What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-13 compared with 2024-02-13 · 86 added, 137 removed, 288 unchanged (44% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Belden is a leading global supplier of network infrastructure and digitization solutions that makes the digital journey simpler, smarter and secure.

We’re moving beyond connectivity, from what we make to what we make possible through a performance-driven portfolio, forward-thinking expertise and purpose-built solutions.

We are aligned with attractive secular growth markets, positioned to provide comprehensive solutions that drive customer outcomes, focused on new product innovation and technology leadership, and committed to sustainable ESG practices.

Our current business goals are to:

• Drive organic revenue growth in excess of GDP;

• Deliver incremental Adjusted EBITDA margins of approximately 30%;

• Generate free cash flows of approximately $1 billion cumulatively from 2022 through 2025;

• Execute a disciplined capital allocation strategy while maintaining net leverage of approximately 1.5x;

• Drive Adjusted EPS to at least $8.00 by 2025.

Belden is a leading global supplier of complete connection solutions that unlock untold possibilities for our customers, their customers and the world.

We advance ideas and technologies that enable a safer, smarter and more prosperous future.

Throughout our 120-plus year history we have evolved as a company, but making connections remains our purpose.

By connecting people, information and ideas, we make it possible.

Our long-term business goals are to:

• Achieve mid-single-digit annual revenue growth;

• Deliver incremental Adjusted EBITDA margins between 25% to 30%;

• Generate free cash flow margin approaching 10%;

• Execute a disciplined capital allocation strategy while maintaining net leverage around 1.5x;

• Strive for annual Adjusted EPS growth of 10% to 12%.

Significant Trends and Events in 2024

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Our exposure to currency rate fluctuations primarily relates to exchange rate movements between the U.S.

dollar and the euro, Canadian dollar, Hong Kong dollar, Chinese yuan, Mexican peso, Australian dollar, British pound, Indian rupee, and Swiss franc.

dollar and the euro, Canadian dollar, Hong Kong dollar, Chinese yuan, Mexican peso, Australian dollar, British pound, and Indian rupee.

Generally, as the U.S.

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During 2024, we repurchased 1.3 million shares of our common stock for an aggregate cost of $132.9 million at an average price per share of $100.15.

Sichert Acquisition

During 2023, we acquired Sichert with cash on hand for $97.5 million, net of cash acquired.

Sichert, based in Berlin Germany, designs and manufactures a portfolio of polycarbonate street cabinets utilized in outside plant passive optical networks (“PON”) and 5G networks.

Sichert is reported within the Enterprise Solutions segment.

CloudRail Acquisition

During 2023, we acquired CloudRail with cash on hand for $9.2 million, net of cash acquired.

CloudRail, based in Mannheim, Germany, spec ializes in sensor to cloud data solutions allowing end users to quickly connect sensors on their machinery to cloud providers to drive business insights and improve outcomes.

CloudRail is reported within the Industrial Automation Solutions segment.

Gain on Sale of Assets

During 2023, we sold our property in Ontario, Canada as part of a sale and leaseback transaction for $13.8 million and recognized a $12.1 million pre-tax gain on sale.

This gain on sale was excluded from Segment EBITDA.

Sale and Deconsolidation of Hite

During 2023, we sold our 51% ownership interest in Shanghai Hi-Tech Control System Co, Ltd to (Hite) for $0.9 million and recognized a $0.4 million pretax gain on sale.

The sale also includes $0.6 million of potential earnout payments.

The joint venture developed and provided certain Industrial Automation Solutions products and integrated solutions to customers in China.

As Belden was the primary beneficiary of the joint venture, due to both our ownership percentage and control over the activities of the joint venture, we consolidated the joint venture in our financial statements and presented the results of the joint venture attributable to Hite’s ownership as net income attributable to noncontrolling inter est in the Consolidated Statements of Operations up to the disposal date when we sold and deconsolidated the entity.

Precision Optical Technologies Acquisition

During 2024, we acquired Precision for $289.6 million, net of cash acquired.

Precision, based in New York, is a leading supplier of value-added optical transceivers with proprietary software, firmware configurations, and related components.

Precision is reported within the Smart Infrastructure Solutions segment.

Voleatech GmbH Acquisition

During 2024, we acquired Voleatech for €5.0 million ($5.6 million), net of cash acquired.

The acquisition includes a potential earn-out up to €3.0 million based upon certain targets over three years, which will be accounted for as compensation cost.

Voleatech, based in Germany, is known for their VT AIR Next Gen Firewall and expands Belden's Firewall product portfolio and overall planning of security in OT networking.

Voleatech is reported within the Automation Solutions segment.

Results of Operations

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Amortization of intangibles 48,794 40,375 37,860 20.9 % 6.6 %

Asset impairments — — 9,283 n/a (100.0) %

Gain on sale of assets 12,056 37,891 — (68.2) % n/a

Gain on sale of assets — 12,056 37,891 (100.0) % (68.2) %

Operating income 266,460 317,518 363,334 (16.1) % (12.6) %

Interest expense, net 38,303 33,625 43,554 13.9 % (22.8) %

Non-operating pension benefit 1,863 4,005 4,476 53.5 % (10.5) %

Gain on sale of note receivable — — 27,036 n/a (100.0) %

Loss on debt extinguishment — 6,392 5,715 100.0 % 11.8 %

Non-operating pension benefit (cost) (215) 1,863 4,005 (111.5) % (53.5) %

Loss on debt extinguishment — — 6,392 n/a (100.0) %

Income from continuing operations before taxes 227,942 285,756 317,393 (20.2) % (10.0) %

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• Lower sales volume resulted in a $141.3 million decrease in revenues.

• Copper prices had a $19.9 million unfavorable impact on revenues.

• Currency translation had a $10.1 million unfavorable impact on revenues.

• Divestitures had a $0.4 million unfavorable impact on revenues.

• Acquisitions contributed $72.9 million in revenues.

• Copper pass-through pricing contributed $27.6 million in revenues.

Gross profit decreased $32.7 million from 2023 to 2024 primarily due to the changes in revenues discussed above.

Selling, general and administrative expenses increased $1.9 million from 2023 to 2024 primarily due to expenses from the operations of companies acquired in 2024, partially offset by the benefits realized from our productivity initiatives.

Research and development expenses decreased $4.1 million from 2023 to 2024 primarily due to the timing of projects.

Amortization of intangibles increased $8.4 million from 2023 to 2024 primarily due to acquisitions.

During 2023, we sold certain real estate in Canada and recognized a $12.1 million pre-tax gain on sale.

Operating income decreased $51.1 million from 2023 to 2024 primarily due to the decrease in gross profit, decrease in the gain on sale of assets, and increase in amortization expense discussed above.

Net interest expense increased $4.7 million from 2023 to 2024 primarily due to fluctuations in interest income and foreign currency translation.

Income from continuing operations before taxes decreased $57.8 million from 2023 to 2024 primarily due to the decrease in operating income and increase in net interest expense discussed above.

2023 Compared to 2022

Revenues decreased $94.4 million from 2022 to 2023 due to the following factors:

• Lower sales volume resulted in a $108.4 million decrease in revenues.

• Copper pass-through pricing had a $19.9 million unfavorable impact on revenues.

• Divestitures had a $1.4 million unfavorable impact on revenues.

• Currency translation had a $0.4 million unfavorable impact on revenues.

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Income from continuing operations before taxes decreased $31.6 million from 2022 to 2023 primarily due to the decrease in operating income discussed above.

2022 Compared to 2021

Revenues increased $305.2 million from 2021 to 2022 due to the following factors:

• Higher sales volume and favorable pricing from industrial automation, smart buildings, and broadband products resulted in a $365.0 million increase in revenues.

• Acquisitions, net of disposals contributed $19.3 million in revenues.

• Currency translation had a $65.3 million unfavorable impact on revenues.

• Copper prices had a $13.8 million unfavorable impact on revenues.

Gross profit increased $144.4 million from 2021 to 2022 due to the increases in revenues discussed above.

Accordingly, gross profit margins expanded nearly 200 basis points year over year.

Selling, general and administrative expenses increased $70.6 million from 2021 to 2022.

The increase in selling, general and administrative expenses is primarily attributable to strategic investments to enhance our solution selling capabilities, expenses from our acquired businesses and costs associated with lease guarantees as discussed in Note 12.

Research and development expenses increased $14.1 million from 2021 to 2022 primarily due to increased investments as we further strengthen our product offering and continue our commitment to growth initiatives.

Amortization of intangibles increased $7.2 million from 2021 to 2022 primarily due to acquisitions.

Asset impairments decreased $9.3 million from 2021 to 2022 as a result of the following impairment charges during 2021:

$3.6 million to write down certain held and used long-lived assets in our Industrial Automation Solutions segment to fair value, $3.4 million for our former oil and gas business in Brazil sold during 2021, and a $2.3 million charge to write down certain real estate in Germany to its fair value and sold as part of a sale and leaseback transaction during 2021.

See Notes 5, 11 and 12.

Gain on sale of assets increased $37.9 million from 2021 to 2022.

During 2022, we sold certain real estate in the United States and recognized a $37.9 million pre-tax gain on sale.

Operating income increased $99.7 million from 2021 to 2022 primarily as a result of the increase in gross profit, the gain on sale of assets in 2022, and lack of asset impairment charges as compared to 2021, partially offset by the increase in selling, general and administrative expenses;

research and development expenses;

and amortization of intangibles expense discussed above.

Net interest expense decreased $19.1 million from 2021 to 2022 primarily due to the repurchase of senior subordinated notes previously due 2026 and currency translation.

Gain on sale of note receivable decreased $27.0 million from 2021 to 2022 as a result of the sale of the Seller’s Note in 2021 related to the 2020 divestiture of Grass Valley.

Loss on debt extinguishment increased $0.7 million from 2021 to 2022.

The loss on debt extinguishment in 2022 represents the premium paid to the bond holders to retire the 2026 Notes and for the unamortized debt issuance costs on the 2026 Notes that we were required to write-off.

The loss on debt extinguishment in 2021 represents the premium paid to the bond holders to retire the 2025 Notes and for the unamortized debt issuance costs on the 2025 Notes that we were required to write-off.

Income from continuing operations before taxes increased $90.6 million from 2021 to 2022 primarily due to the increase in operating income discussed above.

Years Ended December 31, Percentage Change

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Effective tax rate 13.0 % 15.1 % 15.6 %

We recognized income tax expense of $43.2 million in 2023, representing an effective tax rate of 15.1%.

The effective tax rate was primarily impacted by the effect of our foreign operations, including statutory tax rates differences and foreign tax credits.

We recognized income tax expense of $49.6 million in 2022, representing an effective tax rate of 15.6%.

In 2024, we recognized income tax expense of $29.5 million, representing an effective tax rate of 13.0%.

In 2023, we recognized income tax expense of $43.2 million, representing an effective tax rate of 15.1%.

The effective tax rates were primarily impacted by the effect of our foreign operations, including statutory tax rates differences and foreign tax credits.

In 2022, we recognized income tax expense of $49.6 million, representing an effective tax rate of 15.6%.

The 2022 effective tax rate was primarily impacted by foreign tax rate differences, domestic permanent differences, and tax credits primarily associated with our foreign income inclusions.

We recognized income tax expense of $27.9 million in 2021, representing an effective tax rate of 12.3%.

The effective tax rate was primarily impacted by a change in the deferred tax asset valuation allowance due to the release of a valuation allowance against the foreign tax credits in the U.S.

and a pension deferred tax asset in a foreign jurisdiction.

Our income tax expense and effective tax rate in future periods may be impacted by many factors, including our geographic mix of income and changes in tax laws.

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(In thousands, except percentages)

GAAP and Adjusted Revenues $ 2,512,084 $ 2,606,485 $ 2,301,260

Revenues $ 2,460,979 $ 2,512,084 $ 2,606,485

GAAP income from continuing operations $ 198,414 $ 242,556 $ 267,748

Depreciation expense 56,383 51,379 46,669

Income tax expense 43,200 49,645 27,939

Amortization of intangibles 48,794 40,375 37,860

Interest expense, net 38,303 33,625 43,554

Income tax expense 29,528 43,200 49,645

Severance, restructuring, and acquisition integration costs (1)

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4,764 6,177 7,833

Loss on debt extinguishment — 6,392 5,715

Non-operating pension settlement loss 1,208 — 1,189

Asset impairments (3)

Loss on debt extinguishment — — 6,392

Gain on sale of assets (3)

— (12,056) (37,891)

Gain on sale of note receivable (5)

Adjusted EBITDA $ 410,772 $ 438,100 $ 443,559

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Adjusted EBITDA margin 16.7 % 17.4 % 17.0 %

(1) Includes costs from programs described in Note 15, Restructuring Activities as well as other immaterial programs.

(2) In 2023, we incurred $4.1 million for lease guarantees associated with the Grass Valley disposal (see Note 12), $1.5 million related to fair value adjustments of acquired inventory and other assets, and $0.6 million of net losses associated with the sales of businesses.

In 2022, we incurred $10.1 million for lease guarantees associated with the Grass Valley disposal, $2.2 million related to fair value adjustments of acquired inventory and other assets, and gains of $4.5 million on collections from previously written off receivables associated with the sale of Grass Valley.

In 2021, we collected $2.2 million of receivables associated with the sale of Grass Valley and acquisition of SPC that were previously written off, reduced the Opterna earn-out liability by $5.8 million, recognized cost of sales of $2.3 million related to adjustments of acquired inventory to fair value, and recognized a $0.6 million loss on the sale of tangible assets.

(3) In 2021, we recognized a $3.6 million impairment on assets held and used and a $5.7 million impairment on assets held for sale .

See Note 11, Property, Plant, and Equipment , for details.

(1) Includes costs associated with acquisitions, productivity initiatives, and manufacturing footprint actions.

(2) Includes fair value adjustments of acquired assets and costs associated with a former subsidiary that was previously divested.

(3) In 2023, we sold certain real estate in Canada for $13.8 million, net of transaction costs and recognized a $12.1 million pre-tax gain on sale.

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See Note 11, Property, Plant, and Equipment , for details.

(5) In 2021, we sold the seller's note associated with the Grass Valley disposal to a third party for $62.0 million and recognized a pre-tax gain on sale of $27.0 million.

See Note 5, Disposals .

Use of Non-GAAP Financial Information

Adjusted Revenues, Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow are non-GAAP financial measures.

Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow are non-GAAP financial measures.

In addition to reporting financial results in accordance with accounting principles generally accepted in the United States, we provide non-GAAP operating results adjusted for certain items, including:

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gains (losses) on debt extinguishment;

certain revenues and gains (losses) from patent settlements;

certain gains (losses) from patent settlements;

discontinued operations;

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(In thousands, except percentages)

GAAP and Adjusted Revenues $ 2,512,084 $ 2,606,485 $ 2,301,260 (3.6) % 13.3 %

Revenues $ 2,460,979 $ 2,512,084 $ 2,606,485 (2.0) % (3.6) %

Adjusted EBITDA 410,772 438,100 443,559 (6.2) % (1.2) %

as a percent of adjusted revenues 17.4 % 17.0 % 16.1 %

as a percent of revenues 16.7 % 17.4 % 17.0 %

2024 Compared to 2023

Revenues decreased $94.4 million from 2022 to 2023 due to the following factors:

• Lower sales volume resulted in a $108.4 million decrease in revenues.

• Copper prices had a $19.9 million unfavorable impact on revenues.

• Divestitures had a $1.4 million unfavorable impact on revenues.

• Currency translation had a $0.4 million unfavorable impact on revenues.

• Acquisitions contributed $35.7 million in revenues.

Adjusted EBITDA decreased $27.3 million in 2024 from 2023 primarily due to the decline in revenues as discussed above, partially offset by favorable mix and benefits realized from our productivity improvement initiatives.

2023 Compared to 2022

Adjusted EBITDA decreased $5.5 million in 2023 from 2022 primarily due to the decrease in revenues discussed above, partially offset by favorable mix.

Adjusted EBITDA margins expanded to 17.4% from 17.0% in the year ago period.

2022 Compared to 2021

Revenues increased $305.2 million from 2021 to 2022 due to the following factors:

• Higher sales volume and favorable pricing from industrial automation, smart buildings, and broadband products resulted in a $365.0 million increase in revenues.

• Acquisitions, net of disposals contributed $19.3 million in revenues.

• Currency translation had a $65.3 million unfavorable impact on revenues.

• Copper prices had a $13.8 million unfavorable impact on revenues.

Adjusted EBITDA increased $72.0 million in 2022 from 2021 primarily due to the leverage on higher sales volume, as discussed above.

Accordingly, adjusted EBITDA margins expanded to 17.0% from 16.1% in the year ago period.

Segment Results of Operations

For additional information regarding our segment measures, see Note 6 to the Consolidated Financial Statements.

Enterprise Solutions

Smart Infrastructure Solutions

Years Ended December 31, Percentage Change

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2024 Compared to 2023

Enterprise revenues decreased $75.6 million in 2023 as compared to 2022.

Decreases in volume, lower copper prices, and unfavorable currency translation contribu ted $92.5 m illion, $10.2 million, and $4.6 million, respectively, to the decrease in revenues, partially offset by revenues of $31.7 million from acquisitions.

Enterprise EBITDA decreased $12.4 million in 2023 as compared to 2022 primarily due to the decreases in revenues discussed above.

Smart Infrastructure Solutions revenues increased $21.0 million in 2024 as compared to 2023.

Reven ues from acquisitions and higher copper pass-through pricing contributed $72.1 million and $10.7 million, respectively, to the increases in revenues, partially offset by a decline in volume of $60.7 million and unfavorable currency translation of $1.1 million.

Smart Infrastructure Solutions EBITDA decreased $9.0 million in 2024 as compared to 2023 primarily due to unfavorable mix.

2023 Compared to 2022

Enterprise revenues increased $124.1 million in 2022 as compared to 2021.

The increase in revenues was primarily due to increases in volume and favorable pricing of $135.0 million and acquisitions of $5.4 million, partially offset by unfavorable currency translation and lower copper pass-through pricing of $13.3 million and $3.0 million, respectively.

Enterprise EBITDA increased $17.0 million in 2022 as compared to 2021 primarily due to the increase in revenues discussed above.

Accordingly, Adjusted EBITDA margins expanded to 13.5% from 13.4% in the year ago period.

Industrial Automation Solutions

Smart Infrastructure Solutions revenues decreased $75.6 million in 2023 as compared to 2022.

Decreases in volume, lower copper pass-through pricing, and unfavorable currency translation contribu ted $92.5 m illion, $10.2 million, and $4.6 million, respectively, to the decrease in revenues, partially offset by revenues of $31.7 million from acquisitions.

Smart Infrastructure Solutions EBITDA decreased $12.4 million in 2023 as compared to 2022 primarily due to the decreases in revenues discussed above.

Automation Solutions

Years Ended December 31, Percentage Change

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2024 Compared to 2023

Industrial Automation revenues decreased $18.8 million in 2023 as compared to 2022 primarily due to decreases in volume and lower copper prices of $15.9 m illion and $9.7 million, respectively, partially offset by favorable currency translation and acquisitions, net of disposals of $4.2 million and $2.6 million, respectively.

Industrial Automation EBITDA increased $10.2 million in 2023 as compared to 2022 primarily as a result of favorable mix and manufacturing productivity.

Accordingly, Adjusted EBITDA margins expanded to 20.7% from 19.7% in the year ago period.

Automation Solutions revenues decreased $ 72.1 million in 2024 as compared to 2023 primarily due to decreases in volume and unfavorable currency translation of $80.4 m illion and $9.0 million, respectively, partially offset by higher copper pass-through prices and acquisitions, net of disposals of $16.9 million and $0.4 million, respectively.

Automation Solutions EBITDA decreased $17.6 million in 2024 as compared to 2023 primarily as a result of the decrease in revenues discussed above, partially offset by benefits realized from our productivity improvement initiatives.

2023 Compared to 2022

Industrial Automation revenues increased $181.2 million in 2022 as compared to 2021 primarily due to increases in volume and favorable pricing of $230.1 million and acquisitions, net of disposals of $13.9 million, partially offset by unfavorable currency translation and lower copper pass-through pricing of $52.0 million and $10.8 million, respectively.

Industrial Automation EBITDA increased $54.4 million in 2022 as compared to 2021 primarily as a result of the increase in revenues discussed above.

Automation Solutions revenues decreased $18.8 million in 2023 as compared to 2022 primarily due to decreases in volume and lower copper prices of $15.9 m illion and $9.7 million, respectively, partially offset by favorable currency translation and acquisitions, net of disposals of $4.2 million and $2.6 million, respectively.

Automation Solutions EBITDA increased $10.2 million in 2023 as compared to 2022 primarily as a result of favorable mix and manufacturing productivity.

Accordingly, Adjusted EBITDA margins expanded to 20.7% from 19.7% in the year ago period.

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economic conditions worldwide, customer demand, competitive market forces, customer acceptance of our product offerings, and commodities pricing.

The following table is derived from our Consolidated Cash Flow S tatements and includes the results and cash flow activity of discontinued operations up to the February 22, 2022 disposal date :

The following table is derived from our Consolidated Cash Flow S tatements :

Years Ended December 31,

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Effects of currency exchange rate changes on cash and cash equivalents (8,345) 2,020

Increase (decrease) in cash and cash equivalents (90,632) 43,919

Net decrease in cash and cash equivalents (226,742) (90,632)

Cash and cash equivalents, beginning of year 597,044 687,676

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Net cash provided by operating activities totaled $352.1 million for 2024 compared to $319.6 million for 2023.

The increase is primarily due to a $35.4 million improvement in operating assets and liabilities as we successfully managed working capital to mitigate the impact of lower revenues in 2023.

Net cash from investing activities was a use of cash of $200.4 million for 2023 compared to a source of cash of $168.4 million for 2022.

The increase is primarily due to a $44.7 million improvement in operating assets and liabilities that was primarily driven by favorable changes in inventory.

Inventory turns improved to 4.9 turns by the end of 2024 compared to 3.8 turns by the end of 2023.

We calculate inventory turns by dividing annualized cost of sales for the quarter by the inventory balance at the end of the quarter.

Net cash from investing activities was a use of cash of $426.8 million for 2024 compared to $200.4 million for 2023.

Investing activities for 2024 included $296.5 million primarily for the acquisitions of Precision and Voleatech, $129.1 million for capital expenditures, and $1.3 million related to the disposal of a business, partially offset by asset sales of $0.1 million.

Investing activities for 2023 included $116.7 million for capital expenditures and $106.7 million primarily for the acquisitions of Sichert and Cloudrail, partially offset by $13.7 million for asset sales and $9.3 million received from the disposals of businesses.

Investing activities for 2022 included proceeds of $334.6 million and $43.5 million from the sale of the Tripwire disposal group and tangible property, respectively, partially offset by $105.1 million for capital expenditures and $104.6 million primarily for the acquisitions of Macmon, NetModule and CAI.

Net cash flows used for financing activities totaled $143.7 million for 2024 compared to $211.9 million for 2023.

Financing activities for 2024 included payments under our share repurchase program of $134.3 million, payments related to share based compensation activities of $9.7 million, cash dividend payments of $8.2 million, financing lease payments of $1.1 million, and proceeds from the issuance of common stock of $8.9 million.

Financing activities for 2022 included repayments of debt obligations of $230.6 million, payments under our share repurchase program of $150.0 million, cash dividend payments of $8.9 million, net payments related to share based compensation activities of $7.2 million, financing lease payments of $0.2 million, and proceeds from the issuance of common stock of $3.7 million.

Financing activities for 2023 included payments under our share repurchase program of $192.1 million, payments related to share based compensation activities of $17.4 million, cash dividend payments of $8.5 million, financing lease payments of $0.4 million, and proceeds from the issuance of common stock of $6.5 million.

Our cash and cash equivalents balance was $370.3 million as of December 31, 2024.

Of this amount, $303.2 million was held outside of the U.S.

Of this amoun t, $224.1 million was held outside of the U.S.

in our foreign operations.

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• Interest payments on long-term debt of $171.9 million, of which $44.2 million is due in 2025.

Opera ting lease obligations of $91.5 million, of which $18.0 million is due in 2024 (see Note 12).

Pension and other postemployment obligation s of $106.6 million, of which $12.3 million is d ue in 2024 (see Note 19).

• Operating lease obligations of $166.4 million, of which $26.1 million is due in 2025.

• Pension and other postemployment obligations of $105.8 million, of which $9.8 million is due in 2025.

• Obligations to purchase goods or services that are enforceable and legally binding of $36.1 million.

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We expect to replace most of these when they expire or mature.

Obligations for uncertain tax positions of $7.1 million, none of which is due in 2024 (see Note 18).

• Obligations for uncertain tax positions of $15.7 million, none of which is due in 2024.

Off-Balance Sheet Arrangements

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Deferred tax assets generally represent future tax benefits to be received when these carryforwards can be applied against future taxable income or when expenses previously reported in our Consolidated Financial Statements become deductible for income tax purposes.

A deferred tax asset valuation allowance is required when some portion or all of the deferred tax assets may not be realized.

A deferred tax asset valuation allowance is required when some portion or all of the deferred tax assets is not more likely than not to be realized.

We are required to estimate taxable income in future years or develop tax strategies that would enable tax asset realization in each taxing jurisdiction and use judgment to determine whether to record a deferred tax asset valuation allowance for part or all of a deferred tax asset.

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Goodwill and Indefinite-Lived Intangible Assets

We test our goodwill and other indefinite-lived intangible assets not subject to amortization for impairment on an annual basis during the fourth quarter or when indicators of impairment exist.

We test our goodwill for impairment on an annual basis during the fourth quarter or when indicators of impairment exist.

We base our estimates on assumptions we believe to be reasonable, but which are not predictable with precision and therefore are inherently uncertain.

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However, components within an operating segment are aggregated as a single reporting unit if they have similar economic characteristics.

We determined that each of our reportable segments (Enterprise Solutions and Industrial Automation Solutions) represents an operating segment.

We determined that each of our reportable segments ( Smart Infrastructure Solutions and Automation Solutions) represents an operating segment.

Within those operating segments, we have identified reporting units based on whether there is discrete fina ncial information prepared that is regularly reviewed by segment management.

As a result of this evaluation, we have identified three reporting units within Enterprise Solutions and three reporting units within Industrial Automation Solutions for purposes of goodwill impairment testing.

As a result of this evaluation, we have identified three reporting units within Smart Infrastructure Solutions and three reporting units within Automation Solutions for purposes of goodwill impairment testing.

The accounting guidance related to goodwill impairment testing allows for the performance of an optional qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

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If it is more likely than not that the fair value is less than the carrying value, then a quantitative assessment is required for the reporting unit, as described in the paragraph below.

In 2023, we performed a qualitative assessment over three of our re porting units.

In 2024, we performed a qualitative assessment over all six of our re porting units.

When we evaluate goodwill for impairment using a quantitative assessment, we compare the fair value of each reporting unit to its carrying value.

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Consideration is given to the financial conditions and operating performance of the reporting unit being valued relative to those publicly-traded companies operating in the same or similar lines of business.

For our annual impairment test in 2023, we performed a quantitative assessment over three of our reporting units.

The excess of the fair value over the carrying value under the income approach ranged from 30% to 106%.

The assumptions used to estimate fair values were based on the past performance of the reporting unit as well as the projections incorporated in our strategic plan.

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The discount rate used to estimate fair value was risk adjusted in consideration of the economic conditions in effect at the time of the impairment test.

We also considered assumptions that market participants may use.

In our quantitative assessment, the discount rate ranged from 11.9% to 13.8%, the 2024 to 2033 compounded annual revenue growth rate ranged from 4.2% to 6.3%, and the revenue growth rate beyond 2033 ranged from 2.0% to 3.0%.

By their nature, these assumptions involve risks and uncertainties.

There is inherent risk associated with using an income approach to estimate fair values.

If actual results are significantly different from our estimates or assumptions, we may have to recognize impairment charges that could be material.

We also test our indefinite-lived intangible asset, a trademark, for impairment on an annual basis during the fourth quarter.

The accounting guidance allows for the performance of an optional qualitative assessment, similar to that described above for goodwill, but we did not perform a qualitative assessment as part of our indefinite-lived intangible asset impairment testing for 2023.

Rather, we performed a quantitative assessment for our indefinite-lived trademark in 2023.

Under the quantitative assessment, we determined the fair value of the trademark using a relief from royalty methodology and compared the fair value to the carrying value.

We determined that our trademark was not impaired during 2023.

Significant assumptions to determine fair value included sales growth, a royalty rate, and a discount rate.

I n 2024, we did not perform a quantitative assessment over any reporting units.

Pension and Other Postretirement Benefits

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Actual results that differ from our assumptions are accumulated and, if in excess of the lesser of 10% of the projected benefit obligation or the fair market value of plan assets, amortized over the estimated future working life of the plan participants.

As a sensitivity measure, the effect of a 50 basis point decline in the assumed discount rate would have resulted in a decrease in the 2023 net periodic benefit cost of approximately $0.1 million and an increase in the projected benefit obligations of approximately $19.8 million as of December 31, 2023.

As a sensitivity measure, the effect of a 50 basis point decline in the assumed discount rate would have resulted in an increase in the 2024 net periodic benefit cost of less than $0.1 million and an increase in the projected benefit obligations of approximately $16.8 million as of December 31, 2024.

A 50 basis point decline in the expected return on plan assets would have resulted in an increase in the 2024 net periodic benefit cost of approximately $1.5 million.

Conversely, the effect of a 50 basis point increase in the assumed discount rate would have resulted in a decrease in the 2023 net periodic benefit cost of less than $0.1 million and a decrease in the projected benefit obligation of approximately $18.3 million as of December 31, 2023.

Conversely, the effect of a 50 basis point increase in the assumed discount rate would have resulted in an increase in the 2024 net periodic benefit cost of approximately $0.3 million and a decrease in the projected benefit obligation of approximately $15.3 million as of December 31, 2024.

A 50 basis point increase in the expected return on plan assets would have resulted in a decrease in the 2024 net periodic benefit cost of approximately $1.5 million.

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis