What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-05-05 · 106 added, 84 removed, 194 unchanged (49% 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.

In addition, statements with respect to our intention to implement a reorganization of our corporate legal structure described in Note 18 (the "Transaction"), the timing thereof and its anticipated impacts are forward-looking statements.

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

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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;

uncertainties with respect to the completion of the Transaction, which may be delayed or not completed as anticipated, as well as the expected benefits of the Transaction (if it is completed);

the impact of retained liabilities of disposed businesses;

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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.

The combination of these matters negatively impacted our operating results during the first half of 2022, particularly 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 continue to 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.

The Russia/Ukraine conflict, and governmental actions implemented in response to the conflict, have not had a significant adverse impact on our operating results during the first half of 2022.

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

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

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▪ Acquired on April 19, 2021 for cash consideration of $81.6 , net of cash acquired of $2.3 .

▪ During the third quarter of 2021, we agreed to a final adjustment to the purchase price, related to acquired working capital, resulting in our receipt of $1.3 of cash during the quarter.

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

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• 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.

• During the first and second quarters of 2022, we further reduced the estimated fair value/liability by $0.9 and $0.4, respectively, with such amounts recorded to “Other operating expense, net.”

• As of July 2, 2022, the estimated fair value/liability related to the contingent consideration was $0.0.

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

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

▪ During the second quarter of 2022, we agreed to a final adjustment to the purchase price, related to acquired working capital, resulting in our receipt of $0.4 of cash during the quarter.

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

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◦ 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.

◦ We paid $9.0 at the time of the transfer and an additional $1.0 during the second quarter of 2022.

◦ In connection with the transfer, we:

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◦ See Note 11 to our condensed consolidated financial statements for additional details.

• Settlement and Actuarial Losses - U.S.

Pension Plan (“U.S.

◦ In connection with the sale of Transformer Solutions, a significant number of participants of the U.S.

Plan who were employees of Transformer Solutions elected to receive lump-sum payments from the U.S.

◦ The extent of these lump-sum payments, combined with other lump-sum payments during the first half of 2022, required us to record settlement and actuarial losses totaling $3.8 associated with the U.S.

Plan during the second quarter of 2022.

◦ See Note 11 to our condensed consolidated financial statements for additional details.

• Repurchases of Common Stock — During the second quarter of 2022, we repurchased approximately 0.7 shares of our common stock for $33.7.

OVERVIEW OF OPERATING RESULTS

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).

Revenues for the three and six months ended July 2, 2022 totaled $354.0 and $661.1, respectively, compared to $296.6 and $583.8 during the respective periods in 2021.

The increase in revenues during the three and six months ended July 2, 2022, compared to the respective prior-year periods, was due primarily to the impact of the Cincinnati Fan, Sealite, ECS and ITL acquisitions, as well as an increase in organic revenue.

The increase in organic revenue was due primarily to an increase in sales of heating products, associated with both price and volume increases, and an increase in sales for the majority of the product lines within the Detection and Measurement reportable segment.

During the three and six months ended July 2, 2022, we generated operating income of $27.2 and $38.6, respectively, compared to $17.1 and $42.1 for the respective periods in 2021.

The increase in operating income during the three months ended July 2, 2022, compared to the respective period in 2021, was due primarily to an increase in income within our Detection and Measurement reportable segment associated with the increase in revenue noted above.

The decrease in operating income during the six months ended July 2, 2022, compared to the respective period in 2021, was due primarily to an increase in corporate expense associated with increased investments in various strategic and transformational initiatives and a decrease in income within our HVAC reportable segment resulting from additional amortization expense associated with the Cincinnati Fan acquisition and lower absorption of manufacturing costs associated with (i) supply chain delays and (ii) labor shortages.

These decreases in operating income were offset partially by the increase in income within our Detection and Measurement reportable segment noted above.

Cash flows used in operating activities associated with continuing operations totaled $83.5 for the six months ended July 2, 2022, compared to cash flows from operating activities of $39.6 during the six months ended July 3, 2021.

The decrease in cash flows from operating activities was due primarily to (i) income tax payments of $48.8 during the first half of 2022, with a significant portion of these payments related to the gain on sale of Transformer Solutions, (ii) decreases in cash flows at certain of our project-related businesses during the first half 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, (iii) elevated purchases of inventory components during the first half of 2022 in order to manage the potential risk associated with the current supply chain environment, and (iv) cash payments of $10.0 during the first half of 2022 in connection with the transfer of our postretirement life insurance benefit obligation to an insurance carrier.

RESULTS OF CONTINUING OPERATIONS

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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.

It is not practicable to estimate the impact of the one less day on our consolidated operating results for the six months ended July 2, 2022, when compared to the consolidated operating results for the 2021 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.

In addition, certain of our businesses have seasonal fluctuations.

For example, our heating businesses tend to be stronger in the third and fourth quarters, as customer buying habits are driven largely by seasonal weather patterns.

For example, our heating businesses tend to be stronger in the third and fourth quarters, as customer

buying habits are driven largely by seasonal weather patterns.

In aggregate, our businesses tend to be stronger in the second half of the year.

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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 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,

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

Three months ended Six months ended

2021 % Change July 2,

2021 % Change

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Special charges, net 0.1 0.6 * 0.1 0.8 *

Other operating income (0.9) — *

Other income, net 6.5 7.4 (12.2)

Other operating expense, net 1.9 2.7 * 1.0 2.7 *

Other income (expense), net (1.7) 6.4 (126.6) 4.8 13.8 (65.2)

Interest expense, net (2.0) (3.4) (41.2) (4.3) (7.5) (42.7)

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* Not meaningful for comparison purposes.

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.

Revenues — For the three and six months ended July 2, 2022, the increase in revenues, compared to the respective periods in 2021, was due primarily to the impact of the acquisitions of Cincinnati Fan, Sealite, ECS and ITL, as well as an increase in organic revenue.

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 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.

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.

Gross Profit — For the three and six months ended July 2, 2022, the increase in gross profit, compared to the respective periods in 2021, was due primarily to the increase in revenues noted above.

For the three months ended July 2, 2022, the increase in gross profit as a percentage of revenues, compared to the respective period in 2021, was due primarily to a more favorable sales mix in the second quarter of 2022, as the year-over-year increase in revenues was weighted towards high-margin products within our Detection and Measurement reportable segment.

For the six months ended July 2, 2022, the decrease in 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 associated with (i) supply chain delays and (ii) labor shortages.

S elling, General and Administrative (“SG&A”) Expense — For the three and six months ended July 2, 2022, the increase in SG&A expense, compared to the respective periods in 2021, was due primarily to the incremental SG&A resulting from the acquisitions noted above and, to a lesser extent, an increase in corporate expense associated with increased investments in various strategic and transformational initiatives.

Intangible Amortiz ation — For the three and six months ended July 2, 2022, th e increase in i ntangible amortization, compared to the respective periods in 2021, was due to amortization related to the Cincinnati Fan acquisition.

Special Charges, net — Special charges, net, relate 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 2022 and 2021.

Other Operating Expense, net — Other operating expense, net, for the three and six months ended July 2, 2022 related to asbestos-related charges of $2.3, partially offset by a reduction in the fair value/liability associated with the contingent consideration related to the ECS acquisition ($0.4 and $1.3 during the three and six months ended July 2, 2022, respectively).

Other operating expense for the three and six months ended July 3, 2021 related to a revision to recorded assets for asbestos-related claims.

Other Income (Expense), net — Other expense, net, for the three months ended July 2, 2022 was comprised primarily of pension and postretirement expense of $2.7 (inclusive of settlement and actuarial losses of $2.3 and $1.5, respectively), partially offset by income of $0.9 associated with a transition services agreement.

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 owned security we hold, and pension and postretirement income of $1.6.

Other income, net, for the six months ended July 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 $1.8, and income derived from company owned life insurance policies of $0.7, partially offset by pension and postretirement expense (inclusive of the losses mentioned above) of $1.9.

Other income, net, for the six months ended July 3, 2021 was composed primarily of 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.

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

The decrease in interest expense, net, during the three and six months ended July 2, 2022, compared to the respective periods in 2021, was the result of a lower average effective interest rate and lower average debt balances during the 2022 periods.

Income Tax Provision — For the three months ended July 2, 2022, we recorded an income tax provision of $4.4 on $23.5 of pre-tax income from continuing operations, resulting in an effective rate of 18.7%.

This compares to an income tax provision for the three months ended July 3, 2021 of $2.4 on $20.1 of pre-tax income from continuing operations, resulting in an effective rate of 11.9%.

The most significant item impacting the income tax provision for the second quarters of 2022 and 2021 was $0.7 and $2.2 of tax benefits, respectively, related to revisions to liabilities for uncertain tax positions.

In addition, the tax provision for the second quarter of 2021 included interest associated with various refund claims.

For the six months ended July 2, 2022, we recorded an income tax provision of $7.0 on $39.1 of pre-tax income from continuing operations, resulting in effective rate of 17.9%.

This compares to an income tax provision for the six months ended July 3, 2021 of $7.7 on $48.4 of pre-tax income from continuing operations, resulting in an effective rate of 15.9%.

The most significant items impacting the income tax provision for the first half of 2022 and 2021 were (i) $0.7 and $1.0, respectively, of excess tax benefits associated with stock-based compensation awards that vested and/or were exercised during the periods and (ii) the $0.7 and $2.2, respectively, of the tax benefits noted above that were recorded in the second quarter of 2022 and 2021.

RESULTS OF REPORTABLE SEGMENTS

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HVAC Reportable Segment

Three months ended

April 2, 2022 April 3, 2021 % Change

Three months ended Six months ended

July 2, 2022 July 3, 2021 % Change July 2, 2022 July 3, 2021 % Change

Revenues $ 218.7 $ 185.4 18.0 $ 411.8 $ 361.0 14.1

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Components of revenue increase:

Organic 8.9 4.8

Foreign currency (0.7) (0.4)

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Net revenue increase 18.0 14.1

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.

Revenues — For the three and six months ended July 2, 2022, the increase in revenues, compared to the respective periods in 2021, was due primarily to the impact of the acquisition of Cincinnati Fan and an increase in organic revenue.

The increase in organic revenue was due primarily to an increase in sales of heating products associated with both price and volume increases.

Income — For the three and six months ended July 2, 2022, the decrease in income and margin, compared to the respective periods in 2021, was due primarily to amortization expense of $2.1 and $6.8, respectively, resulting from the Cincinnati Fan acquisition.

In addition, income and margin for the three and six months ended July 2, 2022 was negatively impacted by lower absorption of manufacturing costs associated with (i) supply chain delays and (ii) labor shortages.

Backlog — The segment had backlog of $321.6 and $190.7 as of July 2, 2022 and July 3, 2021, respectively.

Backlog associated with Cincinnati Fan totaled $34.9 as of July 2, 2022.

Detection and Measurement Reportable Segment

Three months ended

April 2, 2022 April 3, 2021 % Change

Three months ended Six months ended

July 2, 2022 July 3, 2021 % Change July 2, 2022 July 3, 2021 % Change

Revenues $ 135.3 $ 111.2 21.7 $ 249.3 $ 222.8 11.9

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Net revenue increase 21.7 11.9

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.

Revenues — For the three and six months ended July 2, 2022, the increase in revenues, compared to the respective periods in 2021, was due primarily to the impact of the acquisitions of Sealite, ECS, and ITL, as well as an increase in organic revenue.

During the three months ended July 2, 2022, the segment experienced organic revenue growth across all of its product lines, while the organic revenue growth during the six months ended July 2, 2022 was due to increased sales of obstruction lighting, bus fare collection, and location and inspection products.

Income — For the three and six months ended July 2, 2022, the increase in income and margin, compared to the respective periods in 2021, was due primarily to the increase in revenues noted above.

Backlog — The segment had bac klog of $195.6 and $141.9 as of July 2, 2022 and July 3, 2021, respectively.

Backlog associated with ECS and ITL totaled $18.7 as of July 2, 2022.

CORPORATE AND OTHER EXPENSES

Three months ended

April 2, 2022 April 3, 2021 % Change

Three months ended Six months ended

July 2, 2022 July 3, 2021 % Change July 2, 2022 July 3, 2021 % Change

Total consolidated revenues $ 354.0 $ 296.6 19.4 $ 661.1 $ 583.8 13.2

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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 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.

The increase in corporate expense during the three and six months ended July 2, 2022, compared to the respective periods in 2021, was due primarily to increased investments in various strategic and transformational initiatives.

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 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.

For the three and six months ended July 2, 2022, the decrease in long-term incentive compensation expense, compared to the respective periods in 2021, was due to the impact of forfeitures resulting from various participant resignations during the second quarter of 2022.

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

Three months ended

April 2, 2022 April 3, 2021

Six months ended

July 2, 2022 July 3, 2021

Continuing operations:

Cash flows from (used in) operating activities $ (83.5) $ 39.6

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

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

Cash flows used in investing activities (45.8) (82.2)

Cash flows from (used in) financing activities (46.7) 1.3

Cash flows from (used in) discontinued operations (26.6) 37.7

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Net change in cash and equivalents $ (200.8) $ 0.8

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.

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 three months of 2022 and 2021.

Operating Activities — Th e decrease in cash flows from operating activities during the six months ended July 2, 2022, compared to the respective period in 2021, was due primar ily to (i) income tax payments of $48.8 during the first half of 2022, with a significant portion of these payments related to the gain on sale of Transformer Solutions, (ii) decreases in cash flows at certain of our project-related businesses during the first half 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, (iii) elevated purchases of inventory components during the first half of 2022 in order to manage the potential risk associated with the current supply chain environment, and (iv) cash payments of $10.0 during the first half of 2022 in connection with the transfer of our postretirement life insurance benefit obligation to an insurance carrier.

Investing Activities — Cash fl ows used in investing activities for the six months ended July 2, 2022 were comprised of cash utilized in the acquisition of ITL of $41.8 and capital expenditures of $6.0, partially offset by proceeds from company-owned life insurance policies of $1.6 and $0.4 received upon agreement with the seller on acquired working capital balances associated with Cincinnati Fan.

Cash flows used in investing activities for the six months ended July 3, 2021 were comprised 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.

Financing Activities — Cash flows used in financing activities for the six months ended July 2, 2022 were comprised of repurchases of common stock of $33.7, net repayments under our various debt instruments of $6.5, minimum withholdings

paid on behalf of employees on long-term incentive awards, net of proceeds from options exercised, of $5.2, and contingent consideration paid of $1.3 related to a prior acquisition.

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 $3.8.

Discontinued Operations — Cash flo ws used in discontinued operat ions for the six months ended July 2, 2022 relate primarily to (i) disbursements for professional fees incurred in connection with the claims activities related to the large power projects in South Africa (see Note 15 for additional details), (ii) disbursements for liabilities retained in connection with dispositions, and (iii) 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 six months ended July 3, 2021 related primarily to 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 three months ended April 2, 2022.

2021 Borrowings Repayments Other April 2,

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

2021 Borrowings Repayments Other July 2,

Revolving loans $ — $ — $ — $ — $ —

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

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

Balances are net of unamortized debt issuance costs of $ 0.9 and $1.0 at July 2, 2022 and December 31, 2021, respectively.

(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.

(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.

(3) Primarily includes balances under a purchase card program of $2.1 and $2.2 and finance lease obligations of $1.0 and $1.1 at July 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

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.

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.

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

Availability — At July 2, 2022, we had $439.0 of available borrowing capacity under our revolving credit facilities, after giving effect to $11.0 reserved for letters of credit.

In addition, at July 2, 2022, we had $43.3 of available issuance capacity under our foreign credit instrument facilities after giving effect to $11.7 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 and foreign currency forwards contracts.

rate swap and foreign currency forwards 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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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 $9.8 as of April 2, 2022.

Our total net liabilities for unrecognized tax benefits including interest were $9.1 as of July 2, 2022.

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 to $5.0.

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, 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).

These claims relate to litigation matters (e.g., contracts, intellectual property, and competitive claims), including claims with respect to the large power projects in South Africa, 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).

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.

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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