What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-06 · 133 added, 101 removed, 192 unchanged (55% of the section changed)

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In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “project,” “potential” or “continue” or the negative of those terms or other comparable terminology.

Particular risks facing us include economic, business and other risks stemming from our internal operations, legal and regulatory risks, costs of raw materials, pricing pressures, pension funding requirements, integration of acquisitions, and changes in the economy, as well as the impacts of the coronavirus disease (the “COVID-19 pandemic”) and governmental responses to stem further outbreaks of the COVID-19 pandemic, which is further discussed below and in other sections of this document.

Particular risks and uncertainties facing us include economic, business and other risks stemming from our internal operations, legal and regulatory risks, and uncertainties with respect to costs of raw materials, pricing pressures, pension funding requirements, integration of acquisitions, and changes in the economy, as well as the impacts of the coronavirus disease (the “COVID-19 pandemic”) and governmental responses to stem further outbreaks of the COVID-19 pandemic, which is further discussed below and in other sections of this document.

These statements are only predictions.

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All the forward-looking statements are qualified in their entirety by reference to the factors discussed under the heading “Risk Factors” in our 2020 Annual Report on Form 10-K, in any subsequent filing with the U.S.

Securities and Exchange Commission, as well as in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements.

Securities and Exchange Commission, as well as in any documents incorporated by reference that describe risks, uncertainties and other factors that could cause results to differ materially from those projected in these forward-looking statements.

We caution you that these risk factors may not be exhaustive.

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We disclaim any responsibility to update or publicly revise any forward-looking statements to reflect events or circumstances that arise after the date of this document.

IMPACT OF THE COVID-19 PANDEMIC

The COVID-19 pandemic had an adverse impact on our consolidated results of operations in the first and second quarters of 2020, with diminishing impacts during the second half of 2020.

Any impacts of the pandemic on our first half of 2021 operating results were generally limited to some delays for the project-related businesses within our Detection and Measurement reportable segment.

However, we could experience an increase in adverse impacts during the remainder of 2021, including (i) disruption to our supply chain, (ii) increased cost for certain components, commodities, or services, (iii) labor shortages, and (iv) temporarily closing facilities if incidents of the COVID-19 pandemic increase.

We have taken actions to manage near-term costs and other potential impacts.

We will continue to assess the actual and expected impacts of the COVID-19 pandemic and the need for further actions.

See Notes 1 and 9 to our condensed consolidated financial statements for additional considerations regarding the current and potential impacts of the COVID-19 pandemic.

COVID-19 PANDEMIC, SUPPLY CHAIN DISRUPTIONS, AND OTHER ECONOMIC FACTORS

The COVID-19 pandemic had an adverse impact on our consolidated results of operations in the first half of 2020, with diminishing impacts during the second half of 2020 and during the first nine months of 2021.

During the third quarter of 2021, certain of our businesses began to experience disruptions in the supply chain, which has negatively impacted their production of goods and, thus, resulted in lower absorption of manufacturing costs and delays in shipments to customers during the quarter.

Our businesses are also experiencing increased costs for certain components, commodities, and services and, in some cases, labor shortages.

We are taking actions to manage any additional costs and other potential impacts of these matters.

We will continue to assess the actual and expected impacts and the need for further actions.

OTHER SIGNIFICANT MATTERS

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▪ Post-acquisition operating results are included within the Detection and Measurement reportable segment.

▪ The seller was eligible for additional cash consideration of up to $45.0, upon achievement of certain operating and financial performance milestones.

▪ Contingent Consideration

• During the third quarter of 2021, we concluded that the operating and financial milestones associated with the contingent consideration would not be achieved.

• As a result, we reversed the related liability of $ 24.3, with the offset to “Other operating (income) expense.”

• See Note 1 to our condensed consolidated financial statements for additional details.

▪ Indefinite-Lived Intangible Assets and Goodwill

• We also concluded that the lack of achievement of the above milestones, along with lower than anticipated future cash flows, are indicators of potential impairment related to ULC’s indefinite-lived intangible assets and goodwill.

• As such, we tested ULC’s indefinite-lived intangible assets and goodwill for impairment during the quarter.

• Based on such testing, we determined that the carrying value of ULC’s net assets exceeded the implied fair value of the business.

• As a result, we recorded an impairment charge of $24.3 to “Other operating (income) expense,” with $23.3 related to goodwill and the remainder to trademarks.

• See Note 9 to our condensed consolidated financial statements for additional details.

◦ Sensors & Software, Inc.

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▪ Post-acquisition operating results are included within the Detection and Measurement reportable segment.

▪ The seller is eligible for additional cash consideration of up to $3.9, upon achievement of certain financial performance milestones.

◦ Sealite Pty Ltd and Affiliated Entities (“Sealite”)

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▪ Post-acquisition operating results are included within the Detection and Measurement reportable segment.

• Planned Disposition of SPX Transformer Solutions, Inc.

◦ Enterprise Control Systems Ltd (“ECS”)

▪ Acquired on August 2, 2021 for cash proceeds of $39.4, net of cash acquired of $5.1 .

▪ Revenues for the twelve months prior to the date of acquisition totaled approximately $ 10.9 .

▪ Post-acquisition operating results are included within the Detection and Measurement reportable segment.

▪ The seller is eligible for additional cash consideration of up to $16.8 , upon achievement of certain financial performance milestones.

• Disposition of SPX Transformer Solutions, Inc.

(“Transformer Solutions”)

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◦ Transformer Solutions has been included in discontinued operations for all periods presented.

◦ We expect the transaction to close during the fourth quarter of 2021.

◦ On October 1, 2021, we completed the sale for net cash proceeds of $620.6 and recorded a gain of $357.7 to “ Gain (loss) on disposition of discontinued operations, net of tax.”

• Change in Segment Reporting Structure

◦ In connection with the planned disposition of Transformer Solutions and its classification as a discontinued operation, we have eliminated the Engineered Solutions reportable segment.

◦ The remaining operations of the Engineered Solutions reportable segment have been reflected within our HVAC reportable segment for all periods presented.

◦ In connection with the disposition of Transformer Solutions and its classification as a discontinued operation, we have eliminated the Engineered Solutions reportable segment.

◦ The remaining operations of the former Engineered Solutions reportable segment have been reflected within our HVAC reportable segment for all periods presented.

• Large Power Projects in South Africa

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▪ DBT denies liability for these claims and, thus, fully intends to seek, and believes it is legally entitled to, reimbursement of the South African Rand 178.7 .

▪ As such, the amount has been reflected as a non-current asset in our condensed consolidated balance sheet as of July 3, 2021.

▪ As such, the amount has been reflected as a non-current asset in our condensed consolidated balance sheet as of October 2, 2021.

◦ On June 4, 2021, DBT received a revised version of an interim claim from MHI that was provided on February 26, 2019.

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◦ See Note 15 to our condensed consolidated financial statements for additional details.

• Cash Receipts in the Third Quarter of 2021

◦ Received federal income tax refunds of $22.4.

◦ Received insurance proceeds of $15.0 associated with the settlement of an asbestos insurance coverage matter.

OVERVIEW OF OPERATING RESULTS

Revenues for the three and six months ended July 3, 2021 totaled $296.7 and $584.6, respectively, compared to $258.0 and $514.8 during the respective periods in 2020.

The increase in revenues during the three and six months ended July 3, 2021, compared to the respective prior-year periods, was due primarily to an increase in organic revenue and, to a lesser extent, the impact of the ULC, Sensors & Software, and Sealite acquisitions.

The increase in organic revenue was due primarily to higher sales of heating products and location and inspection equipment, partially offset by lower sales of bus fare collection systems.

During the first half of 2020, sales of heating products and location and inspection equipment were impacted negatively by the COVID-19 pandemic.

Revenues for the three and nine months ended October 2, 2021 totaled $285.8 and $870.4, respectively, compared to $268.3 and $783.1 during the respective periods in 2020.

The increase in revenues during the three and nine months ended October 2, 2021, compared to the respective prior-year periods, was due primarily to the impact of the ULC, Sensors & Software, Sealite and ECS acquisitions and an increase in organic revenue .

The increase in organic revenue was due primarily to higher sales of heating and underground pipe and locator products, partially offset by lower sales of bus fare collection systems.

During the first half of 2020, sales of heating and underground pipe and locator products were impacted negatively by the COVID-19 pandemic.

The decline in sales of bus fare collection systems was due primarily to the timing of large projects, as the extent of such projects can fluctuate from period to period.

During the three and six months ended July 3, 2021, we generated operating income of $12.9 and $32.9, respectively, compared to $17.5 and $33.6 for the respective periods in 2020.

The decrease in operating income during the three and six months ended July 3, 2021, compared to the respective prior-year periods, was due primarily to higher corporate expense, other operating expense of $2.7 during the second quarter of 2021 related to revisions of recorded assets for asbestos-related claims,

and decreases in profitability within our Detection and Measurement reportable segment, partially offset by increases in profitability within our HVAC reportable segment associated with organic revenue growth.

The higher corporate expense was due primarily to increased investments in continuous improvement and other strategic initiatives and an increase in incentive compensation expense.

The decline in profitability within our detection and measurement reportable segment was due primarily to increased amortization expense associated with the acquisitions of Sealite, ULC, and Sensors & Software and the impact of the decline in sales of bus fare collection systems, partially offset by the impact of the organic revenue growth associated with location and inspection equipment.

Cash flows from operating activities associated with continuing operations totaled $38.9 for the six months ended July 3, 2021, compared to cash flows used in operating activities of $9.9 during the six months ended June 27, 2020.

The increase in cash flows from operating activities was due primarily to improved cash flows within our heating and location and inspection businesses associated with improved profitability and decreases in working capital.

During the three and nine months ended October 2, 2021, we generated operating income of $11.8 and $44.7, respectively, compared to $20.4 and $54.0 for the respective periods in 2020.

The decrease in operating income during the three months ended October 2, 2021, compared to the respective prior-year period, was due primarily to additional amortization expense and one-time costs (e.g., charges for inventory adjusted to fair value at the acquisition date) associated with recent acquisitions and lower absorption of manufacturing costs at certain of our businesses due to disruptions in their supply chain.

The decrease in operating income during the nine months ended October 2, 2021, compared to the respective prior-year period, was due primarily to higher corporate expense related to increased investments in continuous improvement and other strategic initiatives and an increase in incentive compensation expense.

Cash flows from operating activities associated with continuing operations totaled $94.0 for the nine months ended October 2, 2021, compared to cash flows from operating activities of $11.0 during the nine months ended September 26, 2020.

The increase in cash flows from operating activities was due primarily to improved cash flows within our heating and underground pipe and locator businesses associated with improved profitability and decreases in working capital , as well as third quarter 2021 cash receipts related to federal tax refunds of $22.4 and insurance proceeds of $15.0 associated with the settlement of an asbestos insurance coverage matter.

RESULTS OF CONTINUING OPERATIONS

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We had five more days in the first quarter of 2021 and will have six fewer days in the fourth quarter of 2021 than in the respective 2020 periods.

It is not practicable to estimate the impact of the five additional days on our consolidated operating results for the six months ended July 3, 2021, when compared to the consolidated operating results for the 2020 respective period.

It is not practicable to estimate the impact of the five additional days on our consolidated operating results for the nine months ended October 2, 2021, when compared to the consolidated operating results for the 2020 respective period.

Cyclicality of End Markets, Seasonality and Competition — The financial results of our businesses closely follow changes in the industries in which they operate and end markets in which they serve.

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This metric, however, is not a measure of financial performance under accounting principles generally accepted in the United States (“GAAP”), should not be considered a substitute for net revenue growth (decline) as determined in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.

The following table provides selected financial information for the three and six months ended July 3, 2021 and June 27, 2020, respectively, including the reconciliation of organic revenue increase to the net revenue increase :

Three months ended Six months ended

2021 June 27,

2020 % Change July 3,

2021 June 27,

The following table provides selected financial information for the three and nine months ended October 2, 2021 and September 26, 2020, respectively, including the reconciliation of organic revenue increase to the net revenue increase :

Three months ended Nine months ended

2021 September 26,

2020 % Change October 2,

2021 September 26,

2020 % Change

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* Not meaningful for comparison purposes.

Revenues — For the three and six months ended July 3, 2021, the increase in revenues, compared to the respective periods in 2020, was primarily due to an increase in organic revenue and, to a lesser extent, the impact of the ULC, Sensors & Software, and Sealite acquisitions.

The increase in organic revenue was due primarily to higher sales of heating products and location and inspection equipment, partially offset by lower sales of bus fare collection systems.

During the first half of 2020, sales of heating products and location and inspection equipment were impacted negatively by the COVID-19 pandemic.

Revenues — For the three months ended October 2, 2021, the increase in revenues, compared to the respective period in 2020, was due primarily to the impact of the acquisitions of Sealite, ULC, Sensors and Software, and ECS and, to a lesser extent, an increase in organic revenue and the favorable impact of foreign currency exchange rates.

The increase in organic revenue was due to higher sales of cooling products in the Americas region, as well as higher sales of underground pipe and locator, communication technologies, and obstruction lighting products.

These increases in organic revenue were partially offset by lower sales of cooling products in the EMEA region and bus fare collection systems.

For the nine months ended October 2, 2021, the increase in revenues, compared to the respective period in 2020, was primarily due to an increase in organic revenue and the impact of the acquisitions noted above.

The increase in organic revenue was due primarily to higher sales of heating and underground pipe and locator products, partially offset by lower sales of bus fare collection systems.

During the first half of

2020, sales of heating and underground pipe and locator products were impacted negatively by the COVID-19 pandemic.

The decline in sales of bus fare collection systems was due primarily to the timing of large projects, as the extent of such projects can fluctuate from period-to-period.

See “Results of Reportable Segments and Other Operating Segment” for additional details.

Gross Profit — For the three and six months ended July 3, 2021, the increase in gross profit and gross profit as a percentage of revenues, compared to the respective periods in 2020, was due primarily to the increase in revenues noted above, including the impact of the additional absorption of fixed costs associated with such revenue increase.

Selling, General and Administrative (“SG&A”) Expense — For the three and six months ended July 3, 2021, the increase in SG&A expense, compared to the respective periods in 2020, was due primarily to the incremental SG&A resulting from the acquisitions noted above and the increase in corporate expense related to additional investments in connection with continuous improvement and other strategic initiatives and an increase in incentive compensation.

Intangible Amortiz ation — For the three and six months ended July 3, 2021, the increase in intangible amortization, compared to the respective periods in 2020, was due to the incremental amortization of $4.0 and $ 5.6 during the three and six months ended July 3, 2021, respectively, related to the acquisitions noted above.

Gross Profit — For the three and nine months ended October 2, 2021, the increase in gross profit, compared to the respective periods in 2020, was due primarily to the increase in revenues noted above.

The decrease in gross profit as a percentage of revenues during the three months ended October 2, 2021, compared to the respective period in 2020, was due primarily to lower absorption of manufacturing costs at the HVAC segment’s heating businesses associated with disruptions in the supply chain.

Selling, General and Administrative (“SG&A”) Expense — For the three and nine months ended October 2, 2021, the increase in SG&A expense, compared to the respective periods in 2020, was due primarily to the incremental SG&A resulting from the acquisitions noted above.

In addition, SG&A expense during the nine months ended October 2, 2021 was impacted by an increase in corporate expense associated with additional investments in connection with continuous improvement and other strategic initiatives and an increase in incentive compensation.

Intangible Amortiz ation — For the three and nine months ended October 2, 2021, the increase in intangible amortization, compared to the respective periods in 2020, was due to the incremental amortization of $2.2 and $7.8, respectively, related to the acquisitions noted above.

Special Charges, net — Special charges, net, related primarily to restructuring initiatives to consolidate manufacturing, distribution, sales and administrative facilities, reduce workforce and rationalize certain product lines.

See Note 7 to our condensed consolidated financial statements for the details of actions taken in the first six months of 2021 and 2020.

Other Operating (Income) Expense — Other operating expense for the three and six months ended July 3, 2021 related to revisions to recorded assets for asbestos-related claims.

Other operating income for the six months ended June 27, 2020 related to revisions to estimates of certain liabilities retained in connection with the 2016 sale of the dry cooling business.

Other Income, net — Other income, net, for the three months ended July 3, 2021 was composed primarily of income derived from company-owned life insurance policies of $2.7, a gain of $2.2 related to changes in the estimated fair value of an equity security we hold, and pension and postretirement income of $1.6.

Other income, net, for the three months ended June 27, 2020 was composed primarily of a gain of $5.3 related to changes in the estimated fair value of an equity security that we hold and pension and postretirement income of $1.0, partially offset by foreign currency transaction losses of $0.6.

Other income, net, for the six months ended July 3, 2021 was composed primarily of a gains of $7.4 related to changes in the estimated fair value of an equity security we hold, pension and postretirement income of $3.2, income derived from company-owned life insurance policies of $2.7, and income of $1.7 related to a reduction of the parent company guarantees and bank surety bonds liability that were outstanding in connection with the 2016 sale of Balcke Dürr, partially offset by foreign currency transaction losses.

Other income, net, for the six months ended June 27, 2020 was composed primarily of a gain of $5.3 related to a change in the estimated fair value of an equity security that we hold and pension and postretirement income of $2.0.

See Note 7 to our condensed consolidated financial statements for the details of actions taken in the first nine months of 2021 and 2020.

Other Operating (Income) Expense — Other operating expense for the nine months ended October 2, 2021 related to revisions to recorded assets for asbestos-related claims.

Other operating income for the nine months ended September 26, 2020 related to revisions to estimates of certain liabilities retained in connection with the 2016 sale of the dry cooling business.

Other Income, net — Other income, net, for the three months ended October 2, 2021 was composed primarily of a gain of $1.6 related to a change in the estimated fair value of an equity security that we hold, a gain of $0.4 related to the sale of a trading security, and pension and postretirement income of $ 1.6, partially offset by foreign currency transaction losses of $ 0.8.

Other income, net, for the three months ended September 26, 2020 was composed primarily of a gain of $2.1 related to a change in the estimated fair value of an equity security that we hold and pension and postretirement income of $0.9, partially offset by foreign currency transaction losses of $0.3.

Other income, net, for the nine months ended October 2, 2021 was composed primarily of a gain of $9.0 related to a change in the estimated fair value of an equity that security we hold, pension and postretirement income of $ 4.8, income derived from company-owned life insurance policies of $ 2.7 , and income of $ 1.7 related to a reduction of the liability associated with the parent company guarantees and bank surety bonds that were outstanding in connection with the 2016 sale of Balcke Dürr, partially offset by foreign currency transaction losses of $1.1.

Other income, net, for the nine months ended September 26, 2020 was composed primarily of a gain of $7.4 related to a change in the estimated fair value of an equity security that we hold and pension and postretirement income of $2.9.

Interest Expense, net — Interest expense, net, includes both interest expense and interest income.

The decrease in interest expense, net, during the three and six months ended July 3, 2021, compared to the respective periods in 2020, was the result of a lower average effective interest rate during 2021.

Income Tax Provision — For the three months ended July 3, 2021, we recorded an income tax provision of $2.0 on $16.7 of pre-tax income from continuing operations, resulting in an effective rate of 12.0%.

This compares to an income tax provision for the three months ended June 27, 2020 of $3.0 on $18.2 of pre-tax income from continuing operations, resulting in an effective rate of 16.5%.

The most significant item impacting the income tax provision for the second quarter of 2021 was a benefit of $2.2 related to revisions to liabilities for uncertain tax positions and interest associated with various refund claims.

The most significant items impacting the income tax provision for the second quarter of 2020 were (i) $0.5 of tax benefits associated with statute expirations in certain jurisdictions and (ii) $0.3 of excess tax benefits resulting from stock option awards that were exercised during the period.

For the six months ended July 3, 2021, we recorded an income tax provision o f $6.1 on $39.8 of pre-tax income from continuing operations, resulting in an effective rate of 15.3%.

This compares to an income tax provision for the six months ended June 27, 2020 of $5.3 on $30.0 of pre-tax income from continuing operations, resulting in an effective rate of 17.7%.

The most significant items impacting the income tax provision for the first half of 2021 were (i) a benefit of $2.2 noted above recorded during the second quarter of 2021 and (ii) $1.0 of excess tax benefits associated with stock-based compensation awards that vested and/or were exercised during the period.

The most significant items impacting the income tax provision for the first half of 2020 were (i) $1.5 of excess tax benefits associated with stock-based compensation awards that vested and/or were exercised during the period and (ii) the $0.5 of tax benefits associated with the statute expirations noted above.

The decrease in interest expense, net, during the three and nine months ended October 2, 2021, compared to the respective periods in 2020, was the result of a lower average effective interest rate and lower average debt balances during 2021.

Income Tax Provision — For the three months ended October 2, 2021, we recorded an income tax pro vision of $3.7 on $11.4 of pre-tax income from continuing operations, resulting in an effective rate of 32.5%.

This compares t o an income tax provision for the three months ended September 26, 2020 of $3.1 on $18.7 of pre-tax income from continuing operations, resulting in an effective rate of 16.6% .

The most significant item impacting the income tax provision for the third quarter of 2021 was $0.7 of expense related to th e revaluation of certain deferred tax liabilities due to an enacted tax rate increase.

The most significant item impacting the income tax provision for the third quarter of 2020 was $1.2 of tax benefits related to our U.S.

tax credits and incentives.

For the nine months ended October 2, 2021, we recorded an income tax provision o f $9.8 on $51.2 of pre-tax income from continuing operations, resulting in an effective rate of 19.1% .

This compares to an income tax provision for the nine months ended September 26, 2020 of $8.4 on $48.7 of pre-tax income from continuing operations, resulting in an effective rate of 17.2% .

The most significant items impacting the income tax provision for the first nine months of 2021 were (i) a benefit of $2.2 related to the resolution of certain liabilities for uncertain tax positions and interest associated with various refund claims and (ii) $1.0 of excess tax benefits associated with stock-based compensation awards that vested and/or were exercised during the period, partially offset by (iii) $1.3 of expense related to the revaluation of deferred tax liabilities due to an enacted tax rate increase.

The most significant items impacting the income tax provision for the first nine months of 2020 were (i) $1.5 of excess tax benefits resulting from stock-based compensation awards that vested and/or were exercised during the period, (ii) the $1.2 of tax benefits associated with U.S.

tax credits and incentives noted above, and (iii) $0.5 of tax benefits associated with statute expirations in certain jurisdictions during the second quarter of 2020.

RESULTS OF REPORTABLE SEGMENTS AND OTHER OPERATING SEGMENT

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HVAC Reportable Segment

Three months ended Six months ended

July 3, 2021 June 27, 2020 % Change July 3, 2021 June 27, 2020 % Change

Three months ended Nine months ended

October 2, 2021 September 26, 2020 % Change October 2, 2021 September 26, 2020 % Change

Revenues $ 179.3 $ 182.6 (1.8) $ 540.3 $ 510.6 5.8

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% of revenues 11.9 % 14.7 % 12.8 % 12.6 %

Components of revenue increase:

Components of revenue increase (decrease):

Organic (2.4) 6.0

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Settlement of legacy dry cooling contract — (0.9)

Net revenue increase 12.2 10.1

Revenues — For the three and six months ended July 3, 2021, the increase in revenues, compared to the respective periods in 2020, was due primarily to an increase in organic revenue for the segment’s heating products, partially offset by a reduction of revenue during the second quarter of 2021 related to the settlement of a legacy dry cooling contract.

Net revenue increase (decrease) (1.8) 5.8

Revenues — F or the three months ended October 2, 2021, the decrease in revenues, compared to the respective period in 2020, was due to a net decline in organic revenue related primarily to the segment’s cooling business in the EMEA region, as this business had some large projects that contributed significant revenue to the segment’s results in the third quarter of 2020.

Despite a significant increase in orders during the third quarter of 2021, organic revenue for the segment’s heating businesses was relatively flat during the quarter as production and shipments for the businesses were negatively impacted by disruptions in the supply chain.

For the nine months ended October 2, 2021, the increase in revenues, compared to the respective period in 2020, was due primarily to an increase in organic revenue for the segment’s heating businesses.

Sales of heating products during the first half of 2020 were impacted negatively by (i) a warmer than normal winter and (ii) the COVID-19 pandemic.

Income — For the three and six months ended July 3, 2021, the increase in income and margin, compared to the respective periods in 2020, was due primarily to the increase in revenues noted above.

Backlog — The segment had backlog of $190.7 and $193.2 as of July 3, 2021 and June 27, 2020, respectively.

In addition, and as indicated above, sales for the segment’s heating businesses during the third quarter of 2021 were negatively impacted by disruptions in the supply chain.

Income — For the three months ended October 2, 2021, the decrease in income and margin, compared to the respective period in 2020, was due primarily to the revenue decline noted above and a decline in manufacturing cost absorption at the segment’s heating businesses associated with disruptions in the supply chain.

For the nine months ended October 2, 2021, the increase in income and margin, compared to the respective period in 2020, was due primarily to the increase in revenues noted above.

Backlog — The segment had backlog of $204.0 and $182.6 as of October 2, 2021 and September 26, 2020, respectively.

Detection and Measurement Reportable Segment

Three months ended Six months ended

July 3, 2021 June 27, 2020 % Change July 3, 2021 June 27, 2020 % Change

Three months ended Nine months ended

October 2, 2021 September 26, 2020 % Change October 2, 2021 September 26, 2020 % Change

Revenues $ 106.4 $ 85.2 24.9 $ 329.2 $ 269.2 22.3

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Net revenue increase 24.9 22.3

Revenues — For the three and six months ended July 3, 2021, the increase in revenues, compared to the respective periods in 2020, was due primarily to the impact of the acquisitions of Sealite, ULC, and Sensors & Software and, to a lesser extent, the impact of changes in foreign currency exchange rates and an increase in organic revenue.

The increase in organic revenue was primarily the result of higher sales of location and inspection equipment, partially offset by lower sales of bus fare collection systems during the three and six months ended July 3, 2021.

During the first half of 2020, sales of location and inspection equipment were impacted negatively by the COVID-19 pandemic, while the decline in sales of bus fare collection systems was due primarily to the timing of large projects, as the extent of such projects can fluctuate from period to period.

Income — For the three and six months ended July 3, 2021, the decrease in income and margin, compared to the respective periods in 2020, was due primarily to increased amortization expense associated with the acquisitions of Sealite, ULC, and Sensors & Software and the impact of the decline in sales of bus fare collection systems, partially offset by the impact of the organic revenue growth associated with location and inspection equipment.

Backlog — The segment had bac klog of $141.9 and $68.7 as of July 3, 2021 and June 27, 2020, respectively.

Aggregate backlog related to ULC, Sensors and Software and Sealite totaled $39.0 as of Ju ly 3, 2021.

Three months ended Six months ended

July 3, 2021 June 27, 2020 % Change July 3, 2021 June 27, 2020 % Change

Revenues — For the three and nine months ended October 2, 2021, the increase in revenues, compared to the respective periods in 2020, was due primarily to the impact of the acquisitions of ECS, Sealite, ULC, and Sensors and Software and, to a lesser extent, organic revenue growth and the impact foreign currency exchange rates.

The increase in organic revenue was primarily the result of higher sales of underground pipe and locator products and, to a lesser extent, higher sales of communication technologies and obstruction lighting products.

These increases in organic revenue were offset partially by lower sales of bus fare collection systems.

During the first half of 2020, sales of underground pipe and locator products were impacted negatively by the COVID-19 pandemic, while the decline in in sales of bus fare collection systems in the current-year period was due primarily to the timing of large projects, as extent of such projects can fluctuate from period to period.

Income — For the three and nine months ended October 2, 2021, the decrease in income and margin, compared to the respective periods in 2020, was due primarily to increased amortization expense, as well as inventory step-up charges ($0.7 and $2.3 during the three and nine months ended October 2, 2021), associated with the acquisitions noted above, partially offset by the income associated with the increases in revenue noted above.

Backlog — The segment had bac klog of $176.5 and $89.5 as of October 2, 2021 and September 26, 2020, respectively.

Aggregate backlog related to Sensors and Software, Sealite and ECS, businesses acquired after September 26, 2020, totaled $50.2 as of October 2 , 2021.

Three months ended Nine months ended

October 2, 2021 September 26, 2020 % Change October 2, 2021 September 26, 2020 % Change

Revenues $ 0.1 $ 0.5 * $ 0.9 $ 3.3 *

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* Not meaningful for comparison purposes.

Revenues — For the three and six months ended July 3, 2021, the decrease in revenues, compared to the respective periods in 2020, was due to a decline in organic revenue resulting from lower sales related to the large power projects in South Africa, as these projects are in the latter stages of completion.

Loss — For the three and six months ended July 3, 2021, the loss decreased, compared to the respective periods in 2020, as a result of the wind-down activities noted above for the large power projects in South Africa.

Revenues — For the three and nine months ended October 2, 2021, the decrease in revenues, compared to the respective periods in 2020, was due to lower sales related to the large power projects in South Africa, as these projects are in the latter stages of completion.

Loss — For the three and nine months ended October 2, 2021, the loss decreased, compared to the respective periods in 2020, as a result of the wind-down activities noted above for the large power projects in South Africa.

The losses for all periods presented relate primarily to legal costs associated with the claims matters for the large power projects in South Africa.

Backlog — The operating segment had a backlog of $3.1 and $4.0 as of July 3, 2021 and June 27, 2020, respectively.

Backlog — The operating segment had a backlog of $2.9 and $3.9 as of October 2, 2021 and September 26, 2020, respectively.

CORPORATE AND OTHER EXPENSES

Three months ended Six months ended

July 3, 2021 June 27, 2020 % Change July 3, 2021 June 27, 2020 % Change

Three months ended Nine months ended

October 2, 2021 September 26, 2020 % Change October 2, 2021 September 26, 2020 % Change

Total consolidated revenues $ 285.8 $ 268.3 6.5 $ 870.4 $ 783.1 11.1

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Corporate Expense — Corporate expense generally relates to the cost of our Charlotte, North Carolina corporate headquarters.

The increase in corporate expense during the three and six months ended July 3, 2021, compared to the respective periods in 2020, was due primarily to increased investments in continuous improvement and other strategic initiatives and an increase in incentive compensation expense.

The increase in corporate expense during the nine months ended October 2, 2021, compared to the respective periods in 2020, was due primarily to increased investments in continuous improvement and other strategic initiatives and an increase in incentive compensation expense.

Long-Term Incentive Compensation Expense — Long-term incentive compensation expense represents our consolidated expense, which we do not allocate for segment reporting purposes.

For the three months ended July 3, 2021, the increase in long-term incentive compensation expense, compared to the respective period in 2020, was due to a higher amount award forfeitures during the 2020 period.

The decrease in long-term incentive compensation during the six months ended July 3, 2021, compared to the respective period in 2020, was due to revisions to/finalization of the liability associated with the 2018 long-term cash awards.

For the three months ended October 2, 2021, the increase in long-term incentive compensation expense, compared to the respective period in 2020, was due to a higher amount award forfeitures during the 2020 period.

The decrease in long-term incentive compensation during the nine months ended October 2, 2021, compared to the respective period in 2020, was due to revisions to/finalization of the liability associated with the 2018 long-term cash awards during the first quarter of 2021, partially offset by the impact of a lower amount of award forfeitures during 2021.

See Note 14 to our condensed consolidated financial statements for additional details.

LIQUIDITY AND FINANCIAL CONDITION

Listed below are the cash flows from (used in) operating, investing, and financing activities and discontinued operations, as well as the net change in cash and equivalents for the six months ended July 3, 2021 and June 27, 2020.

Six months ended

July 3, 2021 June 27, 2020

Nine months ended

October 2, 2021 September 26, 2020

Continuing operations:

Cash flows from (used in) operating activities $ 38.9 $ (9.9)

Cash flows from operating activities $ 94.0 $ 11.0

Cash flows used in investing activities (119.3) (99.3)

Cash flows from financing activities 0.9 119.8

Cash flows from (used in) financing activities (166.8) 64.5

Cash flows from discontinued operations 677.7 42.9

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Net change in cash and equivalents $ 491.8 $ 16.0

Operating Activities — The increase in cash flows from operating activities during the six months ended July 3, 2021, compared to the respective period in 2020, was due primarily to improved cash flows within our location and inspection and heating businesses associated with improved profitability and decreases in working capital.

Investing Activities — Cash flows used in investing activities for the six months ended July 3, 2021 were comprised primarily of cash utilized in the acquisition of Sealite of $81.6 and capital expenditures of $4.2, partially offset by proceeds from company-owned life insurance policies of $3.9.

Cash flows used in investing activities for the six months ended June 27, 2020 were comprised of capital expenditures of $8.3, partially offset by proceeds from company-owned life insurance policies of $1.1.

Financing Activities — Cash flows from financing activities for the six months ended July 3, 2021 were comprised of net borrowings under our various debt instruments of $5.1, partially offset by minimum withholdings paid on behalf of employees on long-term incentive awards, net of proceeds from options exercised, of $4.2.

Cash flows from financing activities for the six months ended June 27, 2020 were comprised of net borrowings under our various debt instruments of $123.6, partially offset by (i) minimum withholdings paid on behalf of employees on long-term incentive awards, net of proceeds from options exercised, of $2.3 and (ii) $1.5 related to contingent consideration paid in connection with the SGS acquisition, which was completed in July 2019.

Discontinued Operations — Cash flo ws from discontinued operations for the six months ended July 3, 2021 and June 27, 2020 related primarily to cash flows from operations generated by Transformers Solutions, partially offset by cash disbursements related to liabilities retained in connection with dispositions.

Change in Cash and Equivalents due to Changes in Foreign Currency Exchange Rate s — Changes in foreign currency exchange rates did not have a significant impact on our cash and equivalents during the first six months of 2021 and 2020.

Operating Activities — The increase in cash flows from operating activities during the nine months ended October 2, 2021, compared to the respective period in 2020, was due primarily to improved cash flows within our underground pipe and locator and heating businesses associated with improved profitability and decreases in working capital, as well as third quarter 2021 cash receipts related to federal tax refunds of $22.4 and insurance proceeds of $15.0 associated with the settlement of an asbestos insurance coverage matter.

Investing Activities — Cash flows used in investing activities for the nine months ended October 2, 2021 were comprised primarily of cash utilized in the acquisitions of Sealite and ECS of $80.3 and $39.4, respectively, and capital expenditures of $7.5 , partially offset by proceeds from company-owned insurance policies of $8.2.

Cash flows used in investing activities for the nine months ended September 26, 2020 were comprised of cash utilized for the acquisition of ULC of $87.9 and capital expenditures of $12.5, partially offset by proceeds from company-owned life insurance policies of $1.1.

Financing Activities — Cash flows used in financing activities for the nine months ended October 2, 2021 were comprised of net repayments under our various debt instruments of $162.8 and minimum withholdings paid on behalf of employees on long-term incentive awards, net of proceeds from options exercised, of $4.0.

Cash flows from financing activities for the nine months ended September 26, 2020 were comprised of net borrowings under our various debt instruments of $67.8, with such net borrowings resulting primarily from borrowings utilized to fund the ULC acquisition.

The impact of these net borrowings was partially offset by (i) minimum withholdings paid on behalf of employees on long-term incentive awards, net of proceeds from options exercised, of $1.8 and (ii) $1.5 related to contingent consideration paid in connection with the SGS acquisition.

Discontinued Operations — Cash flo ws from discontinued operations for the nine months ended October 2, 2021 include proceeds received in connection with the sale of Transformers Solutions of $620.6.

In addition, cash flows from discontinued operations for the nine months ended October 2, 2021 and September 26, 2020 include cash flows from operations generated by Transformers Solutions, partially offset by cash disbursements related to liabilities retained in connection with dispositions.

Borrowings and Availability

Borrowings — The following summarizes our debt activity (both current and non-current) for the six months ended July 3, 2021.

Borrowings — The following summarizes our debt activity (both current and non-current) for the nine months ended October 2, 2021.

2020 Borrowings Repayments Other (5)

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___________________________

(1) While not due for repayment until December 2024 under the terms of our senior credit agreement, we have classified within current liabilities the portion of the outstanding balance that we believe will be repaid over the next year, with such amount based on an estimate of cash that is expected to be generated over such period, including proceeds from the expected sale of Transformer Solutions in the fourth quarter of 2021.

(1) While not due for repayment until December 2024 under the terms of our senior credit agreement, we classify within current liabilities the portion of the outstanding balance that we believe will be repaid over the next year, with such amount based on an estimate of cash that is expected to be generated over such period.

(2) The term loan is repayable in quarterly installments beginning in the first quarter of 2021, with the quarterly installments equal to 0.625% of the initial term loan balance of $250.0 during 2021, 1.25% in each of the four quarters of 2022 and 2023, and 1.25% during the first three quarters of 2024.

The remaining balance is payable in full on December 17, 2024.

Balances are net of unamortized debt issuance costs of $1.2 and $1.4 at July 3, 2021 and December 31, 2020, respectively.

Balances are net of unamortized debt issuance costs of $1.1 and $1.4 at October 2, 2021 and December 31, 2020, respectively.

(3) Under this arrangement, we can borrow, on a continuous basis, up to $50.0, as available.

At July 3, 2021, we had $24.0 of available borrowing capacity under this facility after giving effect to outstanding borrowings of $26.0.

Borrowings under this arrangement are collateralized by eligible trade receivables of certain of our businesses.

(4) Primarily includes balances under a purchase card program of $2.3 and $1.7 and finance lease obligations of $2.7 and $2.6 at July 3, 2021 and December 31, 2020, respectively.

(4) Primarily includes balances under a purchase card program of $2.3 and $1.7 and finance lease obligations of $1.1 and $2.6 at October 2, 2021 and December 31, 2020, respectively.

The purchase card program allows for payment beyond the normal payment terms for goods and services acquired under the program.

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dollar, and the impact of amortization of debt issuance costs associated with the term loan.

At July 3, 2021, we were in compliance with all covenants of our senior credit agreement.

Availability — At July 3, 2021, we had $297.8 of available borrowing capacity under our revolving credit facilities after giving effect to borrowings under the domestic revolving loan facility of $140.0 and $12.2 reserved for domestic letters of credit.

At October 2, 2021, we were in compliance with all covenants of our senior credit agreement.

Availability — At October 2, 2021, we had $437.8 of available borrowing capacity under our revolving credit facilities, after giving effect to $12.2 reserved for domestic letters of credit.

During the second quarter of 2021, we reduced the available issuance capacity under our foreign credit instrument facilities from $100.0 to $55.0.

At July 3, 2021, we had $28.8 of available issuance capacity under our foreign credit instrument facilities after giving effect to $26.2 reserved for outstanding letters of credit.

At October 2, 2021, we had $31.2 of available issuance capacity under our foreign credit instrument facilities after giving effect to $23.8 reserved for outstanding letters of credit.

Financing instruments may be used from time to time including, but not limited to, public and private debt and equity offerings, operating leases, finance leases and securitizations.

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Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and equivalents, trade accounts receivable, insurance recovery assets associated with asbestos product liability matters, and interest rate swap, foreign currency forwards, and commodity contracts.

These financial instruments, other than trade accounts receivable, are placed with high-quality financial institutions and insurance companies throughout the world.

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We have credit loss exposure in the event of nonperformance by counterparties to the above financial instruments, but have no other off-balance-sheet credit risk of accounting loss.

We anticipate, however, that counterparties will be able to fully satisfy their obligations under the contracts.

We anticipate, however, that counterparties will be able to fully

satisfy their obligations under the contracts.

We do not obtain collateral or other security to support financial instruments subject to credit risk.

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Contractual Obligations — There have been no material changes in the amounts of our contractual obligations from those disclosed in our 2020 Annual Report on Form 10-K.

Our total net liabilities for unrecognized tax benefits including interest were $8.8 as of July 3, 2021.

Our total net liabilities for unrecognized tax benefits including interest were $8.9 as of October 2, 2021.

Based on the outcome of certain examinations or as a result of the expiration of statutes of limitations for certain jurisdictions, we believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits could decrease by up t o $5.0.

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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-Q

Item 2. Management’s Discussion and Analysis