What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-04 · 138 added, 185 removed, 140 unchanged (70% 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 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.

Particular risks and uncertainties facing us include the impact of the COVID-19 pandemic and governmental and other actions taken in response;

the uncertainty of claims resolution with respect to the large power projects in South Africa, as well as claims with respect to asbestos, environmental and other contingent liabilities;

cyclical changes and specific industry events in our markets;

economic impacts from continued or escalating geopolitical tensions;

changes in anticipated capital investment and maintenance expenditures by customers;

availability, limitations or cost increases of raw materials and/or commodities that cannot be recovered in product pricing;

the impact of competition on profit margins and our ability to maintain or increase market share;

inadequate performance by third-party suppliers and subcontractors for outsourced products, components and services and other supply-chain risks;

cyber-security risks;

risks with respect to the protection of intellectual property, including with respect to our digitalization initiatives;

the impact of overruns, inflation and the incurrence of delays with respect to long-term fixed-price contracts;

defects or errors in current or planned products;

domestic economic, political, legal, accounting and business developments adversely affecting our business, including regulatory changes;

changes in worldwide economic conditions;

uncertainties with respect to our ability to identify acceptable acquisition targets;

uncertainties surrounding timing and successful completion of any announced acquisition or disposition transactions, including with respect to integrating acquisitions and achieving cost savings or other benefits from acquisitions;

the impact of retained liabilities of disposed businesses;

potential labor disputes;

and extreme weather conditions and natural and other disasters.

These statements are only predictions.

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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.

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.

COVID-19 PANDEMIC, SUPPLY CHAIN DISRUPTIONS, LABOR SHORTAGES, AND COST INCREASES

The impact of the COVID-19 pandemic on our operating results was relatively minimal throughout 2021.

However, during January 2022, there was an increase in COVID-19 cases at certain of our manufacturing facilities, which resulted in a high-level of absenteeism at such facilities during the month.

In addition, since the second half of 2021, certain of our businesses have experienced supply chain disruptions, as well as labor shortages, while all of our businesses have experienced increases in raw material, component, and transportation costs.

The combination of these matters negatively impacted our operating results during the first quarter of 2022, as we experienced lower absorption of manufacturing costs and, in some cases, the negative impact of cost increases on fixed-price customer contracts.

We are actively managing these matters and we expect the potential impacts will diminish as we progress through 2022.

POTENTIAL IMPACTS OF RUSSIA/UKRAINE CONFLICT

The Russia/Ukraine conflict did not have a significant impact on our operating results during the three months ended April 2, 2022.

We are monitoring the availability of certain raw materials that are supplied by these countries.

However, at this time, we do not expect the potential impact to be material to our operating results.

OTHER SIGNIFICANT MATTERS

• Acquisitions

◦ ULC Robotics (“ULC”)

▪ Acquired on September 2, 2020 for cash proceeds of $89.2, net of cash acquired of $4.0.

▪ Revenues for the twelve months prior to the date of acquisition totaled approximately $40.0.

▪ 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.

(“Sensors & Software”)

▪ Acquired on November 11, 2020 for cash proceeds of $15.5, net of cash acquired of $0.3.

▪ Revenues for the twelve months prior to the date of acquisition totaled approximately $7.0.

▪ 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”)

▪ Acquired on April 19, 2021 for cash proceeds of $80.3 , net of cash acquired of $2.3 .

▪ Revenues for the twelve months prior to the date of acquisition totaled approximately $ 33.0 .

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

▪ Acquired on April 19, 2021 for cash consideration of $80.3 , net of cash acquired of $2.3 .

▪ Post-acquisition operating results of Sealite are included within our Detection and Measurement reportable segment.

◦ 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.

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

▪ The seller is eligible for additional cash consideration of up to $16.4, upon achievement of certain financial performance milestones.

• The estimated fair value of such contingent consideration was $8.2 as of the date of the acquisition.

• During the fourth quarter of 2021, we concluded that the probability of achieving the above financial performance milestones had lessened due to a delay in the execution of certain large orders, resulting in a reduction of the estimated fair value/liability of $6.7.

• During the first quarter of 2022, we further reduced the estimated fair value/liability by $0.9, with such amount recorded to “Other operating income” during the quarter.

• As of April 2, 2022, the estimated fair value/liability related to the contingent consideration was $0.6.

▪ Post-acquisition operating results of ECS are included within our Detection and Measurement reportable segment.

◦ Cincinnati Fan & Ventilator Co., Inc.

(“Cincinnati Fan”)

▪ Acquired on December 15, 2021 for cash consideration of $145.2, net of cash acquired of $2.5.

▪ Post-acquisition operating results of Cincinnati Fan are included within our HVAC reportable segment.

◦ International Tower Lighting, LLC (“ITL”)

▪ Acquired on March 31, 2022 for cash consideration of $41.8, net of cash acquired of $1.1.

▪ Post-acquisition operating results of ITL are included within our Detection and Measurement reportable segment.

• Disposition of SPX Transformer Solutions, Inc.

(“Transformer Solutions”)

◦ On June 8, 2021, we signed a definitive agreement to sell Transformer Solutions for cash proceeds of $645.0.

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

◦ On October 1, 2021, we completed the sale for net cash proceeds of $620.6 and recorded a gain of $382.2 to “ Gain (loss) on disposition of discontinued operations, net of tax.”

• Change in Segment Reporting Structure

◦ 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

◦ On February 22, 2021 and April 28, 2021, our South African subsidiary, DBT, received favorable rulings from dispute adjudication panels.

▪ In connection with the rulings, DBT received South African Rand 126.6 (or $ 8.6 at the time of payment ) and South African Rand 82.0 (or $ 6.0 at the time of payment ), respectively.

▪ As the rulings are subject to further arbitration, such amounts have not been reflected in our condensed consolidated statements of operations.

▪ On July 5, 2021, DBT received notice from MHI of its intent to seek final and binding arbitration in the Kusile matter.

◦ In May 2021 , and in connection with certain claims made against DBT, MHI made a demand and received payment of South African Rand 178.7 (or $12.5 at the time of payment) on bonds issued by a bank.

▪ Under the terms of the bonds and our senior credit agreement, we were required to fund the above payment.

▪ 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 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.

DBT has numerous defenses and, thus, does not believe it has a probable liability associated with these claimed damages.

◦ During the first quarter of 2022, we paid $13.9 to the buyer of Transformer Solutions related primarily to the settlement of the final working capital balances of the business.

• Transfer of Postretirement Life Insurance Benefit Obligation

◦ On February 17, 2022, we transferred our obligation for life insurance benefits under our postretirement benefit plans to an insurance carrier for total cash consideration of $10.0.

◦ We paid $9.0 at the time of transfer and expect to pay the remainder in the second quarter of 2022.

◦ In connection with the transfer, we:

▪ Recorded a net charge of $0.3 within our first quarter 2022 operating results;

▪ Have eliminated the (i) third-party cost and (ii) internal resource requirements associated with administering these benefits.

◦ See Note 11 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 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 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.

Revenues for the three months ended April 2, 2022 totaled $307.1, compared to $287.2 during the respective period in 2021.

The increase in revenues during the three months ended April 2, 2022, compared to the respective prior-year period, was due primarily to the impact of the Cincinnati Fan, Sealite, and ECS acquisitions, partially offset by a decrease in organic revenue.

The decrease in organic revenue was due primarily to lower sales of communication technologies products, as the extent of such sales can fluctuate materially from period to period.

During the three months ended April 2, 2022, we generated operating income of $11.4, compared to $25.0 for the respective period in 2021.

The decrease in operating income during the three months ended April 2, 2022 was due primarily to

a decrease in profitability for both our HVAC and Detection and Measurement reportable segments.

The decrease in profitability for our HVAC reportable segment was due primarily to an increase in amortization expense of $4.7 associated with the acquisition of Cincinnati Fan and lower absorption of manufacturing costs resulting from (i) a high-level of absenteeism during January 2022 caused by an increase in COVID-19 cases, (ii) supply chain delays, and (iii) labor shortages.

The decrease in profitability for our Detection and Measurement reportable segment was due primarily to lower sales of communication technologies products, as these sales typically generate high profit margins.

Cash flows used in operating activities associated with continuing operations totaled $48.6 for the three months ended April 2, 2022, compared to cash flows from operating activities of $23.1 during the three months ended April 3, 2021.

The decrease in cash flows from operating activities was due primarily to (i) decreases in cash flows at certain of our project-related businesses during the first quarter of 2022, as cash receipts for these project-related businesses are often subject to contract milestones that can impact the timing of cash flows from period to period, (ii) elevated purchases of raw materials and components during the first quarter of 2022 in order to manage the potential risk associated with the current supply chain environment, and (iii) a cash payment of $9.0 during the first quarter of 2022 in connection with the transfer of our postretirement life insurance benefit obligation to an insurance carrier (see Note 11 to our condensed consolidated financial statements for additional details).

RESULTS OF CONTINUING OPERATIONS

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Our fourth quarter ends on December 31.

The interim closing dates for the first, second and third quarters of 2021 are April 3, July 3 and October 2, compared to the respective March 28, June 27 and September 26, 2020 dates.

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 nine months ended October 2, 2021, when compared to the consolidated operating results for the 2020 respective period.

The interim closing dates for the first, second and third quarters of 2022 are April 2, July 2 and October 1, compared to the respective April 3, July 3, and October 2, 2021 dates.

We had one less day in the first quarter of 2022 and will have one more day in the fourth quarter of 2022 than in the respective 2021 periods.

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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We believe we compete effectively on the basis of each of these factors.

Non-GAAP Measures — Organic revenue growth (decline) presented herein is defined as revenue growth (decline) excluding the effects of foreign currency fluctuations, acquisitions/divestiture s, and the impact of a reduction in revenue during the second quarter of 2021 associated with the settlement of claims on a legacy dry cooling project.

Non-GAAP Measures — Organic revenue growth (decline) presented herein is defined as revenue growth (decline) excluding the effects of foreign currency fluctuations and acquisitions/divestitures.

We believe this metric is a useful financial measure for investors in evaluating our operating performance for the periods presented as, when considered in conjunction with our revenues, it presents a useful tool to evaluate our ongoing operations and provides investors with a tool they can use to evaluate our management of assets held from period to period.

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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 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,

The following table provides selected financial information for the three months ended April 2, 2022 and April 3, 2021, including the reconciliation of organic revenue decrease to the net revenue increase:

Three months ended

2022 April 3,

2021 % Change

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Special charges, net — 0.2 *

Other operating (income) expense — — * 2.7 (0.4) *

Other operating income (0.9) — *

Other income, net 6.5 7.4 (12.2)

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Acquisitions 9.9

Settlement of legacy dry cooling contract — (0.6)

Net revenue increase 6.9

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* Not meaningful for comparison purposes.

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 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.

Revenues — For the three months ended April 2, 2022, the increase in revenues, compared to the respective period in 2021, was due primarily to the impact of the acquisitions of Cincinnati Fan, Sealite, and ECS, partially offset by a decrease in organic revenue.

The decrease in organic revenue was due primarily to lower sales of communication technologies products, as the extent of such sales can fluctuate materially from period to period.

See “Results of Reportable Segments” for additional details.

Gross Profit — For the three months ended April 2, 2022, the decrease in gross profit and gross profit as a percentage of revenues, compared to the respective period in 2021, was due primarily to lower absorption of manufacturing costs within our HVAC reportable segment resulting from (i) a high-level of absenteeism during January 2022 caused by an increase of COVID-19 cases, (ii) supply chain delays, and (iii) labor shortages.

In addition, gross profit and gross profit as a percentage of revenues were negatively impacted by the lower sales of communication technologies products during the three months ended April 2, 2022, as these sales typically generate high profit margins.

The impact of the above items on gross profit, for the three months ended April 2, 2022, was offset partially by the incremental gross profit associated with the above acquisitions.

Selling, General and Administrative (“SG&A”) Expense — For the three months ended April 2, 2022, the increase i n SG&A expense, compared to the respective period in 2021, was due primarily to the incremental SG&A resulting from the acquisitions noted above.

Intangible Amortiz ation — For the three months ended April 2, 2022, th e increase i n intangible amortization, compared to the respective period in 2021, was due to the incremental amortization 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 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.

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

Other Operating Income — Other operating income for the three months ended April 2, 2022 related to a reduction in the fair value / liability associated with the contingent consideration related to the ECS acquisition.

Other Income, net — Other income, net, for the three months ended April 2, 2022 was composed primarily of a gain of $4.4 related to a change in the estimated fair value of an equity security that we hold, income associated with a transition services agreement of $0.9, pension and postretirement income of $0.8, and income derived from company owned life insurance policies of $0.7.

Other income, net, for the three months ended April 3, 2021 was composed primarily of a gain of $5.2 related to a change in the estimated fair value of an equity security that we hold, 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, and pension and postretirement income of $1.6, partially offset by foreign currency transaction losses of $0.7.

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

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

Th e decrease i n interest expense, net, during the three months ended April 2, 2022, compared to the respective peri od in 2021, was the result of a lower average effective interest rate and lower average debt balances during the 2022 period.

Income Tax Provision — For the three months ended April 2, 2022, we recorded an income tax provision of $2.6 on $15.6 of pre-tax income from continuing operations, resulting in an effective rate of 16.7%.

This compares to an income tax provision for the three months ended April 3, 2021 of $5.3 on $28.3 of pre-tax income from continuing operations, resulting in an effective rate of 18.7%.

The most significant item impacting the income tax provision for the first quarters of 2022 and 2021 was $0.7 and $0.9, respectively, of excess tax benefits resulting from stock-based compensation awards that vested and/or were exercised during the periods.

RESULTS OF REPORTABLE SEGMENTS

The following information should be read in conjunction with our condensed consolidated financial statements and related notes.

These results exclude the operating results of discontinued operations for all periods presented.

See Note 6 to our condensed consolidated financial statements for a description of our reportable segments and other operating segment.

See Note 6 to our condensed consolidated financial statements for a description of our reportable segments.

Non-GAAP Measures — Throughout the following discussion of segment results, we use “organic revenue” growth (decline) to facilitate explanation of the operating performance of our segments.

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HVAC Reportable Segment

Three months ended Nine months ended

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

Three months ended

April 2, 2022 April 3, 2021 % Change

Revenues $ 193.1 $ 175.6 10.0

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% of revenues 7.9 % 12.7 %

Components of revenue increase (decrease):

Organic (2.4) 6.0

Components of revenue increase:

Foreign currency —

Settlement of legacy dry cooling contract — (0.9)

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.

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.

Acquisition 9.6

Net revenue increase 10.0

Revenues — For the three months ended April 2, 2022, the increase in revenues, compared to the respective period in 2021, was due primarily to the impact of the acquisition of Cincinnati Fan, and to a much lesser extent, organic revenue growth.

The increase in organic revenue was due to higher sales of boiler products during the quarter, resulting primarily from price increases.

Income — For the three months ended April 2, 2022, the decrease in income and margin, compared to the respective period in 2021, was due primarily to amortization expense of $4.7 resulting from the Cincinnati Fan acquisition and lower absorption of manufacturing costs associated with (i) absenteeism during January 2022 related to the impact of the COVID-19 pandemic, (ii) supply chain delays, and (iii) labor shortages.

Backlog — The segment had backlog of $263.4 and $168.4 as of April 2, 2022 and April 3, 2021, respectively.

Backlog associated with Cincinnati Fan totaled $30.0 as of April 2, 2022.

Detection and Measurement Reportable Segment

Three months ended Nine months ended

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

Three months ended

April 2, 2022 April 3, 2021 % Change

Revenues $ 114.0 $ 111.6 2.2

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Net revenue increase 2.2

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 *

Loss (4.1) (5.3) * (12.6) (13.9) *

% of revenues * * * *

_________________________________

* Not meaningful for comparison purposes.

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 $2.9 and $3.9 as of October 2, 2021 and September 26, 2020, respectively.

Revenues — For the three months ended April 2, 2022, the increase in revenues, compared to the respective period in 2021, was due primarily to the impact of the acquisitions of Sealite and ECS, partially offset by a decrease in organic revenue.

The decrease in organic revenue was due primarily to lower sales of communication technologies products, as the extent of such sales can fluctuate materially from period to period.

Income — For the three months ended April 2, 2022, the decrease in income and margin, compared to the respective period in 2021, was due primarily to lower sales of communication technologies products, as these sales typically generate high profit margins.

Backlog — The segment had bac klog of $153.1 and $109.0 as of April 2, 2022 and April 3, 2021, respectively.

Backlog associated with Sealite and ECS totaled $46.8 as of April 2, 2022.

CORPORATE AND OTHER EXPENSES

Three months ended Nine months ended

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

Three months ended

April 2, 2022 April 3, 2021 % Change

Total consolidated revenues $ 307.1 $ 287.2 6.9

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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 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.

The increase in corporate expense during the three months ended April 2, 2022, compared to the respective period in 2021, was due primarily to increased investments in various strategic initiatives and an increase in travel expense, partially offset by lower 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 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.

For the three months ended April 2, 2022, the increase in long-term incentive compensation expense, compared to the respective period in 2021, was due primarily to a reduction in long-term incentive compensation during the three months ended April 3, 2021 associated with revisions to/finalization of the liability associated with the 2018 long-term cash awards that vested during such period.

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 nine months ended October 2, 2021 and September 26, 2020.

Nine months ended

October 2, 2021 September 26, 2020

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 three months ended April 2, 2022 and April 3, 2021.

Three months ended

April 2, 2022 April 3, 2021

Continuing operations:

Cash flows from operating activities $ 94.0 $ 11.0

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

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

Cash flows from discontinued operations 677.7 42.9

Cash flows from (used in) operating activities $ (48.6) $ 23.1

Cash flows from (used in) investing activities (43.9) 1.3

Cash flows used in financing activities (11.0) (25.2)

Cash flows from (used in) discontinued operations (22.9) 36.3

Change in cash and equivalents due to changes in foreign currency exchange rates (0.1) 3.1

Net change in cash and equivalents $ (126.5) $ 38.6

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.

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 nine months of 2021 and 2020.

Operating Activities — The decrease i n cash flows from operating activities during the three months ended April 2, 2022, compared to the respective period in 2021, was due primarily to (i) decreases in cash flows at certain of our project-related businesses during the first quarter of 2022, as cash receipts for these project-related businesses are often subject to contract milestones that can impact the timing of cash flows from period to period, (ii) elevated purchases of raw materials and components during the first quarter of 2022 in order to manage the potential risk associated with the current supply chain environment, and (iii) a cash payment of $9.0 during the first quarter of 2022 in connection with the transfer of our postretirement life insurance benefit obligation to an insurance carrier (see Note 11 to our condensed consolidated financial statements for additional details).

Investing Activities — Cash fl ows used in investing activities for the three months ended April 2, 2022 were comprised of cash utilized in the acquisition of ITL of $41.8 and capital expenditures of $2.1.

Cash flows from investing activities for the three months ended April 3, 2021 were comprised of proceeds from company-owned life insurance policies of $3.5, partially offset by capital expenditures of $2.2.

Financing Activities — Cash flows used in financing activities for the three months ended April 2, 2022 were c omprised of minimum withholdings paid on behalf of employees on long-term incentive awards, net of proceeds from options exercised, of $6.4, net repayments under our various debt instruments of $3.3, and contingent consideration paid of $1.3 related to a prior acquisition.

Cash used in financing activities for the three months ended April 3, 2021 were comprised of net repayments under our various debt instruments of $21.4 and minimum withholdings paid on behalf of employees on long-term incentive awards, net of proceeds from options exercised, of $3.8.

Discontinued Operations — Cash flo ws used in discontinued operations for the three months ended April 2, 2022 relate primarily to (i) disbursements for liabilities retained in connection with dispositions and (ii) a payment of $13.9 to the buyer of Transformer Solutions related to the settlement of the final working capital balances for the business.

Cash flows from discontinued operations for the three months ended April 3, 2021 related primarily to net cash generated from the operations of Transformer Solutions, partially offset by disbursements for liabilities retained in connection with dispositions.

In addition, cash flows from discontinued operations during the first quarter of 2021 included cash receipts of $15.3 related to claims matters in South Africa.

Borrowings and Availability

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)

Borrowings — The following summarizes our debt activity (both current and non-current) for the three months ended April 2, 2022.

2021 Borrowings Repayments Other April 2,

Revolving loans $ — $ — $ — $ — $ —

$ 129.8 $ 209.1 $ (338.9) $ — $ —

Term loan (1)

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Trade receivables financing arrangement (2)

28.0 179.0 (207.0) — —

Other indebtedness (3)

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___________________________

(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.

(1) The term loan is repayable in quarterly installments equal to 1.25% of the initial term loan balance of $250.0, 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 $1.1 and $1.4 at October 2, 2021 and December 31, 2020, respectively.

Balances are net of unamortized debt issuance costs of $ 1.0 at April 2, 2022 and December 31, 2021.

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

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 $1.1 and $2.6 at October 2, 2021 and December 31, 2020, respectively.

(3) Primarily includes balances under a purchase card program of $2.0 and $2.2 and finance lease obligations of $1.1 and $1.1 at April 2, 2022 and December 31, 2021, respectively.

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

As this arrangement extends the payment of these purchases beyond their normal payment terms through third-party lending institutions, we have classified these amounts as short-term debt.

(5) “Other” primarily includes debt assumed, foreign currency translation on any debt instruments denominated in currencies other than the U.S.

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

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 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.

As this arrangement extends the payment of these purchases beyond their normal payment terms through third-party lending institutions, we have classified these amounts as short-term

At April 2, 2022, we were in compliance with all covenants of our senior credit agreement.

Availability — At April 2, 2022, we had $438.2 of available borrowing capacity under our revolving credit facilities, after giving effect to $11.8 reserved for letters of credit.

In addition, at April 2, 2022, we had $28.9 of available issuance capacity under our foreign credit instrument facilities after giving effect to $26.1 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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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.

4 unchanged sentences

Contractual Obligations — There have been no material changes in the amounts of our contractual obligations from those disclosed in our 2021 Annual Report on Form 10-K.

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.

Our total net liabilities for unrecognized tax benefits including interest were $9.8 as of April 2, 2022.

Contingencies and Other Matters — Numerous claims, complaints and proceedings arising in the ordinary course of business have been asserted or are pending against us or certain of our subsidiaries (collectively, “claims”).

These claims relate to litigation matters (e.g., contracts, intellectual property, and competitive claims), environmental matters, product liability matters (predominately associated with alleged exposure to asbestos-containing materials), and other risk management matters (e.g., general liability, automobile, and workers’ compensation claims).

These claims relate to litigation matters (e.g., contracts, intellectual property, and competitive claims), environmental matters, claims with respect to the large power projects in South Africa, product liability matters (predominately associated with alleged exposure to asbestos-containing materials), and other risk management matters (e.g., general liability, automobile, and workers’ compensation claims).

Additionally, we may become subject to other claims of which we are currently unaware, which may be significant, or the claims of which we are aware may result in our incurring significantly greater loss than we anticipate.

6 unchanged sentences

Critical Accounting Policies and Use of Estimates

General — The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities.

The accounting policies that we believe are most critical to the portrayal of our financial condition and results of operations, and that require our most difficult, subjective or complex judgments in estimating the effect of inherent uncertainties are discussed in our 2020 Annual Report on Form 10-K .

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities.

We have affected no material change in either our critical accounting policies or use of estimates since the filing of our 2021 Annual Report on Form 10-K.

2 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-Q

Item 2. Management’s Discussion and Analysis