What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-24 compared with 2022-02-25 · 331 added, 291 removed, 528 unchanged (54% of the section changed)

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and Results of Operations

(All currency and share amounts are in millions)

(in millions, except share data)

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

Unless otherwise indicated, amounts provided in Item 7 pertain to continuing operations only.

COVID-19 Pandemic, Supply Chain Disruptions and Labor Shortages, and the Related Impacts to Our Business

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 2021.

During the second half of 2021, certain of our businesses began to experience supply chain disruptions and labor shortages, which have negatively impacted their production of goods and, thus, resulted in lower absorption of manufacturing costs and, in some cases, delays in shipments to customers.

We are taking actions to manage the potential impacts of these matters and we will continue to assess the actual and expected impacts and the need for further actions.

Change in Accounting Method

Historically, certain of our domestic businesses within our HVAC reportable segment accounted for their inventories under the last-in, last-out (“LIFO”) method.

During the fourth quarter of 2021, as a means of harmonizing our accounting method for inventories across all of our businesses, we converted the inventory accounting for these businesses to the first-in, first-out (“FIFO”) method.

This change in accounting has been retrospectively applied to our consolidated financial statements.

See Note 9 to our consolidated financial statements for further discussion of this change, including the impact of the change on our prior years’ consolidated financial statements.

COVID-19 Pandemic, Supply Chain Disruptions and Labor Shortages, and Cost Increases

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 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 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.

During the second half of 2022, the supply chain disruptions and labor shortages lessened, resulting in improved productivity at a number of our manufacturing facilities.

In addition, the negative impact of cost increases diminished due to the effect of pricing initiatives that were implemented throughout 2022.

Potential Impacts of Russia/Ukraine Conflict

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 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 conflict to have a significant adverse impact to our operating results.

Executive Overview

Revenues for 2022 totaled $1,460.9, compared to $1,219.5 in 2021 (and $1,128.1 in 2020).

The increase in revenues during 2021, compared to 2020, was due primarily to (i) the impact of the ULC and Sensors & Software acquisitions in 2020 and the Sealite, ECS and Cincinnati Fan acquisitions in 2021 and (ii) an increase in organic revenue.

The increase in revenues during 2022, compared to 2021, was due to organic revenue growth within both our HVAC and Detection and Measurement reportable segments and the impact of the Sealite, ECS and Cincinnati Fan acquisitions in 2021 and the ITL acquisition in 2022 .

The increase in organic revenue within the HVAC reportable segment was driven by increased sales of heating and cooling products associated with price increases and, to a lesser extent, volume increases.

Organic growth within the Detection and Measurement reportable segment was due to continued strong order trends for our short-cycled businesses and execution of large projects within the fare collection, communication technologies, and obstruction lighting businesses.

The increase in revenues in 2021, compared to 2020, was due primarily to (i) the impact of the ULC and Sensors & Software acquisitions in 2020 and the Sealite, ECS and Cincinnati Fan acquisitions in 2021 and (ii) 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 cooling products.

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Sales of cooling products declined in 2021, as several large cooling projects favorably impacted sales in 2020.

The increase in revenues in 2020, compared to 2019, was due to the impact of the acquisitions of SGS and Patterson-Kelley during 2019 and ULC and Sensors & Software during 2020, partially offset by a decline in organic revenue in 2020.

The decline in organic revenue during 2020 was due primarily to lower sales of heating products, domestic cooling products, and communication technologies products, partially offset by higher sales of cooling products in the international markets.

A portion of the organic revenue decline in 2020 was attributable to a decline in customer demand and order delays caused by the COVID-19 pandemic.

For 2022, operating income totaled $51.0 , compared to $73.7 in 2021 (and $96.9 in 2020).

The decrease in operating income in 2021, compared to 2020, was due primarily to increases in asbestos product liability charges of $16.9 and corporate expense of $10.8.

The increase in asbestos product liability charges was due primarily to a continuing unfavorable trend in the percentage of claims with payment (versus claims dismissed without payment), while the increase in corporate expense was due to additional investments in continuous improvement and strategic initiatives and higher incentive compensation expense in 2021.

The decrease in operating income in 2020, compared to 2019, was due primarily to declines in profitability associated with lower sales of heating products and higher-margin communication technologies products.

Operating cash flows from continuing operations totaled $131.2 in 2021, compared to $105.2 in 2020 (and $110.0 in 2019).

The increase in operating cash flows from continuing operations in 2021, compared to 2020, was due primarily to (i) improved cash flows within our heating and underground pipe and locator businesses associated with improved profitability, (ii) a decline in working capital at certain of our businesses, (iii) insurance proceeds of $15.0 associated with the settlement of an asbestos insurance coverage matter, and (iv) income tax refunds, net of tax payments, of $5.5 in 2021 (compared to income tax payments, net of refunds, of $7.6 in 2020).

The decrease in operating cash flows from continuing operations in 2020, compared to 2019, was due primarily to a decline in cash flows at certain of our project-related businesses during 2020, as cash receipts for these project-related businesses are often subject to contractual milestones that can impact the timing of cash flows from year-to-year.

The de crease in operating income in 2022, compared to 2021, was due primarily to the loss on the Asbestos Portfolio Sale of $73.9, partially offset by an increase in income within our HVAC and Detection and Measurement reportable segments of $49.0 associated with the increase in revenue noted above.

The decrease in operating income in 2021, compared to 2020, was due primarily to increases in asbestos product liability charges of $16.9, corporate expense of $10.8, amortization and acquisition-related costs of $11.4, partially offset by an increase in segment income of $13.5.

The increase in asbestos product liability charges was due primarily to an unfavorable trend in the percentage of claims with payment (versus claims dismissed without payment), while the increase in corporate expense was due to additional costs associated with continuous improvement and strategic initiatives and higher incentive compensation expense in 2021.

The increase in segment income was due primarily to the increase in revenues noted above.

Operating cash flows used in continuing operations totaled $115.2 in 2022, compared to operating cash flows from continuing operations of $131.2 in 2021 (and $105.2 in 2020).

The decrease in operating cash flows from continuing operations in 2022, compared to 2021, was due primarily to (i) a cash contribution of $138.8 associated with funding the Asbestos Portfolio Sale;

(ii) income tax payments, net of refunds, of $59.6 (compared to income tax refunds, net of tax payments, of $5.5 during the year ended December 31, 2021), with a significant portion of the 2022 payments related to the gain on sale of Transformer Solutions;

(iii) elevated purchases of inventory components in order to manage the potential risk associated with the current supply chain environment;

(iv) decreases in cash flows at certain of our project-related businesses, as cash receipts for these businesses are often subject to contractual milestones that can impact cash receipts from period to period;

(v) net payments for asbestos-related matters of $15.3 (compared to net recoveries of $0.3 during the year ended December 31, 2021);

and (vi) cash payments of $10.0 in connection with the transfer of our postretirement life insurance benefit obligation to an insurance carrier.

The increase in operating cash flows from continuing operations in 2021, compared to 2020, was due primarily to (i) improved

cash flows within our heating and underground pipe and locator businesses associated with improved profitability, (ii) a decline in working capital at certain of our businesses, (iii) insurance proceeds of $15.0 associated with the settlement of an asbestos insurance coverage matter, and (iv) income tax refunds, net of tax payments, of $5.5 in 2021 (compared to income tax payments, net of refunds, of $7.6 in 2020).

Additional details on certain matters noted above as well as significant items impacting the financial results for 2022, 2021, and 2020 are as follows:

• 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 cash consideration paid of $10.0.

◦ In connection with the transfer, we:

• Recorded a net charge of $0.3 to “Other income (expense), net;” and

• Eliminated the (i) third-party cost and (ii) internal resource requirements associated with administering these benefits.

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

• On March 31, 2022, we completed the acquisition of ITL.

◦ The purchase price for ITL was $40.4, net of cash acquired of $1.1.

◦ The post-acquisition operating results of ITL are included within our Detection and Measurement reportable segment.

• Amendment of Senior Credit Agreement

◦ On August 12, 2022, we amended and restated our credit agreement (the “Credit Agreement”).

◦ The Credit Agreement provides for committed senior secured financing with an aggregate amount of $770.0, with a final maturity of August 12, 2027.

◦ See Note 13 to our consolidated financial statements for additional details.

• Settlement and Actuarial Gains and Losses - Pension and Postretirement Plans

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

Pension Plan (“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 that were made by the U.S.

Plan during the first nine months of 2022, required us to record settlement and actuarial losses of $6.2 during this period.

◦ In addition, we recorded settlement and actuarial gains o f $8.0 in t he fourth quarter of 2022 in connection with the annual remeasurement of our pension and postretirement plans, with such gains resulting primarily from the impact of increases in discount rates, partially offset by lower than expected returns on plan assets.

◦ See Notes 1 and 11 to our consolidated financial statements for additional details.

• Repurchases of Common Stock — During the second quarter of 2022, we repurchased 706,827 shares of our common stock for $33.7.

• Changes in Estimated Fair Value of an Equity Security

◦ We recorded losses of $3.0 within “ Other income (expense), net ” related to decreases in the estimated fair value of an equity security that we hold.

◦ See Note 17 to our consolidated financial statements for additional details.

• Asbestos-Related Matters

◦ During the third quarter of 2022, we received a ruling from a North Carolina trial court that certain excess insurance carriers associated with our asbestos product liability matters are not required to cover the costs of defending suits that are dismissed without an indemnity payment.

◦ As a result of this ruling, we recorded charges of $21.7 during the third quarter, with $16.5 ref lected in “Income from continuing operations before income taxes” and the remainder in “Income (loss) on disposition of discontinued operations, net of tax.”

◦ On November 1, 2022, we completed the Asbestos Portfolio Sale.

In connection with the sale, we contributed $138.8 to the divested subsidiaries and recorded a loss on sale of $73.9 .

See Notes 1 and 4 to our consolidated financial statements for additional detail.

• Impairment of Goodwill and Indefinite-Lived Intangible Assets

◦ During the fourth quarter of 2022, we performed our annual impairment analyses of our goodwill and indefinite-lived intangible assets.

As a result of such analyses, we recorded impairment charges of $13.4, with $12.0 related to goodwill and remainder to trademarks.

◦ See Notes 1 and 10 to our consolidated financial statements for additional details.

• On April 19, 2021, we completed the acquisition of Sealite.

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◦ The purchase price for ECS was $39.4 , net of cash acquired of $5.1 .

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

▪ The estimated fair value of such contingent consideration was $8.2 as of the date of acquisition, which we reflected as a liability in our condensed consolidated balance sheet as of the end of the third quarter of 2021.

▪ 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 a large order, resulting in a reduction of the estimated fair value/liability of $ 6.7 , with such amount recorded to "Other operating expenses, net" during the quarter.

◦ The seller was eligible for additional cash consideration of up to $15.0, upon achievement of certain financial performance milestones.

▪ The estimated fair value of such contingent consideration was $ 8.2 as of the date of 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 a large order, resulting in a reduction of the estimated fair value/liability of $6.7, with such amount recorded to “Other operating (income) expense, net” during the quarter.

▪ 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 (income) expense, net.”

▪ The financial performance milestones were not achieved and, thus, as of December 31, 2022, the estimated fair value/liability related to the contingent consideration was $0.0.

◦ The post-acquisition operating results of ECS are included within our Detection and Measurement reportable segment.

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◦ The purchase price for Cincinnati Fan was $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.

◦ The post-acquisition operating results of Cincinnati Fan are included within our HVAC reportable segment.

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

◦ We received 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.

◦ We received net cash proceeds of $620.6 and recorded a gain of $382.2 to “Gain (loss) on disposition of discontinued operations, net of tax” in 2021.

◦ 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.

• DBT (our South Africa subsidiary):

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

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

• On July 5, 2021, DBT received notice from Mitsubishi Heavy Industries Power – ZAF (or “MHI”) of its intent to seek final and binding arbitration on the matter related to the February 22, 2021 dispute adjudication panel's ruling.

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

• On July 5, 2021, DBT received notice from Mitsubishi Heavy Industries Power – ZAF (or “MHI”) of its intent to seek final and binding arbitration on the first ruling.

The arbitration occurred in December 2022 with the ruling from such arbitration yet to be received.

▪ In May 2021, and in connection with certain claims made by MHI, 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 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 consolidated balance sheet as of December 31, 2021.

▪ On June 4, 2021, DBT received a revised version of the 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.

• DBT denies liability for these claims and, thus, fully intends to seek, and believes it is legally entitled to, reimbursement of the amounts demanded.

• On October 11, 2022, a dispute adjudication panel ruled MHI drew (in both the May 2021 and September 2020 bond draws) on amounts in excess of the bond values stipulated in the contracts and was required to refund DBT South African Rand 90.8 (or $5.3) of the previously demanded amounts, plus interest of South African Rand 12.5 (or $0.7).

MHI paid these amounts on October 14, 2022.

• We have reflected the remaining amounts related to the May 2021 and September 2020 bond draws within “Assets of DBT and Heat Transfer” on the consolidated balance sheet as of December 31, 2022 .

▪ On June 4, 2021, DBT received a revised version of the interim claim that had been provided by MHI.

On September 21, 2022, an arbitration tribunal ruled that only South African Rand 349.6 (or $20.4) of MHI's revised claim had been brought appropriately before a dispute adjudication board as required under the relevant subcontracts, with MHI's other claims dismissed from the arbitration proceedings.

MHI subsequently notified DBT of its intent to refer the claims dismissed to a new adjudication panel.

DBT has numerous defenses and, thus, we do not believe that DBT has a probable loss associated with any of these claims.

◦ In the fourth quarter of 2021, we completed the wind-down of DBT.

▪ The wind-down was a culmination of a strategic shift away from the power generation markets.

▪ As a result of completing the wind-down plan, we are now reporting DBT as a discontinued operation for all periods presented.

▪ As a result of completing the wind-down plan, we are reporting DBT as a discontinued operation for all periods presented.

• Asbestos Product Li ability Matters:

◦ During 2021, we recorded charg es of $51.2 related to asbestos product liability matters, with such charges related primarily to a continuing unfavorable trend in the percentage of claims with payment (versus dismissed without payment).

◦ During 2021, we recorded charg es of $51.2 related to asbestos product liability matters, with such charges related primarily to an unfavorable trend in the percentage of claims with payment (versus dismissed without payment).

◦ Of such charges, $48.6 were reflected in “Income from continuing operations before income taxes” and the remainder in “Gain (loss) on disposition of discontinued operations, net of tax.”

◦ Insurance recoveries for asbestos product liability matters, net of payments, totaled $0.3 in 2021.

◦ Insurance recoveries included $15.0 associated with the settlement of an insurance coverage matter.

◦ These recoveries included $15.0 associated with the settlement of an insurance coverage matter.

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

• Actuarial Losses on Pension and Postretirement Plans:

◦ We recorded net actuarial gains o f $9.9 in t he fourth quarter of 2021 in connection with the annual remeasurement of our pension and postretirement plans, with such gains resulting primarily from increases in discount rates.

• Actuarial Gains on Pension and Postretirement Plans:

◦ During 2021, we recorded net actuarial gains o f $ 9.9 in t he fourth quarter of 2021 in connection with the annual remeasurement of our pension and postretirement plans, with such gains resulting primarily from increases in discount rates.

◦ See Notes 1 and 11 to our consolidated financial statements for additional details.

• Changes in the Estimated Fair Value of an Equity Security:

◦ Recorded gains of $11.8 within “Other income (expense), net” related to increases in the estimated fair value of an equity security that we hold.

◦ During 2021, we recorded gains of $ 11.8 within “Other income (expense), net” related to increases in the estimated fair value of an equity security that we hold.

◦ See Note 17 to our consolidated financial statements for additional details.

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

◦ As a result, we reversed the related liability of $24.3, with the offset to “Other operating expenses, net.”

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

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

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◦ 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 expenses, net,” with $23.3 related to goodwill and the remainder to trademarks.

◦ As a result, we recorded an impairment charge of $24.3, with $23.3 related to goodwill and the remainder to trademarks.

◦ During the fourth quarter of 2021, we performed our annual analysis of ULC’s indefinite-lived intangible assets and goodwill.

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◦ The seller of Sensors & Software was eligible for additional cash consideration of up to $3.9, upon achievement of certain financial performance milestones.

◦ During the fourth quarter of 2021, we concluded that certain of the financial milestones associated with the Sensors & Software contingent consideration had been achieved.

◦ As a result, we recorded an additional charge of $0.6 to “Other operating expenses, net.”

◦ The estimated fair value of such contingent consideration is $1.3 and $0.7, which is reflected as a liability in our consolidated balance sheets at December 31, 2021 and 2020, respectively.

◦ During the fourth quarter of 2021, we concluded that certain of the financial performance milestones associated with the Sensors & Software contingent consideration had been achieved.

◦ As a result, we recorded an additional charge of $0.6 to “Other operating (income) expense, net” and the resulting fair value of such contingent consideration of $1.3 is reflected as a liability in our consolidated balance sheet at December 31, 2021.

◦ The $1.3 was paid during 2022 and is reflected within cash flows from financing activities in our consolidated statement of cash flows for the year ended December 31, 2022.

• In February 2020, and as a result of the December 2019 amendment that extended the maturity date of our senior credit facilities to December 17, 2024, we entered into additional interest rate swap agreements.

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◦ Cover the period March 2021 to November 2024;

◦ Effectively convert borrowings under our senior credit facilities to a fixed rate of 1.061%, plus an applicable margin, during the period noted above.

◦ Effectively convert a portion of the borrowings under our senior credit facilities to a fixed rate, plus an applicable margin, during the period noted above.

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

• On September 2, 2020, we completed the acquisition of ULC.

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◦ DBT denies liability and, thus, intends to seek, and believes it is fully entitled to, reimbursement of the South African Rand 239.6 that has been paid.

◦ As such, we have reflected the South African Rand 239.6 (or $ 15.0 and $16.3 at December 31, 2021 and 2020, respectively) within non-current assets on our consolidated balance sheets as of December 31, 2021 and 2020.

◦ As such, we have reflected the South African Rand 239.6 (or $14.0 and $15.0 at December 31, 2022 and 2021, respectively) within “Assets of DBT and Heat Transfer” on our consolidated balance sheets as of December 31, 2022 and 2021.

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

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◦ See Note 17 to our consolidated financial statements for additional details.

• On February 1, 2019, we completed the acquisition of Sabik.

◦ The purchase price for Sabik was $77.2, net of cash acquired of $0.6.

◦ The post-acquisition operating results of Sabik are reflected within our Detection and Measurement reportable segment.

• On July 3, 2019, we completed the acquisition of SGS.

◦ The purchase price for SGS was $11.5, including contingent consideration of $1.5 that was paid during 2020.

◦ The post-acquisition operating results of SGS are reflected within our HVAC reportable segment.

• On November 12, 2019, we completed the acquisition of Patterson-Kelley.

◦ The purchase price for Patterson-Kelley was $59.9.

◦ The post-acquisition operating results of Patterson-Kelley are reflected within our HVAC reportable segment.

• On December 17, 2019, we amended our senior credit agreement.

In connection with the amendment, we recorded a charge of $0.6 associated with the write-off of a portion of deferred financing costs associated with the senior credit agreement.

• Asbestos Product Liability Matters:

◦ During 2019, we recorded charges of $10.1 related to asbestos product liability matters.

◦ Of such charges, $6.3 were reflected in “Income from continuing operations before income taxes” and the remainder in “Gain (loss) on disposition of discontinued operations, net of tax.”

◦ Payments for asbestos product liability matters, net of insurance recoveries, totaled $13.1 in 2019.

• Actuarial Losses on Pension and Postretirement Plans:

◦ We recorded net actuarial losses of $10.0 in t he fourth quarter of 2019 in connection with the annual remeasurement of our pension and postretirement plans, with such losses resulting primarily from declines in discount rates on our unfunded pension and postretirement plans.

◦ See Notes 1 and 11 to our consolidated financial statements for additional details.

• Changes in the Estimated Fair Value of an Equity Security:

◦ During 2019, we:

▪ Recorded gains of $7.9 within “Other income (expense), net” related to increases in the estimated fair value of an equity security that we hold;

▪ Received distributions of $2.6, which are included in “Cash flows from operating activities.”

◦ See Note 17 to our consolidated financial statements for additions details.

Results of Continuing Operations

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This metric, however, is not a measure of financial performance under 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 years ended December 31, 2021, 2020, and 2019, including the reconciliation of organic revenue increase (decline) to net revenue increase:

Presentation of Segment Income — During 2022, management concluded that, although the assessment of our reportable segments was performed using the appropriate measures as defined by the Segment Reporting Topic of the Codification, the disclosure of income from segments was not consistent with these measures or the measures used by our CODM when evaluating the results of, or allocating resources to, our reportable segments.

We previously disclosed that segment income was determined before considering impairment and special charges, long-term incentive compensation, certain other operating income/expense, and other indirect corporate expenses.

Our CODM also excludes the impact of intangible asset amortization, inventory step-up charges, and other acquisition related costs from Segment Income.

Accordingly, these amounts have now been excluded, for all periods presented, from Segment Income and presented separately in our reconciliation of Segment Income to consolidated operating income within this annual report on Form 10-K.

Refer to Notes 1 and 7 to our consolidated financial statements for additional details.

The following table provides selected financial information for the years ended December 31, 2022, 2021, and 2020, including the reconciliation of organic revenue increase to net revenue increase:

Year ended December 31, 2022 vs 2021 vs

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Special charges, net 0.4 1.0 2.4 (60.0) (58.3)

Other operating expenses, net 20.2 9.0 1.8 * *

Other operating (income) expense, net 74.9 (4.1) 9.0 * *

Other income (expense), net (15.2) 9.0 (0.1) * *

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* Not meaningful for comparison purposes.

Revenues - For 2021, the increase in revenues, compared to 2020, was du e primarily to (i) the impact of the acquisitions of ULC and Sensors & Software in 2020 and Sealite, ECS and Cincinnati Fan in 2021 and (ii) an increase in organic revenue.

Revenues - For 2022, th e increase in re venues, compared to 2021, was du e to organic revenue growth within both our HVAC and Detection and Measurement reportable segments and the impact of the Sealite, ECS and Cincinnati Fan acquisitions in 2021 and the ITL acquisition in 2022.

For 2021, the increase in revenues, compared to 2020, was due primarily to (i) the impact of the acquisitions of ULC and Sensors & Software in 2020 and Sealite, ECS and Cincinnati Fan in 2021 and (ii) 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 cooling products.

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Sales of cooling products declined in 2021, as there were several large cooling projects that favorably impacted sales in 2020.

For 2020, the increase in revenues, compared to 2019, was due to the impact of the acquisitions of SGS and Patterson-Kelley during 2019 and ULC and Sensors & Software during 2020, partially offset by a decline in organic revenue in 2020.

The decline in organic revenue was due primarily to lower sales of heating products, domestic cooling products, and communication technologies products, partially offset by higher sales of cooling products in the international markets.

A portion of the organic revenue decline is attributable to a decline in customer demand and order delays caused by the COVID-19 pandemic.

See “Results of Reportable Segments” for additional details.

Gross Profi t - For 2021, the increase in gross profit and gross profit as a percentage of revenues, compared to 2020, was due primarily to the revenue increases noted above.

For 2020, the decrease in gross profit and gross profit as a percentage of revenues, compared to 2019, was due primarily to lower sales of high-margin communication technologies products and heating products.

Selling, General a nd Administrative (“SG&A”) Expense — For 2021, the increase in SG&A expense, compared to 2020, was due primarily to SG&A associated with Sealite, ECS and Cincinnati Fan since their dates of acquisition in 2021 and the impact of a full year’s SG&A associated with the 2020 acquisitions of ULC and Sensors and Software.

Also, additional corporate expense in 2021 associated with (i) increased investments in continuous improvement and strategic initiatives and (ii) higher incentive compensation contributed to the increase in SG&A in 2021.

For 2020, the decrease in SG&A expense, compared to 2019, was due primarily to lower incentive compensation and lower travel expense during 2020, with the lower travel expense due to the impact of the COVID-19 pandemic.

Intangible Amortization — For 2021, the increase in intangible amortization, compared to 2020, was due to the amortization expense associated with Sealite, ECS and Cincinnati Fan since their dates of acquisition in 2021 and the impact of a full year’s amortization expense on the 2020 acquisitions of ULC and Sensors and Software.

For 2020, the increase in intangible amortization, compared to 2019, was due primarily to the amortization expense associated with ULC since its date of acquisition in 2020 and the impact of a full year’s amortization expense on the 2019 acquisitions of Sabik, SGS, and Patterson-Kelley.

Gross Profi t - For 2022, th e increase gross profit and gross profit as a percentage of revenues, compared to 2021, was due primarily to the increase in revenues noted above, including revenue increases associated with higher-margin, large projects within our communication technologies and obstruction lighting businesses.

For 2021, the increase in gross profit and gross profit as a percentage of revenues, compared to 2020, was due primarily to the revenue increases noted above.

Selling, General a nd Administrative (“SG&A”) Expense — For 2022, th e increase in SG&A expense, compared to 2021, was due primarily t o (i) incremental SG&A resulting from the acquisitions noted above, (ii) higher corporate expense associated with increased costs associated with various strategic and transformational initiatives, including the Asbestos Portfolio Sale, and higher short-term incentive compensation in 2022, and (iii) higher travel expenses due to the easing of COVID-19 pandemic restrictions in 2022.

For 2021, the increase in SG&A expense, compared to 2020, was due primarily to SG&A associated with Sealite, ECS and Cincinnati Fan since their dates of acquisition in 2021 and the impact of a full year’s SG&A associated with the 2020 acquisitions of ULC and Sensors & Software.

Also, additional corporate expense in 2021 associated with (i) increased costs associated with continuous improvement and strategic initiatives and (ii) higher short-term incentive compensation contributed to the increase in SG&A in 2021.

Intangible Amortization — For 2022, the increase in intangible amortization, compared to 2021, was due to a full year's amortization related to the Cincinnati Fan and ECS acquisitions, as well as amortization associated with the ITL acquisition.

For 2021, the increase in intangible amortization, compared to 2020, was due to the amortization expense associated with Sealite, ECS and Cincinnati Fan since their dates of acquisition in 2021 and the impact of a full year’s amortization expense on the 2020 acquisitions of ULC and Sensors & Software.

Impairment of Goodwill and Intangible Assets — During 2022, we recorded impairment charges of $12.9 related to the goodwill and trademarks of ULC and $0.5 related to certain other trademarks.

During 2021, we recorded impairment charges of $29.5 related to the goodwill and trademarks of ULC and $0.5 related to certain other trademarks.

During 2020, we recorded $0.7 of impairment charges related to certain trademarks.

See Note 10 to our consolidated financial statements for additional details.

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.

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 8 to our consolidated financial statements for the details of actions taken in 2022, 2021, and 2020.

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Employee termination costs $ 0.1 $ 1.0 $ 1.0

Facility consolidation costs — — 0.5

Other cash costs, net — — 1.0

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Total $ 0.4 $ 1.0 $ 2.4

Other Operating Expenses, Net – During 2021, we recorded charges of $26.3 for asbes tos product liability matters related to products that we no longer manufacture, along with a charge of $0.6 related to revisions to the contingent consideration liability associated with the Sensors and Software acquisition, partially offset by income of $6.7 associated with a reduction in the liability associated with the contingent consideration related to the ECS acquisition.

The charges for the asbestos product liability matters were due to a change in assumptions for estimating the related liabilities primarily as a result of a continuing unfavorable trend in the percentage of claims with payment (versus claims dismissed without payment).

The charge of $0.6 was the result of finalizing the contingent consideration amount that is due on the Sensors & Software acquisition.

The income associated with the ECS contingent consideration was due to a change in fair value of the related liability resulting from a lower probability of the business achieving certain defined financial milestones .

Other Operating (Income) Expense, Net – During 2022, and in connection with the Asbestos Portfolio Sale, we recorded a loss of $73.9.

Additionally, prior to the Asbestos Portfolio Sale, we recorded charges of $2.3 for asbestos product liability matters, partially offset by a reduction in the fair value/liability associated with the contingent consideration related to the ECS acquisition of $1.3.

During 2021, we recorded income of $24.3 and $6.7 associated with a reduction in the liability associated with the contingent consideration related to the ULC and ECS acquisitions, respectively.

This income resulted from changes in the fair value of the related liabilities resulting from a lower probability of the businesses achieving certain defined operational and/or financial milestones.

This income was partially offset by charges of $26.3 for asbes tos product liability matters, along with a charge of $0.6 related to finalizing the contingent consideration liability associated with the Sensors & Software acquisition.

During 2020, we recorded charges of $9.4 for asbestos product liability matters, net of a gain of $0.4 related to revisions to estimates of certain liabilities retained in connection with the 2016 sale of the dry cooling business.

The charges for the asbestos product liability matters were due to a change in assumptions for estimating the related liabilities as a result of recent claim trends.

For 2019, we recorded charges associated with revisions to estimates of certain liabilities retained in connection with the 2016 sale of the dry cooling business.

Other Income (Expense), Net – Other income, net, for 2021 was composed primarily of pension and post retirement income of $16.4, a gain of $11.8 related to changes in the estimated fair value of an equity security we hold, and income derived from company-owned life insurance policies of $3.2, partially offset by charges of $21.0 associated with asbestos product liability matters.

The charges associated with asbestos product liability matters were the result of a change in assumptions for estimating the related liabilities due primarily to a continuing unfavorable trend in the percentage of claims with payment (versus claims dismissed without payment).

Other expense, net, for 2020 was composed primarily of charges of $7.6 associated with asbestos product liability matters, pension and postretirement expense of $3.0, environmental remediation charges of $1.5, and foreign currency transaction losses

of $0.6, partially offset by a gain of $8.6 related to changes in the estimated fair value of an equity security we hold and income derived from company-owned life insurance policies of $5.0.

Other expense, net, for 2019 was composed primarily of pension and postretirement expense of $9.9, charges of $4.5 associated with asbestos product liability matters, and foreign currency transaction losses of $1.5, pa rtially offset by a gain of $7.9 related to changes in the estimated fair value of an equity security that we hold and income derived from company-owned life insurance policies of $4.0.

Other Income (Expense), Net – Other expense , net, for 2022 was composed primarily of $16.5 of asbestos-related charges incurred prior to the Asbestos Portfolio Sale, a loss of $3.0 related to a change in the estimated fair value of an equity security that we hold, environmental remediation charges of $2.9, and foreign currency transaction losses of $1.1, partially offset by pension and postretirement income (inclusive of net settlement and actuarial gains of $1.5) of $4.4, income of $2.0 derived from company-owned life insurance policies, and $3.0 of income associated with transition services agreements.

Other income, net, for 2021 was composed primarily of pension and post retirement income of $16.4 (including actuarial gains of $9.9), a gain of $11.8 related to changes in the estimated fair value of an equity security we hold, and income derived from company- owned life insurance policies of $3.2, partially offset by charges of $21.0 associated with asbestos product liability matters.

Other expense, net, for 2020 was composed primarily of charges of $7.6 associated with asbestos product liability matters, pension and postretirement expense of $3.0 (including actuarial losses of $6.8), environmental remediation charges of $1.5, and foreign currency transaction losses of $0.6, partially offset by a gain of $8.6 related to changes in the estimated fair value of an equity security we hold and income derived from company-owned life insurance policies of $5.0.

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

The decrease in interest expense, net, during 2022, compared to 2021, was the result of lower average debt balances and increased interest rates on cash balances during 2022.

The decrease in interest expense, net, during 2021, compared to 2020, was the result of lower average effective interest rates and lower average debt balances during 2021.

The decrease in interest expense, net, during 2020, compared to 2019, was the result of lower average interest rates during 2020, partially offset by the impact of higher average debt balances during 2020.

Loss on Amendment/Refinancing of Senior Credit Agreement — During the fourth quarter of 2019, we amended our senior credit agreement.

In connection with the amendment, we recorded a charge of $0.6, which consisted of the write-off of a portion of the unamortized deferred financing costs related to our senior credit facilities.

Income Taxes — During 2021, we recorded an income tax provision of $10.9 on $69.9 of pre-tax income from continuing operations, resulting in an effective tax rate of 15.6%.

The most significant items impacting the effective income tax rate for 2021 were (i) earnings in jurisdictions with lower statutory rates, (ii) $4.3 of income tax benefits related to various valuation allowance adjustments, primarily due to foreign tax credits for which the future realization is now considered likely, and (iii) a benefit of $3.5 related to the resolution of certain liabilities for uncertain tax positions and interest associated with various refund claims, partially offset by $13.2 of tax expense associated with global intangible low-taxed income created by the liquidation of various recently acquired entities.

Loss on Amendment/Refinancing of Senior Credit Agreement — During 2022, we amended our senior credit agreement.

In connection with the amendment, we recorded a charge of $1.1, which consisted of the write-off of a portion of the unamortized deferred financing costs related to our senior credit facilities ($0.7) and certain expenses incurred in connection with the amendment ($0.4).

During 2021, we reduced the issuance capacity of our then-existing foreign credit instrument facilities resulting in a charge of $0.2 associated with the write-off of unamortized deferred financing costs.

Income Taxes — During 2022, we recorded an income tax provision of $7.3 on $27.1 of pre-tax income from continuing operations, resulting in an effective rate of 26.9%.

The most significant item impacting the effective tax rate for 2022 was the $73.9 loss on the Asbestos Portfolio Sale, which generated a tax benefit of only $1.1.

In addition, the 2022 effective income tax rate was also impacted by (i) a $4.7 tax benefit related to the release of valuation allowances recognized against certain deferred tax assets, as we now expect to realize these deferred tax assets primarily due to the Holding Company Reorganization completed in 2022, (ii) $3.0 of tax benefits related to statute expirations and other revisions to liabilities for uncertain tax positions.

and (iii) $1.7 of excess tax benefits associated with stock-based compensation awards that vested and/or were exercised during the year.

During 2021, we recorded an income tax provision of $10.9 on $69.9 of pre-tax income from continuing operations, resulting in an effective tax rate of 15.6%.

The most significant items impacting the effective tax rate for 2020 were (i) earnings in jurisdictions with lower statutory tax rates, (ii) $4.2 of tax benefits related to various audit settlements, statute expirations, and other adjustments to liabilities for uncertain tax positions, and (iii) $2.8 of excess tax benefits resulting from stock-based compensation awards that vested and/or were exercised during the year.

The most significant items impacting the effective income tax rate for 2021 were (i) earnings in jurisdictions with lower statutory rates, (ii) $4.3 of income tax benefits related to various valuation allowance adjustments, primarily due to foreign tax credits for which the future realization is now considered likely, and (iii) a benefit of $3.5 related to the resolution of certain liabilities for uncertain tax positions and interest associated with various refund claims, partially offset by $13.2 of income tax expense associated with global intangible low-taxed income created by the liquidation of various acquired entities.

During 2020, we recorded an income tax provision of $4.8 on $78.6 of pre-tax income from continuing operations, resulting in an effective tax rate of 6.1%.

The most significant items impacting the effective tax rate for 2019 were (i) $1.6 of excess tax benefits resulting from stock-based compensation awards that vested and/or were exercised during the year, (ii) $1.3 of tax benefits related to our U.S.

tax credits and incentives, and (iii) $1.2 of tax benefits related to various audit settlements, statute expirations, and other adjustments to liabilities for uncertain tax positions.

The most significant items impacting the effective income tax rate for 2020 were (i) earnings in jurisdictions with lower statutory tax rates, (ii) $4.2 of tax benefits related to various audit settlements, statute expirations, and other adjustments to liabilities for uncertain tax positions, and (iii) $2.8 of excess tax benefits resulting from stock-based compensation awards that vested and/or were exercised during the year.

Results of Discontinued Operations

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We transferred all of the outstanding common stock of Transformer Solutions to the Purchaser for an aggregate cash purchase price of $645.0 (the “Transaction”).

The purchase price is subject to potential adjustment based on Transformer Solutions’ cash, debt and working capital on the date the Transaction was consummated, as well as for specified transaction expenses and other specified items.

The purchase price was subject to potential adjustment based on Transformer Solutions’ cash, debt and working capital on the date the Transaction was consummated, as well as for specified transaction expenses and other specified items.

In connection with the sale, we received net cash proceeds of $620.6 and recorded a gain of $382.2 to “Gain (loss) on disposition of discontinued operations, net of tax” within our 2021 consolidated statement of operations.

During 2022, we agreed to the final adjustment of the purchase price which resulted in a payment to the Purchaser of $13.9.

We have classified the business as a discontinued operation in our consolidated financial statements for all periods presented.

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Wind-Down of DBT Business

As a culmination of our strategic shift away from power generation markets, we completed the wind-down of our DBT business.

As a result, we are now reporting DBT as a discontinued operation in our consolidated financial statements for all periods presented.

In connection with the wind-down, we recorded a charge of $19.9 to “Gain (loss) on disposition of discontinued operations, net of taxes” within our consolidated statement of operations for the year ended December 31, 2021 to reflect the write-off of historical currency translation amounts associated with DBT that had been previously reported within “Stockholders' equity” of our consolidated balance sheet.

As a culmination of our strategic shift away from power generation markets, we completed the wind-down of our DBT business during the fourth quarter of 2021.

As a result, we are reporting DBT as a discontinued operation in our consolidated financial statements for all periods presented.

DBT continues to be engaged in various dispute resolution matters related to two large power projects, as indicated in Note 15 to the consolidated financial statements.

Other Discontinued Operations Activity

In addition to Heat Transfer, Transformer Solutions, and DBT, we recognized net losses of $1.3, $3.7 and $4.4 during 2021, 2020 and 2019, respectively.

The net losses for 2021, 2020, and 2019 resulted primarily from revisions to liabilities, including income tax liabilities, retained in connection with prior businesses classified as discontinued operations.

Changes in estimates associated with liabilities retained in connection with a business divestiture (e.g., income taxes) may occur.

As a result, it is possible that the resulting gains/losses on these and other previous divestitures may be materially adjusted in subsequent periods.

For the years ended December 31, 2022, 2021 and 2020, results of operations from our businesses reported as discontinued operations were as follows:

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Transformer Solutions

Income from discontinued operations $ 454.9 $ 56.9 $ 39.4

Income tax provision (1)

Income (loss) from discontinued operations (1)

$ (0.6) $ 454.9 $ 56.9

Income tax (provision) benefit (2)

0.9 (51.8) (14.0)

Income from discontinued operations, net 0.3 403.1 42.9

Loss from discontinued operations (3)

(17.3) (37.8) (16.6)

Income tax benefit 2.1 2.7 2.4

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Income (loss) from discontinued operations, net (0.3) (0.3) 0.2

All other (4)

Loss from discontinued operations (6.0) (7.6) (4.8)

Income tax (provision) benefit 6.3 1.1 (0.4)

Income tax benefit 1.6 6.3 1.1

Loss from discontinued operations, net (4.4) (1.3) (3.7)

Income (loss) from discontinued operations (24.3) 409.2 35.8

Income tax provision (42.8) (10.6) (1.5)

Income tax (provision) benefit 4.7 (42.8) (10.6)

Income (loss) from discontinued operations, net $ (19.6) $ 366.4 $ 25.2

________________________________________________

(1) During the fourth quarter of 2021, we liquidated various recently acquired entities.

(1) Loss for the year ended December 31, 2022 resulted primarily from revisions to liabilities retained in connection with the disposition.

Income for the year ended December 31, 2021 resulted primarily from the gain on sale of the business of $382.2 , as well as the results of operations for the year.

Income for the year ended December 31, 2020 related to the results of operations for the year.

(2) During the fourth quarter of 2021, we liquidated certain recently acquired entities.

As a result of this action, we recorded a net income tax benefit of $16.5 within our 2021 consolidated statement of operations, which included an income tax charge of $10.9 within continuing operations and income tax benefit of $27.4 within discontinued operations.

(3) Loss for the years ended December 31, 2022, 2021, and 2020 resulted primarily from legal costs incurred in connection with various dispute resolution matters related to two large power projects.

In addition, and as previously noted, the year ended December 31, 2021 includes a charge of $19.9 related to the write-off of historical translation amounts.

(4) Loss for the years ended December 31, 2022, 2021, and 2020 resulted primarily from asbestos-related charges and revisions to liabilities, including income tax liabilities, retained in connection with prior dispositions.

Results of Reportable Segments

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Net revenue increase 21.5 1.5

Revenues — For 2021, the increase in revenues, compared to 2020, was due primarily to an increase in organic revenue for the segment’s heating businesses, partially offset by a decline in organic revenue at the segment's cooling businesses due to several large projects that contributed significant revenue to the segment's results in 2020.

Revenues — For 2022, the increase in revenues, compared to 2021, was due to an increase in organic revenue within our heating businesses and, to a lesser extent, within our cooling businesses and the impact of the acquisition of Cincinnati Fan.

The increase in organic revenue was due to increased pricing and, to a lesser extent, volume increases.

For 2021, the increase in revenues, compared to 2020, was due primarily to an increase in organic revenue within our heating businesses, partially offset by a decline in organic revenue within our cooling businesses due to several large projects that contributed significant revenue to our results in 2020.

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.

For 2020, the increase in revenues, compared to 2019, was due to the impact of the SGS and Patterson-Kelley acquisitions in 2019, partially offset by a decline in organic revenue.

The decline in organic revenue was due to a decrease in sales of heating products and domestic cooling products.

The decline in the sales of heating products was due primarily to (i) warmer than normal weather during the first half of 2020 and (ii) the negative impact of the COVID-19 pandemic on customer demand.

The demand for domestic cooling products was also negatively impacted by the COVID-19 pandemic.

These declines in organic revenue were offset partially by higher sales of cooling products in the international markets, with such sales favorably impacted by a number of large orders that were secured prior to the COVID-19 pandemic.

Income — For 2021, the increase in income, compared to 2020, was due primarily to the increase in revenues noted above.

For 2020, the decrease in income and margin, compared to 2019, was due primarily to the decline in sales of heating products noted above.

This decrease in income and margin was partially offset by the impact of (i) improved operational execution and a favorable sales mix within the segment’s domestic cooling products business and (ii) higher sales of cooling products in the international markets.

Backlog — The segment had backlog of $226.9 (including $20.4 related to Cincinnati Fan) and $150.1 as of December 31, 2021 and 2020, respectively.

Income — For 2022, th e increase i n income, compared to 2021, was due primarily to the increase in revenues noted above, while the increase in margin was due primarily to a more favorable project/product sales mix in 2022.

For 2021, the increase in income, compared to 2020, was due primarily to the increase in revenues noted above.

Backlog — The segment had backlog of $243.1 and $226.9 as of December 31, 2022 and 2021, respectively.

Approximately 98% of the segment’s backlog as of December 31, 2022 is expected to be recognized as revenue during 2023.

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Net revenue increase 17.1 20.7

Revenues — For 2021, the increase in revenues, compared to 2020, was due primarily to the impact of the acquisitions of ECS and Sealite in 2021 and ULC and Sensors and Software in 2020 and, to a lesser extent, organic revenue growth and the impact of 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 sales of bus fare collection systems in the current year was due primarily to the timing of large projects, as the extent of such projects can fluctuate from year-to-year.

For 2020, the increase in revenues, compared to 2019, was due primarily to the impact of the ULC acquisition and, to a lesser extent, the Sensors & Software acquisition, partially offset by a decline in organic revenue.

The decline in organic revenue was primarily the result of lower sales of communication technologies products, with a portion of the decline due to order delays caused by the COVID-19 pandemic.

Income — For 2021, the increase in income, compared to 2020, was due primarily to the increase in revenue noted above, partially offset by increases in amortization expense of $7.1 and inventory step-up charges of $2.3 associated with the acquisitions noted above.

The year-over-year decrease in margins was due primarily to the increases in amortization expense and inventory step-up charges noted above.

For 2020, the decrease in income and margin, compared to 2019, was due primarily to the decline in sales of high-margin communication technologies products noted above.

Backlog — The segment had ba cklog of $153.6 (including $50.8 related to Sealite and ECS) and $89.3 as of December 31, 2021 and 2020, respectively.

Approximately 71% of the segment’s backlog as of Decem ber 31, 2021 is expected to be recognized as revenue during 2022.

Revenues — For 2022, the increase in revenues, compared to 2021, was due to organic growth across all product lines and the impact of the acquisitions of Sealite, ECS, and ITL.

The organic growth was driven by continued strong order trends for our short-cycled businesses and execution of large projects within our fare collection, communication technologies, and obstruction lighting businesses.

For 2021, the increase in revenues, compared to 2020, was due to the impact of the acquisitions of ECS and Sealite in 2021 and ULC and Sensors & Software in 2020 and, to a lesser extent, organic revenue growth and the impact of 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 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 sales of fare collection systems in 2021 was due primarily to the timing of large projects, as the extent of such projects can fluctuate from year-to-year.

Income — For 2022, the increase i n income and margin, compared to 2021, was due primarily to the increase in revenues noted above, including revenue increases associated with higher-margin large projects within our communication technologies and obstruction lighting businesses.

For 2021, the increase in income, compared to 2020, was due primarily to the increase in reven ues noted above.

The year-over-year decrease in margin was due primarily to volume declines in our robotic systems business.

Backlog — The segment had backlog of $251.0 (including $0.4 related to ITL) and $153.6 as of December 31, 2022 and 2021, respectively.

Approximately 80% of the segment’s backlog as of December 31, 2022 is expected to be recognized as revenue during 2023.

Corporate Expense and Other Expense

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Corporate Expense — Corporate expense generally relates to the cost associated with our Charlotte, NC corporate headquarters.

The increase in corporate expense during 2021, compared to 2020, was due primarily to increased investments in continuous improvement and other strategic initiatives and higher incentive compensation during 2021.

The decrease in corporate expense during 2020, compared to 2019, was due primarily to lower incentive compensation and travel expense during 2020, with the decline in travel expense resulting from the impact of the COVID-19 pandemic.

Long- Term Incentive Compensation Expense — The decrease in long-term incentive compensation in 2021, compared to 2020, was due primarily 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.

The increase in long-term incentive compensation in 2020, compared to 2019, was due primarily to the accelerated expense in 2020 on certain awards.

The increase in corporate expense during 2022, compared to 2021, was due primarily to increased costs associated with various strategic and transformational initiatives, including the Asbestos Portfolio Sale, and higher short-term incentive compensation in 2022.

The increase in corporate expense during 2021, compared to 2020, was due primarily to increased costs associated with continuous improvement and other strategic initiatives and higher short-term incentive compensation during 2021.

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

The decrease in long-term incentive compensation in 2022, compared to 2021, was due primarily to the impact of forfeitures resulting from various participant resignations during 2022.

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

See Note 16 to our consolidated financial statements for further details on our long-term incentive compensation plans.

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Continuing operations:

Cash flows from operating activities $ 131.2 $ 105.2 $ 110.0

Cash flows from (used in) operating activities $ (115.2) $ 131.2 $ 105.2

Cash flows used in investing activities (52.2) (306.0) (119.9)

Cash flows from (used in) financing activities (39.9) (167.8) 16.3

Cash flows from discontinued operations 663.7 14.5 24.0

Cash flows from (used in) discontinued operations (34.5) 663.7 14.5

Change in cash and equivalents due to changes in foreign currency exchange rates

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2022 Compared to 2021

Operating Activities – The decrease in cash flows from operating activities, compared to 2021, was due primarily to (i) a cash contribution to the divested subsidiaries of $138.8 in connection with the Asbestos Portfolio Sale;

(iii) elevated purchases of inventory components in order to manage the potential risk associated with the current supply chain environment;

(v) net payments for asbestos-related matters of $15.3 (co mpared to net recoveries of $0.3 during the year ended December 31, 2021);

and (vi) cash payments of $10.0 in connection with the transfer of our postretirement life insurance benefit obligation to an insurance carrier.

Investing Activiti es - Cash flows used in investing activities for 2022 were comprised primarily of cash utilized in the acquisition of ITL of $41.8 and capital expenditures of $15.9 , partially offset by (i) proceeds from company-owned life insurance policie s of $3.7 and (ii) $1.8 received upon agreement with sellers on acquired working capital balances associated with the Cincinnati Fan and ITL acquisitions.

Cash flows used in investing activities for the year ended December 31, 2021 were comprised primarily of cash utilized in the acquisitions of Sealite, ECS and Cincinnati Fan of $264.9, capital expenditures of $9.6, and net expenditures related to company-owned life insurance policies of $31.2.

Financing Activities – Cash flows used in financing activities during 2022 were comprised primarily of repurchases of common stock of $33.7, minimum tax withholdings paid on behalf of employees on net-share settlements of long-term incentive awards, net of proceeds from options exercised, of $3.5, and contingent consideration of $1.3 paid in relation to the Sensors & Software acquisition.

Additionally, prior to the August 12, 2022 amendment of our Credit Agreement, we made scheduled repayments under our then-existing term loan of $6.3 and in connection with entering the Credit Agreement, we received $245.0 under our new term loan and (i) repaid the remaining balance under the then-existing term loan of $237.4 and (ii) paid fees in connection with the refinancing of $1.9.

Net repayments under our various other debt instruments totaled $0.8.

Cash flows used in financing activities during 2021 were comprised primarily of net repayments on various debt instruments of $164.5 .

Discontinued Operations – Cash flows used in discontinued operations during 2022 related 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 to the consolidated financial statements for additional details), (ii) disbursements related to asbestos product liability matters made prior to the Asbestos Portfolio Sale, (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, and (iv) disbursements for liabilities retained in connection with dispositions, including fees associated with the sale of Transformer Solutions.

These disbursements were partially offset by proceeds from stock options exercised of $1.0.

Cash flows from discontinued operations for 2021 related primarily to proceeds received in connection with the sale of Transformer Solutions of $ 620.6 .

In addition, cash flows from discontinued operations included cash flows from operations generated by Transformer Solutions, partially offset by cash flows used in DBT's operations and disbursements related to liabilities retained in connection with other dispositions.

Change in Cash and Equivalents Due to Changes in Foreign Currency Exchange Rates - Changes in foreign currency exchange rates did not have a significant impact on our cash and equivalents during 2022 and 2021.

2021 Compared to 2020

Operating Activities – The increase in cash flows from operating activities, compared to 2020, was due primarily to (i) improved cash flows within our heating and underground pipe and locator businesses associated with improved profitability, (ii) a decline in working capital at certain of our businesses, (iii) insurance proceeds of $15.0 associated with the settlement of an asbestos insurance coverage matter, and (iv) income tax refunds, net of tax payments, of $5.5 in 2021 (compared to income tax payments, net of refunds, of $7.6 in 2020).

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Discontinued Operations – Cash flows from discontinued operations for 2021 related primarily to proceeds received in connection with the sale of Transformer Solutions of $ 620.6 .

In addition cash flows from discontinued operations include cash flows from operations generated by Transformer Solutions, partially offset by cash flows used in DBT's operations and disbursements related to liabilities retained in connection with other dispositions.

Cash flows from discontinued operations for 2020 related primarily to cash flows generated by Transformer Solutions and Heat Transfer, partially offset by cash flows used in DBT's operations and disbursements for liabilities retained in connection with other dispositions.

2020 Compared to 2019

Operating Activities – The decrease in cash flows from operating activities, compared to 2019, was due primarily to a decline in cash flows at certain of our project-related businesses during 2020, as cash receipts for these project-related business are often subject to contractual milestones that can impact the timing of cash flows from year-to-year.

Investing Activities - Cash flows used in investing activities for 2020 were comprised primarily of cash utilized in the acquisitions of ULC and Sensors & Software of $104.4 and capital expenditures of $15.3.

Cash flows used in investing activities in 2019 were comprised primarily of cash utilized in the acquisitions of Sabik, SGS, and Patterson-Kelley of $147.1 and capital expenditures of $13.5, partially offset by proceeds from company-owned life insurance policies of $5.9.

Financing Activities – Cash flows from financing activities during 2020 were comprised primarily of net borrowings on our various debt instruments of $15.6.

Cash flows from financing activities during 2019 were comprised primarily of net borrowings on various debt instruments of $10.0.

Discontinued Operations – Cash flows from discontinued operations for 2020 related primarily to cash flows generated by Transformer Solutions and Heat Transfer, partially offset by cash flows used in DBT operations and disbursements for liabilities retained in connection with other dispositions.

Cash flows from discontinued operations for 2019 related primarily to cash flows generated by Transformer Solutions and proceeds of $5.5 received in connection with the sale of Heat Transfer's manufacturing facility, partially offset by disbursements for liabilities retained in connection with other dispositions, net cash flows used in operations by Heat Transfer and DBT, and a payment of $15.6 to settle a put option held by a minority shareholder of DBT (see Note 15 to our consolidated financial statements for additional details).

The following summarizes our debt activity (both current and non-current) for the year ended December 31, 2022:

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Revolving loans $ — $ — $ — $ — $ —

$ 129.8 $ 209.9 $ (339.7) $ — $ —

Term loan (1)(2)

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Trade receivables financing arrangement (3)

28.0 179.0 (207.0) — —

Other indebtedness (4)

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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.

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

(1) As noted below, we amended our senior credit agreement on August 12, 2022.

The amendment made available a new term loan facility in the amount of $245.0, the proceeds of which were primarily used to repay the outstanding balance of $237.4 under the then-existing term loan facility.

(2) The term loan is repayable in quarterly installments equal to 0.625% of the initial term loan balance of $245.0, beginning in December 2023 and in each of the first three quarters of 2024, and 1.25% during the fourth quarter of 2024, all quarters of 2025 and 2026, and the first two quarters of 2027.

The remaining balance is payable in full on August 12, 2027.

Balances are net of unamortized debt issuance costs of $0.7 and $1.0 at December 31, 2022 and December 31, 2021, respectively.

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

At December 31, 2021, there was no available borrowing capacity under the agreement.

(4) Primarily includes balances under a purchase card program of $2.2 and $1.7 and finance lease obligations of $1.1 and $2.6 at December 31, 2021 and 2020, respectively.

(3) 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.

At December 31, 2022, we had $45.7 of available borrowing capacity under this facility .

(4) Primarily includes balances under a purchase card program of $1.8 and $2.2 and finance lease obligations of $0.7 and $1.1 at December 31, 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.

Maturities of long-term debt payable during each of the five years subsequent to December 31, 2021 are ar e $13.0, $12.9, $218.9, $0.0, and $0.0 respectively.

(5) “Other” includes the impact of amortization of debt issuance costs associated with the term loan.

Maturities of long-term debt payable during each of the five years subsequent to December 31, 2022 are $2.0, $7.9, $12.3, $12.3, and $211.2 respectively.

Senior Credit Facilities

On December 17, 2019, we amended our senior credit agreement (the “Credit Agreement”) to, among other things, extend the term of each facility under the Credit Agreement (with the aggregate of each facility comprising the “Senior Credit Facilities”) and provide for committed senior secured financing with an aggregate amount of $800.0.

On May 24, 2021, we elected to reduce our participating foreign credit instrument facility and bilateral foreign credit instrument facility, available for performance letters of credit and guarantees, by an aggregate amount of $20.0 and $25.0, respectively.

The facility reduction resulted in a write-off of deferred finance costs of $0.2, recorded to “Interest expense” in the consolidated statement of operations for the year ended December 31, 2021.

After this reduction, and repayments of term loans through December 31, 2021, our committed senior secured financing consists of the following at December 31, 2021 (each with a final maturity of December 17, 2024):

• A term loan facility with a remaining principle amount, as of December 31, 2021, of $243.7;

• A domestic revolving credit facility, available for loans and letters of credit, in an aggregate principal amount of $300.0;

• A global revolving credit facility, available for loans in USD, Euros, British Pound Sterling, and other currencies, in the aggregate principal amount up to the equivalent of $150.0;

• A participating foreign credit instrument facility, available for performance letters of credit and guarantees, in an aggregate principal amount up to the equivalent of $35.0;

• A bilateral foreign credit instrument facility, available for performance letters of credit and guarantees, in an aggregate principal amount up to the equivalent of $20.0.

On August 12, 2022, we entered into the Credit Agreement to, among other things, extend the term of the facilities under the Credit Agreement (with the aggregate of each facility comprising the “Senior Credit Facilities”) and provide for committed senior secured financing with an aggregate amount of $770.0 which consists of the following facilities at December 31, 2022 (each with a final maturity of August 12, 2027):

• A term loan facility in an aggregate principal amount of $245.0;

• A multicurrency revolving credit facility, available for loans and letters of credit in Dollars, Euro, Sterling and other currencies, in an aggregate principal amount up to the equivalent of $500.0 (with sub-limits equal to the equivalents of $200.0 for financial letters of credit, $50.0 for non-financial letters of credit, and $150.0 for non-U.S.

• A bilateral foreign credit instrument facility, available for performance letters of credit and bank undertakings, in an aggregate principal amount in various currencies up to the equivalent of $25.0.

The Credit Agreement also:

• Requires that we maintain a Consolidated Leverage Ratio (defined in the Credit Agreement) as of the last day of each fiscal quarter to not more than 3.75 to 1.00 (or up to 4.25 to 1.00 for the four fiscal quarters after certain permitted acquisitions);

• Requires that we maintain a Consolidated Interest Coverage Ratio as of the last day of each fiscal quarter to not less than 3.00 to 1.00;

• Establishes per annum fees charged and applies interest rate margins to Eurodollar and alternate base rate loans, in each case based on the Consolidated Leverage Ratio, as follows:

Ratio Domestic

Fee Letter of

• Requires that we maintain a Consolidated Leverage Ratio (defined in the Credit Agreement) as of the last day of any fiscal quarter of not more than 3.75 to 1.00 (or (i) 4.00 to 1.00 for the four fiscal quarters after certain permitted acquisitions or (ii) 4.25 to 1.00 for the four fiscal quarters after certain permitted acquisitions with a minimum amount financed by unsecured debt);

• Requires that we maintain a Consolidated Interest Coverage Ratio (defined in the Credit Agreement) as of the last day of any fiscal quarter of at least 3.00 to 1.00;

• Allows SPX to seek additional commitments, without consent from the existing lenders, to add incremental term loan facilities and/or increase the commitments in respect of the revolving credit facility and/or the bilateral foreign credit instrument facility by up to an aggregate principal amount not to exceed (x) the greater of (i) $200.0 and (ii) the amount of Consolidated EBITDA (as defined in the Credit Agreement) for the four fiscal quarters ended most recently before the date of determination, plus (y) an unlimited amount so long as, immediately after giving effect thereto, our Consolidated Senior Secured Leverage Ratio (defined in the Credit Agreement generally as the ratio of consolidated total debt (excluding the face amount of undrawn letters of credit, bank undertakings, or analogous instruments and net of unrestricted cash and cash equivalents) at the date of determination secured by liens to Consolidated EBITDA for the four fiscal quarters ended most recently before such date) does not exceed 2.75:1.00, plus (z) an amount equal to all voluntary prepayments of the term loan facility and voluntary prepayments accompanied by permanent commitment reductions of the revolving credit facility and foreign credit instrument facility;

• Establishes per annum fees charged and applies interest rate margins, as follows:

Ratio Revolving Commitment Fee Financial Letter of Credit Fee Foreign Credit Instrument (“FCI”) Commitment Fee

FCI Fee and Non-Financial Letter of Credit Fee Term Secured Overnight Financing Rate (“SOFR”) Loans/Alternative Currency Loans

Greater than or equal to 3.00 to 1.00

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0.200 % 1.250 % 0.200 % 0.750 % 1.250 % 0.250 %

The interest rates applicable to loans under the Credit Agreement are, at our option, equal to either (i) an alternate base rate (the highest of (a) the federal funds effective rate plus 0.5%, (b) the prime rate of Bank of America, N.A., and (c) the one-month LIBOR rate plus 1.0%) or (ii) a reserve-adjusted LIBOR rate for dollars (Eurodollars) plus, in each case, an applicable margin percentage as previously discussed, which varies based on our Consolidated Leverage Ratio (defined in the Credit Agreement generally as the ratio of consolidated total debt (excluding the face amount of undrawn letters of credit, bank undertakings and analogous instruments and net of cash and cash equivalents) at the date of determination to consolidated adjusted EBITDA for the four fiscal quarters ended most recently before such date).

We may elect interest periods of one, two, three or six months (and, if consented to by all relevant lenders, twelve months) for Eurodollar borrowings.

The interest rates applicable to loans under the Senior Credit Facilities are, at our option, equal to either (i) an alternate base rate (the highest of (a) the federal funds effective rate plus 0.5%, (b) the prime rate of Bank of America, N.A., and (c) the one-month Term SOFR rate plus 1.0%) or (ii) the Term SOFR rate for the applicable interest period plus 0.1%, plus, in each case, an applicable margin percentage, which varies based on the Consolidated Leverage Ratio (defined in the Credit Agreement generally as the ratio of consolidated total debt (excluding the face amount of undrawn letters of credit, bank undertakings or analogous instruments and net of unrestricted cash and cash equivalents) at the date of determination to Consolidated EBITDA for the four fiscal quarters ended most recently before such date).

The interest rates applicable to loans in other currencies under the Senior Credit Facilities are, at the applicable borrower’s option, equal to either (a) an adjusted alternative currency daily rate or (b) an adjusted alternative currency term rate for the applicable interest period, plus, in each case, the applicable margin percentage.

The borrowers may elect interest periods of one, three or six months (and, if consented to by all relevant lenders, any other period not greater than twelve months) for term rate borrowings, subject in each case to availability in the applicable currency.

The weighted-average interest rate of outstanding borrowings under our Senior Credit Facilities was approximately 5.8% at December 31, 2022.

On December 9, 2021, in preparation of our adoption of Accounting Standards Update ("ASU") No.

2020-04 and No.

2021-01, Reference Rate Reform, we entered into a LIBOR transition amendment related to our global revolving credit facility for certain foreign currencies.

This amendment provides for a transition from the LIBOR rate to a successor rate in accordance with the Credit Agreement.

The fees and bilateral foreign credit commitments are as specified above for foreign credit commitments unless otherwise agreed with the bilateral foreign issuing lender.

We also pay fronting fees on the outstanding amounts of letters of credit and foreign credit instruments (in the participation facility) at the rates of 0.125% per annum and 0.25% per annum, respectively.

SPX is the borrower under each of the above facilities, and certain of our foreign subsidiaries are (and we may designate other foreign subsidiaries to be) borrowers under the global revolving credit facility and the foreign credit instrument facilities.

SPX Enterprises, LLC, the direct wholly owned subsidiary of the Company, is the borrower under each of above facilities, and SPX may designate certain foreign subsidiaries to be borrowers under the revolving credit facility and the foreign credit instrument facility.

All borrowings and other extensions of credit under the Credit Agreement are subject to the satisfaction of customary conditions, including absence of defaults and accuracy in material respects of representations and warranties.

The letters of credit under the domestic revolving credit facility are stand-by letters of credit requested by SPX on behalf of any of our subsidiaries or certain joint ventures.

The foreign credit instrument facility is used to issue foreign credit instruments, including bank undertakings to support our foreign operations.

The Credit Agreement requires mandatory prepayments in amounts equal to the net proceeds from the sale or other disposition of, including from any casualty to, or governmental taking of, property in excess of specified values (other than in the ordinary course of business and subject to other exceptions) by SPX or our subsidiaries.

Mandatory prepayments will be applied to repay, first, amounts outstanding under any term loans and, then, amounts (or cash collateralize letters of credit) outstanding under the global revolving credit facility and the domestic revolving credit facility (without reducing the commitments thereunder).

No prepayment is required generally to the extent the net proceeds are reinvested (or committed to be reinvested) in permitted acquisitions, permitted investments or assets to be used in our business within 360 days (and if committed to be reinvested, actually reinvested within 360 days after the end of such 360-day period) of the receipt of such proceeds.

The letters of credit under the revolving credit facility are stand-by letters of credit requested by SPX on behalf of any of our subsidiaries or certain joint ventures.

The foreign credit instrument facility is used to issue foreign credit instruments, including bank undertakings to support our operations.

The Credit Agreement requires mandatory prepayments in amounts equal to the net proceeds from the sale or other disposition of (including from any casualty to, or governmental taking of) property in excess of specified values (other than in the ordinary course of business and subject to other exceptions) by SPX.

Mandatory prepayments will be applied first to repay amounts outstanding under any term loans and then to amounts outstanding under the revolving credit facility (without reducing the commitments thereunder).

No prepayment is required generally to the extent the net proceeds are reinvested (or committed to be reinvested) in permitted acquisitions, permitted investments or assets to be used in the business of SPX within 360 days (and if committed to be reinvested, actually reinvested within 180 days after the end of such 360-day period) of the receipt of such proceeds.

We may voluntarily prepay loans under the Credit Agreement, in whole or in part, without premium or penalty.

Any voluntary prepayment of loans will be subject to reimbursement of the lenders’ breakage costs in the case of a prepayment of Eurodollar rate borrowings other than on the last day of the relevant interest period.

Any voluntary prepayment of loans will be subject to reimbursement of the lenders’ breakage costs in the case of a prepayment of term rate borrowings other than on the last day of the relevant interest period.

Indebtedness under the Credit Agreement is guaranteed by:

• Each existing and subsequently acquired or organized domestic material subsidiary with specified exceptions;

• SPX with respect to the obligations of our foreign borrower subsidiaries under the global revolving credit facility, the participation foreign credit instrument facility and the bilateral foreign credit instrument facility.

Indebtedness under the Credit Agreement is secured by a first priority pledge and security interest in 100% of the capital stock of our domestic subsidiaries (with certain exceptions) held by SPX or our domestic subsidiary guarantors and 65% of the capital stock of our material first-tier foreign subsidiaries (with certain exceptions).

• SPX with respect to the obligations of our foreign borrower subsidiaries under the revolving credit facility and the bilateral foreign credit instrument facility.

Indebtedness under the Credit Agreement is secured by a first priority pledge and security interest in 100% of the capital stock of our domestic subsidiaries (with certain exceptions) or our domestic subsidiary guarantors and 65% of the voting capital stock (and 100% of the non-voting capital stock) of material first-tier foreign subsidiaries (with certain exceptions).

If SPX obtains a corporate credit rating from Moody’s and S&P and such corporate credit rating is less than “Ba2” (or not rated) by Moody’s and less than “BB” (or not rated) by S&P, then SPX and our domestic subsidiary guarantors are required to grant security interests, mortgages and other liens on substantially all of their assets.

If SPX’s corporate credit rating is “Baa3” or better by Moody’s or “BBB-” or better by S&P and no defaults then exist, all collateral security is to be released and the indebtedness under the Credit Agreement would be unsecured.

If SPX’s corporate credit rating is “Baa3” or better by Moody’s or “BBB-” or better by S&P and no defaults would exist, then all collateral security is to be released and the indebtedness under the Credit Agreement will be unsecured.

The Credit Agreement also contains covenants that, among other things, restrict our ability to incur additional indebtedness, grant liens, make investments, loans, guarantees, or advances, make restricted junior payments, including dividends, redemptions of capital stock, and voluntary prepayments or repurchase of certain other indebtedness, engage in mergers, acquisitions or sales of assets, enter into sale and leaseback transactions, or engage in certain transactions with affiliates, and otherwise restrict certain corporate activities.

The Credit Agreement contains customary representations, warranties, affirmative covenants and events of default.

We are permitted under the Credit Agreement to repurchase our capital stock and pay cash dividends in an unlimited amount if our Consolidated Leverage Ratio is (after giving pro forma effect to such payments) less than 2.75 to 1.00.

generally as consolidated net income subject to certain adjustments solely for the purposes of determining this basket) during the period from September 1, 2015 to the end of the most recent fiscal quarter preceding the date of such repurchase or dividend declaration for which financial statements have been (or were required to be) delivered (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit) plus (iii) certain other amounts, less our previous usage of such additional amount for certain other investments and restricted junior payments.

We are permitted under the Credit Agreement to repurchase capital stock and pay cash dividends in an unlimited amount if our Consolidated Leverage Ratio is (after giving pro forma effect to such payments) less than 2.75 to 1.00.

If our Consolidated Leverage Ratio is (after giving pro forma effect to such payments) greater than or equal to 2.75 to 1.00, the aggregate amount of such repurchases and dividend declarations cannot exceed (A) $100.0 in any fiscal year plus (B) an additional amount for all such repurchases and dividend declarations made after September 1, 2015 equal to the sum of (i) $100.0 plus (ii) a positive amount equal to 50% of cumulative Consolidated Net Income (as defined in the Credit Agreement generally as consolidated net income subject to certain adjustments solely for the purposes of determining this basket) during the period from September 1, 2015 to the end of the most recent fiscal quarter preceding the date of such repurchase or dividend declaration for which financial statements have been (or were required to be) delivered (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit) plus (iii) certain other amounts, less our previous usage of such additional amount for certain other investments and restricted junior payments.

At December 31, 2022, we had $489.0 of available borrowing capacity under our revolving credit facilities, after giving effect to $11.0 reserved for outstanding letters of credit.

In addition, at December 31, 2022, we had $10.2 of available issuance capacity under our foreign credit instrument facilities after giving effect to $14.8 reserved for outstanding letters of credit.

At December 31, 2021, we were in compliance with all covenants of our Credit Agreement.

At December 31, 2022, we were in compliance with all covenants of the Credit Agreement.

In connection with the August 2022 amendment of the Credit Agreement, we recorded charges of $1.1 to “Loss on amendment/refinancing of senior credit agreement” related to the write-off of unamortized deferred financing costs totaling $0.7 and transaction costs of $0.4.

Additionally, $1.5 of fees paid in connection with the August 2022 amendment were capitalized, with $1.2 related to our revolving loans and $0.3 related to the term loan.

During 2021, we reduced the issuance capacity of our then-existing foreign credit instrument facilities resulting in a charge of $0.2 to “Loss on amendment/refinancing of senior credit agreement” associated with the write-off of unamortized deferred financing costs.

Other Borrowings and Financing Activities

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The facility does not contain any covenants that we view as materially constraining to the activities of our business.

In addition, we maintain uncommitted line of credit facilities in China and South Africa available to fund operations in these regions, when necessary, and at the discretion of the lender.

At December 31, 2022, the aggregate amount of borrowing capacity under these facilities was $20.0, while there were no borrowings outstanding.

Financial Instruments

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These inputs can be readily observable quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2) or significant unobservable inputs (Level 3).

Our derivative financial assets and liabilities include interest rate swap agreements, forward contracts to manage exposure on contracts with forecasted transactions denominated in non-functional currencies and to manage the risk of transaction gains and losses associated with assets/liabilities denominated in currencies other than the functional currency of certain subsidiaries ("FX forward contracts"), and, as related to Transformer Solutions through its date of disposition, forward contracts that manage the exposure on forecasted purchases of commodity raw materials (“commodity contracts”) that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk, and our counterparties’ credit risks.

Our derivative financial assets and liabilities include interest rate swap agreements, forward contracts to manage exposure on contracts with forecasted transactions denominated in non-functional currencies and to manage the risk of transaction gains and losses associated with assets/liabilities denominated in currencies other than the functional currency of certain subsidiaries (“FX forward contracts”), and, as related to Transformer Solutions through its date of disposition, forward contracts that managed the exposure on forecasted purchases of commodity raw materials (“commodity contracts”) that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk, and our counterparties’ credit risks.

Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the valuation hierarchy.

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In February 2020, and as a result of a December 2019 amendment that extended the maturity date of our senior credit facilities to December 17, 2024, we entered into additional interest swap agreements (“Swaps”).

The Swaps have a notional amount of $243.7, cover the period from March 2021 to November 2024, and effectively convert borrowings under our senior credit facilities to a fixed rate of 1.061%, plus the applicable margin.

We have designated and are accounting for our interest rate swap agreements as cash flow hedges.

As of December 31, 2021 and 2020, the unrealized gain (loss), net of tax, recorded in Accumulated other comprehensive income ("AOCI") was $0.5 and $(5.9), respectively.

In addition, as of December 31, 2021, the fair value of our interest rate swap agreements was $0.6

(with $2.5 recorded as a non-current asset and $1.9 as a current liability), and $7.8 at December 31, 2020 (with $1.4 recorded as a current liability and the remainder in long-term liabilities).

Changes in fair value of our interest rate swap agreements are reclassified into earnings as a component of interest expense, when the forecasted transaction impacts earnings.

The Swaps have a remaining notional amount of $231.3, cover the period through November 2024, and effectively convert this portion of the borrowings under our senior credit facilities to a fixed rate of 1.077%, plus the applicable margin.

In connection with entering into the Credit Agreement, the Swaps were amended to be based on SOFR as opposed to LIBOR.

We applied the optional expedients per Accounting Standards Update ( “ASU”) No.

2020-04 and No.

2021-01 and, thus, continue to designate and account for our interest rate swap agreements as cash flow hedges.

As of December 31, 2022 and 2021, the unrealized gain, net of tax, recorded in Accumulated Other Comprehensive Income ( “AOCI” ) was $11.0 and $0.5, respectively.

In addition, the fair value of our interest rate swap agreements was $14.7 (with $8.7 recorded as a current asset and $6.0 as a non-current asset) as of December 31, 2022 , and $0.6 (with $2.5 recorded as a non-current asset and $1.9 as a current liability) as of December 31, 2021.

Changes in fair value of our interest rate swap agreements are reclass ified into earnings as a component of interest expense, when the forecasted transaction impacts earnings.

Currency Forward Contracts

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Our principal currency exposures relate to the South African Rand, British Pound Sterling, and Euro.

From time to time, we enter into FX forward contracts to manage the exposure on contracts with forecasted transactions denominated in non-functional currencies and to manage the risk of transaction gains and losses associated with assets/liabilities denominated in currencies other than the functional currency of certain subsidiaries.

None of our FX forward contracts are designated as cash flow hedges.

We had FX forward contracts with an aggregate notional amount of $8.7 and $6.3 outstanding as of December 31, 2021 and 2020, respectively, with all of the $8.7 scheduled to mature in 2022.

From time to time, we enter into forward contracts to manage the exposure on contracts with forecasted transactions denominated in non-functional currencies and to manage the risk of transaction gains and losses associated with assets/liabilities denominated in currencies other than the functional currency of certain subsidiaries (“FX forward contracts”).

We had FX forward contracts with an aggregate notional amount of $6.9 and $8.7 outstanding as of December 31, 2022 and 2021, respectively, with all of the $6.9 scheduled to mature within one year.

The fair value of our FX forward contracts was less than $0.1 at December 31, 2022 and 2021.

Commodity Contracts

From time to time, we entered into commodity contracts to manage the exposure on forecasted purchases of commodity raw materials.

The commodity contracts related solely to Transformer Solutions.

As discussed in Note 1, on October 1, 2021, we completed the sale of Transformer Solutions.

For our Transformer Solutions business, we historically entered into commodity contracts to manage the exposure on forecasted purchases of commodity raw materials.

As discussed in Note 1 to our consolidated financial statements, on October 1, 2021, we completed the sale of Transformer Solutions, which has been presented within discontinued operations.

Immediately prior to the sale, we extinguished the existing commodity contracts and reclassified from AOCI a net loss of $0.6 to “Gain (loss) on disposition of discontinued operations, net of tax” within our consolidated statement of operations for the year ended December 31, 2021.

Prior to extinguishment, we designated and accounted for these c ontracts as cash flow hedges and, to the extent these commodity contracts were effective in offsetting the variability of the forecasted purchases, the change in fair value was included in AOCI.

We reclassified amounts associated with our commodity contracts out of AOCI when the f orecasted transaction impacted earnings.

As of December 31, 2020, the fair values of these contracts was a current asset of $2.4.

Since these commodity contracts related to our Transformer Solutions business, the amount has been recorded within assets of discontinued operations of our consolidated balance sheet.

The unrealized gain, net of taxes, recorded in AOCI was $1.5 as of December 31, 2020.

Prior to extinguishment, we designated and accounted for these contracts as cash flow hedges and, to the extent the commodity contracts were effective in offsetting the variability of the forecasted purchases, the change in fair value was included in AOCI.

We reclassified amounts associated with our commodity contracts out of AOCI when the forecasted transaction impacted earnings.

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 forward contracts.

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

We periodically evaluate the credit standing of these financial institutions and insurance companies.

Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and equivalents, trade accounts receivable, and interest rate swap and foreign currency forward contracts.

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

We periodically evaluate the credit standing of these financial institutions.

We maintain cash levels in bank accounts that, at times, may exceed federally-insured limits.

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Cash and Other Commitments

Balances under our Credit Agreement are payable in full on December 17, 2024.

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

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

Balances under the Credit Agreement are payable in full on August 12, 2027.

Our term loan is repayable in quarterly installments equal to 0.625% of the initial term loan balance of $245.0, beginning in December 2023 and in each of the first three quarters of 2024, and 1.25% during the fourth quarter of 2024, all quarters of 2025 and 2026, and the first two quarters of 2027.

The remaining balance is payable in full on August 12, 2027.

We use operating leases to finance certain equipment, vehicles and properties.

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Capital expenditures for 2022 t otaled $15.9 , compared to $9.6 and $15.3 in 2021 and 2020, respectively.

Capital expenditures in 2021 related prima rily to upgrades to manufacturing facilities, including replacement of equipment.

We expect 2022 capital expenditures to approximate $15.0 to $20.0, with a significant portion related to replacement of equipment.

Capital expenditures in 2022 related prima ril y to upgrades to manufacturing facilities, including replacement of equipment.

We expect 2023 capital expenditures to approximate $20.0 to $30.0, with a significant portion related to upgrades to manufacturing facilities.

In 2022, we made contributions and direct benefit payments of $11.0 to our defined benefit pension and postretirement benefit plans.

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Our pension plans have not experienced any liquidity difficulties or counterparty defaults due to the volatility in the credit markets.

Our pension funds earned asset returns of approximately 1.0% in 2021.

Our pension fund assets had negative returns of approximately 24.0% in 2022.

See Note 11 to our consolidated financial statements for further disclosure of expected future contributions and benefit payments.

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Off-Balance Sheet Arrangements

A s of December 31, 2021, except as discussed in Notes 15 and 17 to our consolidated financial statements and in the contractual obligations table below, we did not have any material guarantees, off-balance sheet arrangements or purchase commitments other than the following:

A s of December 31, 2022, except as discussed in Note 15 to our consolidated financial statements and in the contractual obligations table below, we did not have any material guarantees, off-balance sheet arrangements or purchase commitments other than the following:

(i) $35.8 of certain standby letters of credit outstanding, all of which relate to self-insurance or environmental matters and $11.0 of which reduce the available borrowing capacity on our domestic revolving credit facility, (ii) $14.8 of letters of credit outstanding, all of which reduce the available borrowing capacity on our foreign trade facilities, and (iii) $50.7 of surety bonds.

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Interest payments (4)

72.4 16.3 31.3 24.8 —

Total contractual cash obligations (5)

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plans in 2022 and therea fter reflect the minimum required contributions under the Pension Protection Act of 2006 and the Worker, Retiree, and Employer Recovery Act of 2008.

These contributions do not reflect potential voluntary contributions, or additional contributions that may be required in connection with acquisitions, dispositions or related

plan mergers.

These contributions do not reflect potential voluntary contributions, or additional contributions that may be required in connection with acquisitions, dispositions or related plan mergers.

See Note 11 to our consolidated financial statements for additional information on expected future contributions and benefit payments.

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(3) Represents rental payments under operating leases with remaining non-cancelable terms in excess of one year.

(4) Represents interest payments exclusive of the impact of our interest rate swap agreements.

(5) Contingent obligations, such as environmental accruals and those relating to uncertain tax positions generally do not have specific payment dates and accordingly have been excluded from the above ta ble.

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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., class actions, derivative lawsuits and 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., class actions, derivative lawsuits and contracts, intellectual property and competitive claims), environmental matters, product liability matters (which, prior to the Asbestos Portfolio Sale, were 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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Our recorded liabilities related to these matters totaled $39.5 and $658.8 at December 31, 2022 and 2021, respectively.

Of these amounts, $584.3 and $499.8 are included in “Other long-term liabilities” within our consolidated balance sheets at December 31, 2021 and 2020, respectively, with the remainder included in “Accrued expenses.” The liabilities we record for these matters are based on a number of assumptions, inc luding historical claims and payment experience.

Of these amounts, $30.8 and $584.3 are included in “Other long-term liabilities” within our consolidated balance sheets at December 31, 2022 and 2021, respectively, with the remainder included in “Accrued expenses.” The decline in liabilities is primarily related to the Asbestos Portfolio Sale.

The liabilities we record for these matters are based on a number of assumptions, inc luding historical claims and payment experience.

While we base our assumptions on facts currently known to us, they entail inherently subjective judgments and uncertainties.

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These variances relative to current expectations could have a material impact on our financial position and results of operations.

Our asbestos-related claims are typical in certain of the industries in which we operate or pertain to legacy businesses we no longer operate.

It is not unusual in these cases for fifty or more corporate entities to be named as defendants.

We vigorously defend these claims, many of which are dismissed without payment, and the significant majority of costs related to these claims have historically been paid pursuant to our insurance arrangements.

Our recorded assets and liabilities related to asbestos-related claims were as follows at December 31, 2021 and 2020:

Asbestos Matters

Prior to the Asbestos Portfolio Sale, our asbestos-related claims were typical in certain of the industries in which we operate or pertain to legacy businesses we no longer operate.

Our recorded assets and liabilities related to asbestos-related claims were as follows at December 31, 2021:

Insurance recovery assets (1)

$ 526.2 $ 496.4

Liabilities for claims (2)

_____________________________________________________________

(1) Of these amounts $473.6 and $446.4 are included in “ Other assets” at December 31, 2021 and 2020, respectively, while the remainder is included in “ Other current assets.”

(2) Of these amounts $561.4 and $479.9 are included in “ Other long-term liabilities” at December 31, 2021 and 2020, respectively, while the remainder is included in “ Accrued expenses.”

The liabilities we record for asbestos-related claims are based on a number of assumptions.

In estimating our liabilities for asbestos-related claims, we consider, among other things, the following:

(1) Of these amounts, $473.6 are included in “ Other assets” at December 31, 2021, while the remainder is included in “ Other current assets.”

(2) Of these amounts, $561.4 are included in “ Other long-term liabilities” at December 31, 2021, while the remainder is included in “ Accrued expenses.”

The liabilities we recorded for asbestos-related claims were based on a number of assumptions.

In estimating our liabilities for asbestos-related claims, we considered, among other things, the following:

• The number of pending claims by disease type and jurisdiction.

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◦ Average claim settlement amounts.

• The period over which we can reasonably project asbestos-related claims (currently projecting through 2057).

The following table presents information regarding activity for asbestos-related claims for the years ended December 31, 2021, 2020 and 2019:

Year ended December 31

2021 2020 2019

Pending claims, beginning of year 9,782 11,079 13,767

Claims filed 2,826 2,449 3,607

Claims resolved (2,543) (3,746) (6,295)

Pending claims, end of year 10,065 9,782 11,079

The assets we record for asbestos-related claims represent amounts that we believe we are or will be entitled to recover under agreements we have with insurance companies.

The amount of these assets are based on a number of assumptions, including the continued solvency of the insurers and our legal interpretation of our rights for recovery under the agreements we have with the insurers.

Our current assumptions for estimating these assets may not prove accurate, and we may be required to adjust these assets in the future.

These variances relative to current expectations could have a material impact on our financial position and results of operations.

During the years ended December 31, 2021, 2020 and 2019, our (receipts) payments for asbestos-related claims, net of respective insurance recoveri es of $53.9, $35.4, and $47.1, were $(0.3), $19.3 and $13.1, respectively.

• The period over which we could reasonably project asbestos-related claims (projected through 2057 at December 31, 2021 ).

The assets we recorded for asbestos-related claims represent amounts that we believe we were entitled to recover under agreements we had with insurance companies.

The amount of these assets were based on a number of assumptions, including the continued solvency of the insurers and our legal interpretation of our rights for recovery under the agreements we had with the insurers.

During the years ended December 31, 2022, 2021, and 2020, our (receipts) payments for asbestos-related claims, net of respective insurance recoveries of $31.6, $53.9, and $35.4, were $20.1, $(0.3) and $19.3, respectively.

The year ended December 31, 2021 includes insurance proceeds of $15.0 associated with the settlement of an asbestos insurance coverage matter.

A significant increase in claims, costs and/or issues with existing i nsurance coverage (e.g., dispute with or insolvency of insurer(s)) could have a material adverse impact on our share of future payments related to these matters, and, as a result, have a material impact on our financial position, results of operations and cash flows.

During the years ended December 31, 2022, 2021, and 2020 , we recorded charges of $24.2, $51.2, and $21.3, respectively, as a result of changes in estimates associated with the liabilities and assets related to asbestos-related claims.

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Large Power Projects in South Africa

Overview - Since 2008, DBT had been executing on two large power projects in South Africa (Kusile and Medupi), on which it has now substantially completed its scope of work.

Overview - Since 2008, DBT had been executing on two large power projects in South Africa (Kusile and Medupi), on which it has substantially completed its scope of work.

Over such time, the business environment surrounding these projects was difficult, as DBT, along with many other contractors on the projects, experienced delays, cost over-runs, and various other challenges associated with a complex set of contractual relationships among the end customer, prime contractors, various subcontractors (including DBT and its subcontractors), and various suppliers.

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In connection with the ruling, MHI paid DBT South African Rand 126.6 (or $8.6 at the time of payment).

This ruling is subject to MHI’s rights to seek further arbitration in the matter and, thus, the amount awarded has not been reflected in our consolidated statement of operations for the year ended December 31, 2021.

This ruling is subject to MHI’s rights to seek further arbitration in the matter and, thus, the amount awarded has not been reflected in our consolidated statements of operations.

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

The hearing on this matter occurred in December 2022, with the ruling from such hearing yet to be received.

On April 28, 2021, a dispute adjudication panel issued a ruling in favor of DBT related to costs incurred in connection with delays on two units of the Medupi project.

In connection with the ruling, MHI paid DBT South African Rand 82.0 (or $6.0 at the time of payment).

This ruling is subject to MHI’s rights to seek further arbitration in the matter and, thus, the amount awarded has not been reflected in our consolidated st atement of operations for the year ended December 31, 2021.

In connection with the ruling, MHI paid DBT South African Rand 82.0 (or $6.0 at the

time of payment).

This ruling is subject to MHI’s rights to seek further arbitration in the matter and, thus, the amount awarded has not been reflected in our consolidated st atements of operations.

Claims by MHI - On February 26, 2019, DBT received notification of an interim claim consisting of both direct and consequential damages from MHI alleging, among other things, that DBT (i) provided defective product and (ii) failed to meet certain project milestones.

In September 2020, MHI made a demand on certain bonds issued in its favor by DBT, based solely on these alleged defects, but without further substantiation or other justification (see further discussion below).

On December 30, 2020, MHI notified DBT of its intent to take these claims to binding arbitration even though the vast majority of these claims has not been brought appropriately before a dispute adjudication board as required under the relevant subcontracts.

On December 30, 2020, MHI notified DBT of its intent to take these claims to binding arbitration even though the vast majority of these claims had not been brought appropriately before a dispute adjudication board as required under the relevant subcontracts.

On June 4, 2021, in connection with the arbitration, DBT received a revised version of the claim.

Similar to the interim claim, we believe the vast majority of the damages summarized in the revised claim are unsubstantiated and, thus, any loss for the majority of these claims is considered remote.

For the remainder of the claims in both the interim notification and the revised

version, which largely appear to be direct in nature (approximately South African Rand 790.0 or $49.5), DBT has numerous defenses and, thus, we do not believe that DBT has a probable loss associated with these claims.

In addition, we do not believe MHI has followed the appropriate dispute resolution processes under our agreement and therefore most, if not all, of its claims against DBT are invalid.

The remainder of the claims in both the interim notification and the revised version largely appear to be direct in nature (approximately South African Rand 790.0 or $46.1).

On November 25, 2022, MHI notified DBT of its intent to refer the claims dismissed from the arbitration to a new dispute adjudication panel.

DBT has numerous defenses and, thus, we do not believe that DBT has a probable loss associated with any of these claims.

As such, no loss has been recorded in the consolidated financial statements with respect to these claims.

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Although it is reasonably possible that some loss may be incurred in connection with these claims, we currently are unable to estimate the potential loss or range of potential loss.

MHI has made other claims against DBT totaling South African Rand 176.2 (or $11.0).

DBT has numerous defenses against these claims and, thus, we do not believe that DBT has a probable loss associated with these claims.

As such, no loss has been recorded in the consolidated financial statements with respect to these claims.

MHI has made other claims against DBT totaling South African Rand 176.2 (or $10.3), and has also alleged that it has incurred additional remedial costs related to portions of DBT’s scope of work.

DBT has numerous defenses against these claims, as well as claims, if any, that may result from the above unsubstantiated allegations, and, thus, we do not believe that DBT has a probable loss associated with these claims.

As such, no loss has been recorded in the consolidated financial statements with respect to these claims and allegations.

Bonds Issued in Favor of MHI - DBT is obligated with respect to bonds issued by banks in favor of MHI.

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DBT denies liability for such allegations and, thus, fully intends to seek, and believes it is legally entitled to, reimbursement of the South African Rand 418.3 (or $24.4) that has been paid.

However, given the extent and complexities of the claims between DBT and MHI, reimbursement of the South African Rand 418.3 (or $26.2) is unlikely to occur over the next twelve months.

As such, we have reflected the South African Rand 418.3 (or $26.2) as a non-current asset within our consolidated balance sheet as of December 31, 2021.

The remaining bond of $1.8 issued to MHI as a performance guarantee could be exercised by MHI for an alleged breach of DBT's obligation.

On October 11, 2022, a dispute adjudication panel ruled MHI drew on amounts in excess of the bond values stipulated in the contracts and was required to refund DBT South African Rand 90.8 (or $5.0 at the time of payment) of the previously demanded amounts, plus interest of South African Rand 12.5 (or $0.7 at the time of payment).

MHI paid these amounts on October 14, 2022.

We have reflected the remaining South African Rand 327.5 (or $19.1) within “ Assets of DBT and Heat Transfer” on the consolidated balance sheet as of December 31, 2022.

The remaining bond of South African Rand 29.2 (or $1.7) was issued to MHI as a performance guarantee in the event of a breach of DBT’s contractual obligations.

In the event that MHI were to receive payment on a portion, or all, of the remaining bond, we would be required to reimburse the issuing bank.

In addition to this bond, SPX Corporation has guaranteed DBT’s performance on these projects to the prime contractors, including MHI.

In addition SPX Technologies, Inc.

has guaranteed DBT’s performance on these projects to the prime contractors, including MHI.

Claim against Surety - On February 5, 2021, DBT received payment of $6.7 on bonds issued in support of performance by one of DBT’s sub-contractors.

The sub-contractor maintains a right to seek recovery o f such amount and, thus, the amount received by DBT has not been reflected in our consolidated statement of operations for the year ended December 31, 2021.

Settlement with the Minority Shareholder of DBT – On October 16, 2019, SPX Technologies (PTY) LTD, DBT’s parent company, along with DBT and SPX Corporation, executed an agreement with the then minority shareholder of DBT to settle a put option and other claims between the parties for a total payment of South African Rand 230.0 (or $15.6 at the time of payment).

The difference between the settlement amount (South African Rand 230.0) and the amount previously recorded for the matter of South African Rand 257.0, or South African Rand 27.0 (or $1.8), along with a tax benefit of $3.8 associated with the total payment of South African Rand 230.0, has been reflected as an adjustment to “Net income attributable to SPX common stockholders” in our calculations of basic and diluted earnings per share for the year ended December 31, 2019.

The sub-contractor maintains a right to seek recovery o f such amount and, thus, the amount received by DBT has not been reflected in our consolidated statements of operations.

Claim for Contingent Consideration Related to ULC Acquisition

In connection with our acquisition of ULC in September 2020, the seller of ULC was eligible for additional cash consideration of up to $45.0 upon achievement of certain operating and financial performance milestones.

At the time of the acquisition, we recorded a liability of $24.3, which represented the estimated fair value of the contingent consideration.

During the third quarter of 2021, we concluded that the operational and financial performance milestones noted above were not achieved.

As a result, we reversed the liability of $24.3 during the third quarter of 2021, with the offset recorded to “Other operating (income) expense, net.”

On August 23, 2022, the seller of ULC initiated a breach-of-contract lawsuit against us in the United States District Court for the Eastern District of New York claiming that it is entitled to a portion of the additional cash consideration totaling $15.0 linked to certain operating performance milestones.

SPX has numerous defenses against this claim and, thus, we do not believe we have a probable loss associated with the claim.

Environmental Matters

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It is our policy to accrue for estimated losses from legal actions or claims when events exist that make the realization of the losses or expenses probable and they can be reasonably estimated.

Our environmental accruals cover anticipated costs, including investigation, remediation, and

operation and maintenance of clean-up sites.

Our environmental accruals cover anticipated costs, including investigation, remediation, and operation and maintenance of clean-up sites.

Accordingly, our estimates may change based on future developments, including new or changes in existing environmental laws or policies, differences in costs required to complete anticipated actions from estimates provided, future findings of investigation or remediation actions, or alteration to the expected remediation plans.

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Our long-term contracts often include unapproved change orders and claims.

We include in our contract estimates additional revenue for unapproved change orders or claims when we believe we have an enforceable right to the unapproved change order or claim and the amount can be reliably estimated.

We include in our contract estimates additional revenue for unapproved change orders or claims when we believe we have an enforceable right to the unapproved

change order or claim and the amount can be reliably estimated.

In evaluating these criteria, we consider the contractual/legal basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs, and the objective evidence available to support the claim.

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We analyze the risk of a significant revenue reversal and, if necessary, constrain the amount of variable consideration recognized in order to mitigate this risk.

See Note 1 and 5 to our consolidated financial statements for further information on our revenue recognition policies.

See Notes 1 and 5 to our consolidated financial statements for further information on our revenue recognition policies.

Impairment of Goodwill and Indefinite-Lived Intangible Assets

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We have the option to assess impairment through a qualitative assessment, which includes factors such as general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which a reporting unit operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others.

When a potential impairment is indicated, we perform quantitative testing by

comparing the estimated fair value of the reporting unit to the carrying value of the reported net assets.

Under our quantitative testing, fair value is generally based on the income approach using a calculation of discounted cash flows, based on the most recent financial projections for the reporting units.

The revenue growth rates included in the financial projections are our best estimates based on current and forecasted market conditions, and the profit margin assumptions are projected by each reporting unit based on current cost structure and, when applicable, anticipated net cost reductions.

When a potential impairment is indicated, we perform quantitative testing by comparing the estimated fair value of the reporting unit to the carrying value of the reported net assets.

Under our quantitative testing, fair value is generally based on discounted projected cash flows, but we also consider factors such as comparable industry price multiples.

The calculation of fair value for our reporting units incorporates many assumptions including future growth rates, profit margin and discount factors.

Changes in economic and operating conditions impacting these assumptions could result in impairment charges in future periods.

After performing our qualitative assessment during the fourth quarter of 2021, we concluded that, with the exception of our Cues and ULC reporting units, it was not more likely than not that the fair values of our reporting units were less than their respective carrying values and, therefore, did not perform a quantitative analysis on these reporting units.

Based on our quantitative review of the Cues and ULC reporting units during the fourth quarter of 2021, we concluded that the estimated fair value of ULC, after impairment charges of $5.2, approximates the carrying value of its net assets, and the estimated fair value of Cues exceeded the carrying value of its respective net assets by 30%.

The total goodwill for ULC was $12.0 as of December 31, 2021.

A change in assumptions used in ULC's quantitative analysis (e.g., projected revenues and profit growth rates, discount rates, industry price multiples, etc.) could result in the reporting unit's estimated fair value being less than the carrying value of its net assets.

In addition to ULC, the fair value of Sealite, ECS and Cincinnati Fan, acquisitions over the past 12 months, approximate their carrying value.

If ULC, Sealite, ECS or Cincinnati Fan are unable to achieve their respective current financial forecast, we may be required to record an impairment charge in a future period related to their respective goodwill.

As indicated in Note 10 to the consolidated financial statements, we concluded during the third quarter of 2021 that the operating and financial milestones related to the ULC contingent consideration would not be achieved, resulting in the reversal of the related liability of $24.3, with the offset to “Other operating (income) expenses, net.” We also concluded that the lack of achievement of these milestones, along with lower than anticipated future cash flows, were indicators of potential impairment related to ULC’s goodwill and indefinite-lived intangible assets.

As such, we performed quantitative analyses on ULC’s goodwill and indefinite-lived intangible assets for impairment during the third quarter of 2021.

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 during the quarter, with $23.3 related to goodwill and the remainder to trademarks.

In connection with our annual impairment analyses of ULC’s goodwill and indefinite-lived intangibles during the fourth quarters of 2022 and 2021, we determined that the carrying value of ULC’s net assets exceeded the implied fair value of the business.

As a result, we recorded impairment charges of $12.9 ($12.0 related to goodwill, which represented all of ULC’s goodwill prior to impairment, and $0.9 related to trademarks) and $5.2 ($4.9 related to goodwill and $0.3 related to trademarks) during the fourth quarters of 2022 and 2021, respectively.

During the fourth quarter of 2022, in addition to the ULC analysis mentioned above, we performed quantitative analyses on the goodwill and indefinite-lived intangible assets of our Cincinnati Fan reporting unit.

The Cincinnati Fan analysis indicated that the fair value of its net assets exceeded the related carrying value by less than 10%.

A change in assumptions used in Cincinnati Fan’s quantitative analyses (e.g., projected revenues and profit growth rates, discount rates, industry price multiples, etc.) could result in the reporting unit's estimated fair value being less than the carrying value.

If Cincinnati Fan is unable to achieve its current financial forecast, we may be required to record an impairment charge in a future period related to its goodwill.

As of December 31, 2022, Cincinnati Fan’s goodwill totaled $54.8.

We perform our annual trademarks impairment testing during the fourth quarter, or on a more frequent basis if there are indications of potential impairment.

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The basis for these projected revenues is the annual operating plan for each of the related businesses, which is prepared in the fourth quarter of each year.

In connection with the annual impairment testing of our trademarks during the fourth quarters of 2021 and 2020, we recorded impairment charges of $0.5 and $ 0.7, respectively, related to certain of these trademarks

In connection with the annual impairment testing of our trademarks during the fourth quarters of 2022, 2021, and

2020, we recorded impairment charges of $1.4 (including $0.9 related to ULC as noted above), $0.8 (including $0.3 related to ULC as noted above), and $0.7, respectively.

See Note 10 to our consolidated financial statements for additional details.

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A lower discount rate increases the present value of benefit obligations and increases pension expense.

Including the effects of recognizing actuarial gains and losses into earnings as described above, a 50 basis point decrease in the discount rate for our domestic plans would have increased our 2021 pension expense by approximately $16.6, and a 50 basis point increase in the discount rate would have decreased our 2021 pension expense by approximately $15.3.

Including the effects of recognizing actuarial gains and losses into earnings as described above, a 50 basis point decrease in the discount rate for our domestic plans would have increased our 2022 pension expense by approximately $9.4, a nd a 50 basis point increase in the discount rate would have decreased our 2022 pension expense by appro ximately $8.8.

The trend in healthcare costs is difficult to e stimate, and it can significantly impact our postretirement liabilities and costs.

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We perform reviews of our income tax positions on a quarterly basis and accrue for potential uncertain tax positions.

Accruals for these uncertain tax positions are classified as “Income taxes payable” and “Deferred and other income taxes” in our consolidated balance sheets based on an expectation as to the timing of when the matter will be resolved.

Accruals for these uncertain tax

positions are classified as “Income taxes payable” and “Deferred and other income taxes” in our consolidated balance sheets based on an expectation as to the timing of when the matter will be resolved.

As events change or resolutions occur, these accruals are adjusted, such as in the case of audit settlements with taxing authorities.

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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-K

Item 7. Management’s Discussion and Analysis