earnings before provision for income taxes and discontinued operations in the Consolidated Statementsconsolidated statements of Earnings: earnings:
| | | | Years Ended December 31, | | Years Ended December 31, |
| | | 2020 | | 2019 | | 2018 | | 2023 | | 2022 | | 2021 |
| Domestic | Domestic | $ | 464,145 | | | $ | 448,301 | | | $ | 344,793 | |
| Foreign | Foreign | 377,589 | | | 394,708 | | | 380,585 | |
| Total | Total | $ | 841,734 | | | $ | 843,009 | | | $ | 725,378 | |
Income tax expense (benefit) relating to continuing operations for the years ended December 31, 2020, 20192023, 2022 and 20182021 is comprised of the following:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| Current: | | | | | |
| U.S. federal | $ | 79,305 | | | $ | 71,069 | | | $ | 47,445 | |
| State and local | 13,312 | | | 16,709 | | | 14,120 | |
| Foreign | 97,106 | | | 102,284 | | | 86,523 | |
| Total current | 189,723 | | | 190,062 | | | 148,088 | |
| Deferred: | | | | | |
| U.S. federal | 2,777 | | | (6,033) | | | 876 | |
| State and local | (10,526) | | | 1,770 | | | 626 | |
| Foreign | (23,691) | | | (20,708) | | | (15,357) | |
| Total deferred | (31,440) | | | (24,971) | | | (13,855) | |
| Total expense | $ | 158,283 | | | $ | 165,091 | | | $ | 134,233 | |
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| Current: | | | | | |
| U.S. federal | $ | 143,294 | | | $ | 106,768 | | | $ | 150,990 | |
| State and local | 18,873 | | | 1,450 | | | 28,106 | |
| Foreign | 143,216 | | | 140,696 | | | 154,147 | |
| Total current | 305,383 | | | 248,914 | | | 333,243 | |
| Deferred: | | | | | |
| U.S. federal | (28,471) | | | (4,760) | | | (14,143) | |
| State and local | 4,047 | | | 303 | | | 3,165 | |
| Foreign | (67,781) | | | (22,328) | | | (45,257) | |
| Total deferred | (92,205) | | | (26,785) | | | (56,235) | |
| Total expense | $ | 213,178 | | | $ | 222,129 | | | $ | 277,008 | |
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Differences between the effective income tax rate and the U.S. federal income statutory tax rate are as follows:
| | | | Years Ended December 31, | | Years Ended December 31, |
| | | 2020 | | 2019 | | 2018 | | 2023 | | 2022 | | 2021 |
| U.S. federal income tax rate | U.S. federal income tax rate | 21.0 | % | | 21.0 | % | | 21.0 | % | U.S. federal income tax rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
| State and local taxes, net of federal income tax benefit | State and local taxes, net of federal income tax benefit | 1.7 | | | 1.7 | | | 1.6 | |
| Foreign operations tax effect | Foreign operations tax effect | (0.8) | | | (1.3) | | | (1.1) | |
| SAB 118 | 0 | | | 0 | | | (0.6) | |
| | Foreign tax credits | 0 | | | (0.1) | | | (0.3) | |
| | Foreign-derived intangible income | |
| | Foreign-derived intangible income | |
| | | Foreign-derived intangible income | Foreign-derived intangible income | (1.1) | | | (1.0) | | | (0.8) | |
| Share awards | Share awards | (1.2) | | | (1.7) | | | (2.0) | |
| Withholding tax | |
| Change in valuation allowance | |
| | Disposition of businesses | 0 | | | 1.2 | | | 0 | |
| Dispositions | |
| Dispositions | |
| Dispositions | |
| Audit resolutions | |
| Other | Other | (0.8) | | | (0.2) | | | 0.7 | |
| Effective tax rate from continuing operations | 18.8 | % | | 19.6 | % | | 18.5 | % |
| Effective tax rate | | Effective tax rate | 16.8 | % | | 17.3 | % | | 19.8 | % |
The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows:
| | December 31, 2020 | | December 31, 2019 |
| December 31, 2023 | | | December 31, 2023 | | December 31, 2022 |
| Deferred Tax Assets: | Deferred Tax Assets: | | | |
| Accrued compensation, principally postretirement and other employee benefits | $ | 60,797 | | | $ | 62,547 | |
| Accrued expenses, principally for state income taxes, interest and warranty | 32,418 | | | 29,736 | |
| Accrued compensation, postretirement and other employee benefits | |
| Accrued compensation, postretirement and other employee benefits | |
| Accrued compensation, postretirement and other employee benefits | |
| Accrued expenses | |
| Net operating loss and other carryforwards | Net operating loss and other carryforwards | 319,291 | | | 269,599 | |
| Inventories, principally due to reserves for financial reporting purposes and capitalization for tax purposes | 23,723 | | | 17,671 | |
| Accounts receivable, principally due to allowance for doubtful accounts | 7,118 | | | 3,409 | |
| Inventories | |
| Allowance for credit losses | |
| Accrued insurance | Accrued insurance | 4,165 | | | 2,001 | |
| | Long-term liabilities, principally warranty, environmental and exit costs | 2,273 | | | 3,305 | |
| Long-term liabilities, warranty and environmental costs | |
| Long-term liabilities, warranty and environmental costs | |
| Long-term liabilities, warranty and environmental costs | |
| Lease obligations | Lease obligations | 40,984 | | | 35,473 | |
| | Capitalized research and development | |
| Total gross deferred tax assets | Total gross deferred tax assets | 490,769 | | | 423,741 | |
| Valuation allowance | Valuation allowance | (287,679) | | | (244,153) | |
| Total deferred tax assets, net of valuation allowances | Total deferred tax assets, net of valuation allowances | $ | 203,090 | | | $ | 179,588 | |
| Deferred Tax Liabilities: | Deferred Tax Liabilities: | | | |
| Intangible assets, principally due to different tax and financial reporting bases and amortization lives | $ | (387,897) | | | $ | (364,843) | |
| Property, plant and equipment, principally due to differences in depreciation | (62,667) | | | (56,401) | |
| Intangible assets | |
| Intangible assets | |
| Intangible assets | |
| Property, plant and equipment | |
| Lease right-of-use assets | Lease right-of-use assets | (38,742) | | | (34,191) | |
| | Other liabilities | Other liabilities | 9,992 | | | (19,716) | |
| Total gross deferred tax liabilities | (479,314) | | | (475,151) | |
| Other liabilities | |
| Other liabilities | |
| Total deferred tax liabilities | |
| Net deferred tax liability | Net deferred tax liability | $ | (276,224) | | | $ | (295,563) | |
| | Classified as follows in the Consolidated Balance Sheets: | |
| Classified as follows in the Consolidated Balance Sheets: | |
| Classified as follows in the Consolidated Balance Sheets: | Classified as follows in the Consolidated Balance Sheets: | |
| | Other assets and deferred charges | Other assets and deferred charges | $ | 22,199 | | | $ | 26,473 | |
| | Other assets and deferred charges | |
| | Other assets and deferred charges | |
| | Deferred income taxes | Deferred income taxes | (298,423) | | | (322,036) | |
| $ | (276,224) | | | $ | (295,563) | |
| Deferred income taxes | |
| Deferred income taxes | |
| $ | |
As of December 31, 2020,2023, the Company had non-U.Shas $271,255 of deferred tax assets recorded related to non-U.S. tax loss carryforwards of $1,031.2 million primarily resulting from non-operating activities.activities and tax credit carryforwards. The entire balance of the non-U.S. losses and credits as of December 31, 2020 is2023 are available to be carried forward, with $97.0 million of these losses$59,816 expiring during the years 20212024 through 2040. The2043, and the remaining $934.2 million of such losses can be$211,439 carried forward indefinitely.
The Company has $315.2 million and $54.1 million of state tax loss carryovers as of December 31, 2020 and 2019, respectively. The balance of the state losses as of December 31, 2020 is available for carry over, with $287.4 million of these losses expiring during the years 2021 and 2040, and the remaining $27.8 million being carried over indefinitely. The increase in loss carryovers is driven by favorable audit settlements.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
As of December 31, 2023, the Company has $55,182 of deferred tax assets recorded related to U.S. federal and state tax loss and tax credit carryforwards. The U.S. federal and state tax losses and credits as of December 31, 2023 are available to be carried forward, with $52,206 expiring during the years 2024 through 2043, and the remaining $2,976 carried forward indefinitely.
The Company maintains valuation allowances by jurisdiction against the deferred tax assets related to certain of these carryforwards for which it is more likely than not that some portion or all will not be realized.
On December 22, 2017, the Tax Reform Act was enacted which permanently reduced the U.S. corporate income tax rate to a flat 21% rate along with other changes in corporate tax law.On that same date, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) SAB 118 to address situations when a registrant does not have the necessary information to complete the accounting for certain income tax effects of the Tax Reform Act. In accordance with the SAB 118 guidance, the Company recognized the provisional impacts of the Tax Reform Act in its Consolidated Financial Statements for the year ended December 31, 2017.For the year ended December 31, 2018,2023, the Company recorded a $4.2 million net valuation allowance release of $69,716 against non-U.S. tax benefit, which resulted in a 0.6% decrease inloss carryforwards mainly related to an internal reorganization on the effective tax rate, as an adjustment to the provisional estimates as a resultbasis of additional regulatory guidance and changes in interpretations and assumptions the Company has made as a resultmanagement’s reassessment of the Tax Reform Act.amount of its deferred tax assets that are more likely than not to be realized.
In 2023, the Company recorded $30,413 of withholding taxes on current and future distributions from certain foreign subsidiaries. If management decides to repatriate additional foreign earnings, the Company would need to adjust the income tax provision in the period that management makes that decision.
Unrecognized Tax Benefits
The Company files U.S federal, state, local and foreignnon-U.S. tax returns. The Company is routinely audited by the tax authorities in these jurisdictions, and a number of audits are currently underway. It is reasonably possible during the next twelve months that uncertain tax positions may be settled, which could result in a decrease in the gross amount of unrecognized tax benefits. This decrease may result in an income tax benefit. Due to the potential for resolution of U.S federal, state and foreignnon-U.S. examinations, and the expiration of various statutes of limitation, the Company's gross unrecognized tax benefits balance may change within the next twelve months by a range of 0zero to $30.9 million.$4,578. All significant U.S. federal, state, local and internationalnon-U.S. matters have been concluded through 2016.2020. The Company believes adequate provision has been made for all income tax uncertainties.
The following table is a reconciliation of the beginning and ending balances of the Company’sCompany's unrecognized tax benefits:
| | | | | | | | | |
| | | | | | Total |
Unrecognized tax benefits at January 1, 20182021 | | | | | $ | 68,03472,338 | |
| Additions based on tax positions related to the current year | | | | | 15,5805,859 | |
| Additions for tax positions of prior years | | | | | 29,6373,784 | |
| Reductions for tax positions of prior years | | | | | (5,226)(13,008) | |
| Cash settlements | | | | | (7,345)(1,490) | |
| Lapse of statutes | | | | | (7,219)(2,831) | |
Unrecognized tax benefits at December 31, 20182021 (1) | | | | | 64,652 | | | | | 93,461 | |
| Additions based on tax positions related to the current year | | | | | 4,4933,315 | |
| Additions for tax positions of prior years | | | | | 6,6683,421 | |
| Reductions for tax positions of prior years | | | | | (9,217)(39,439) | |
| Cash settlements | | | | | (922)(411) | |
| Lapse of statutes | | | | | (11,269)(3,352) | |
Unrecognized tax benefits at December 31, 20192022 (1) | | | | | 28,186 | | | | | 83,214 | |
| Additions based on tax positions related to the current year | | | | | 3,1341,235 | |
| Additions for tax positions of prior years | | | | | 5,4902,223 | |
| Reductions for tax positions of prior years | | | | | (3,599)(3,361) | |
| Cash settlements | | | | | (6,214)(1,791) | |
| Lapse of statutes | | | | | (9,687)(3,983) | |
Unrecognized tax benefits at December 31, 20202023 (1) | | | | | $ | 72,33822,509 | |
(1) If recognized, the net amount of potential tax benefits as of December 31, 2023 that would impact the Company’sCompany's effective tax rate is $65.5 million.$18,367. During the years ended December 31, 2020, 20192023, 2022 and 2018,2021, the Company recorded (income) expenseincome of $(0.1) million, $(0.6) million$1,378, $8,931 and $2.4 million,$2,654, respectively, as a component of provision for income taxes related to the accrued interest and penalties on net reductions to unrecognized tax benefits. The Company had accrued interest and penalties of $17.8 million$4,798 at December 31, 20202023 and $17.8 million$6,175 at December 31, 2019,2022, which are not included in the above table.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
16.15. Equity and Cash Incentive Program
The Company's share-basedCompany typically makes its annual grants of equity awards are typically granted annuallypursuant to actions taken by the Compensation Committee of the Board of Directors at its regularly scheduled first quarter Compensation Committee meeting. Additionally, inFor the second quarter of 2018, the Company granted equityyears presented herein, employee awards to its new President and Chief Executive Officer. Awards were made pursuant to the terms of the Company's 2021 Omnibus Incentive Plan (the "2021 Plan") and 2012 Equity and Cash Incentive Plan (the "2012 Plan"),.
On May 7, 2021, the shareholders approved the 2021 Plan, to replace the 2012 Plan, which was approved by shareholders on May 3, 2012. This plan replaced the 2005 Equity and Cash Incentive Plan (the "2005 Plan"), whichotherwise would have otherwise terminated according to its terms on January 31, 2015 and the 1996 Non-Employee Directors Stock Compensation Plan (the "Directors Plan"), which would have otherwise terminated according to its terms on December 31, 2012.May 3, 2022. Upon adoptionapproval of the 20122021 Plan, no additional awards could be granted under the 2005 Plan. Officers and other key employees, as well as non-employee directors, are eligible to participate in the 2012 Plan, which has a ten-year term and will terminate on May 3, 2022.the remaining 4,888,197 shares available for additional award grant purposes became available for issuance under the 2021 Plan. The 20122021 Plan provides for stock options and SARs, grants, restricted stock awards, restricted stock unit awards, performance share awards,RSUs, PSAs, cash performance awards, directors' shares and deferred stock units. Under the 20122021 Plan, a total of 17,000,0008,300,000 newly authorized shares of common stock are reserved for issuance, resulting in a total of 13,188,197 authorized shares available for issuance. These shares are subject to adjustments resulting from stock dividends, stock splits, recapitalizations, reorganizations and other similar changes.
In 2018, in connection with the separation of Apergy, the Company modified the outstanding equity awards for its employees. The awards were modified such that all individuals received an equivalent fair value both beforeOfficers and after the separation of Apergy. This modification resultedother key employees, as well as non-employee directors, are eligible to participate in the issuance of an additional 1,138,008 SARs, 26,316 performance shares,2021 Plan, and 47,063 RSUs in 2018. The exercise price of these outstanding awards, where applicable, was adjustedwere also eligible under the 2012 Plan which had a ten-year term between May 3, 2012 to preserve the value of the awards immediately prior to the separation. As no incremental fair value was awarded as a result of the issuance of these additional shares, the modification did not result in additional compensation expense.May 3, 2022.
Stock-based compensation costs are reported within selling, general and administrative expenses in the Consolidated Statementsconsolidated statements of Earnings.earnings. The following table summarizes the Company’sCompany's compensation expense relating to all stock-based incentive plans:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| Pre-tax stock-based compensation expense (continuing) | $ | 25,026 | | | $ | 29,702 | | | $ | 23,698 | |
| Tax benefit | (2,731) | | | (2,490) | | | (2,722) | |
| Total stock-based compensation expense, net of tax | $ | 22,295 | | | $ | 27,212 | | | $ | 20,976 | |
Pre-tax stock-based compensation expense attributable to Apergy employees for the year ended December 31, 2018 was $744. These costs are reported within earnings from discontinued operations in the Consolidated Statement of Earnings. | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| Pre-tax stock-based compensation expense | $ | 31,465 | | | $ | 30,821 | | | $ | 31,111 | |
| Tax benefit | (3,266) | | | (2,993) | | | (2,859) | |
| Total stock-based compensation expense, net of tax | $ | 28,199 | | | $ | 27,828 | | | $ | 28,252 | |
SARs
The exercise price per share for SARs is equal to the closing price of the Company’sCompany's stock on the New York Stock Exchange on the date of grant. New common shares are issued when SARs are exercised. The period during which SARs are exercisable is fixed by the Company’sCompany's Compensation Committee at the time of grant. Generally, the SARs vest after three years of service and expire at the end of ten years.
In 2020, 20192023, 2022 and 2018,2021, the Company issued SARs covering 390,780, 615,089359,715, 335,285 and 757,603413,173 shares, respectively. The fair value of each SAR grant was estimated on the date of grant using a Black-Scholes option-pricing model with the following assumptions:
| | | | 2020 | | 2019 | | 2018 | | 2023 | | 2022 | | 2021 |
| Risk-free interest rate | Risk-free interest rate | 1.44 | % | | 2.51 | % | | 2.58 | % | — | 2.87% | Risk-free interest rate | 3.91 | % | | 1.86 | % | | 0.59 | % |
| Dividend yield | Dividend yield | 1.65 | % | | 2.13 | % | | 1.99 | % | — | 2.43% | Dividend yield | 1.32 | % | | 1.25 | % | | 1.62 | % |
| Expected life (years) | Expected life (years) | 5.5 | | 5.6 | | 5.6 | — | 5.7 | Expected life (years) | 5.4 | | 5.4 | | 5.5 |
| Volatility | Volatility | 22.76 | % | | 22.35 | % | | 20.95 | % | — | 21.20% | Volatility | 30.65 | % | | 29.46 | % | | 30.49 | % |
| Grant price | Grant price | $119.86 | | $91.20 | | $79.75 | — | $82.09 | Grant price | $153.25 | | $160.21 | | $122.73 |
| Fair value at date of grant | $22.54 | | $17.55 | | $14.58 | — | $15.41 |
| Fair value per share at date of grant | | Fair value per share at date of grant | $47.27 | | $42.07 | | $29.08 |
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Expected volatilities are based on Dover's stock price history, including implied volatilities from traded options on Dover stock. The Company uses historical data to estimate SAR exerciseexercises and employee termination patterns within the valuation model. The expected life of SARs granted is derived from the output of the option valuation model and represents the average period of time that SARs granted are expected to be outstanding. The interest rate for periods within the contractual life of the awards is based on the U.S. Treasury yield curve in effect at the time of grant.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
A summary of activity relating to SARs granted under the 20122021 Plan and the predecessor plans2012 Plan for the year ended December 31, 20202023 is as follows:
| | | | SARs | | SARs |
| | | Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (Years) | | Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (Years) | | Aggregate Intrinsic Value |
| Outstanding at January 1, 2020 | 3,599,169 | | | $ | 69.07 | | | |
| Outstanding at January 1, 2023 | |
| Granted | |
| Granted | |
| Granted | Granted | 390,780 | | | 119.86 | | | |
| | Forfeited / expired | Forfeited / expired | (17,103) | | | 91.98 | | | |
| | Forfeited / expired | |
| | Forfeited / expired | |
| Exercised | Exercised | (992,913) | | | 57.49 | | | |
| Outstanding at December 31, 2020 | 2,979,933 | | | 79.36 | | | 6.4 |
| Exercised | |
| Exercised | |
| Outstanding at December 31, 2023 | |
| Outstanding at December 31, 2023 | |
| Outstanding at December 31, 2023 | |
| | Exercisable at December 31, 2020 | 1,385,683 | | | $ | 62.59 | | | 4.6 |
| Exercisable at December 31, 2023 | |
| Exercisable at December 31, 2023 | |
| Exercisable at December 31, 2023 | |
The following table summarizes information about outstanding SARs at December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | SARs Outstanding | | SARs Exercisable |
| Range of Exercise Prices | | Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Life in Years | | Aggregate Intrinsic Value | | Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Life in Years | | Aggregate Intrinsic Value |
| $25.96 - $58.69 | | 336,295 | | | $ | 49.29 | | | 4.1 | | $ | 25,891 | | | 336,295 | | | $ | 49.29 | | | 4.1 | | $ | 25,891 | |
| $61.79 - $84.94 | | 1,716,140 | | | $ | 72.54 | | | 5.8 | | 92,163 | | | 1,049,388 | | | $ | 66.95 | | | 4.8 | | 62,230 | |
| $91.20 - $119.86 | | 927,498 | | | $ | 103.15 | | | 8.5 | | 21,421 | | | 0 | | | $ | 0 | | | — | | | 0 | |
| | 2,979,933 | | | | | | | $ | 139,475 | | | 1,385,683 | | | | | | | $ | 88,121 | |
Unrecognized compensation expense related to SARs not yet exercisable was $8,746$10,967 at December 31, 2020.2023. This cost is expected to be recognized over a weighted average period of 1.61.5 years.
Other information regarding the exercise of SARs is listed below:
| | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | 2018 |
| SARs | | | | | |
| Fair value of SARs that became exercisable | $ | 8,585 | | | $ | 8,611 | | | $ | 12,832 | |
| Aggregate intrinsic value of SARs exercised | $ | 55,031 | | | $ | 89,473 | | | $ | 101,365 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | 2021 |
| Fair value of SARs that became exercisable | $ | 7,492 | | | $ | 8,939 | | | $ | 10,199 | |
| Aggregate intrinsic value of SARs exercised | $ | 26,041 | | | $ | 11,992 | | | $ | 62,895 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Performance Share AwardsPSAs
Performance share awardsPSAs granted are expensed over the three-year requisite performance and service period. Awards become vested if (1) the Company achieves certain market conditions or specified internal metrics and (2) the employee remains continuously employed by the Company during the performance period. Partial vesting may occur after separation from service in the case of certain terminations not for cause and for retirements.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share dataIn 2023, 2022 and where otherwise indicated)
In 2020, 2019 and 2018,2021, the Company issued performance sharesPSAs covering 49,056, 35,17243,656, 40,087 and 122,45950,371 shares, respectively.
The performance share awardsPSAs granted in 2020 are market condition awards as attainment is based on Dover's performance relative to its peer group (companies listed under the S&P 500 Industrials sector) for the relevant performance period. The performance period and vesting period for these awards is approximately three years. These awards were valued on the date of grant using the Monte Carlo simulation model (a binomial lattice-based valuation model), and are generally recognized ratably over the vesting period, and theperiod. The fair value is not subject to change based on future market conditions. The assumptions used in determining the fair value of the performance sharesPSAs granted in 2020 were as follows:
| | | | | |
| Performance Shares |
| 2020 |
Risk-free interest rate | 1.40 | % |
Dividend yield | 1.65 | % |
Expected life (years) | 2.9 |
Volatility | 23.30 | % |
| |
Grant price | $119.86 |
Fair value per share at date of grant | $165.71 |
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | 2021 |
| Risk-free interest rate | 4.28 | % | | 1.68 | % | | 0.19 | % |
| Dividend yield | 1.32 | % | | 1.25 | % | | 1.62 | % |
| Expected life (years) | 2.9 | | 2.9 | | 2.9 |
| Volatility | 27.30 | % | | 31.10 | % | | 31.90 | % |
| | | | | |
| Grant price | $153.25 | | $160.21 | | $122.73 |
| Fair value per share at date of grant | $249.48 | | $196.40 | | $148.29 |
The performance share awards granted in 2019 and 2018 are considered performance condition awards as attainment is based on Dover's performance relative to established internal metrics. The fair value of these awards was determined using Dover's closing stock price on the date of grant. The expected attainment of the internal metrics for these awards is analyzed each reporting period, and the related expense is adjusted up or down based on expected attainment, if that attainment differs from previous estimates. The cumulative effect on current and prior periods of a change in attainment is recognized in selling, general and administrative expenses in the Consolidated Statements of Earnings in the period of change.
The fair value and average attainment used in determining compensation cost of the performance shares issued in 2019 and 2018 are as follows for the year ended December 31, 2020:
| | | | | | | | | | | | | | | | | |
| |
| | 2019 | | 2018 |
| Fair value per share at date of grant | $91.20 | | $79.75 | - | $82.09 |
| Average attainment rate reflected in expense | 191.2 | % | | 186.1% |
A summary of activity for performance share awards for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | |
| | Number of Shares | | Weighted Average Grant-Date Fair Value |
| Unvested at January 1, 2020 | 137,809 | | | $ | 82.45 | |
| Granted | 49,056 | | | 165.71 | |
| | | |
| | | |
| | | |
| Vested | (108,886) | | | 80.08 | |
| Unvested at December 31, 2020 | 77,979 | | | $ | 138.14 | |
Unrecognized compensation expense related to unvested performance shares as of December 31, 2020 was $7,402, which will be recognized over a weighted average period of 1.8 years.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Restricted Stock UnitsA summary of activity for PSAs for the year ended December 31, 2023 is as follows:
| | | | | | | | | | | |
| | Number of Shares | | Weighted Average Grant-Date Fair Value |
| Unvested at January 1, 2023 | 85,807 | | | $ | 170.03 | |
| Granted | 43,656 | | | 249.48 | |
| | | |
| | | |
| Forfeited | (7,360) | | | 197.65 | |
| Vested | (44,342) | | | 148.29 | |
| Unvested at December 31, 2023 | 77,761 | | | $ | 224.42 | |
Unrecognized compensation expense related to unvested PSAs as of December 31, 2023 was $9,599, which will be recognized over a weighted average period of 1.8 years.
RSUs
The Company also has restricted stock authorized for grant (as part of the 2012 Plan). Under this Plan, commongrant. Common stock of the Company may be granted at no cost to certain officers and key employees. In general, restrictions limit the sale or transfer of these shares during a three-year period, and restrictions lapse proportionately over the three-year period. The Company granted 83,512, 124,92991,439, 79,556 and 284,72187,177 of restricted stock unitsRSUs in 2020, 20192023, 2022 and 2018,2021, respectively. The fair value of these awards was determined using Dover's closing stock price on the date of grant, which were $119.86, $91.20,was $153.25, $160.21, and $79.75-$82.09$122.73 in 2020, 20192023, 2022 and 2018,2021, respectively.
A summary of activity for restricted stock unitsRSUs for the year ended December 31, 20202023 is as follows:
| | | | | | | | | | | |
| | Number of Shares | | Weighted Average Grant-Date Fair Value |
| Unvested at January 1, 2020 | 324,553 | | | $ | 81.45 | |
| Granted | 83,512 | | | 119.86 | |
| | | |
| | | |
| Forfeited | (11,140) | | | 96.26 | |
| Vested | (144,018) | | | 81.16 | |
| Unvested at December 31, 2020 | 252,907 | | | $ | 93.43 | |
| | | |
| | | | | | | | | | | |
| | Number of Shares | | Weighted Average Grant-Date Fair Value |
| Unvested at January 1, 2023 | 147,676 | | | $ | 135.98 | |
| Granted | 91,439 | | | 153.25 | |
| | | |
| | | |
| Forfeited | (12,513) | | | 148.95 | |
| Vested | (73,628) | | | 133.83 | |
| Unvested at December 31, 2023 | 152,974 | | | $ | 145.45 | |
| | | |
Unrecognized compensation expense relating to unvested restricted stock unitsRSUs as of December 31, 20202023 was $14,943,$10,387, which will be recognized over a weighted average period of 1.31.4 years.
Directors' Shares
The Company issued the following shares to its non-employee directors under the 2012 Plan as partial compensation for serving as directors of the Company:
| | | | Years ended December 31, | | Years ended December 31, |
| | | 2020 | | 2019 | | 2018 | | 2023 | | 2022 | | 2021 |
| Aggregate shares granted | Aggregate shares granted | 9,854 | | | 10,838 | | | 15,802 | |
| Deferred stock units | Deferred stock units | (6,278) | | | (6,168) | | | (9,917) | |
| | Net shares issued | Net shares issued | 3,576 | | | 4,670 | | | 5,885 | |
| Net shares issued | |
| Net shares issued | |
17.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
16. Commitments and Contingent Liabilities
Guarantees
The Company has provided typical indemnities in connection with sales of certain businesses and assets, including representations and warranties and related indemnities for environmental, health and safety, tax and employment matters. The Company does not have any material liabilities recorded for these indemnifications and is not aware of any claims or other information that would give rise to material payments under such indemnities.
Litigation
A few of the Company’sCompany's subsidiaries are involved in legal proceedings relating to the cleanup of waste disposal sites identified under federal and state statutes which provide for the allocation of such costs among “potentially"potentially responsible parties.”" In each instance, the extent of the Company’sCompany's liability appears to be relatively insignificant in relation to the total projected expenditures and the number of other “potentially"potentially responsible parties”parties" involved and is anticipated to be immaterial to the Company. In addition, a few of the Company’sCompany's subsidiaries are involved in ongoing remedial activities at certain current and former plant sites, in cooperation with regulatory agencies, and appropriate estimated liabilities have been established. At December 31, 20202023 and 2019, the Company hasDecember 31, 2022, these estimated liabilities totaling $30,431 and $30,608, respectively, for environmental and other matters, including private party claims for exposure to hazardous substances that are probable and estimable.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share dataestimable, were not significant. See Note 10 — Other Accrued Expenses and where otherwise indicated)
Other Liabilities for additional details.
The Company and some of its subsidiaries are also parties to a number of other legal proceedings incidental to their businesses. These proceedings primarily involve claims by private parties alleging injury arising out of use of the Company’sCompany's products, patent infringement, employment matters and commercial disputes. Management and legal counsel, at least quarterly, review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and currently accrued to-date and consider the availability and extent of insurance coverage. The Company has estimated liabilities for these other legal matters that are probable and estimable, and at December 31, 20202023 and 2019,2022, these estimated liabilities were immaterial. While it is not possible at this time to predict the outcome of these legal actions, in the opinion of management, based on the aforementioned reviews, the Company is not currently involved in any legal proceedings which, individually or in the aggregate, could have a material effect on its financial position, results of operations, or cash flows.
18.17. Employee Benefit Plans
The Company offers defined contribution retirement plans which cover the majority of its U.S. employees, as well as employees in certain other countries. The Company’s expense relating to defined contribution plans was $52,629, $50,031$61,032, $57,543 and $46,030$59,719 for the years ended December 31, 2020, 20192023, 2022 and 2018,2021, respectively.
The Company sponsors qualified defined benefit pension plans covering certain employees of the Company and its subsidiaries. The plans’plans' benefits are generally based on years of service and employee compensation. The Company also provides to certain management employees, through non-qualified plans, supplemental retirement benefits in excess of qualified plan limits imposed by federal tax law.
In July 2013, the Company announced that, after December 31, 2013, theThe U.S. qualified and non-qualified defined benefit plans would bewere closed to new employees.employees after December 31, 2013. All pension-eligible employees as of December 31, 2013 will continuecontinued to earn a pension benefit through December 31, 2023 as long as they remainremained employed by an operating companythe Company participating in the impacted plans. The Company also announced that effectiveEffective January 1, 2024, the plans wouldwill be frozen tofor any future benefit accruals.
In connection with the spin-off on May 9, 2018, certain assets and liabilities were moved to a new plan sponsored by Apergy. The separation of Apergy triggered a pension plan curtailment which required a re-measurement of the Dover U.S. pension plan's (the "Plan") benefit obligation in the second quarter of 2018, assuming a discount rate of 4.2% and an expected return on assets of 6.8%. In 2018, the Plan made total lump sum payments of $74,016. Based on the total lump sum payments made to both Apergy and other participants in the plan during the year and the second quarter re-measurement, the Company recorded non-cash settlement and curtailment charges of approximately $13,939 in 2018, of which $9,200 was classified within discontinued operations.
The Company also maintains other post-retirement benefit plans. These plans are closed to new entrants and are not considered to be significant. The supplemental and other post-retirement benefit plans are supported by the general assets of the Company.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Obligations and Funded Status
The following tables summarize the change in benefit obligations, change in plan assets, and funded status associated with the Company's significant defined benefit plans and the amounts recognized in the consolidated balance sheets at December 31, 20202023 and 2019:2022:
| | | |
| | |
| | |
| | |
| | |
| | | | Qualified Defined Benefits | | Non-Qualified Supplemental Benefits | |
| | | U.S. Plan | | Non-U.S. Plans | | |
| | | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 | |
| Change in benefit obligation: | Change in benefit obligation: | | | | | | | | | | | | |
| Change in benefit obligation: | |
| Change in benefit obligation: | |
| Benefit obligation at beginning of year | |
| Benefit obligation at beginning of year | |
| Benefit obligation at beginning of year | Benefit obligation at beginning of year | $ | 490,228 | | | $ | 447,173 | | | $ | 296,534 | | | $ | 270,329 | | | $ | 60,183 | | | $ | 66,836 | | |
| Service cost | Service cost | 6,824 | | | 7,016 | | | 5,345 | | | 5,665 | | | 1,272 | | | 1,942 | | |
| Service cost | |
| Service cost | |
| Interest cost | |
| Interest cost | |
| Interest cost | Interest cost | 16,272 | | | 19,026 | | | 3,697 | | | 5,101 | | | 1,765 | | | 2,670 | | |
| Plan participants' contributions | Plan participants' contributions | 0 | | | 0 | | | 1,707 | | | 1,681 | | | 0 | | | 0 | | |
| Plan participants' contributions | |
| Plan participants' contributions | |
| Benefits paid | Benefits paid | (36,303) | | | (38,093) | | | (8,613) | | | (9,298) | | | (12,324) | | | (13,617) | | |
Actuarial loss(1) | 47,160 | | | 55,105 | | | 19,558 | | | 24,791 | | | 298 | | | 2,352 | | |
| Benefits paid | |
| Benefits paid | |
Actuarial loss (gain)(1) | |
Actuarial loss (gain)(1) | |
Actuarial loss (gain)(1) | |
| | Amendments | |
| | Amendments | |
| | Amendments | Amendments | 0 | | | 0 | | | (1,401) | | | 0 | | | 0 | | | 0 | | |
| Settlements and curtailments | Settlements and curtailments | 0 | | | 0 | | | (294) | | | (5,412) | | | 0 | | | 0 | | |
| Settlements and curtailments | |
| Settlements and curtailments | |
| Currency translation and other | |
| Currency translation and other | |
| Currency translation and other | Currency translation and other | 0 | | | 1 | | | 24,296 | | | 3,677 | | | 0 | | | 0 | | |
| | Benefit obligation at end of year | Benefit obligation at end of year | 524,181 | | | 490,228 | | | 340,829 | | | 296,534 | | | 51,194 | | | 60,183 | | |
| | Benefit obligation at end of year | |
| | Benefit obligation at end of year | |
| Change in plan assets: | |
| Change in plan assets: | |
| Change in plan assets: | Change in plan assets: | | | | | | | | | | | | |
| Fair value of plan assets at beginning of year | Fair value of plan assets at beginning of year | 550,238 | | | 488,900 | | | 185,590 | | | 162,589 | | | 0 | | | 0 | | |
| Fair value of plan assets at beginning of year | |
| Fair value of plan assets at beginning of year | |
| Actual return on plan assets | |
| Actual return on plan assets | |
| Actual return on plan assets | Actual return on plan assets | 92,961 | | | 99,431 | | | 13,560 | | | 23,812 | | | 0 | | | 0 | | |
| Company contributions | Company contributions | 0 | | | 0 | | | 7,315 | | | 7,247 | | | 12,324 | | | 13,617 | | |
| Company contributions | |
| Company contributions | |
| Plan participants' contributions | Plan participants' contributions | 0 | | | 0 | | | 1,707 | | | 1,681 | | | 0 | | | 0 | | |
| Plan participants' contributions | |
| Plan participants' contributions | |
| Benefits paid | |
| Benefits paid | |
| Benefits paid | Benefits paid | (36,303) | | | (38,093) | | | (8,613) | | | (9,298) | | | (12,324) | | | (13,617) | | |
| | Settlements and curtailments | Settlements and curtailments | 0 | | | 0 | | | (294) | | | (4,350) | | | 0 | | | 0 | | |
| | Settlements and curtailments | |
| | Settlements and curtailments | |
| Currency translation and other | |
| Currency translation and other | |
| Currency translation and other | Currency translation and other | 0 | | | 0 | | | 13,483 | | | 3,909 | | | 0 | | | 0 | | |
| | Fair value of plan assets at end of year | Fair value of plan assets at end of year | 606,896 | | | 550,238 | | | 212,748 | | | 185,590 | | | 0 | | | 0 | | |
| | Fair value of plan assets at end of year | |
| | Fair value of plan assets at end of year | |
| Funded (Unfunded) status | |
| Funded (Unfunded) status | |
| Funded (Unfunded) status | Funded (Unfunded) status | $ | 82,715 | | | $ | 60,010 | | | $ | (128,081) | | | $ | (110,944) | | | $ | (51,194) | | | $ | (60,183) | | |
| Amounts recognized in the consolidated balance sheets consist of: | Amounts recognized in the consolidated balance sheets consist of: | | | | | | | | | | | | |
| Amounts recognized in the consolidated balance sheets consist of: | |
| Amounts recognized in the consolidated balance sheets consist of: | |
| Assets and Liabilities: | |
| Assets and Liabilities: | |
| Assets and Liabilities: | Assets and Liabilities: | | | | | | | | | | | | |
| Other assets and deferred charges | Other assets and deferred charges | $ | 82,715 | | | $ | 60,010 | | | $ | 653 | | | $ | 671 | | | $ | 0 | | | $ | 0 | | |
| Other assets and deferred charges | |
| Other assets and deferred charges | |
| Accrued compensation and employee benefits | Accrued compensation and employee benefits | 0 | | | 0 | | | (1,691) | | | (1,526) | | | (4,899) | | | (12,500) | | |
| Other liabilities (deferred compensation) | 0 | | | 0 | | | (127,043) | | | (110,089) | | | (46,295) | | | (47,683) | | |
| Accrued compensation and employee benefits | |
| Accrued compensation and employee benefits | |
Liabilities held for sale (2) | |
Liabilities held for sale (2) | |
Liabilities held for sale (2) | |
| Defined benefit and other post-retirement benefit plans | |
| Defined benefit and other post-retirement benefit plans | |
| Defined benefit and other post-retirement benefit plans | |
| | Total assets and liabilities | 82,715 | | | 60,010 | | | (128,081) | | | (110,944) | | | (51,194) | | | (60,183) | | |
| Total assets (liabilities) | |
| | Total assets (liabilities) | |
| | Total assets (liabilities) | |
| Accumulated Other Comprehensive Loss (Earnings): | |
| Accumulated Other Comprehensive Loss (Earnings): | |
| Accumulated Other Comprehensive Loss (Earnings): | Accumulated Other Comprehensive Loss (Earnings): | | | | | | | | | | | | |
| Net actuarial losses (gains) | Net actuarial losses (gains) | 49,386 | | | 71,247 | | | 80,472 | | | 70,694 | | | (18,400) | | | (20,556) | | |
| Net actuarial losses (gains) | |
| Net actuarial losses (gains) | |
| Prior service cost (credit) | |
| Prior service cost (credit) | |
| Prior service cost (credit) | Prior service cost (credit) | 322 | | | 549 | | | (3,632) | | | (2,724) | | | 4,593 | | | 6,288 | | |
| | Deferred taxes | (10,272) | | | (15,263) | | | (17,144) | | | (15,492) | | | 2,961 | | | 3,066 | | |
| Tax (benefit) expense | |
| | Tax (benefit) expense | |
| | Tax (benefit) expense | |
| Total accumulated other comprehensive loss (earnings), net of tax | Total accumulated other comprehensive loss (earnings), net of tax | 39,436 | | | 56,533 | | | 59,696 | | | 52,478 | | | (10,846) | | | (11,202) | | |
| Total accumulated other comprehensive loss (earnings), net of tax | |
| Total accumulated other comprehensive loss (earnings), net of tax | |
| Net amount recognized at December 31, | |
| Net amount recognized at December 31, | |
| Net amount recognized at December 31, | Net amount recognized at December 31, | $ | 122,151 | | | $ | 116,543 | | | $ | (68,385) | | | $ | (58,466) | | | $ | (62,040) | | | $ | (71,385) | | |
| | Accumulated benefit obligations | Accumulated benefit obligations | $ | 511,292 | | | $ | 476,357 | | | $ | 326,317 | | | $ | 282,883 | | | $ | 47,358 | | | $ | 56,017 | | |
| | Accumulated benefit obligations | |
| | Accumulated benefit obligations | |
(1) The actuarial lossesloss (gain) were primarily due to lower discount rates.rate fluctuations and plan experience.
(2) De-Sta-Co assets and liabilities are classified as held for sale as of December 31, 2023. See Note 4 — Dispositions for further details.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The Company’sCompany's net unfunded status at December 31, 20202023 and 20192022 includes net liabilities of $128,081$74,264 and $110,944,$62,457, respectively, relating to the Company’sCompany's significant international qualified plans, some in locations where it is not economically advantageous to pre-fund the plans due to local regulations. The majority of the international obligations relate to defined pension plans operated by the Company’sCompany's businesses in Germany, Switzerland, andFrance, the United Kingdom.Kingdom, and Italy.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The accumulated benefit obligation for all defined benefit pension plans was $884,967$591,114 and $815,257$560,057 at December 31, 20202023 and 2019,2022, respectively. Pension
Non-U.S. pension plans with projected benefit obligations and accumulated benefit obligations in excess of plan assets consist of the following at December 31, 20202023 and 2019:2022:
| | | | | | | | | | | |
| | 2020 | | 2019 |
| Projected benefit obligation (PBO) | $ | 383,244 | | | $ | 348,137 | |
| Accumulated benefit obligation (ABO) | 364,895 | | | 331,126 | |
| Fair value of plan assets | 203,314 | | | 177,057 | |
| | | | | | | | | | | |
| | 2023 | | 2022 |
| | | |
| Accumulated benefit obligation | $ | 227,442 | | | $ | 124,082 | |
| Fair value of plan assets | 158,653 | | | 64,112 | |
Non-U.S. pension plans with projected benefit obligations in excess of plan assets consist of the following at December 31, 2023 and 2022:
| | | | | | | | | | | |
| | 2023 | | 2022 |
| Projected benefit obligation | $ | 234,854 | | | $ | 200,671 | |
| | | |
| Fair value of plan assets | 158,653 | | | 136,351 | |
Net Periodic Benefit Cost
The operating expense component of net periodic benefit cost (service cost) is reported with similar compensation costs in the Company's Consolidated Statementconsolidated statement of Earnings.earnings. The non-operating components (all other components of net periodic benefit expense, including interest cost, amortization of prior service cost, curtailments and settlements, etc.) are reported outside of operating income in other income, net in the Consolidated Statementconsolidated statement of Earnings.earnings.
Components of the net periodic benefit cost were as follows:
Defined Benefit Plans
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Qualified Defined Benefits | | Non-Qualified Supplemental Benefits |
| | U.S. Plan | | Non-U.S. Plans | |
| | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2018 |
| Service cost | $ | 6,824 | | | $ | 7,016 | | | $ | 9,019 | | | $ | 5,345 | | | $ | 5,665 | | | $ | 5,359 | | | $ | 1,272 | | | $ | 1,942 | | | $ | 2,624 | |
| Interest cost | 16,272 | | | 19,026 | | | 20,756 | | | 3,697 | | | 5,101 | | | 4,962 | | | 1,765 | | | 2,670 | | | 3,204 | |
| Expected return on plan assets | (31,475) | | | (34,136) | | | (39,045) | | | (6,837) | | | (6,220) | | | (7,675) | | | 0 | | | 0 | | | 0 | |
| Amortization of: | | | | | | | | | | | | | | | | | |
| Prior service cost (credit) | 227 | | | 303 | | | 298 | | | (493) | | | (398) | | | (449) | | | 1,695 | | | 2,811 | | | 3,770 | |
| Recognized actuarial loss (gain) | 7,536 | | | 0 | | | 3,102 | | | 3,047 | | | 3,109 | | | 2,952 | | | (1,857) | | | (2,280) | | | (1,132) | |
| Transition obligation | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1 | | | — | | | — | | | — | |
| Settlement and curtailment loss (gain) | 0 | | | 0 | | | 13,939 | | (1) | 25 | | | 961 | | | 7 | | | 0 | | | 0 | | | (1,381) | |
| | | | | | | | | | | | | | | | | |
| Net periodic (benefit) expense | $ | (616) | | | $ | (7,791) | | | $ | 8,069 | | | $ | 4,784 | | | $ | 8,218 | | | $ | 5,157 | | | $ | 2,875 | | | $ | 5,143 | | | $ | 7,085 | |
Less: Discontinued operations | 0 | | | 0 | | | 10,109 | | (1) | 0 | | | 0 | | | 114 | | | 0 | | | 0 | | | 279 | |
| Net periodic (income) expense - Continuing operations | $ | (616) | | | $ | (7,791) | | | $ | (2,040) | | | $ | 4,784 | | | $ | 8,218 | | | $ | 5,043 | | | $ | 2,875 | | | $ | 5,143 | | | $ | 6,806 | |
(1) $9.2 million of the total settlement and curtailment loss on the U.S. Plan is attributable to Apergy participants in the Dover Defined Benefit Plan and has therefore been reflected in the results of discontinued operations. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Qualified Defined Benefits | | Non-Qualified Supplemental Benefits |
| | U.S. Plan | | Non-U.S. Plans | |
| | 2023 | | 2022 | | 2021 | | 2023 | | 2022 | | 2021 | | 2023 | | 2022 | | 2021 |
| Service cost | $ | 2,867 | | | $ | 5,703 | | | $ | 7,134 | | | $ | 3,712 | | | $ | 4,675 | | | $ | 5,749 | | | $ | 970 | | | $ | 1,426 | | | $ | 1,561 | |
| Interest cost | 17,203 | | | 13,745 | | | 13,605 | | | 10,591 | | | 5,220 | | | 3,590 | | | 1,636 | | | 1,215 | | | 1,232 | |
| Expected return on plan assets | (26,208) | | | (29,104) | | | (28,980) | | | (7,331) | | | (7,191) | | | (7,188) | | | — | | | — | | | — | |
| Amortization of: | | | | | | | | | | | | | | | | | |
| Prior service cost (credit) | — | | | 110 | | | 212 | | | (717) | | | (526) | | | (453) | | | 1,874 | | | 1,490 | | | 1,531 | |
| Actuarial loss (gain) | — | | | 2,300 | | | 10,012 | | | 656 | | | 1,747 | | | 3,938 | | | (3,207) | | | (2,016) | | | (1,672) | |
| | | | | | | | | | | | | | | | | |
| Settlement and curtailment loss (gain) | 4,434 | | | 6,276 | | | 2,031 | | | (801) | | | (393) | | | 194 | | | — | | | — | | | (743) | |
| | | | | | | | | | | | | | | | | |
| Net periodic (benefit) expense | $ | (1,704) | | | $ | (970) | | | $ | 4,014 | | | $ | 6,110 | | | $ | 3,532 | | | $ | 5,830 | | | $ | 1,273 | | | $ | 2,115 | | | $ | 1,909 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Assumptions
The Company determines actuarial assumptions on an annual basis. The weighted average assumptions used in determining the benefit obligations were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Qualified Defined Benefits | | Non-Qualified Supplemental Benefits | | |
| | U.S. Plan | | Non-U.S. Plans | | |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 | | | | |
| Discount rate | 2.65 | % | | 3.40 | % | | 0.79 | % | | 1.18 | % | | 2.45 | % | | 3.20 | % | | | | |
| Average wage increase | 4.00 | % | | 4.00 | % | | 1.51 | % | | 1.80 | % | | 4.50 | % | | 4.50 | % | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Qualified Defined Benefits | | Non-Qualified Supplemental Benefits | | |
| | U.S. Plan | | Non-U.S. Plans | | |
| | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | | | |
| Discount rate | 5.20 | % | | 5.55 | % | | 2.80 | % | | 3.57 | % | | 5.15 | % | | 5.50 | % | | | | |
| Average wage increase | 4.00 | % | | 4.00 | % | | 1.65 | % | | 1.70 | % | | 4.50 | % | | 4.50 | % | | | | |
| | | | | | | | | | | | | | | |
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The weighted average assumptions used in determining the net periodic benefit cost were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Qualified Defined Benefits | | Non- Qualified Supplemental Benefits | | |
| | U.S. Plan | | Non-U.S. Plans | |
| | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2018 | | | | | | |
| Discount rate | 3.40 | % | | 4.35 | % | | 4.20 | % | / | 3.65 | % | (1) | 1.18 | % | | 1.83 | % | | 1.94 | % | | 3.20 | % | | 4.30 | % | | 3.57 | % | | | | | | |
| Average wage increase | 4.00 | % | | 4.00 | % | | 4.00 | % | | 1.80 | % | | 2.10 | % | | 2.33 | % | | 4.50 | % | | 4.50 | % | | 4.50 | % | | | | | | |
| Expected return on plan assets | 6.30 | % | | 6.80 | % | | 6.80 | % | / | 7.25 | % | (1) | 3.69 | % | | 3.67 | % | | 4.66 | % | | na | | na | | na | | | | | | |
(1) The separation of Apergy triggered a pension plan curtailment which required a re-measurement of the Plan's benefit obligation in the second quarter 2018, assuming a discount rate of 4.2% and an expected return on assets of 6.8%. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Qualified Defined Benefits | | Non- Qualified Supplemental Benefits | | |
| | U.S. Plan | | Non-U.S. Plans | |
| | 2023 | | 2022 | | 2021 | | 2023 | | 2022 | | 2021 | | 2023 | | 2022 | | 2021 | | | | | | |
| Discount rate | 5.55 | % | | 2.95 | % | | 2.65 | % | | 3.57 | % | | 1.18 | % | | 0.79 | % | | 5.50 | % | | 2.90 | % | | 2.45 | % | | | | | | |
| Average wage increase | 4.00 | % | | 4.00 | % | | 4.00 | % | | 1.67 | % | | 1.53 | % | | 1.51 | % | | 4.50 | % | | 4.50 | % | | 4.50 | % | | | | | | |
| Expected return on plan assets | 5.60 | % | | 5.60 | % | | 5.60 | % | | 4.69 | % | | 3.47 | % | | 3.40 | % | | na | | na | | na | | | | | | |
The Company’sCompany's discount rate assumption is determined by developing a yield curve based on high quality corporate bonds with maturities matching the plans’plans' expected benefit payment streams. The plans’plans' expected cash flows are then discounted by the resulting year-by-year spot rates. The remeasurement in the second quarter of 2018, triggered by the Apergy spin-off, resulted in an increase to the discount rate used in determining net periodic benefit cost from 3.65% to 4.20% for the balance of 2018.
Plan Assets
The primary financial objective of the plans is to secure participant retirement benefits. Accordingly, the key objective in the plans’plans' financial management is to promote stability and, to the extent appropriate, growth in the funded status. Related and supporting financial objectives are established in conjunction with a review of current and projected plan financial requirements.
As it relates to the funded defined benefit pension plans, the Company’sCompany's funding policy is consistent with the funding requirements of the Employment Retirement Income Security Act ("ERISA") and applicable international laws. The Company is responsible for overseeing the management of the investments of the plans’plans' assets and otherwise ensuring that the plans’plans' investment programs are in compliance with ERISA, other relevant legislation and the related plan documents. Where relevant, the Company has retained professional investment managers to manage the plans’plans' assets and implement the investment process. The investment managers, in implementing their investment processes, have the authority and responsibility to select appropriate investments in the asset classes specified by the terms of their applicable prospectus or investment manager agreements with the plans.
The assets of the plans are invested to achieve an appropriate return for the plans consistent with a prudent level of risk. The plan'splans' long-term investment objective is to generate investment returns that provide adequate assets to meet all benefit obligations in accordance with applicable regulations. The expected return on assets assumption used for pension expensenet periodic benefit cost is developed through analysis of historical and forecasted market returns, statistical analysis, current market conditions and the past experience of plan asset investments.
The Company’sCompany's actual and target weighted average asset allocation for our U.S. Corporate PensionQualified Defined Benefits Plan was as follows:
| | 2020 | | 2019 | | Current Target |
| Equity securities | 22 | % | | 34 | % | | 22 | % |
| Fixed income | 77 | % | | 64 | % | | 78 | % |
| 2023 | | | 2023 | | 2022 | | Current Target |
| Return-seeking investments | | Return-seeking investments | 28 | % | | 27 | % | | 30 | % |
| Liability hedging investments | | Liability hedging investments | 72 | % | | 73 | % | | 70 | % |
| Other | Other | 1 | % | | 2 | % | | 0 | % | Other | — | % | | — | % | | — | % |
| Total | Total | 100 | % | | 100 | % | | 100 | % | Total | 100 | % | | 100 | % | | 100 | % |
Return-seeking investments include diversified foreign and domestic equities, U.S. high yield fixed income investments, and emerging market debt. Liability hedging investments primarily include a diversified portfolio of U.S. long duration fixed income assets. While the non-U.S. investment policies are different for each country, the long-term objectives are generally the same as for the U.S. pension assets.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The fair values of both U.S. and non-U.S. pension plan assets by asset category within the fair value hierarchy (as defined in Note 1413 — Financial Instruments) were as follows:
| | | |
| | | | U.S. Qualified Defined Benefits Plan | U.S. Qualified Defined Benefits Plan |
| | | 12/31/2020 | | 12/31/2019 | | December 31, 2023 | | December 31, 2022 |
| | | Level 1 | | Level 2 | | | Total Fair Value | | Level 1 | | Level 2 | | | Total Fair Value | | Level 1 | | Level 2 | | | | Total Fair Value | | Level 1 | | Level 2 | | | | Total Fair Value |
| | Corporate bonds | Corporate bonds | $ | 0 | | | $ | 329,800 | | | | $ | 329,800 | | | $ | 0 | | | $ | 216,981 | | | | $ | 216,981 | |
| | Corporate bonds | |
| | Corporate bonds | |
| Government securities | Government securities | 8,533 | | | 72,018 | | | | 80,551 | | | 5,846 | | | 69,486 | | | | 75,332 | Government securities | — | | | 52,862 | | 52,862 | | | | | 52,862 | | | | 52,862 | | | — | | — | | | 56,978 | | 56,978 | | | | | 56,978 | | | | 56,978 |
| Interest-bearing cash and short-term investments | Interest-bearing cash and short-term investments | 3,117 | | | 0 | | | | 3,117 | | | 1,438 | | | 0 | | | | 1,438 | Interest-bearing cash and short-term investments | 3,901 | | | — | | — | | | | | 3,901 | | | | 3,901 | | | 2,900 | | 2,900 | | | — | | — | | | | | 2,900 | | | | 2,900 |
| Total investments at fair value | Total investments at fair value | 11,650 | | | 401,818 | | | | 413,468 | | | 7,284 | | | 286,467 | | | | 293,751 | Total investments at fair value | $ | 3,901 | | | $ | | $ | 268,493 | | | | | 272,394 | | | | 272,394 | | | $ | | $ | 2,900 | | | $ | | $ | 258,181 | | | | | 261,081 | | | | 261,081 |
| Investments measured at net asset value* | Investments measured at net asset value* | | | | | |
| Collective funds | Collective funds | 0 | | | 0 | | | | 180,103 | | | 0 | | | 0 | | | | 241,058 | |
| Collective funds | |
| Collective funds | |
| | Short-term investment funds | Short-term investment funds | 0 | | | 0 | | | | 13,325 | | | 0 | | | 0 | | | | 15,429 | |
| | Short-term investment funds | |
| | Short-term investment funds | |
| | Total investments | Total investments | $ | 11,650 | | | $ | 401,818 | | | | $ | 606,896 | | | $ | 7,284 | | | $ | 286,467 | | | | $ | 550,238 | |
| Total investments | |
| Total investments | |
| | | | Non-U.S. Plans | | Non-U.S. Plans |
| | | 12/31/2020 | | 12/31/2019 | | December 31, 2023 | | December 31, 2022 |
| | | Level 1 | | Level 2 | | Level 3 | | Total Fair Value | | Level 1 | | Level 2 | | Level 3 | | Total Fair Value | | Level 1 | | Level 2 | | Level 3 | | Total Fair Value | | Level 1 | | Level 2 | | Level 3 | | Total Fair Value |
| Common stocks | Common stocks | $ | 52,865 | | | $ | 0 | | | $ | 0 | | | $ | 52,865 | | | $ | 44,685 | | | $ | 0 | | | $ | 0 | | | $ | 44,685 | |
| Fixed income investments | Fixed income investments | 0 | | | 26,068 | | | 0 | | | 26,068 | | | 0 | | | 19,871 | | | 0 | | | 19,871 | |
| Mutual funds | Mutual funds | 29,413 | | | 0 | | | 0 | | | 29,413 | | | 26,799 | | | 0 | | | 0 | | | 26,799 | |
| | Cash and cash equivalents | Cash and cash equivalents | 2,822 | | | 0 | | | 0 | | | 2,822 | | | 3,752 | | | 0 | | | 0 | | | 3,752 | |
| | Cash and cash equivalents | |
| | Cash and cash equivalents | |
| Other | Other | 0 | | | 1,181 | | | 21,276 | | | 22,457 | | | 0 | | | 3,519 | | | 18,597 | | | 22,116 | |
| Total investments at fair value | Total investments at fair value | 85,100 | | | 27,249 | | | 21,276 | | | 133,625 | | | 75,236 | | | 23,390 | | | 18,597 | | | 117,223 | |
| Investments measured at net asset value* | Investments measured at net asset value* | |
| Collective funds | Collective funds | 0 | | | 0 | | | 0 | | | 74,138 | | | 0 | | | 0 | | | 0 | | | 64,000 | |
| Collective funds | |
| Collective funds | |
| Other | Other | 0 | | | 0 | | | 0 | | | 4,985 | | | 0 | | | 0 | | | 0 | | | 4,367 | |
| Total | $ | 85,100 | | | $ | 27,249 | | | $ | 21,276 | | | $ | 212,748 | | | $ | 75,236 | | | $ | 23,390 | | | $ | 18,597 | | | $ | 185,590 | |
| Total investments | |
* In accordance with Fair Value Measurement Topic 820 (Subtopic 820-10), certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient were not classified in the fair value hierarchy. These are included to permit reconciliation of the fair value hierarchy to the aggregate pension plan assets.
Common stocks represent investments in domestic and foreign equities, which are publicly traded on active exchanges and are valued based on quoted market prices.
Fixed income investments include U.S. Treasury bonds and notes, which are valued based on quoted market prices, as well as investments in other government and municipal securities and corporate bonds, which are valued based on yields currently available on comparable securities of issuers with similar credit ratings.
Mutual funds are categorized as either Level 1, 2 or Net Asset Value ("NAV") as a practical expedient depending on the nature of the observable inputs. Collective funds and real estateshort-term investment funds are valued using NAV as a practical expedient as of the last business day of the year. The NAV is based on the underlying value of the assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The value of the underlying assets is based on quoted prices in active markets.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
The availability of observable data is monitored by plan management to assess appropriate classification of financial instruments within the fair value hierarchy. Depending upon the availability of such inputs, specific securities may transfer between levels. In such instances, the transfer is reported at the end of the reporting period.
The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 20192022 and 2020,2023, due to the following:
| | | | | |
| Level 3 |
Balance at December 31, 20182021 | $ | 21,28320,252 | |
| Actual return on plan assets: | |
| |
Relating to assets still held at December 31, 20192022 | 319 (382) | |
| |
| |
| Relating to assets sold during the period | 14— | |
| Purchases | 1,6151,852 | |
| Sales and settlements | (4,971)(4,808) | |
| Foreign currency translation | 337 (620) | |
Balance at December 31, 20192022 | 18,59716,294 | |
| Actual return on plan assets: | |
Relating to assets still held at December 31, 20202023 | 349 (417) | |
| Relating to assets sold during the period | 6 (17) | |
| Purchases | 1,7151,746 | |
| Sales and settlements | (1,111)(346) | |
| Foreign currency translation | 1,7201,392 | |
Balance at December 31, 20202023 | $ | 21,27618,652 | |
Future Estimates
Benefit Payments
Estimated future benefit payments to retirees, which reflect expected future service except to the extent frozen, are as follows:
| | | | | | | | | | | | | | | | | | | |
| | Qualified Defined Benefits | | Non-Qualified Supplemental Benefits | | |
| | U.S. Plan | | Non-U.S. Plans | |
| 2021 | $ | 36,044 | | | $ | 9,999 | | | $ | 4,958 | | | |
| 2022 | 37,184 | | | 9,944 | | | 5,021 | | | |
| 2023 | 34,679 | | | 11,333 | | | 5,406 | | | |
| 2024 | 35,863 | | | 13,170 | | | 7,090 | | | |
| 2025 | 33,816 | | | 11,375 | | | 1,758 | | | |
| 2026 - 2030 | 146,262 | | | 69,768 | | | 22,248 | | | |
| | | | | | | | | | | | | | | | | | | |
| | Qualified Defined Benefits | | Non-Qualified Supplemental Benefits | | |
| | U.S. Plan | | Non-U.S. Plans | |
| 2024 | $ | 30,930 | | | $ | 11,964 | | | $ | 5,616 | | | |
| 2025 | 29,031 | | | 11,379 | | | 2,366 | | | |
| 2026 | 27,631 | | | 12,489 | | | 4,626 | | | |
| 2027 | 26,842 | | | 15,279 | | | 1,841 | | | |
| 2028 | 25,629 | | | 14,037 | | | 5,795 | | | |
| 2029 - 2033 | 115,629 | | | 71,276 | | | 10,268 | | | |
Contributions
In 2021,2024, the Company expects to contributemake payments of approximately $5.2$8.2 million to its non-US plans and currently does not expect to contribute$5.6 million to its non-qualified U.S. plans.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
19.18. Accumulated Other Comprehensive Earnings (Loss)
The components of accumulated other comprehensive earnings (loss) are as follows:
| | | | December 31, 2020 | | December 31, 2019 | | December 31, 2023 | | December 31, 2022 |
| Cumulative foreign currency translation adjustments | Cumulative foreign currency translation adjustments | $ | (66,802) | | | $ | (122,252) | |
| Pension and other postretirement benefit plans | Pension and other postretirement benefit plans | (88,126) | | | (97,525) | |
| Changes in fair value of cash flow hedges and other | Changes in fair value of cash flow hedges and other | 1,674 | | | 3,751 | |
| | | $ | (153,254) | | | $ | (216,026) | |
Amounts reclassified from accumulated other comprehensive earnings (loss) to earnings (loss) during the year ended December 31, 2020, 20192023, 2022 and 20182021 were as follows:
| | Years Ended December 31, | |
| 2020 | | 2019 | | 2018 | |
| Years Ended December 31, | |
| Years Ended December 31, | |
| Years Ended December 31, | |
| 2023 | |
| 2023 | |
| 2023 | |
| Foreign currency translation: | |
| Foreign currency translation: | |
| Foreign currency translation: | Foreign currency translation: | | | | | | |
| Reclassification of foreign currency translation losses to earnings | Reclassification of foreign currency translation losses to earnings | $ | 0 | | | $ | 25,339 | | | $ | 0 | | |
| Reclassification of foreign currency translation losses to earnings | |
| Reclassification of foreign currency translation losses to earnings | |
| Tax benefit | |
| Tax benefit | |
| Tax benefit | Tax benefit | 0 | | | 0 | | | 0 | | |
| Net of tax | Net of tax | $ | 0 | | | $ | 25,339 | | | $ | 0 | | |
| Net of tax | |
| Net of tax | |
| Pension and other postretirement benefit plans: | Pension and other postretirement benefit plans: | | | | | | |
| Amortization of actuarial losses | $ | 8,583 | | | $ | 759 | | | $ | 4,893 | | |
| Pension and other postretirement benefit plans: | |
| Pension and other postretirement benefit plans: | |
| Amortization of actuarial (gains) losses | |
| Amortization of actuarial (gains) losses | |
| Amortization of actuarial (gains) losses | |
| Amortization of prior service costs and transition obligation | |
| Amortization of prior service costs and transition obligation | |
| Amortization of prior service costs and transition obligation | Amortization of prior service costs and transition obligation | 1,442 | | | 2,729 | | | 3,631 | | |
| Settlement and curtailment | Settlement and curtailment | 25 | | | 961 | | | 12,565 | | |
| Settlement and curtailment | |
| Settlement and curtailment | |
| Total before tax | |
| Total before tax | |
| Total before tax | Total before tax | 10,050 | | | 4,449 | | | 21,089 | | |
| Tax benefit | Tax benefit | (2,184) | | | (906) | | | (4,459) | | |
| Tax benefit | |
| Tax benefit | |
| Net of tax | |
| Net of tax | |
| Net of tax | Net of tax | $ | 7,866 | | | $ | 3,543 | | | $ | 16,630 | | |
| Cash flow hedges: | Cash flow hedges: | | | | | | |
| Net (gains) losses reclassified into earnings | $ | (817) | | | $ | (186) | | | $ | 1,950 | | |
| Tax expense (benefit) | 185 | | | 39 | | | (409) | | |
| Cash flow hedges: | |
| Cash flow hedges: | |
| Net losses (gains) reclassified into earnings | |
| Net losses (gains) reclassified into earnings | |
| Net losses (gains) reclassified into earnings | |
| Tax (benefit) expense | |
| Tax (benefit) expense | |
| Tax (benefit) expense | |
| Net of tax | Net of tax | $ | (632) | | | $ | (147) | | | $ | 1,541 | | |
| Net of tax | |
| Net of tax | |
Foreign currency translation losses were recognized in selling, general and administrative expenses within the consolidated statement of earnings as a result of the substantial liquidation of certain businesses.
The Company recognizes the amortization of net actuarial gains and losses and prior service costs and transition obligation as well as settlements and curtailments, in other income, net inwithin the Consolidated Statementsconsolidated statements of Earnings.earnings.
Cash flow hedges consist mainly of foreign currency forward contracts. The Company recognizes the realized gains and losses on its cash flow hedges in the same line item as the hedged transaction, such as revenue, cost of goods and services, or selling, general and administrative expenses in the Consolidated Statementsconsolidated statements of Earnings.earnings.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
20.19. Segment Information
The Company categorizes its operating companies into five reportable segments: Engineered Products, Clean Energy & Fueling, Solutions, Imaging & Identification, Pumps & Process Solutions, and RefrigerationClimate & Food Equipment.Sustainability Technologies. The Company's businesses are structured around similar business models, go-to market strategies, and manufacturing practices and product categories which increases management efficiency and better aligns Dover's operations with its strategic initiatives and capital allocation priorities, and provideprovides greater transparency about performance. Operating segments are defined as the components of an enterprise for which separate financial information is available, that engage in business activities from which they may recognize revenues and incur expenses, and that are regularly evaluated by the entity's chief operating decision maker ("CODM") or decision-making group, which is composed of Dover's executive leadership team, in making resource allocation decisions and evaluating performance.
The 5five reportable segments are as follows:
•Engineered Products segment is a provider ofprovides a wide range of products,equipment, components, software, solutions and services that have broad customer applications across a number of markets, includingto the vehicle aftermarket, vehicle service, solid waste handling, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing.dispensing end-markets.
•Clean Energy & Fueling Solutions segment is focused on providingprovides components, equipment, software, solutions and software and service solutionsservices 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 fluidssubstances along the supply chain, as well as theand safe and efficient operation of convenience retail, retail fueling and vehicle wash establishments.
•Imaging & Identification segmentsegment supplies precision marking and coding, product traceability, brand protection and digital textile printing equipment, as well as related consumables, software and services.services to the global packaged and consumer goods, pharmaceutical, industrial manufacturing, textile and other end-markets.
•Pumps & Process Solutions segment manufactures specialty pumps and flow meters, highly engineered precision components, specialized instrumentation and digital controls for rotating and reciprocating machines, fluid handling components,connecting solutions and plastics and polymer processing equipment, single use pumps, flow metersserving single-use biopharmaceutical production, diversified industrial manufacturing, chemical production, plastics and connectors,polymer processing, midstream and highly engineered components for rotatingdownstream oil and reciprocating machines.gas, energy transition, thermal management applications and other end-markets.
•RefrigerationClimate & Food EquipmentSustainability Technologies segment is a provider of innovative and energy-efficient equipment, components and systems that serveparts for the commercial refrigeration, heating and cooling and foodbeverage can-making equipment markets.end-markets.
Management uses segment earnings to evaluate segment performance and allocate resources. Segment earnings is defined as earnings before purchase accounting expenses, restructuring and other costs (benefits), disposition costs, loss (gain) on dispositions, corporate expenses/other, interest expense, interest income and provision for income taxes.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
Segment financial information and a reconciliation of segment results to consolidated results follows:
| | | | Years Ended December 31, | | Years Ended December 31, |
| | | 2020 | | 2019 | | 2018 | | 2023 | | 2022 | | 2021 |
| Revenue: | Revenue: | | | | | |
| Engineered Products | Engineered Products | $ | 1,531,277 | | | $ | 1,697,557 | | | $ | 1,633,147 | |
| Fueling Solutions | 1,476,282 | | | 1,620,177 | | | 1,465,590 | |
| Engineered Products | |
| Engineered Products | |
| Clean Energy & Fueling | |
| Imaging & Identification | Imaging & Identification | 1,038,178 | | | 1,084,471 | | | 1,109,843 | |
| Pumps & Process Solutions | Pumps & Process Solutions | 1,324,003 | | | 1,338,528 | | | 1,331,893 | |
| Refrigeration & Food Equipment | 1,316,090 | | | 1,396,617 | | | 1,453,093 | |
| Intra-segment eliminations | (2,070) | | | (953) | | | (1,448) | |
| Climate & Sustainability Technologies | |
| Intersegment eliminations | |
| Total consolidated revenue | Total consolidated revenue | $ | 6,683,760 | | | $ | 7,136,397 | | | $ | 6,992,118 | |
| Net earnings: | Net earnings: | | | | | |
Segment earnings (EBIT): (1) | |
| Engineered Products | $ | 238,167 | | | $ | 291,848 | | | $ | 252,368 | |
| Fueling Solutions | 236,974 | | | 231,873 | | | 152,255 | |
| Segment earnings: | |
| Segment earnings: | |
| Segment earnings: | |
Engineered Products (1) | |
Engineered Products (1) | |
Engineered Products (1) | |
| Clean Energy & Fueling | |
| Imaging & Identification | Imaging & Identification | 193,473 | | | 229,484 | | | 198,902 | |
Pumps & Process Solutions (2) | 305,276 | | | 240,081 | | | 237,549 | |
Refrigeration & Food Equipment (3) | 102,872 | | | 118,832 | | | 136,119 | |
| Total segment earnings (EBIT) | 1,076,762 | | | 1,112,118 | | | 977,193 | |
Corporate expense / other (4) | 126,662 | | | 124,274 | | | 129,724 | |
| Pumps & Process Solutions | |
| Climate & Sustainability Technologies | |
| Total segment earnings | |
Purchase accounting expenses (2) | |
Restructuring and other costs (3) | |
Disposition costs (4) | |
Loss (gain) on dispositions (5) | |
Corporate expense / other (6) | |
| Interest expense | Interest expense | 111,937 | | | 125,818 | | | 130,972 | |
| Interest income | Interest income | (3,571) | | | (4,526) | | | (8,881) | |
| Loss on extinguishment of debt | 0 | | | 23,543 | | | 0 | |
| | Earnings before provision for income taxes | |
| Earnings before provision for income taxes | |
| Earnings before provision for income taxes | Earnings before provision for income taxes | 841,734 | | | 843,009 | | | 725,378 | |
| Provision for income taxes | Provision for income taxes | 158,283 | | | 165,091 | | | 134,233 | |
| Net earnings | Net earnings | $ | 683,451 | | | $ | 677,918 | | | $ | 591,145 | |
| Segment margins: | Segment margins: | | | | | |
| Engineered Products | Engineered Products | 15.6 | % | | 17.2 | % | | 15.5 | % |
| Fueling Solutions | 16.1 | % | | 14.3 | % | | 10.4 | % |
| Engineered Products | |
| Engineered Products | | 18.8 | % | | 17.0 | % | | 15.6 | % |
| Clean Energy & Fueling | | Clean Energy & Fueling | 18.4 | % | | 18.8 | % | | 19.9 | % |
| Imaging & Identification | Imaging & Identification | 18.6 | % | | 21.2 | % | | 17.9 | % | Imaging & Identification | 24.4 | % | | 23.9 | % | | 22.9 | % |
Pumps & Process Solutions (2) | 23.1 | % | | 17.9 | % | | 17.8 | % |
Refrigeration & Food Equipment (3) | 7.8 | % | | 8.5 | % | | 9.4 | % |
| Total Segments | 16.1 | % | | 15.6 | % | | 14.0 | % |
| Pumps & Process Solutions | | Pumps & Process Solutions | 27.6 | % | | 30.8 | % | | 33.7 | % |
| Climate & Sustainability Technologies | | Climate & Sustainability Technologies | 17.2 | % | | 14.6 | % | | 11.5 | % |
| Total segments | | Total segments | 21.0 | % | | 20.6 | % | | 20.7 | % |
| Net earnings | Net earnings | 10.2 | % | | 9.5 | % | | 8.5 | % | Net earnings | 12.5 | % | | 12.5 | % | | 14.2 | % |
| Depreciation and amortization: | Depreciation and amortization: | | | | | | Depreciation and amortization: | | | |
Other depreciation and amortization (7): | |
| Engineered Products | Engineered Products | $ | 42,603 | | | $ | 41,032 | | | $ | 44,995 | |
| Fueling Solutions | 72,803 | | | 75,045 | | | 68,463 | |
| Engineered Products | |
| Engineered Products | |
| Clean Energy & Fueling | |
| Imaging & Identification | Imaging & Identification | 38,378 | | | 30,530 | | | 30,882 | |
| Pumps & Process Solutions | Pumps & Process Solutions | 72,191 | | | 67,584 | | | 71,982 | |
| Refrigeration & Food Equipment | 46,541 | | | 51,360 | | | 60,477 | |
| Corporate | 6,535 | | | 6,736 | | | 5,781 | |
| Consolidated total | $ | 279,051 | | | $ | 272,287 | | | $ | 282,580 | |
| Capital expenditures: | | | | | |
| Engineered Products | $ | 23,515 | | | $ | 38,049 | | | $ | 34,016 | |
| Fueling Solutions | 26,903 | | | 21,780 | | | 37,232 | |
| Imaging & Identification | 10,690 | | | 18,593 | | | 13,029 | |
| Pumps & Process Solutions | 52,804 | | | 50,442 | | | 49,333 | |
| Refrigeration & Food Equipment | 42,923 | | | 51,052 | | | 32,482 | |
| Corporate | 8,857 | | | 6,888 | | | 4,902 | |
| Consolidated total | $ | 165,692 | | | $ | 186,804 | | | $ | 170,994 | |
| Climate & Sustainability Technologies | |
| Total other depreciation and amortization | |
| Corporate depreciation and amortization | |
| Depreciation and amortization included in purchase accounting expenses and restructuring and other | |
| Consolidated depreciation and amortization total | |
(1)Segment earnings (EBIT) includes non-operating incomeinclude a fourth quarter benefit of $14,448 as a result of the change from the LIFO method to FIFO method of inventory costing for an immaterial portion of inventories. See Note 1 — Description of Business and expense directly attributable to the segments. Non-operating income and expense includes gain on saleSummary of businesses and other income, net.Significant Accounting Policies.
(2) For the year ended December 31, 2019, includes a $46,946 loss on assets held for sale for Finder.
(3) For the year ended December 31, 2020, includes a $5,213 pre-tax gain on the sale of AMS Chino.
(4) CertainPurchase accounting expenses are maintained atprimarily comprised of amortization of intangible assets and charges related to fair value step-ups for acquired inventory sold during the corporate level and not allocated to the segments. These expenses include executive and functional compensation costs, non-service pension costs, non-operating insurance expenses, shared business services overhead costs, deal related expenses and various administrative expenses relating to the corporate headquarters.period.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(3) Restructuring and other costs relate to actions taken for headcount reductions, facility consolidations and site closures, product line exits, and other asset charges. Restructuring and other costs consist of the following:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | 2022 | | 2021 |
| Restructuring | $ | 50,435 | | | $ | 30,480 | | | $ | 26,705 | |
| Other costs, net | 13,238 | | | 8,510 | | | 11,731 | |
| Restructuring and other costs | $ | 63,673 | | | $ | 38,990 | | | $ | 38,436 | |
(4) Disposition costs related to the sale of De-Sta-Co which is expected to close in Q1 2024.
(5) Loss (gain) on dispositions includes working capital adjustments related to dispositions.
(6) Certain expenses are maintained at the corporate level and not allocated to the segments. These expenses include executive and functional compensation costs, non-service pension costs, non-operating insurance expenses, shared business services and digital overhead costs, deal related expenses and various administrative expenses relating to the corporate headquarters.
(7) Other depreciation and amortization relates to property, plant, and equipment and intangibles, and excludes amounts related to purchase accounting expenses and restructuring and other costs.
Selected financial information by segment (continued):
| | | | | | | | | | | |
| Total assets at December 31: | 2020 | | 2019 |
| Engineered Products | $ | 1,482,430 | | | $ | 1,431,948 | |
| Fueling Solutions | 2,125,900 | | | 2,107,045 | |
| Imaging & Identification | 1,919,223 | | | 1,673,689 | |
| Pumps & Process Solutions | 1,591,441 | | | 1,553,836 | |
| Refrigeration & Food Equipment | 1,320,950 | | | 1,302,618 | |
Corporate (5) | 712,130 | | | 600,341 | |
| | | |
| | | |
| Total assets | $ | 9,152,074 | | | $ | 8,669,477 | |
| | | | | | | | | | | | | | | | | |
| Capital expenditures: | 2023 | | 2022 | | 2021 |
| Engineered Products | $ | 26,643 | | | $ | 39,765 | | | $ | 48,453 | |
| Clean Energy & Fueling | 25,421 | | | 33,489 | | | 25,167 | |
| Imaging & Identification | 11,598 | | | 14,695 | | | 10,671 | |
| Pumps & Process Solutions | 60,860 | | | 82,817 | | | 44,578 | |
| Climate & Sustainability Technologies | 61,790 | | | 41,426 | | | 34,335 | |
| Corporate | 6,280 | | | 8,770 | | | 8,261 | |
| Total capital expenditures | $ | 192,592 | | | $ | 220,962 | | | $ | 171,465 | |
(5)
| | | | | | | | | | | |
| Total assets at December 31: | 2023 | | 2022 |
Engineered Products (8) | $ | 1,797,242 | | | $ | 1,771,689 | |
| Clean Energy & Fueling | 3,020,621 | | | 3,068,260 | |
| Imaging & Identification | 1,812,704 | | | 1,821,649 | |
Pumps & Process Solutions (9) | 2,654,421 | | | 2,161,210 | |
| Climate & Sustainability Technologies | 1,466,141 | | | 1,525,449 | |
Corporate (10) | 597,384 | | | 548,262 | |
| | | |
| | | |
| Total assets | $ | 11,348,513 | | | $ | 10,896,519 | |
(8) The significant portion of corporateEngineered Products includes De-Sta-Co assets classified as held for sale. See Note 4 — Dispositions for additional information.
(9) Increase primarily driven by 2023 acquisition. See Note 3 — Acquisitions for additional information.
(10) Corporate assets are principallycomprised primarily of cash and cash equivalents.
| | | | Revenue | | Long-Lived Assets (6) | | Revenue | | Long-Lived Assets (11) |
| | | Years Ended December 31, | | At December 31, | | Years Ended December 31, | | At December 31, |
| | | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2023 | | 2022 | | 2021 | | 2023 | | 2022 |
| United States | United States | $ | 3,677,285 | | | $ | 3,806,033 | | | $ | 3,619,717 | | | $ | 518,679 | | | $ | 491,732 | |
| Europe | Europe | 1,482,520 | | | 1,571,901 | | | 1,572,788 | | | 289,657 | | | 261,170 | |
| Asia | Asia | 745,150 | | | 863,050 | | | 867,268 | | | 61,235 | | | 60,601 | |
| Other Americas | Other Americas | 535,091 | | | 625,707 | | | 631,164 | | | 21,174 | | | 24,174 | |
| Other | Other | 243,714 | | | 269,706 | | | 301,181 | | | 6,581 | | | 4,641 | |
| Consolidated total | Consolidated total | $ | 6,683,760 | | | $ | 7,136,397 | | | $ | 6,992,118 | | | $ | 897,326 | | | $ | 842,318 | |
(6)(11) Long-lived assets are comprised of net property, plant and equipment.
The U.S. was the largest geographical market for revenue for the Engineered Products, Clean Energy & Fueling, Solutions, Pumps & Process Solutions, and RefrigerationClimate & Food EquipmentSustainability Technologies segments, and Europe was the largest market for the Imaging & Identification segment.
Revenue is attributed to regions based on the location of the Company’s customer, which in some instances is an intermediary and not necessarily the end user. The Company’s businesses serve thousands of customers, none of which accounted for more than 10% of consolidated revenue.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
21.Revenue is attributed to regions based on the location of the Company's customer, which in some instances is an intermediary and not necessarily the end user. The Company's businesses serve thousands of customers, none of which individually accounted for more than 10% of consolidated revenue.
20. Earnings per Share
The following table sets forth a reconciliation of the information used in computing basic and diluted earnings per share:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| Earnings from continuing operations | $ | 683,451 | | | $ | 677,918 | | | $ | 591,145 | |
| Loss from discontinued operations, net | 0 | | | 0 | | | (20,878) | |
| Net earnings | $ | 683,451 | | | $ | 677,918 | | | $ | 570,267 | |
| Basic earnings per common share: | | | | | |
| Earnings from continuing operations | $ | 4.74 | | | $ | 4.67 | | | $ | 3.94 | |
| Loss from discontinued operations, net | $ | 0 | | | $ | 0 | | | $ | (0.14) | |
| Net earnings | $ | 4.74 | | | $ | 4.67 | | | $ | 3.80 | |
| | | | | |
| Weighted average basic shares outstanding | 144,050,000 | | | 145,198,000 | | | 149,874,000 | |
| Diluted earnings per common share: | | | | | |
| Earnings from continuing operations | $ | 4.70 | | | $ | 4.61 | | | $ | 3.89 | |
| Loss from discontinued operations, net | $ | 0 | | | $ | 0 | | | $ | (0.14) | |
| Net earnings | $ | 4.70 | | | $ | 4.61 | | | $ | 3.75 | |
| | | | | |
| Weighted average diluted shares outstanding | 145,393,000 | | | 146,992,000 | | | 152,133,000 | |
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| | | | | |
| | | | | |
| Net earnings | $ | 1,056,828 | | | $ | 1,065,376 | | | $ | 1,123,818 | |
| | | | | |
| Basic earnings per common share: | | | | | |
| | | | | |
| | | | | |
| Net earnings | $ | 7.56 | | | $ | 7.47 | | | $ | 7.81 | |
| | | | | |
| Weighted average basic shares outstanding | 139,848,000 | | | 142,681,000 | | | 143,923,000 | |
| Diluted earnings per common share: | | | | | |
| | | | | |
| | | | | |
| Net earnings | $ | 7.52 | | | $ | 7.42 | | | $ | 7.74 | |
| | | | | |
| Weighted average shares outstanding | 140,599,000 | | | 143,595,000 | | | 145,273,000 | |
The following table is a reconciliation of the share amounts used in computing earnings per share:
| | | | Years Ended December 31, | | Years Ended December 31, |
| | | 2020 | | 2019 | | 2018 | | 2023 | | 2022 | | 2021 |
| Weighted average shares outstanding - Basic | Weighted average shares outstanding - Basic | 144,050,000 | | | 145,198,000 | | | 149,874,000 | |
| Dilutive effect of assumed exercise of SARs and vesting of performance shares and RSUs | 1,343,000 | | | 1,794,000 | | | 2,259,000 | |
| Dilutive effect of assumed exercise of SARs and vesting of PSAs and RSUs | |
| Weighted average shares outstanding - Diluted | Weighted average shares outstanding - Diluted | 145,393,000 | | | 146,992,000 | | | 152,133,000 | |
Diluted earnings per share amounts are computed using the weighted average number of common shares outstanding and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of SARs and vesting of performance sharesPSAs and RSUs, as determined using the treasury stock method. For the years ended December 31, 2020, 20192023, 2022 and 2018,2021, the weighted average number of anti-dilutive potential common shares excluded from the calculation above totaled 30,378, 28,09648,000, 21,173 and 1,382,1,072, respectively.
22.21. Stockholders' Equity
Share Repurchases
In February 2018, the Company's Board of Directors approved a standing share repurchase authorization, whereby the Company was authorized to repurchase up to 20 million shares of its common stock through December 31, 2020.
The Company suspended share repurchases in the second quarter of 2020 due to business uncertainty related to COVID-19. This temporary suspension in share repurchases was lifted during the beginning of the third quarter. During the year ended December 31, 2020 and 2019 the Company repurchased 979,165 and 1,343,622 shares of common stock at a total cost of $106,279 and $143,280 or $108.54 and $106.64 per share, respectively.
Upon expiration of the February 2018 share repurchase authorization on December 31, 2020, there were 7,380,879 shares remaining.
In November 2020, the Company's Board of Directors approved a new standing share repurchase authorization whereby the Company may repurchase up to 20 million shares beginning on January 1, 2021 through December 31, 2023.
On August 31, 2022, the Company entered into a $500,000 accelerated share repurchase agreement (the "ASR Agreement") with Bank of America N.A. ("Bank of America") to repurchase its shares in an accelerated share repurchase program (the "ASR Program"). The ASR Program is classified as equity, initially recorded at fair value with no subsequent remeasurement. The Company conducted the ASR Program under the November 2020 share repurchase authorization. The Company funded the ASR Program with net proceeds from commercial paper.
Under the terms of the ASR Agreement, the Company paid Bank of America $500,000 on September 1, 2022 and on that date received initial deliveries of 3,201,025 shares, representing a substantial majority of the shares expected to be retired over the course of the ASR Agreement. In December 2022, Bank of America delivered 691,270 additional shares which completed the ASR Program. During 2022, the Company received a total of 3,892,295 shares upon completion of the ASR Agreement. 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 Program, less a discount, which was $128.46 over the term of the ASR Program.
DOVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
23. Quarterly Data (Unaudited)During the year ended December 31, 2023, the Company had no share repurchases. During the years ended 2022, and 2021, exclusive of the ASR Program, the Company repurchased 641,428, and 182,951 shares of common stock at a total cost of $85,000, and $21,637 or $132.52, and $118.27 per share, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Net Earnings | | |
| Quarter | Revenue | | Gross Profit | | | | | | | | Net Earnings | | Per Share - Basic | | Per Share - Diluted | | | | | | |
| 2020 | | | | | | | | | | | | | | | | | | | | | |
| First | $ | 1,655,939 | | | $ | 612,243 | | | | | | | | | $ | 176,279 | | | $ | 1.22 | | | $ | 1.21 | | | | | | | |
| Second | 1,499,175 | | | 551,598 | | | | | | | | | 124,766 | | 0.87 | | | 0.86 | | | | | | | |
| Third | 1,748,256 | | | 658,729 | | | | | | | | | 200,300 | | 1.39 | | | 1.38 | | | | | | | |
| Fourth | 1,780,390 | | | 651,449 | | | | | | | | | 182,106 | | 1.27 | | | 1.25 | | | | | | | |
| | $ | 6,683,760 | | | $ | 2,474,019 | | | | | | | | | $ | 683,451 | | | $ | 4.74 | | | $ | 4.70 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| 2019 | | | | | | | | | | | | | | | | | | | | | |
| First | $ | 1,724,757 | | | $ | 623,542 | | | | | | | | | $ | 105,705 | | | $ | 0.73 | | | $ | 0.72 | | | | | | | |
| Second | 1,810,706 | | | 672,593 | | | | | | | | | 198,085 | | 1.36 | | | 1.35 | | | | | | | |
| Third | 1,825,345 | | | 673,488 | | | | | | | | | 206,006 | | 1.42 | | | 1.40 | | | | | | | |
| Fourth | 1,775,589 | | | 651,315 | | | | | | | | | 168,122 | | 1.16 | | | 1.15 | | | | | | | |
| | $ | 7,136,397 | | | $ | 2,620,938 | | | | | | | | | $ | 677,918 | | | $ | 4.67 | | | $ | 4.61 | | | | | | | |
In August 2023, the Company's Board of Directors approved a new standing share repurchase authorization whereby the Company may repurchase up to 20 million shares beginning on January 1, 2024 through December 31, 2026.
22. Subsequent Events
On January 17, 2024, the Company completed the acquisition of Transchem Group ("Transchem"), a supplier of car wash chemicals and associated solutions, for approximately $29.6 million, net of cash acquired, plus potential contingent consideration of up to approximately $18.6 million and subject to customary post-closing adjustments. Transchem will expand the Company's chemical product offerings in the Clean Energy & Fueling segment, specializing in wash performance and water reclaim technology that reduces water usage and lowers operators' costs.
On January 31, 2024, the Company completed the acquisition of Bulloch Technologies, Inc. ("Bulloch"), a provider of point-of-sale ("POS"), forecourt controller and electronic payment server solutions to the convenience retail industry, for approximately $111.0 million, net of cash acquired, plus potential contingent consideration of up to approximately $14.8 million and subject to customary post-closing adjustments. The acquisition of Bulloch expands our offering in North America with highly complementary POS and forecourt solutions within the Clean Energy & Fueling segment.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2020, 20192023, 2022 and 20182021
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | |
| | | | | | | | | | |
| Deferred Tax Valuation Allowance | | Balance at Beginning of Year | | Additions | | Reductions | | | | Balance at End of Year |
| | | | | | | | | | |
| Year Ended December 31, 2020 | | $ | 244,153 | | | 49,130 | | | (5,604) | | | | | $ | 287,679 | |
| | | | | | | | | | |
| Year Ended December 31, 2019 | | $ | 264,398 | | | 14,189 | | | (34,434) | | | | | $ | 244,153 | |
| | | | | | | | | | |
| Year Ended December 31, 2018 | | $ | 238,236 | | | 26,162 | | | 0 | | | | | $ | 264,398 | |
| | | | | | | | | | |
| LIFO Reserve | | Balance at Beginning of Year | | Charged to Cost and Expense | | Reductions | | | | Balance at End of Year |
| | | | | | | | | | |
| Year Ended December 31, 2020 | | $ | 11,428 | | | 357 | | | (4,636) | | | | | $ | 7,149 | |
| | | | | | | | | | |
| Year Ended December 31, 2019 | | $ | 20,020 | | | 491 | | | (9,083) | | | | | $ | 11,428 | |
| | | | | | | | | | |
| Year Ended December 31, 2018 | | $ | 17,571 | | | 3,474 | | | (1,025) | | | | | $ | 20,020 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | |
| | | | | | | | | | |
| Deferred Tax Valuation Allowance | | Balance at Beginning of Year | | Additions | | Reductions | | | | Balance at End of Year |
| | | | | | | | | | |
| Year Ended December 31, 2023 | | $ | 271,203 | | | 31,388 | | | (92,660) | | | | | $ | 209,931 | |
| | | | | | | | | | |
| Year Ended December 31, 2022 | | $ | 306,066 | | | 4,960 | | | (39,823) | | | | | $ | 271,203 | |
| | | | | | | | | | |
| Year Ended December 31, 2021 | | $ | 287,679 | | | 38,514 | | | (20,127) | | | | | $ | 306,066 | |
| | | | | | | | | | |
| LIFO Reserve | | Balance at Beginning of Year | | Charged to Cost and Expense | | Reductions | | | | Balance at End of Year |
| | | | | | | | | | |
Year Ended December 31, 2023(1) | | $ | 14,151 | | | 316 | | | (14,467) | | | | | $ | — | |
| | | | | | | | | | |
| Year Ended December 31, 2022 | | $ | 13,155 | | | 2,329 | | | (1,333) | | | | | $ | 14,151 | |
| | | | | | | | | | |
| Year Ended December 31, 2021 | | $ | 7,149 | | | 7,220 | | | (1,214) | | | | | $ | 13,155 | |
(1) During the fourth quarter of 2023, the Company changed the method of accounting for the inventories previously accounted for under LIFO to FIFO. See Note 1 — Description of Business and Summary of Significant Accounting Policies. |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company’sCompany's management, the Company’sCompany's Chief Executive Officer and Chief Financial Officer have concluded that the Company’sCompany's disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act were effective as of December 31, 20202023 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’sCompany's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Controls
During the fourth quarter of 2020,2023, there were no changes in the Company’sCompany's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’sCompany's internal control over financial reporting.
Inherent Limitations Over Internal Controls
The Company’sCompany's internal control over financial reporting is 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. The Company’sCompany'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 Company’sCompany's assets;
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 the Company’sCompany's receipts and expenditures are being made only in accordance with authorizations of the Company’sCompany's management and directors; and
iii.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’sCompany's assets that could have a material effect on the financial statements.
Management’sManagement's report on the effectiveness of the Company’sCompany's internal control over financial reporting is included in Item 8 of this Form 10-K. Management, including the Company’sCompany's Chief Executive Officer and Chief Financial Officer, does not expect that the Company’sCompany's internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods is subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
ITEM 9B. OTHER INFORMATION
a.None.
b.During the three months ended December 31, 2023, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements as defined in Item 408 of Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information with respect to the corporate governance matters required to be included pursuant to this Item 10 will be included in the 20212024 Proxy Statement that will be filed with the Securities and Exchange Commission pursuant to Rule 14a-6 under the Exchange Act in accordance with applicable SEC deadlines, and is incorporated in this Item 10 by reference.
As set forth below is a list of the members of our Board of Directors as of February 12, 2021.9, 2024.
Deborah L. DeHaas 11,3
Former Vice Chairman of Deloitte and Managing Partner of the Center for Board Effectiveness
H. John Gilbertson, Jr.1,43,4
Retired Managing Director, Goldman Sachs Group Inc.
Kristiane C. Graham2,3
Private Investor
Marc A. Howze1
Senior Advisor, Office of the Chairman at Deere & Company
Michael F. Johnston, Chairman of the Board2,3
Retired Chief Executive Officer, Visteon Corporation
Michael Manley1,4
Chief Executive Officer of AutoNation, Inc.
Danita K. Ostling1
Former Partner and Senior Leader at Ernst & Young LLP
Eric A. Spiegel1,4
Former President and CEO of Siemens USA
Richard J. Tobin
President &and Chief Executive Officer, Dover Corporation
Stephen M. Todd1
Former Global Vice Chairman of Assurance Professional Practice of Ernst & Young Global Limited
Stephen K. Wagner1,3
Former Senior Advisor, Center for Corporate Governance, Deloitte & Touche LLP
Keith E. Wandell2,4
Retired President and Chief Executive Officer, Harley-Davidson, Inc.
Mary A. Winston2,4
President of WinsCo Enterprises Inc.;
Former Executive Vice President & Chief Financial Officer, Family Dollar Stores, Inc.
1 Members of Audit Committee
2 Members of Compensation Committee
3 Members of Governance & Nominating Committee
4 Members of Finance Committee
The information with respect to Section 16(a) reporting compliance required to be included in this Item 10 will be included in our 20212024 Proxy Statement and is incorporated in this Item 10 by reference.
The Company has adopted a code of ethics that applies to its chief executive officer and senior financial officers. A copy of this code of ethics can be found on our website at www.dovercorporation.com. In the event of any amendment to, or waiver from, the code of ethics, we will publicly disclose the amendment or waiver by posting the information on our website.
ITEM 11. EXECUTIVE COMPENSATION
The information with respect to executive compensation and the compensation committee required to be included pursuant to this Item 11 will be included in our 20212024 Proxy Statement and is incorporated in this Item 11 by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The information regarding security ownership of certain beneficial owners and management that is required to be included pursuant to this Item 12 will be included in our 20212024 Proxy Statement and is incorporated in this Item 12 by reference.
Equity Compensation Plans
The Equity Compensation Plan Table below presents information regarding our equity compensation plans at December 31, 2020:2023:
| | | | | | | | | | | | | | | | | (b) | | (c) |
| (a) | | (b) | | (c) | |
| Plan Category | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (2) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (2) |
| Equity compensation plans approved by stockholders | Equity compensation plans approved by stockholders | 3,310,819 | | | $ | 79.36 | | | 5,613,856 | |
| Equity compensation plans not approved by stockholders | Equity compensation plans not approved by stockholders | — | | | — | | | — | |
| Total | Total | 3,310,819 | | | $ | 79.36 | | | 5,613,856 | |
1.Column (a) includes shares issuable pursuant to outstanding SARs,stock appreciation rights ("SARs"), restricted stock units ("RSUs") and performance share awards ("PSAs") under the Company's 2021 Omnibus Incentive Plan (the "2021 Plan") and 2012 Equity and Cash Incentive Plan (the "2012 Plan") and the 2005 Equity and Cash Incentive Plan (the "2005 Plan"). Performance sharesPSAs are subject to satisfaction of the applicable performance criteria over a three-year performance period. Restricted stock unitRSUs and performance share awardsPSAs are not reflected in the weighted exercise price in column (b) as these awards do not have an exercise price.
2.Column (c) consists of shares available for future issuance under the Company's the 20122021 Plan. Under the 20122021 Plan, the Company may grant stock options, SARs, restricted stock, or restricted stock units, performance share awards,RSUs, PSAs, director shares, or deferred stock units. Under the 20122021 Plan, the number of shares available for issuance will be reduced (i) by one share for each share issued pursuant to options or SARs and (ii) by three shares for each share of stock issued pursuant to restricted stock, restricted stock unit, performance share,RSUs, PSAs, director share, or deferred stock unit awards.
As of December 31, 2020,2023, equity securities have been authorized for issuance to employees and/or non-employee directors under the 20122021 Plan and its predecessor plan the 2005 Plan.(the "2012 Plan"). Although the 20052012 Plan has expired and no further awards may be granted under the Plan, there remain outstanding stock-settled appreciation rightsSARs, RSUs, and PSAs under the 20052012 Plan, which are reflected in Column (a) of the table.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information with respect to any director independence, related party transaction policies and any reportable transaction, business relationship, or indebtedness between the Company and the beneficial owners of more than 5% of the Common Stock, the directors or nominees for director of the Company, the executive officers of the Company, or the members of the immediate families of such individuals that are required to be included pursuant to this Item 13 will be included in the 20212024 Proxy Statement and is incorporated in this Item 13 by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information with respect to the Company’sCompany's relationship with its independent registered public accounting firm and fees paid thereto required to be included pursuant to this Item 14 will be included in the 20212024 Proxy Statement and is incorporated in this Item 14 by reference.
The information with respect to audit committee pre-approval policies and procedures required to be included pursuant to this Item 14 will be included in the 20212024 Proxy Statement and is incorporated in this Item 14 by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| | | | | |
| a) | The following documents are filed as part of this report: |
| | | | | |
| (1) | Financial Statements. The financial statements are set forth under “Item"Item 8. Financial Statements and Supplementary Data”Data" of this Form 10-K. |
| | | | | |
| (2) | Schedules. The following financial statement schedule is set forth under “Item"Item 8. Financial Statements and Supplementary Data”Data" of this Form 10-K. All other schedules have been omitted because they are not required, are not applicable or the required information is included in the financial statements or the notes thereto. |
•Schedule II – Valuation and Qualifying Accounts
| | | | | |
| (3) | Exhibits. The exhibits below are filed or incorporated by reference as part of this Form 10-K. The exhibits will be filed with the SEC but will not be included in the printed version of the Annual Report to Shareholders. |
EXHIBIT INDEX
| | | | | |
(2.1) | | |
| (3)(i) | |
| (3)(ii) | |
| (4.1) | |
| (4.2) | |
| (4.3) | |
| (4.4) | First Supplemental Indenture, dated as of October 13, 2005, among the Company, J.P. Morgan Trust Company, National Association, as original trustee, and The Bank of New York, as trustee, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed October 13, 2005 (SEC File No. 001-04018), is incorporated by reference. |
| (4.5) | |
| (4.6) | |
| (4.7) | |
| (4.8) | |
| (4.9) | |
| | | | | |
| (4.12) | |
| (4.13) | |
| (4.14) | |
| (4.15) | |
| (4.16) | |
| (4.17) | |
| (4.18) | |
| (4.19) | |
| The Company agrees to furnish to the Securities and Exchange Commission upon request, a copy of any instrument with respect to long-term debt under which the total amount of securities authorized does not exceed 10 percent of the total consolidated assets of the Company. |
| (10.1) | Five-Year Credit Agreement dated as of April 6, 2023 among Dover Corporation, Senior Executive Change-in-Control Severance Plan,the Lenders party thereto, the Issuing Banks party thereto, the Borrowing Subsidiaries party thereto from time to time and JPMorgan Chase Bank, N.A. as amended and restated effective November 1, 2018, asAdministrative Agent, filed as Exhibit 10.1 to the Company's AnnualCurrent Report on Form 10-K for8-K filed April 11, 2023 (SEC File No. 001-04018), is incorporated by reference. |
| (10.2) | |
(10.2)(10.3) | |
| (10.4) | |
(10.3)(10.5) | |
(10.4) | |
(10.5) | |
| (10.6) | |
| (10.7) | |
| | | | | |
(10.8) | |
(10.9)(10.8) | |
(10.10)(10.9) | |
| | | | | |
(10.11)(10.10) | |
(10.12)(10.11) | |
| (10.12) | |
| (10.13) | |
(10.15)(10.14) | |
| (10.15) | |
| (10.16) | |
| (10.17) | |
| (10.18) | |
| (10.19) | |
| (10.20) | |
| (10.21) | |
| (10.22) | |
| (10.23) | |
| (10.24) | |
| (10.25) | |
| (10.26) | |
(10.27) | |
| | | | | |
(10.28) | |
(10.29)(10.27) | |
(10.30)(10.28) | |
| | | | | |
| (10.29) | |
| (10.30) | |
| (10.31) | |
| (10.32) | |
| (10.33) | |
| (10.34) | |
(10.32)(10.35) | |
| (10.36) | |
| (10.37) | |
| (10.38) | |
| (10.39) | |
| (10.40) | |
| (10.41) | |
(10.33)(10.42) | Five-Year CreditAmendment to Employment Agreement of Richard J. Tobin, dated as of October 4, 2019, among the Company, the Borrowing Subsidiaries party thereto from time to time, the Lenders party thereto, and JPMorgan Chase Bank, N.A, as Administrative Agent,February 19, 2021, filed as Exhibit 10.01 10.1to the Company’sCompany's Current Report on Form 8-K filed October 10, 2019February 19, 2021 (SEC File No. 001-04018), isincorporated by reference. |
(10.34) | |
(10.35) | |
| (21) | |
| (23) | |
| (24) | Power of Attorney (included in signature page). (1) |
| (31.1) | |
| (31.2) | |
| (32) | |
| (97.1) | |
| (101) | The following materials from Dover Corporation's Annual Report on Form 10-K for the year ended December 31, 20202023 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Earnings, (ii) Consolidated Statements of Comprehensive Earnings (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements. (1) |
| (104) | Cover Page formatted in Inline XBRL and contained in Exhibit 101. (1) |
| | | | | |
| |
| * | Executive compensation plan or arrangement. |
| (1) | Filed herewith. |
ITEM 16. FORM 10-K SUMMARY
None.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
| | DOVER CORPORATION |
| | |
| | /s/ Richard J. Tobin |
| | Richard J. Tobin |
| | President and Chief Executive Officer |
| Date: | February 12, 20219, 2024 | |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Each of the undersigned, being a director or officer of Dover Corporation (the “Company”"Company"), hereby constitutes and appoints Richard J. Tobin, Brad M. Cerepak and Ivonne M. Cabrera and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent for him or her and in his or her name, place and stead in any and all capacities, to sign the Company’sCompany's Annual Report on Form 10-K for the fiscal year ended December 31, 20202023 under the Securities Exchange Act of 1934, as amended, and any and all amendments thereto, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission and any other appropriate authority, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing required and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he or she might or could do if personally present, hereby ratifying and confirming all that such attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.
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| Signature | | Title | | Date |
| | | | |
| /s/ Michael F. Johnston | | Chairman, Board of Directors | | February 12, 20219, 2024 |
| Michael F. Johnston | | | | |
| | | | |
| /s/ Richard J. Tobin | | Chief Executive Officer, President and Director (Principal Executive Officer) | | February 12, 20219, 2024 |
| Richard J. Tobin | | | | |
| | | | |
| /s/ Brad M. Cerepak | | Senior Vice President and Chief Financial Officer (Principal Financial Officer) | | February 12, 20219, 2024 |
| Brad M. Cerepak | | | | |
| | | | |
| /s/ Ryan W. Paulson | | Vice President, Controller (Principal Accounting Officer) | | February 12, 20219, 2024 |
| Ryan W. Paulson | | | | |
| | | | |
| /s/ Deborah L. DeHaas | | Director | | February 12, 20219, 2024 |
| Deborah L. DeHaas | | | | |
| | | | |
| /s/ H. John Gilbertson, Jr. | | Director | | February 12, 20219, 2024 |
| H. John Gilbertson, Jr. | | | | |
| | | | |
| /s/ Kristiane C. Graham | | Director | | February 12, 20219, 2024 |
| Kristiane C. Graham | | | | |
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| Signature | | Title | | Date |
| | | | |
| | | | |
| /s/ Marc A. Howze | | Director | | | February 9, 2024 |
| Marc A. Howze | | | | |
| | | | |
| /s/ Michael Manley | | Director | | February 9, 2024 |
| Michael Manley | | | | |
| | | | |
| /s/ Danita K. Ostling | | Director | | February 9, 2024 |
| Danita K. Ostling | | | | |
| | | | |
| /s/ Eric A. Spiegel | | Director | | February 12, 20219, 2024 |
| Eric A. Spiegel | | | | |
| | | | |
| /s/ Stephen M. Todd | | Director | | February 12, 20219, 2024 |
| Stephen M. Todd | | | | |
| | | | |
/s/ Stephen K. Wagner | | Director | | February 12, 2021 |
Stephen K. Wagner | | | | |
| | | | |
| /s/ Keith E. Wandell | | Director | | February 12, 20219, 2024 |
| Keith E. Wandell | | | | |
| | | | |
| /s/ Mary A. Winston | | Director | | February 12, 2021
| Mary A. Winston | | | |
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