SPX Technologies, Inc. 10-Q

ITEM 1. Financial Statements SPX TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited; in millions, except per share amounts) Three months ended Six months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Revenues $ 501.3 $ 423.3 $ 966.5 $ 823.1 Costs and expenses: Cost of products sold 300.5 259.7 582.8 509.6 Selling, general and administrative 101.2 100.8 204.1 194.6 Intangible amortization 16.8 11.5 31.6 17.8 Special charges, net ( 0.2 ) — 0.4 — Other operating expense, net 8.4 — 8.4 — Operating income 74.6 51.3 139.2 101.1 Other income (expense), net ( 1.7 ) — ( 5.7 ) 2.5 Interest expense ( 12.8 ) ( 5.4 ) ( 22.6 ) ( 7.8 ) Interest income 0.3 0.2 0.6 0.7 Income from continuing operations before income taxes 60.4 46.1 111.5 96.5 Income tax provision ( 15.2 ) ( 7.8 ) ( 17.1 ) ( 19.1 ) Income from continuing operations 45.2 38.3 94.4 77.4 Income (loss) from discontinued operations, net of tax — — — — Gain (loss) on disposition of discontinued operations, net of tax ( 1.0 ) ( 2.3 ) ( 1.2 ) 1.4 Income (loss) from discontinued operations, net of tax ( 1.0 ) ( 2.3 ) ( 1.2 ) 1.4 Net income $ 44.2 $ 36.0 $ 93.2 $ 78.8 Basic income per share of common stock: Income from continuing operations $ 0.98 $ 0.84 $ 2.05 $ 1.70 Income (loss) from discontinued operations, net of tax ( 0.02 ) ( 0.05 ) ( 0.03 ) 0.03 Net income per share $ 0.96 $ 0.79 $ 2.02 $ 1.73 Weighted-average number of common shares outstanding — basic 46.246 45.533 46.038 45.457 Diluted income per share of common stock: Income from continuing operations $ 0.96 $ 0.82 $ 2.01 $ 1.66 Income (loss) from discontinued operations, net of tax ( 0.02 ) ( 0.05 ) ( 0.02 ) 0.03 Net income per share $ 0.94 $ 0.77 $ 1.99 $ 1.69 Weighted-average number of common shares outstanding — diluted 47.158 46.627 46.901 46.500 Comprehensive income $ 38.2 $ 39.2 $ 77.0 $ 83.8 The accompanying notes are an integral part of these statements. 3 SPX TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited; in millions, except share data) June 29, 2024 December 31, 2023 ASSETS Current assets: Cash and equivalents $ 128.1 $ 99.4 Accounts receivable, net 325.9 279.8 Contract assets 32.0 16.6 Inventories, net 292.7 276.7 Other current assets 30.0 37.1 Total current assets 808.7 709.6 Property, plant and equipment: Land 23.2 17.9 Buildings and leasehold improvements 119.4 73.4 Machinery and equipment 297.5 264.4 440.1 355.7 Accumulated depreciation ( 221.4 ) ( 215.2 ) Property, plant and equipment, net 218.7 140.5 Goodwill 845.0 704.8 Intangibles, net 742.7 680.8 Other assets 154.2 188.9 Deferred income taxes 3.5 4.0 Assets of DBT and Heat Transfer (includes cash and equivalents of $ 4.9 and $ 5.5 at June 29, 2024 and December 31, 2023, respectively) (Note 3) 10.3 11.1 TOTAL ASSETS $ 2,783.1 $ 2,439.7 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 128.2 $ 118.7 Contract liabilities 61.7 73.5 Accrued expenses 150.7 168.5 Income taxes payable 12.3 5.3 Short-term debt 256.3 17.9 Current maturities of long-term debt 24.1 17.3 Total current liabilities 633.3 401.2 Long-term debt 509.9 523.1 Deferred and other income taxes 102.9 77.0 Other long-term liabilities 213.2 204.1 Liabilities of DBT and Heat Transfer (Note 3) 40.0 39.7 Total long-term liabilities 866.0 843.9 Commitments and contingent liabilities (Note 15) Stockholders' Equity: Common stock ( 54,120,924 and 46,289,384 issued and outstanding at June 29, 2024, respectively, and 53,618,720 and 45,674,572 issued and outstanding at December 31, 2023, respectively) 0.5 0.5 Paid-in capital 1,359.1 1,353.6 Retained earnings 131.5 38.3 Accumulated other comprehensive income 244.9 261.1 Common stock in treasury ( 7,831,540 and 7,944,148 shares at June 29, 2024 and December 31, 2023, respectively) ( 452.2 ) ( 458.9 ) Total stockholders' equity 1,283.8 1,194.6 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,783.1 $ 2,439.7 The accompanying notes are an integral part of these statements. 4 SPX TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited; in millions) Three months ended June 29, 2024 Common Stock Paid-In Capital Retained Earnings Accum. Other Comprehensive Income Common Stock In Treasury Total Stockholders’ Equity Balance at March 30, 2024 $ 0.5 $ 1,351.6 $ 87.3 $ 250.9 $ ( 452.8 ) $ 1,237.5 Net income — — 44.2 — — 44.2 Other comprehensive loss, net — — — ( 6.0 ) — ( 6.0 ) Incentive plan activity — 4.5 — — — 4.5 Long-term incentive compensation expense — 3.7 — — — 3.7 Restricted stock unit vesting — ( 0.7 ) — — 0.6 ( 0.1 ) Balance at June 29, 2024 $ 0.5 $ 1,359.1 $ 131.5 $ 244.9 $ ( 452.2 ) $ 1,283.8 Six months ended June 29, 2024 Common Stock Paid-In Capital Retained Earnings Accum. Other Comprehensive Income Common Stock In Treasury Total Stockholders’ Equity Balance at December 31, 2023 $ 0.5 $ 1,353.6 $ 38.3 $ 261.1 $ ( 458.9 ) $ 1,194.6 Net income — — 93.2 — — 93.2 Other comprehensive loss, net — — — ( 16.2 ) — ( 16.2 ) Incentive plan activity — 14.3 — — — 14.3 Long-term incentive compensation expense — 7.0 — — — 7.0 Restricted stock unit vesting — ( 15.8 ) — — 6.7 ( 9.1 ) Balance at June 29, 2024 $ 0.5 $ 1,359.1 $ 131.5 $ 244.9 $ ( 452.2 ) $ 1,283.8 Three months ended July 1, 2023 Common Stock Paid-In Capital Retained Earnings (Deficit) Accum. Other Comprehensive Income Common Stock In Treasury Total Stockholders’ Equity Balance at April 1, 2023 $ 0.5 $ 1,335.3 $ ( 8.8 ) $ 259.3 $ ( 460.2 ) $ 1,126.1 Net income — — 36.0 — — 36.0 Other comprehensive income, net — — — 3.2 — 3.2 Incentive plan activity — 3.0 — — — 3.0 Long-term incentive compensation expense — 3.5 — — — 3.5 Restricted stock unit vesting — ( 0.3 ) — — 1.1 0.8 Balance at July 1, 2023 $ 0.5 $ 1,341.5 $ 27.2 $ 262.5 $ ( 459.1 ) $ 1,172.6 Six months ended July 1, 2023 Common Stock Paid-In Capital Retained Earnings (Deficit) Accum. Other Comprehensive Income Common Stock In Treasury Total Stockholders’ Equity Balance at December 31, 2022 $ 0.5 $ 1,338.3 $ ( 51.6 ) $ 257.5 $ ( 465.5 ) $ 1,079.2 Net income — — 78.8 — — 78.8 Other comprehensive income, net — — — 5.0 — 5.0 Incentive plan activity — 8.2 — — — 8.2 Long-term incentive compensation expense — 6.6 — — — 6.6 Restricted stock unit vesting — ( 11.6 ) — — 6.4 ( 5.2 ) Balance at July 1, 2023 $ 0.5 $ 1,341.5 $ 27.2 $ 262.5 $ ( 459.1 ) $ 1,172.6 The accompanying notes are an integral part of these statements. 5 SPX TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in millions) Six months ended June 29, 2024 July 1, 2023 Cash flows from (used in) operating activities: Net income $ 93.2 $ 78.8 Less: Gain (loss) from discontinued operations, net of tax ( 1.2 ) 1.4 Income from continuing operations 94.4 77.4 Adjustments to reconcile income from continuing operations to net cash from operating activities: Special charges, net 0.4 — (Gain) loss on change in fair value of equity security 4.2 ( 3.6 ) Deferred and other income taxes ( 10.6 ) ( 10.4 ) Depreciation and amortization 44.4 26.7 Pension and other employee benefits 6.9 5.7 Long-term incentive compensation 7.0 6.6 Other, net ( 3.0 ) ( 3.0 ) Changes in operating assets and liabilities, net of effects from acquisitions and divestitures: Accounts receivable and other assets ( 29.8 ) 4.9 Inventories ( 10.7 ) ( 27.0 ) Accounts payable, accrued expenses and other ( 33.0 ) ( 2.7 ) Cash spending on restructuring actions ( 0.8 ) — Net cash from continuing operations 69.4 74.6 Net cash used in discontinued operations ( 1.4 ) ( 7.0 ) Net cash from operating activities 68.0 67.6 Cash flows from (used in) investing activities: Proceeds/borrowings related to company-owned life insurance policies, net 42.9 1.0 Business acquisitions, net of cash acquired ( 294.1 ) ( 547.1 ) Capital expenditures ( 20.3 ) ( 8.7 ) Net cash used in continuing operations ( 271.5 ) ( 554.8 ) Net cash used in discontinued operations — — Net cash used in investing activities ( 271.5 ) ( 554.8 ) Cash flows from (used in) financing activities: Borrowings under senior credit facilities 575.2 820.0 Repayments under senior credit facilities ( 382.0 ) ( 420.0 ) Borrowings under trade receivables arrangement 132.0 61.0 Repayments under trade receivables arrangement ( 93.0 ) ( 31.0 ) Net repayments under other financing arrangements ( 0.8 ) ( 0.1 ) Minimum withholdings paid on behalf of employees for net share settlements, net of proceeds from the exercise of employee stock options ( 0.9 ) ( 2.4 ) Financing fees paid — ( 1.3 ) Net cash from continuing operations 230.5 426.2 Net cash from discontinued operations — — Net cash from financing activities 230.5 426.2 Change in cash and equivalents due to changes in foreign currency exchange rates 1.1 ( 0.5 ) Net change in cash and equivalents 28.1 ( 61.5 ) Consolidated cash and equivalents, beginning of period 104.9 157.1 Consolidated cash and equivalents, end of period $ 133.0 $ 95.6 Six months ended June 29, 2024 July 1, 2023 Components of cash and equivalents: Cash and equivalents $ 128.1 $ 87.1 Cash and equivalents included in assets of DBT and Heat Transfer 4.9 8.5 Total cash and equivalents $ 133.0 $ 95.6 The accompanying notes are an integral part of these statements. 6 SPX TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited; in millions, except per share data) (1) BASIS OF PRESENTATION Unless otherwise indicated, “we,” “us” and “our” mean SPX Technologies, Inc. and its consolidated subsidiaries (“SPX” or the “Company”). We prepared the condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information normally required by accounting principles generally accepted in the United States (“GAAP”) can be condensed or omitted. The financial statements represent our accounts after the elimination of intercompany transactions and, in our opinion, include the adjustments (consisting only of normal and recurring items) necessary for their presentation. Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations only (see Note 3 for information on discontinued operations). We account for investments in unconsolidated companies where we exercise significant influence but do not have control using the equity method. In determining whether we are the primary beneficiary of a variable interest entity (“VIE”), we perform a qualitative analysis that considers the design of the VIE, the nature of our involvement and the variable interests held by other parties to determine which party has the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and which party has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. All of our VIE’s are immaterial, individually and in aggregate, to our condensed consolidated financial statements. Acquisition of TAMCO On April 3, 2023, we completed the acquisition of T. A. Morrison & Co. Inc. ( “TAMCO” ), a market leader in motorized and non-motorized dampers that control airflow in large-scale specialty applications in commercial, industrial, and institutional markets . We purchased TAMCO for cash consideration of $ 125.5 , inclusive of an adjustment to the purchase price of $ 0.2 paid during the third quarter of 2023 related to acquired working capital, and net of cash acquired of $ 1.0 . The post-acquisition operating results of TAMCO are reflected within our HVAC reportable segment. Acquisition of ASPEQ On June 2, 2023, we completed the acquisition of ASPEQ Heating Group ( “ASPEQ”), a leading provider of electrical heating solutions to customers in industrial and commercial markets. We purchased ASPEQ for cash consideration of $ 421.5 , net of (i) an adjustment to the purchase price of $ 0.3 received during the fourth quarter of 2023 related to acquired working capital and (ii) cash acquired of $ 0.9 . The post-acquisition operating results of ASPEQ are reflected within our HVAC reportable segment. Acquisition of Ingénia On February 7, 2024, we completed the acquisition of Ingénia Technologies Inc. (“Ingénia”) which specializes in the design and manufacture of custom air handling units that demand high levels of precision and reliability in healthcare, pharmaceutical, education, food processing and industrial end markets. We purchased Ingénia for cash consideration of $ 294.1 , net of cash acquired of $ 1.5 . Under the terms of the purchase and sales agreement, the seller is eligible for additional cash consideration of up to Canadian Dollar (“CAD”) 3.0 (or $ 2.2 at the time of acquisition), with payment scheduled to be made in the event certain contingent liabilities do not materialize. The estimated fair value of such contingent consideration is $ 0.3 , which is reflected as a liability in our condensed consolidated balance sheet as of June 29, 2024. The post-acquisition results of Ingénia are reflected within our HVAC reportable segment. The assets acquired and liabilities assumed in the Ingénia transaction have been recorded at estimates of fair value as determined by management, based on information available and assumptions as to future operations and are subject to change, primarily for the final assessment and valuation of certain income tax amounts. Other Preparing financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from these estimates. The unaudited information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2023 (“our 2023 Annual Report on Form 10-K”). Interim results are not necessarily indicative of full year results. 7 We establish actual interim closing dates using a fiscal calendar, which requires our businesses to close their books on the Saturday closest to the end of the first calendar quarter, with the second and third quarters being 91 days in length. Our fourth quarter ends on December 31. The interim closing dates for the first, second and third quarters of 2024 are March 30, June 29, and September 28, compared to the respective April 1, July 1, and September 30, dates of 2023. We had one less day in the first quarter of 2024, and will have two more days in the fourth quarter of 2024 than in the respective 2023 periods. It is not practicable to estimate the impact of the one less day on our consolidated operating results for the six months ended June 29, 2024, when compared to the consolidated operating results for the respective 2023 period. (2) NEW ACCOUNTING PRONOUNCEMENTS The following is a summary of new accounting pronouncements that apply or may apply to our business. In November 2023, the FASB issued ASU No. 2023-07. Among other new disclosure requirements, ASU 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker. ASU 2023-07 will be effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025. ASU 2023-07 must be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the disclosure impact of ASU 2023-07; however, the standard will not have an impact on the Company’s condensed consolidated financial position, results of operations or cash flows. In December 2023, the FASB issued ASU No. 2023-09, which requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. We are currently evaluating the disclosure impact of ASU 2023-09; however, the standard will not have an impact on the Company’s condensed consolidated financial position, results of operations or cash flows. (3) ACQUISITIONS AND DISCONTINUED OPERATIONS Acquisitions As indicated in Note 1, on April 3, 2023, we completed the acquisition of TAMCO. The pro forma effect of this acquisition is not material to our condensed consolidated results of operations. Acquisition of Ingénia As indicated in Note 1, on February 7, 2024, we completed the acquisition of Ingénia, for $ 294.1 , net of cash acquired of $ 1.5 . We financed the acquisition with available borrowings on our revolving credit facilities under our senior credit facilities. The assets acquired and liabilities assumed have been recorded at preliminary estimates of fair value as determined by management, based on information currently available and on current assumptions as to future operations and are subject to change upon completion of the acquisition method of accounting. Final determination of the fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the acquisition date, as permitted under GAAP. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed for Ingénia, we engaged a third-party independent valuation specialist. 8 The following is a summary of the recorded preliminary fair values of the assets acquired and liabilities assumed for Ingénia as of February 7, 2024: Assets acquired: Current assets, including cash and equivalents of $ 1.5 $ 33.5 Property, plant and equipment 73.6 Goodwill 141.6 Intangible assets 97.9 Total assets acquired 346.6 Current liabilities assumed 13.1 Non-current liabilities assumed (1) 37.9 Net assets acquired $ 295.6 ___________________________ (1) Includes net deferred income tax liabilities and other liabilities of $ 37.8 and $ 0.1 , respectively. The identifiable intangible assets acquired consis t of technology, customer relationships, trademarks, and customer backlog of $ 46.7 , $ 23.5 , $ 13.9 , and $ 13.8 , respectively, with suc h amounts based on a preliminary assessment of the related fair values. We expect to amortize the technology, customer relationships, trademarks, and customer backlog assets ove r 12.0 , 7.0 , 8.0 , and 1.0 years, respectively. We acquired gro ss receivables of $ 18.2 , which had the same fair value at the acquisition date based on our estimates of cash flows expected to be recovered. The qualitative factors that comprise the recorded goodwill include expected market growth for Ingénia's existing operations, increased volumes achieved by selling Ingénia’s products through existing SPX sales channels, procurement and operational savings and efficiencies, and various other factors. We expect no ne of the goodwill described above to be deductible for tax purposes. We recognized revenues and net income for Ingénia of $ 21.6 and $ 1.7 , and $ 34.1 and $ 2.3 , r espectively, for the three and six months ended June 2 9, 2024 with net income impacted by charges during the three and six months ended June 29, 2024 of (i) $ 5.3 and $ 8.6 , respectively, associated with amortization of the various intangible assets mentioned above and (ii) $ 0.9 and $ 1.8 , respectively, associate d with the excess fair value (over historical cost) of inventory acquired which was subsequently sold. Addition ally, during the three and six months ended June 29, 2024, we incurred acquisition-related costs for Ingénia of $ 0.6 and $ 2.9 , respectively, which have been recorded to “Selling, general and administrative” within our condensed consolidated statements of operations and “Corporate expense” within consolidated operating income, as further described in Note 6. Acquisition of ASPEQ As indicated in Note 1, on June 2, 2023, we completed the acquisition of ASPEQ for $ 421.5 , net of (i) an adjustment to the purchase price of $ 0.3 received during the fourth quarter of 2023 related to acquired working capital and (ii) cash acquired of $ 0.9 . We financed the acquisition with available cash and borrowings under our senior credit facilities. The excess of the purchase price over the total of the fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed fo r ASPEQ, we engaged a third-party independent valuation specialist. 9 The following is a summary of the recorded final fair values of the assets acquired and liabilities assumed for ASPEQ as of June 2, 2023: Assets acquired: Current assets, including cash and equivalents of $ 0.9 $ 38.0 Property, plant and equipment 10.6 Goodwill 195.0 Intangible assets 246.1 Other assets 1.2 Total assets acquired 490.9 Current liabilities assumed 11.1 Non-current liabilities assumed (1) 57.4 Net assets acquired $ 422.4 ________________________________ (1) Includes net deferred income tax liabilities and other liabilities of $ 56.4 and $ 1.0 , respectively. The identifiable intangible assets acquired consist of customer relationships, trademarks, technology, and customer backlog of $ 142.3 , $ 51.5 , $ 47.8 , and $ 4.5 , respectively, with such amounts based on a final assessment of the related fair values. We expect to amortize the ASPEQ customer relationships, technology, and customer backlog assets over 12.0 , 16.0 , and 1.0 years, respectively, with the trademarks acquired being indefinite-lived. We acquired gross receivables of $ 18.0 , which had a fair value at the acquisition date of $ 17.8 , respectively, based on our estimates of cash flows expected to be recovered. The qualitative factors that comprise the recorded goodwill include expected market growth for ASPEQ’s existing operations, increased volumes achieved by selling ASPEQ’s products through existing SPX sales channels, procurement and operational savings and efficiencies, and various other factors. The following unaudited pro forma information presents our condensed consolidated results of operations for the three and six months ended June 29, 2024 and July 1, 2023, respectively, as if the acquisitions of Ingénia and ASPEQ had taken place on January 1, 2023 and January 1, 2022, respectively. The unaudited pro forma financial information is not intended to represent or be indicative of our condensed consolidated results of operations that would have been reported had the acquisitions been completed as of the dates presented, and should not be taken as representative of our future consolidated results of operations. The pro forma results include estimates and assumptions that management believes are reasonable; however, these results do not include any anticipated cost savings or expenses of the planned integration of Ingénia and ASPEQ. These pro forma consolidated results of operations have been prepared for comparative purposes only and include additional interest expense on the borrowings required to finance the acquisitions, additional depreciation and amortization expense associated with fair value adjustments to the acquired property, plant and equipment and intangible assets, adjustments to reflect charges associated with acquisition and integration-related costs and charges associated with the excess fair value (over historical cost) of inventory acquired and subsequently sold as if they were incurred during the first quarter of 2023 for Ingénia and first quarter of 2022 for ASPEQ, and the related income tax effects. Three months ended Six months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Revenues $ 501.3 $ 457.9 $ 974.5 $ 903.6 Income from continuing operations 49.0 36.1 99.3 65.8 Net income 48.0 33.8 98.1 67.2 Income from continuing operations per share of common stock: Basic $ 1.06 $ 0.79 $ 2.16 $ 1.45 Diluted $ 1.04 $ 0.77 $ 2.12 $ 1.42 Net income per share of common stock: Basic $ 1.04 $ 0.74 $ 2.13 $ 1.48 Diluted $ 1.02 $ 0.72 $ 2.09 $ 1.45 10 Wind-Down of DBT Business We completed the wind-down of our DBT Technologies (PTY) LTD (“DBT”) business after ceasing all operations, including those related to two large power projects in South Africa (Kusile and Medupi), in the fourth quarter of 2021. As a result of completing the wind-down plan, we are reporting DBT as a discontinued operation for all periods presented. As previously disclosed, DBT had asserted claims against the remaining prime contractor on the large projects, Mitsubishi Heavy Industries Power — ZAF (f.k.a. Mitsubishi-Hitachi Power Systems Africa (PTY) LTD) (“MHI”), which had also asserted claims against DBT. As previously disclosed in our 2023 Annual Report on Form 10-K, on September 5, 2023, DBT and SPX entered into an agreement with MHI to resolve all claims between the parties with respect to the two large power projects in South Africa (the “Settlement Agreement”). The Settlement Agreement provides for full and final settlement and mutual release of all claims between the parties with respect to the projects, including any claim against SPX Technologies, Inc. as guarantor of DBT's performance on the projects. It also provides that the underlying subcontracts are terminated and all obligations of both parties under the subcontracts have been satisfied in full. Prior to the Settlement Agreement, on February 22, 2021, a dispute adjudication panel issued a ruling in favor of DBT against MHI related to costs incurred in connection with delays on two units of the Kusile project. In connection with the ruling, DBT received South African Rand 126.6 (or $ 8.6 at the time of payment). This ruling was subject to final and binding arbitration in this matter. In March 2023, an arbitration tribunal upheld the decision of the dispute adjudication panel. As a result, South African Rand 126.6 (or $ 7.0 ) was recorded as income during the first quarter of 2023, with such amount recorded within “Gain (loss) on disposition of discontinued operations, net of tax.” Further, in June 2023, the arbitration tribunal ruled DBT was entitled to recover $ 1.3 of legal costs incurred related to the arbitration. Additionally, in May 2023, a separate arbitration tribunal ruled DBT was entitled to recover $ 5.5 of legal costs incurred related to another prior arbitration. Such amounts were recorded within “Gain (loss) on disposition of discontinued operations, net of tax” during the quarter ended July 1, 2023. The assets and liabilities of DBT have been included within “ Assets of DBT and Heat Transfer ” and “ Liabilities of DBT and Heat Transfer, ” respectively, on the condensed consolidated balance sheets as of June 29, 2024 and December 31, 2023 . The major line items constituting DBT ’ s assets and liabilities as of June 29, 2024 and December 31, 2023 are shown below: June 29, 2024 December 31, 2023 ASSETS Cash and equivalents $ 4.9 $ 5.5 Accounts receivable, net — 0.4 Other current assets (1) 5.1 4.7 Property, plant and equipment: Buildings and leasehold improvements — 0.2 Machinery and equipment — 0.5 — 0.7 Accumulated depreciation — ( 0.6 ) Property, plant and equipment, net — 0.1 Total assets of DBT $ 10.0 $ 10.7 LIABILITIES Accounts payable (2) $ 27.1 $ 26.9 Contract liabilities (1) 2.1 2.1 Accrued expenses (1) 5.9 6.3 Other long-term liabilities (1) 4.7 4.2 Total liabilities of DBT $ 39.8 $ 39.5 ___________________________ (1) Recorded amounts relate primarily to disputed amounts due to or from a subcontractor engaged by DBT during the Kusile project, that is currently in liquidation. The timing of the ultimate resolution of these matters is uncertain as they are likely to occur as part of the liquidation process. (2) Includes DBT's remaining obligation under the Settlement Agreement to make a payment to MHI of South African Rand 480.9 (or $ 26.4 and $ 26.2 at June 29, 2024 and December 31, 2023, respectively), due in September 2024. In connection with this remaining 11 obligation, we entered into a foreign currency forward contract which we are accounting for as a fair value hedge. Refer to Note 14 for additional details. Wind-Down of the Heat Transfer Business We completed the wind-down of our SPX Heat Transfer (“Heat Transfer”) business in the fourth quarter of 2020. As a result of completing the wind-down plan, we are reporting Heat Transfer as a discontinued operation for all periods presented. The assets and liabilities of Heat Transfer have been included within “Assets of DBT and Heat Transfer” and “Liabilities of DBT and Heat Transfer,” respectively, on the condensed consolidated balance sheets as of June 29, 2024 and December 31, 2023. The major line items constituting Heat Transfer’s assets and liabilities as of June 29, 2024 and December 31, 2023 are shown below: June 29, 2024 December 31, 2023 ASSETS Other current assets $ 0.3 $ 0.3 Other assets — 0.1 Total assets of Heat Transfer $ 0.3 $ 0.4 LIABILITIES Accounts payable $ 0.2 $ 0.2 Total liabilities of Heat Transfer $ 0.2 $ 0.2 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 three and six months ended June 29, 2024 and July 1, 2023, results of operations from our businesses reported as discontinued operations were as follows: Three months ended Six months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 DBT Income (loss) from discontinued operations (1) $ ( 0.4 ) $ ( 2.4 ) $ ( 0.6 ) $ 0.6 Income tax (provision) benefit ( 0.2 ) 0.2 — 0.9 Income (loss) from discontinued operations, net ( 0.6 ) ( 2.2 ) ( 0.6 ) 1.5 All other Loss from discontinued operations (2) ( 0.2 ) ( 0.1 ) ( 0.4 ) ( 0.1 ) Income tax provision ( 0.2 ) — ( 0.2 ) — Loss from discontinued operations, net ( 0.4 ) ( 0.1 ) ( 0.6 ) ( 0.1 ) Total Income (loss) from discontinued operations ( 0.6 ) ( 2.5 ) ( 1.0 ) 0.5 Income tax (provision) benefit ( 0.4 ) 0.2 ( 0.2 ) 0.9 Income (loss) from discontinued operations, net $ ( 1.0 ) $ ( 2.3 ) $ ( 1.2 ) $ 1.4 ________________________________ (1) Income for the six months ended July 1, 2023 resulted primarily from income recorded in connection with the dispute resolutions mentioned above, partially offset by legal costs incurred in connection with various dispute resolution matters that existed prior to the Settlement Agreement. Loss for the three months ended July 1, 2023 resulted primarily from net legal costs incurred in connection with various dispute resolution matters that existed prior to the Settlement Agreement. (2) Loss for the three and six months ended June 29, 2024 and July 1, 2023 resulted primarily from revisions to liabilities, including income tax liabilities, retained in connection with prior dispositions. 12 (4) REVENUES FROM CONTRACTS Disaggregated Revenues We disaggregate revenue from contracts with customers by major product line and based on the timing of recognition for each of our reportable segments, as we believe such disaggregation best depicts how the nature, amount, timing, and uncertainty of our revenues and cash flows are affected by economic factors, with such disaggregation presented below for the three and six months ended June 29, 2024 and July 1, 2023: Three months ended June 29, 2024 Reportable Segments HVAC Detection and Measurement Total Major product lines Package and process cooling equipment and services, and engineered air movement solutions $ 244.6 $ — $ 244.6 Boilers, electrical heating, and ventilation 111.9 — 111.9 Underground locators, inspection and rehabilitation equipment, and robotic systems — 66.1 66.1 Communication technologies, aids to navigation, and transportation systems — 78.7 78.7 $ 356.5 $ 144.8 $ 501.3 Timing of Revenue Recognition Revenues recognized at a point in time $ 315.0 $ 120.7 $ 435.7 Revenues recognized over time 41.5 24.1 65.6 $ 356.5 $ 144.8 $ 501.3 Six months ended June 29, 2024 Reportable Segments HVAC Detection and Measurement Total Major product lines Package and process cooling equipment and services, and engineered air movement solutions $ 432.4 $ — $ 432.4 Boilers, electrical heating, and ventilation 226.5 — 226.5 Underground locators, inspection and rehabilitation equipment, and robotic systems — 127.1 127.1 Communication technologies, aids to navigation, and transportation systems — 180.5 180.5 $ 658.9 $ 307.6 $ 966.5 Timing of Revenue Recognition Revenues recognized at a point in time $ 597.4 $ 258.7 $ 856.1 Revenues recognized over time 61.5 48.9 110.4 $ 658.9 $ 307.6 $ 966.5 Three months ended July 1, 2023 Reportable Segments HVAC Detection and Measurement Total Major product lines Package and process cooling equipment and services, and engineered air movement solutions $ 173.3 $ — $ 173.3 Boilers, electrical heating, and ventilation 95.7 — 95.7 Underground locators, inspection and rehabilitation equipment, and robotic systems — 67.2 67.2 Communication technologies, aids to navigation, and transportation systems — 87.1 87.1 $ 269.0 $ 154.3 $ 423.3 Timing of Revenue Recognition Revenues recognized at a point in time $ 248.0 $ 127.3 $ 375.3 Revenues recognized over time 21.0 27.0 48.0 $ 269.0 $ 154.3 $ 423.3 13 Six months ended July 1, 2023 Reportable Segments HVAC Detection and Measurement Total Major product lines Package and process cooling equipment and services, and engineered air movement solutions $ 331.6 $ — $ 331.6 Boilers, electrical heating, and ventilation 189.0 — 189.0 Underground locators, inspection and rehabilitation equipment, and robotic systems — 133.1 133.1 Communication technologies, aids to navigation, and transportation systems — 169.4 169.4 $ 520.6 $ 302.5 $ 823.1 Timing of Revenue Recognition Revenues recognized at a point in time $ 476.3 $ 255.5 $ 731.8 Revenues recognized over time 44.3 47.0 91.3 $ 520.6 $ 302.5 $ 823.1 Contract Balances Our customers are invoiced for products and services at the time of delivery or based on contractual milestones, resulting in outstanding receivables with payment terms from these customers (“Contract Accounts Receivable”). In some cases, the timing of revenue recognition, particularly for revenue recognized over time, differs from when such amounts are invoiced to customers, resulting in a contract asset (revenue recognition precedes the invoicing of the related revenue amount) or a contract liability (payment from the customer precedes recognition of the related revenue amount). Contract assets and liabilities are generally classified as current. On a contract-by-contract basis, the contract assets and contract liabilities are reported net within our condensed consolidated balance sheets. Our contract balances consisted of the following as of June 29, 2024 and December 31, 2023: Contract Balances June 29, 2024 December 31, 2023 Change Contract Accounts Receivable (1) $ 319.3 $ 275.4 $ 43.9 Contract Assets 32.0 16.6 15.4 Contract Liabilities - current ( 61.7 ) ( 73.5 ) 11.8 Contract Liabilities - non-current (2) ( 3.7 ) ( 4.0 ) 0.3 Net contract balance $ 285.9 $ 214.5 $ 71.4 ___________________________ (1) Included in “Accounts receivable, net” within the accompanying condensed consolidated balance sheets. (2) Included in “Other long-term liabilities” within the accompanying condensed consolidated balance sheets. The timing of revenue recognition, invoicing and cash collections results in contract accounts receivable, contract assets, and customer advances and deposits (contract liabilities) on our condensed consolidated balance sheets. In general, we receive payments from customers based on a billing schedule established in our contracts. During the three and six months ended June 29, 2024, changes in contract balances were not materially impacted by any other factors besides the acquisition of Ingénia. At June 29, 2024, contract account receivables and current contract liabilities attributable to Ingénia were $ 20.0 and $ 0.5 , respectively. During the three and six months ended June 29, 2024, we recognized revenues of $ 14.2 and $ 40.7 , respectively, related to our contract liabilities at December 31, 2023. Performance Obligations As of June 29, 2024, the aggre gate amount all ocated to remaining performance obligations was $ 137.1 . We expect to recognize revenue on approximately 76 % and 84 % of these remaining performance obligations o ver the next 12 and 24 months, respectively, with the remaining recognized thereafter. 14 (5) LEASES There have been no material changes to our finance leases during the three and six months ended June 29, 2024. During the six months ended June 29, 2024, we obtained operating lease right-of-use assets in exchange for new lease obligations of $ 15.8 , recorded as a non-cash activity within the condensed consolidated statement of cash flows. Supplemental balance sheet information related to operating leases is as follows: June 29, 2024 December 31, 2023 Operating Leases: Affected Line Item in the Condensed Consolidated Balance Sheets Operating lease ROU assets $ 52.2 $ 42.4 Other assets Operating lease current liabilities $ 10.2 $ 11.3 Accrued expenses Operating lease non-current liabilities 39.4 28.5 Other long-term liabilities Total operating lease liability $ 49.6 $ 39.8 The weighted average remaining lease term (years) of our operating leases as of June 29, 2024 and December 31, 2023, were as follows: June 29, 2024 December 31, 2023 Operating Leases 5.9 5.5 The discount rate utilized to determine the present value of lease payments over the lease term is our incremental borrowing rate based on the information available at lease commencement date. In developing the incremental borrowing rate, we considered the interest rate that reflects a term similar to the underlying lease term on a fully collateralized basis. We concluded to apply the incremental borrowing rate at a consolidated portfolio level using a five-year term, as the results did not materially differ upon further stratification. The weighted-average discount rate for our operating leases was 3.8 % and 3.2 % at June 29, 2024 and December 31, 2023, respectively. The future minimum payments under our operating leases were as follows as of June 29, 2024: Operating Leases Remainder of 2024 $ 6.7 2025 10.5 2026 9.1 2027 8.5 2028 7.7 Thereafter 13.0 Total lease payments 55.5 Less imputed interest 5.9 Total $ 49.6 (6) INFORMATION ON REPORTABLE SEGMENTS We are a global supplier of highly specializ ed, engineered solutions with operations in 15 countries and sales in over 100 countries around the world. We have aggregated our operating segments into the following two reportable segments: HVAC and Detection and Measurement. The factors considered in determining our aggregated segments are the economic similarity of the businesses, the nature of products sold or services provided, production processes, types of customers, distribution methods, and regulatory environment. In determining our reportable segments, we apply the threshold criteria of the Segment Reporting Topic of the Codification. Segment Income is determined before considering, if applicable, impairment and special charges, long-term incentive compensation, certain other operating income/expense, other indirect corporate expenses, intangible asset amortization expense, inventory step-up charges, and certain other acquisition and integration-related costs. This is consistent with the way our Chief Operating Decision Maker ( “ CODM ” ) evaluates the results of each segment. 15 HVAC Reportable Segment Our HVAC reportable segment engineers, designs, manufactures, installs and services package and process cooling products and engineered air movement solutions for the HVAC industrial, commercial, data center, and power generation markets, as well as boilers and electrical heating and ventilation products for the residential and commercial markets. The primary distribution channels for the segment’s products are direct to customers, independent manufacturing representatives, third-party distributors, and retailers. The segment serves a global customer base in North America, Europe, and Asia. Detection and Measurement Reportable Segment Our Detection and Measurement reportable segment engineers, designs, manufactures, services, and installs underground pipe and cable locators, inspection and rehabilitation equipment, robotic systems, transportation systems, communication technologies, and aids to navigation. The primary distribution channels for the segment’s products are direct to customers and third-party distributors. The segment serves a global customer base in North America, Europe, Africa, and Asia. Corporate Expense Corporate expense generally relates to the operating cost of our Charlotte, North Carolina corporate headquarters. Financial data for our reportable segments for the three and six months ended June 29, 2024 and July 1, 2023 are presented below: Three months ended Six months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Revenues: HVAC reportable segment $ 356.5 $ 269.0 $ 658.9 $ 520.6 Detection and Measurement reportable segment 144.8 154.3 307.6 302.5 Consolidated revenues $ 501.3 $ 423.3 $ 966.5 $ 823.1 Income: HVAC reportable segment $ 83.7 $ 55.2 $ 152.1 $ 102.9 Detection and Measurement reportable segment 33.9 29.2 65.3 55.9 Total income for segments 117.6 84.4 217.4 158.8 Corporate expense 12.0 16.6 25.9 31.2 Acquisition-related and other costs (1) 2.3 1.5 4.9 2.1 Long-term incentive compensation expense 3.7 3.5 7.0 6.6 Amortization of acquired intangible assets 16.8 11.5 31.6 17.8 Special charges, net ( 0.2 ) — 0.4 — Other operating expense, net (2) 8.4 — 8.4 — Consolidated operating income $ 74.6 $ 51.3 $ 139.2 $ 101.1 ________________________________ (1) Represents certain integration costs incurred of $ 2.3 and $ 4.9 during the three and six months ended June 29, 2024, respectively, and $ 1.5 and $ 2.1 during the three and six months ended July 1, 2023, respectively, including additional “Cost of products sold” related to the step-up of inventory (to fair value) acquired in connection with the Ingénia acquisition of $ 0.9 and $ 1.8 during the three and six months ended June 29, 2024, respectively, and the ASPEQ acquisition of $ 1.1 during the three and six months ended July 1, 2023. (2) Represents a charge of $ 8.4 related to a settlement with the seller of ULC Robotics (“ULC”) regarding additional contingent consideration. 16 (7) SPECIAL CHARGES, NET Special charges, net, for the three and six months ended June 29, 2024 and July 1, 2023 are described in more detail below: Three months ended Six months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 HVAC reportable segment $ ( 0.1 ) $ — $ 0.2 $ — Detection and Measurement reportable segment ( 0.1 ) — 0.2 — Total $ ( 0.2 ) $ — $ 0.4 $ — HVAC — Special charges, net for the three and six months ended June 29, 2024 related primarily to recording, and subsequent adjustments of, severance costs associated with a restructuring action at one of the segment's cooling businesses. Detection and Measurement — Special charges, net for the three and six months ended June 29, 2024 related primarily to recording, and subsequent adjustments of, severance costs associated with restructuring actions at the segment's inspection and rehabilitation and aids to navigation businesses. No significant future charges are expected to be incurred under actions approved as of June 29, 2024. The following is an analysis of our restructuring liabilities for the six months ended June 29, 2024 and July 1, 2023: Six months ended June 29, 2024 July 1, 2023 Balance at beginning of year $ 0.7 $ — Special charges 0.4 — Utilization — cash ( 0.8 ) — Balance at end of period $ 0.3 $ — (8) INVENTORIES, NET Inventories are accounted for under the first-in, first-out method and are comprised of the following at June 29, 2024 and December 31, 2023: June 29, 2024 December 31, 2023 Finished goods $ 73.8 $ 79.4 Work in process 35.7 31.4 Raw materials and purchased parts 183.2 165.9 Total inventories $ 292.7 $ 276.7 Inventories include material, labor and factory overhead costs and are reduced, when necessary, to estimated net realizable values. 17 (9) GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The changes in the carrying amount of goodwill for the six months ended June 29, 2024 were as follows: December 31, 2023 Goodwill Resulting from Business Combinations (1) Foreign Currency Translation June 29, 2024 HVAC reportable segment Gross goodwill $ 777.8 $ 147.2 $ ( 7.6 ) $ 917.4 Accumulated impairments ( 331.9 ) — 3.2 ( 328.7 ) Goodwill 445.9 147.2 ( 4.4 ) 588.7 Detection and Measurement reportable segment Gross goodwill 432.6 — ( 3.2 ) 429.4 Accumulated impairments ( 173.7 ) — 0.6 ( 173.1 ) Goodwill 258.9 — ( 2.6 ) 256.3 Total Gross goodwill 1,210.4 147.2 ( 10.8 ) 1,346.8 Accumulated impairments ( 505.6 ) — 3.8 ( 501.8 ) Goodwill $ 704.8 $ 147.2 $ ( 7.0 ) $ 845.0 __________________________ (1) Reflects (i) goodwill acquired with the Ingénia acquisition o f $ 141.6 and (ii) an increase in ASPEQ and TAMCO goodwill of $ 3.9 and $ 1.7 , respectively, resulting from revisions to the valuation of certain assets and liabilities. As indicated in Notes 1 and 3, the acquired assets, including goodwill, and liabilities assumed in the In génia acquisition have been recorded at estimates of fair value and are subject to change upon completion of acquisition accounting. Other Intangibles, Net Identifiable intangible assets at June 29, 2024 and December 31, 2023 comprised the following: June 29, 2024 December 31, 2023 Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value Intangible assets with determinable lives: (1) Customer relationships $ 424.4 $ ( 86.1 ) $ 338.3 $ 403.2 $ ( 68.8 ) $ 334.4 Technology 184.7 ( 34.6 ) 150.1 139.5 ( 27.8 ) 111.7 Patents 4.5 ( 4.5 ) — 4.5 ( 4.5 ) — Other 72.6 ( 38.7 ) 33.9 45.4 ( 32.0 ) 13.4 686.2 ( 163.9 ) 522.3 592.6 ( 133.1 ) 459.5 Trademarks with indefinite lives 220.4 — 220.4 221.3 — 221.3 Total $ 906.6 $ ( 163.9 ) $ 742.7 $ 813.9 $ ( 133.1 ) $ 680.8 __________________________ (1) The gross carrying value of identifiable intangible assets acquired with the Ingénia acquisition consist of technology of $ 46.7 , customer relationships of $ 23.5 , definite-lived trademarks of $ 13.9 , and backlog of $ 13.8 . In connection with the acquisition of Ingénia, which has definite-lived intangible assets as noted above, we updated our estimated annual amortization expense related to intangible assets to approximately $ 66.0 for the full year 2024, $ 54.0 for 2025, and $ 53.0 for each of the three years thereafter. At June 29, 2024, the net carrying value of intangible assets with determinable lives consisted of $ 408.8 in the HVAC reportable segment and $ 113.5 in the Detection and Measurement reportable segment. At June 29, 2024, trademarks with indefinite lives consisted of $ 156.6 in the HVAC reportable segment and $ 63.8 in the Detection and Measurement reportable segment. We review goodwill and indefinite-lived intangible assets for impairment annually during th e fourth quarter in conjunction with our annual financial planning process, with such testing based primarily on events and circumstances existing as of the end of the third quarter. In addition, we test goodwill for impairment on a more frequent basis if there are indications 18 of potential impairment. In reviewing goodwill and indefinite-lived intangible assets for impairment, we initially perform a qualitative analysis. If there is an indication of impairment, we then perform a quantitative analysis. A significant amount of judgment is involved in determining if an indication of impairment has occurred between annual testing dates. Such indication may include: a significant decline in expected future cash flows; a significant adverse change in legal factors or the business climate; unanticipated competition; and a more likely than not expectation of selling or disposing all, or a portion, of a reporting unit. The fair value of the assets related to the ASPEQ and Ingénia acquisitions approximate their respective carrying values. If ASPEQ and Ingénia are unable to achieve their current financial forecast, we may be required to record an impairment charge in a future period related to their goodwill or indefinite-lived intangible assets. As of June 29, 2024, ASPEQ and Ingénia's goodwill totaled $ 195.0 and $ 139.4 , respectively, and indefinite-lived intangible assets totaled $ 51.5 for ASPEQ. We perform our annual trademarks impairment testing during the fourth quarter, or on a more frequent basis, if there are indications of potential impairment. The fair value of our trademarks is based on applying estimated royalty rates to projected revenues, with resulting cash flows discounted at a rate of return that reflects current market conditions (fair value based on unobservable inputs - Level 3, as defined in Note 17) . The primary 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. (10) WARRANTY The following is an analysis of our product warranty accrual for the periods presented: 10 Six months ended June 29, 2024 July 1, 2023 Balance at beginning of year $ 37.9 $ 34.7 Acquisitions 0.3 0.8 Provisions 9.8 7.9 Usage ( 7.6 ) ( 7.5 ) Balance at end of period 40.4 35.9 Less: Current portion of warranty 16.7 13.2 Non-current portion of warranty $ 23.7 $ 22.7 (11) EMPLOYEE BENEFIT PLANS Net periodic benefit (income) expense for our pension and postretirement plans included the following components: Domestic Pension Plans Three months ended Six months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Service cost $ — $ — $ — $ — Interest cost 3.0 3.3 6.0 6.6 Expected return on plan assets ( 2.2 ) ( 2.2 ) ( 4.4 ) ( 4.4 ) Net periodic pension benefit expense $ 0.8 $ 1.1 $ 1.6 $ 2.2 Foreign Pension Plans Three months ended Six months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Service cost $ — $ — $ — $ — Interest cost 1.4 1.4 2.8 2.8 Expected return on plan assets ( 1.3 ) ( 1.6 ) ( 2.6 ) ( 3.2 ) Net periodic pension benefit (income) expense $ 0.1 $ ( 0.2 ) $ 0.2 $ ( 0.4 ) 19 Postretirement Plans Three months ended Six months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Service cost $ — $ — $ — $ — Interest cost 0.3 0.3 0.6 0.6 Amortization of unrecognized prior service credits ( 0.8 ) ( 1.0 ) ( 1.6 ) ( 2.0 ) Net periodic postretirement benefit income $ ( 0.5 ) $ ( 0.7 ) $ ( 1.0 ) $ ( 1.4 ) (12) INDEBTEDNESS The following summarizes our debt activity (both current and non-current) for the six months ended June 29, 2024: December 31, 2023 Borrowings Repayments Other (5) June 29, 2024 Revolving loans (1) $ — $ 575.2 $ ( 375.2 ) $ — $ 200.0 Term loans (2) 539.9 — ( 6.8 ) 0.2 533.3 Trade receivables financing arrangement (3) 16.0 132.0 ( 93.0 ) — 55.0 Other indebtedness (4) 2.4 — ( 0.8 ) 0.4 2.0 Total debt 558.3 $ 707.2 $ ( 475.8 ) $ 0.6 790.3 Less: short-term debt 17.9 256.3 Less: current maturities of long-term debt 17.3 24.1 Total long-term debt, net $ 523.1 $ 509.9 ___________________________ (1) While the revolving credit facility extends through August 2027 under the terms of our senior credit agreement, it is available in notes that mature, but may be reissued upon maturity, over varying terms of twelve months or less. The revolving credit facility, classified within short-term debt, is primarily used to provide liquidity for general corporate and business needs or for funding acquisitions. The revolving credit facility was utilized as the primary funding mechanism for the Ingénia acquisition. (2) The term loans are repayable in quarterly installments equal to 0.625 % of the initial balances of $ 545.0 , 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 balances are payable in full on August 12, 2027. Balances are net of unamortized debt issuance costs of $ 1.5 and $ 1.7 at June 29, 2024 and December 31, 2023, respectively. (3) Under this arrangement, we can borrow, on a continuous basis, up to $ 60.0 , as available. Borrowings under this arrangement are collateralized by eligible trade receivables of certain of our businesses. At June 29, 2024, we had $ 5.0 of available borrowing capacity under this facility after giving effect to outstanding borrowings of $ 55.0 . (4) Primarily includes balances under a purchase card program of $ 1.3 and $ 1.9 and finance lease obligations of $ 0.7 and $ 0.5 at June 29, 2024 and December 31, 2023, 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” includes the amortization of debt issuance costs associated with the term loans. Senior Credit Facilities A detailed description of our senior credit facilities is included in our 2023 Annual Report on Form 10-K. At June 29, 2024, we had $ 288.9 of available borrowing capacity under our revolving credit facilities, after giving effect to borrowings under the domestic revolving loan facility of $ 200.0 and $ 11.1 reserved for outstanding letters of credit. In addition, at June 29, 2024, we had $ 6.4 of available issuance capacity under our foreign credit instrument facilities after giving effect to $ 18.6 reserved for outstanding letters of credit. The weighted-average interest rate of outstanding borrowings under our senior credit agreement was approximately 6.9 % at June 29, 2024. At June 29, 2024, we were in compliance with all covenants of our senior credit agreement. Company-owned Life Insurance The Company has investments in company-owned life insurance (“COLI”) policies, which are recorded at their cash surrender value at each balance sheet date. Changes in the cash surrender value during the period are recorded as a gain or loss 20 within “Other income (expense), net” within our condensed consolidated statements of operations. The Company has the ability to borrow against a portion of its investment in the COLI policies as an additional source of liquidity. During the quarter ended June 29, 2024, the Company borrowed $ 41.2 against the cash surrender value of these COLI policies. Such borrowings were primarily used to pay down amounts payable under the revolving credit facility. The amounts borrowed incur interest at a rate of 5.3 %. The cash surrender value of the Company’s investments in COLI assets, net of the aforementioned borrowing, was $ 34.9 and $ 76.7 at June 29, 2024 and December 31, 2023, respectively, recorded in “Other assets” on the condensed consolidated balance sheets. (13) DERIVATIVE FINANCIAL INSTRUMENTS Interest Rate Swaps We maintain interest rate swap agreements (“Swaps”) that have a remaining notional amount of $ 212.5 , cover the period through November 202 4, and effectively convert this portion of the borrowings under our senior credit facilities to a fixed rate of 1.077 %, plus the applicable margin. We have designated, and are accounting for, our Swaps as cash flow hedges. As of June 29, 2024 and December 31, 2023 , the unrealized gain, net of tax, recorded in accumulated other comprehensive income ( “ AOCI ”) was $ 2.9 and $ 5.7 , respectively. In addition, the fair value of our Swaps, recorded as a current asset, was $ 3.8 and $ 7.5 as of June 29, 2024 and December 31, 2023, respectively. Changes in the fair value of our Swaps are reclassified into earnings, as a component of interest expense, when the forecasted transaction impacts earnings. Currency Forward Contracts We manufacture and sell our products in a number of countries and, as a result, are exposed to movements in foreign currency exchange rates. Our objective is to preserve the economic value of non-functional currency-denominated cash flows and to minimize the impact of changes as a result of currency fluctuations. Our principal currency exposures relate to the South African Rand, British Pound Sterling, Canadian Dollar, and Euro. 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 $ 8.0 and $ 9.4 outstanding as of June 29, 2024 and December 31, 2023, respectively, with all of the $ 8.0 scheduled to mature within one year. The fair value of our FX forward contracts was less than $ 0.1 at June 29, 2024 and December 31, 2023. In addition to the above, we entered FX forward contracts associated with the Settlement Agreement, to mitigate our exposure to fluctuations in the South African Rand, with a notional amount of South African Rand 480.9 (or $ 24.9 at the time of execution) and a fair value of $ 1.5 and $ 1.3 at June 29, 2024 and December 31, 2023, respectively, which are included within “Assets of DBT and Heat Transfer” on the condensed consolidated balance sheets. All of these FX forward contracts are scheduled to mature within one year. Refer to Note 3 for additional details. (14) STOCKHOLDERS' EQUITY AND LONG-TERM INCENTIVE COMPENSATION Income Per Share The following table sets forth the number of weighted-average shares outstanding used in the computation of basic and diluted income per share: Three months ended Six months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Weighted-average number of common shares used in basic income per share 46.246 45.533 46.038 45.457 Dilutive securities — Employee stock options and restricted stock units 0.912 1.094 0.863 1.043 Weighted-average number of common shares and dilutive securities used in diluted income per share 47.158 46.627 46.901 46.500 The weighted-average number of restricted stock units and stock options excluded from the computation of diluted income per share because the assumed proceeds for these instruments exceed the average market value of the underlying common stock for the related period were 0.155 and 0.283 , r espectively, for the three mon ths ended June 29, 2024, and 0.137 and 0.305 , respectively, for the six months ended June 29, 2024. 21 The weighted-average number of restricted stock units and stock options excluded from the computation of diluted income per share because the assumed proceeds for these instruments exceed the average market value of the underlying common stock for the related period were 0.228 and 0.535 , respectively, for the three months ended July 1, 2023, and 0.198 and 0.529 , respectively, for the six months ende d July 1, 2023 . Long-Term Incentive Compensation Long-term incentive compensation awards may be granted to certain eligible employees or non-employee directors. A detailed description of the awards granted prior to 2024 is included in our 2023 Annual Report on Form 10-K. Awards granted on February 28, 2024 to executive officers and other members of senior management were comprised of performance stock units (“PSU’s”), stock options, and time-based restricted stock units (“RSU’s”), while other eligible employees were granted PSU’s and RSU’s. The PSU’s are eligible to vest at the end of a three-year performance period, with performance based on the total return of our stock over the three-year performance period against a peer group within the combined S&P 600 Small Cap Capital Goods Index and S&P 400 Mid Cap Capital Goods Index. Stock options and RSU’s vest ratably over the three-year period subsequent to the date of grant. Effective May 14, 2024, we granted 0.008 RSU’s to our non-employee directors, which vest in their entirety immediately prior to the annual meeting of stockholders in May 2025. C ompensation expense within income from continuing operations related to long-term incentive awards totaled $ 3.7 and $ 3.5 for the three months ended June 29, 2024 and July 1, 2023 , respectively, an d $ 7.0 an d $ 6.6 for the six months ended June 29, 2024 and July 1, 2023 , respectively. The related tax benefit w as $ 0.6 for the three months ended June 29, 2024 and July 1, 2023 and $ 1.2 and $ 1.1 for the six months e nded June 29, 2024 and July 1, 2023 , respectively. Repurchases of Common Stock On May 14, 2024, our Board of Directors authorized management, in its sole discretion, to repurchase, in any fiscal year, up to $ 100.0 of our common stock, subject to maintaining compliance with all covenants of our senior credit agreement. No share repurchases were effected pursuant to this and prior authorizations during the three and six months ended June 29, 2024. Accumulated Other Comprehensive Income The changes in the components of AOCI, net of tax, for the three months ended June 29, 2024 were as follows: Foreign Currency Translation Adjustment Net Unrealized Gains on Qualifying Cash Flow Hedges (1) Pension and Postretirement Liability Adjustment (2) Total Balance at beginning of period $ 242.7 $ 4.4 $ 3.8 $ 250.9 Other comprehensive income (loss) before reclassifications ( 3.9 ) 0.2 — ( 3.7 ) Amounts reclassified from accumulated other comprehensive income — ( 1.7 ) ( 0.6 ) ( 2.3 ) Current-period other comprehensive loss ( 3.9 ) ( 1.5 ) ( 0.6 ) ( 6.0 ) Balance at end of period $ 238.8 $ 2.9 $ 3.2 $ 244.9 __________________________ (1) Net of tax provision o f $ 0.8 and $ 1.4 as of June 29, 2024 and March 30, 2024, respectively. (2) Net of tax provision of $ 1.4 and $ 1.6 as of June 29, 2024 and March 30, 2024, respectively. The balances as of June 29, 2024 and March 30, 2024 include unamortized prior service credits. 22 The changes in the components of AOCI, net of tax, for the six months ended June 29, 2024 were as follows: Foreign Currency Translation Adjustment Net Unrealized Gains on Qualifying Cash Flow Hedges (1) Pension and Postretirement Liability Adjustment (2) Total Balance at beginning of period $ 251.0 $ 5.7 $ 4.4 $ 261.1 Other comprehensive income (loss) before reclassifications ( 12.2 ) 0.7 — ( 11.5 ) Amounts reclassified from accumulated other comprehensive income — ( 3.5 ) ( 1.2 ) ( 4.7 ) Current-period other comprehensive loss ( 12.2 ) ( 2.8 ) ( 1.2 ) ( 16.2 ) Balance at end of period $ 238.8 $ 2.9 $ 3.2 $ 244.9 __________________________ (1) Net of tax provision of $ 0.8 a nd $ 1.8 as of June 29, 2024 and December 31, 2023, respectively. (2) Net of tax provision of $ 1.4 and $ 1.8 as of June 29, 2024 and December 31, 2023, respectively. The balances as of June 29, 2024 and December 31, 2023 include unamortized prior service credits. The changes in the components of AOCI, net of tax, for the three months ended July 1, 2023 were as follows: Foreign Currency Translation Adjustment Net Unrealized Gains on Qualifying Cash Flow Hedges (1) Pension and Postretirement Liability Adjustment (2) Total Balance at beginning of period $ 243.5 $ 9.1 $ 6.7 $ 259.3 Other comprehensive income before reclassifications 3.9 1.8 — 5.7 Amounts reclassified from accumulated other comprehensive income — ( 1.7 ) ( 0.8 ) ( 2.5 ) Current-period other comprehensive income (loss) 3.9 0.1 ( 0.8 ) 3.2 Balance at end of period $ 247.4 $ 9.2 $ 5.9 $ 262.5 __________________________ (1) Net of tax provision of $ 3.1 as of July 1, 2023 and April 1, 2023. (2) Net of tax provision of $ 2.2 and $ 2.4 as of July 1, 2023 and April 1, 2023, respectively. The balances as of July 1, 2023 and April 1, 2023 include unamortized prior service credits. The changes in the components of AOCI, net of tax, for the six months ended July 1, 2023 were as follows: Foreign Currency Translation Adjustment Net Unrealized Gains on Qualifying Cash Flow Hedges (1) Pension and Postretirement Liability Adjustment (2) Total Balance at beginning of period $ 239.1 $ 11.0 $ 7.4 $ 257.5 Other comprehensive income before reclassifications 8.3 1.5 — 9.8 Amounts reclassified from accumulated other comprehensive income — ( 3.3 ) ( 1.5 ) ( 4.8 ) Current-period other comprehensive income (loss) 8.3 ( 1.8 ) ( 1.5 ) 5.0 Balance at end of period $ 247.4 $ 9.2 $ 5.9 $ 262.5 __________________________ (1) Net of tax provision of $ 3.1 and $ 3.7 as of July 1, 2023 and December 31, 2022, respectively. (2) Net of tax provision of $ 2.2 and $ 2.7 as of July 1, 2023 and December 31, 2022, respectively. The balances as of July 1, 2023 and December 31, 2022 include unamortized prior service credits. 23 The following summarizes amounts reclassified from each component of AOCI for the three months ended June 29, 2024 and July 1, 2023: Amount Reclassified from AOCI Three months ended June 29, 2024 July 1, 2023 Affected Line Item in the Condensed Consolidated Statements of Operations Gains on qualifying cash flow hedges: Swaps $ ( 2.4 ) $ ( 2.3 ) Interest expense Pre-tax ( 2.4 ) ( 2.3 ) Income taxes 0.7 0.6 $ ( 1.7 ) $ ( 1.7 ) Gains on pension and postretirement items: Amortization of unrecognized prior service credits - Pre-tax $ ( 0.8 ) $ ( 1.0 ) Other income (expense), net Income taxes 0.2 0.2 $ ( 0.6 ) $ ( 0.8 ) The following summarizes amounts reclassified from each component of AOCI for the six months ended June 29, 2024 and July 1, 2023: Amount Reclassified from AOCI Six months ended June 29, 2024 July 1, 2023 Affected Line Item in the Condensed Consolidated Statements of Operations Gains on qualifying cash flow hedges: Swaps $ ( 4.8 ) $ ( 4.4 ) Interest expense Pre-tax ( 4.8 ) ( 4.4 ) Income taxes 1.3 1.1 $ ( 3.5 ) $ ( 3.3 ) Gains on pension and postretirement items: Amortization of unrecognized prior service credits - Pre-tax $ ( 1.6 ) $ ( 2.0 ) Other income (expense), net Income taxes 0.4 0.5 $ ( 1.2 ) $ ( 1.5 ) (15) CONTINGENT LIABILITIES AND OTHER MATTERS General 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, claims for contingent consideration on prior acquisitions, product liability matters, 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. While we (and our subsidiaries) maintain property, cargo, auto, product, general liability, environmental, and directors’ and officers’ liability insurance and have acquired rights under similar policies in connection with acquisitions that we believe cover a significant portion of these claims, this insurance may be insufficient or unavailable (e.g., in the case of insurer insolvency) to protect us against potential loss exposures. Also, while we believe we are entitled to indemnification from third parties for some of these claims, these rights may be insufficient or unavailable to protect us against potential loss exposures. Our recorded liab ilities related to these matters, primarily associated with environmental matters, totaled $ 37.8 and $ 37.9 at June 29, 2024 and December 31, 2023, respectively. Of these amounts, $ 29.7 and $ 29.4 are included in “Other long-term liabilities” within our condensed consolidated balance sheets at June 29, 2024 and December 31, 2023 , respectively, with the remainder included in “Accrued expenses.” The liabilities we record for these matters are based on a number of assumptions, including historical claims and payment experience. While we base our assumptions on facts currently known to 24 us, they entail inherently subjective judgments and uncertainties. As a result, our current assumptions for estimating these liabilities may not prove accurate, and we may be required to adjust these liabilities in the future, which could result in charges to earnings. These variances relative to current expectations could have a material impact on our financial position and results of operations in future periods. 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 completed its scope of work. During that 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. DBT had asserted claims against the remaining prime contractor, MHI, and MHI had asserted, or issued letters of intent to claim for, alleged damages against DBT. As previously disclosed in our 2023 Annual Report on Form 10-K, and as mentioned in Note 3, on September 5, 2023, DBT and SPX entered into the Settlement Agreement to resolve all claims between the parties with respect to the two large power projects. The Settlement Agreement provides for full and final settlement and the mutual release of all claims between the parties with respect to the projects, including any claim against SPX Technologies, Inc. as guarantor of DBT’s performance on the projects. Refer to Note 3 for additional details. Prior to the Settlement Agreement, DBT had experienced success in enforcing its rights through dispute resolution processes, including a favorable arbitration ruling during the first quarter of 2023 related to awards for costs incurred in connection with delays on the Kusile project of South African Rand 126.6 (or $ 7.0 ) with such amount recorded to “Gain (loss) on disposition of discontinued operations, net of tax” during the first quarter of 2023. Further, in June 2023, the arbitration tribunal ruled DBT was entitled to recover $ 1.3 of legal costs incurred related to the arbitration. Additionally, in May 2023, a separate arbitration tribunal ruled DBT was entitled to recover $ 5.5 of legal costs incurred related to another prior arbitration. Such amounts were recorded within “Gain (loss) on disposition of discontinued operations, net of tax” during the quarter ended July 1, 2023. 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 subcontractors. The subcontractor, currently in liquidation, maintains a right to seek recovery of such amount and, thus, the amount received by DBT has not been reflected in our condensed 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 to receive additional contingent consideration of up to $ 45.0 under an earn-out provision. During the third quarter of 2021, we concluded that none of the milestones for the payment of any of the contingent consideration were achieved. On May 20, 2024, we entered into a settlement agreement with the seller of ULC to resolve a lawsuit it commenced in August 2022 seeking contingent consideration of $ 15.0 , prejudgment interest on that amount, and attorney's fees. The settlement agreement required a payment by us to the seller of ULC of $ 8.4 , which was paid during the second quarter of 2024, with a corresponding charge recorded within “Other operating expense, net” within the condensed consolidated statement of operations for the three and six months ended June 29, 2024. We expect this payment to be tax deductible in future periods. Resolution of Dispute with Former Representative On January 18, 2024, a jury ruled that one of our businesses within the Detection and Measurement reportable segment had breached its contract and implied duties of good faith and fair dealings in connection with an agreement entered into with a former representative. On January 26, 2024, we negotiated a settlement requiring a payment, paid during the first quarter of 2024, to the former representative of $ 9.0 to resolve all claims related to the matter. This amount was recorded within “ Accrued Liabilities ” on the condensed consolidated balance sheet as of December 31, 2023. Litigation Matters We are subject to other legal matters that arise in the normal course of business. We believe these matters are either without merit or of a kind that should not have a material effect, individually or in the aggregate, on our financial position, results of operations or cash flows; however, we cannot assure you that these proceedings or claims will not have a material effect on our financial position, results of operations or cash flows. 25 Environmental Matters Our operations and properties are subject to federal, state, local and foreign regulatory requirements relating to environmental protection. It is our policy to comply fully with all applicable requirements. As part of our effort to comply, we have a comprehensive environmental compliance program that includes environmental audits conducted by internal and external independent professionals, as well as regular communications with our operating units regarding environmental compliance requirements and anticipated regulations. Based on current information, we believe that our operations are in substantial compliance with applicable environmental laws and regulations, and we are not aware of any violations that could have a material effect, individually or in the aggregate, on our business, financial condition, and results of operations or cash flows. We had liabilities for site investigation and/or remediation at 16 sites that we own or control, or formerly owned and controlled, as of June 29, 2024 and December 31, 2023. In addition, while we believe that we maintain adequate accruals to cover the costs of site investigation and/or remediation, we cannot provide assurance that new matters, developments, laws and regulations, or stricter interpretations of existing laws and regulations will not materially affect our business or operations in the future. Our environmental accruals cover anticipated costs, including investigation, remediation, and maintenance of clean-up sites. Our estimates are based primarily on investigations and remediation plans established by independent consultants, regulatory agencies and potentially responsible third parties. 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. It is our policy to revise an estimate once the revision becomes probable and the amount of change can be reasonably estimated. We generally do not discount our environmental accruals and do not reduce them by anticipated insurance recoveries. We take into account third-party indemnification from financially viable parties in determining our accruals where there is no dispute regarding the right to indemnification. In the case of contamination at offsite, third-party disposal sites, as of June 29, 2024 and December 31, 2023, we have been notified that we are potentially responsible and have received other notices of potential liability pursuant to various environmental laws at 9 sites, at which the liability has not been settled and all of which have been active in the past few years. These laws may impose liability on certain persons that are considered jointly and severally liable for the costs of investigation and remediation of hazardous substances present at these sites, regardless of fault or legality of the original disposal. These persons include the present or former owners or operators of the site and companies that generated, disposed of or arranged for the disposal of hazardous substances at the site. We are considered a “de minimis” potentially responsible party at most of the sites, and we estimate that our aggregate liability, if any, related to these sites is not material to our condensed consolidated financial statements. We conduct extensive environmental due diligence with respect to potential acquisitions, including environmental site assessments and such further testing as we may deem warranted. If an environmental matter is identified, we estimate the cost and either establish a liability, purchase insurance or obtain an indemnity from a financially sound seller; however, in connection with our acquisitions or dispositions, we may assume or retain significant environmental liabilities, some of which we may be unaware. The potential costs related to these environmental matters and the possible impact on future operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of various clean-up technologies, the uncertain level of insurance or other types of recovery, and the questionable level of our responsibility. We record a liability when it is both probable and the amount can be reasonably estimated. In our opinion, after considering accruals established for such purposes of $ 24.1 at June 29, 2024 and December 31, 2023, the cost of remedial actions for compliance with the present laws and regulations governing the protection of the environment are not expected to have a material impact, individually or in the aggregate, on our financial position, results of operations or cash flows. Self-insured Risk Management Matters We are self-insured for certain of our workers’ compensation, automobile, product and general liability, disability and health costs, and we believe that we maintain adequate accruals to cover our retained liability. Our accruals for risk management matters are determined by us, are based on claims filed and estimates of claims incurred but not yet reported, and generally are not discounted. We consider a number of factors, including third-party actuarial valuations, when making these determinations. We maintain third-party stop-loss insurance policies to cover certain liability costs in excess of predetermined retained amounts. This insurance may be insufficient or unavailable (e.g., because of insurer insolvency) to protect us against loss exposures. 26 (16) INCOME AND OTHER TAXES Uncertain Tax Benefits As of June 29, 2024 , we had gross and net unrecognized tax ben efits of $ 2.6 . All of these unrecognized tax benefits would impact our effective tax rate from continuing operations if recognized. We classify interest and penalties related to unrecognized tax benefits as a component of our income tax provision. As of June 29, 2024, gross and net accrued interest totaled $ 1.3 . As of June 29, 2024, we had no accrual for penalties included in our unrecognized tax benefits. Based on the outcome of certain examinations or as a result of the expiration of statutes of limitations for certain jurisdictions, we do not believe that within the next 12 months our previously unrecognized tax benefits will decrease by a material amount. The previously unrecognized tax benefits relate to a variety of tax matters including transfer pricing and various state matters. Organization for Economic Co-operation and Development (“OECD”) Pillar Two Model Rules In December 2021, the OECD issued model rules for a new global minimum tax framework (“Pillar Two”), and various governments around the world have issued, or are in the process of issuing, legislation to implement these rules. The Company is within the scope of the OECD Pillar Two model rules and is assessing the impact thereof. As of June 29, 2024, we believe the implementation of these rules will not have a material impact on our financial results. Other Tax Matters For the three months ended June 29, 2024, we recorded an income tax provision of $ 15.2 on $ 60.4 of pre-tax income from continuing operations, resulting in an effective rate of 25.2 %. This compares to an income tax provision for the three months ended July 1, 2023 of $ 7.8 on $ 46.1 of pre-tax income from continuing operations, resulting in an effective rate of 16.9 %. The most significant items impacting the income tax provision for the second quarters of 2024 and 2023 were (i) $ 0.5 of tax provision and $ 1.2 of tax benefit, respectively, related to revisions to liabilities for uncertain tax positions and (ii) $ 0.2 and $ 0.5 , respectively, of excess tax benefits associated with stock-based compensation awards that vested and/or were exercised during the periods. In addition, the rate for the three months ended July 1, 2023 was favorably impacted by a tax benefit of $ 1.8 related to the release of valuation allowances recognized against certain deferred tax assets, as we now expect these deferred tax assets to be realized. For the six months ended June 29, 2024, we recorded an income tax provision of $ 17.1 on $ 111.5 of pre-tax income from continuing operations, resulting in an effective rate of 15.3 %. This compares to an income tax provision for the six months ended July 1, 2023 of $ 19.1 on $ 96.5 of pre-tax income from continuing operations, resulting in an effective rate of 19.8 %. The most significant items impacting the income tax provision during the first half of 2024 and 2023 were (i) $ 11.1 and $ 1.4 , respectively, of excess tax benefits resulting from stock-based compensation awards that vested and/or were exercised during the periods and (ii) $ 0.5 of tax provision and $ 1.2 of tax benefit, respectively, related to revisions to liabilities for uncertain tax positions. In addition, the 2023 rate was favorably impacted by a tax benefit of $ 1.8 related to the release of valuation allowances recognized against certain deferred tax assets, as we now expect these deferred tax assets to be realized. We perform reviews of our income tax positions on a continuous basis and accrue for potential uncertain positions when we determine that an uncertain position meets the criteria of the Income Taxes Topic of the Codification. Accruals for these uncertain tax positions are recorded in “Income taxes payable” and “Deferred and other income taxes” in the accompanying condensed consolidated balance sheets based on the expectation as to the timing of when the matters will be resolved. As events change and resolutions occur, these accruals are adjusted, such as in the case of audit settlements with taxing authorities. U.S. Federal income tax returns are subject to examination for a period of three years after filing the return. We are not currently under examination by the Internal Revenue Service and believe any contingencies in open years are adequately provided for. State income tax returns generally are subject to examination for a period of three to five years after filing the respective tax returns. The impact on such tax returns of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. We regularly have various state income tax returns in the process of examination. We believe any uncertain tax positions related to these examinations have been adequately provided for. 27 We regularly have various foreign income tax returns under examination. We believe that any uncertain tax positions related to these examinations have been adequately provided for. An unfavorable resolution of one or more of the above matters could have a material impact on our results of operations or cash flows in the quarter and year in which an adjustment is recorded or the tax is due or paid. As audits and examinations are still in process, the timing of the ultimate resolution and any payments that may be required for the above matters cannot be determined at this time. (17) FAIR VALUE Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Preference is given to observable inputs. These two types of inputs create the following fair value hierarchy: • Level 1 — Quoted prices for identical instruments in active markets. • Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. • Level 3 — Significant inputs to the valuation model are unobservable. There were no changes during the periods presented to the valuation techniques we use to measure asset and liability fair values on a recurring or nonrecurring basis. There were no transfers between the three levels of the fair value hierarchy for the periods pres ented. Contingent Consideration for the Ingénia Acquisition — In connection with the acquisition of Ingénia, the seller is eligible for additional cash consideration of up to CAD 3.0 (or $ 2.2 at the time of acquisition), with payment scheduled to be made in the event certain contingent liabilities do not materialize. The estimated fair value of such contingent consideration is $ 0.3 , which is reflected as a liability in our condensed consolidated balance sheet as of June 29, 2024. Goodwill, Indefinite-Lived Intangible and Other Long-Lived Assets — Certain of our non-financial assets are subject to impairment analyses, including long-lived assets, indefinite-lived intangible assets and goodwill. We review the carrying amounts of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually for indefinite-lived intangible assets and goodwill. Any asset impairment would result in the asset being recorded at its fair value. Derivative Financial Instruments — Our financial derivative assets and liabilities include interest rate swaps and FX forward contracts, and are valued using valuation models based on observable market inputs such as forward rates, inte rest rates, our own credit risk and the credit risk of our counterparties, which comprise investment-grade financial institutions. Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the valuation hierarchy. We have not made any adjustments to the inputs obtained from the independent sources. Based on our continued ability to enter into forward contracts, we consider the markets for our fair value instruments active. We primarily use the income approach, which uses valuation techniques to convert future amounts to a single present amount. As of June 29, 2024, there has been no significant impact to the fair value of our derivative liabilities due to our own credit risk, as the related instruments are collateralized under our senior credit facilities. Similarly, there has been no significant impact to the fair value of our derivative assets based on our evaluation of our counterparties’ credit risks. Equity Security — We estimate the fair value of an equity security that we hold utilizing a practical expedient under existing guidance, with such estimated fair value based on our ownership percentage applied to the net asset value as provided quarterly by the investee. The value is updated annually, during the first quarter, based on the investee’s most recent audited financial statements. Duri ng the three and six months ended June 29, 2024 and July 1, 2023, we recorded gains (losses) of $ 0.0 and $( 4.2 ), and $ 0.0 and $ 3.6 , respectively, to “Other income (expense), net” to reflect changes in the estimated fair value of the equity security. As of June 29, 2024 and December 31, 2023, the equity security had an estimated fair value of $ 35.2 and $ 39.4 , respectively. Indebtedness and Other — The estimated fair value of our debt instruments as of June 29, 2024 and December 31, 2023 approximated the related carrying values due primarily to the variable market-based interest rates for such instruments. Se e Note 12 f or further details. 28