What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-08-02 · 143 added, 109 removed, 205 unchanged (55% of the section changed)

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POTENTIAL IMPACTS OF GEOPOLITICAL CONFLICTS

Ongoing geopolitical conflicts, and governmental actions implemented in response to these conflicts, did not have a significant adverse impact on our operating results during the three and six months ended June 29, 2024 and July 1, 2023.

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

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◦ Ingénia Technologies Inc.

▪ Acquired on February 7, 2024 for cash consideration of Canadian Dollar (“CAD”) 396.8 (or $294.1 at the time of payment), net of cash acquired of $1.5.

▪ The purchase price is subject to adjustment based upon the final settlement of working capital and cash as of the date of acquisition.

▪ Acquired on February 7, 2024 for cash consideration of Canadian Dollar (“CAD”) 393.9 (or $292.0), net of (i) an adjustment to the purchase price of $2.1 during the third quarter of 2024 related to acquired working capital and (ii) 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 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 estimated fair value of such contingent consideration is $0.3, which is reflected as a liability in our condensed consolidated balance sheet as of September 28, 2024.

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

• Changes in Estimated Fair Value of an Equity Security

◦ We recorded no adjustments to the fair value during the three months ended June 29, 2024 and July 1, 2023.

We recorded gains (losses) of $(4.2) and $3.6 during the six months ended June 29, 2024 and July 1, 2023, respectively.

• Financing Activities

◦ On August 30, 2024, we entered into an amendment to the Amended and Restated Credit Agreement governing our senior credit facilities (as amended, the “ Credit Agreement ” ) .

◦ The amendment increases the aggregate revolving credit commitments under the Credit Agreement from $500.0 to $1,000.0 and makes certain conforming changes and other amendments to the Credit Agreement.

◦ We expect to utilize the increased revolving credit capacity to finance, in part, permitted acquisitions, to pay related fees, costs and expenses and for other lawful corporate purposes.

◦ During the third quarter of 2024, we renewed, and increased the capacity of, our trade receivables financing agreement for the next 12 months, whereby we can borrow, on a continuous basis, up to $100.0, as available.

◦ See Note 12 to our condensed consolidated financial statements for additional details.

• Incremental Term Loan

◦ On April 21, 2023, we amended and restated our senior credit agreement (the “Credit Agreement”).

◦ The amendment provided for an additional senior secured term loan in the aggregate amount of $300.0, which was borrowed during the second quarter of 2023.

◦ The funds from the additional term loan (“Incremental Term Loan”) were used to partially fund the acquisition of ASPEQ.

• Changes in Estimated Fair Value of an Equity Security

◦ We recorded no adjustments to the fair value of an equity security that we hold during the three months ended September 28, 2024 and September 30, 2023.

We recorded gains (losses) of $(4.2) and $3.6 during the nine months ended September 28, 2024 and September 30, 2023, respectively.

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

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◦ 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 our condensed consolidated statements of operations for the three and six months ended June 29, 2024.

◦ 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 our condensed consolidated statement of operations for the nine months ended September 28, 2024.

We expect this payment to be tax deductible in future periods.

• Incremental Term Loan

◦ On April 21, 2023, the Credit Agreement was amended to provide for an additional senior secured term loan in the aggregate amount of $300.0, which was borrowed during the second quarter of 2023.

◦ The funds from the additional term loan (“Incremental Term Loan”) were used to partially fund the acquisition of ASPEQ.

◦ See Note 12 to our condensed consolidated financial statements for additional details.

• Resolution of Claims with Prime Contractor of South Africa Power Projects

◦ On September 5, 2023, SPX Technologies and our DBT Technologies (PTY) LTD (“DBT”) business entered into an agreement with MHI to affect the negotiated resolution of all claims between the parties with respect to DBT’s involvement in two large power projects in South Africa - Kusile and Medupi (the “Settlement Agreement”).

◦ In connection with the Settlement Agreement, the Company incurred a charge, net of tax, of $54.2 during the three months ended September 30, 2023.

The charge included the write-off of $15.2 in net amounts due from MHI.

Such charge is included in “Loss on disposition of discontinued operations, net of tax” for the three and nine months ended September 30, 2023.

In addition, DBT made payments of $25.1 (net of $2.0 received on a related foreign currency forward agreement) and $25.3 to MHI during the third quarters of 2024 and 2023, respectively, in connection with the Settlement Agreement.

◦ There are no further payment obligations to MHI under the terms of the Settlement Agreement.

◦ See Notes 3 and 15 to our condensed consolidated financial statements for additional details.

OVERVIEW OF OPERATING RESULTS

Revenues for the three months ended June 29, 2024, totaled $501.3 compared to $423.3 during the respective period in 2023.

The increase in revenues, compared to the respective period in 2023, was due primarily to (i) inorganic revenue growth resulting from the Ingénia and ASPEQ acquisitions (each within the HVAC reportable segment) and (ii) organic revenue growth within the HVAC reportable segment, partially offset by an organic revenue decline within the Detection and Measurement reportable segment.

The organic revenue decline within the Detection and Measurement reportable segment was driven by lower large project volumes primarily within the communication technologies business.

Revenues for the six months ended June 29, 2024, totaled $966.5 compared to $823.1 during the respective period in 2023.

The increase in revenues, compared to the respective period in 2023, was due primarily to (i) inorganic revenue growth resulting from the Ingénia, ASPEQ, and TAMCO acquisitions (each within the HVAC reportable segment) and (ii) organic revenue growth within the HVAC reportable segment and, to a lesser extent, the Detection and Measurement reportable segment.

The organic revenue growth within the HVAC reportable segment was due primarily to increased sales of cooling products associated with volume increases, including execution of a larger than typical service project, partially offset by organic revenue declines of heating products due primarily to (i) the unseasonably warm winter conditions prevalent in the relevant end markets during the first quarter of 2024 and (ii) higher volumes during the first quarter of 2023 that was supported by elevated backlog resulting from the effects of the COVID-19 pandemic.

The organic revenue growth within the Detection and Measurement reportable segment was due primarily to higher large project volumes within the communication technologies business.

During the three and six months ended June 29, 2024, we generated operating income of $74.6 and $139.2, respectively, compared to $51.3 and $101.1 for the respective periods in 2023.

The increase in operating income during the three and six months ended June 29, 2024, compared to the respective periods in 2023, was due primarily to higher income from our reportable segments of $33.2 and $58.6, respectively, and lower corporate expense of $4.6 and $5.3, respectively, primarily due to lower strategic and acquisition-related costs, partially offset by increases in (i) intangible asset amortization expense of $5.3 and $13.8, respectively and (ii) integration costs of $0.8 and $2.8, respectively, primarily related to the Ingénia and ASPEQ acquisitions.

In addition, the three and six months ended June 29, 2024 included a charge of $8.4 related to a settlement with the seller of ULC regarding additional contingent consideration.

The increase in income from our HVAC and Detection and Measurement reportable segments was primarily due to (i) the revenue growth mentioned above, (ii) more favorable product mix primarily within the Detection and Measurement reportable segment, and (iii) the impact of continuous improvement initiatives.

Revenues for the three months ended September 28, 2024, totaled $483.7 compared to $448.7 during the respective period in 2023.

The increase in revenues, compared to the respective period in 2023, was due primarily to (i) organic revenue growth within the HVAC reportable segment and (ii) inorganic revenue growth resulting from the Ingénia acquisition within the HVAC reportable segment, partially offset by an organic revenue decline within the Detection and Measurement reportable segment.

The organic revenue growth within the HVAC reportable segment was due primarily to increased volume of cooling products driven by continued strength in demand and higher throughput resulting from expanded production capacity.

The organic revenue decline within the Detection and Measurement reportable segment was primarily driven by lower large project volume within our communication technologies business associated with a larger-than-typical project that executed throughout 2023 and completed during the first quarter of 2024.

This decline was partially offset by higher project volumes at our transportation and aids to navigation businesses, in which volume can vary from period to period based on project execution timing.

Revenues for the nine months ended September 28, 2024, totaled $1,450.2 compared to $1,271.8 during the respective period in 2023.

The increase in revenues, compared to the respective period in 2023, was due primarily to (i) inorganic revenue growth resulting from the Ingénia, ASPEQ, and TAMCO acquisitions (each within the HVAC reportable segment) and (ii) organic revenue growth within the HVAC reportable segment, partially offset by an organic revenue decline within the Detection and Measurement reportable segment.

The organic revenue growth within the HVAC reportable segment was due primarily to (i) increased volume of cooling products driven by continued strength in demand and higher throughput resulting from expanded production capacity and (ii) execution of a larger-than-typical service project.

These increases were partially offset by organic revenue declines of heating products due primarily to (i) the unseasonably warm winter conditions prevalent in the relevant end markets during the first quarter of 2024 and (ii) higher volumes during the first quarter of 2023 that was supported by elevated backlog resulting from the effects of the COVID-19 pandemic.

The organic revenue decline within the Detection and Measurement reportable segment was primarily driven by (i) lower large project volume within our communication technologies business associated with a larger-than-typical project that executed throughout 2023 and completed in the first quarter of 2024 and, to a lesser extent, (ii) modestly lower global demand for location and inspection products.

These declines were partially offset by higher project volumes at our transportation and aids to navigation businesses, in which volume can vary from period to period based on project execution timing.

During the three and nine months ended September 28, 2024, we generated operating income of $78.9 and $218.1, respectively, compared to $57.7 and $158.8 for the respective periods in 2023.

The increase in operating income during the three and nine months ended September 28, 2024, compared to the respective periods in 2023, was due primarily to higher income from our reportable segments of $22.2 and $80.8, respectively, lower corporate expense of $0.6 and $5.9, respectively, and, for the three month period, a decrease in integration costs of $1.5.

These impacts were partially offset by increases during the three and nine months ended, compared to their respective periods in 2023, in intangible asset amortization expense of $2.0 and $15.8, respectively.

The nine-month period ended September 28, 2024 also included increased integration costs of $1.3, primarily related to the Ingénia and ASPEQ acquisitions, and a charge of $8.4 related to a settlement with the seller of ULC regarding additional contingent consideration.

The increase in income from our reportable segments was primarily due to (i) the revenue growth mentioned above and associated operating leverage, (ii) more favorable product mix, primarily within the Detection and Measurement reportable segment, and (iii) the impact of continuous improvement initiatives, partially offset by increases in personnel costs, within our HVAC reportable segment, due to annual merit increases and growth-related headcount additions.

The increase in intangible asset amortization expense was driven by the acquisitions mentioned above.

Cash flows from operating activities associated with continuing operations totaled $69.4 for the six months ended June 29, 2024, compared to cash flows from operating activities of $74.6 during the six months ended July 1, 2023.

The decrease in cash flows from operating activities was due primarily to (i) decreases in cash flows at certain of our project-related businesses, as cash flows for these businesses are often subject to contract milestones that can impact the timing of cash flows from period to period, (ii) $11.9 in additional short-term incentive compensation payments, (iii) a payment, during the first quarter of 2024, related to the resolution of a dispute with a former representative at one of our businesses within the Detection and Measurement reportable segment of $9.0, and (iv) payment of $8.4 associated with a settlement for additional contingent consideration to the seller of ULC mentioned above.

These impacts were partially offset by cash inflows resulting from the increase in income discussed above, exclusive of the non-cash expenses (primarily intangible asset amortization) incurred during the respective periods, and reductions in the level of elevated purchases of raw materials and components during the 2024 period due to stabilization of the supply chain environment.

Cash flows from operating activities associated with continuing operations totaled $146.4 for the nine months ended September 28, 2024, compared to cash flows from operating activities of $120.0 during the nine months ended September 30,

The increase in cash flows from operating activities was due primarily to cash inflows resulting from the increase in operating income discussed above, exclusive of the non-cash expenses (primarily intangible asset amortization and depreciation expense) incurred during the respective periods, and reductions in the level of elevated purchases of raw materials and components during the 2024 period due to stabilization of the supply chain environment.

These impacts were primarily offset by (i) decreases in cash flows at certain of our project-related businesses, as cash flows for these businesses are often subject to contract milestones that can impact the timing of cash flows from period to period, (ii) additional interest payments of $16.7 due to higher average debt balances resulting from borrowings associated with the Ingénia, ASPEQ, and TAMCO acquisitions, (iii) $11.9 in additional short-term incentive compensation payments, (iv) a payment, during the first quarter of 2024, related to the resolution of a dispute with a former representative at one of our businesses within the Detection and Measurement reportable segment of $9.0, and (v) payment of $8.4 associated with a settlement for additional contingent consideration to the seller of ULC mentioned above.

RESULTS OF CONTINUING OPERATIONS

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

The following table provides selected financial information for the three and six months ended June 29, 2024 and July 1, 2023, including the reconciliation of organic revenue increase to the net revenue increase:

Three months ended Six months ended

2023 % Change June 29,

The following table provides selected financial information for the three and nine months ended September 28, 2024 and September 30, 2023, including the reconciliation of organic revenue increase to the net revenue increase:

Three months ended Nine months ended

September 28,

2024 September 30,

2023 % Change September 28,

2024 September 30,

2023 % Change

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* Not meaningful for comparison purposes.

Revenues — For the three months ended June 29, 2024, revenues totaled $501.3 compared to $423.3 during the respective period in 2023.

The organic revenue decline within the Detection and Measurement reportable segment was driven by lower large project volumes primarily within the communication technologies business.

For the six months ended June 29, 2024, revenues totaled $966.5 compared to $823.1 during the respective period in 2023.

revenue growth within the HVAC reportable segment and, to a lesser extent, the Detection and Measurement reportable segment.

The organic revenue growth within the HVAC reportable segment was due primarily to increased sales of cooling products associated with volume increases, including execution of a larger than typical service project, partially offset by organic revenue declines from heating products due primarily to (i) the unseasonably warm winter conditions prevalent in the relevant end markets during the first quarter of 2024 and (ii) higher volumes during the first quarter of 2023 that were supported by elevated backlog resulting from the effects of the COVID-19 pandemic.

The organic revenue growth within the Detection and Measurement reportable segment was due primarily to higher large project volumes within the communication technologies business.

Revenues — Revenues for the three months ended September 28, 2024, totaled $483.7 compared to $448.7 during the respective period in 2023.

This decline was partially offset by higher project volumes at our transportation and aids to navigation businesses, in which volume can vary from period to period based on project execution timing.

Revenues for the nine months ended September 28, 2024, totaled $1,450.2 compared to $1,271.8 during the respective period in 2023.

The increase in revenues, compared to the respective period in 2023, was due primarily to (i) inorganic revenue growth resulting from the Ingénia, ASPEQ, and TAMCO acquisitions (each within the HVAC reportable segment) and (ii) organic revenue growth within the HVAC reportable segment, partially offset by an organic revenue decline within the Detection and Measurement reportable segment.

See “Results of Reportable Segments” for additional details.

Gross Profit — For the three and six months ended June 29, 2024, the increase in gross profit and gross profit as a percentage of revenues, compared to the respective periods in 2023, was due primarily to (i) the revenue growth mentioned above and associated operating leverage, (ii) more favorable product mix from certain large projects within our transportation, communication technologies and aids to navigation businesses within the Detection and Measurement reportable segment, and (iii) the impact of continuous improvement initiatives.

Selling, General and Administrative (“SG&A”) Expense — For the three months ended June 29, 2024, the increase in SG&A expense, compared to the respective period in 2023, was due primarily to incremental SG&A resulting from the acquisitions of Ingénia and ASPEQ of $6.1 (including higher integration costs of $1.0) partially offset by lower corporate expense resulting primarily from a reduction in various strategic and acquisition-related costs of $4.3.

For the six months ended June 29, 2024, the increase in SG&A expense, compared to the respective period in 2023, was due primarily to incremental SG&A resulting from the acquisitions of Ingénia, ASPEQ, and TAMCO of $14.9 (including higher integration costs of $2.1) partially offset by lower corporate expense resulting primarily from a reduction in various strategic and acquisition-related costs of $3.4 and a reduction in short-term incentive compensation expense.

Intangible Amortiz ation — For the three an d six months ended June 29, 2024, the increase in intangible amortization, compared to the respective periods in 2023, was primarily related to incremental amortization associated with (i) backlog from the Ingénia acquisition and (ii) other intangible assets associated with the acquisitions of Ingénia and ASPEQ and, for the six month period, the acquisition of TAMCO.

Special Charges, net — 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 businesses within our HVAC and Detection and Measurement reportable segments.

Gross Profit — For the three and nine months ended September 28, 2024, the increase in gross profit and gross profit as a percentage of revenues, compared to the respective periods in 2023, was due primarily to (i) the revenue growth mentioned above and associated operating leverage, (ii) a more favorable product mix, primarily within the Detection and Measurement reportable segment, and (iii) the impact of continuous improvement initiatives.

Selling, General and Administrative (“SG&A”) Expense — For the three months ended September 28, 2024, the increase in SG&A expense, compared to the respective period in 2023, was due primarily to incremental SG&A resulting from the acquisition of Ingénia of $2.6 (including integration costs of $0.7) and increases in personnel costs, primarily within our HVAC reportable segment, due to annual merit increases and growth-related headcount additions.

For the nine months ended September 28, 2024, the increase in SG&A expense, compared to the respective period in 2023, was due primarily to incremental SG&A resulting from the acquisitions of Ingénia, ASPEQ, and TAMCO of $17.4 (including integration costs of $3.7) and increases in personnel costs, primarily within our HVAC reportable segment, due to annual merit increases and growth-related headcount additions, partially offset by a reduction in corporate expense of $5.9.

Intangible Amortiz ation — For the three an d nine months ended September 28, 2024, the increase in intangible amortization, compared to the respective periods in 2023, was primarily related to incremental amortization associated with (i) backlog from the Ingénia acquisition and (ii) other intangible assets associated with the acquisition of Ingénia and, for the nine-month period, the acquisitions of TAMCO and ASPEQ.

Special Charges, net — Special charges, net, for the three and nine months ended September 28, 2024 related primarily to severance costs associated with restructuring actions at businesses within our HVAC and Detection and Measurement reportable segments.

See Note 7 to our condensed consolidated financial statements for additional details.

Other Operating Expense, net — Other operating expense, net for the three and six months ended June 29, 2024 related to a charge of $8.4 regarding a settlement with the seller of ULC referred to previously.

Other Income (Expense), net — Other expense, net, for the three months ended June 29, 2024 was composed primarily of environmental remediation charges of $1.0, pension and postretirement expense of $0.4, and foreign currency transaction losses of $0.4.

Other income, net, for the three months ended July 1, 2023 was composed primarily of a gain of $0.4 related to income derived from company-owned life insurance (“COLI”) policies, offset by pension and postretirement expense of $0.2, foreign currency transaction losses of $0.1, and environmental remediation charges of $0.1.

Other expense, net, for the six months en ded June 29, 2024 was composed primarily of a loss of $4.2 related to a change in the estimated fair value of an equity security that we hold, environmental remediation charges of $1.8, and pension and postretirement expense of $0.8, partially offset by income of $0.9 derived from COLI policies.

Other income, net, for the six months ended July 1, 2023 was composed primarily of a gain of $3.6 related to a change in the estimated fair value of an equity security that we hold and a gain of $0.4 related to income derived from COLI policies, partially offset by foreign currency transaction losses of $0.7, pension and postretirement expense of $0.4, and environmental remediation charges of $0.2.

Other Operating Expense, net — Other operating expense, net for the nine months ended September 28, 2024 related to a charge of $8.4 related to a settlement with the seller of ULC regarding additional contingent consideration.

Other Income (Expense), net — Other expense, net, for the three months ended September 28, 2024 was composed primarily of foreign currency transaction losses of $1.1, environmental remediation charges of $0.3, pension and postretirement expense of $0.2, and losses on fixed asset disposals of $0.2, partially offset by income of $0.5 derived from company-owned life insurance (“COLI”) policies.

Other expense, net, for the three months ended September 30, 2023 was composed primarily of environmental remediation charges of $0.3 and pension and postretirement expense of $0.2, partially offset by foreign currency transaction gains of $0.3.

Other expense, net, for the nine months en ded September 28, 2024 was composed primarily of a loss of $4.2 related to a change in the estimated fair value of an equity security that we hold, environmental remediation charges of $2.1, pension and postretirement expense of $1.0, foreign currency transaction losses of $0.8, and losses on fixed asset disposals of $0.2, partially offset by income of $1.4 derived from COLI policies.

Other income, net, for the nine months ended September 30, 2023 was composed primarily of a gain of (i) $3.6 related to a change in the estimated fair value of an equity security that we hold and (ii) $0.4 related to income derived from COLI policies, partially offset by foreign currency transaction losses of $0.4, pension and postretirement expense of $0.6, and environmental remediation charges of $0.5.

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

The increase in interest expense, net, during the three and six months ended June 29, 2024, compared to the respective periods in 2023, was due primarily to higher average debt balances during the 2024 periods and, to a lesser extent, a higher average effective interest rate.

The higher average debt balances primarily resulted from borrowings associated with the Ingénia, ASPEQ, and TAMCO acquisitions.

The increase in interest expense, net, during the three and nine months ended September 28, 2024, compared to the respective periods in 2023, was due primarily to higher average debt balances during the 2024 periods, primarily resulting from borrowings associated with the Ingénia, ASPEQ, and TAMCO acquisitions.

Refer to Note 12 to the condensed consolidated financial statements for additional details.

Income Tax Provision — 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 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.

Income Tax Provision — For the three months ended September 28, 2024, we recorded an income tax provision of $15.1 on $66.0 of pre-tax income from continuing operations, resulting in an effective rate of 22.9%.

This compares to an income tax provision for the three months ended September 30, 2023 of $12.4 on $48.1 of pre-tax income from continuing operations, resulting in an effective rate of 25.8%.

The most significant items impacting the income tax provision for the third quarters of 2024 and 2023 were $0.7 of tax benefits in 2024 resulting from increased federal tax credits and $0.8 of foreign withholding tax in 2023.

For the nine months ended September 28, 2024, we recorded an income tax provision of $32.2 on $177.5 of pre-tax income from continuing operations, resulting in effective rate of 18.1%.

This compares to an income tax provision for the nine months ended September 30, 2023 of $31.5 on $144.6 of pre-tax income from continuing operations, resulting in an effective rate of 21.8%.

The most significant items impacting the income tax provision during the first nine months of 2024 and 2023 were (i) $10.8 and $1.7, respectively, of excess tax benefits resulting from stock-based compensation awards that vested and/or were exercised during the periods, (ii) $0.7 of tax benefits in 2024 resulting from increased federal tax credits, and (iii) $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.

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HVAC Reportable Segment

Three months ended Six months ended

June 29, 2024 July 1, 2023 % Change June 29, 2024 July 1, 2023 % Change

Three months ended Nine months ended

September 28, 2024 September 30, 2023 % Change September 28, 2024 September 30, 2023 % Change

Revenues $ 335.3 $ 289.2 15.9 $ 994.2 $ 809.8 22.8

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Net revenue increase 15.9 22.8

Revenues — For the three months ended June 29, 2024, the increase in revenues, compared to the respective period in 2023, was due primarily to organic revenue growth as well as inorganic revenue growth resulting from the Ingénia and ASPEQ acquisitions.

The organic revenue growth was due primarily to increased sales of cooling products associated with volume increases, including execution of a larger than typical service project.

For the six months ended June 29, 2024, the increase in revenues, compared to the respective period in 2023, was due primarily to (i) inorganic revenue growth resulting from the Ingénia, ASPEQ, and TAMCO acquisitions and (ii) organic revenue growth.

The organic revenue growth was due primarily to increased sales of cooling products associated with volume increases, including execution of a larger than typical service project, partially offset by organic revenue declines within heating products due primarily to (i) the unseasonably warm winter conditions prevalent in the relevant end markets during the first quarter of 2024 and (ii) higher volumes during the first quarter of 2023 that were supported by elevated backlog resulting from the effects of the COVID-19 pandemic.

Income — For the three and six months ended June 29, 2024, the increase in income and margin, compared to the respective periods in 2023, was due primarily to the revenue growth mentioned above and associated operating leverage, as well as the impact of continuous improvement initiatives.

Backlog — The segment had backlog of $433.7 and $337.2 as of June 29, 2024 and July 1, 2023, respectively.

Backlog associated with the Ingénia acquisition totaled $107.5 as of June 29, 2024.

Revenues — For the three months ended September 28, 2024, the increase in revenues, compared to the respective period in 2023, was due primarily to organic revenue growth as well as inorganic revenue growth resulting from the Ingénia acquisition.

The organic revenue growth was due primarily to increased volume of cooling products driven by continued strength in demand and higher throughput resulting from expanded production capacity.

For the nine months ended September 28, 2024, the increase in revenues, compared to the respective period in 2023, was due primarily to (i) inorganic revenue growth resulting from the Ingénia, ASPEQ, and TAMCO acquisitions and (ii) organic revenue growth.

The organic revenue growth was due primarily to (i) increased volume of cooling products driven by continued strength in demand and higher throughput resulting from expanded production capacity and (ii) execution of a larger-than-typical service project.

These increases were partially offset by organic revenue declines within heating products due primarily to (i) the unseasonably warm winter conditions prevalent in the relevant end markets during the first quarter of 2024 and (ii) higher volumes during the first quarter of 2023 that were supported by elevated backlog resulting from the effects of the COVID-19 pandemic.

Income — For the three and nine months ended September 28, 2024, the increase in income and margin, compared to the respective periods in 2023, was due primarily to the revenue growth mentioned above and associated operating leverage, as well as the impact of continuous improvement initiatives, partially offset by increases in personnel costs due to annual merit increases and growth-related headcount additions.

Backlog — The segment had backlog of $437.7 and $338.2 as of September 28, 2024 and September 30, 2023, respectively.

Backlog associated with the Ingénia acquisition totaled $136.4 as of September 28, 2024.

Detection and Measurement Reportable Segment

Three months ended Six months ended

June 29, 2024 July 1, 2023 % Change June 29, 2024 July 1, 2023 % Change

Three months ended Nine months ended

September 28, 2024 September 30, 2023 % Change September 28, 2024 September 30, 2023 % Change

Revenues $ 148.4 $ 159.5 (7.0) $ 456.0 $ 462.0 (1.3)

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Acquisitions — —

Net revenue increase (decrease) (6.2) 1.7

Revenues — For the three months ended June 29, 2024, the decrease in revenues, compared to the respective period in 2023, was due to an organic revenue decline.

The organic revenue decline was driven by lower large project volumes, with the comparative period including revenue associated with a larger than typical project within the communication technologies business that executed throughout 2023 and completed during the first quarter of 2024.

For the six months ended June 29, 2024, the increase in revenues, compared to the respective period in 2023, was due primarily to organic revenue growth.

The organic revenue growth was due primarily to higher large project volumes within our communication technologies business.

Income — For the three and six months ended June 29, 2024, the increase in income and margin, compared to the respective periods in 2023, was due primarily to (i) more favorable product mix from certain large projects within our transportation, communication technologies, and aids to navigation businesses and (ii) the impact of continuous improvement initiatives.

Backlog — The segment had bac klog of $205.4 and $233.9 as of June 29, 2024 and July 1, 2023, respectively.

Net revenue decrease (7.0) (1.3)

Revenues — For the three and nine months ended September 28, 2024, the decrease in revenues, compared to the respective period in 2023, was due primarily to an organic revenue decline.

The organic revenue decline for the three and nine months ended was primarily driven by lower large project volume within our communication technologies business associated with a larger-than-typical project that executed throughout 2023 and completed in the first quarter of 2024.

In addition, the organic revenue decline for the nine months ended was impacted by modestly lower global demand for location and inspection products.

For the three and nine months ended, these declines were partially offset by higher project volumes at our transportation and aids to navigation businesses, in which volume can vary from period to period based on project execution timing.

Income — For the three and nine months ended September 28, 2024, the increase in income and margin, compared to the respective periods in 2023, was due primarily to (i) increased volume and a more favorable project mix within our transportation and aids to navigation businesses and (ii) the impact of continuous improvement initiatives.

These increases were partially offset by the reduction in income associated with the volume declines from the larger-than-typical project within our communications technologies business mentioned above.

Backlog — The segment had bac klog of $193.5 and $233.6 as of September 28, 2024 and September 30, 2023, respectively.

CORPORATE AND OTHER EXPENSES

Three months ended Six months ended

June 29, 2024 July 1, 2023 % Change June 29, 2024 July 1, 2023 % Change

Three months ended Nine months ended

September 28, 2024 September 30, 2023 % Change September 28, 2024 September 30, 2023 % Change

Total consolidated revenues $ 483.7 $ 448.7 7.8 $ 1,450.2 $ 1,271.8 14.0

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Long-term incentive compensation expense 4.0 3.4 17.6 11.0 10.0 10.0

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

The decrease in corporate expense during the three months ended June 29, 2024, compared to the respective period in 2023, was due primarily to lower expense related to various strategic and acquisition-related costs of $4.3 largely driven by the ASPEQ and TAMCO acquisitions in 2023.

The decline in corporate expense during the six months ended June 29, 2024, compared to the respective period in 2023, was due primarily to lower expense related to various strategic and acquisition-related costs of $3.4 largely driven by the ASPEQ and TAMCO acquisitions in 2023, partially offset by expense incurred for the Ingénia acquisition in 2024 and a reduction in short-term incentive compensation expense.

Corporate Expense — Corporate expense generally relates to the personnel and general operating costs of our corporate headquarters based in Charlotte, North Carolina.

The decrease in corporate expense during the three months ended September 28, 2024, compared to the respective period in 2023, was due primarily to a reduction in costs incurred for professional services.

The decline in corporate expense during the nine months ended September 28, 2024, compared to the respective period in 2023, was due primarily to (i) lower expense related to various strategic and acquisition-related costs of $3.3, largely driven by the ASPEQ and TAMCO acquisitions in 2023, partially offset by expense incurred for the Ingénia acquisition in 2024, (ii) a reduction in short-term incentive compensation expense, and (iii) a reduction in costs incurred for professional services.

These declines were partially offset by annual personnel merit increases.

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

LIQUIDITY AND FINANCIAL CONDITION

Listed below are the cash flows from (used in) operating, investing, and financing activities and discontinued operations, as well as the net change in cash and equivalents for the six months ended June 29, 2024 and July 1, 2023.

Six months ended

June 29, 2024 July 1, 2023

Nine months ended

September 28, 2024 September 30, 2023

Continuing operations:

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Net change in cash and equivalents $ 24.5 $ (55.1)

Operating Activities — Th e decrease in c ash flows from operating activities for the six months ended June 29, 2024, compared to the six months ended July 1, 2023, was due primar ily to (i) decreases in cash flows at certain of our project-related businesses, as cash flows for these businesses are often subject to contract milestones that can impact the timing of cash flows from period to period, (ii) $11.9 in additional short-term incentive compensation payments, (iii) a payment, during the first quarter of 2024, related to the resolution of a dispute with a former representative at one of our businesses within the Detection and Measurement reportable segment of $9.0, and (iv) payment of $8.4 associated with a settlement with the seller of ULC for additional contingent consideration as mentioned previously.

Investing Activities — Cash fl ows used in investing activities of continuing operations for the six months ended June 29, 2024 were comprised primarily of net cash utilized in the acquisition of Ingénia of $294.1 and capital expenditures of $20.3, partially offset by net proceeds from COLI policies of $42.9, inclusive of borrowings of $41.2 against the cash surrender value of these COLI policies.

Operating Activities — Th e increase in c ash flows from operating activities for the nine months ended September 28, 2024, compared to the nine months ended September 30, 2023, was due primar ily to cash inflows resulting from the increase in operating income discussed previously, exclusive of the non-cash expenses (primarily intangible asset amortization and depreciation expense) incurred during the respective periods, and reductions in the level of elevated purchases of raw materials and components during the 2024 period due to stabilization of the supply chain environment.

Investing Activities — Cash flows used in investing activities of continuing operations for the nine months ended September 28, 2024 were comprised of net cash utilized in the acquisition of Ingénia of $292.0 and capital expenditures of $28.2, partially offset by net proceeds from COLI policies of $42.9, inclusive of borrowings of $41.2 against the cash surrender value of these COLI policies.

See Note 12 to the condensed consolidated financial statements for additional details.

Cash flows used in investing activities of continuing operations for the six months ended July 1, 2023 were comprised of net cash utilized in the acquisitions of TAMCO and ASPEQ of $547.1 and capital expenditures of $8.7, partially offset by proceeds from COLI policies of $1.0.

Financing Activities — Cash flows from financing activities of continuing operations for the six months ended June 29, 2024 were comprised of net borrowings under the Credit Agreement and trade receivables financing arrangement of $193.2 and $39.0, respectively, primarily in connection with the Ingénia acquisition.

These net borrowings were partially offset by minimum tax withholdings paid on behalf of employees related to long-term incentive awards, net of proceeds from options exercised, of $0.9 and net repayments under our other various debt instruments of $0.8.

Cash flows from financing activities of continuing operations for the six months ended July 1, 2023 were comprised of net borrowings under the Credit Agreement and trade receivables financing arrangement of $400.0 and $30.0, respectively, primarily in connection with the TAMCO and ASPEQ acquisitions, minimum withholdings paid on behalf of employees on long-term incentive awards, net of proceeds from options exercised, of $2.4, and fees paid in connection with the Incremental Term Loan of $1.3.

Discontinued Operations — Cash flows used in discontinued operations for the six months ended June 29, 2024 relate primarily to disbursements for liabilities retained in connection with previous dispositions.

Cash flows used in discontinued operations for the six months ended July 1, 2023 relate primarily to disbursements for professional fees incurred in connection with the claims activities related to the large power projects in South Africa (see Notes 3 and 15 to the condensed consolidated financial statements for additional details).

Change in Cash and Equivalents due to Changes in Foreign Currency Exchange Rate s — Changes in foreign currency exchange rates did not have a significant impact on our cash and equivalents during the first six months of 2024 and 2023.

Cash flows used in investing activities of continuing operations for the nine months ended September 30, 2023 were comprised of net cash utilized in the acquisitions of TAMCO and ASPEQ of $547.3 and capital expenditures of $16.5, partially offset by proceeds from COLI policies of $2.6.

Financing Activities — Cash flows from financing activities of continuing operations for the nine months ended September 28, 2024 were comprised of (i) net borrowings under the Credit Agreement and trade receivables financing arrangement of $148.2 and $31.0, respectively, primarily in connection with the Ingénia acquisition, (ii) fees paid in connection with the August 30, 2024 amendment of our Credit Agreement, and (iii) net repayments under our other various debt instruments of $0.8.

These net borrowings were partially offset by minimum tax withholdings paid on behalf of employees related to long-term incentive awards, net of proceeds from options exercised, of $1.1.

Cash flows from financing activities of continuing operations for the nine months ended September 30, 2023 were comprised of net borrowings under the Credit Agreement and trade receivables financing arrangement of $396.3 and $32.0, respectively, primarily in connection with the TAMCO and ASPEQ acquisitions.

These borrowings were partially offset by minimum withholdings paid on behalf of employees on long-term incentive awards, net of proceeds from options exercised, of $1.5, and fees paid in connection with the Incremental Term Loan of $1.3.

Net repayments under our other various debt instruments totaled $0.4.

Discontinued Operations — Cash flows used in discontinued operations for the nine months ended September 28, 2024 relate primarily to the final payment under the Settlement Agreement of $25.1 (net of the cash received upon maturation of the related foreign currency forward contracts of $2.0) to MHI and disbursements for liabilities retained in connection with previous dispositions.

Cash flows used in discontinued operations for the nine months ended September 30, 2023 relate primarily to (i) cash payments of $25.3 made by DBT to MHI during the three months ended September 30, 2023 in connection with the Settlement Agreement, (ii) disbursements of $14.5 for professional fees and support costs incurred principally in connection with the claims resolved by the Settlement Agreement, and (iii) local taxes of $3.8 paid in South Africa, which we subsequently

recovered during the fourth quarter of 2023, partially offset by the recovery of legal costs we were awarded in arbitration proceedings between DBT and MHI of $6.8.

Refer to Notes 3 and 15 to the condensed consolidated financial statements for additional details related to the Settlement Agreement.

Borrowings and Availability

Borrowings — The following summarizes our debt activity (both current and non-current) for the six months ended June 29, 2024.

Borrowings — The following summarizes our debt activity (both current and non-current) for the nine months ended September 28, 2024:

2023 Borrowings Repayments Other (5)

September 28,

Revolving loans (1)

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___________________________

(1) While the revolving credit facility extends through August 2027 under the terms of the 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.

(1) The revolving credit facility extends through August 2027 under the terms of the Credit Agreement and is primarily used to provide liquidity for funding acquisitions, including related fees and expenses, and 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.

Balances are net of unamortized debt issuance costs of $1.3 and $1.7 at September 28, 2024 and December 31, 2023, respectively.

(3) Under this arrangement, we can borrow, on a continuous basis, up to $100.0, 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.

At September 28, 2024, we had $17.5 of available borrowing capacity under this facility after giving effect to outstanding borrowings of $47.0.

(4) Primarily includes balances under a purchase card program of $1.4 and $1.9 and finance lease obligations of $0.9 and $0.5 at September 28, 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.

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

At June 29, 2024, we were in compliance with all covenants of the Credit Agreement.

Availability — At June 29, 2024, we h ad $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.

Senior Credit Facilities

A detailed description of our senior credit facilities is included in our 2023 Annual Report on Form 10-K.

On August 30, 2024, we entered into a Second Amendment to the Amended and Restated Credit Agreement and Incremental Facility Activation Notice (the “Second Amendment”) with Bank of America, N.A., as administrative agent (the “Administrative Agent”), the lenders party thereto, and certain domestic subsidiaries of the Company, as guarantors, which amends the Amended and Restated Credit Agreement, dated as of August 12, 2022 (as amended, the “Credit Agreement”) with the lenders party thereto, Deutsche Bank AG, as foreign trade facility agent, and the Administrative Agent.

The Second Amendment increases the aggregate revolving credit commitments under the Credit Agreement from $500.0 to $1,000.0 and makes certain conforming changes and other amendments to the Credit Agreement.

We expect to utilize the increased revolving credit capacity to finance, in part, permitted acquisitions, to pay related fees, costs and expenses and for other lawful corporate purposes.

In connection with the Second Amendment, we recorded $2.6 of debt issuance costs classified within “Other assets” on the condensed consolidated balance sheet as of September 28, 2024.

At September 28, 2024, we were in compliance with all covenants of the Credit Agreement.

Availability — At September 28, 2024, we h ad $834.0 of available borrowing capacity under our revolving credit facilities, after giving effect to borrowings under the domestic revolving loan facilities of $155.0 and $11.0 reserved for outstanding letters of credit.

In addition, at September 28, 2024, we had $8.9 of available issuance capacity under our foreign credit instrument facilities after giving effect to $16.1 reserved for outstanding letters of credit.

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

We expect that we will continue to access these markets as appropriate to maintain liquidity and to provide sources of funds for general corporate purposes, acquisitions or to refinance existing debt.

Other Borrowings and Financing Activities

During the third quarter of 2024, we renewed, and increased the capacity of, our trade receivables financing agreement for the next 12 months, whereby we can borrow, on a continuous basis, up to $100.0, as available.

Company-owned Life Insurance

The Company has investments in COLI policies, which are recorded at their cash surrender value at each balance sheet date.

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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.

During the first nine months of 2024, the Company borrowed $41.2 against the cash surrender value of these COLI policies.

Such borrowings were used primarily 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.

The cash surrender value of the Company’s investments in COLI assets, net of the aforementioned borrowing, was $34.0 and $76.7 at September 28, 2024 and December 31, 2023, respectively, recorded in “Other assets” on the condensed consolidated balance sheets.

See Note 12 to the condensed consolidated financial statements for additional information.

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Other Matters

Contractual Obligations — Other than the borrowings under our revolving loan facility in connection with the Ingénia acquisition discussed above, there have been no material changes in the amounts of our contractual obligations from those disclosed in our 2023 Annual Report on Form 10-K.

Our total net liabilities for unrecognized tax benefits including interest were $3.9 as of June 29, 2024.

Based on the outcome of certain examinations or as a result of the expiration of statutes of limitations for certain jurisdictions, we believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits could decrease by up to $0.2.

Contractual Obligations — Other than items discussed in the borrowings and availability section above, and new operating leases referenced in Note 5 to the condensed consolidated financial statements, there have been no material changes in the amounts of our contractual obligations from those disclosed in our 2023 Annual Report on Form 10-K.

Our total net liabilities for unrecognized tax benefits including interest were $4.0 as of September 28, 2024.

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.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis