2
0
2
2
A
N
N
U
A
L
R
E
P
O
R
T
S
P
X
T
E
C
H
N
O
L
O
G
I
E
S
T H E P O W E R O F T E C H N O L O G I E S
2022
2022
ANNUAL
ANNUAL
REPORT
REPORT
T E C H N O L O G I E S
S P X T E C H N O L O G I E S B U S I N E S S S E G M E N T S
HVAC
Our HVAC segment offers package cooling towers, commercial and industrial refrigeration products,
engineered air movement, residential and commercial boilers and comfort heating solutions. The com-
bination of our leading brands and our focus on innovating to meet our customers’ expanding needs
enables us to deliver high-value-added products in commercial, industrial and residential markets.
DETECTION &
MEASUREMENT
Our Detection & Measurement segment provides specialized underground location and inspection
equipment, fare collection systems, aids to navigation, and communication technologies products.
We have market-leading brands, with scalable platforms and technologies. Our value-creating
solutions make people’s lives easier and safer, and enable our customers to be more efficient.
D E A R F E L L O W S H A R E H O L D E R S ,
In August, we adopted the name SPX Technologies to reflect our commitment to leveraging technology
solutions that enhance customers’ experiences, and enable success in a rapidly changing world. Each
of our platforms is focused on developing innovative designs, products, and solutions to allow our
customers to be safer, more efficient, and more sustainable.
I am very proud of our team for their accomplishments across both segments last year. In our HVAC
Heating platform, we continued our focus on customer efficiency and increasing penetration of digital
solutions and high-efficiency products. Our new PROTOOLS™ tech mobile app helps technicians in the
field become hydronics experts by putting our boiler product information at their fingertips in a mobile
environment, while our interactive, mobile-friendly parts catalog makes it easier and faster than ever to
locate precision components for our Weil-McLain business’ full line of residential and commercial boilers.
Our HVAC Cooling platform marked an important anniversary in 2022: 100 years since the founding of
our Marley Cooling Towers brand, the originator of the cooling tower, and a global leader in cooling
solutions. Our company has a strong tradition of innovation in HVAC, evolving early cooling towers
into one of the most efficient means of cooling available. Last year we continued to see customer
traction with new innovations, such as our CoolSpec™ software, an intuitive tool that helps compare
and select cooling products faster and easier than ever before. We also advanced our continuous
improvement initiatives, and benefitted from a solid performance in our Cincinnati Fan business,
which we acquired in 2021.
In our Detection & Measurement segment, we further extended our Aids to Navigation platform with
the acquisition of International Tower Lighting, LLC ("ITL"), a widely recognized provider of high-quality
obstruction lighting solutions. We also continued to see strong customer demand for our portable
S P X T E C H N O L O G I E S 2 0 2 2 A R
51320_1CV-SPX2022AR.indd 5-8
51320_1CV-SPX2022AR.indd 5-8
Consolidated Segment
Income1 (M)
Adjusted EPS1
$250
$3.10
$201
$2.33
Another Year of
Strong Growth
2021
2022
2021
2022
expeditionary airfield lighting systems which are rapidly deployable and eliminate the logistical
challenges of generators, cables and battery charging with self-sustaining solar-powered operation.
Our Location & Inspection platform continued to see strong growth and customer interest in
technology-enabled offerings, such as our CUES GraniteNet solution, a powerful software platform
that helps municipalities locate and remediate maintenance priorities using traditional and LIDAR-
enabled robotics as well as AI solutions.
In our CommTech platform, the integration of Enterprise Control Systems Ltd ("ECS"), which we acquired
in 2021, was a great success. In 2022 we received tens of millions of dollars of orders for products that
combine proprietary technologies from ECS and our flagship TCI business to create innovative defensive
intelligence applications. Also, in our Transportation platform, our Genfare business continued to
expand its innovative fare collection solutions for municipalities and began to see the benefits of an
emerging wave of demand related to infrastructure spending that we expect to continue for years.
SPX Technologies made considerable strides in our Environmental Social and Governance (ESG) journey
during 2022. We formally incorporated ESG as a key element of our strategic planning process for each
business, and adopted company-wide sustainability commitments, including a 30% reduction in green-
house gas emissions intensity by 2030, and more robust disclosures of Diversity & Inclusion metrics.
I am proud of what we have accomplished, and am pleased with our momentum and direction as a
company, and as a team. Today SPX Technologies is in a very strong position to continue successfully
executing on our value-creation roadmap which has guided our journey since late 2015. We entered
2023 with a robust backlog, solid customer demand for our products, and a strong balance sheet that
supports our growth plans for our strategic platforms. With a pipeline of attractive acquisition pros-
pects and a strong team to execute and manage integrations, I am very excited about the growth
opportunities ahead.
Looking forward, I am confident in the strength and future of SPX Technologies, and excited about the
opportunities that lie ahead. I am also confident that we have the right strategy and the right team in
place to continue generating value for years to come. Finally, I would like to thank you, our shareholders,
for your support and valuable feedback which helps guide our journey.
GENE LOWE
President and Chief Executive Officer
C O R P O R AT E I N F O R M AT I O N
Officers
NaTausha H. White, Vice President and
Chief Human Resources Officer
John W. Nurkin, Vice President, General Counsel
and Secretary
Mark A. Carano, Vice President, Chief Financial Officer
and Treasurer
Directors
T E C H N O L O G I E S
ANNUAL MEETING
SPX Technologies Annual
Meeting of Stockholders
May 9th, 2023, 8 a.m. ET*
Virtual Meeting
CORPORATE OFFICE
SPX Technologies
6325 Ardrey Kell Road, Suite 400
Charlotte, NC 28277
980-474-3700 | www.spx.com
TRANSFER AGENT
AND REGISTRAR
Computershare Investor Services
PO Box 505000
Louisville, KY 40233-5000
Inside the United States:
877-498-8861
Outside the United States:
781-575-2879
TDD/TTY for hearing impaired:
800-952-9245
Operators are available Monday–
Friday 9:00 a.m. to 5:00 p.m.
Eastern Time.
An interactive automated system is
available around the clock every day.
www.computershare.com
AUDITORS
Deloitte & Touche LLP
Charlotte, NC
STOCK EXCHANGE LISTING
New York Stock Exchange
Symbol “SPXC”
* Please consult Notice or proxy
card for details
3/13/23 11:01 AM
3/13/23 11:01 AM
SPX Technologies had another exciting year with numerous successes in 2022. We accelerated our organic and inorganic growth initiatives, significantly reduced our exposure to legacy liabilities, made additional progress on our continuous improvement and digital initiatives, and adopted sustainability commitments that align with our culture and values. These successes did not come without challenges. Our teams worked hard to overcome continued supply chain and labor constraints, leveraging our business system to meet strong levels of customer demand, and reflecting our solutions-oriented and people-focused culture.1 Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.LEFT TO RIGHTLEFT TO RIGHTMeenal A. Sethna, Audit Committee Chair, Executive Vice President and Chief Financial Officer, Littelfuse, Inc. David A. Roberts, Retired Executive Chairman, President and Chief Executive Officer, Carlisle Companies, Inc. Dr. Ruth G. Shaw, Governance & Sustainability Committee Chair, Former President and Chief Executive Officer, Duke Power Ricky D. Puckett, Compensation Committee Chair, Retired Executive Vice President, Chief Financial Officer, Treasurer and Chief Administrative Officer, Snyder’s-Lance, Inc. Robert B. Toth, Former Chairman, Chief Executive Officer and President, Polypore International, Inc. Eugene J. Lowe, III, President and Chief Executive Officer, SPX Technologies Angel Shelton Willis, Vice President, General Counsel & Secretary, Sealed Air Corporation Tana L. Utley, Retired Vice President of Large Power Systems Division, Caterpillar Inc. Patrick J. O’Leary, Chairman, Retired Executive Vice President, Finance, Treasurer and Chief Financial Officer, SPX Corporation (now SPX Technologies)J. Randall Data, President, Heating and Global OperationsSean McClenaghan, President, Global CoolingEugene J. Lowe, III, President and Chief Executive OfficerJohn W. Swann, III, President, Detection & Measurement Segment Consolidated Segment
Income1 (M)
Adjusted EPS1
$250
$3.10
$201
$2.33
Another Year of
Strong Growth
2021
2022
2021
2022
expeditionary airfield lighting systems which are rapidly deployable and eliminate the logistical
challenges of generators, cables and battery charging with self-sustaining solar-powered operation.
Our Location & Inspection platform continued to see strong growth and customer interest in
technology-enabled offerings, such as our CUES GraniteNet solution, a powerful software platform
that helps municipalities locate and remediate maintenance priorities using traditional and LIDAR-
enabled robotics as well as AI solutions.
In our CommTech platform, the integration of Enterprise Control Systems Ltd ("ECS"), which we acquired
in 2021, was a great success. In 2022 we received tens of millions of dollars of orders for products that
combine proprietary technologies from ECS and our flagship TCI business to create innovative defensive
intelligence applications. Also, in our Transportation platform, our Genfare business continued to
expand its innovative fare collection solutions for municipalities and began to see the benefits of an
emerging wave of demand related to infrastructure spending that we expect to continue for years.
SPX Technologies made considerable strides in our Environmental Social and Governance (ESG) journey
during 2022. We formally incorporated ESG as a key element of our strategic planning process for each
business, and adopted company-wide sustainability commitments, including a 30% reduction in green-
house gas emissions intensity by 2030, and more robust disclosures of Diversity & Inclusion metrics.
I am proud of what we have accomplished, and am pleased with our momentum and direction as a
company, and as a team. Today SPX Technologies is in a very strong position to continue successfully
executing on our value-creation roadmap which has guided our journey since late 2015. We entered
2023 with a robust backlog, solid customer demand for our products, and a strong balance sheet that
supports our growth plans for our strategic platforms. With a pipeline of attractive acquisition pros-
pects and a strong team to execute and manage integrations, I am very excited about the growth
opportunities ahead.
Looking forward, I am confident in the strength and future of SPX Technologies, and excited about the
opportunities that lie ahead. I am also confident that we have the right strategy and the right team in
place to continue generating value for years to come. Finally, I would like to thank you, our shareholders,
for your support and valuable feedback which helps guide our journey.
GENE LOWE
President and Chief Executive Officer
1Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.
63%
HVAC
37%
Detection &
Measurement
Revenue
$1.46B
46%
Detection &
Measurement
Consolidated
Segment Income*
$250M
54%
HVAC
*Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130 of this report.
Focused, Market Leading
~$1.46B(1)
Premium engineered niches Technology/innovation focus Market Leadership (#1 or #2)
High replacement revenue (~2/3) Mandated/spec driven markets
Less cyclical/capital intensive Diverse end markets
HVAC (~$914M)(1)
COOLING
MARLEY
SGS REFRIGERATION
CINCINNATI FAN
HEATING
WEIL-MCLAIN®
PATTERSON-KELLEY MARLEY ENGINEERED PRODUCTS
(1) 2022 revenue
2 // S P X T E C H N O L O G I E S 2 0 2 2 A R
Growth Platforms
T E C H N O L O G I E S
Detection & Measurement (~$547M)(1)
LOCATION & INSPECTION
RADIODETECTION
SENSORS & SOFTWARE
ULC TECHNOLOGIES
SCHONSTEDT
CUES
AIDS TO NAVIGATION
SABIK MARINE
FLASH TECHNOLOGY
SEALITE/AVLITE
ITL
COMMTECH/TRANSPORTATION
GENFARE
TCI
ENTERPRISE CONTROL SYSTEMS
S P X T E C H N O L O G I E S 2 0 2 2 A R // 3
Growth Strategy
Organic Growth
A key focus of our growth strategy is continually increasing the value we provide to customers
through innovative new products, services, and channels, and building on our successes to
expand our growth potential. This approach was evident in many of our achievements in 2022.
In our HVAC segment, our heating platform continued to see
demand growth for our electrical heating units with new
advanced digital controllers. We also had continued success
with our high-efficiency boilers, including both commercial
and residential lines. In our cooling platform, we celebrated
the 100th year anniversary of Marley Cooling Towers, our pri-
mary trade brand for cooling
applications, and experienced
strong customer traction with
our CoolSpec™ software, an
intuitive tool that helps custom-
ers select and compare cooling
products faster and easier than
ever before.
In our Detection & Measurement segment, our Location
& Inspection platform continued to deliver innovative and
sustainable solutions. This includes expanding our line of
ground-penetrating radar products for locating utility mains,
and discontinuing the sale of alkaline batteries, while launching
a new range of rechargeable (NiMH) batteries and charger
options to help limit customers’ environmental footprints. It
also includes the addition of optional AI features in our CUES
GraniteNet infrastructure management software platform,
helping to increase customer penetration of the solution.
In our Transportation platform, our Genfare Link digital
transit-fare management solution has won more than 50
customer accounts. Additionally, in our Aids to Navigation
(“AtoN”) platform, we continued to see strong demand for
our airfield lighting systems.
The Marley® NC Cooling Tower has set the standard for
high efficiency and low maintenance since its introduction,
and now has the highest cooling capacities available in a
package cooling tower.
Weil-McLain’s SVF delivers
energy efficiency and reliability.
The SVF is a leading-edge addition
to our commercial boilers ideal for
schools and municipal buildings,
hybrid applications or replacements.
4 // S P X T E C H N O L O G I E S 2 0 2 2 A R
Acquisitions
Using our attractive business platforms as a foundation for
strategic acquisitions allows us to compound our growth by
continually strengthening and expanding our future opportu-
nities. In 2022, we completed one acquisition (ITL) and saw
significant growth in prior year acquisitions that illustrate the
success of this approach.
In our HVAC segment, at the end of 2021, we acquired
Cincinnati Fan, a leader in engineered air movement. Over the
past year we have seen accelerating performance from this
business as it was further integrated into SPX Technologies’
culture and business system.
In our Detection & Measurement segment we continued
building on our successful AtoN platform, with the purchase
of ITL, a leader in the design and manufacture of highly
engineered AtoN systems, including obstruction lighting
for telecommunications towers, wind turbines and
numerous other structures. ITL broadens and strengthens
SPX Technologies’ position in AtoN by adding widely recog-
nized, high quality products and technology, including a leading
network operation center, and value added monitoring and
communications services.
Within our Communication Technologies ("CommTech")
platform, the integration of ECS, which we acquired in 2021,
has been highly successful and has enabled numerous orders for
innovative intelligence applications that combine proprietary
technologies from ECS and our flagship TCI business.
Communication Technologies (CommTech) has seen considerable
success integrating technologies to launch highly successful solutions
from TCI and the recently acquired ECS business.
Cincinnati Fan’s Centrifugal
Plug Fan is designed to efficiently
deliver large volumes of recirculated
air and is available in multiple designs
to deliver exacting performance.
Avlite’s AV-HMALS® or High Mobility Airfield
Lighting System is a robust and durable system
that provides lighting for airfields of up to 10,000ft
long for military, humanitarian, and civil applications.
// 5
2 0 2 2 A R // 5
// 5
2 0 2 2 A R
S P X T E C H N O L O G I E S 2 0 2 2 A R
S P X T E C H N O L O G I E S
S P X T E C H N O L O G I E S
S P X T E C H N O L O G I E S
S P X T E C H N O L O G I E S
Value Drivers
Digital
Enabling our customers to become more efficient, safer,
and productive is at the heart of our Digital initiatives. At
SPX Technologies we constantly look for new ways to use
software and data capture and analysis tools in conjunction
with our world-class hardware to help people work smarter.
As we advance this mission, we remain keenly focused on
security and data privacy, as we build on the success of such
products as our Genfare Link transit-fare management solution,
and CUES GraniteNet, a powerful asset management software
platform that helps water and wastewater municipalities
perform inspections, and locate and schedule maintenance
priorities faster and easier than ever.
In 2022, our HVAC Heating platform introduced a new product,
PROTOOLSTM which provides our customers with tech support
in the palm of their hand. Like our other digital tools, we
believe PROTOOLSTM is helping us win additional share in our
end markets and improving the value proposition of our
highly engineered solutions. Our HVAC Cooling platform
continues to see our customers benefit from our CoolSpecTM
product specification tool, which represents a significant leap
forward in ease and optimization of the cooling equipment
selection process.
Continuous
Improvement
From the way we prepare for meetings to
the way we execute on the production floor,
we are constantly seeking ways be more effi-
cient and productive. This takes the form of
investing in technology, finding innovative
ways to increase value to customers, and
providing tools and training to our people.
In 2022, SPX Technologies continued to build
on our continuous improvement momentum
by further extending the use of Lean and
80/20 programs across the enterprise.
Investing in these programs has been invalu-
able to our ability to continue successfully
advancing our value creation initiatives, and
managing the broad-based supply chain
and labor constraints faced by industrial
companies in recent years. We now have
full-time continuous improvement personnel
in each business, and have hundreds of Lean
projects underway.
6 // S P X T E C H N O L O G I E S 2 0 2 2 A R
People & Culture
Our people and culture are the foundation
of our success as a company.
At SPX Technologies we strive to build a strong culture where
everyone has a voice, and all voices matter. To enable success,
we invest in our people to help them acquire the skills needed
to grow and develop. We believe motivated employees thrive
in an environment where they are recognized and rewarded,
and see a clear path for advancement.
RiSE, our talent management framework, helps SPX Technologies
to Reach, Identify, Strengthen, and Engage our workforce. Our
initiatives include a wide array of activities ranging from techni-
cal skill building, leadership development, employee mentoring
programs and community engagement.
We value diversity and inclusion, and focus on ensuring that
all of our employees feel safe and empowered to make their
best contributions. We believe that the best ideas come from
groups where diverse backgrounds and points of view are
represented. To this end, we have a Diversity & Inclusion
Council, which is designed to promote awareness of the
principles of diversity and inclusion, to develop tools for
inclusive management, and to encourage diverse perspec-
tives. We have also developed networking and action
groups that highlight and develop solutions to challenges.
Our education and training programs, which are provided
to all employees, are helping our teams advance their
knowledge and awareness of diversity issues, and develop
the skills and behaviors required to embed these principles
into our culture.
SPX Technologies’
Employee Development
& Training Program
provides opportunities
for employees to develop
leadership and advanced
problem solving skills.
SPX Cooling
Technologies
employees celebrate
the 100th anniversary
of the Marley Cooling
Tower brand.
S P X T E C H N O L O G I E S 2 0 2 2 A R // 7
ESG
SPX Technologies is committed to a strong sustainability culture and a journey of continuous
improvement on environmental, social, and governance (ESG) issues.
We believe that our success depends on our resilient and sus-
tainable business strategy, especially in a rapidly changing
world. Our businesses, products and initiatives help support
our mission to create solutions for a smarter, more productive
future. From our cooling towers, which help reduce energy
usage in buildings, to our inspection equipment, which helps
remediate leakage of underground water, wastewater, and
natural gas distribution pipes, SPX Technologies offers a wide
array of highly efficient and innovative products for the main-
tenance of critical infrastructure.
greenhouse gas intensity by 30% by 2030.* We also incor-
porated ESG as a key element of our strategic planning
process for each business unit and began requiring each of
our businesses to consider ESG impacts and opportunities
when developing their annual and multi-year plans. At the
Board level, our Nomination & Governance Committee was
renamed the Governance and Sustainability Committee
to reflect the committee’s increasing responsibility over
sustainability matters, including the assessment of climate
risks and opportunities.
Consistent with our values, we set high standards for social
responsibility. Whether it is developing our employees through
training and development programs, supporting community
educational or charity events, or embracing diverse backgrounds
and points of view, we are committed to enabling a safer,
healthier, more inclusive, and sustainable society.
Looking ahead, we are very excited about our opportunities
to continue growing with a focus on sustainability. We believe
SPX Technologies is well positioned to thrive in a world where
Paris Climate Agreement targets are realized and we look
forward to continuing to deliver impactful and innovative
infrastructure solutions to a rapidly changing world.
In 2022, we published our fifth sustainability report with
enhanced levels of disclosure, refreshed our ESG materiality
assessment, adopted a human rights policy and, in early 2023,
adopted sustainability goals, including a commitment to reduce
A Day of Understanding was held at all SPX Technologies locations in 2022, focused on World Humanitarian Day,
providing employees an opportunity to learn about the cause and to give back to their communities.
SPX Technologies is proud to be
recognized as one of America's
most responsible companies.
(# 190 of 500)
For more information please visit
www.newsweek.com/rankings/
americas-most-responsible-
companies-2023
2023
In April 2022, The United Nations Mine Action Service (UNMAS)
recognized contributions to global demining by SPX Technologies’
Schonstedt business which provides magnetometers for locating
unexploded ordinance in former conflict zones.
*Reduction of scope 1 and scope 2 greenhouse gas emissions as a percent of revenue, using 2019 as the baseline.
*Reduction of scope 1 and scope 2 greenhouse gas emissions as a percent of revenue, using 2019 as the baseline.
8 // S P X T E C H N O L O G I E S 2 0 2 2 A R
T E C H N O L O G I E S
Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number: 1-6948
SPX Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
88-3567996
(I.R.S. Employer
Identification No.)
6325 Ardrey Kell Road Suite 400,
Charlotte, NC 28277
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (980) 474-3700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, Par Value $0.01
Trading Symbol(s)
SPXC
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to used the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued its audit report ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of
the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ (Box unchecked
pending adoption of final rules mandated by 17 C.F.R. §240.10D-1)
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant
to §240.10D-1(b). ☐ (Box unchecked pending adoption of final rules mandated by 17 C.F.R. §240.10D-1)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant as of July 2, 2022 was
$2,350,413,056. The determination of affiliate status for purposes of the foregoing calculation is not necessarily a conclusive
determination for other purposes.
____________________________________________________________________________
The number of shares outstanding of the registrant’s common stock as of February 17, 2023 was 45,342,160.
____________________________________________________________________________
Documents incorporated by reference: Portions of the Registrant’s proxy statement for its Annual Meeting to be held on
May 9, 2023 are incorporated by reference into Part III of this Annual Report on Form 10-K.
SPX TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-K TABLE OF CONTENTS
Part I
Item 1 – Business
Item 1A – Risk Factors
Item 1B – Unresolved Staff Comments
Item 2 – Properties
Item 3 – Legal Proceedings
Item 4 – Mine Safety Disclosures
Part II
Item 5 – Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6 – [Reserved]
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A – Quantitative and Qualitative Disclosures About Market Risk
Item 8 – Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
Item 9 – Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A – Controls and Procedures
Item 9B – Other Information
Item 9C – Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III
Item 10 – Directors, Executive Officers and Corporate Governance
Item 11 – Executive Compensation
Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 – Certain Relationships and Related Transactions, and Director Independence
Item 14 – Principal Accountant Fees and Services
Part IV
Item 15 – Exhibits and Financial Statement Schedules
Item 16 – Form 10-K Summary
Signatures
Index to Exhibits
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18
19
19
20
22
23
52
53
54
56
57
58
59
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62
116
116
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P A R T I
ITEM 1. Business
(All currency and share amounts are in millions)
Forward-Looking Information
Some of the statements in this document and any documents incorporated by reference, including any statements as to
operational and financial projections, constitute “forward-looking statements” within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the Securities Act of 1933, as amended.
These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties
and other factors that may cause our businesses’ or our industries’ actual results, levels of activity, performance or achievements
to be materially different from those expressed or implied by any forward-looking statements. Such statements may address our
plans, our strategies, our prospects, changes and trends in our business and the markets in which we operate under the heading
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) or in other sections of
this document. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “would,”
“should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “project,” “potential” or “continue” or the
negative of those terms or other comparable terminology. Particular risks and uncertainties facing us include economic, business
and other risks stemming from our internal operations, legal and regulatory risks, and uncertainties with respect to costs and
availability of raw materials, availability of labor, pricing pressures, pension funding requirements, integration of acquisitions,
and changes in the economy, as well as the impacts of the coronavirus disease (the “COVID-19 pandemic”), which is further
discussed in other sections of this document. These statements are only predictions. Actual events or results may differ
materially because of market conditions in our industries or other factors, and forward-looking statements should not be relied
upon as a prediction of actual results. In addition, management’s estimates of future operating results are based on our current
complement of businesses, which is subject to change as management selects strategic markets.
All the forward-looking statements are qualified in their entirety by reference to the risks and uncertainties discussed in this
filing, including under the heading “Risk Factors,” and any subsequent filing with the U.S. Securities and Exchange Commission
(“SEC”), as well as in any documents incorporated by reference that describe risks, uncertainties, and other factors that could
cause results to differ materially from those projected in these forward-looking statements. We caution you that these discussions
of risks and uncertainties may not be exhaustive. We operate in a continually changing business environment and frequently
enter into new businesses and product lines. We cannot predict these new risk factors, and we cannot assess the impact, if any, of
these new risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to
differ materially from those projected in any forward-looking statements. Accordingly, you should not rely on forward-looking
statements as a prediction of actual results. We disclaim any responsibility, except to the extent we are legally required, to update
or publicly revise any forward-looking statements to reflect events or circumstances that arise after the date of this document.
Business
SPX Technologies, Inc. (“SPX”, “our”, “the Company”, or “we”) is the successor registrant pursuant to Rule 12g-3(a)
under the Securities Exchange Act of 1934, as amended, to SPX Corporation (“Legacy SPX”) as a result of the completion on
August 15, 2022 of a holding company reorganization (the “Holding Company Reorganization”) effected as a merger of Legacy
SPX with and into SPX Merger, LLC, a subsidiary of the Company. Each share of Legacy SPX’s common stock, par value $0.01
per share, issued and outstanding immediately prior to the consummation of the Holding Company Reorganization was
automatically converted into an equivalent corresponding share of the Company's common stock having the same designations,
rights, powers and preferences and the qualifications, limitations and restrictions as the corresponding share of Legacy SPX
common stock being converted. Accordingly, upon consummation of the Holding Company Reorganization, Legacy SPX
stockholders became stockholders of the Company. Legacy SPX was founded in Muskegon, Michigan in 1912 as the Piston
Ring Company and adopted the name SPX Corporation in 1988. Its common stock had been listed on the New York Stock
Exchange since 1972. The terms “SPX,” “we” and “our” include Legacy SPX for periods prior to the consummation of the
Holding Company Reorganization as the context requires.
On September 26, 2015, we completed the spin-off to our stockholders (the “Spin-Off”) of all the outstanding shares of
SPX FLOW, Inc. (“SPX FLOW”), a wholly-owned subsidiary of SPX prior to the Spin-Off, which at the time of the Spin-Off
held the businesses comprising our Flow Technology reportable segment, our Hydraulic Technologies business, and certain of
our corporate subsidiaries.
Prior to the Spin-Off, our businesses serving the power generation markets had a major impact on the consolidated
financial results of SPX. In the years leading up to the Spin-Off, these businesses experienced significant declines in revenues
and profitability associated with weak demand and increased competition within the global power generation markets. Based on
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a review of our post-spin portfolio and the belief that a recovery within the power generation markets was unlikely in the
foreseeable future, we decided coming out of the Spin-Off that our strategic focus at that time would be on our (i) scalable
growth businesses that serve the heating, ventilation and cooling (“HVAC”) and detection and measurement markets and (ii)
power transformer and process cooling systems businesses. As a result, we have significantly reduced our exposure to the power
generation markets as indicated by the dispositions of our dry cooling and Balcke Dürr businesses during 2016. Additionally,
during 2018, we initiated a plan to wind-down the SPX Heat Transfer (“Heat Transfer”) business, with the wind-down
completed during the fourth quarter of 2020. As a result of completing such wind-down activities, we are reporting the Heat
Transfer business as a discontinued operation for all periods presented. Lastly, with its substantial completion of its remaining
scope on the large power projects in South Africa, our South African subsidiary, DBT Technologies (PTY) LTD (“DBT”),
completed wind-down activities during the fourth quarter of 2021. As a result of completing wind-down activities, we are
reporting the DBT business as a discontinued operation for all periods presented.
On September 2, 2020 and November 11, 2020, we completed the acquisitions of ULC Robotics (“ULC”) and Sensors &
Software, Inc. (“Sensors & Software”), respectively. ULC is a leading developer of robotic systems, mechanical learning
applications, and inspection technology for the energy, utility, and industrial markets, while Sensors & Software is a
manufacturer and distributor of ground penetrating radar products used for locating underground utilities, detecting unexploded
ordinances, and geotechnical and geological investigations. The post-acquisition operating results of ULC and Sensors &
Software are reflected within our Detection and Measurement reportable segment.
On April 19, 2021 and August 2, 2021, we completed the acquisitions of Sealite Pty Ltd and affiliated entities, including
Sealite USA, LLC (doing business as Avlite Systems) and Star2M Pty Ltd (collectively, “Sealite”), and Enterprise Control
Systems Ltd (“ECS”), respectively. Sealite is a leader in the design and manufacture of marine and aviation Aids to Navigation
products, while ECS is a manufacturer and designer of highly-engineered tactical datalinks and radio frequency (“RF”)
countermeasures, including counter-drone and counter-improvised explosive device RF jammers. The post-acquisition operating
results of Sealite and ECS are reflected within our Detection and Measurement reportable segment.
On October 1, 2021 we completed the sale of SPX Transformer Solutions, Inc. (“Transformer Solutions”) pursuant to the
terms of the Stock Purchase Agreement dated June 8, 2021 with GE-Prolec Transformers, Inc. (the “Purchaser”) and Prolec GE
Internacional, S. de R.L. de C.V. We are reporting Transformer Solutions as a discontinued operation for all periods presented.
On December 15, 2021, we completed the acquisition of Cincinnati Fan & Ventilator Co., Inc. (“Cincinnati Fan”), a leader
in engineered air movement solutions, including blowers and critical exhaust systems. The post-acquisition operating results of
Cincinnati Fan are reflected within our HVAC reportable segment.
On March 31, 2022, we completed the acquisition of International Tower Lighting, LLC (“ITL”), a leader in the design and
manufacture of highly-engineered Aids to Navigation systems, including obstruction lighting for telecommunications towers,
wind turbines and numerous other terrestrial obstructions. The post-acquisition operating results of ITL are reflected within our
Detection and Measurement reportable segment.
On November 1, 2022, SPX divested three wholly-owned subsidiaries that hold asbestos liabilities and certain assets,
including related insurance assets, to Canvas Holdco LLC, an entity formed by a joint venture of Global Risk Capital LLC and
an affiliate of Premia Holdings Ltd (the “Asbestos Portfolio Sale”). The divested subsidiaries have agreed to indemnify us and
our affiliates for their asbestos-related liabilities, which encompassed all of our consolidated asbestos-related liabilities and
contingent liabilities immediately prior to the divestiture. These indemnification obligations are not subject to any cap or time
limitation. The board of managers of the divested subsidiaries each received a solvency opinion from an independent advisory
firm that the divested subsidiaries were solvent after giving effect to the divestiture.
Unless otherwise indicated, the description of our business provided in Part I pertains to continuing operations only (see
Notes 1 and 4 to our consolidated financial statements for information on discontinued operations).
We are a diversified, global supplier of infrastructure equipment serving the HVAC and detection and measurement
markets. With operations in 15 countries and approximately 3,300 employees, we offer a wide array of highly engineered
infrastructure products with strong brands.
HVAC solutions offered by our businesses include package and process cooling equipment, engineered air quality
solutions, residential and commercial boilers, comfort heating, and ventilation products. Our market leading brands, coupled
with our commitment to continuous innovation and focus on our customers’ needs, enables our HVAC cooling and heating
businesses to serve an expanding number of industrial, commercial and residential customers. Growth for our HVAC businesses
will be driven by innovation, increased scalability, and our ability to meet the needs of broader markets.
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Our detection and measurement product lines encompass underground pipe and cable locators, inspection and rehabilitation
equipment, robotic systems, fare collection systems, communication technologies, and obstruction lighting. Our detection and
measurement solutions enable utilities, telecommunication providers and regulators, and municipalities and transit authorities to
build, monitor and maintain vital infrastructure. Our technology and decades of experience have afforded us a strong position in
specific detection and measurement markets. We intend to expand our portfolio of specialized products through new, innovative
hardware and software solutions in an attempt to (i) further capitalize on the detection and measurement markets we currently
serve and (ii) expand the number of markets that we serve.
Reportable Segments
Our operating segments are aggregated 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
Financial Accounting Standards Board Codification (“Codification”). Operating income for our reportable segments is
determined before considering 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-related costs. This is consistent with the way our Chief Operating Decision Maker (“CODM”) evaluates the
results of each segment.
During 2022, management concluded that, although the assessment of our reportable segments was performed using the
appropriate measures as defined by the Segment Reporting Topic of the Codification, the disclosure of operating income for each
of our reportable segments (“Segment Income”) was not consistent with the measure used by our CODM when evaluating the
results of, or allocating resources to, our reportable segments. We previously disclosed that Segment Income is determined
before considering impairments and special charges, long-term incentive compensation, certain other operating income/expense,
and other indirect corporate expenses. Our CODM also excludes the impact of intangible asset amortization expense, inventory
step-up charges, and certain other acquisition-related costs from Segment Income. Accordingly, Segment Income, as presented in
Note 7 to the consolidated financial statements, now excludes all of the items noted above. This change had no impact to the
amounts previously presented in our consolidated statements of operations for the years ended December 31, 2021 and 2020.
Although the impact of this change to previously disclosed Segment Income is not material, we revised the prior years’
presentation to be consistent with the current year disclosure. Refer to Notes 1 and 7 to our consolidated financial statements for
additional details.
HVAC Reportable Segment
Our HVAC reportable segment had revenues of $913.8, $752.1, and $740.8 in 2022, 2021 and 2020, respectively, and
backlog of $243.1 and $226.9 as of December 31, 2022 and 2021, respectively. Approximately 98% of the segment’s backlog as
of December 31, 2022 is expected to be recognized as revenue during 2023. The segment engineers, designs, manufactures,
installs and services cooling products and engineered air quality solutions for the HVAC and industrial markets, as well as
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 customer base in North America, Europe, and Asia. Core brands for our cooling products include Marley, Recold, SGS
and Cincinnati Fan, while our heating and ventilation products are sold under the Berko, Qmark, Fahrenheat, Leading Edge,
Patterson-Kelley, Weil-McLain, and Williamson-Thermoflo brands.
Detection and Measurement Reportable Segment
Our Detection and Measurement reportable segment had revenues of $547.1, $467.4, and $387.3 in 2022, 2021 and 2020,
respectively, and backlog of $251.0 and $153.6 as of December 31, 2022 and 2021, respectively. Approximately 80% of the
segment’s backlog as of December 31, 2022 is expected to be recognized as revenue during 2023. The segment engineers,
designs, manufactures, services, and installs underground pipe and cable locators, inspection and rehabilitation equipment,
robotic systems, fare collection systems, communication technologies, and obstruction lighting. The primary distribution
channels for the segment’s products are direct to customers and third-party distributors. The segment serves a global customer
base, with a strong presence in North America, Europe, Africa and Asia. Core brands for our underground pipe and cable
locators and inspection and rehabilitation equipment are Radiodetection, Pearpoint, Schonstedt, Dielectric, Riser Bond, Warren
G-V, Cues, ULC Robotics, and Sensors & Software. Our fare collection systems are sold under the Genfare brand, our
communication technologies products are sold under the TCI and ECS brands, and our obstruction lighting products are sold
under the Flash Technology, ITL, Sabik Marine, Sealite, and Avlite brands.
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Acquisitions
We regularly review and negotiate potential acquisitions in the ordinary course of business, some of which are or may be
material.
As previously indicated, we acquired ITL in 2022, Sealite, ECS, and Cincinnati Fan in 2021, and ULC and Sensors &
Software in 2020.
Divestitures
We regularly review and negotiate potential divestitures in the ordinary course of business, some of which are or may be
material. As previously indicated, the divestiture of three wholly-owned subsidiaries that hold asbestos liabilities and certain
assets, including related insurance assets, was completed in the fourth quarter of 2022 and the divestiture of Transformer
Solutions was completed in 2021. There were no divestitures in 2020. As previously indicated, we completed the wind-down of
our DBT and Heat Transfer businesses in the fourth quarters of 2021 and 2020, respectively.
International Operations
We are a multinational corporation with operations in over 15 countries. Sales outside the United States were $237.4,
$228.0 and $192.4 in 2022, 2021 and 2020, respectively.
See Note 7 to our consolidated financial statements for more information on our international operations.
Research and Development
We are actively engaged in research and development programs designed to improve existing products and manufacturing
methods and develop new products to better serve our current and future customers. These efforts encompass certain of our
products with divisional engineering teams coordinating their resources. We place particular emphasis on the development of
new products that are compatible with, and build upon, our manufacturing and marketing capabilities.
Patents/Trademarks
We own 141 domestic and 366 foreign patents (comprising 132 patent “families”) (foreign patents include patents in
individual countries in the European Union (“EU”), as well as EU-level patents), including 18 patents that were issued in 2022,
covering a variety of our products and manufacturing methods. We also own a number of registered trademarks. Although in the
aggregate our patents and trademarks are of considerable importance in the operation of our business, we do not consider any
single patent or trademark to be of such importance that its absence would adversely affect our ability to conduct business as
presently constituted. We are both a licensor and licensee of patents. For more information, please refer to “Risk Factors.”
Outsourcing and Raw Materials
We manufacture many of the components used in our products; however, our strategy includes outsourcing certain
components and sub-assemblies to other companies where strategically and economically beneficial. In instances where we
depend on third-party suppliers for outsourced products or components, we are subject to the risk of customer dissatisfaction
with the quality or performance of the products we sell due to supplier failure. In addition, business difficulties experienced by a
third-party supplier can lead to the interruption of our ability to obtain the outsourced product or component and ultimately to
our inability to supply products to our customers. We believe that we generally will be able to continue to obtain adequate
supplies of key products, components or appropriate substitutes at reasonable costs.
We are subject to increases in the prices of many of our key raw materials, including petroleum-based products and steel.
In recent years, we have generally been able to offset increases in raw material costs through corresponding product pricing
actions. Occasionally, we are subject to long-term supplier contracts, which may increase our exposure to pricing fluctuations.
Due to our diverse products and services, as well as the wide geographic dispersion of our production facilities, we use
numerous sources for the raw materials needed in our operations. We are not significantly dependent on any one or a limited
number of suppliers, and we have been able to obtain suitable quantities of raw materials at competitive prices.
For information regarding COVID-19 impacts, please refer to “MD&A - COVID-19 Pandemic, Supply Chain Disruptions
and Labor Shortages, and Cost Increases.”
Competition
Our competitive position cannot be determined accurately in the aggregate or by reportable or operating segment since we
and our competitors do not offer all the same product lines or serve all the same markets. In addition, specific reliable
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comparative figures are not available for many of our competitors. In most product groups, competition comes from numerous
concerns, both large and small. The principal methods of competition are service, product performance, technical innovation and
price. These methods vary with the type of product sold. We believe we compete effectively on the basis of each of these factors
as they apply to the various products and services offered.
Environmental Matters
See “Risk Factors - Risks Related to Contingent Liabilities,” “MD&A — Critical Accounting Estimates — Contingent
Liabilities,” and Note 15 to our consolidated financial statements for information regarding environmental matters.
Human Capital Resources
At December 31, 2022, we had approximately 3,300 employees, with approximately 2,600 employed in the United States.
We also leverage temporary workers to provide flexibility for our business and manufacturing needs. Six domestic collective
bargaining agreements cover approximately 340 of our employees. In addition, we have various collective labor arrangements
covering certain of our non-U.S. employee groups. While we generally have experienced satisfactory labor relations, we are
subject to potential union campaigns, work stoppages, union negotiations and other potential labor disputes.
We believe that our future success largely depends upon our continued ability to attract and retain highly skilled
employees. As such, we strive to provide an environment where employees are developed and provided challenging career
growth opportunities and know that their efforts and contributions are appreciated. We offer a “Total Rewards” program that
provides comprehensive compensation and benefits packages that are competitive with the market and choices designed to
reward employees and assist them in managing their well-being. We have focused significant time on re-working many of our
policies and programs to provide increased flexibility and work-life balance to our team members. Together, these opportunities
present significant growth potential for our employees from a financial, professional, and personal standpoint.
As part of our focus on building and sustaining a highly capable, engaged and motivated workforce that has the ability to
deliver on the current and future requirements of the Company, we continue to advance our talent management framework,
known as RiSE, which helps us Reach, Identify, Strengthen, and Engage our workforce. In 2022, we continued deployment of
our Frontline Leader Program and have now trained more than 180 leaders in the fundamentals of effective leadership,
communication, and team development. We also launched the third cohort of our Executive Leadership Development Program
expanding the bench strength of our most senior leaders. We are looking forward to adding the final piece to our leadership
development program in 2023 with the launch of our Mid-level Program, “Amplified Leadership.”
At the beginning of 2022, we launched our updated Global Employee Survey. This annual survey captures employee
feedback on topics related to Engagement and Diversity & Inclusion. The results of the survey informed discussions about what
is most important to our employees and helped us develop action plans to focus on those priorities.
During 2022, we continued our focus on enhancing our Diversity & Inclusion programs, aimed at ensuring that we provide
an inclusive environment where all employees feel valued and respected. We launched a new program engaging our entire
workforce in a conversation about Unconscious Bias and how we might mitigate biases that typically show up in the workplace.
In addition, we were able to leverage our online learning platform for our leaders, providing continuing education on the value of
Diversity & Inclusion and the importance of their roles as leaders, ensuring that all employees have opportunities to contribute
their perspectives. We launched our Diversity & Inclusion calendar highlighting days of celebration or remembrance that further
educate our employees on topics that are current and relevant and engaged our global workforce in activities related to World
Humanitarian Day. We believe that through these efforts we can unlock greater potential, provide new opportunities for our
employees, and benefit from diverse backgrounds and points of view. Valuing diversity and inclusion is, and will be, an on-
going part of the culture we are continuously working to strengthen.
Other Matters
No customer or group of customers that, to our knowledge, are under common control accounted for more than 10% of our
consolidated revenues for any period presented.
Our businesses maintain sufficient levels of working capital to support customer requirements, particularly inventory. We
believe our businesses’ sales and payment terms are generally similar to those of our competitors.
Many of our businesses closely follow changes in the industries and end markets they serve. In addition, certain businesses
have seasonal fluctuations. Historically, our businesses generally tend to be stronger in the second half of the year.
Our website address is www.spx.com. Information on our website is not incorporated by reference herein. We file reports
with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and
certain amendments to these reports. Copies of these reports are available free of charge on our website as soon as reasonably
5
practicable after we file the reports with the SEC. The SEC also maintains a website at www.sec.gov that contains reports, proxy
and information statements, and other information regarding issuers that file electronically with the SEC.
6
ITEM 1A. Risk Factors
(All currency and share amounts are in millions)
You should consider the risks described below and elsewhere in our documents filed with the SEC before investing in any
of our securities. We may amend, supplement or add to the risk factors described below from time to time in future reports filed
with the SEC.
Risks Related to our Markets and Customers
Many of the markets in which we operate are cyclical or are subject to industry events, and our results have been and could
be affected as a result.
Many of the markets in which we operate are subject to general economic cycles or industry events. In addition, certain of
our businesses are subject to market-specific cycles.
Furthermore, contract timing on projects, including those relating to communication technologies, fare collection systems,
obstruction lighting products, and process cooling systems and towers may cause significant fluctuations in revenues and profits
from period to period.
The businesses of many of our customers are to varying degrees cyclical and have experienced, and may continue to
experience, periodic downturns. Cyclical changes and specific industry events could also affect sales of products in our other
businesses. Downturns in the business cycles of our different operations may occur at the same time, which could exacerbate any
adverse effects on our business. In addition, certain of our businesses have seasonal and weather-related fluctuations.
Historically, many of our key businesses generally have tended to have stronger performance in the second half of the year. See
“MD&A - Results of Continuing Operations and Results of Reportable Segments.”
Our business depends on capital investment and maintenance expenditures by our customers.
Demand for most of our products and services depends on the level of new capital investment and planned maintenance
expenditures by our customers. The level of capital expenditures by our customers fluctuates based on planned expansions, new
builds and repairs, commodity prices, general economic conditions, availability of credit, and expectations of future market
behavior. Any of these factors, whether individually or in the aggregate, could have a material adverse effect on our customers
and, in turn, our business, financial condition, results of operations and cash flows.
Our customers have been and could be impacted by commodity availability and prices.
A number of factors outside our control, including fluctuating commodity prices, impact the demand for our products.
Increased commodity prices, including as a result of new or increased tariffs or the impact of new trade laws, may increase our
customers’ cost of doing business, thus causing them to delay or cancel large capital projects.
On the other hand, declining commodity prices may cause our customers to delay or cancel projects relating to the
production of such commodities. Reduced demand for our products and services could result in the delay or cancellation of
existing orders or lead to excess manufacturing capacity, which unfavorably impacts our absorption of fixed manufacturing
costs. Reduced demand may also erode average selling prices in the relevant market.
We operate in highly competitive markets. Our failure to compete effectively could harm our business.
We sell our products in highly competitive markets, which could result in pressure on our profit margins and limit our
ability to maintain or increase the market share of our products. We compete on a number of fronts, including on the basis of
service, product performance, technical innovation and price. We have a number of competitors with substantial technological
and financial resources, brand recognition and established relationships with global service providers. Some of our competitors
have lower cost structures, support from local governments, or both. In addition, new competitors may enter the markets in
which we participate. Competitors may be able to offer lower prices, additional products or services or a more attractive mix of
products or services, or services or other incentives that we cannot or will not match. These competitors may be in a stronger
position to respond quickly to new or emerging technologies and may be able to undertake more extensive marketing campaigns
and make more attractive offers to potential customers, employees and strategic partners. In addition, competitive environments
in slow-growth markets, to which some of our businesses have exposure, have been inherently more influenced by pricing and
domestic and global economic conditions. To remain competitive, we need to invest in manufacturing, marketing, customer
service and support, and our distribution networks. No assurances can be made that we will have sufficient resources to continue
to make the investment required to maintain or increase our market share or that our investments will be successful. If we do not
7
compete successfully, our business, financial condition, results of operations and cash flows could be materially adversely
affected.
Our business with various governments is subject to government contracting risks.
Our business with government agencies, including sales to prime contractors that supply these agencies, is subject to
government contracting risks. U.S. and other government contracts are subject to termination by the government, either for the
convenience of the government or for default as a result of our failure to perform under the applicable contract. If terminated by
the government as a result of our default, we could be liable for additional costs the government incurs in acquiring undelivered
goods or services from another source and any other damages it suffers. In addition, if we or one of our divisions were charged
with wrongdoing with respect to a U.S. government contract, the U.S. government could suspend us from bidding on or
receiving awards of new government contracts pending the completion of legal proceedings. If convicted or found liable, the
U.S. government could subject us to fines, penalties, repayments and treble and other damages, and/or bar us from bidding on or
receiving new awards of U.S. government contracts and void any contracts found to be tainted by fraud. The U.S. government
also reserves the right to debar a contractor from receiving new government contracts for fraudulent, criminal or other seriously
improper conduct.
Risks Related to our Suppliers and Vendors
The price and availability of raw materials and components has and may adversely affect our business.
We are exposed to a variety of risks relating to the price and availability of raw materials and components. In recent years,
we have faced volatility in the prices of many key raw materials (e.g., steel and oil) and key components (e.g., circuit boards),
including price increases in response to trade laws and tariffs and shortages related to the COVID-19 pandemic. Increases in the
prices of raw materials and components, including as a result of new or increased tariffs or the impact of new trade laws, or
shortages or allocations of materials and components may have a material adverse effect on our financial position, results of
operations or cash flows, as there may be delays in our ability, or we may not be able, to pass cost increases on to our customers,
or our sales may be reduced. We are subject to, or may enter into, long-term supplier contracts that may increase our exposure to
pricing fluctuations.
The fact that we outsource various elements of the products and services we sell subjects us to the business risks of our
suppliers and subcontractors, which could have a material adverse impact on our operations.
In areas where we depend on third-party suppliers and subcontractors for outsourced products, components or services, we
are subject to the risk of customer dissatisfaction with the quality or performance of the products or services we sell due to
supplier or subcontractor failure. In addition, business difficulties experienced by a third-party supplier or subcontractor can lead
to the interruption of our ability to obtain outsourced products or services and ultimately our inability to supply products or
services to our customers. Third-party supplier and subcontractor business interruptions can include, but are not limited to, work
stoppages, union negotiations and other labor disputes. Current economic conditions could also impact the ability of suppliers
and subcontractors to access credit and, thus, impair their ability to provide us quality products or services in a timely manner, or
at all.
Risks Related to Our Manufacturing and Operations
Cost overruns, inflation, delays and other risks could significantly impact our results, particularly with respect to fixed-price
contracts.
A portion of our revenues and earnings is generated through fixed-price contracts. We recognize revenues for certain of
these contracts over time whereby revenues and expenses, and thereby profit, in a given period are determined based on our
estimates as to the project status and the costs remaining to complete a particular project.
Estimates of total revenues and cost at completion are subject to many variables, including the length of time to complete a
contract. In addition, contract delays may negatively impact these estimates and our revenues and earnings results for affected
periods.
To the extent that we underestimate the remaining cost to complete a project, we may overstate the revenues and profit in a
particular period. Further, certain of these contracts provide for penalties or liquidated damages for failure to timely perform our
obligations under the contract, or require that we, at our expense, correct and remedy certain defects to the satisfaction of the
other party. Because some of our contracts are at a fixed price, we face the risk that cost overruns or inflation may exceed, erode
or eliminate our expected profit margin, or cause us to record a loss on our projects.
8
Our current and planned products may contain defects or errors that are detected only after delivery to customers. If that
occurs, our reputation may be harmed and we may face additional costs.
We cannot assure you that our product development, manufacturing and integration testing will be adequate to detect all
defects, errors, failures and quality issues that could impact customer satisfaction or result in claims against us with regard to our
products. As a result, we may have, and from time to time have had, to replace certain components and/or provide remediation in
response to the discovery of defects in products that are shipped. The occurrence of any defects, errors, failures or quality issues
could result in cancellation of orders, product returns, diversion of our resources, legal actions by our customers or our
customers’ end users and other losses to us or to any of our customers or end users, and could also result in the loss of or delay in
market acceptance of our products and loss of sales, which would harm our business and adversely affect our revenues,
profitability and cash flows.
Risks Related to Contingent Liabilities
Our South African subsidiary is subject to various claims, disputes, enforcement actions, litigation, arbitration and other
legal proceedings related to two large power projects in South Africa that could ultimately be resolved against it.
Since 2008, DBT had been executing on two large power projects in South Africa (Kusile and Medupi), on which it has
now substantially completed its scope of work. Over such time, the business environment surrounding these projects was
difficult, as DBT, along with many other contractors on the projects, experienced delays, cost over-runs, and various other
challenges associated with a complex set of contractual relationships among the end customer, prime contractors, various
subcontractors (including DBT and its subcontractors), and various suppliers. DBT is currently involved in a number of claims
relating to these challenges and may be subject to other claims, which could be significant. SPX has provided parent company
guarantees to certain counterparties in connection with these projects. We cannot give assurance that these claims and the costs
to assert DBT's claims and defend claims against DBT will not have a material adverse effect on our financial position, results of
operations, or cash flows. See “MD&A - Critical Accounting Estimates - Contingent Liabilities” and Note 15 to our consolidated
financial statements for further discussion.
We are subject to potential liability relating to claims, complaints and proceedings, including those relating environmental,
product liability and other matters.
We are subject to various laws, ordinances, regulations and other requirements of government authorities in the United
States and other nations. Additionally, changes in laws, ordinances, regulations, or other governmental policies may significantly
increase our expenses and liabilities.
Certain 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, environmental matters,
product liability matters, and other risk management matters (e.g., general liability, automobile, and workers’ compensation
claims). Periodically, claims, complaints and proceedings arising other than in the ordinary course of business have been asserted
or are pending against us or certain of our subsidiaries (e.g. patent infringement), including claims with respect to businesses that
we have acquired for matters arising before the relevant date of the acquisition. From time to time, we face actions by
governmental authorities, both in and outside the United States. 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. Our insurance may be insufficient or unavailable (e.g., because of insurer
insolvency) to protect us against potential loss exposures.
We face environmental exposures including, for example, those relating to discharges from and materials handled as part of
our operations, the remediation of soil and groundwater contaminated by petroleum products or hazardous substances or wastes,
and the health and safety of our employees. We may be liable for the costs of investigation, removal, or remediation of
hazardous substances or petroleum products on, under, or in our current or formerly owned or leased properties, or from third-
party disposal facilities that we may have used, without regard to whether we knew of, or caused, the presence of the
contaminants. The presence of, or failure to properly remediate, these substances may have adverse effects, including, for
example, substantial investigative or remedial obligations and limitations on the ability to sell or rent affected property or to
borrow funds using affected property as collateral. New or existing environmental matters or changes in environmental laws or
policies could lead to material costs for environmental compliance or cleanup. In addition, environmentally related product
regulations are growing globally in number and complexity and could contribute to increased costs with respect to disclosure
requirements, product sales and distribution related costs, and post-sale recycling and disposal costs. There can be no assurance
that these liabilities and costs will not have a material adverse effect on our financial position, results of operations, or cash
flows.
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See “MD&A - Critical Accounting Estimates - Contingent Liabilities” and Note 15 to our consolidated financial statements
for further discussion.
Risks Related to Macro-Economic, Domestic and World Events
Governmental laws and regulations could negatively affect our business.
Changes in laws and regulations to which we are or may become subject could have a significant negative impact on our
business. In addition, we could face material costs and risks if it is determined that we have failed to comply with relevant laws
and regulations. We are subject to U.S. Customs and Export Regulations, including U.S. International Traffic and Arms
Regulations and similar laws, which collectively control import, export and sale of technologies by companies and various other
aspects of the operation of our business; the Foreign Corrupt Practices Act and similar anti-bribery laws, which prohibit
companies from making improper payments to government officials for the purposes of obtaining or retaining business; the
California Transparency in Supply Chain Act and similar laws and regulations, which relate to human trafficking and anti-
slavery and impose new compliance requirements on our businesses and their suppliers; and the California Consumer Privacy
Act of 2018 and the European General Data Protection Regulation, which establish data management requirements for the
protection of personal information of individuals. While our policies and procedures mandate compliance with such laws and
regulations, there can be no assurance that our employees and agents will always act in strict compliance. Failure to comply with
such laws and regulations may result in civil and criminal enforcement, including monetary fines and possible injunctions
against shipment of product or other of our activities, which could have a material adverse impact on our results of operations
and financial condition.
Several of our businesses are reliant on or may be directly impacted by government regulations. Changes to these
regulations may have a significant negative impact on these businesses. For example, (i) a reduction of Federal Aviation
Administration regulations mandating lighting of towers and buildings at height; (ii) increases in Department of Energy
regulations on energy efficiency requirements for heating, and (iii) a reduction in regulations requiring 811 calls to be made
before the commencement of a digging project, could have a significant negative impact on these businesses. While we monitor
these regulations and our businesses’ plan for potential changes, there can be no assurance that we will be able to adapt in each
circumstance. Failure to adapt if regulations change could have a material adverse impact on our results of operations and
financial condition.
Difficulties presented by domestic economic, political, legal, accounting and business factors could negatively affect our
business.
In 2022, approximately 84% of our revenues were generated inside the United States. Our reliance on U.S. revenues and
U.S. manufacturing bases exposes us to a number of risks, including:
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Government embargoes or foreign trade restrictions such as antidumping duties, as well as the imposition of trade
sanctions by the United States against a class of products imported from or sold and exported to, or the loss of “normal
trade relations” status with, countries in which we conduct business, could significantly increase our cost of products
imported into or exported from the United States or reduce our sales and harm our business and the relaxation of
embargoes and foreign trade restrictions by the United States could adversely affect the market for our products in the
United States;
Customs and tariffs may make it difficult or impossible for us to move our products or assets across borders in a cost-
effective manner and may increase the cost of our raw materials, including raw materials sourced domestically;
Transportation and shipping expenses add cost to our products;
Complications related to shipping, including delays due to weather, labor action, or customs, may impact our profit
margins or lead to lost business;
Environmental and other laws and regulations could increase our costs or limit our ability to run our business; and
Our ability to obtain supplies from foreign vendors and ship products internationally may be impaired during times of
crisis or otherwise.
Any of the above factors or other factors affecting the movement of people and products into and from various countries to
North America could have a significant negative effect on our operations. In addition, our concentration on U.S. business may
make it difficult to enter new markets, making it more difficult for our businesses to grow.
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Worldwide economic conditions could negatively impact our businesses.
Many of our customers historically have tended to delay capital projects, including expensive maintenance and upgrades,
during economic downturns. Poor macroeconomic conditions could negatively impact our businesses by adversely affecting,
among other things, our:
Revenues;
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Profits;
Cash flows;
Customers’ orders, including order cancellation activity or delays on existing orders;
Customers’ ability to access credit;
Customers’ ability to pay amounts due to us; and
Suppliers’ and distributors’ ability to perform and the availability and costs of materials and subcontracted services.
Downturns in global economies could negatively impact our results of operations and prospects. In addition, economic
instabilities resulting from geopolitical activities, including instabilities associated with the armed conflict in Ukraine, and the
imposition of governmental sanctions in response thereto, and any conflict or threat of conflict that may affect Taiwan, could
negatively impact our results of operations and prospects.
Our non-U.S. revenues and operations expose us to numerous risks that may negatively impact our business.
To the extent we generate revenues outside of the United States, non-U.S. revenues and non-U.S. manufacturing bases
exposes us to a number of risks, including:
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Significant competition could come from local or long-term participants in non-U.S. markets who may have
significantly greater market knowledge and substantially greater resources than we do;
Local customers may have a preference for locally-produced products;
Credit risk or financial condition of local customers and distributors could affect our ability to market our products or
collect receivables;
Regulatory or political systems or barriers may make it difficult or impossible to enter or remain in new markets. In
addition, these barriers may impact our existing businesses, including making it more difficult for them to grow;
Local political, economic and social conditions, including the possibility of hyperinflationary conditions, political
instability, nationalization of private enterprises, or unexpected changes relating to currency could adversely impact
our revenues and operations;
Customs, tariffs and trade restrictions may make it difficult or impossible for us to move our products or assets across
borders in a cost-effective manner;
Transportation and shipping expenses add cost to our products;
Complications related to shipping, including delays due to weather, labor action, or customs, may impact our profit
margins or lead to lost business;
Local, regional or worldwide hostilities, including armed conflicts, could impact our operations;
Distance and language and cultural differences may make it more difficult to manage our business and employees and
to effectively market our products and services; and
Public health crises, including the outbreak of a pandemic or other contagious disease.
Any of the above factors or other factors affecting social and economic activity in the United Kingdom and China or
affecting the movement of people and products into and from these countries to our major markets, could have a significant
negative effect on our operations.
Climate change and legal or regulatory responses thereto may have an adverse impact on our business and results of
operations.
There is growing concern that increases in global average temperatures as a result of increased concentration of carbon
dioxide and other greenhouse gases in the atmosphere will cause significant adverse long-term climate changes, as well as more
near-term changes in weather patterns that could adversely impact our operations. Moreover, growing concern over climate
change may result in additional legal or regulatory requirements to disclose levels of carbon dioxide and other greenhouse gas
emissions or that are designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the
environment. Many of our manufacturing plants and the products we manufacture, particularly in the HVAC reportable segment,
use significant amounts of electricity generated by burning fossil fuels, which releases carbon dioxide. Additionally, many of the
products we manufacture in the HVAC reportable segment use natural gas or oil as a fuel source and may be subject to
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increasing regulatory restrictions aimed at “de-carbonization” or the elimination of such fuel sources. Increased energy or
compliance costs and expenses as a result of increased legal or regulatory requirements may cause disruptions in, or an increase
in the costs associated with, the manufacturing and distribution of our products and we may be required to develop product
improvements to satisfy developing energy-efficiency targets in order to remain competitive. In addition, the impacts of climate
change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and
results of operations. If we fail to achieve or improperly report on our progress on environmental and sustainability programs and
initiatives or fail to develop product improvements to satisfy developing energy-efficiency targets, the results could have an
adverse impact on our business, results of operations and financial condition.
Risks Related to Information, Technology and Cybersecurity
If we are unable to protect our information systems against data corruption, cyber-based attacks or network security
breaches, our operations could be disrupted.
We are increasingly dependent on cloud-based and other information technology (“IT”) networks and systems, some of
which are managed by third parties, to process, transmit, and store electronic information. We depend on such IT infrastructure
for electronic communications among our locations around the world and between our personnel and suppliers and customers. In
addition, we rely on these IT systems to record, process, summarize, transmit, and store electronic information, and to manage or
support a variety of business processes and activities, including, among other things, our accounting and financial reporting
processes; our manufacturing and supply chain processes; our sales and marketing efforts; and the data related to our research
and development efforts. The failure of our IT systems or those of our business partners or third-party service providers to
perform properly, or difficulties encountered in the development of new systems or the upgrade of existing systems, could
disrupt our business and harm our reputation, which may result in decreased sales, increased overhead costs, excess or obsolete
inventory, and product shortages, causing our business, reputation, financial condition, and operating results to suffer. Upon
expiration or termination of any of our agreements with third-party vendors, we may not be able to replace the services provided
to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition
from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete.
IT security threats are increasing in frequency and sophistication and we have detected numerous attempts to compromise
the security of our IT systems. Cyber-attacks may be random, coordinated, or targeted, including sophisticated computer crime
threats. These threats pose a risk to the security of our systems and networks, and those of our business partners and third-party
service providers, and to the confidentiality, availability, and integrity of our data. Despite our implementation of security
measures, cybersecurity threats, such as malicious software, ransomware, phishing attacks, computer viruses, and attempts to
gain unauthorized access, cannot be completely mitigated. Our business, reputation, operating results, and financial condition
could be materially adversely affected if, as a result of a significant cyber event or otherwise, our operations or industrial
processes are disrupted or shutdown; our confidential, proprietary information is stolen or disclosed; the performance or security
of our cloud-based product offerings is impacted; our intranet and internet sites are compromised; data is manipulated or
destroyed; we incur costs or are required to pay fines in connection with stolen customer, employee, or other confidential
information; we must dedicate significant resources to system repairs or increase cyber security protection; or we otherwise incur
significant litigation or other costs.
In addition, newer generations of certain of our products include IT systems, including systems that are cloud-based and/or
interconnect through the internet. These systems are subject to the same cybersecurity threats described above and the failure of
these systems, including by cyber-attack, could disrupt our customers’ business, leading to potential exposure for us.
Our technology is important to our success, and failure to develop new products or make the appropriate investment in
technology advancements may result in the loss of any sustainable competitive advantage in products, services and processes.
We believe the development of our intellectual property rights is critical to the success of our business. In order to maintain
our market positions and margins, we need to regularly develop and introduce high-quality, technologically advanced and cost-
effective products on a timely basis, in many cases in multiple jurisdictions around the world. Information technology systems,
platforms and products are critical to our operating environment, product offerings and competitive position. Certain
digitalization initiatives important to our long-term success may require capital investment, have significant risks associated with
their execution, and could take several years to implement. If we do not accurately predict, prepare and respond to new
technology innovations, market developments and changing customer needs, our revenues, profitability and long-term
competitiveness could be materially adversely affected.
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Failure to protect or unauthorized use of our intellectual property may harm our business.
Despite our efforts to protect our proprietary rights, unauthorized parties or competitors may copy or otherwise obtain and
use our products or technology. The steps we have taken may not prevent unauthorized use of our technology or knowledge,
particularly in foreign countries where the laws may not protect our proprietary rights to the same extent as in the United States.
Costs incurred to defend our rights may be material.
Acquisitions involve a number of risks and present financial, managerial and operational challenges.
Risks Related to Acquisitions and Dispositions
Our recent and future acquisitions involve a number of risks and may present financial, managerial and operational
challenges, including:
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Adverse effects on our reported operating results due to charges to earnings, including potential impairment charges
associated with goodwill and other intangibles;
Diversion of management attention from core business operations;
Integration of technology, operations, personnel and financial and other systems;
Increased expenses;
Increased foreign operations, often with unique issues relating to corporate culture, compliance with legal and
regulatory requirements and other challenges;
Assumption of known and unknown liabilities and exposure to litigation;
Increased levels of debt or dilution to existing stockholders;
Potential disputes with the sellers of acquired businesses; and
Potential cybersecurity risks, as acquired systems may not possess the appropriate security measures.
We conduct operational, financial, tax, systems, and legal due diligence on all acquisitions; however, we cannot assure that
all potential risks or liabilities are adequately discovered, disclosed, or understood in each instance.
In addition, internal controls over financial reporting of acquired companies may not be compliant with required standards.
Issues may exist that could rise to the level of significant deficiencies or, in some cases, material weaknesses, particularly with
respect to foreign companies or non-public U.S. companies.
Our integration activities may place substantial demands on our management, operational resources and financial and
internal control systems. Customer dissatisfaction or performance problems with an acquired business, technology, service or
product could also have a material adverse effect on our reputation and business.
Our failure to successfully complete acquisitions could negatively affect us.
We may not be able to consummate desired acquisitions, which could materially impact our growth rate, results of
operations, future cash flows and stock price. Our ability to achieve our goals depends upon, among other things, our ability to
identify and successfully acquire companies, businesses and product lines, to effectively integrate them and to achieve cost
savings. We may also be unable to raise additional funds necessary to consummate these acquisitions. In addition, decreases in
our stock price may adversely affect our ability to consummate acquisitions. Competition for acquisitions in our business areas
may be significant and result in higher prices for businesses, including businesses that we may target, which may also affect our
acquisition rate or benefits achieved from our acquisitions.
We may not achieve the expected cost savings and other benefits of our acquisitions.
We strive for and expect to achieve cost savings in connection with our acquisitions, including: (i) manufacturing process
and supply chain rationalization, (ii) streamlining redundant administrative overhead and support activities, (iii) restructuring and
repositioning sales and marketing organizations to eliminate redundancies, and (iv) achieving anticipated revenue synergies.
Cost savings expectations are estimates that are inherently difficult to predict and are necessarily speculative in nature, and we
cannot assure you that we will achieve expected, or any, cost savings in connection with an acquisition. In addition, we cannot
assure you that unforeseen factors will not offset the estimated cost savings or other benefits from our acquisitions. As a result,
anticipated benefits could be delayed, differ significantly from our estimates and the other information contained in this report,
or not be realized.
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Dispositions or liabilities retained in connection with dispositions could negatively affect us.
Our dispositions involve a number of risks and present financial, managerial and operational challenges, including
diversion of management attention from running our core businesses, increased expense associated with the dispositions,
potential disputes with the customers or suppliers of the disposed businesses, potential disputes with the acquirers of the
disposed businesses and a potential dilutive effect on our earnings per share.
If dispositions are not completed in a timely manner, there may be a negative effect on our cash flows and/or our ability to
execute our strategy. In addition, we may not realize some or all of the anticipated benefits of our dispositions. See “Business,”
“MD&A - Results of Discontinued Operations,” and Note 4 to our consolidated financial statements for the status of our
divestitures.
We have divested a number of businesses, including the Spin-Off in 2015. With respect to some of these former
businesses, we have contractually agreed to indemnify the counterparties against, or otherwise retain, certain liabilities,
including, certain lawsuits, tax liabilities, product liability claims, and environmental matters. Even without ongoing contractual
indemnification obligations, we could be exposed to liabilities arising out of the businesses for certain activities prior to the
divestitures. In addition, certain of the counterparties to those divestitures and/or the divested businesses have agreed to
indemnify us or assume certain liabilities relating to those divestitures. However, there can be no assurance that the indemnity or
assumption of liability by the counterparties or divested businesses will be sufficient to protect us against the full amount of
these liabilities, or that a counterparty or divested business will be able to fully satisfy its obligations. Third parties also could
seek to hold us responsible for any of the liabilities that a counterparty or divested business agreed to assume. Even if we
ultimately succeed in recovering any amounts for which we were initially held liable, we may be temporarily required to bear
these losses ourselves.
The COVID-19 pandemic has had, and could continue to have, an adverse impact on our business.
Risks Related to the COVID-19 Pandemic
The COVID-19 pandemic had an adverse impact on our consolidated results of operations in the first half of 2020, with
diminishing impacts during the second half of 2020 and during 2021 and 2022. The COVID-19 pandemic could have an adverse
impact on our business and consolidated financial results during 2023 and we are unable to determine the extent, duration, or
nature at this time. The intensity, duration and governmental responses to the pandemic, as well as the pace of vaccination efforts
and the emergence of new variants of the virus that cause COVID-19, are all highly uncertain and could contribute to the
ultimate impact on our business. Specifically, the COVID-19 pandemic could impact:
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Our suppliers’ ability to perform and the availability of materials and subcontractors’ services;
Our customers’ ability to access credit and to pay amounts due to us;
Our distributors’ ability to perform; and
Our ability to:
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Access credit;
◦ Meet contractual deadlines with customers, which could result in delays in payments from customers and
customers possibly seeking delay damages;
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Complete acquisitions due to potential adverse impacts on targeted businesses or product lines; and
◦ Meet the financial covenants under our senior credit and other debt agreements.
The impact of the COVID-19 pandemic has resulted, and could continue to result, in:
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Disruptions in our supply chain or increased costs for certain components or commodities;
Labor shortages and difficulties filling the positions within our organization;
A prolonged reduction in the demand for certain of our products;
A prolonged shut-down of one or more of our facilities either due to exposure to the COVID-19 pandemic or to
further restrictive government orders;
Asset impairment charges;
A loss of productivity, greater cybersecurity risk and other fraud risks, and difficulties in maintaining internal
controls over financial reporting due to the impact of employees working remotely;
An adverse impact to the funded status of our defined benefit pension plans, which could result in additional
funding requirements for the plans;
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The diversion of management’s attention from core business operations; and
Restructuring charges if we decide to reduce headcount as a result of a decline in customer demand.
Any of the above risks could have a material adverse impact on our business and consolidated financial results.
Risks Related to Human Capital Resources
The loss of key personnel and an inability to attract and retain qualified employees could have a material adverse effect on
our operations.
We are dependent on the continued services of our leadership team. The loss of these personnel without adequate
replacement could have a material adverse effect on our operations. Additionally, we need qualified managers and skilled
employees with technical and manufacturing industry experience in many locations in order to operate our business successfully.
From time to time, there may be a shortage of qualified managers or skilled labor, which may make it more difficult and
expensive for us to attract and retain qualified employees. If we were unable to attract and retain sufficient numbers of qualified
individuals or our costs to do so were to increase significantly, our operations could be materially adversely affected.
We are subject to work stoppages, union negotiations, labor disputes and other matters associated with our labor force, which
may adversely impact our operations and cause us to incur incremental costs.
At December 31, 2022, we had six domestic collective bargaining agreements covering approximately 340 of our over
3,300 employees. Three of these collective bargaining agreements expire in 2023 and are scheduled for negotiation and renewal.
We also have various collective labor arrangements covering certain non-U.S. employee groups. We are subject to potential
union campaigns, work stoppages, union negotiations and other potential labor disputes. Further, we may be subject to work
stoppages, which are beyond our control, at our suppliers or customers.
Risks Related to Financial Matters
We may not be able to finance future needs or adapt our business plan to react to changes in economic or business conditions
because of restrictions placed on us by our senior credit facilities and any existing or future instruments governing our other
indebtedness.
Our senior credit facilities and agreements governing our other indebtedness contain, or future or revised instruments may
contain, various restrictions and covenants that limit our ability to make distributions or other payments to our investors and
creditors unless certain financial tests or other criteria are satisfied. We also must comply with certain specified financial ratios
and tests. Our subsidiaries may also be subject to restrictions on their ability to make distributions to us. In addition, our senior
credit facilities and agreements governing our other indebtedness contain or may contain additional affirmative and negative
covenants. Material existing restrictions are described more fully in the “MD&A - Liquidity and Financial Condition - Senior
Credit Facilities” and Note 13 to our consolidated financial statements. Each of these restrictions could affect our ability to
operate our business and may limit our ability to take advantage of potential business opportunities, such as acquisitions.
If we do not comply with the covenants and restrictions contained in our senior credit facilities and agreements governing
our other indebtedness, we could default under those agreements, and the debt, together with accrued interest, could be declared
due and payable. If we default under our senior credit facilities, the lenders could cause all our outstanding debt obligations
under our senior credit facilities to become due and payable or require us to repay the indebtedness under these facilities. If our
debt is accelerated, we may not be able to repay or refinance our debt. In addition, any default under our senior credit facilities or
agreements governing our other indebtedness could lead to an acceleration of debt under other debt instruments that contain
cross-acceleration or cross-default provisions. If the indebtedness under our senior credit facilities is accelerated, we may not
have sufficient assets to repay amounts due under our senior credit facilities or other debt securities then outstanding. Our ability
to comply with these provisions of our senior credit facilities and agreements governing our other indebtedness will be affected
by changes in the economic or business conditions or other events beyond our control. Complying with our covenants may also
cause us to take actions that are not favorable to us and may make it more difficult for us to successfully execute our business
strategy and compete, including against companies that are not subject to such restrictions.
Currency conversion risk could have a material impact on our reported results of business operations.
Our operating results are presented in U.S. dollars for reporting purposes. The strengthening or weakening of the U.S.
dollar against other currencies in which we conduct business could result in unfavorable translation effects as the results of
transactions in foreign countries are translated into U.S. dollars.
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Increased strength of the U.S. dollar will increase the effective price of our products sold in U.S. dollars into other
countries, including countries utilizing the Euro, which may have a material adverse effect on sales or require us to lower our
prices, and also decrease our reported revenues or margins related to sales conducted in foreign currencies to the extent we are
unable or determine not to increase local currency prices. Likewise, the increased strength of the U.S. dollar could allow
competitors with foreign-based manufacturing costs to sell their products in the U.S. at lower prices. Alternatively, decreased
strength of the U.S. dollar could have a material adverse effect on the cost of materials and products purchased overseas.
Similarly, increased or decreased strength of the currencies of non-U.S. countries in which we manufacture will have a
comparable effect against the currencies of other jurisdictions in which we sell. For example, our Radiodetection business
manufactures a number of detection instruments in the United Kingdom and sells to customers in other countries, therefore
increased strength of the British pound sterling will increase the effective price of these products sold in British pound sterling
into other countries; and decreased strength of British pound sterling could have a material adverse effect on the cost of materials
and products purchased outside of the United Kingdom.
Credit and counterparty risks could harm our business.
The financial condition of our customers and distributors could affect our ability to market our products or collect
receivables. In addition, financial difficulties faced by our customers may lead to cancellations or delays of orders.
Our customers may suffer financial difficulties that make them unable to pay for a project when completed, or they may
decide not or be unable to pay us, either as a matter of corporate decision-making or in response to changes in local laws and
regulations. We cannot assure you that expenses or losses for uncollectible amounts will not have a material adverse effect on
our earnings and cash flows.
Changes in tax laws and regulations or other factors could cause our income tax obligations to increase, potentially reducing
our net income and adversely affecting our cash flows.
We are subject to taxation in various jurisdictions around the world. In preparing our financial statements, we provide for
income taxes based on current tax laws and regulations and the estimated taxable income within each of these jurisdictions. Our
income tax obligations, however, may be higher due to numerous factors, including changes in tax laws or regulations and the
outcome of audits and examinations of our tax returns.
Officials in some of the jurisdictions in which we do business have proposed, or announced that they are reviewing, tax
changes that could potentially increase taxes, and other revenue-raising laws and regulations, including those that may be
enacted as a result of various OECD projects. Changes in applicable U.S. or foreign tax laws and regulations, or their
interpretation and application, could have a material impact on our financial position, results of operations, and cash flows.
As indicated in Note 12 to our consolidated financial statements, certain of our income tax returns are currently under
audit. In connection with these and any future audits, there is a risk that we could be challenged by tax authorities on certain of
the tax positions we have taken, or will take, on our tax returns. Although we believe that current tax laws and regulations
support our positions, there can be no assurance that tax authorities will agree with our positions. In the event tax authorities
were to challenge one or more of our tax positions, an unfavorable outcome could have a material adverse impact on our
financial position, results of operations, and cash flows.
If the fair value of any of our reporting units is insufficient to recover the carrying value of the goodwill and other intangible
assets of the respective reporting unit, a material non-cash charge to earnings could result.
At December 31, 2022, we had goodwill and other intangible assets, net, of $856.9. We conduct annual impairment testing
to determine if we will be able to recover all or a portion of the carrying value of goodwill and indefinite-lived intangibles. In
addition, we review goodwill and indefinite-lived intangible assets for impairment more frequently if impairment indicators
arise. If the fair value is insufficient to recover the carrying value of our goodwill and indefinite-lived intangibles, we may be
required to record a material non-cash charge to earnings.
The fair values of our reporting units generally are based on discounted cash flow projections that are believed to be
reasonable under current and forecasted circumstances, the results of which form the basis for making judgments about carrying
values of the reported net assets of our reporting units. Other considerations are also incorporated, including comparable price
multiples. Many of our businesses closely follow changes in the industries and end markets that they serve. Accordingly, we
consider estimates and judgments that affect the future cash flow projections, including principal methods of competition such as
volume, price, service, product performance and technical innovations and estimates associated with cost reduction initiatives,
capacity utilization, and assumptions for inflation and foreign currency changes. We monitor impairment indicators across all of
16
our businesses. Significant changes in market conditions and estimates or judgments used to determine expected future cash
flows that indicate a reduction in carrying value may give, and have given, rise to impairments in the period that the change
becomes known.
Cost reduction actions may affect our business.
Cost reduction actions often result in charges against earnings. These charges can vary significantly from period to period
and, as a result, we may experience fluctuations in our reported net income and earnings per share due to the timing of cost
reduction actions.
Changes in key estimates and assumptions related to our defined benefit pension and postretirement plans, such as discount
rates, assumed long-term return on assets, assumed long-term trends of future cost, and accounting and legislative changes,
as well as actual investment returns on our pension plan assets and other actuarial factors, could affect our results of
operations and cash flows.
We have defined benefit pension and postretirement plans, including both qualified and non-qualified plans, which cover a
portion of our salaried and hourly employees and retirees, including a portion of our employees and retirees in foreign countries.
As of December 31, 2022, our net liability to these plans was $95.8. The determination of funding requirements and pension
expense or income associated with these plans involves significant judgment, particularly with respect to discount rates, long-
term trends of future costs and other actuarial assumptions. If our assumptions change significantly due to changes in economic,
legislative and/or demographic experience or circumstances, our pension and other benefit plans’ expense, funded status and our
required cash contributions to such plans could be negatively impacted. In addition, returns on plan assets could have a material
impact on our pension plans’ expense, funded status and our required contributions to the plans. Changes in regulations or law
could also significantly impact our obligations. For example, see “MD&A - Critical Accounting Estimates” for the impact that
changes in certain assumptions used in the calculation of our costs and obligations associated with these plans could have on our
results of operations and financial position.
Our incurrence of additional indebtedness may affect our business and may restrict our operating flexibility.
At December 31, 2022, we had $246.8 in total indebtedness. On that same date, we had $489.0 of available borrowing
capacity under our revolving credit facilities, after giving effect to $11.0 reserved for outstanding letters of credit. In addition, at
December 31, 2022, we had $10.2 of available issuance capacity under our foreign credit instrument facilities after giving effect
to $14.8 reserved for outstanding letters of credit. At December 31, 2022, our cash and equivalents balance was $157.1. See
“MD&A - Liquidity and Financial Condition - Borrowings” and Note 13 to our consolidated financial statements for further
discussion. We may incur additional indebtedness in the future, including indebtedness incurred to finance, or assumed in
connection with, acquisitions. We may renegotiate or refinance our senior credit facilities or other debt facilities, or enter into
additional agreements that have different or more stringent terms. Increases in the level of our indebtedness relative to our cash
balances could:
•
•
•
•
•
•
Impact our ability to obtain new, or refinance existing, indebtedness, on favorable terms or at all;
Limit our ability to obtain, or obtain on favorable terms, additional debt financing for working capital, capital
expenditures or acquisitions;
Limit our flexibility in reacting to competitive and other changes in the industry and economic conditions;
Limit our ability to pay dividends on our common stock in the future;
Coupled with a substantial decrease in net operating cash flows due to economic developments or adverse
developments in our business, make it difficult to meet debt service requirements; and
Expose us to interest rate fluctuations to the extent existing borrowings are, and any new borrowings may be, at variable
rates of interest, which could result in higher interest expense and interest payments in the event of increases in interest
rates.
Our ability to make scheduled payments of principal or pay interest on, or to refinance, our indebtedness and to satisfy our
other debt obligations will depend upon our future operating performance, which may be affected by general economic,
financial, competitive, legislative, regulatory, business and other factors beyond our control. In addition, we cannot assure you
that future borrowings or equity financing will be available for the payment or refinancing of our indebtedness. If we are unable
to service our indebtedness, whether in the ordinary course of business or upon an acceleration of such indebtedness, we may
pursue one or more alternative strategies, such as restructuring or refinancing our indebtedness, selling assets, reducing or
delaying capital expenditures, revising implementation of or delaying strategic plans or seeking additional equity capital. Any of
these actions could have a material adverse effect on our business, financial condition, results of operations and stock price. In
addition, we cannot assure that we would be able to take any of these actions, that these actions would enable us to continue to
satisfy our capital requirements, or that these actions would be permitted under the terms of our various debt agreements.
Numerous banks in many countries are syndicate members in our credit facility. Failure of one or more of our larger
lenders, or several of our smaller lenders, could significantly reduce availability of our credit, which could harm our liquidity.
17
Failure of our internal control over financial reporting could adversely affect our business and financial results.
Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal
control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for
external purposes in accordance with accounting principles generally accepted in the United States (“GAAP”). Because of its
inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent
or detect a misstatement of our financial statements or fraud. Any failure to maintain an effective system of internal control over
financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud.
Risks Related to Ownership of Our Common Stock
Provisions in our corporate documents and Delaware law may delay or prevent a change in control of our company, and
accordingly, we may not consummate a transaction that our stockholders consider favorable.
Provisions of our Certificate of Incorporation and By-laws may inhibit changes in control of our company not approved by
our Board. These provisions include, for example: a classified board of directors with directors serving staggered three-year
terms; a prohibition on stockholder action by written consent; a requirement that special stockholder meetings be called only by
our Chairman, President or Board; advance notice requirements for stockholder proposals and nominations; limitations on
stockholders’ ability to amend, alter or repeal the By-laws; enhanced voting requirements for certain business combinations
involving substantial stockholders; the authority of our Board to issue, without stockholder approval, preferred stock with terms
determined in its discretion; and limitations on stockholders’ ability to remove directors. In addition, we are afforded the
protections of Section 203 of the Delaware General Corporation Law, which could have similar effects. In general, Section 203
prohibits us from engaging in a “business combination” with an “interested stockholder” (each as defined in Section 203) for at
least three years after the time the person became an interested stockholder unless certain conditions are met. These protective
provisions could result in our not consummating a transaction that our stockholders consider favorable or discourage entities
from attempting to acquire us, potentially at a significant premium to our then-existing stock price.
Increases in the number of shares of our outstanding common stock could adversely affect our common stock price or dilute
our earnings per share.
Sales of a substantial number of shares of common stock into the public market, or the perception that these sales could
occur, could have a material adverse effect on our stock price. As of December 31, 2022, we had the ability to issue up to an
additional 3.851 shares as restricted stock units, performance stock units, or stock options under our 2019 Stock Compensation
Plan. We also may issue a significant number of additional shares, in connection with acquisitions, through a registration
statement, or otherwise. Additional shares issued would have a dilutive effect on our earnings per share.
None.
ITEM 1B. Unresolved Staff Comments
The following is a summary of our principal properties as of December 31, 2022:
ITEM 2. Properties
Location
Facilities
Owned
Leased
No. of
Approximate
Square Footage
HVAC reportable segment
9 U.S. states and 2 foreign countries
Detection and Measurement reportable segment
8 U.S. states and 4 foreign countries
Corporate
Total
1 U.S. state
16
20
1
37
(in millions)
1.7
0.4
—
2.1
1.5
0.4
0.1
2.0
In addition to manufacturing plants, we own and lease various sales, service and other locations throughout the world. We
consider these properties, as well as the related machinery and equipment, to be well maintained and suitable and adequate for
their intended purposes.
18
ITEM 3. Legal Proceedings
See “Risk Factors,” “MD&A — Critical Accounting Estimates — Contingent Liabilities,” and Note 15 to our consolidated
financial statements for a discussion of legal proceedings.
We are also subject to legal proceedings and claims 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.
Not applicable.
ITEM 4. Mine Safety Disclosures
19
P A R T I I
ITEM 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock is traded on the New York Stock Exchange under the symbol “SPXC.”
We discontinued dividend payments in September 2015 in connection with the Spin-off and, thus, there have been no
dividends declared since such time.
On May 10, 2022, our Board of Directors re-authorized management, in its sole discretion, to repurchase our capital stock
in any fiscal year. Under the authorization, we may repurchase shares through open market purchases, privately negotiated
transactions or otherwise, and at prices and times and in amounts as we determine, subject to applicable restrictions under our
senior credit agreement. Our senior credit agreement permits an unlimited amount of share repurchases if our consolidated
leverage ratio (as calculated under the senior credit agreement) is less than 2.75 to 1.00. Otherwise, the senior credit agreement
restricts our repurchase of shares if the amount of repurchases in any fiscal year exceeds $100.0 million plus a basket amount
based on our cumulative consolidated net income from a specified date.
Pursuant to this re-authorization, we repurchased 706,827 of our common stock for an aggregate purchase price of $33.7
million during the year ended December 31, 2022. As of December 31, 2022, the maximum approximate dollar value of our
common stock that may be purchased under this authorization during the current fiscal year is $66.3 million. The number of
stockholders of record of our common stock as of February 17, 2023 was 2,268.
20
This graph shows a five-year comparison of cumulative total returns for SPX, the S&P 500 Index, the S&P 1500
Industrials Index, and the S&P 600 Index. The graph assumes an initial investment of $100 on December 31, 2017 and the
reinvestment of dividends.
Company Performance
$300
$250
$200
$150
$100
$50
$0
2017
2018
2019
2020
2021
2022
SPX Technologies, Inc.
S&P 500
S&P 1500 Industrials
S&P 600
2017
2018
2019
2020
2021
2022
SPX Technologies, Inc.
$
100.00 $
89.23 $
162.09 $
173.75 $
190.12 $
S&P 500
S&P 1500 Industrials
S&P 600
100.00
100.00
100.00
95.62
86.62
90.25
125.72
112.43
109.07
148.85
125.58
119.51
191.58
153.43
149.71
209.14
156.88
143.57
123.63
21
ITEM 6. [Reserved]
22
ITEM 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
(in millions, except share data)
The following should be read in conjunction with our consolidated financial statements and the related notes thereto.
Unless otherwise indicated, amounts provided in Item 7 pertain to continuing operations only.
COVID-19 Pandemic, Supply Chain Disruptions and Labor Shortages, and Cost Increases
The COVID-19 pandemic had an adverse impact on our consolidated results of operations in the first half of 2020, with
diminishing impacts during the second half of 2020 and 2021. However, during January 2022, there was an increase in
COVID-19 cases at certain of our manufacturing facilities, which resulted in a high-level of absenteeism at such facilities during
the month. In addition, since the second half of 2021, certain of our businesses have experienced supply chain disruptions, as
well as labor shortages, while all of our businesses have experienced increases in raw material, component, and transportation
costs. The combination of these matters negatively impacted our operating results during the first half of 2022, particularly
during the first quarter of 2022, as we experienced lower absorption of manufacturing costs and, in some cases, the negative
impact of cost increases on fixed-price customer contracts. During the second half of 2022, the supply chain disruptions and
labor shortages lessened, resulting in improved productivity at a number of our manufacturing facilities. In addition, the negative
impact of cost increases diminished due to the effect of pricing initiatives that were implemented throughout 2022.
Potential Impacts of Russia/Ukraine Conflict
The Russia/Ukraine conflict, and governmental actions implemented in response to the conflict, have not had a significant
adverse impact on our operating results during 2022. We are monitoring the availability of certain raw materials that are supplied
by businesses in these countries. However, at this time, we do not expect the conflict to have a significant adverse impact to our
operating results.
Executive Overview
Revenues for 2022 totaled $1,460.9, compared to $1,219.5 in 2021 (and $1,128.1 in 2020). The increase in revenues during
2022, compared to 2021, was due to organic revenue growth within both our HVAC and Detection and Measurement reportable
segments and the impact of the Sealite, ECS and Cincinnati Fan acquisitions in 2021 and the ITL acquisition in 2022. The
increase in organic revenue within the HVAC reportable segment was driven by increased sales of heating and cooling products
associated with price increases and, to a lesser extent, volume increases. Organic growth within the Detection and Measurement
reportable segment was due to continued strong order trends for our short-cycled businesses and execution of large projects
within the fare collection, communication technologies, and obstruction lighting businesses. The increase in revenues in 2021,
compared to 2020, was due primarily to (i) the impact of the ULC and Sensors & Software acquisitions in 2020 and the Sealite,
ECS and Cincinnati Fan acquisitions in 2021 and (ii) an increase in organic revenue. The increase in organic revenue was due
primarily to higher sales of heating and underground pipe and locator products, partially offset by lower sales of cooling
products. During the first half of 2020, sales of heating and underground pipe and locator products were impacted negatively by
the COVID-19 pandemic. Sales of cooling products declined in 2021, as several large cooling projects favorably impacted sales
in 2020.
For 2022, operating income totaled $51.0, compared to $73.7 in 2021 (and $96.9 in 2020). The decrease in operating
income in 2022, compared to 2021, was due primarily to the loss on the Asbestos Portfolio Sale of $73.9, partially offset by an
increase in income within our HVAC and Detection and Measurement reportable segments of $49.0 associated with the increase
in revenue noted above. The decrease in operating income in 2021, compared to 2020, was due primarily to increases in asbestos
product liability charges of $16.9, corporate expense of $10.8, amortization and acquisition-related costs of $11.4, partially offset
by an increase in segment income of $13.5. The increase in asbestos product liability charges was due primarily to an
unfavorable trend in the percentage of claims with payment (versus claims dismissed without payment), while the increase in
corporate expense was due to additional costs associated with continuous improvement and strategic initiatives and higher
incentive compensation expense in 2021. The increase in segment income was due primarily to the increase in revenues noted
above.
Operating cash flows used in continuing operations totaled $115.2 in 2022, compared to operating cash flows from
continuing operations of $131.2 in 2021 (and $105.2 in 2020). The decrease in operating cash flows from continuing operations
in 2022, compared to 2021, was due primarily to (i) a cash contribution of $138.8 associated with funding the Asbestos Portfolio
Sale; (ii) income tax payments, net of refunds, of $59.6 (compared to income tax refunds, net of tax payments, of $5.5 during the
year ended December 31, 2021), with a significant portion of the 2022 payments related to the gain on sale of Transformer
Solutions; (iii) elevated purchases of inventory components in order to manage the potential risk associated with the current
supply chain environment; (iv) decreases in cash flows at certain of our project-related businesses, as cash receipts for these
businesses are often subject to contractual milestones that can impact cash receipts from period to period; (v) net payments for
asbestos-related matters of $15.3 (compared to net recoveries of $0.3 during the year ended December 31, 2021); and (vi) cash
payments of $10.0 in connection with the transfer of our postretirement life insurance benefit obligation to an insurance carrier.
The increase in operating cash flows from continuing operations in 2021, compared to 2020, was due primarily to (i) improved
23
cash flows within our heating and underground pipe and locator businesses associated with improved profitability, (ii) a decline
in working capital at certain of our businesses, (iii) insurance proceeds of $15.0 associated with the settlement of an asbestos
insurance coverage matter, and (iv) income tax refunds, net of tax payments, of $5.5 in 2021 (compared to income tax payments,
net of refunds, of $7.6 in 2020).
Additional details on certain matters noted above as well as significant items impacting the financial results for 2022, 2021,
and 2020 are as follows:
2022:
•
Transfer of Postretirement Life Insurance Benefit Obligation
◦
◦
On February 17, 2022, we transferred our obligation for life insurance benefits under our postretirement
benefit plans to an insurance carrier for cash consideration paid of $10.0.
In connection with the transfer, we:
•
•
Recorded a net charge of $0.3 to “Other income (expense), net;” and
Eliminated the (i) third-party cost and (ii) internal resource requirements associated with
administering these benefits.
◦
See Note 11 to our consolidated financial statements for additional details.
•
On March 31, 2022, we completed the acquisition of ITL.
◦
◦
The purchase price for ITL was $40.4, net of cash acquired of $1.1.
The post-acquisition operating results of ITL are included within our Detection and Measurement reportable
segment.
•
Amendment of Senior Credit Agreement
◦
◦
◦
On August 12, 2022, we amended and restated our credit agreement (the “Credit Agreement”).
The Credit Agreement provides for committed senior secured financing with an aggregate amount of $770.0,
with a final maturity of August 12, 2027.
See Note 13 to our consolidated financial statements for additional details.
•
Settlement and Actuarial Gains and Losses - Pension and Postretirement Plans
◦
◦
◦
◦
In connection with the sale of Transformer Solutions, a significant number of participants of the U.S. Pension
Plan (“U.S. Plan”) who were employees of Transformer Solutions elected to receive lump-sum payments from
the U.S. Plan.
The extent of these lump-sum payments, combined with other lump-sum payments that were made by the U.S.
Plan during the first nine months of 2022, required us to record settlement and actuarial losses of $6.2 during
this period.
In addition, we recorded settlement and actuarial gains of $8.0 in the fourth quarter of 2022 in connection with
the annual remeasurement of our pension and postretirement plans, with such gains resulting primarily from
the impact of increases in discount rates, partially offset by lower than expected returns on plan assets.
See Notes 1 and 11 to our consolidated financial statements for additional details.
•
•
Repurchases of Common Stock — During the second quarter of 2022, we repurchased 706,827 shares of our common
stock for $33.7.
Changes in Estimated Fair Value of an Equity Security
◦ We recorded losses of $3.0 within “Other income (expense), net” related to decreases in the estimated fair
value of an equity security that we hold.
See Note 17 to our consolidated financial statements for additional details.
◦
• Asbestos-Related Matters
◦
◦
During the third quarter of 2022, we received a ruling from a North Carolina trial court that certain excess
insurance carriers associated with our asbestos product liability matters are not required to cover the costs of
defending suits that are dismissed without an indemnity payment.
As a result of this ruling, we recorded charges of $21.7 during the third quarter, with $16.5 reflected in
“Income from continuing operations before income taxes” and the remainder in “Income (loss) on disposition
of discontinued operations, net of tax.”
24
◦
On November 1, 2022, we completed the Asbestos Portfolio Sale. In connection with the sale, we contributed
$138.8 to the divested subsidiaries and recorded a loss on sale of $73.9. See Notes 1 and 4 to our consolidated
financial statements for additional detail.
•
Impairment of Goodwill and Indefinite-Lived Intangible Assets
◦
◦
During the fourth quarter of 2022, we performed our annual impairment analyses of our goodwill and
indefinite-lived intangible assets. As a result of such analyses, we recorded impairment charges of $13.4, with
$12.0 related to goodwill and remainder to trademarks.
See Notes 1 and 10 to our consolidated financial statements for additional details.
2021:
•
On April 19, 2021, we completed the acquisition of Sealite.
◦
◦
The purchase price for Sealite was $80.3, net of cash acquired of $2.3.
The post-acquisition operating results of Sealite are reflected within our Detection and Measurement reportable
segment.
•
On August 2, 2021, we completed the acquisition of ECS.
◦
◦
The purchase price for ECS was $39.4, net of cash acquired of $5.1.
The seller was eligible for additional cash consideration of up to $15.0, upon achievement of certain financial
performance milestones.
▪
▪
▪
▪
The estimated fair value of such contingent consideration was $8.2 as of the date of acquisition.
During the fourth quarter of 2021, we concluded that the probability of achieving the above financial
performance milestones had lessened due to a delay in the execution of a large order, resulting in a
reduction of the estimated fair value/liability of $6.7, with such amount recorded to “Other operating
(income) expense, net” during the quarter.
During the first and second quarters of 2022, we further reduced the estimated fair value/liability by
$0.9 and $0.4, respectively, with such amounts recorded to “Other operating (income) expense, net.”
The financial performance milestones were not achieved and, thus, as of December 31, 2022, the
estimated fair value/liability related to the contingent consideration was $0.0.
◦
The post-acquisition operating results of ECS are included within our Detection and Measurement reportable
segment.
•
On December 15, 2021, we completed the acquisition of Cincinnati Fan.
◦
◦
◦
The purchase price for Cincinnati Fan was $145.2, net of cash acquired of $2.5.
During the second quarter of 2022, we agreed to a final adjustment to the purchase price, related to acquired
working capital, resulting in our receipt of $0.4 of cash during the quarter.
The post-acquisition operating results of Cincinnati Fan are included within our HVAC reportable segment.
•
On October 1, 2021, we completed the sale of Transformer Solutions.
Transformer Solutions is included in discontinued operations for all periods presented.
◦
◦ We received net cash proceeds of $620.6 and recorded a gain of $382.2 to “Gain (loss) on disposition of
◦
discontinued operations, net of tax” in 2021.
During the first quarter of 2022, we paid $13.9 to the buyer of Transformer Solutions related primarily to the
settlement of the final working capital balances of the business.
•
DBT (our South Africa subsidiary):
◦
Large Power Projects
▪
▪
On February 22, 2021 and April 28, 2021, DBT received favorable rulings from dispute adjudication
panels.
•
•
In connection with the rulings, DBT received South African Rand 126.6 ($8.6 at time of
payment) and South African Rand 82.0 ($6.0 at the time of payment), respectively.
As the rulings are subject to further arbitration, such amounts have not been reflected in our
consolidated statements of operations.
On July 5, 2021, DBT received notice from Mitsubishi Heavy Industries Power – ZAF (or
“MHI”) of its intent to seek final and binding arbitration on the first ruling. The arbitration
occurred in December 2022 with the ruling from such arbitration yet to be received.
In May 2021, and in connection with certain claims made by MHI, MHI made a demand and received
payment of South African Rand 178.7 (or $12.5 at the time of payment) on bonds issued by a bank.
•
25
•
•
•
Under the terms of the bonds and our senior credit agreement, we were required to fund the
payment.
DBT denies liability for these claims and, thus, fully intends to seek, and believes it is legally
entitled to, reimbursement of the amounts demanded.
On October 11, 2022, a dispute adjudication panel ruled MHI drew (in both the May 2021
and September 2020 bond draws) on amounts in excess of the bond values stipulated in the
contracts and was required to refund DBT South African Rand 90.8 (or $5.3) of the
previously demanded amounts, plus interest of South African Rand 12.5 (or $0.7). MHI paid
these amounts on October 14, 2022.
• We have reflected the remaining amounts related to the May 2021 and September 2020 bond
draws within “Assets of DBT and Heat Transfer” on the consolidated balance sheet as of
December 31, 2022.
▪
On June 4, 2021, DBT received a revised version of the interim claim that had been provided by MHI.
On September 21, 2022, an arbitration tribunal ruled that only South African Rand 349.6 (or $20.4) of
MHI's revised claim had been brought appropriately before a dispute adjudication board as required
under the relevant subcontracts, with MHI's other claims dismissed from the arbitration proceedings.
MHI subsequently notified DBT of its intent to refer the claims dismissed to a new adjudication
panel. DBT has numerous defenses and, thus, we do not believe that DBT has a probable loss
associated with any of these claims.
◦
In the fourth quarter of 2021, we completed the wind-down of DBT.
▪
▪
The wind-down was a culmination of a strategic shift away from the power generation markets.
As a result of completing the wind-down plan, we are reporting DBT as a discontinued operation for
all periods presented.
•
Asbestos Product Liability Matters:
◦
◦ During 2021, we recorded charges of $51.2 related to asbestos product liability matters, with such charges
related primarily to an unfavorable trend in the percentage of claims with payment (versus dismissed without
payment).
Of such charges, $48.6 were reflected in “Income from continuing operations before income taxes” and the
remainder in “Gain (loss) on disposition of discontinued operations, net of tax.”
Insurance recoveries for asbestos product liability matters, net of payments, totaled $0.3 in 2021.
These recoveries included $15.0 associated with the settlement of an insurance coverage matter.
See Note 15 to our consolidated financial statements for additional details.
◦
◦
◦
•
Actuarial Gains on Pension and Postretirement Plans:
◦
◦
During 2021, we recorded net actuarial gains of $9.9 in the fourth quarter of 2021 in connection with the
annual remeasurement of our pension and postretirement plans, with such gains resulting primarily from
increases in discount rates.
See Notes 1 and 11 to our consolidated financial statements for additional details.
•
Changes in the Estimated Fair Value of an Equity Security:
◦
◦
During 2021, we recorded gains of $11.8 within “Other income (expense), net” related to increases in the
estimated fair value of an equity security that we hold.
See Note 17 to our consolidated financial statements for additional details.
•
ULC Contingent Consideration, Indefinite-Lived Intangible Assets, and Goodwill:
◦
◦
◦
The seller of ULC was eligible for additional cash consideration of up to $45.0, upon achievement of certain
operating and financial performance milestones.
During the third quarter of 2021, we concluded that the operating and financial milestones associated with the
ULC contingent consideration would not be achieved.
As a result, we reversed the related liability of $24.3, with the offset to “Other operating (income) expense,
net.”
◦
◦ We also concluded that the lack of achievement of the above milestones, along with lower than anticipated
future cash flows, were indicators of potential impairment related to ULC’s indefinite-lived intangible assets
and goodwill.
As such, we tested ULC’s infinite-lived intangible assets and goodwill for impairment during the third quarter
of 2021.
Based on such testing, we determined that the carrying value of ULC’s net assets exceeded the implied fair
value of the business.
As a result, we recorded an impairment charge of $24.3, with $23.3 related to goodwill and the remainder to
trademarks.
◦
◦
26
◦
◦
During the fourth quarter of 2021, we performed our annual analysis of ULC’s indefinite-lived intangible
assets and goodwill. As a result of such analysis, we recorded impairment charges of $5.2, with $0.3 related to
trademarks and $4.9 to goodwill.
See Note 1 and 10 to our consolidated financial statements for additional details.
•
Sensors & Software Contingent Consideration:
◦
◦
◦
◦
The seller of Sensors & Software was eligible for additional cash consideration of up to $3.9, upon
achievement of certain financial performance milestones.
During the fourth quarter of 2021, we concluded that certain of the financial performance milestones
associated with the Sensors & Software contingent consideration had been achieved.
As a result, we recorded an additional charge of $0.6 to “Other operating (income) expense, net” and the
resulting fair value of such contingent consideration of $1.3 is reflected as a liability in our consolidated
balance sheet at December 31, 2021.
The $1.3 was paid during 2022 and is reflected within cash flows from financing activities in our consolidated
statement of cash flows for the year ended December 31, 2022.
2020:
•
In February 2020, and as a result of the December 2019 amendment that extended the maturity date of our senior credit
facilities to December 17, 2024, we entered into additional interest rate swap agreements. These additional swaps:
◦
◦
◦
◦
Had an initial notional amount of $248.4;
Cover the period March 2021 to November 2024; and
Effectively convert a portion of the borrowings under our senior credit facilities to a fixed rate, plus an
applicable margin, during the period noted above.
See Note 14 to our consolidated financial statements for additional details.
•
On September 2, 2020, we completed the acquisition of ULC.
◦
◦
The purchase price for ULC was $89.2, net of cash acquired of $4.0.
The post-acquisition operating results of ULC are reflected within our Detection and Measurement reportable
segment.
•
In September 2020, MHI made a demand and received payment of South African Rand 239.6 (or $14.3 at the time of
payment) on certain bonds that were issued by a bank in favor of MHI.
◦
◦
◦
◦
◦
As required under the terms of the bonds and our senior credit agreement, we funded the South African Rand
239.6.
In its demand, MHI purported that DBT failed to carry out certain contractual obligations.
DBT denies liability and, thus, intends to seek, and believes it is fully entitled to, reimbursement of the South
African Rand 239.6 that has been paid.
As such, we have reflected the South African Rand 239.6 (or $14.0 and $15.0 at December 31, 2022 and 2021,
respectively) within “Assets of DBT and Heat Transfer” on our consolidated balance sheets as of December
31, 2022 and 2021.
See Note 15 to our consolidated financial statements for additional details.
•
On November 11, 2020, we completed the acquisition of Sensors & Software.
◦
◦
The purchase price for Sensors & Software was $15.5, net of cash acquired of $0.3.
The post-acquisition operating results of Sensors & Software are reflected within our Detection and
Measurement reportable segment.
•
In the fourth quarter of 2020, we completed the wind-down of Heat Transfer.
◦
◦
◦
The wind-down was initiated in 2018 after an unsuccessful attempt to sell the business.
The wind-down was part of a strategic shift away from the power generation markets.
As a result of completing the wind-down plan, we are reporting Heat Transfer as a discontinued operation for
all periods presented.
•
Asbestos Product Liability Matters:
◦ During 2020, we recorded charges of $21.3 related to asbestos product liability matters.
◦
Of such charges, $19.2 were reflected in “Income from continuing operations before income taxes” and the
remainder in “Gain (loss) on disposition of discontinued operations, net of tax.”
Payments for asbestos product liability matters, net of insurance recoveries, totaled $19.3 in 2020.
◦
27
•
Actuarial Losses on Pension and Postretirement Plans:
◦ We recorded net actuarial losses of $6.8 in the fourth quarter of 2020 in connection with the annual
remeasurement of our pension and postretirement plans, with such losses resulting primarily from declines in
discount rates on our unfunded pension and postretirement plans.
See Notes 1 and 11 to our consolidated financial statements for additional details.
◦
•
Changes in the Estimated Fair Value of an Equity Security:
◦
◦
During 2020, we:
▪
▪
Recorded gains of $8.6 within “Other income (expense), net” related to increases in the estimated fair
value of an equity security that we hold; and
Received distributions of $3.5, which are included in “Cash flows from operating activities.”
See Note 17 to our consolidated financial statements for additional details.
Results of Continuing Operations
Cyclicality of End Markets, Seasonality and Competition—The financial results of our businesses closely follow changes in
the industries in which they operate and end markets in which they serve. In addition, certain of our businesses have seasonal
fluctuations. For example, our heating products businesses tend to be stronger in the third and fourth quarters, as customer
buying habits are driven largely by seasonal weather patterns. In aggregate, our businesses generally tend to be stronger in the
second half of the year.
Although our businesses operate in highly competitive markets, our competitive position cannot be determined accurately
in the aggregate or by segment since none of our competitors offer all the same product lines or serve all the same markets as we
do. In addition, specific reliable comparative figures are not available for many of our competitors. In most product groups,
competition comes from numerous concerns, both large and small. The principal methods of competition are service, product
performance, technical innovation and price. These methods vary with the type of product sold. We believe we compete
effectively on the basis of each of these factors.
Non-GAAP Measures — Organic revenue growth (decline) presented herein is defined as revenue growth (decline)
excluding the effects of foreign currency fluctuations, acquisitions/divestitures, and the impact of a reduction in revenue during
2021 associated with the settlement of claims on a legacy dry cooling project. We believe this metric is a useful financial
measure for investors in evaluating our operating performance for the periods presented, as, when read in conjunction with our
revenues, it presents a useful tool to evaluate our ongoing operations and provides investors with a tool they can use to evaluate
our management of assets held from period to period. In addition, organic revenue growth (decline) is one of the factors we use
in internal evaluations of the overall performance of our business. This metric, however, is not a measure of financial
performance under GAAP, should not be considered a substitute for net revenue growth (decline) as determined in accordance
with GAAP, and may not be comparable to similarly titled measures reported by other companies.
Presentation of Segment Income — During 2022, management concluded that, although the assessment of our reportable
segments was performed using the appropriate measures as defined by the Segment Reporting Topic of the Codification, the
disclosure of income from segments was not consistent with these measures or the measures used by our CODM when
evaluating the results of, or allocating resources to, our reportable segments. We previously disclosed that segment income was
determined before considering impairment and special charges, long-term incentive compensation, certain other operating
income/expense, and other indirect corporate expenses. Our CODM also excludes the impact of intangible asset amortization,
inventory step-up charges, and other acquisition related costs from Segment Income. Accordingly, these amounts have now been
excluded, for all periods presented, from Segment Income and presented separately in our reconciliation of Segment Income to
consolidated operating income within this annual report on Form 10-K. Refer to Notes 1 and 7 to our consolidated financial
statements for additional details.
28
The following table provides selected financial information for the years ended December 31, 2022, 2021, and 2020,
including the reconciliation of organic revenue increase to net revenue increase:
Revenues
Gross profit
% of revenues
Selling, general and administrative expense
% of revenues
Intangible amortization
Impairment of goodwill and intangible assets
Special charges, net
Other operating (income) expense, net
Other income (expense), net
Interest expense, net
Loss on amendment/refinancing of senior credit
agreement
Income from continuing operations before income
taxes
Income tax provision
Income from continuing operations
Components of consolidated revenue increase:
Organic
Foreign currency
Settlement of legacy dry cooling contract
Acquisitions
Net revenue increase
Year ended December 31,
$
2022
1,460.9
523.9
$
2021
1,219.5
431.8
$
2020
1,128.1
395.5
35.9 %
355.7
24.3 %
28.5
13.4
0.4
74.9
(15.2)
(7.6)
(1.1)
27.1
(7.3)
19.8
35.4 %
309.6
25.4 %
21.6
30.0
1.0
(4.1)
9.0
(12.6)
(0.2)
69.9
(10.9)
59.0
35.1 %
272.5
24.2 %
14.0
0.7
2.4
9.0
(0.1)
(18.2)
—
78.6
(4.8)
73.8
2022 vs
2021 %
2021 vs
2020 %
19.8 %
21.3
14.9
31.9
(60.0)
(39.7)
(61.2)
*
*
*
*
*
8.1 %
9.2
13.6
54.3
(58.3)
(30.8)
(11.1)
*
*
*
*
*
(66.4)
(20.1)
11.8
(1.7)
—
9.7
19.8
2.6
0.7
(0.4)
5.2
8.1
___________________________________________________________________
*
Not meaningful for comparison purposes.
Revenues - For 2022, the increase in revenues, compared to 2021, was due to organic revenue growth within both our
HVAC and Detection and Measurement reportable segments and the impact of the Sealite, ECS and Cincinnati Fan acquisitions
in 2021 and the ITL acquisition in 2022. The increase in organic revenue within the HVAC reportable segment was driven by
increased sales of heating and cooling products associated with price increases and, to a lesser extent, volume increases. Organic
growth within the Detection and Measurement reportable segment was due to continued strong order trends for our short-cycled
businesses and execution of large projects within the fare collection, communication technologies, and obstruction lighting
businesses.
For 2021, the increase in revenues, compared to 2020, was due primarily to (i) the impact of the acquisitions of ULC and
Sensors & Software in 2020 and Sealite, ECS and Cincinnati Fan in 2021 and (ii) an increase in organic revenue. The increase in
organic revenue was due primarily to higher sales of heating and underground pipe and locator products, partially offset by lower
sales of cooling products. During the first half of 2020, sales of heating and underground pipe and locator products were
impacted negatively by the COVID-19 pandemic. Sales of cooling products declined in 2021, as there were several large cooling
projects that favorably impacted sales in 2020.
Gross Profit - For 2022, the increase gross profit and gross profit as a percentage of revenues, compared to 2021, was due
primarily to the increase in revenues noted above, including revenue increases associated with higher-margin, large projects
within our communication technologies and obstruction lighting businesses.
For 2021, the increase in gross profit and gross profit as a percentage of revenues, compared to 2020, was due primarily to
the revenue increases noted above.
29
Selling, General and Administrative (“SG&A”) Expense — For 2022, the increase in SG&A expense, compared to 2021,
was due primarily to (i) incremental SG&A resulting from the acquisitions noted above, (ii) higher corporate expense associated
with increased costs associated with various strategic and transformational initiatives, including the Asbestos Portfolio Sale, and
higher short-term incentive compensation in 2022, and (iii) higher travel expenses due to the easing of COVID-19 pandemic
restrictions in 2022.
For 2021, the increase in SG&A expense, compared to 2020, was due primarily to SG&A associated with Sealite, ECS and
Cincinnati Fan since their dates of acquisition in 2021 and the impact of a full year’s SG&A associated with the 2020
acquisitions of ULC and Sensors & Software. Also, additional corporate expense in 2021 associated with (i) increased costs
associated with continuous improvement and strategic initiatives and (ii) higher short-term incentive compensation contributed
to the increase in SG&A in 2021.
Intangible Amortization — For 2022, the increase in intangible amortization, compared to 2021, was due to a full year's
amortization related to the Cincinnati Fan and ECS acquisitions, as well as amortization associated with the ITL acquisition.
For 2021, the increase in intangible amortization, compared to 2020, was due to the amortization expense associated with
Sealite, ECS and Cincinnati Fan since their dates of acquisition in 2021 and the impact of a full year’s amortization expense on
the 2020 acquisitions of ULC and Sensors & Software.
Impairment of Goodwill and Intangible Assets — During 2022, we recorded impairment charges of $12.9 related to the
goodwill and trademarks of ULC and $0.5 related to certain other trademarks. During 2021, we recorded impairment charges of
$29.5 related to the goodwill and trademarks of ULC and $0.5 related to certain other trademarks. During 2020, we recorded
$0.7 of impairment charges related to certain trademarks. See Note 10 to our consolidated financial statements for additional
details.
Special Charges, Net — Special charges, net, relate primarily to restructuring initiatives to consolidate manufacturing,
distribution, sales and administrative facilities, reduce workforce, and rationalize certain product lines. See Note 8 to our
consolidated financial statements for the details of actions taken in 2022, 2021, and 2020. The components of special charges,
net, are as follows:
Employee termination costs
Other cash costs, net
Non-cash asset write-downs
Total
Year ended December 31,
2022
2021
2020
$
$
0.1 $
—
0.3
0.4 $
1.0 $
—
—
1.0 $
1.0
1.0
0.4
2.4
Other Operating (Income) Expense, Net – During 2022, and in connection with the Asbestos Portfolio Sale, we recorded a
loss of $73.9. Additionally, prior to the Asbestos Portfolio Sale, we recorded charges of $2.3 for asbestos product liability
matters, partially offset by a reduction in the fair value/liability associated with the contingent consideration related to the ECS
acquisition of $1.3.
During 2021, we recorded income of $24.3 and $6.7 associated with a reduction in the liability associated with the
contingent consideration related to the ULC and ECS acquisitions, respectively. This income resulted from changes in the fair
value of the related liabilities resulting from a lower probability of the businesses achieving certain defined operational and/or
financial milestones. This income was partially offset by charges of $26.3 for asbestos product liability matters, along with a
charge of $0.6 related to finalizing the contingent consideration liability associated with the Sensors & Software acquisition.
During 2020, we recorded charges of $9.4 for asbestos product liability matters, net of a gain of $0.4 related to revisions to
estimates of certain liabilities retained in connection with the 2016 sale of the dry cooling business.
Other Income (Expense), Net – Other expense, net, for 2022 was composed primarily of $16.5 of asbestos-related charges
incurred prior to the Asbestos Portfolio Sale, a loss of $3.0 related to a change in the estimated fair value of an equity security
that we hold, environmental remediation charges of $2.9, and foreign currency transaction losses of $1.1, partially offset by
pension and postretirement income (inclusive of net settlement and actuarial gains of $1.5) of $4.4, income of $2.0 derived from
company-owned life insurance policies, and $3.0 of income associated with transition services agreements.
Other income, net, for 2021 was composed primarily of pension and post retirement income of $16.4 (including actuarial
gains of $9.9), a gain of $11.8 related to changes in the estimated fair value of an equity security we hold, and income derived
from company-owned life insurance policies of $3.2, partially offset by charges of $21.0 associated with asbestos product
liability matters.
30
Other expense, net, for 2020 was composed primarily of charges of $7.6 associated with asbestos product liability matters,
pension and postretirement expense of $3.0 (including actuarial losses of $6.8), environmental remediation charges of $1.5, and
foreign currency transaction losses of $0.6, partially offset by a gain of $8.6 related to changes in the estimated fair value of an
equity security we hold and income derived from company-owned life insurance policies of $5.0.
Interest Expense, Net — Interest expense, net, includes both interest expense and interest income. The decrease in interest
expense, net, during 2022, compared to 2021, was the result of lower average debt balances and increased interest rates on cash
balances during 2022.
The decrease in interest expense, net, during 2021, compared to 2020, was the result of lower average effective interest
rates and lower average debt balances during 2021.
Loss on Amendment/Refinancing of Senior Credit Agreement — During 2022, we amended our senior credit agreement. In
connection with the amendment, we recorded a charge of $1.1, which consisted of the write-off of a portion of the unamortized
deferred financing costs related to our senior credit facilities ($0.7) and certain expenses incurred in connection with the
amendment ($0.4). During 2021, we reduced the issuance capacity of our then-existing foreign credit instrument facilities
resulting in a charge of $0.2 associated with the write-off of unamortized deferred financing costs.
Income Taxes — During 2022, we recorded an income tax provision of $7.3 on $27.1 of pre-tax income from continuing
operations, resulting in an effective rate of 26.9%. The most significant item impacting the effective tax rate for 2022 was the
$73.9 loss on the Asbestos Portfolio Sale, which generated a tax benefit of only $1.1. In addition, the 2022 effective income tax
rate was also impacted by (i) a $4.7 tax benefit related to the release of valuation allowances recognized against certain deferred
tax assets, as we now expect to realize these deferred tax assets primarily due to the Holding Company Reorganization
completed in 2022, (ii) $3.0 of tax benefits related to statute expirations and other revisions to liabilities for uncertain tax
positions. and (iii) $1.7 of excess tax benefits associated with stock-based compensation awards that vested and/or were
exercised during the year.
During 2021, we recorded an income tax provision of $10.9 on $69.9 of pre-tax income from continuing operations,
resulting in an effective tax rate of 15.6%. The most significant items impacting the effective income tax rate for 2021 were (i)
earnings in jurisdictions with lower statutory rates, (ii) $4.3 of income tax benefits related to various valuation allowance
adjustments, primarily due to foreign tax credits for which the future realization is now considered likely, and (iii) a benefit of
$3.5 related to the resolution of certain liabilities for uncertain tax positions and interest associated with various refund claims,
partially offset by $13.2 of income tax expense associated with global intangible low-taxed income created by the liquidation of
various acquired entities.
During 2020, we recorded an income tax provision of $4.8 on $78.6 of pre-tax income from continuing operations,
resulting in an effective tax rate of 6.1%. The most significant items impacting the effective income tax rate for 2020 were (i)
earnings in jurisdictions with lower statutory tax rates, (ii) $4.2 of tax benefits related to various audit settlements, statute
expirations, and other adjustments to liabilities for uncertain tax positions, and (iii) $2.8 of excess tax benefits resulting from
stock-based compensation awards that vested and/or were exercised during the year.
Wind-Down of the Heat Transfer Business
Results of Discontinued Operations
Following the Spin-Off, we initiated a strategic shift away from the power generation markets. As part of this strategic
shift, we sold the dry cooling and Balcke Dürr businesses in 2016 and commenced efforts to sell the Heat Transfer business.
After an unsuccessful attempt to sell the Heat Transfer business, we implemented a wind-down plan for the business in 2018.
During the fourth quarter of 2020, we completed the wind-down plan, which included providing all products and services on the
business’s remaining contracts with customers. As a result, we are reporting Heat Transfer as a discontinued operation for all
periods presented.
31
Sale of Transformer Solutions Business
On October 1, 2021, we completed the sale of Transformer Solutions pursuant to the terms of the Stock Purchase
Agreement dated June 8, 2021. We transferred all of the outstanding common stock of Transformer Solutions to the Purchaser
for an aggregate cash purchase price of $645.0 (the “Transaction”). The purchase price was subject to potential adjustment based
on Transformer Solutions’ cash, debt and working capital on the date the Transaction was consummated, as well as for specified
transaction expenses and other specified items. In connection with the sale, we received net cash proceeds of $620.6 and
recorded a gain of $382.2 to “Gain (loss) on disposition of discontinued operations, net of tax” within our 2021 consolidated
statement of operations. During 2022, we agreed to the final adjustment of the purchase price which resulted in a payment to the
Purchaser of $13.9. We have classified the business as a discontinued operation in our consolidated financial statements for all
periods presented. See Notes 1 and 4 to our consolidated financial statements for additional details.
Wind-Down of DBT Business
As a culmination of our strategic shift away from power generation markets, we completed the wind-down of our DBT
business during the fourth quarter of 2021. As a result, we are reporting DBT as a discontinued operation in our consolidated
financial statements for all periods presented. In connection with the wind-down, we recorded a charge of $19.9 to “Gain (loss)
on disposition of discontinued operations, net of taxes” within our consolidated statement of operations for the year ended
December 31, 2021 to reflect the write-off of historical currency translation amounts associated with DBT that had been
previously reported within “Stockholders' equity” on our consolidated balance sheet. DBT continues to be engaged in various
dispute resolution matters related to two large power projects, as indicated in Note 15 to the consolidated financial statements.
For the years ended December 31, 2022, 2021 and 2020, results of operations from our businesses reported as discontinued
operations were as follows:
Transformer Solutions
Income (loss) from discontinued operations (1)
Income tax (provision) benefit (2)
Income from discontinued operations, net
DBT
Loss from discontinued operations (3)
Income tax benefit
Loss from discontinued operations, net
Heat Transfer
Income (loss) from discontinued operations
Income tax (provision) benefit
Income (loss) from discontinued operations, net
All other (4)
Loss from discontinued operations
Income tax benefit
Loss from discontinued operations, net
Total
Income (loss) from discontinued operations
Income tax (provision) benefit
Income (loss) from discontinued operations, net
Year ended December 31,
2022
2021
2020
$
(0.6) $
0.9
0.3
454.9 $
(51.8)
403.1
(17.3)
2.1
(15.2)
(0.4)
0.1
(0.3)
(6.0)
1.6
(4.4)
(37.8)
2.7
(35.1)
(0.3)
—
(0.3)
(7.6)
6.3
(1.3)
(24.3)
4.7
(19.6) $
409.2
(42.8)
366.4 $
$
56.9
(14.0)
42.9
(16.6)
2.4
(14.2)
0.3
(0.1)
0.2
(4.8)
1.1
(3.7)
35.8
(10.6)
25.2
________________________________________________
(1) Loss for the year ended December 31, 2022 resulted primarily from revisions to liabilities retained in connection with
the disposition. Income for the year ended December 31, 2021 resulted primarily from the gain on sale of the business of
$382.2, as well as the results of operations for the year. Income for the year ended December 31, 2020 related to the results
of operations for the year.
(2) During the fourth quarter of 2021, we liquidated certain recently acquired entities. As a result of this action, we recorded
a net income tax benefit of $16.5 within our 2021 consolidated statement of operations, which included an income tax
charge of $10.9 within continuing operations and income tax benefit of $27.4 within discontinued operations.
32
(3) Loss for the years ended December 31, 2022, 2021, and 2020 resulted primarily from legal costs incurred in connection
with various dispute resolution matters related to two large power projects. In addition, and as previously noted, the year
ended December 31, 2021 includes a charge of $19.9 related to the write-off of historical translation amounts.
(4) Loss for the years ended December 31, 2022, 2021, and 2020 resulted primarily from asbestos-related charges and
revisions to liabilities, including income tax liabilities, retained in connection with prior dispositions.
Results of Reportable Segments
The following information should be read in conjunction with our consolidated financial statements and related notes.
These results exclude the operating results of discontinued operations for all periods presented. See Note 7 to our consolidated
financial statements for a description of each of our reportable segments.
Non-GAAP Measures — Throughout the following discussion of reportable segments, we use “organic revenue” growth
(decline) to facilitate explanation of the operating performance of our segments. Organic revenue growth (decline) is a non-
GAAP financial measure, and is not a substitute for net revenue growth (decline). Refer to the explanation of this measure and
purpose of use by management under “Results of Continuing Operations — Non-GAAP Measures.”
HVAC Reportable Segment
Revenues
Income
% of revenues
Components of revenue increase:
Organic
Foreign currency
Settlement of legacy dry cooling contract
Acquisitions
Net revenue increase
Year Ended December 31,
2022
2021
2020
$
$
913.8
135.5
14.8 %
$
752.1
107.7
14.3 %
740.8
106.2
14.3 %
2022 vs.
2021 %
2021 vs.
2020 %
21.5
25.8
12.3
(0.8)
—
10.0
21.5
1.5
1.4
1.3
0.5
(0.6)
0.3
1.5
Revenues — For 2022, the increase in revenues, compared to 2021, was due to an increase in organic revenue within our
heating businesses and, to a lesser extent, within our cooling businesses and the impact of the acquisition of Cincinnati Fan. The
increase in organic revenue was due to increased pricing and, to a lesser extent, volume increases.
For 2021, the increase in revenues, compared to 2020, was due primarily to an increase in organic revenue within our
heating businesses, partially offset by a decline in organic revenue within our cooling businesses due to several large projects
that contributed significant revenue to our results in 2020. Sales of heating products during the first half of 2020 were impacted
negatively by (i) a warmer than normal winter and (ii) the COVID-19 pandemic.
Income — For 2022, the increase in income, compared to 2021, was due primarily to the increase in revenues noted above,
while the increase in margin was due primarily to a more favorable project/product sales mix in 2022.
For 2021, the increase in income, compared to 2020, was due primarily to the increase in revenues noted above.
Backlog — The segment had backlog of $243.1 and $226.9 as of December 31, 2022 and 2021, respectively.
Approximately 98% of the segment’s backlog as of December 31, 2022 is expected to be recognized as revenue during 2023.
33
Detection and Measurement Reportable Segment
Revenues
Income
% of revenues
Components of revenue increase:
Organic
Foreign currency
Acquisitions
Net revenue increase
Year Ended December 31,
2022
2021
2020
$
$
547.1
114.1
20.9 %
$
467.4
92.9
19.9 %
387.3
80.9
20.9 %
2022 vs.
2021 %
2021 vs.
2020 %
17.1
22.8
11.0
(3.1)
9.2
17.1
20.7
14.8
5.0
1.1
14.6
20.7
Revenues — For 2022, the increase in revenues, compared to 2021, was due to organic growth across all product lines and
the impact of the acquisitions of Sealite, ECS, and ITL. The organic growth was driven by continued strong order trends for our
short-cycled businesses and execution of large projects within our fare collection, communication technologies, and obstruction
lighting businesses.
For 2021, the increase in revenues, compared to 2020, was due to the impact of the acquisitions of ECS and Sealite in 2021
and ULC and Sensors & Software in 2020 and, to a lesser extent, organic revenue growth and the impact of foreign currency
exchange rates. The increase in organic revenue was primarily the result of higher sales of underground pipe and locator
products and, to a lesser extent, higher sales of communication technologies and obstruction lighting products. These increases in
organic revenue were offset partially by lower sales of fare collection systems. During the first half of 2020, sales of
underground pipe and locator products were impacted negatively by the COVID-19 pandemic, while the decline in sales of fare
collection systems in 2021 was due primarily to the timing of large projects, as the extent of such projects can fluctuate from
year-to-year.
Income — For 2022, the increase in income and margin, compared to 2021, was due primarily to the increase in revenues
noted above, including revenue increases associated with higher-margin large projects within our communication technologies
and obstruction lighting businesses.
For 2021, the increase in income, compared to 2020, was due primarily to the increase in revenues noted above. The year-
over-year decrease in margin was due primarily to volume declines in our robotic systems business.
Backlog — The segment had backlog of $251.0 (including $0.4 related to ITL) and $153.6 as of December 31, 2022 and
2021, respectively. Approximately 80% of the segment’s backlog as of December 31, 2022 is expected to be recognized as
revenue during 2023.
Corporate Expense and Other Expense
Total consolidated revenues
Corporate expense
% of revenues
Long-term incentive compensation expense
Year Ended December 31,
$
2022
1,460.9
68.6
$
2021
1,219.5
60.5
$
2020
1,128.1
49.7
4.7 %
10.9
5.0 %
12.8
4.4 %
13.1
2022 vs.
2021 %
2021 vs.
2020 %
19.8
13.4
8.1
21.7
(14.8)
(2.3)
Corporate Expense — Corporate expense generally relates to the cost associated with our Charlotte, NC corporate
headquarters. The increase in corporate expense during 2022, compared to 2021, was due primarily to increased costs associated
with various strategic and transformational initiatives, including the Asbestos Portfolio Sale, and higher short-term incentive
compensation in 2022.
The increase in corporate expense during 2021, compared to 2020, was due primarily to increased costs associated with
continuous improvement and other strategic initiatives and higher short-term incentive compensation during 2021.
34
Long-Term Incentive Compensation Expense — Long-term incentive compensation expense represents our consolidated
expense, which we do not allocate for segment reporting purposes. The decrease in long-term incentive compensation in 2022,
compared to 2021, was due primarily to the impact of forfeitures resulting from various participant resignations during 2022.
The decrease in long-term incentive compensation in 2021, compared to 2020, was due primarily to revisions to/
finalization of the liability associated with the 2018 long-term cash awards during the first quarter of 2021, partially offset by the
impact of a lower amount of award forfeitures during 2021.
See Note 16 to our consolidated financial statements for further details on our long-term incentive compensation plans.
Cash Flows
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 years ended December 31, 2022, 2021 and 2020.
Continuing operations:
Cash flows from (used in) operating activities
Cash flows used in investing activities
Cash flows from (used in) financing activities
Cash flows from (used in) discontinued operations
Change in cash and equivalents due to changes in foreign currency exchange
rates
Net change in cash and equivalents
2022 Compared to 2021
Year Ended December 31,
2022
2021
2020
$
(115.2) $
131.2 $
(52.2)
(39.9)
(34.5)
(306.0)
(167.8)
663.7
2.9
6.6
$
(238.9) $
327.7 $
105.2
(119.9)
16.3
14.5
(2.5)
13.6
Operating Activities – The decrease in cash flows from operating activities, compared to 2021, was due primarily to (i) a
cash contribution to the divested subsidiaries of $138.8 in connection with the Asbestos Portfolio Sale; (ii) income tax payments,
net of refunds, of $59.6 (compared to income tax refunds, net of tax payments, of $5.5 during the year ended December 31,
2021), with a significant portion of the 2022 payments related to the gain on sale of Transformer Solutions; (iii) elevated
purchases of inventory components in order to manage the potential risk associated with the current supply chain environment;
(iv) decreases in cash flows at certain of our project-related businesses, as cash receipts for these businesses are often subject to
contractual milestones that can impact cash receipts from period to period; (v) net payments for asbestos-related matters of $15.3
(compared to net recoveries of $0.3 during the year ended December 31, 2021); and (vi) cash payments of $10.0 in connection
with the transfer of our postretirement life insurance benefit obligation to an insurance carrier.
Investing Activities - Cash flows used in investing activities for 2022 were comprised primarily of cash utilized in the
acquisition of ITL of $41.8 and capital expenditures of $15.9, partially offset by (i) proceeds from company-owned life
insurance policies of $3.7 and (ii) $1.8 received upon agreement with sellers on acquired working capital balances associated
with the Cincinnati Fan and ITL acquisitions. Cash flows used in investing activities for the year ended December 31, 2021 were
comprised primarily of cash utilized in the acquisitions of Sealite, ECS and Cincinnati Fan of $264.9, capital expenditures of
$9.6, and net expenditures related to company-owned life insurance policies of $31.2.
Financing Activities – Cash flows used in financing activities during 2022 were comprised primarily of repurchases of
common stock of $33.7, minimum tax withholdings paid on behalf of employees on net-share settlements of long-term incentive
awards, net of proceeds from options exercised, of $3.5, and contingent consideration of $1.3 paid in relation to the Sensors &
Software acquisition. Additionally, prior to the August 12, 2022 amendment of our Credit Agreement, we made scheduled
repayments under our then-existing term loan of $6.3 and in connection with entering the Credit Agreement, we received $245.0
under our new term loan and (i) repaid the remaining balance under the then-existing term loan of $237.4 and (ii) paid fees in
connection with the refinancing of $1.9. Net repayments under our various other debt instruments totaled $0.8. Cash flows used
in financing activities during 2021 were comprised primarily of net repayments on various debt instruments of $164.5.
35
Discontinued Operations – Cash flows used in discontinued operations during 2022 related primarily to (i) disbursements
for professional fees incurred in connection with the claims activities related to the large power projects in South Africa (see
Note 15 to the consolidated financial statements for additional details), (ii) disbursements related to asbestos product liability
matters made prior to the Asbestos Portfolio Sale, (iii) a payment of $13.9 to the buyer of Transformer Solutions related to the
settlement of the final working capital balances for the business, and (iv) disbursements for liabilities retained in connection with
dispositions, including fees associated with the sale of Transformer Solutions. These disbursements were partially offset by
proceeds from stock options exercised of $1.0. Cash flows from discontinued operations for 2021 related primarily to proceeds
received in connection with the sale of Transformer Solutions of $620.6. In addition, cash flows from discontinued operations
included cash flows from operations generated by Transformer Solutions, partially offset by cash flows used in DBT's operations
and disbursements related to liabilities retained in connection with other dispositions.
Change in Cash and Equivalents Due to Changes in Foreign Currency Exchange Rates - Changes in foreign currency
exchange rates did not have a significant impact on our cash and equivalents during 2022 and 2021.
2021 Compared to 2020
Operating Activities – The increase in cash flows from operating activities, compared to 2020, was due primarily to (i)
improved cash flows within our heating and underground pipe and locator businesses associated with improved profitability, (ii)
a decline in working capital at certain of our businesses, (iii) insurance proceeds of $15.0 associated with the settlement of an
asbestos insurance coverage matter, and (iv) income tax refunds, net of tax payments, of $5.5 in 2021 (compared to income tax
payments, net of refunds, of $7.6 in 2020).
Investing Activities – Cash flows used in investing activities for 2021 were comprised primarily of cash utilized in the
acquisitions of Sealite, ECS and Cincinnati Fan of $264.9, net expenditures related to company-owned life insurance policies of
$31.2, and capital expenditures of $9.6. Cash flows used in investing activities in 2020 were comprised primarily of cash utilized
in the acquisitions of ULC and Sensors & Software of $104.4 and capital expenditures of $15.3.
Financing Activities – Cash flows used in financing activities during 2021 were comprised primarily of net repayments on
our various debt instruments of $164.5. Cash flows from financing activities during 2020 were comprised primarily of net
borrowings on our various debt instruments of $15.6.
Discontinued Operations – Cash flows from discontinued operations for 2021 related primarily to proceeds received in
connection with the sale of Transformer Solutions of $620.6. In addition, cash flows from discontinued operations included cash
flows from operations generated by Transformer Solutions, partially offset by cash flows used in DBT's operations and
disbursements related to liabilities retained in connection with other dispositions. Cash flows from discontinued operations for
2020 related primarily to cash flows generated by Transformer Solutions and Heat Transfer, partially offset by cash flows used
in DBT's operations and disbursements for liabilities retained in connection with other dispositions.
Change in Cash and Equivalents Due to Changes in Foreign Currency Exchange Rates - Changes in foreign currency
exchange rates did not have a significant impact on our cash and equivalents during 2021 and 2020.
Borrowings
The following summarizes our debt activity (both current and non-current) for the year ended December 31, 2022:
Revolving loans
Term loan (1)(2)
Trade receivables financing arrangement (3)
Other indebtedness (4)
Total debt
Less: short-term debt
Less: current maturities of long-term debt
Total long-term debt
December 31,
2021
Borrowings
Repayments
Other (5)
December 31,
2022
— $
245.0
—
0.1
245.1 $
— $
(243.7)
—
(0.9)
(244.6) $
$
$
— $
242.7
—
3.3
246.0 $
2.2
13.0
230.8
— $
0.3
—
—
0.3
$
—
244.3
—
2.5
246.8
1.8
2.0
243.0
_____________________________________________________________
(1) As noted below, we amended our senior credit agreement on August 12, 2022. The amendment made available a new term loan
facility in the amount of $245.0, the proceeds of which were primarily used to repay the outstanding balance of $237.4 under the
then-existing term loan facility.
36
(2)
The term loan is repayable in quarterly installments equal to 0.625% of the initial term loan balance of $245.0, beginning in
December 2023 and in each of the first three quarters of 2024, and 1.25% during the fourth quarter of 2024, all quarters of 2025 and
2026, and the first two quarters of 2027. The remaining balance is payable in full on August 12, 2027. Balances are net of
unamortized debt issuance costs of $0.7 and $1.0 at December 31, 2022 and December 31, 2021, respectively.
(3) Under this arrangement, we can borrow, on a continuous basis, up to $50.0, as available. Borrowings under this arrangement are
collateralized by eligible trade receivables of certain of our businesses. At December 31, 2022, we had $45.7 of available borrowing
capacity under this facility.
(4)
(5)
Primarily includes balances under a purchase card program of $1.8 and $2.2 and finance lease obligations of $0.7 and $1.1 at
December 31, 2022 and December 31, 2021, respectively. The purchase card program allows for payment beyond the normal
payment terms for goods and services acquired under the program. As this arrangement extends the payment of these purchases
beyond their normal payment terms through third-party lending institutions, we have classified these amounts as short-term debt.
“Other” includes the impact of amortization of debt issuance costs associated with the term loan.
Maturities of long-term debt payable during each of the five years subsequent to December 31, 2022 are $2.0, $7.9, $12.3,
$12.3, and $211.2 respectively.
Senior Credit Facilities
On August 12, 2022, we entered into the Credit Agreement to, among other things, extend the term of the facilities under
the Credit Agreement (with the aggregate of each facility comprising the “Senior Credit Facilities”) and provide for committed
senior secured financing with an aggregate amount of $770.0 which consists of the following facilities at December 31, 2022
(each with a final maturity of August 12, 2027):
•
•
•
•
•
•
A term loan facility in an aggregate principal amount of $245.0;
A multicurrency revolving credit facility, available for loans and letters of credit in Dollars, Euro, Sterling and other
currencies, in an aggregate principal amount up to the equivalent of $500.0 (with sub-limits equal to the equivalents of
$200.0 for financial letters of credit, $50.0 for non-financial letters of credit, and $150.0 for non-U.S. exposure); and
A bilateral foreign credit instrument facility, available for performance letters of credit and bank undertakings, in an
aggregate principal amount in various currencies up to the equivalent of $25.0.
The Credit Agreement also:
Requires that we maintain a Consolidated Leverage Ratio (defined in the Credit Agreement) as of the last day of any
fiscal quarter of not more than 3.75 to 1.00 (or (i) 4.00 to 1.00 for the four fiscal quarters after certain permitted
acquisitions or (ii) 4.25 to 1.00 for the four fiscal quarters after certain permitted acquisitions with a minimum amount
financed by unsecured debt);
Requires that we maintain a Consolidated Interest Coverage Ratio (defined in the Credit Agreement) as of the last day
of any fiscal quarter of at least 3.00 to 1.00;
Allows SPX to seek additional commitments, without consent from the existing lenders, to add incremental term loan
facilities and/or increase the commitments in respect of the revolving credit facility and/or the bilateral foreign credit
instrument facility by up to an aggregate principal amount not to exceed (x) the greater of (i) $200.0 and (ii) the amount
of Consolidated EBITDA (as defined in the Credit Agreement) for the four fiscal quarters ended most recently before
the date of determination, plus (y) an unlimited amount so long as, immediately after giving effect thereto, our
Consolidated Senior Secured Leverage Ratio (defined in the Credit Agreement generally as the ratio of consolidated
total debt (excluding the face amount of undrawn letters of credit, bank undertakings, or analogous instruments and net
of unrestricted cash and cash equivalents) at the date of determination secured by liens to Consolidated EBITDA for the
four fiscal quarters ended most recently before such date) does not exceed 2.75:1.00, plus (z) an amount equal to all
voluntary prepayments of the term loan facility and voluntary prepayments accompanied by permanent commitment
reductions of the revolving credit facility and foreign credit instrument facility; and
37
•
Establishes per annum fees charged and applies interest rate margins, as follows:
Consolidated
Leverage
Ratio
Revolving
Commitment
Fee
Financial
Letter of
Credit Fee
Foreign Credit
Instrument
(“FCI”)
Commitment
Fee
FCI Fee and
Non-Financial
Letter of Credit
Fee
Term Secured
Overnight
Financing Rate
(“SOFR”) Loans/
Alternative
Currency Loans
Greater than or equal to
3.00 to 1.00
Between 2.00 to 1.00 and
3.00 to 1.00
Between 1.50 to 1.00 and
2.00 to 1.00
Less than 1.50 to 1.00
0.275 %
1.750 %
0.275 %
0.250 %
1.500 %
0.250 %
0.225 %
0.200 %
1.375 %
1.250 %
0.225 %
0.200 %
1.000 %
0.875 %
0.800 %
0.750 %
1.750 %
1.500 %
1.375 %
1.250 %
ABR Loans
0.750 %
0.500 %
0.375 %
0.250 %
The interest rates applicable to loans under the Senior Credit Facilities are, at our option, equal to either (i) an alternate
base rate (the highest of (a) the federal funds effective rate plus 0.5%, (b) the prime rate of Bank of America, N.A., and (c) the
one-month Term SOFR rate plus 1.0%) or (ii) the Term SOFR rate for the applicable interest period plus 0.1%, plus, in each
case, an applicable margin percentage, which varies based on the Consolidated Leverage Ratio (defined in the Credit Agreement
generally as the ratio of consolidated total debt (excluding the face amount of undrawn letters of credit, bank undertakings or
analogous instruments and net of unrestricted cash and cash equivalents) at the date of determination to Consolidated EBITDA
for the four fiscal quarters ended most recently before such date). The interest rates applicable to loans in other currencies under
the Senior Credit Facilities are, at the applicable borrower’s option, equal to either (a) an adjusted alternative currency daily rate
or (b) an adjusted alternative currency term rate for the applicable interest period, plus, in each case, the applicable margin
percentage. The borrowers may elect interest periods of one, three or six months (and, if consented to by all relevant lenders, any
other period not greater than twelve months) for term rate borrowings, subject in each case to availability in the applicable
currency.
The weighted-average interest rate of outstanding borrowings under our Senior Credit Facilities was approximately 5.8% at
December 31, 2022.
The fees and bilateral foreign credit commitments are as specified above for foreign credit commitments unless otherwise
agreed with the bilateral foreign issuing lender. We also pay fronting fees on the outstanding amounts of letters of credit and
foreign credit instruments (in the participation facility) at the rates of 0.125% per annum and 0.25% per annum, respectively.
SPX Enterprises, LLC, the direct wholly owned subsidiary of the Company, is the borrower under each of above facilities,
and SPX may designate certain foreign subsidiaries to be borrowers under the revolving credit facility and the foreign credit
instrument facility. All borrowings and other extensions of credit under the Credit Agreement are subject to the satisfaction of
customary conditions, including absence of defaults and accuracy in material respects of representations and warranties.
The letters of credit under the revolving credit facility are stand-by letters of credit requested by SPX on behalf of any of
our subsidiaries or certain joint ventures. The foreign credit instrument facility is used to issue foreign credit instruments,
including bank undertakings to support our operations.
The Credit Agreement requires mandatory prepayments in amounts equal to the net proceeds from the sale or other
disposition of (including from any casualty to, or governmental taking of) property in excess of specified values (other than in
the ordinary course of business and subject to other exceptions) by SPX. Mandatory prepayments will be applied first to repay
amounts outstanding under any term loans and then to amounts outstanding under the revolving credit facility (without reducing
the commitments thereunder). No prepayment is required generally to the extent the net proceeds are reinvested (or committed to
be reinvested) in permitted acquisitions, permitted investments or assets to be used in the business of SPX within 360 days (and
if committed to be reinvested, actually reinvested within 180 days after the end of such 360-day period) of the receipt of such
proceeds.
We may voluntarily prepay loans under the Credit Agreement, in whole or in part, without premium or penalty. Any
voluntary prepayment of loans will be subject to reimbursement of the lenders’ breakage costs in the case of a prepayment of
term rate borrowings other than on the last day of the relevant interest period. Indebtedness under the Credit Agreement is
guaranteed by:
•
Each existing and subsequently acquired or organized domestic material subsidiary with specified exceptions; and
38
•
SPX with respect to the obligations of our foreign borrower subsidiaries under the revolving credit facility and the
bilateral foreign credit instrument facility.
Indebtedness under the Credit Agreement is secured by a first priority pledge and security interest in 100% of the capital
stock of our domestic subsidiaries (with certain exceptions) or our domestic subsidiary guarantors and 65% of the voting capital
stock (and 100% of the non-voting capital stock) of material first-tier foreign subsidiaries (with certain exceptions). If SPX
obtains a corporate credit rating from Moody’s and S&P and such corporate credit rating is less than “Ba2” (or not rated) by
Moody’s and less than “BB” (or not rated) by S&P, then SPX and our domestic subsidiary guarantors are required to grant
security interests, mortgages and other liens on substantially all of their assets. If SPX’s corporate credit rating is “Baa3” or
better by Moody’s or “BBB-” or better by S&P and no defaults would exist, then all collateral security is to be released and the
indebtedness under the Credit Agreement will be unsecured.
The Credit Agreement also contains covenants that, among other things, restrict our ability to incur additional
indebtedness, grant liens, make investments, loans, guarantees, or advances, make restricted junior payments, including
dividends, redemptions of capital stock, and voluntary prepayments or repurchase of certain other indebtedness, engage in
mergers, acquisitions or sales of assets, enter into sale and leaseback transactions, or engage in certain transactions with
affiliates, and otherwise restrict certain corporate activities. The Credit Agreement contains customary representations,
warranties, affirmative covenants and events of default.
We are permitted under the Credit Agreement to repurchase capital stock and pay cash dividends in an unlimited amount if
our Consolidated Leverage Ratio is (after giving pro forma effect to such payments) less than 2.75 to 1.00. If our Consolidated
Leverage Ratio is (after giving pro forma effect to such payments) greater than or equal to 2.75 to 1.00, the aggregate amount of
such repurchases and dividend declarations cannot exceed (A) $100.0 in any fiscal year plus (B) an additional amount for all
such repurchases and dividend declarations made after September 1, 2015 equal to the sum of (i) $100.0 plus (ii) a positive
amount equal to 50% of cumulative Consolidated Net Income (as defined in the Credit Agreement generally as consolidated net
income subject to certain adjustments solely for the purposes of determining this basket) during the period from September 1,
2015 to the end of the most recent fiscal quarter preceding the date of such repurchase or dividend declaration for which
financial statements have been (or were required to be) delivered (or, in case such Consolidated Net Income is a deficit, minus
100% of such deficit) plus (iii) certain other amounts, less our previous usage of such additional amount for certain other
investments and restricted junior payments.
At December 31, 2022, we had $489.0 of available borrowing capacity under our revolving credit facilities, after giving
effect to $11.0 reserved for outstanding letters of credit. In addition, at December 31, 2022, we had $10.2 of available issuance
capacity under our foreign credit instrument facilities after giving effect to $14.8 reserved for outstanding letters of credit.
At December 31, 2022, we were in compliance with all covenants of the Credit Agreement.
In connection with the August 2022 amendment of the Credit Agreement, we recorded charges of $1.1 to “Loss on
amendment/refinancing of senior credit agreement” related to the write-off of unamortized deferred financing costs totaling $0.7
and transaction costs of $0.4. Additionally, $1.5 of fees paid in connection with the August 2022 amendment were capitalized,
with $1.2 related to our revolving loans and $0.3 related to the term loan. During 2021, we reduced the issuance capacity of our
then-existing foreign credit instrument facilities resulting in a charge of $0.2 to “Loss on amendment/refinancing of senior credit
agreement” associated with the write-off of unamortized deferred financing costs.
Other Borrowings and Financing Activities
Certain of our businesses purchase goods and services under a purchase card program allowing for payment beyond their
normal payment terms. As of December 31, 2022 and 2021, the participating businesses had $1.8 and $2.2, respectively,
outstanding under this arrangement.
We are party to a trade receivables financing agreement, whereby we can borrow, on a continuous basis, up to $50.0.
Availability of funds may fluctuate over time given, among other things, changes in eligible receivable balances, but will not
exceed the $50.0 program limit. The facility contains representations, warranties, covenants and indemnities customary for
facilities of this type. The facility does not contain any covenants that we view as materially constraining to the activities of our
business.
In addition, we maintain uncommitted line of credit facilities in China and South Africa available to fund operations in
these regions, when necessary, and at the discretion of the lender. At December 31, 2022, the aggregate amount of borrowing
capacity under these facilities was $20.0, while there were no borrowings outstanding.
39
Financial Instruments
We measure our financial assets and liabilities on a recurring basis, and nonfinancial assets and liabilities on a non-
recurring basis, at 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. We utilize market data or assumptions that we believe
market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the
inputs to the valuation technique. These inputs can be readily observable quoted prices in active markets for identical assets or
liabilities (Level 1), significant other observable inputs (Level 2) or significant unobservable inputs (Level 3).
Our derivative financial assets and liabilities include interest rate swap agreements, forward contracts to manage exposure
on contracts with forecasted transactions denominated in non-functional currencies and to manage the risk of transaction gains
and losses associated with assets/liabilities denominated in currencies other than the functional currency of certain subsidiaries
(“FX forward contracts”), and, as related to Transformer Solutions through its date of disposition, forward contracts that
managed the exposure on forecasted purchases of commodity raw materials (“commodity contracts”) that are measured at fair
value using observable market inputs such as forward rates, interest rates, our own credit risk, and our counterparties’ credit
risks. Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the valuation hierarchy. Based on
our continued ability to enter into forward contracts, we consider the markets for our fair value instruments active.
As of December 31, 2022, there was 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 was no significant impact to
the fair value of our derivative assets based on our evaluation of our counterparties’ credit risk.
We primarily use the income approach, which uses valuation techniques to convert future amounts to a single present
amount. Assets and liabilities measured at fair value on a recurring basis are further discussed below.
Interest Rate Swaps
We previously maintained interest rate swap agreements that matured in March 2021 and effectively converted borrowings
under our senior credit facilities to a fixed rate of 2.535%, plus the applicable margin.
In February 2020, and as a result of a December 2019 amendment that extended the maturity date of our senior credit
facilities to December 17, 2024, we entered into additional interest swap agreements (“Swaps”). The Swaps have a remaining
notional amount of $231.3, cover the period through November 2024, and effectively convert this portion of the borrowings
under our senior credit facilities to a fixed rate of 1.077%, plus the applicable margin.
In connection with entering into the Credit Agreement, the Swaps were amended to be based on SOFR as opposed to
LIBOR. We applied the optional expedients per Accounting Standards Update (“ASU”) No. 2020-04 and No. 2021-01 and, thus,
continue to designate and account for our interest rate swap agreements as cash flow hedges. As of December 31, 2022 and
2021, the unrealized gain, net of tax, recorded in Accumulated Other Comprehensive Income (“AOCI”) was $11.0 and $0.5,
respectively. In addition, the fair value of our interest rate swap agreements was $14.7 (with $8.7 recorded as a current asset and
$6.0 as a non-current asset) as of December 31, 2022, and $0.6 (with $2.5 recorded as a non-current asset and $1.9 as a current
liability) as of December 31, 2021. Changes in fair value of our interest rate swap agreements are 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, 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 $6.9 and $8.7 outstanding as of December 31, 2022
and 2021, respectively, with all of the $6.9 scheduled to mature within one year. The fair value of our FX forward contracts was
less than $0.1 at December 31, 2022 and 2021.
40
Commodity Contracts
For our Transformer Solutions business, we historically entered into commodity contracts to manage the exposure on
forecasted purchases of commodity raw materials. As discussed in Note 1 to our consolidated financial statements, on October 1,
2021, we completed the sale of Transformer Solutions, which has been presented within discontinued operations. Immediately
prior to the sale, we extinguished the existing commodity contracts and reclassified from AOCI a net loss of $0.6 to “Gain (loss)
on disposition of discontinued operations, net of tax” within our consolidated statement of operations for the year ended
December 31, 2021. Prior to extinguishment, we designated and accounted for these contracts as cash flow hedges and, to the
extent the commodity contracts were effective in offsetting the variability of the forecasted purchases, the change in fair value
was included in AOCI. We reclassified amounts associated with our commodity contracts out of AOCI when the forecasted
transaction impacted earnings.
Concentrations of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and equivalents,
trade accounts receivable, and interest rate swap and foreign currency forward contracts. These financial instruments, other than
trade accounts receivable, are placed with high-quality financial institutions throughout the world. We periodically evaluate the
credit standing of these financial institutions.
We maintain cash levels in bank accounts that, at times, may exceed federally-insured limits. We have not experienced
significant loss, and believe we are not exposed to significant risk of loss, in these accounts.
We have credit loss exposure in the event of nonperformance by counterparties to the above financial instruments, but have
no other off-balance-sheet credit risk of accounting loss. We anticipate, however, that counterparties will be able to fully satisfy
their obligations under the contracts. We do not obtain collateral or other security to support financial instruments subject to
credit risk, but we do monitor the credit standing of counterparties.
Concentrations of credit risk arising from trade accounts receivable are due to selling to customers in a particular industry.
Credit risks are mitigated by performing ongoing credit evaluations of our customers’ financial conditions and obtaining
collateral, advance payments, or other security when appropriate. No one customer, or group of customers that to our knowledge
are under common control, accounted for more than 10% of our revenues for any period presented.
Cash and Other Commitments
Balances under the Credit Agreement are payable in full on August 12, 2027. Our term loan is repayable in quarterly
installments equal to 0.625% of the initial term loan balance of $245.0, beginning in December 2023 and in each of the first three
quarters of 2024, and 1.25% during the fourth quarter of 2024, all quarters of 2025 and 2026, and the first two quarters of 2027.
The remaining balance is payable in full on August 12, 2027.
We use operating leases to finance certain equipment, vehicles and properties. At December 31, 2022, we had $47.8 of
future minimum rental payments under operating leases with remaining non-cancelable terms in excess of one year.
Capital expenditures for 2022 totaled $15.9, compared to $9.6 and $15.3 in 2021 and 2020, respectively. Capital
expenditures in 2022 related primarily to upgrades to manufacturing facilities, including replacement of equipment. We expect
2023 capital expenditures to approximate $20.0 to $30.0, with a significant portion related to upgrades to manufacturing
facilities.
In 2022, we made contributions and direct benefit payments of $11.0 to our defined benefit pension and postretirement
benefit plans. We expect to make $10.3 of minimum required funding contributions and direct benefit payments in 2023. Our
pension plans have not experienced any liquidity difficulties or counterparty defaults due to the volatility in the credit markets.
Our pension fund assets had negative returns of approximately 24.0% in 2022. See Note 11 to our consolidated financial
statements for further disclosure of expected future contributions and benefit payments.
On a net basis, both from continuing and discontinued operations, net income tax refunds (payments) totaled $(59.6), $5.5,
and $(7.6) in 2022, 2021, and 2020, respectively. In 2022, we made payments of $64.2 associated with the actual and estimated
tax liability for federal, state and foreign tax obligations and received refunds of $4.6. The amount of income taxes that we
receive or pay annually is dependent on various factors, including the timing of certain deductions. Deductions and the amount
of income taxes can and do vary from year-to-year.
Our Certificate of Incorporation provides that we indemnify our officers and directors to the fullest extent permitted by the
Delaware General Corporation Law for any personal liability in connection with their employment or service with us, subject to
limited exceptions. While we maintain insurance for this type of liability, the liability could exceed the amount of the insurance
coverage.
41
We continually review each of our businesses in order to determine their long-term strategic fit. These reviews could result
in selected acquisitions to expand an existing business or result in the disposition of an existing business. In addition, you should
read “Risk Factors,” “Results for Reportable Segments” included in this MD&A, and “Business” for an understanding of the
risks, uncertainties and trends facing our businesses.
Off-Balance Sheet Arrangements
As of December 31, 2022, except as discussed in Note 15 to our consolidated financial statements and in the contractual
obligations table below, we did not have any material guarantees, off-balance sheet arrangements or purchase commitments
other than the following: (i) $35.8 of certain standby letters of credit outstanding, all of which relate to self-insurance or
environmental matters and $11.0 of which reduce the available borrowing capacity on our domestic revolving credit facility,
(ii) $14.8 of letters of credit outstanding, all of which reduce the available borrowing capacity on our foreign trade facilities, and
(iii) $50.7 of surety bonds.
Contractual Obligations
The following is a summary of our primary contractual obligations as of December 31, 2022:
Long-term debt obligations
Pension and postretirement benefit plan
contributions and payments(1)
Purchase and other contractual obligations(2)
Future minimum operating lease payments(3)
Interest payments(4)
Total contractual cash obligations(5)
____________________________
Total
Due
Within
1 Year
Due in
1-3 Years
Due in
3-5 Years
Due After
5 Years
$
245.7 $
2.0 $
20.2 $
223.5 $
—
165.8
182.3
47.8
72.4
10.3
174.6
11.1
16.3
18.7
7.7
16.9
31.3
27.9
—
9.3
24.8
108.9
—
10.5
—
$
714.0 $
214.3 $
94.8 $
285.5 $
119.4
(1) Estimated minimum required pension funding and pension and postretirement benefit payments are based on actuarial
estimates using current assumptions for, among other things, discount rates, expected long-term rates of return on plan
assets (where applicable), and health care cost trend rates. The expected pension contributions for the U.S. plans in
2022 and thereafter reflect the minimum required contributions under the Pension Protection Act of 2006 and the
Worker, Retiree, and Employer Recovery Act of 2008. These contributions do not reflect potential voluntary
contributions, or additional contributions that may be required in connection with acquisitions, dispositions or related
plan mergers. See Note 11 to our consolidated financial statements for additional information on expected future
contributions and benefit payments.
(2) Represents contractual commitments to purchase goods and services at specified dates.
(3) Represents rental payments under operating leases with remaining non-cancelable terms in excess of one year.
(4) Represents interest payments exclusive of the impact of our interest rate swap agreements.
(5) Contingent obligations, such as environmental accruals and those relating to uncertain tax positions generally do not
have specific payment dates and accordingly have been excluded from the above table. We believe that within the next
12 months it is reasonably possible that our previously unrecognized tax benefits could decrease up to $3.0. In addition,
the above table does not include potential payments under our derivative financial instruments.
Critical Accounting Estimates
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. The
accounting policies that we believe are most critical to the portrayal of our financial condition and results of operations, and that
require our most difficult, subjective or complex judgments in estimating the effect of inherent uncertainties, are listed below.
This section should be read in conjunction with Notes 1 and 2 to our consolidated financial statements, which include a detailed
discussion of these and other accounting policies.
42
Contingent Liabilities
Numerous claims, complaints and proceedings arising in the ordinary course of business have been asserted or are pending
against us or certain of our subsidiaries (collectively, “claims”). These claims relate to litigation matters (e.g., class actions,
derivative lawsuits and contracts, intellectual property and competitive claims), environmental matters, product liability matters
(which, prior to the Asbestos Portfolio Sale, were predominately associated with alleged exposure to asbestos-containing
materials), and other risk management matters (e.g., general liability, automobile, and workers’ compensation claims).
Additionally, we may become subject to other claims of which we are currently unaware, which may be significant, or the claims
of which we are aware may result in our incurring significantly greater loss than we anticipate. 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 liabilities related to these matters totaled $39.5 and $658.8 at December 31, 2022 and 2021, respectively. Of
these amounts, $30.8 and $584.3 are included in “Other long-term liabilities” within our consolidated balance sheets at
December 31, 2022 and 2021, respectively, with the remainder included in “Accrued expenses.” The decline in liabilities is
primarily related to the Asbestos Portfolio Sale. The liabilities we record for these matters are based on a number of assumptions,
including historical claims and payment experience. While we base our assumptions on facts currently known to 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.
Asbestos Matters
Prior to the Asbestos Portfolio Sale, our asbestos-related claims were typical in certain of the industries in which we
operate or pertain to legacy businesses we no longer operate. Our recorded assets and liabilities related to asbestos-related claims
were as follows at December 31, 2021:
Insurance recovery assets (1)
Liabilities for claims (2)
_____________________________________________________________
December 31,
2021
$
526.2
616.5
(1) Of these amounts, $473.6 are included in “Other assets” at December 31, 2021, while the remainder is included in
“Other current assets.”
(2) Of these amounts, $561.4 are included in “Other long-term liabilities” at December 31, 2021, while the remainder is
included in “Accrued expenses.”
The liabilities we recorded for asbestos-related claims were based on a number of assumptions. In estimating our liabilities
for asbestos-related claims, we considered, among other things, the following:
•
The number of pending claims by disease type and jurisdiction.
• Historical information by disease type and jurisdiction with regard to:
◦ Average number of claims settled with payment (versus dismissed without payment); and
◦ Average claim settlement amounts.
•
The period over which we could reasonably project asbestos-related claims (projected through 2057 at December 31,
2021).
The assets we recorded for asbestos-related claims represent amounts that we believe we were entitled to recover under
agreements we had with insurance companies. The amount of these assets were based on a number of assumptions, including the
continued solvency of the insurers and our legal interpretation of our rights for recovery under the agreements we had with the
insurers.
43
During the years ended December 31, 2022, 2021, and 2020, our (receipts) payments for asbestos-related claims, net of
respective insurance recoveries of $31.6, $53.9, and $35.4, were $20.1, $(0.3) and $19.3, respectively. The year ended
December 31, 2021 includes insurance proceeds of $15.0 associated with the settlement of an asbestos insurance coverage
matter.
During the years ended December 31, 2022, 2021, and 2020, we recorded charges of $24.2, $51.2, and $21.3, respectively,
as a result of changes in estimates associated with the liabilities and assets related to asbestos-related claims. Of these charges,
$18.8, $48.6 and $19.2 were reflected in “Income from continuing operations before income taxes” for the years ended
December 31, 2022, 2021, and 2020, respectively, and $5.4, $2.6, and $2.1, respectively, were reflected in “Gain (loss) on
disposition of discontinued operations, net of tax.”
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 substantially completed its scope of work. Over such time, the business environment surrounding these projects was
difficult, as DBT, along with many other contractors on the projects, experienced delays, cost over-runs, and various other
challenges associated with a complex set of contractual relationships among the end customer, prime contractors, various
subcontractors (including DBT and its subcontractors), and various suppliers. DBT’s remaining responsibilities relate largely to
resolution of various claims, primarily between itself and one of its prime contractors, MHI.
The challenges related to the projects have resulted in (i) significant adjustments to our revenue and cost estimates for the
projects, (ii) DBT’s submission of numerous change orders to the prime contractors, (iii) various claims and disputes between
DBT and other parties involved with the projects (e.g., prime contractors, subcontractors, suppliers, etc.), and (iv) the possibility
that DBT may become subject to additional claims, which could be significant. It is possible that some outstanding claims may
not be resolved until after the prime contractors complete their scopes of work. Our future financial position, operating results,
and cash flows could be materially impacted by the resolution of current and any future claims.
Claims by DBT - DBT has asserted claims against MHI of approximately South African Rand 1,000.0 (or $58.4). As DBT
prepares these claims for dispute resolution processes, the amounts, along with the characterization, of the claims could change.
Of these claims, South African Rand 732.6 (or $42.8), which is inclusive of the amounts awarded in the adjudications referred to
below, are currently proceeding through contractual dispute resolution processes and DBT is likely to initiate additional dispute
resolution processes. DBT is also pursuing several claims to force MHI to abide by its contractual obligations and provide DBT
with certain benefits that MHI may have received from its customer on the projects. In addition to existing asserted claims, DBT
believes it has additional claims and rights to recovery based on its performance under the contracts with, and actions taken by,
MHI. DBT is continuing to evaluate the claims and the amounts owed to it under the contracts based on MHI's failure to comply
with its contractual obligations. The amounts DBT may recover for current and potential future claims against MHI are not
currently known given (i) the extent of current and potential future claims by MHI against DBT (see below for further
discussion) and (ii) the unpredictable nature of any dispute resolution processes that may occur in connection with these current
and potential future claims. No revenue has been recorded in the consolidated financial statements with respect to current or
potential future claims against MHI.
On July 23, 2020, a dispute adjudication panel issued a ruling in favor of DBT on certain matters related to the Kusile and
Medupi projects. The panel (i) ruled that DBT had achieved takeover on 9 of the units; (ii) ordered MHI to return $2.3 of bonds
(which have been subsequently returned by MHI); (iii) ruled that DBT is entitled to the return of an additional $4.3 of bonds
upon the completion of certain administrative milestones; (iv) ordered MHI to pay South African Rand 18.4 (or $1.1 at the time
of the ruling) in incentive payments for work performed by DBT (which MHI has subsequently paid); and (v) ruled that MHI
waived its rights to assert delay damages against DBT on one of the units of the Kusile project. The ruling is subject to MHI’s
rights to seek further arbitration in the matter, as provided in the contracts. As such, the incentive payments noted above have not
been recorded in our consolidated statements of operations.
On February 22, 2021, a dispute adjudication panel issued a ruling in favor of DBT related to costs incurred in connection
with delays on two units of the Kusile project. In connection with the ruling, MHI paid DBT South African Rand 126.6 (or $8.6
at the time of payment). This ruling is subject to MHI’s rights to seek further arbitration in the matter and, thus, the amount
awarded has not been reflected in our consolidated statements of operations. On July 5, 2021, DBT received notice from MHI of
its intent to seek final and binding arbitration in this matter. The hearing on this matter occurred in December 2022, with the
ruling from such hearing yet to be received.
On April 28, 2021, a dispute adjudication panel issued a ruling in favor of DBT related to costs incurred in connection with
delays on two units of the Medupi project. In connection with the ruling, MHI paid DBT South African Rand 82.0 (or $6.0 at the
44
time of payment). This ruling is subject to MHI’s rights to seek further arbitration in the matter and, thus, the amount awarded
has not been reflected in our consolidated statements of operations.
Claims by MHI - On February 26, 2019, DBT received notification of an interim claim consisting of both direct and
consequential damages from MHI alleging, among other things, that DBT (i) provided defective product and (ii) failed to meet
certain project milestones. In September 2020, MHI made a demand on certain bonds issued in its favor by DBT, based solely on
these alleged defects, but without further substantiation or other justification (see further discussion below). On December 30,
2020, MHI notified DBT of its intent to take these claims to binding arbitration even though the vast majority of these claims had
not been brought appropriately before a dispute adjudication board as required under the relevant subcontracts. On June 4, 2021,
in connection with the arbitration, DBT received a revised version of the claim. Similar to the interim claim, we believe the vast
majority of the damages summarized in the revised claim are unsubstantiated and, thus, any loss for the majority of these claims
is considered remote. The remainder of the claims in both the interim notification and the revised version largely appear to be
direct in nature (approximately South African Rand 790.0 or $46.1). On September 21, 2022, an arbitration tribunal ruled that
only South African Rand 349.6 (or $20.4) of MHI's revised claim had been brought appropriately before a dispute adjudication
board as required under the relevant subcontracts, with MHI's other claims dismissed from the arbitration proceedings. On
November 25, 2022, MHI notified DBT of its intent to refer the claims dismissed from the arbitration to a new dispute
adjudication panel. DBT has numerous defenses and, thus, we do not believe that DBT has a probable loss associated with any of
these claims. As such, no loss has been recorded in the consolidated financial statements with respect to these claims. DBT
intends to vigorously defend itself against these claims. Although it is reasonably possible that some loss may be incurred in
connection with these claims, we currently are unable to estimate the potential loss or range of potential loss associated with
these claims due to the (i) lack of support provided by MHI for these claims; (ii) complexity of contractual relationships between
the end customer, MHI, and DBT; (iii) legal interpretation of the contract provisions and application of South African law to the
contracts; and (iv) unpredictable nature of any dispute resolution processes that may occur in connection with these claims.
In April and July 2019, DBT received notifications of intent to claim liquidated damages totaling South African Rand
407.2 (or $23.8) from MHI alleging that DBT failed to meet certain project milestones related to the construction of the filters
for both the Kusile and Medupi projects. DBT has numerous defenses against these claims and, thus, we do not believe that DBT
has a probable loss associated with these claims. As such, no loss has been recorded in the consolidated financial statements with
respect to these claims. Although it is reasonably possible that some loss may be incurred in connection with these claims, we
currently are unable to estimate the potential loss or range of potential loss.
MHI has made other claims against DBT totaling South African Rand 176.2 (or $10.3), and has also alleged that it has
incurred additional remedial costs related to portions of DBT’s scope of work. DBT has numerous defenses against these claims,
as well as claims, if any, that may result from the above unsubstantiated allegations, and, thus, we do not believe that DBT has a
probable loss associated with these claims. As such, no loss has been recorded in the consolidated financial statements with
respect to these claims and allegations.
Bonds Issued in Favor of MHI - DBT is obligated with respect to bonds issued by banks in favor of MHI. In September of
2020, MHI made a demand, and received payment of South African Rand 239.6 (or $14.3 at the time of payment), on certain of
these bonds. In May 2021, MHI made an additional demand, and received payment of South African Rand 178.7 (or $12.5 at
time of payment), on certain of the remaining bonds at such time. In both cases, we funded the payment as required under the
terms of the bonds and our senior credit agreement. In its demands, MHI purported that DBT failed to carry out its obligations to
rectify certain alleged product defects and that DBT failed to meet certain project milestones. DBT denies liability for such
allegations and, thus, fully intends to seek, and believes it is legally entitled to, reimbursement of the South African Rand 418.3
(or $24.4) that has been paid. On October 11, 2022, a dispute adjudication panel ruled MHI drew on amounts in excess of the
bond values stipulated in the contracts and was required to refund DBT South African Rand 90.8 (or $5.0 at the time of payment)
of the previously demanded amounts, plus interest of South African Rand 12.5 (or $0.7 at the time of payment). MHI paid these
amounts on October 14, 2022. We have reflected the remaining South African Rand 327.5 (or $19.1) within “Assets of DBT and
Heat Transfer” on the consolidated balance sheet as of December 31, 2022.
The remaining bond of South African Rand 29.2 (or $1.7) was issued to MHI as a performance guarantee in the event of a
breach of DBT’s contractual obligations. In the event that MHI were to receive payment on a portion, or all, of the remaining
bond, we would be required to reimburse the issuing bank.
In addition SPX Technologies, Inc. has guaranteed DBT’s performance on these projects to the prime contractors,
including MHI.
45
Claim against Surety - On February 5, 2021, DBT received payment of $6.7 on bonds issued in support of performance by
one of DBT’s sub-contractors. The sub-contractor maintains a right to seek recovery of such amount and, thus, the amount
received by DBT has not been reflected in our consolidated statements of operations.
Claim for Contingent Consideration Related to ULC Acquisition
In connection with our acquisition of ULC in September 2020, the seller of ULC was eligible for additional cash
consideration of up to $45.0 upon achievement of certain operating and financial performance milestones. At the time of the
acquisition, we recorded a liability of $24.3, which represented the estimated fair value of the contingent consideration. During
the third quarter of 2021, we concluded that the operational and financial performance milestones noted above were not
achieved. As a result, we reversed the liability of $24.3 during the third quarter of 2021, with the offset recorded to “Other
operating (income) expense, net.”
On August 23, 2022, the seller of ULC initiated a breach-of-contract lawsuit against us in the United States District Court
for the Eastern District of New York claiming that it is entitled to a portion of the additional cash consideration totaling $15.0
linked to certain operating performance milestones. SPX has numerous defenses against this claim and, thus, we do not believe
we have a probable loss associated with the claim.
Environmental Matters
We believe that we are in substantial compliance with applicable environmental requirements. We are currently involved in
various investigatory and remedial actions at our facilities and at third-party waste disposal sites. It is our policy to accrue for
estimated losses from legal actions or claims when events exist that make the realization of the losses or expenses probable and
they can be reasonably estimated. Our environmental accruals cover anticipated costs, including investigation, remediation, and
operation and maintenance of clean-up sites. 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. We
expense costs incurred to investigate and remediate environmental issues unless they extend the economic useful lives of related
assets. We record liabilities when it is probable that an obligation has been incurred and the amounts can be reasonably
estimated. Our estimates are based primarily on investigations and remediation plans established by independent consultants,
regulatory agencies and potentially responsible third parties. It is our policy to realize a change in estimates once it becomes
probable and can be reasonably estimated. In determining our accruals, we generally do not discount environmental accruals and
do not reduce them by anticipated insurance, litigation and other 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.
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 an estimate 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;
however, this insurance may be insufficient or unavailable (e.g., because of insurer insolvency) to protect us against potential
loss exposures. The key assumptions considered in estimating the ultimate cost to settle reported claims and the estimated costs
associated with incurred but not yet reported claims include, among other things, our historical and industry claims experience,
trends in health care and administrative costs, our current and future risk management programs, and historical lag studies with
regard to the timing between when a claim is incurred versus when it is reported.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification 606, which requires revenue to be recognized
over-time or at a point in time.
Most of our businesses recognize revenue at a point in time as satisfaction of the related performance obligations occur at
the time of shipment or delivery, while certain of our businesses recognize revenue and costs for long-term contracts over-time.
The revenue for these long-term contracts is recorded based on the percentage of costs incurred to date for each contract to
the estimated total costs for such a contract at completion. In 2022, 2021, and 2020 we recognized $167.8, $142.4 and $164.0,
respectively, of revenues under such method. We record any provision for estimated losses on uncompleted long-term contracts
in the period which the losses are determined.
Our long-term contracts often include unapproved change orders and claims. We include in our contract estimates
additional revenue for unapproved change orders or claims when we believe we have an enforceable right to the unapproved
46
change order or claim and the amount can be reliably estimated. In evaluating these criteria, we consider the contractual/legal
basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs, and the objective evidence
available to support the claim. These estimates are also based on historical award experience. Due to uncertainties inherent in the
estimation process, it is reasonably possible that the ultimate revenues and completion costs on our long-term contracts,
including those arising from contract penalty provisions and final contract settlements, will be revised during the duration of the
contract. These revised revenues and costs are recognized in the period in which the revisions are determined.
Our estimation process for determining revenues and costs for our long-term contracts is based upon (i) our historical
experience, (ii) the professional judgment and knowledge of our engineers, project managers, and operations and financial
professionals, and (iii) an assessment of the key underlying factors (see below).
As our long-term contracts generally range from six to eighteen months in duration, we typically reassess the estimated
revenues and costs of these contracts on a quarterly basis, but may reassess more often as situations warrant. We record changes
in estimates of revenues and costs when identified using the cumulative catch-up method.
We believe the underlying factors used to estimate our long-term contracts costs to complete and percentage-of-completion
are sufficiently reliable to provide a reasonable estimate of revenue and profit; however, due to the length of time over which
revenues are generated and costs are incurred, along with the judgment required in developing the underlying factors, the
variability of revenue and cost can be significant. Factors that may affect revenue and costs relating to long-term contracts
include, but are not limited to, the following:
•
Cost Recovery for Product Design Changes and Claims — On occasion, design specifications may change during the
course of the contract. Any additional costs arising from these changes may be supported by change orders, or we may
submit a claim to the customer. Change orders and claims related to design changes are accounted for as described
above.
• Material Availability and Costs — Our estimates of material costs generally are based on existing supplier
relationships, adequate availability of materials, prevailing market prices for materials, and, in some cases, long-term
supplier contracts. Changes in our supplier relationships, delays in obtaining materials, or changes in material prices
can have a significant impact on our cost and profitability estimates.
•
•
•
Use of Subcontractors — Our arrangements with subcontractors are generally based on fixed prices; however, our
estimates of the cost and profitability can be impacted by subcontractor delays, customer claims arising from
subcontractor performance issues, or a subcontractor’s inability to fulfill its obligations.
Labor Costs and Anticipated Productivity Levels — Where applicable, we include the impact of labor improvements
in our estimation of costs, such as in cases where we expect a favorable learning curve over the duration of the
contract. In these cases, if the improvements do not materialize, costs and profitability could be adversely impacted.
Additionally, to the extent we are more or less productive than originally anticipated, estimated costs and profitability
may also be impacted.
Effect of Foreign Currency Fluctuations — Fluctuations between currencies in which our long-term contracts are
denominated and the currencies under which contract costs are incurred can have an impact on profitability. When the
impact on profitability is potentially significant, we may enter into FX forward contracts or prepay certain vendors for
raw materials to manage the potential exposure. See Note 14 to our consolidated financial statements for additional
details on our FX forward contracts.
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 are recoverable from customers based upon various measures of performance, including achievement of certain
milestones, completion of specific units, or completion of the contract.
In contracts where a portion of the price may vary, we estimate the variable consideration at the amount to which we expect
to be entitled, which is included in the transaction price to the extent it is probable that a significant reversal of cumulative
revenue recognized will not occur. We analyze the risk of a significant revenue reversal and, if necessary, constrain the amount
of variable consideration recognized in order to mitigate this risk.
See Notes 1 and 5 to our consolidated financial statements for further information on our revenue recognition policies.
47
Impairment of Goodwill and Indefinite-Lived Intangible Assets
Goodwill and indefinite-lived intangible assets are not amortized, but instead are subject to annual impairment testing. We
review goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter and continually assess
whether a triggering event has occurred to determine whether the carrying value exceeds the implied fair value. We monitor the
results of each of our reporting units as a means of identifying trends and/or matters that may impact their financial results and,
thus, be an indicator of a potential impairment. The trends and/or matters that we specifically monitor for each of our reporting
units are as follows:
•
•
•
•
Significant variances in financial performance (e.g., revenues, earnings and cash flows) in relation to expectations and
historical performance;
Significant changes in end markets or other economic factors;
Significant changes or planned changes in our use of a reporting unit’s assets; and
Significant changes in customer relationships and competitive conditions.
The identification and measurement of goodwill impairment involves the estimation of the fair value of reporting units. We
have the option to assess impairment through a qualitative assessment, which includes factors such as general economic
conditions, negative developments in equity and credit markets, adverse changes in the markets in which a reporting unit
operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash
flows over multiple periods, among others. When a potential impairment is indicated, we perform quantitative testing by
comparing the estimated fair value of the reporting unit to the carrying value of the reported net assets. Under our quantitative
testing, fair value is generally based on discounted projected cash flows, but we also consider factors such as comparable
industry price multiples. The revenue growth rates included in the financial projections are our best estimates based on current
and forecasted market conditions, and the profit margin assumptions are projected by each reporting unit based on current cost
structure and, when applicable, anticipated net cost increases/reductions.
The calculation of fair value for our reporting units incorporates many assumptions including future growth rates, profit
margin and discount factors. Changes in economic and operating conditions impacting these assumptions could result in
impairment charges in future periods.
As indicated in Note 10 to the consolidated financial statements, we concluded during the third quarter of 2021 that the
operating and financial milestones related to the ULC contingent consideration would not be achieved, resulting in the reversal
of the related liability of $24.3, with the offset to “Other operating (income) expenses, net.” We also concluded that the lack of
achievement of these milestones, along with lower than anticipated future cash flows, were indicators of potential impairment
related to ULC’s goodwill and indefinite-lived intangible assets. As such, we performed quantitative analyses on ULC’s
goodwill and indefinite-lived intangible assets for impairment during the third quarter of 2021. Based on such testing, we
determined that the carrying value of ULC’s net assets exceeded the implied fair value of the business. As a result, we recorded
an impairment charge of $24.3 during the quarter, with $23.3 related to goodwill and the remainder to trademarks. In connection
with our annual impairment analyses of ULC’s goodwill and indefinite-lived intangibles during the fourth quarters of 2022 and
2021, we determined that the carrying value of ULC’s net assets exceeded the implied fair value of the business. As a result, we
recorded impairment charges of $12.9 ($12.0 related to goodwill, which represented all of ULC’s goodwill prior to impairment,
and $0.9 related to trademarks) and $5.2 ($4.9 related to goodwill and $0.3 related to trademarks) during the fourth quarters of
2022 and 2021, respectively.
During the fourth quarter of 2022, in addition to the ULC analysis mentioned above, we performed quantitative analyses on
the goodwill and indefinite-lived intangible assets of our Cincinnati Fan reporting unit. The Cincinnati Fan analysis indicated
that the fair value of its net assets exceeded the related carrying value by less than 10%. A change in assumptions used in
Cincinnati Fan’s quantitative analyses (e.g., projected revenues and profit growth rates, discount rates, industry price multiples,
etc.) could result in the reporting unit's estimated fair value being less than the carrying value. If Cincinnati Fan is unable to
achieve its current financial forecast, we may be required to record an impairment charge in a future period related to its
goodwill. As of December 31, 2022, Cincinnati Fan’s goodwill totaled $54.8.
We perform our annual trademarks impairment testing during the fourth quarter, or on a more frequent basis if there are
indications of potential impairment. The fair values of our trademarks are determined by applying estimated royalty rates to
projected revenues, with resulting cash flows discounted at a rate of return that reflects current market conditions. The basis for
these projected revenues is the annual operating plan for each of the related businesses, which is prepared in the fourth quarter of
each year. In connection with the annual impairment testing of our trademarks during the fourth quarters of 2022, 2021, and
48
2020, we recorded impairment charges of $1.4 (including $0.9 related to ULC as noted above), $0.8 (including $0.3 related to
ULC as noted above), and $0.7, respectively.
See Note 10 to our consolidated financial statements for additional details.
Employee Benefit Plans
Defined benefit plans cover a portion of our salaried and hourly paid employees, including certain employees in foreign
countries. Additionally, domestic postretirement plans provide health and life insurance benefits for certain retirees and their
dependents. We recognize changes in the fair value of plan assets and actuarial gains and losses into earnings during the fourth
quarter of each year, unless earlier remeasurement is required, as a component of net periodic benefit expense. The remaining
components of pension/postretirement expense, primarily interest costs and expected return on plan assets, are recorded on a
quarterly basis.
Our pension plans have not experienced any significant impact on liquidity or counterparty exposure due to the volatility in
the credit markets.
The costs and obligations associated with these plans are determined based on actuarial valuations. The critical
assumptions used in determining these related expenses and obligations are discount rates and healthcare cost projections. These
critical assumptions are calculated based on company data and appropriate market indicators, and are evaluated at least annually
by us in consultation with outside actuaries. Other assumptions involving demographic factors such as retirement patterns and
mortality, are evaluated periodically and are updated to reflect our experience and expectations for the future. While
management believes that the assumptions used are appropriate, actual results may differ.
The discount rate enables us to state expected future cash flows at a present value on the measurement date. This rate is the
yield on high-quality fixed income investments at the measurement date. A lower discount rate increases the present value of
benefit obligations and increases pension expense. Including the effects of recognizing actuarial gains and losses into earnings as
described above, a 50 basis point decrease in the discount rate for our domestic plans would have increased our 2022 pension
expense by approximately $9.4, and a 50 basis point increase in the discount rate would have decreased our 2022 pension
expense by approximately $8.8.
The trend in healthcare costs is difficult to estimate, and it can significantly impact our postretirement liabilities and costs.
The healthcare cost trend rate for 2022, which is the weighted-average annual projected rate of increase in the per capita cost of
covered benefits, is 7.0%. This rate is assumed to decrease to 5.0% by 2031 and then remain at that level.
See Note 11 to our consolidated financial statements for further information on our pension and postretirement benefit
plans.
Income Taxes
We record our income taxes based on the Income Taxes Topic of the Codification, which includes an estimate of the
amount of income taxes payable or refundable for the current year and deferred income tax liabilities and assets for the future tax
consequences of events that have been recognized in our consolidated financial statements or tax returns.
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. We periodically assess the
realizability of deferred tax assets and the adequacy of deferred tax liabilities, including the results of local, state, federal or
foreign statutory tax audits or estimates and judgments used.
Realization of deferred tax assets involves estimates regarding (i) the timing and amount of the reversal of taxable
temporary differences, (ii) expected future taxable income, and (iii) the impact of tax planning strategies. We believe that it is
more likely than not that we will not realize the benefit of certain deferred tax assets and, accordingly, have established a
valuation allowance against them. In assessing the need for a valuation allowance, we consider all available positive and
negative evidence, including past operating results, projections of future taxable income and the feasibility of and potential
changes to ongoing tax planning strategies. The projections of future taxable income include a number of estimates and
assumptions regarding our volume, pricing and costs. Although realization is not assured for the remaining deferred tax assets,
we believe it is more likely than not that the remaining deferred tax assets will be realized through future taxable earnings or
alternative tax strategies. However, deferred tax assets could be reduced in the near term if our estimates of taxable income are
significantly reduced or tax strategies are no longer viable.
The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions
and ongoing audits by federal, state and foreign tax authorities, which may result in proposed adjustments. We perform reviews
of our income tax positions on a quarterly basis and accrue for potential uncertain tax positions. Accruals for these uncertain tax
49
positions are classified as “Income taxes payable” and “Deferred and other income taxes” in our consolidated balance sheets
based on an expectation as to the timing of when the matter will be resolved. As events change or resolutions occur, these
accruals are adjusted, such as in the case of audit settlements with taxing authorities. We believe we have adequately provided
for any reasonably foreseeable outcome related to these matters.
Our future results may include favorable or unfavorable adjustments to our estimated tax liabilities due to closure of
income tax examinations, statute expirations, new regulatory or judicial pronouncements, changes in tax laws, changes in
projected levels of taxable income, future tax planning strategies, or other relevant events. See Note 12 to our consolidated
financial statements for additional details regarding our uncertain tax positions.
50
See Note 3 to our consolidated financial statements for a discussion of recent accounting pronouncements.
New Accounting Pronouncements
51
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
(All amounts are in millions)
We are exposed to market risk related to changes in interest rates, foreign currency exchange rates and commodity raw
material prices, and we selectively use financial instruments to manage these risks. We do not enter into financial instruments for
speculative or trading purposes; however, these instruments may be deemed speculative if the future cash flows originally
hedged are no longer probable of occurring as anticipated. Our currency exposures vary, but are primarily concentrated in the
South African Rand, British Pound Sterling, and Euro. We generally do not hedge currency translation exposures. Our exposures
for commodity raw materials vary, with the highest concentration relating to steel and oil. See Note 14 to our consolidated
financial statements for further details.
The following table provides information, as of December 31, 2022, about our primary outstanding debt obligations and
presents principal cash flows by expected maturity dates, weighted-average interest rates and fair values.
Senior Credit Facilities
Average interest rate
2023
2024
2025
2026
Thereafter
Total
Fair Value
$
1.5 $
7.7 $
12.3 $ 12.3 $
211.2 $ 245.0
$
245.0
Expected Maturity Date
5.8 %
At December 31, 2022, we had swaps with a notional amount of $231.3 that cover the period through November 2024, and
effectively convert this portion of the borrowings under our senior credit facilities to a fixed rate of 1.077%, plus the applicable
margin. The fair value of these swaps was $14.7 at December 31, 2022, with $8.7 recorded as a current asset and $6.0 as a non-
current asset.
We believe that cash and equivalents, cash flows from operations, and availability under revolving credit facilities and our
trade receivables financing arrangement will be sufficient to fund working capital needs, planned capital expenditures, other
operational cash requirements and required debt service obligations.
From time to time, we enter into FX forward contracts to manage the exposure on contracts with forecasted transactions
denominated in non-functional currencies and to manage the risk of transaction gains and losses associated with assets/liabilities
denominated in currencies other than the functional currency of certain subsidiaries. We had FX forward contracts with an
aggregate notional amount of $6.9 at December 31, 2022, with all of the $6.9 scheduled to mature within one year. The fair value
of our FX forward contracts was less than $0.1 at December 31, 2022.
52
ITEM 8. Financial Statements And Supplementary Data
SPX Technologies, Inc. and Subsidiaries
Index To Consolidated Financial Statements
December 31, 2022
SPX Technologies, Inc. and Subsidiaries
Report of Independent Registered Public Accounting Firm — Deloitte & Touche LLP (PCAOB ID No. 34)
Consolidated Financial Statements:
Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2022, 2021 and
2020
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
Page
54
56
57
58
59
60
62
All schedules are omitted because they are not applicable, not required or because the required information is included in
our consolidated financial statements or notes thereto.
53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of SPX Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SPX Technologies, Inc. and subsidiaries (the “Company”) as
of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’
equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the
United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 23, 2023, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on
the accounts or disclosures to which it relates.
Goodwill — Refer to Notes 2 and 10 to the financial statements
Critical Audit Matter Description
In testing the goodwill of its reporting units for potential impairment, the Company applies either a qualitative or quantitative
test, in accordance with ASC 350, Intangibles – Goodwill and Other. A qualitative approach may be applied when the Company
concludes that it is not “more likely than not” that the fair value of a reporting unit is less than its carrying value. A quantitative
approach is performed by comparing the fair value of a reporting unit with its carrying amount (“quantitative assessment”). For
reporting units tested for impairment using the quantitative assessment, the Company determines the fair value of each reporting
unit using both the income approach and the market approach. The income approach requires management to make a number of
business and valuation assumptions for each reporting unit including annual assumptions of projected revenue growth rates,
projected profit margins and discount rate factors. The market approach requires management to estimate fair value using
marketplace fair value data derived from a comparable industry grouping of publicly traded companies and from pricing
multiples implied from sales of companies similar to the Company’s reporting units (“market multiples”). The Company’s
goodwill balance was $455.3 as of December 31, 2022.
We identified the valuation of goodwill for two of the Company’s reporting units as a critical audit matter due to the historic
performance of each reporting unit as compared to projections and because the determination of the reporting unit fair values
was based on significant assumptions that are sensitive to changes and are affected by expected future market and economic
conditions. Auditing the judgments used by management in the quantitative impairment tests required a high degree of auditor
judgment and an increased extent of effort, which included the need to involve our fair value specialists.
54
–
– Historical results
–
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s assumptions and valuation methodology included the following, among others:
• We tested the design and operating effectiveness of controls over management’s quantitative impairment tests,
including controls over forecasts of future cash flows based on estimates of revenue growth rates, profit margins and
the determinations of the discount rate, as well as the determination of comparable market multiples.
• We evaluated management’s ability to accurately forecast projected revenue growth rates and profit margins by
comparing actual results to management’s historical forecasts.
• We evaluated the reasonableness of management’s forecasts by comparing the forecasts to:
Internal communications to management and the Board of Directors
Third-party economic research, industry performance, and peer company performance
• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, the
discount rate, and the industry pricing multiples by performing certain procedures, that included:
–
–
–
Evaluating whether the fair value models being used are appropriate considering the Company’s circumstances
and valuation premise identified
Evaluating the market multiples by considering the selected comparable industry grouping of publicly traded
companies
Testing the underlying source information and mathematical accuracy of the calculations
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 23, 2023
We have served as the Company’s auditor since 2002.
55
SPX Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
(in millions, except per share amounts)
Revenues
Costs and expenses:
Cost of products sold
Selling, general and administrative
Intangible amortization
Impairment of goodwill and intangible assets
Special charges, net
Other operating (income) expense, net
Operating income
Other income (expense), net
Interest expense
Interest income
Loss on amendment/refinancing of senior credit agreement
Income from continuing operations before income taxes
Income tax provision
Income from continuing operations
Income from discontinued operations, net of tax
Gain (loss) on disposition of discontinued operations, net of tax
Gain (loss) from discontinued operations, net of tax
Net income
Basic income (loss) per share of common stock:
Income from continuing operations
Income (loss) from discontinued operations
Net income per share
Weighted-average number of common shares outstanding — basic
Diluted income (loss) per share of common stock:
Income from continuing operations
Income (loss) from discontinued operations
Net income per share
Year ended December 31,
2021
2020
2022
$
1,460.9 $
1,219.5 $
1,128.1
937.0
355.7
28.5
13.4
0.4
74.9
51.0
(15.2)
(9.3)
1.7
(1.1)
27.1
(7.3)
19.8
—
(19.6)
(19.6)
787.7
309.6
21.6
30.0
1.0
(4.1)
73.7
9.0
(13.1)
0.5
(0.2)
69.9
(10.9)
59.0
5.7
360.7
366.4
0.2 $
425.4 $
0.44 $
1.30 $
(0.44)
8.09
— $
9.39 $
732.6
272.5
14.0
0.7
2.4
9.0
96.9
(0.1)
(18.4)
0.2
—
78.6
(4.8)
73.8
28.9
(3.7)
25.2
99.0
1.65
0.57
2.22
45.345
45.289
44.628
0.43 $
1.27 $
(0.43)
7.88
— $
9.15 $
1.61
0.55
2.16
$
$
$
$
$
Weighted-average number of common shares outstanding — diluted
46.221
46.495
45.766
The accompanying notes are an integral part of these statements.
56
SPX Technologies, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in millions)
Net income
Other comprehensive income (loss), net:
Pension and postretirement liability adjustment, net of tax benefit of $1.0,
$1.2, and $1.2 in 2022, 2021 and 2020, respectively
Net unrealized gains (losses) on qualifying cash flow hedges, net of tax
(provision) benefit of $(3.6), $(1.5), and $0.9 in 2022, 2021 and 2020,
respectively
Foreign currency translation adjustments
Other comprehensive income (loss), net
Total comprehensive income (loss)
Year ended December 31,
2022
2021
2020
$
0.2 $
425.4 $
99.0
(3.3)
(3.6)
(3.6)
10.5
(13.6)
(6.4)
(6.2) $
$
4.9
14.1
15.4
(2.8)
10.6
4.2
440.8 $
103.2
The accompanying notes are an integral part of these statements.
57
SPX Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions, except share data)
December 31,
2022
December 31,
2021
$
$
$
ASSETS
Current assets:
Cash and equivalents
Accounts receivable, net
Contract assets
Inventories, net
Other current assets
Total current assets
Property, plant and equipment:
Land
Buildings and leasehold improvements
Machinery and equipment
Accumulated depreciation
Property, plant and equipment, net
Goodwill
Intangibles, net
Other assets
Deferred income taxes
Assets of DBT and Heat Transfer (includes cash and equivalents of $9.3 and $7.8 at December 31, 2022
and 2021, respectively) (Note 4)
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Contract liabilities
Accrued expenses
Income taxes payable
Short-term debt
Current maturities of long-term debt
Total current liabilities
Long-term debt
Deferred and other income taxes
Other long-term liabilities
Liabilities of DBT and Heat Transfer (Note 4)
Total long-term liabilities
Commitments and contingent liabilities (Note 15)
Stockholders' equity:
Common stock (53,350,918 and 45,291,989 issued and outstanding at December 31, 2022,
respectively, and 53,011,255 and 45,467,768 issued and outstanding at December 31, 2021,
respectively)
Paid-in capital
Retained deficit
Accumulated other comprehensive income
Common stock in treasury (8,058,929 and 7,543,487 shares at December 31, 2022 and 2021
respectively)
Total stockholders' equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
0.5
1,338.3
(51.6)
257.5
(465.5)
1,079.2
1,930.9 $
$
The accompanying notes are an integral part of these statements.
58
147.8 $
263.5
23.9
244.0
41.9
721.1
13.9
63.7
233.4
311.0
(201.1)
109.9
455.3
401.6
197.4
2.7
388.2
223.4
28.9
189.8
73.1
903.4
13.9
62.9
231.4
308.2
(194.9)
113.3
457.3
415.5
675.9
11.0
42.9
1,930.9 $
52.2
2,628.6
124.5 $
52.8
148.0
4.7
1.8
2.0
333.8
243.0
34.8
208.3
31.8
517.9
119.6
44.7
217.9
42.1
2.2
13.0
439.5
230.8
31.3
788.5
35.6
1,086.2
0.5
1,334.2
(51.8)
263.9
(443.9)
1,102.9
2,628.6
SPX Technologies, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(in millions)
Balance at December 31, 2019
$
0.5 $ 1,302.4 $
(575.7) $
244.3 $
(460.0) $
511.5
Common
Stock
Paid-In
Capital
Retained
Deficit
Accum. Other
Comprehensive
Income
Common
Stock In
Treasury
Total
Stockholders'
Equity
Impact of adoption of ASU 2016-13 - See Note 3
Net income
Other comprehensive income, net
Incentive plan activity
Long-term incentive compensation expense
Restricted stock unit vesting
Balance at December 31, 2020
Net income
Other comprehensive income, net
Incentive plan activity
Long-term incentive compensation expense
Restricted stock unit vesting
Balance at December 31, 2021
Net income
Other comprehensive loss, net
Incentive plan activity
Long-term incentive compensation expense
Restricted stock unit vesting
Common stock repurchases
—
—
—
—
—
—
—
—
—
17.5
12.8
(12.8)
0.5
1,319.9
—
—
—
—
—
—
—
12.8
14.2
(12.7)
(0.5)
99.0
—
—
—
—
(477.2)
425.4
—
—
—
—
—
—
4.2
—
—
—
—
—
—
—
—
8.4
248.5
(451.6)
—
15.4
—
—
—
—
—
—
—
7.7
(0.5)
99.0
4.2
17.5
12.8
(4.4)
640.1
425.4
15.4
12.8
14.2
(5.0)
0.5
1,334.2
(51.8)
263.9
(443.9)
1,102.9
—
—
—
—
—
—
—
—
12.6
10.9
(19.4)
—
0.2
—
—
—
—
—
—
(6.4)
—
—
—
—
—
—
—
—
12.1
(33.7)
0.2
(6.4)
12.6
10.9
(7.3)
(33.7)
Balance at December 31, 2022
$
0.5 $ 1,338.3 $
(51.6) $
257.5 $
(465.5) $
1,079.2
The accompanying notes are an integral part of these statements.
59
SPX Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in millions)
Year ended December 31,
2022
2021
2020
Cash flows from (used in) operating activities:
Net income
Less: Gain (loss) from discontinued operations, net of tax
Income from continuing operations
Adjustments to reconcile income from continuing operations to net cash from (used in) operating
activities
Loss on divestiture of asbestos-related assets and liabilities
Special charges, net
(Gain) loss on change in fair value of equity security
Loss on amendment/refinancing of senior credit agreement
Impairment of goodwill and intangible assets
Deferred and other income taxes
Depreciation and amortization
Pension and other employee benefits
Long-term incentive compensation
Other, net
Contribution to divest asbestos-related assets and liabilities
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable and other assets
Inventories
Accounts payable, accrued expenses and other
Cash spending on restructuring actions
Net cash from (used in) continuing operations
Net cash from (used in) discontinued operations
Net cash from (used in) operating activities
Cash flows from (used in) investing activities:
Proceeds (expenditures) related to company-owned life insurance policies, net
Business acquisitions, net of cash acquired
Capital expenditures
Net cash used in continuing operations
Net cash from (used in) discontinued operations
Net cash from (used in) investing activities
Cash flows from (used in) financing activities:
Borrowings under senior credit facilities
Repayments under senior credit facilities
Borrowings under trade receivables agreement
Repayments under trade receivables agreement
Net repayments under other financing arrangements
Payment of contingent consideration
Minimum withholdings paid on behalf of employees for net share settlements, net of proceeds from
the exercise of employee stock options and other
Repurchases of common stock
Financing fees paid
Net cash from (used in) continuing operations
Net cash from (used in) discontinued operations
60
$
0.2 $
425.4 $
(19.6)
19.8
73.9
0.4
3.0
1.1
13.4
(21.4)
46.4
3.4
10.9
0.5
(138.8)
(0.3)
(53.4)
(73.7)
(0.4)
(115.2)
(21.6)
(136.8)
3.7
(40.0)
(15.9)
(52.2)
(13.9)
(66.1)
245.0
(243.7)
—
—
(0.8)
(1.3)
(3.5)
(33.7)
(1.9)
(39.9)
1.0
366.4
59.0
—
1.0
(11.8)
0.2
30.0
(1.4)
42.3
(8.6)
12.8
4.3
—
(19.8)
(21.0)
45.8
(1.6)
131.2
43.4
174.6
(31.2)
(265.2)
(9.6)
(306.0)
620.1
314.1
209.9
(346.0)
179.0
(207.0)
(0.4)
—
(3.3)
—
—
(167.8)
0.2
99.0
25.2
73.8
—
2.4
(8.6)
—
0.7
0.3
31.9
10.7
13.1
5.0
—
33.5
—
(56.1)
(1.5)
105.2
21.1
126.3
(0.2)
(104.4)
(15.3)
(119.9)
(6.2)
(126.1)
197.6
(207.8)
134.4
(106.4)
(2.2)
(1.5)
2.2
—
—
16.3
(0.4)
Net cash from (used in) financing activities
Change in cash and equivalents due to changes in foreign currency exchange rates
Net change in cash and equivalents
Consolidated cash and equivalents, beginning of period
Consolidated cash and equivalents, end of period
Supplemental disclosure of cash flow information:
Interest paid
Income tax refunds (payments), net
Non-cash investing and financing activity:
Debt assumed
Components of cash and equivalents:
Cash and equivalents
Cash and equivalents included in assets of DBT and Heat Transfer
Total cash and equivalents
(38.9)
(167.6)
2.9
(238.9)
396.0
6.6
327.7
68.3
157.1 $
396.0 $
6.5 $
11.4 $
(59.6) $
5.5 $
15.9
(2.5)
13.6
54.7
68.3
17.5
(7.6)
— $
0.4 $
2.9
Year ended December 31,
2022
2021
2020
147.8 $
388.2 $
9.3
7.8
157.1 $
396.0 $
64.0
4.3
68.3
$
$
$
$
$
$
The accompanying notes are an integral part of these statements.
61
Notes to Consolidated Financial Statements
December 31, 2022
(All currency and share amounts are in millions, except per share and par value data)
(1) Basis of Presentation and Summary of Significant Accounting Policies
Our significant accounting policies are described below, as well as in other Notes that follow. Unless otherwise indicated,
amounts provided in these Notes pertain to continuing operations only (see Note 4 for information on discontinued operations).
Merger and Consummation of Holding Company Reorganization — As of August 15, 2022, SPX Technologies, Inc.
(“SPX”, “our”, “we”, or the “Company”) is the successor registrant pursuant to Rule 12g-3(a) under the Securities Exchange Act
of 1934, as amended, to SPX Corporation (“Legacy SPX”) as a result of the completion on August 15, 2022 of a holding
company reorganization (the “Holding Company Reorganization”) effected as a merger of Legacy SPX with and into SPX
Merger, LLC, a subsidiary of the Company. Each share of Legacy SPX’s common stock, par value $0.01 per share, issued and
outstanding immediately prior to the consummation of the Holding Company Reorganization was automatically converted into
an equivalent corresponding share of the Company's common stock having the same designations, rights, powers and preferences
and the qualifications, limitations and restrictions as the corresponding share of Legacy SPX common stock being converted.
Accordingly, upon consummation of the Holding Company Reorganization, Legacy SPX stockholders became stockholders of
the Company. The terms “SPX,” “we” and “our” include Legacy SPX for periods prior to the consummation of the Holding
Company Reorganization as the context requires.
Principles of Consolidation — The consolidated financial statements include our accounts prepared in conformity with
accounting principles generally accepted in the United States (“GAAP”) after the elimination of intercompany transactions.
Investments in unconsolidated companies where we exercise significant influence but do not have control are accounted for
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 of the entity that could
potentially be significant to the VIE. All of our VIEs are immaterial, individually and in aggregate, to our consolidated financial
statements.
Shift Away from the Power Generation Markets — On September 26, 2015, we completed the spin-off to our stockholders
(the “Spin-Off”) of all the outstanding shares of SPX FLOW, Inc., a wholly-owned subsidiary of SPX prior to the Spin-Off,
which at the time of the Spin-Off held the businesses comprising our Flow Technology reportable segment, our Hydraulic
Technologies business, and certain of our corporate subsidiaries. Prior to the Spin-Off, our businesses serving the power
generation markets had a major impact on the consolidated financial results of SPX. In the years leading up to the Spin-Off,
these businesses experienced significant declines in revenues and profitability associated with weak demand and increased
competition within the global power generation markets. Based on a review of our post-spin portfolio and the belief that a
recovery within the power generation markets was unlikely in the foreseeable future, we decided coming out of the Spin-Off that
our strategic focus would be on our (i) scalable growth businesses that serve the heating, ventilation and cooling (“HVAC”) and
detection and measurement markets and (ii) power transformers and process cooling systems business. As a result, we have
significantly reduced our exposure to the power generation markets as indicated by the activities summarized below:
•
•
Sale of Dry Cooling Business – On March 30, 2016, we completed the sale of our dry cooling business, a business that
provides dry cooling systems to the global power generation markets.
Sale of Balcke Dürr Business – On December 30, 2016, we completed the sale of Balcke Dürr, a business that provides
heat exchangers and other related components to the European and Asian power generation markets. Balcke Dürr
historically had been the most significant of our power generation businesses. As we considered the disposition of
Balcke Dürr to be the cornerstone of our strategic shift away from the power generation markets, and given the
significance of Balcke Dürr’s financial results to our overall operations prior to its disposition, we began classifying
Balcke Dürr as a discontinued operation at the time of its disposition.
• Wind-Down of the SPX Heat Transfer Business – After an unsuccessful attempt to sell the SPX Heat Transfer (“Heat
Transfer”) business, and as a continuation of our strategic shift away from power generation markets, we initiated a
wind-down plan for the business in 2018. During the fourth quarter of 2020, we completed the plan, which included
providing all products and services on the business’s remaining contracts with customers. As a result, we are reporting
Heat Transfer as a discontinued operation in the accompanying consolidated financial statements. See Note 4 for
additional details.
62
• Wind-Down of DBT Technologies Business – As a culmination of our strategic shift away from power generation
markets, in 2021 we substantially ceased all operations of, and have ceased accepting new businesses in, our South
African subsidiary, DBT Technologies (PTY) LTD (“DBT”). As a result, we are reporting DBT as a discontinued
operation in the accompanying consolidated financial statements. DBT continues to be involved in various dispute
resolution matters related to two large power projects. See Note 4 for additional details regarding DBT's presentation as
a discontinued operation and Note 15 regarding the dispute resolution matters.
Sale of Transformer Solutions Business — On October 1, 2021, we completed the sale of SPX Transformer Solutions, Inc.
(“Transformer Solutions”) pursuant to the terms of the Stock Purchase Agreement dated June 8, 2021 with GE-Prolec
Transformers, Inc. (the “Purchaser”) and Prolec GE Internacional, S. de R.L. de C.V. We transferred all of the outstanding
common stock of Transformer Solutions to the Purchaser for an aggregate cash purchase price of $645.0 (the “Transaction”).
The purchase price was subject to potential adjustment based on Transformer Solutions’ cash, debt and working capital on the
date the Transaction was consummated, as well as for specified transaction expenses and other specified items. In connection
with the sale, we received cash proceeds of $620.6 and recorded a gain of $382.2 to “Gain (loss) on disposition of discontinued
operations, net of tax” within our 2021 consolidated statement of operations. During 2022, we agreed to the final adjustment of
the purchase price which resulted in a payment to the Purchaser of $13.9 with an increase to the gain on sale of $0.2.
Historically, Transformer Solutions’ operations had a significant impact on our consolidated financial results, with revenues
totaling approximately 25% of our total consolidated revenues. As we no longer have a consequential presence in the power
transmission and distribution markets, and given Transformer Solutions' significance to our historical consolidated financial
results, we concluded that the sale of Transformer Solutions represents a strategic shift. Accordingly, we have classified the
business as a discontinued operation in the accompanying consolidated financial statements. See Note 4 for additional details.
Divestiture of Asbestos Liabilities and Certain Assets — On November 1, 2022, we divested three wholly-owned
subsidiaries that hold asbestos liabilities and certain assets, including related insurance assets, to Canvas Holdco LLC
(“Canvas”), an entity formed by a joint venture of Global Risk Capital LLC and an affiliate of Premia Holdings Ltd. In
connection with the divestiture (the “Asbestos Portfolio Sale”), we contributed $138.8 in cash to the divested subsidiaries,
financed with cash on hand; while Canvas made a capital contribution to the divested subsidiaries of $8.0. The divestiture
resulted in a loss of $73.9, recorded to “Other operating (income) expense, net,” which includes the write-off of certain deferred
income tax assets recorded by the divested subsidiaries. The divested subsidiaries have agreed to indemnify us and our affiliates
for their asbestos-related liabilities, which encompassed all of our consolidated asbestos-related liabilities and contingent
liabilities immediately prior to the divestiture. These indemnification obligations are not subject to any cap or time limitation. As
a result of this transaction, the Company divested all obligations with respect to pending and future asbestos claims relating to
these matters. The board of managers of the divested subsidiaries each received a solvency opinion from an independent
advisory firm that the divested subsidiaries were solvent after giving effect to the Asbestos Portfolio Sale.
The agreement for the Asbestos Portfolio Sale contains customary representations and warranties with respect to the
divested subsidiaries, the Company, and Canvas. Pursuant to the agreement, the Company and Canvas will each indemnify the
other for breaches of representation and warranties or breaches of covenants, subject to certain limitations as set forth in the
agreement. Refer to Note 4 for additional details.
Acquisitions in 2022:
•
ITL - On March 31, 2022, we completed the acquisition of International Tower Lighting, LLC (“ITL”), a leader in the
design and manufacture of highly-engineered Aids to Navigation systems, including obstruction lighting for
telecommunications towers, wind turbines and numerous other terrestrial obstructions. We purchased ITL for cash
proceeds of $40.4, net of cash acquired of $1.1. The post-acquisition operating results of ITL are reflected within our
Detection and Measurement reportable segment.
The assets acquired and liabilities assumed in the ITL 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.
Acquisitions in 2021:
•
Sealite - On April 19, 2021, we completed the acquisition of Sealite Pty Ltd and affiliated entities, including Sealite
USA, LLC (doing business as Avlite Systems) and Star2M Pty Ltd (collectively, “Sealite”). Sealite is a leader in the
design and manufacture of marine and aviation Aids to Navigation products. We purchased Sealite for cash proceeds of
$80.3, net of cash acquired of $2.3. The post-acquisition operating results of Sealite are reflected within our Detection
and Measurement reportable segment.
63
•
•
•
•
ECS - On August 2, 2021, we completed the acquisition of Enterprise Control Systems Ltd (“ECS”), a leader in the
design and manufacture of highly-engineered tactical datalinks and radio frequency (“RF”) countermeasures, including
counter-drone and counter-IED RF jammers. We purchased ECS for cash proceeds of $39.4, net of cash acquired of
$5.1. Under the terms of the purchase and sales agreement, the seller was eligible for additional cash consideration of
up to $15.0, with payment to be made in 2022 upon successful achievement of certain financial performance
milestones. The estimated fair value of such contingent consideration as of the date of acquisition was $8.2. During the
fourth quarter of 2021, we concluded that the probability of achieving the above financial performance milestones had
lessened due to a delay in the execution of a large order, resulting in a reduction of the estimated liability of $6.7, with
such amount recorded within “Other operating (income) expense, net” in the 2021 consolidated statement of operations.
During the first and second quarters of 2022, we further reduced the estimated liability by $0.9 and $0.4, respectively,
with such amount recorded within “Other operating (income) expense, net” in the 2022 consolidated statement of
operations. The estimated fair value of such contingent consideration, which we have reflected as a liability in our
consolidated balance sheets, was $0.0 and $1.5 at December 31, 2022 and 2021, respectively. The post-acquisition
operating results of ECS are reflected within our Detection and Measurement reportable segment.
Cincinnati Fan - On December 15, 2021, we completed the acquisition of Cincinnati Fan & Ventilator Co., Inc.
(“Cincinnati Fan”), a leader in engineered air movement solutions, including blowers and critical exhaust systems. We
purchased Cincinnati Fan for cash proceeds of $145.2, net of cash acquired of $2.5. During 2022, we agreed to a final
adjustment of the purchase price, related to acquired working capital, resulting in our receiving $0.4. The post-
acquisition operating results of Cincinnati Fan are reflected within our HVAC reportable segment.
Acquisitions in 2020:
ULC – On September 2, 2020, we completed the acquisition of ULC Robotics (“ULC”), a leading developer of robotic
systems, machine learning applications, and inspection technology for the energy, utility, and industrial markets, for
cash proceeds of $89.2, net of cash acquired of $4.0. Under the terms of the purchase and sales agreement, the seller
was eligible for additional cash consideration of up to $45.0, with payments scheduled to be made upon successful
achievement of certain operational and financial performance milestones. At the time of the acquisition, we recorded a
liability of $24.3, which represented the estimated fair value of the contingent consideration. During the third quarter of
2021, we concluded that the operational and financial performance milestones noted above would not be achieved. As a
result, we reversed the liability of $24.3, with the offset recorded to “Other operating (income) expense, net” and also
recorded an impairment charge related to ULC’s goodwill and intangible assets of $24.3. See Note 10 for further
discussion of impairments related to ULC. The post-acquisition operating results of ULC are reflected within our
Detection and Measurement reportable segment.
Sensors & Software – On November 11, 2020, we completed the acquisition of Sensors & Software Inc. (“Sensors &
Software”), a leading manufacturer and distributor of ground penetrating radar products used for locating underground
utilities, detecting unexploded ordinances, and geotechnical and geological investigations, for cash proceeds of $15.5,
net of cash acquired of $0.3. Under the terms of the purchase and sales agreement, the seller was eligible for additional
cash consideration of up to $3.7, with payment scheduled to be made upon successful achievement of defined financial
performance milestones during the twelve months following the date of acquisition. At the time of the acquisition, we
recorded a liability of $0.7 which represented the estimated fair value of the contingent consideration. During the fourth
quarter of 2021, we concluded that certain of these financial performance milestones had been achieved, resulting in an
increase to the liability of $0.6, with the offset reflected in “Other operating (income) expense, net” in the
accompanying 2021 consolidated statement of operations. The estimated fair value of such contingent consideration of
$1.3 is reflected as a liability in the accompanying consolidated balance sheet as of December 31, 2021 and was paid
during 2022. The post-acquisition operating results of Sensors & Software are reflected within our Detection and
Measurement reportable segment.
Foreign Currency Translation and Transactions — The financial statements of our foreign subsidiaries are translated into
U.S. dollars in accordance with the Foreign Currency Matters Topic of the Financial Accounting Standards Board Codification
(“Codification”). Gains and losses on foreign currency translations are reflected as a separate component of stockholders' equity
and other comprehensive income/loss. Foreign currency transaction gains and losses, as well as gains and losses related to
foreign currency forward contracts, are included in “Other income (expense), net,” with the related net losses totaling $1.1, $0.9
and $0.6 in 2022, 2021 and 2020, respectively.
Cash Equivalents — We consider highly liquid money market investments with original maturities of three months or less
at the date of purchase to be cash equivalents.
64
Revenue Recognition — We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606. See
Note 5 for our policy for recognizing revenue under ASC 606 as well as the various other disclosures required by ASC 606.
Research and Development Costs — We expense research and development costs as incurred. We charge costs incurred in
the research and development of new software included in products to expense until technological feasibility is established. After
technological feasibility is established, additional eligible costs are capitalized until the product is available for general release.
We amortize these costs over the economic lives of the related products and include the amortization in cost of products sold.
We perform periodic reviews of the recoverability of these capitalized software costs. If, and at the time, we determine that
capitalized amounts are not recoverable based on the estimated cash flows to be generated from the applicable software, we write
off any unrecoverable capitalized amounts. Capitalized software, net of amortization, totaled $1.2 and $0.1 as of December 31,
2022 and 2021, respectively. Capitalized software amortization expense totaled $0.1, $1.3, and $2.5 in 2022, 2021, and 2020,
respectively. We expensed research activities relating to the development and improvement of our products of $39.1, $30.7 and
$28.1 in 2022, 2021 and 2020, respectively.
Property, Plant and Equipment — Property, plant and equipment (“PP&E”) is stated at cost, less accumulated depreciation.
We use the straight-line method for computing depreciation expense over the useful lives of PP&E, which do not exceed
40 years for buildings and range from 3 to 15 years for machinery and equipment. Depreciation expense, including amortization
of finance leases, was $17.8, $19.4 and $15.4 for the years ended December 31, 2022, 2021 and 2020, respectively. Leasehold
improvements are amortized over the life of the related asset or the life of the lease, whichever is shorter. Interest is capitalized
on significant construction or installation projects. No interest was capitalized during 2022, 2021 or 2020.
Pension and Postretirement — We recognize changes in the fair value of plan assets and actuarial gains and losses in
earnings during the fourth quarter of each year, unless earlier remeasurement is required, as a component of net periodic benefit
expense/income and, accordingly, recognize the effects of plan investment performance, interest rate changes, and changes in
actuarial assumptions as a component of earnings in the year in which they occur. The remaining components of pension/
postretirement expense/income, primarily interest costs and expected return on plan assets, are recorded on a quarterly basis.
Income Taxes — We account for income taxes based on the requirements of the Income Taxes Topic of the Codification,
which includes an estimate of the amount of taxes payable or refundable for the current year and deferred tax liabilities and
assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. We periodically assess the realizability of
deferred tax assets and the adequacy of deferred tax liabilities, including the results of local, state, federal or foreign statutory tax
audits or estimates and judgments used.
Derivative Financial Instruments — We use foreign currency forward contracts to manage our exposures to fluctuating
currency exchange rates and interest rate protection agreements to manage our exposures to fluctuating interest rate risk on
variable rate debt. In addition, prior to the sale of Transformers Solutions, we used forward contracts to manage the exposure on
forecasted purchases of commodity raw materials (“commodity contracts”). Derivatives are recorded on the balance sheet and
measured at fair value. For derivatives designated as hedges of the fair value of assets or liabilities, the changes in fair values of
both the derivatives and the hedged items are recorded in current earnings. For derivatives designated as cash flow hedges, the
change in fair value of the derivatives is recorded in accumulated other comprehensive income (“AOCI”) and subsequently
recognized in earnings when the forecasted transaction impacts earnings. We do not enter into financial instruments for
speculative or trading purposes.
For those transactions that are designated as cash flow hedges, on the date the derivative contract is entered into, we
document our hedge relationship, including identification of the hedging instruments and the hedged items, as well as our risk
management objectives and strategies for undertaking the hedge transaction. We also assess, both at inception and quarterly
thereafter, whether such derivatives are highly effective in offsetting changes in the fair value of the hedged item. See Notes 14
and 17 for further information.
Cash flows from hedging activities are included in the same category as the items being hedged, which are primarily
operating activities.
Correction of Prior-Year Classification and Disclosure – Subsequent to issuance of the December 31, 2021 financial
statements, management concluded that the impairment charge of $24.3 related to our ULC business’ goodwill and intangible
assets mentioned above should have been reported in a separate line item within our consolidated statement of operations for the
year ended December 31, 2021. This amount, which was previously classified within “Other operating (income) expense, net,”
has been reclassified to “Impairment of goodwill and intangible assets” for the year ended December 31, 2021. As a result of this
immaterial correction, “Other operating (income) expense, net” for the year ended December 31, 2021 reflects income of $4.1
whereas the expense disclosed prior to reclassification for the year ended December 31, 2021 was $20.2.
65
In addition, management concluded that, although the assessment of our reportable segments was performed using the
appropriate measures as defined by the Segment Reporting Topic of the Codification, the disclosure of operating income for each
of our reportable segments (“Segment Income”) was not consistent with the measure used by our Chief Operating Decision
Maker (“CODM”) when evaluating the results of, or allocating resources to, our reportable segments. We previously disclosed
that Segment Income is determined before considering impairments and special charges, long-term incentive compensation,
certain other operating income/expense, and other indirect corporate expenses. Our CODM also excludes the impact of
intangible asset amortization, inventory step-up charges, and certain other acquisition-related costs from Segment Income.
Accordingly, Segment Income, as presented in Note 7, now excludes all of the items noted above. This change had no impact to
the amounts previously presented in our consolidated statements of operations for the years ended December 31, 2021 and 2020.
Although the impact of this change to previously disclosed Segment Income is not material, we revised the prior year
presentation to be consistent with the current year disclosure. The impact of this change on the Segment Income previously
presented for the years ended December 31, 2021 and 2020 is summarized below:
December 31, 2021
December 31, 2020
As Previously
Presented
Effect of
Change
Current
Presentation
As Previously
Presented
Effect of
Change
Current
Presentation
Income:
HVAC reportable segment
$
104.2 $
3.5 $
107.7 $
102.7 $
3.5 $
106.2
Detection and Measurement
reportable segment
Total income for segments
Corporate expense
Acquisition related costs (1)
Long-term incentive
compensation expense
Amortization of intangible assets
Impairment of goodwill and
intangible assets
Special charges, net
Other operating (income)
expense, net
Consolidated operating income
$
69.7
173.9
60.5
—
12.8
—
30.0
1.0
23.2
26.7
—
5.1
—
21.6
—
—
92.9
200.6
60.5
5.1
12.8
21.6
30.0
1.0
69.1
171.8
49.7
—
13.1
—
0.7
2.4
11.8
15.3
—
1.3
—
14.0
—
—
(4.1)
73.7 $
—
— $
(4.1)
73.7 $
9.0
96.9 $
—
— $
80.9
187.1
49.7
1.3
13.1
14.0
0.7
2.4
9.0
96.9
_______________________________________________________________
(1)
Includes cost incurred in connection with acquisitions, including additional “Cost of products sold” related to the step-
up of inventory (to fair value) acquired in connection with acquisitions of $2.6 and $0.3 during the years ended
December 31, 2021 and 2020, respectively, as well as integration costs of $0.7 and $1.0 during the years ended
December 31, 2021 and 2020, respectively. The year ended December 31, 2021 also includes a non-cash impairment
charge of $1.8.
(2) Use of Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses
during the reporting period. We evaluate these estimates and judgments on an ongoing basis and base our estimates on
experience, current and expected future conditions, third-party evaluations and various other assumptions that we believe are
reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values
of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and
contingencies. Actual results may differ from the estimates and assumptions used in the consolidated financial statements and
related notes.
Listed below are certain significant estimates and assumptions used in the preparation of our consolidated financial
statements. Certain other estimates and assumptions are further explained in the related notes.
Accounts Receivable Allowances — We provide allowances for estimated losses on uncollectible accounts based on our
historical experience, current and future economic and market conditions, and the evaluation of the likelihood of success in
66
collecting specific customer receivables. In addition, we maintain allowances for customer returns, discounts and invoice pricing
discrepancies, with such allowances primarily based on historical experience. Summarized below is the activity for these
allowance accounts.
Balance at beginning of year
Acquisitions
Allowances provided
Write-offs, net of recoveries, credits issued and other
Balance at end of year
Year ended December 31,
2022
2021
2020
$
10.4 $
11.5 $
0.1
17.9
—
14.9
(18.0)
10.4 $
(16.0)
10.4 $
$
8.5
0.3
18.6
(15.9)
11.5
Inventory — We estimate losses for excess and/or obsolete inventory and the net realizable value of inventory based on the
aging and historical utilization of the inventory and the evaluation of the likelihood of recovering the inventory costs based on
anticipated demand and selling price.
Long-Lived Assets and Intangible Assets Subject to Amortization — We continually review whether events and
circumstances subsequent to the acquisition of any long-lived assets, including intangible assets subject to amortization, have
occurred that indicate the remaining estimated useful lives of those assets may warrant revision or that the remaining balance of
those assets may not be fully recoverable. If events and circumstances indicate that the long-lived assets should be reviewed for
possible impairment, we use projections to assess whether future cash flows on an undiscounted basis related to the assets are
likely to exceed the related carrying amount. We will record an impairment charge to the extent that the carrying value of the
assets exceed their fair values as determined by valuation techniques appropriate in the circumstances, which could include the
use of similar projections on a discounted basis.
In determining the estimated useful lives of definite-lived intangibles, we consider the nature, competitive position, life
cycle position, and historical and expected future operating cash flows of each acquired asset, as well as our commitment to
support these assets through continued investment and legal infringement protection.
Goodwill and Indefinite-Lived Intangible Assets — We review goodwill and indefinite-lived intangible assets for
impairment annually during the fourth quarter and continually assess whether a triggering event has occurred to determine
whether the carrying value exceeds the implied fair value. In reviewing goodwill for impairment, we first assess qualitative
factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not
(greater than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If we determine that an
impairment is more likely than not, we then perform a quantitative impairment test (described below). Otherwise, no further
analysis is required. Our qualitative evaluation is an assessment of factors, including reporting unit-specific operating results, as
well as industry, market, and general economic conditions. Our quantitative analysis of the fair value of reporting units is based
generally on discounted projected cash flows, but we also consider factors such as comparable industry price multiples. We
employ cash flow projections that we believe to be reasonable under current and forecasted circumstances, the results of which
form the basis for making judgments about the carrying values of the reported net assets of our reporting units. Many of our
businesses closely follow changes in the industries and end markets that they serve. Accordingly, we consider estimates and
judgments that affect the future cash flow projections, including principal methods of competition, such as volume, price,
service, product performance and technical innovations, as well as estimates associated with cost reduction initiatives, capacity
utilization and assumptions for inflation and foreign currency changes.
Accrued Expenses — We make estimates and judgments in establishing accruals as required under GAAP. Summarized in
the table below are the components of accrued expenses at December 31, 2022 and 2021.
Employee benefits
Warranty
Other (1)
Total
December 31,
2022
2021
$
$
58.3 $
12.9
76.8
148.0 $
66.7
11.8
139.4
217.9
___________________________________________________________________
(1) Other consists of various items including, among other items, the current portion of our liabilities related to risk
management matters, environmental remediation costs, and operating leases, as well as, accrued rebates, legal, interest
and restructuring costs, none of which is individually material.
67
Legal — It is our policy to accrue for estimated losses from legal actions or claims when events exist that make the
realization of the losses probable and they can be reasonably estimated. We do not discount legal obligations or reduce them by
anticipated insurance recoveries. See Note 15 for additional details.
Environmental Remediation Costs — We expense costs incurred to investigate and remediate environmental issues unless
they extend the economic useful lives of related assets. We record liabilities when it is probable that an obligation has been
incurred and the amounts can be reasonably estimated. Our environmental accruals cover anticipated costs, including
investigation, remediation and operation 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. We
generally do not discount environmental obligations or reduce them by anticipated insurance recoveries.
Risk Management Matters — We are subject to claims associated with risk management matters (e.g., product liability,
general liability, automobile, and workers’ compensation claims). The liabilities we record for these claims are based on a
number of assumptions, including historical claims and payment experience and, prior to the Asbestos Portfolio Sale, with
respect to asbestos claims, actuarial estimates of the future period during which additional claims were reasonably foreseeable.
Prior to the Asbestos Portfolio Sale, we also recorded insurance recovery assets associated with the asbestos product liability
matters. These assets represented amounts that we believe we were entitled to recover under agreements we had with insurance
companies. The assets we recorded for these insurance recoveries were based on a number of assumptions, including the
continued solvency of the insurers, and our legal interpretation of our rights for recovery under the agreements we had with the
insurers. In addition, we are self-insured for certain of our workers’ compensation, automobile, product, general liability,
disability and health costs, and we maintain adequate accruals to cover our retained liabilities. Our accruals for self-insurance
liabilities are based on claims filed and an estimate 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; however, this
insurance may be insufficient or unavailable (e.g., because of insurer insolvency) to protect us against potential loss exposures.
The key assumptions considered in estimating the ultimate cost to settle reported claims and the estimated costs associated with
incurred but not yet reported claims include, among other factors, our historical and industry claims experience, trends in health
care and administrative costs, our current and future risk management programs, and historical lag studies with regard to the
timing between when a claim is incurred and reported. See Note 15 for additional details.
Warranty — In the normal course of business, we issue product warranties for specific products and provide for the
estimated future warranty cost in the period in which the sale is recorded. We provide for the estimate of warranty cost based on
contract terms and historical warranty loss experience that is periodically adjusted for recent actual experience. Because warranty
estimates are forecasts that are based on the best available information, claims costs may differ from amounts provided. In
addition, due to the seasonal fluctuations at certain of our businesses, the timing of warranty provisions and the usage of
warranty accruals can vary period to period. We make adjustments to initial obligations for warranties as changes in the
obligations become reasonably estimable. The following is an analysis of our product warranty accrual for the periods presented:
Balance at beginning of year
Acquisitions
Provisions
Usage
Currency translation adjustment
Balance at end of year
Less: Current portion of warranty
Non-current portion of warranty
Year ended December 31,
2022
2021
2020
$
$
34.8 $
0.4
10.6
(10.8)
(0.3)
34.7
12.9
21.8 $
35.3 $
0.1
8.5
(9.1)
—
34.8
11.8
23.0 $
31.7
1.6
12.4
(10.6)
0.2
35.3
11.6
23.7
Income Taxes — We perform reviews of our income tax positions on a continuous basis and accrue for potential uncertain
tax positions in accordance with the Income Taxes Topic of the Codification. Accruals for these uncertain tax positions may be
classified as “Income taxes payable” and “Deferred and other income taxes” in the accompanying consolidated balance sheets
based on an expectation as to the timing of when the matter will be resolved. As events change or resolutions occur, these
accruals are adjusted, such as in the case of audit settlements with taxing authorities. For tax positions where it is more likely
than not that a tax benefit will be sustained, we record the largest amount of tax benefit with a greater than 50% likelihood of
being realized upon ultimate settlement with a taxing authority, assuming such authority has full knowledge of all relevant
information. These reviews also entail analyzing the realization of deferred tax assets. When we believe that it is more likely
than not that we will not realize a benefit for a deferred tax asset based on all available evidence, we establish a valuation
allowance.
68
Employee Benefit Plans — Defined benefit plans cover a portion of our salaried and hourly employees, including certain
employees in foreign countries. As discussed in Note 1, we recognize changes in the fair value of plan assets and actuarial gains
and losses associated with our pension and postretirement benefit plans in earnings during the fourth quarter of each year, unless
earlier remeasurement is required, as a component of net periodic benefit expense. The remaining components of pension/
postretirement expense, primarily interest costs and expected return on plan assets, are recorded on a quarterly basis. See Note 11
for further discussion of our pension and postretirement benefits.
We derive pension expense from an actuarial calculation based on the defined benefit plans’ provisions and our
assumptions regarding discount rate. We primarily determine the discount rate for our plans by matching the expected projected
benefit obligation cash flows for each of the plans to a yield curve that is representative of long-term, high-quality (rated AA or
higher) fixed income debt instruments as of the measurement date. We also consult with independent actuaries in determining
these assumptions.
Parent Guarantees and Bonds Associated with Balcke Dürr — In connection with the sale of Balcke Dürr in 2016, we
became contingently obligated under existing parent company guarantees and bank and surety bonds which totaled
approximately Euro 79.0 and Euro 79.0, respectively, at the time of sale. Since the sale of Balcke Dürr, the guarantees have
expired and, as of the third quarter of 2021, all the bonds have been returned. We accounted for our contingent obligation in
accordance with the Guarantees Topic of the Codification, which required that we record a liability for the estimated fair value of
the parent company guarantees and the bonds in connection with the accounting for the sale of Balcke Dürr. Under the related
purchase agreement, Balcke Dürr provided cash collateral and the parent company of the buyer provided a partial guarantee in
the event any of the bonds were called. We recorded an asset for the estimated fair value of the cash collateral provided by
Balcke Dürr and the partial guarantee provided by the parent company of the buyer, with the estimated fair values based on the
terms and conditions and relative risk associated with each of these securities. As the guarantees have expired and the bonds
have been returned, we no longer have assets or liabilities recorded for this matter. See Note 17 for additional details.
(3) New Accounting Pronouncements
The following is a summary of new accounting pronouncements that apply or may apply to our business.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-13. ASU 2016-13 changes how entities measure credit losses for most financial assets and certain other instruments that
are not measured at fair value through net income, including trade receivables, based on historical experience, current conditions,
and reasonable and supportable forecasts. The requirements of ASU 2016-13 are to be applied on a modified retrospective basis,
which entails recognizing the initial effect of adoption in retained earnings. We adopted ASU 2016-13 on January 1, 2020, which
resulted in an increase of our retained deficit of $0.5.
The London Interbank Offered Rate (“LIBOR”) is scheduled to be discontinued on June 30, 2023. In an effort to address
the various challenges created by such discontinuance, the FASB issued three amendments to existing guidance, ASU No.
2020-04, No. 2021-01 and No. 2022-06, Reference Rate Reform. The amended guidance is designed to provide relief from the
accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities,
derivatives, etc.) necessitated by the reference rate reform. It also provides optional expedients to enable companies to continue
to apply hedge accounting to certain hedging relationships impacted by the reference rate reform. Application of the guidance in
the amendments is optional, is only available in certain situations, and is only available for companies to apply until December
31, 2024. In conjunction with entering into an amended and restated credit agreement (the “Credit Agreement”) on August 12,
2022, we adopted this guidance with no material impact on our consolidated financial statements. Refer to Note 13 for additional
information on the Credit Agreement.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets
and Contract Liabilities from Contracts with Customers. This ASU requires acquiring entities to apply Topic 606 to recognize
and measure contract assets and contract liabilities in a business combination. This guidance is effective for public entities for
fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The impact of adopting this
guidance on our consolidated financial statements will depend on business combinations occurring on or after the effective date.
69
(4) Acquisitions, Discontinued Operations, and the Asbestos Portfolio Sale
Acquisitions
As indicated in Note 1, on September 2, 2020, November 11, 2020, April 19, 2021, August 2, 2021, December 15, 2021,
and March 31, 2022, we completed the acquisitions of ULC, Sensors & Software, Sealite, ECS, Cincinnati Fan, and ITL,
respectively. The pro forma effects of these acquisitions are not material to our consolidated results of operations.
Sale of Transformer Solutions Business
As discussed in Note 1, on October 1, 2021, we completed the sale of Transformer Solutions for net cash proceeds of
$620.6. In connection with the sale, we recorded a gain of $382.2 to “Gain (loss) on disposition of discontinued operations, net
of tax” within our consolidated statement of operations for the year ended December 31, 2021.
The results of Transformer Solutions are presented as a discontinued operation for all periods presented. Major line items
constituting pre-tax income and after-tax income of Transformer Solutions for the period January 1, 2021 to October 1, 2021 and
the year ended December 2020 are shown below:
Revenues
Costs and expenses:
Cost of product sold
Selling, general and administrative
Other income, net
Income before tax
Income tax provision
Income after tax
Wind-Down of DBT Business
2021
2020
$
313.5 $
427.4
257.2
28.4
—
27.9
(7.0)
20.9 $
338.7
32.7
0.9
56.9
(14.0)
42.9
$
As discussed in Note 1, we completed the wind-down of our DBT business 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. In connection with
the wind-down, we recorded a charge of $19.9 to “Gain (loss) on disposition of discontinued operations, net of tax” within our
consolidated statement of operations for the year ended December 31, 2021 to reflect the write-off of historical currency
translation amounts associated with DBT that had been previously reported within “Stockholders' equity.”
Major line items constituting pre-tax loss and after-tax loss of DBT for the years ended December 31, 2021 and 2020 are
shown below:
Revenues
Costs and expenses:
Cost of product sold
Selling, general and administrative
Special charges, net
Other income (expense), net
Interest income, net
Loss before tax
Income tax benefit
Loss after tax
2021
2020
$
0.5 $
0.9
15.1
1.3
(1.2)
0.1
(17.9)
2.7
(15.2) $
$
70
4.0
6.9
14.8
0.8
1.9
—
(16.6)
2.4
(14.2)
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 consolidated balance sheets as of December 31, 2022 and 2021. The major line items
constituting DBT's assets and liabilities as of December 31, 2022 and 2021 are shown below:
December 31, 2022
December 31, 2021
ASSETS
Cash and equivalents
Accounts receivable, net
Other current assets
Property, plant and equipment:
Buildings and leasehold improvements
Machinery and equipment
Accumulated depreciation
Property, plant and equipment, net
Other assets
Total assets of DBT
LIABILITIES
Accounts payable
Contract liabilities
Accrued expenses
Other long-term liabilities
Total liabilities of DBT
$
$
$
$
$
$
$
9.3
7.6
6.5
0.2
0.7
0.9
(0.8)
0.1
19.1
42.6
1.4
3.6
22.0
4.6
31.6
$
7.8
9.1
7.0
0.2
1.5
1.7
(1.5)
0.2
27.6
51.7
2.3
5.6
22.4
4.9
35.2
Wind-Down of the Heat Transfer Business
As discussed in Note 1, we completed the wind-down of our 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.
Major line items constituting pre-tax income and after-tax income of Heat Transfer for the year ended December 31, 2020
are shown below:
Revenues
Costs and expenses:
Cost of products sold
Selling, general and administrative
Special charges, net
Income before tax
Income tax provision
Income after tax
2020
3.9
3.1
0.1
0.4
0.3
(0.1)
0.2
$
$
71
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 consolidated balance sheets as of December 31, 2022 and 2021. The major line
items constituting Heat Transfer's assets and liabilities as of December 31, 2022 and 2021 are shown below:
ASSETS
Accounts receivable, net
Other current assets
Other assets
Total assets of Heat Transfer
LIABILITIES
Accounts payable
Accrued expenses
Total liabilities of Heat Transfer
December 31, 2022
December 31, 2021
$
$
$
$
—
0.2
0.1
0.3
0.1
0.1
0.2
$
$
$
$
0.1
0.2
0.2
0.5
0.3
0.1
0.4
For the years ended December 31, 2022, 2021 and 2020, results of operations from our businesses reported as discontinued
operations were as follows:
Transformer Solutions
Income (loss) from discontinued operations (1)
Income tax (provision) benefit (2)
Income from discontinued operations, net
DBT
Loss from discontinued operations (3)
Income tax benefit
Loss from discontinued operations, net
Heat Transfer
Income (loss) from discontinued operations
Income tax (provision) benefit
Income (loss) from discontinued operations, net
All other (4)
Loss from discontinued operations
Income tax benefit
Loss from discontinued operations, net
Total
Income (loss) from discontinued operations
Income tax (provision) benefit
Income (loss) from discontinued operations, net
$
$
2022
2021
2020
(0.6) $
0.9
0.3
454.9 $
(51.8)
403.1
(17.3)
2.1
(15.2)
(0.4)
0.1
(0.3)
(6.0)
1.6
(4.4)
(37.8)
2.7
(35.1)
(0.3)
—
(0.3)
(7.6)
6.3
(1.3)
(24.3)
4.7
(19.6) $
409.2
(42.8)
366.4 $
56.9
(14.0)
42.9
(16.6)
2.4
(14.2)
0.3
(0.1)
0.2
(4.8)
1.1
(3.7)
35.8
(10.6)
25.2
________________________________________________
(1) Loss for the year ended December 31, 2022 resulted primarily from revisions to liabilities retained in connection with
the disposition. Income for the year ended December 31, 2021 resulted primarily from the gain on sale of the business of
$382.2, as well as the results of operations for the year. Income for the year ended December 31, 2020 related to the results
of operations for the year.
(2) During the fourth quarter of 2021, we liquidated certain recently acquired entities. As a result of this action, we recorded
a net income tax benefit of $16.5 within our 2021 consolidated statement of operations, which included an income tax
charge of $10.9 within continuing operations and income tax benefit of $27.4 within discontinued operations.
72
(3) Loss for the years ended December 31, 2022, 2021, and 2020 resulted primarily from legal costs incurred in connection
with various dispute resolution matters related to two large power projects. In addition, and as previously noted, the year
ended December 31, 2021 includes a charge of $19.9 related to the write-off of historical translation amounts.
(4) Loss for the years ended December 31, 2022, 2021, and 2020 resulted primarily from asbestos-related charges and
revisions to liabilities, including income tax liabilities, retained in connection with prior dispositions.
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 previous business divestitures may be materially adjusted in
subsequent periods.
Asbestos Portfolio Sale
As indicated in Note 1, we completed the Asbestos Portfolio Sale on November 1, 2022.
Below is a summary of the impact of the Asbestos Portfolio Sale, including the loss on sale, on our consolidated financial
statements:
Cash contribution
Assets divested:
Accounts receivable, net
Other current assets
Other assets
Deferred tax assets
Liabilities divested:
Accrued liabilities
Other long-term liabilities
Loss on Asbestos Portfolio Sale, before transaction costs
Transaction costs
Loss on Asbestos Portfolio Sale
(5) Revenues from Contracts
$
(138.8)
(5.0)
(50.0)
(420.3)
(27.0)
53.9
518.0
(69.2)
(4.7)
(73.9)
$
Summarized below is our policy for recognizing revenue under ASC 606, as well as the various disclosures required by
ASC 606.
Performance Obligations - Certain of our contracts are comprised of multiple deliverables, which can include hardware
and software components, installation, maintenance, and extended warranties. For these contracts, we evaluate whether these
deliverables represent separate performance obligations as defined by ASC 606. In some cases, a customer contracts with us to
integrate a complex set of tasks and components into a single project or capability (even if the single project results in the
delivery of multiple units). Hence, the entire contract is treated as a single performance obligation. In contrast, we may promise
to provide distinct goods or services within a contract, in which case we separate the contract into more than one performance
obligation. If a contract is separated into more than one performance obligation, we allocate the total transaction price to each
performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services
underlying each performance obligation. In cases where we sell standard products with observable standalone selling prices,
these selling prices are used to determine the relative standalone selling price. In cases where we sell a customized customer
specific solution, we typically use the expected cost plus margin approach to estimate the standalone selling price of each
performance obligation. Sales taxes and other usage-based taxes are excluded from revenue.
Remaining performance obligations represent performance obligations that have yet to be satisfied. As a practical
expedient, we do not disclose performance obligations (i) that are part of a contract that has an original expected duration of less
than one year and/or (ii) where our right to consideration corresponds directly to the value transferred to the customer.
Performance obligations for contracts with an original duration in excess of one year that have yet to be satisfied as of the end of
a period primarily relate to our Aids to Navigation systems, communication technologies products, large process cooling
systems, as well as certain of our fare collection systems. As of December 31, 2022, the aggregate amount allocated to remaining
performance obligations after the effect of practical expedients was $158.5. We expect to recognize revenue on approximately
72% and 89% of the remaining performance obligations over the next 12 and 24 months, respectively, with the remaining
recognized thereafter.
73
Options - We offer options within certain of our contracts to purchase future goods or services. To the extent the option
provides a material right to a future benefit (i.e., future goods and services at a discount from the relative standalone selling
price), we separate the material right as a performance obligation and adjust the standalone selling price of the other performance
obligations within the contract. When determining the relative standalone selling price of the option, we first determine the
incremental discount that the customer would receive by exercising the option and then adjust that value based on the probability
of option exercise (based, where possible, on historical experience). Revenue is recognized for the option as either the option is
exercised or when it expires.
Contract Combination and Modification - We assess each contract at its inception to determine whether it should be
combined with other contracts for revenue recognition purposes. When making this determination, we consider factors such as
whether two or more contracts with a customer were negotiated at or near the same time or were negotiated with an overall profit
objective. Contracts are sometimes modified for changes in contract specifications, scope, or price (or a combination of these).
Contract modifications for goods or services that are not distinct within the context of the contract (generally associated with
specification changes for certain product lines within our HVAC reportable segment) are accounted for as part of the existing
contract. Contract modifications for goods or services that are distinct (i.e., adding or subtracting distinct goods or services) are
accounted for as either a termination of the existing contract and the creation of a new contract (where the goods or services are
not priced at their standalone selling price), or the creation of separate contract (where the goods or services are priced at their
standalone selling price).
Variable Consideration - We determine the transaction price for each contract based on the consideration we expect to
receive for the products or services being provided under the contract. For contracts where a portion of the price may vary, we
estimate the variable consideration at the amount to which we expect to be entitled, which is included in the transaction price to
the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. We analyze the risk of a
significant revenue reversal and, if necessary, constrain the amount of variable consideration recognized in order to mitigate this
risk. Variable consideration primarily pertains to late delivery penalties and unapproved change orders and claims (levied by us
and/or against us). Actual amounts of consideration ultimately received may differ from our estimates. If actual results vary from
our estimates, we will adjust these estimates, which would affect revenue and earnings, in the period such variances become
known.
As noted above, the nature of our contracts gives rise to several types of variable consideration, including unapproved
change orders and claims. We include in our contract estimates additional revenue for unapproved change orders or claims
against the customer when we believe we have an enforceable right to the unapproved change order or claim, the amount can be
reliably estimated, and the above criteria have been met. In evaluating these criteria, we consider the contractual/legal basis for
the claim, the cause of any additional costs incurred, the reasonableness of those costs, and the objective evidence available to
support the claim. These estimates are also based on historical award experience.
Returns, Customer Sales Incentives and Warranties - We have certain arrangements that require us to estimate, at the time
of sale, the amounts of variable consideration that should be excluded from revenue as (i) certain amounts are not expected to be
collected from customers and/or (ii) the product may be returned. We principally rely on historical experience, specific customer
agreements, and anticipated future trends to estimate these amounts at the time of shipment and to reduce the transaction price.
These arrangements include volume rebates, which are estimated using the most likely amount method, as well as early payment
discounts and promotional and advertising allowances, which are estimated using the expected value method. We primarily offer
assurance-type standard warranties that the product will conform to published specifications for a defined period of time after
delivery. These types of warranties do not represent separate performance obligations. We establish provisions for estimated
returns and warranties primarily based on contract terms and historical experience, using the expected value method. Certain
businesses offer extended warranties, which are considered separate performance obligations.
Contract Costs - We have elected to apply the practical expedient provided under ASC 606 which allows an entity to
expense incremental costs of obtaining or fulfilling a contract when incurred if the amortization period of the asset that the entity
otherwise would have recorded is one year or less. Shipping and handling costs associated with outbound freight after control
over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of products sold. The
net asset recorded for incremental costs incurred to obtain or fulfill contracts, after consideration of the practical expedient
mentioned above, is not material to our consolidated financial statements.
Nature of Goods and Services, Satisfaction of Performance Obligations, and Payment Terms
Our HVAC product lines include package and process cooling equipment, residential and commercial boilers, comfort
heating and ventilation products, and engineered air movement solutions. Performance obligations for our HVAC product lines
relate primarily to the delivery of equipment and components, construction and reconstruction of cooling towers and other
74
components, and providing installation, replacement/spare parts and various other services. Performance obligations related to
equipment and components are satisfied at the time of shipment or delivery (i.e., control is transferred at a point in time). The
typical length of these contracts is one to three months and payment terms are generally 15 to 60 days after shipment to the
customer. Performance obligations for construction and reconstruction of cooling towers and other components, and providing
installation and various other services, are typically satisfied through a contract with us to provide a customer-specific solution.
The customer typically controls the work in process due to contractual termination clauses whereby we have an enforceable right
to recovery of cost incurred including a reasonable profit for work performed to date on products or services that do not have an
alternative use to us. Additionally, certain projects are performed on customer sites such that the customer controls the asset as it
is created or enhanced. As such, performance obligations for these product lines are generally satisfied over time, with the
related revenue recorded based on the percentage of costs incurred to date for each contract to the estimated total costs for such
contract at completion, as this method best depicts how control of the product or service is being transferred. The length of
customer contract for these product lines is generally 6 to 18 months. Revenue for sales of certain engineered components and all
replacement/spare parts is recognized upon shipment or delivery (i.e., at a point in time). Payments on longer-term contracts are
generally commensurate with milestones defined in the related contract, while payments for the replacement/spare parts
contracts typically occur 30 to 60 days after delivery.
Our detection and measurement product lines include underground pipe and cable locators, inspection and rehabilitation
equipment, robotic systems, fare collection systems, communication technologies, and obstruction lighting. Performance
obligations for these product lines relate to delivery of equipment and components, installation and other short-term services,
long-term maintenance and software subscription services, pipeline remediation services and development of robotics, and
obstruction lighting solutions. Performance obligations for equipment and components generally are satisfied at the time of
shipment or delivery (i.e., control is transferred at a point in time). Performance obligations for installation and other short-term
services, pipeline remediation, and development of robotics are satisfied over time as the installation or service is performed.
Performance obligations for maintenance and software subscription services are satisfied over time, with the related revenue
recorded evenly throughout the contract service period as this method best depicts how control of the service is transferred.
Payment terms for equipment and components are typically 30 to 60 days after shipment or delivery, while payment for services
typically occurs at completion for shorter-term engagements (less than three months in duration) and throughout the service
period for longer-term engagements (generally greater than three months in duration). These product lines have varying contract
lengths ranging from one to eighteen months (with the longer term contracts generally associated with our Aids to Navigation
systems, fare collection systems, and communication technologies products lines), with the typical duration being one to three
months.
Customer prepayments, progress billings, and retention payments are customary for some of our longer-term contracts.
Customer prepayments, progress billings, and retention payments are not considered a significant financing component because
they are intended to protect either the customer or ourselves in the event that some or all of the obligations under the contract are
not completed. Additionally, most contract assets are expected to convert to accounts receivable, and contract liabilities are
expected to convert to revenue, within one year. As such, after applying the practical expedient to exclude potential financing
components that are less than one year in duration, we do not have any such financing components.
75
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 effected by economic factors, with such disaggregation presented below for the years ended
December 31, 2022, 2021, and 2020:
Reportable Segments
Major product lines
Package and process cooling equipment and services, and engineered air quality
solutions
Boilers, comfort heating, and ventilation
Underground locators, inspection and rehabilitation equipment, and robotic systems
Communication technologies, obstruction lighting, and fare collection systems
Timing of Revenue Recognition
Revenues recognized at a point in time
Revenues recognized over time
Reportable Segments
Major product lines
Package and process cooling equipment and services, and engineered air quality
solutions
Boilers, comfort heating, and ventilation
Underground locators, inspection and rehabilitation equipment, and robotic systems
Communication technologies, obstruction lighting, and fare collection systems
Timing of Revenue Recognition
Revenues recognized at a point in time
Revenues recognized over time
Year Ended December 31, 2022
HVAC
Detection and
Measurement
Total
537.0 $
376.8
—
—
913.8 $
838.0 $
75.8
913.8 $
— $
—
262.1
285.0
547.1 $
537.0
376.8
262.1
285.0
1,460.9
455.1 $
1,293.1
92.0
547.1 $
167.8
1,460.9
Year Ended December 31, 2021
HVAC
Detection and
Measurement
Total
433.8 $
318.3
—
—
752.1 $
— $
—
256.8
210.6
467.4 $
433.8
318.3
256.8
210.6
1,219.5
661.2 $
90.9
752.1 $
415.9 $
51.5
467.4 $
1,077.1
142.4
1,219.5
$
$
$
$
$
$
$
$
76
Reportable Segments
Major product lines
Package and process cooling equipment and services
Boilers, comfort heating, and ventilation
Underground locators, inspection and rehabilitation equipment, and robotic systems
Communication technologies, obstruction lighting, and fare collection systems
Timing of Revenue Recognition
Revenues recognized at a point in time
Revenues recognized over time
Contract Balances
Year Ended December 31, 2020
HVAC
Detection and
Measurement
Total
$
$
$
$
447.1 $
293.7
— $
—
—
217.8
447.1
293.7
217.8
—
740.8 $
169.5
387.3 $
169.5
1,128.1
622.2 $
118.6
740.8 $
341.9 $
45.4
387.3 $
964.1
164.0
1,128.1
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 consolidated balance sheets. Our contract balances consisted of the following as of December 31, 2022 and 2021:
Contract Balances
Contract Accounts Receivable (1)
Contract Assets
Contract Liabilities - current
Contract Liabilities - non-current (2)
Net contract balance
_____________________
$
$
December 31, 2022
December 31, 2021
Change
259.9 $
23.9
(52.8)
(4.7)
226.3 $
215.3 $
28.9
(44.7)
(5.8)
193.7 $
44.6
(5.0)
(8.1)
1.1
32.6
(1) Included in “Accounts receivable, net” within the accompanying consolidated balance sheets.
(2) Included in “Other long-term liabilities” within the accompanying consolidated balance sheets.
The $32.6 increase in our net contract balance from December 31, 2021 to December 31, 2022 was due primarily to
revenue recognized during the period, partially offset by cash payments received from customers during the period.
During 2022, we recognized revenues of $38.0 related to our contract liabilities at December 31, 2021.
(6) Leases
Summarized below is our policy under, as well as the various other disclosures required by, ASC 842.
We have elected to account for lease agreements with lease and non-lease components as a single component for all leases.
Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets and we recognize lease
expense for these leases on a straight-line basis over the lease term.
We review if an arrangement is a lease at inception and conclude whether the contract contains an identified asset if we
have the right to obtain substantially all the economic benefit and direct the use of the asset. Operating leases with right-of-use
(“ROU”) assets are reflected within “Other assets,” “Accrued expenses,” and “Other long-term liabilities” within our
consolidated balance sheets. Finance leases are included in “Property, plant and equipment,” “Current maturities of long-term
debt,” and “Long-term debt.”
77
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to
make lease payments arising from the lease. Operating lease ROU assets and the related liabilities are recognized at
commencement date based on the present value of lease payments over the lease term. These payments include renewal options
when reasonably certain to be exercised, and exclude termination options. As none of our leases provide an implicit rate, we use
our incremental borrowing rate based on the information available at commencement date in determining the present value of
lease payments. The operating lease ROU asset also includes any prepaid lease payments and excludes lease incentives.
We have operating and finance leases for facilities, equipment, and vehicles. Our leases have remaining lease terms of one
year to 10 years, some of which include options to extend the leases for up to 5 years, and some of which include options to
terminate the lease within one year. We rent or sublease certain space within owned facilities to third parties under operating
leases, with the impact of these lease arrangements being immaterial to our consolidated financial statements.
The components of lease expense were as follows:
Operating lease cost (1)
Variable lease cost
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Total finance lease cost
__________________________
Year ended
December 31, 2022
December 31, 2021
$
$
$
15.3 $
0.4
0.5 $
—
0.5 $
13.5
0.1
0.6
—
0.6
(1) Includes short-term lease cost of $3.7 and $4.3, at December 31, 2022 and 2021 respectively.
Supplemental cash flow information related to leases was as follows:
Year ended
December 31, 2022
December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases
$
11.4 $
Operating cash flows from finance leases
Financing cash flows used in finance leases
Non-cash activities:
Operating lease right-of-use assets obtained in exchange for new lease
obligations
Finance lease right-of-use assets obtained in exchange for new lease obligations
—
0.4
16.4
—
9.4
—
0.6
9.1
0.4
78
Supplemental balance sheet information related to leases was as follows:
Operating Leases:
Operating lease ROU assets
Operating lease current liabilities
Operating lease non-current liabilities
Total operating lease liabilities
Finance Leases:
Finance lease assets
Finance lease current liabilities
Finance lease non-current liabilities
Total finance lease liabilities
$
$
$
$
$
$
December 31,
2022
2021
Affected Line Item in the Consolidated Balance Sheets
46.3 $
41.7 Other assets
10.1 $
7.7 Accrued expenses
33.8
31.5 Other long-term liabilities
43.9 $
39.2
0.7 $
1.0 Property, plant and equipment, net
0.5 $
0.5 Current maturities of long-term debt
0.2
0.6 Long-term debt
0.7 $
1.1
The weighted average remaining lease terms (years) of our leases as of December 31, 2022 and December 31, 2021, were
as follows:
Operating Leases
Finance Leases
December 31,
2022
2021
6.0
1.7
6.6
2.3
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 3.0% and 3.1% at
December 31, 2022 and 2021, respectively, and finance leases was 2.9% and 3.0% at December 31, 2022 and 2021, respectively.
79
The future minimum payments under our operating and finance leases were as follows as of December 31, 2022:
Next 12 months
12 to 24 months
24 to 36 months
36 to 48 months
48 to 60 months
Thereafter
Total lease payments
Less imputed interest
Total
Operating Leases
Finance Leases
Total
$
11.1 $
0.5 $
10.8
6.1
4.9
4.4
10.5
47.8
3.9
0.2
—
—
—
—
0.7
—
$
43.9 $
0.7 $
11.6
11.0
6.1
4.9
4.4
10.5
48.5
3.9
44.6
(7) Information on Reportable Segments
We are a global supplier of highly specialized, 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 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-related costs. This is consistent with the way our CODM evaluates the
results of each segment.
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 and power generation markets, as well as boilers and
comfort 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 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, fare collection systems, communication
technologies, and obstruction lighting. The primary distribution channels for the segment’s products are direct to customers and
third-party distributors. The segment serves a global customer base, with a strong presence in North America, Europe, Africa and
Asia.
Corporate Expense
Corporate expense generally relates to the cost of our Charlotte, North Carolina corporate headquarters.
80
Financial data for our reportable segments for the years ended December 31, 2022, 2021 and 2020 were as follows:
Revenues:
HVAC reportable segment
Detection and Measurement reportable segment
Consolidated revenues
Income:
HVAC reportable segment
Detection and Measurement reportable segment
Total income for segments
Corporate expense
Acquisition related and other costs (1)
Long-term incentive compensation expense
Amortization of intangible assets
Impairment of goodwill and intangible assets (2)
Special charges, net
Other operating (income) expense, net (3)
Consolidated operating income
Capital expenditures:
HVAC reportable segment
Detection and Measurement reportable segment
General corporate
Total capital expenditures
Depreciation and amortization:
HVAC reportable segment
Detection and Measurement reportable segment
General corporate
Total depreciation and amortization
Identifiable assets:
HVAC reportable segment
Detection and Measurement reportable segment
General corporate and eliminations (4)
Insurance recovery assets (5)
Discontinued operations
Total identifiable assets
Geographic Areas:
Revenues: (6)
United States
China
United Kingdom
Other
Tangible Long-Lived Assets:
United States
Other
Long-lived assets of continuing operations
Long-lived assets of discontinued operations, DBT and Heat Transfer
Total tangible long-lived assets
81
106.2
80.9
187.1
49.7
1.3
13.1
14.0
0.7
2.4
9.0
96.9
7.0
2.7
5.6
15.3
11.0
17.6
3.3
31.9
632.2
772.5
45.6
496.4
387.0
2022
2021
2020
913.8 $
752.1 $
547.1
467.4
740.8
387.3
1,460.9 $
1,219.5 $
1,128.1
$
$
$
$
$
$
$
$
135.5 $
107.7 $
114.1
249.6
68.6
1.9
10.9
28.5
13.4
0.4
74.9
51.0 $
92.9
200.6
60.5
5.1
12.8
21.6
30.0
1.0
(4.1)
73.7 $
10.1 $
5.3 $
4.6
1.2
3.4
0.9
15.9 $
9.6 $
20.5 $
11.5 $
23.5
2.4
28.0
2.8
46.4 $
42.3 $
2022
2021
2020
$
853.3 $
808.4 $
920.1
114.6
—
42.9
835.4
406.4
526.2
52.2
$
$
$
$
$
1,930.9 $
2,628.6 $
2,333.7
1,223.5 $
991.5 $
51.0
96.5
89.9
57.9
80.1
90.0
935.7
41.7
88.4
62.3
1,460.9 $
1,219.5 $
1,128.1
275.0 $
762.4 $
35.0
310.0
19.3
37.8
800.2
28.0
329.3 $
828.2 $
695.6
26.8
722.4
109.1
831.5
_______________________________________________________________
(1) Represents cost incurred in connection with acquisitions of $1.9, $3.3, and $1.3, including additional “Cost of products
sold” related to the step-up of inventory (to fair value) acquired in connection with these acquisitions of $1.1, $2.6 and
$0.3 during the years ended December 31, 2022, 2021 and 2020, respectively. The year ended December 31, 2021 also
includes a non-cash impairment charge of $1.8.
(2) The year ended December 31, 2022 includes impairment charges of $12.9 related to the goodwill and trademarks of
ULC and $0.5 related to certain other trademarks. The year ended December 31, 2021 includes impairment charges of
$29.5 related to the goodwill and trademarks of ULC and $0.5 related to certain other trademarks. The year ended
December 31, 2020 includes impairment charges of $0.7 related to certain other trademarks.
(3) The year ended December 31, 2022 includes a loss on the Asbestos Portfolio Sale of $73.9 as well as charges of $2.3
for asbestos product liability matters incurred prior to the Asbestos Portfolio Sale, partially offset by a reduction in the
fair value/liability associated with contingent consideration related to the ECS acquisition of $1.3. For 2021, includes
income of $24.3 and $6.7 related to the reduction of the liabilities associated with contingent consideration for the ULC
and ECS acquisitions, respectively, partially offset by charges of (i) $26.3 for asbestos product liability matters and (ii)
$0.6 related to revisions to the liability associated with the contingent consideration for the Sensors & Software
acquisition. For 2020, includes charges of $9.4 for asbestos product liability matters, net of a gain of $0.4 related to
revisions to certain liabilities retained in connection with the 2016 sale of the dry cooling business.
(4) General corporate and eliminations is comprised of general corporate assets and includes elimination or netting of
intercompany amounts, primarily related to certain deferred tax balances and cash management arrangements.
(5)
Insurance recovery assets were associated with asbestos product liability matters. As indicated in Note 1, we divested
these assets on November 1, 2022 in connection with the Asbestos Portfolio Sale. Refer to Notes 1 and 4 for additional
details.
(6) Revenues are included in the above geographic areas based on the country that recorded the revenue.
(8) Special Charges, Net
As part of our business strategy, we periodically right-size and consolidate operations to improve long-term results.
Additionally, from time to time, we alter our business model to better serve customer demand, discontinue lower-margin product
lines and rationalize and consolidate manufacturing capacity. Our restructuring and integration decisions are based, in part, on
discounted cash flows and are designed to achieve our goals of reducing structural footprint and maximizing profitability. As a
result of our strategic review process, we recorded net special charges of $0.4 in 2022, $1.0 in 2021, and $2.4 in 2020. These net
special charges were primarily related to restructuring initiatives to consolidate manufacturing and sales facilities, reduce
workforce, and rationalize certain product lines.
The components of the charges have been computed based on actual cash payouts, including severance and other employee
benefits based on existing severance policies, local laws, and other estimated exit costs, and our estimate of the realizable value
of the affected tangible assets.
Impairments of long-lived assets, which represent non-cash asset write-downs, typically arise from business restructuring
decisions that lead to the disposition of assets no longer required in the restructured business. For these situations, we recognize a
loss when the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and
eventual disposition of the asset. Fair values for assets subject to impairment testing are determined primarily by management,
taking into consideration various factors including third-party appraisals, quoted market prices and previous experience. If an
asset remains in service at the decision date, the asset is written down to its fair value and the resulting net book value is
depreciated over its remaining economic useful life. When we commit to a plan to sell an asset, including the initiation of a plan
to locate a buyer, and it is probable that the asset will be sold within one year based on its current condition and sales price,
depreciation of the asset is discontinued and the asset is classified as an asset held for sale. The asset is written down to its fair
value less any selling costs.
Liabilities for exit costs, including, among other things, severance, other employee benefit costs, and operating lease
obligations on idle facilities, are measured initially at their fair value and recorded when incurred.
We anticipate that the liabilities related to restructuring actions will be paid within one year from the period in which the
action was initiated.
82
Special charges for the years ended December 31, 2022, 2021 and 2020 are described in more detail below and in the
applicable sections that follow:
Employee termination costs
Other cash costs, net
Non-cash asset write-downs
Total
2022 Charges:
Years Ended December 31,
2022
2021
2020
$
$
0.1 $
—
0.3
0.4 $
1.0 $
—
—
1.0 $
1.0
1.0
0.4
2.4
HVAC reportable segment
Detection and Measurement reportable segment
Corporate
Total
Employee
Termination
Costs
Other
Cash Costs, Net
Non-Cash
Asset
Write-downs
Total
Special
Charges
$
$
0.1 $
— $
— $
—
—
—
—
0.3
—
0.1 $
— $
0.3 $
0.1
0.3
—
0.4
HVAC – Charges for 2022 related to severance costs associated with a restructuring action at one of the segment’s cooling
businesses. This action resulted in the termination of 2 employees.
Detection & Measurement – Charges for 2022 related to asset impairment charges associated with the relocation of certain
operations at the segment’s obstruction lighting business.
2021 Charges:
HVAC reportable segment
Detection and Measurement reportable segment
Corporate
Total
Employee
Termination
Costs
Other
Cash Costs, Net
Non-Cash
Asset
Write-downs
Total
Special
Charges
$
$
0.1 $
0.9
—
1.0 $
— $
—
—
— $
— $
—
—
— $
0.1
0.9
—
1.0
HVAC – Charges for 2021 related to severance costs associated with a restructuring action at one of the segment’s heating
businesses. This action resulted in the termination of 6 employees.
Detection & Measurement – Charges for 2021 related primarily to severance costs associated with restructuring actions at
the segment’s location and inspection businesses. These actions resulted in the termination of 44 employees.
2020 Charges:
HVAC reportable segment
Detection and Measurement reportable segment
Corporate
Total
Employee
Termination
Costs
Other
Cash Costs, Net
Non-Cash
Asset
Write-downs
Total
Special
Charges
$
$
0.5 $
0.3
0.2
1.0 $
— $
—
1.0
1.0 $
— $
—
0.4
0.4 $
0.5
0.3
1.6
2.4
HVAC — Charges for 2020 related to severance costs associated with restructuring actions at the segment’s Cooling
Americas and heating businesses. These actions resulted in the termination of 11 employees.
83
Detection & Measurement — Charges for 2020 related to severance costs for a restructuring action at the segment's fare
collection systems business. The action resulted in the termination of 5 employees.
Corporate — Charges for 2020 related primarily to (i) asset impairment and other charges associated with the move to a
new corporate headquarters and (ii) cost incurred for a legal entity reorganization initiative.
The following is an analysis of our restructuring liabilities for the years ended December 31, 2022, 2021 and 2020:
Balance at beginning of year
Special charges (1)
Utilization — cash
Balance at the end of year
2022
2021
2020
$
$
0.3 $
0.1
(0.4)
— $
0.9 $
1.0
(1.6)
0.3 $
0.4
2.0
(1.5)
0.9
___________________________________________________________________
(1) The years ended December 31, 2022, 2021 and 2020 excluded $0.3, $0.0 and $0.4, respectively, of non-cash charges that impacted
special charges but not the restructuring liabilities.
(9) Inventories, Net
Inventories are accounted for under the first-in, first-out method and are comprised of the following at December 31, 2022
and 2021:
Finished goods
Work in process
Raw materials and purchased parts
Total inventories
December 31,
2022
2021
$
$
73.0 $
25.7
145.3
244.0 $
55.1
21.1
113.6
189.8
Inventories include material, labor and factory overhead costs and are reduced, when necessary, to estimated net realizable
values.
(10) Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill, for the year ended December 31, 2022, were as follows:
December 31,
2021
Goodwill
Resulting
from Business
Combinations (1)
Impairments (2)
Foreign
Currency
Translation
December 31,
2022
HVAC reportable segment
Gross goodwill
Accumulated impairments
Goodwill
Detection and Measurement reportable segment
Gross goodwill
Accumulated impairments
Goodwill
Total
Gross goodwill
Accumulated impairments
Goodwill
$
$
528.9 $
(334.1)
194.8
424.9
(162.4)
262.5
953.8
(496.5)
457.3 $
___________________________________________________________________
8.9
—
8.9
11.0
—
11.0
19.9
—
19.9
$
$
— $
—
—
(8.3) $
5.9
(2.4)
—
(12.0)
(12.0)
(10.7)
3.2
(7.5)
—
(12.0)
(12.0) $
(19.0)
9.1
(9.9) $
529.5
(328.2)
201.3
425.2
(171.2)
254.0
954.7
(499.4)
455.3
84
(1) Reflects (i) goodwill acquired with the ITL acquisition of $10.8, (ii) an increase in Sealite’s goodwill of $0.2 resulting
from revisions to the valuation of certain assets and liabilities, and (iii) an increase in Cincinnati Fan’s goodwill of $8.9
resulting from revisions to the valuation of certain assets and liabilities. As indicated in Note 1, the acquired assets,
including goodwill, and liabilities assumed in the ITL acquisition have been recorded at estimates of fair value and are
subject to change upon completion of acquisition accounting.
(2) During the fourth quarter of 2022, in connection with the annual impairment analyses of ULC’s goodwill and indefinite-
lived intangible assets, we determined that the carrying value of ULC’s net assets exceeded the estimated fair value of the
business, resulting in an impairment charge of $12.9, with $12.0 related to goodwill and $0.9 to the ULC trademarks. After
such impairment charge, ULC had no goodwill and $5.4 of trademarks included in our consolidated balance sheet as of
December 31, 2022.
The changes in the carrying amount of goodwill, for the year ended December 31, 2021, were as follows:
HVAC reportable segment
Gross goodwill
Accumulated impairments
Goodwill
Detection and Measurement reportable segment
Gross goodwill
Accumulated impairments
Goodwill
Total
Gross goodwill
Accumulated impairments
Goodwill
December 31,
2020
Goodwill
Resulting
from Business
Combinations (1)
Impairments (2)
Foreign
Currency
Translation
December 31,
2021
$
492.2 $
46.0 $
— $
(9.3) $
528.9
(340.6)
151.6
351.5
(134.5)
217.0
843.7
(475.1)
—
46.0
78.7
—
78.7
124.7
—
—
—
—
(28.2)
(28.2)
—
(28.2)
6.5
(2.8)
(5.3)
0.3
(5.0)
(14.6)
6.8
(334.1)
194.8
424.9
(162.4)
262.5
953.8
(496.5)
$
368.6 $
124.7 $
(28.2) $
(7.8) $
457.3
___________________________________________________________________
(1) Reflects (i) goodwill acquired with the Sealite, ECS and Cincinnati Fan acquisitions of $47.7, $25.9 and $46.0,
respectively, (ii) and increase in ULC’s goodwill of $3.1 resulting from revisions to the valuation of certain assets and
liabilities, and (iii) an increase in Sensors & Software's goodwill of $2.0 resulting from revisions to the valuation of certain
assets and liabilities.
(2) As indicated in Note 1, we concluded during the third quarter of 2021 that the operating and financial performance
milestones related to the ULC contingent consideration would not be achieved, resulting in the reversal of the related
liability of $24.3, with the offset to “Other operating (income) expense, net.” We also concluded that the lack of
achievement of these milestones, along with lower than anticipated future cash flows, were indicators of potential
impairment related to ULC’s indefinite-lived intangible assets and goodwill. As such, we performed quantitative analyses of
ULC’s goodwill and indefinite-lived intangible assets for impairment during the third quarter of 2021. Based on such
testing, we determined that the carrying value of ULC’s net assets exceeded the implied fair value of the business. As a
result, we recorded an impairment charge of $24.3 during the third quarter, with $23.3 related to goodwill and the remainder
to trademarks. In connection with our annual impairment analyses of ULC’s goodwill and indefinite-lived intangibles,
during the fourth quarter of 2021, we determined that the carrying value of ULC’s net assets exceeded the implied fair value
of the business by $5.2. As a result, we recorded impairment charges of $4.9 and $0.3 related to the business’s goodwill and
trademarks, respectively.
85
Identifiable intangible assets were as follows:
Intangible assets with determinable
lives:(1)
Customer relationships
Technology
Patents
Other
Trademarks with indefinite lives (2)
Total
December 31, 2022
December 31, 2021
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
$
$
198.9 $
81.5
4.5
36.7
321.6
168.7
490.3 $
(41.7) $
(18.4)
(4.5)
(24.1)
(88.7)
—
(88.7) $
157.2 $
63.1
—
12.6
232.9
168.7
401.6 $
188.2 $
80.1
4.5
31.6
304.4
172.2
476.6 $
(26.7) $
(11.9)
(4.5)
(18.0)
(61.1)
—
(61.1) $
161.5
68.2
—
13.6
243.3
172.2
415.5
___________________________________________________________________
(1) The identifiable intangible assets associated with the ITL acquisition consist of customer relationships of $14.0,
definite-lived trademarks of $3.0, technology of $2.9, and non-compete agreements of $2.6.
(2) During the fourth quarter of 2022, in connection with our annual impairment analyses, we recorded impairment charges
of $1.4, with $0.9 related to ULC’s trademarks (see above) and the remainder to certain other trademarks. Other
changes during 2022 related primarily to foreign currency translation.
Amortization expense was $28.5, $21.6 and $14.0 for the years ended December 31, 2022, 2021 and 2020, respectively.
Estimated amortization expense is approximately $25.0 for 2023 and each of the four years thereafter.
At December 31, 2022, the net carrying value of intangible assets with determinable lives consisted of $94.6 in the HVAC
reportable segment and $138.3 in the Detection and Measurement reportable segment. Trademarks with indefinite lives consisted
of $105.0 in the HVAC reportable segment and $63.7 in the Detection and Measurement reportable segment.
As indicated in Note 1, we review goodwill and indefinite-lived intangible assets for impairment annually during the fourth
quarter. In addition, we test goodwill for impairment on a more frequent basis if there are indications of potential impairment. In
reviewing goodwill for impairment, we initially perform a qualitative analysis. If there is an indication of impairment, we then
perform a quantitative analysis. During the fourth quarter of 2022, we performed quantitative analyses on the goodwill of our
Cincinnati Fan and ULC reporting units. The Cincinnati Fan analysis indicated that the fair value of its net assets exceeded the
related carrying value by less than 10%. A change in assumptions used in Cincinnati Fan’s quantitative analysis (e.g., projected
revenues and profit growth rates, discount rates, industry price multiples, etc.) could result in the reporting unit’s estimated fair
value being less than the carrying value. If Cincinnati Fan is unable to achieve its current financial forecast, we may be required
to record an impairment charge in a future period related to its goodwill. As of December 31, 2022, Cincinnati Fan’s goodwill
totaled $54.8. As previously discussed, our fourth quarter 2022 quantitative analysis of the ULC reporting unit resulted in an
impairment charge of $12.9, with $12.0 related to goodwill and $0.9 to the ULC trademarks. After recording this impairment
charge, there is no goodwill remaining related to the ULC acquisition.
Our quantitative analysis of 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. In addition to the impairment charges related to
the ULC trademarks of $0.9 and $1.3, respectively, during 2022 and 2021, we recorded impairment charges of $0.5, $0.5 and
$0.7, respectively, during 2022, 2021, and 2020 related to certain other trademarks.
(11) Employee Benefit Plans
Overview — Defined benefit pension plans cover a portion of our salaried and hourly paid employees, including certain
employees in foreign countries. Beginning in 2001, we discontinued providing these pension benefits generally to newly hired
employees. Effective January 31, 2018, we discontinued providing service credits to active participants.
We have domestic postretirement plans that provide health and life insurance benefits to certain retirees and their
dependents. Beginning in 2003, we discontinued providing these postretirement benefits generally to newly hired employees.
The plan year-end date for all our plans is December 31.
86
Actuarial Gains and Losses - As indicated in Notes 1 and 2, changes in fair value of plan assets and actuarial gains and
losses related to our pension and postretirement plans are recorded to earnings during the fourth quarter of each year, unless
earlier remeasurement is required.
Defined Benefit Pension Plans
Plan assets — Our investment strategy is based on the long-term growth and protection of principle while mitigating
overall risk to ensure that funds are available to pay benefit obligations. The domestic plan assets are invested in a broad range of
investment classes, including fixed income securities and domestic and international equities. We engage various investment
managers who are regularly evaluated on long-term performance, adherence to investment guidelines and the ability to manage
risk commensurate with the investment style and objective for which they were hired. We continuously monitor the value of
assets by class and routinely rebalance our portfolio with the goal of meeting our target allocations.
The strategy for bonds emphasizes investment-grade corporate and government debt with maturities matching the longer
duration pension liabilities. The bonds strategy also includes a high yield element, although minimal, which is generally shorter
in duration. The strategy for equity assets is to minimize concentrations of risk by investing primarily in companies in a
diversified mix of industries worldwide, while targeting neutrality in exposure to global versus regional markets, fund types and
fund managers. A small portion of U.S. plan assets (Level 3 assets) is allocated to private equity partnerships and real estate asset
fund investments for diversification, providing opportunities for above market returns.
Allowable investments under the plan agreements include fixed income securities, equity securities, mutual funds, venture
capital funds, real estate and cash and equivalents. In addition, investments in futures and option contracts, commodities and
other derivatives are allowed in commingled fund allocations managed by professional investment managers. Investments
prohibited under the plan agreements include private placements and short selling of stock. No shares of our common stock were
held by our defined benefit pension plans as of December 31, 2022 or 2021.
Actual asset allocation percentages of each class of our domestic and foreign pension plan assets as of December 31, 2022
and 2021, along with the current targeted asset investment allocation percentages, each of which is based on the midpoint of an
allocation range, were as follows:
Domestic Pension Plans
Fixed income common trust funds
Commingled global fund allocation
Global equity common trust funds
U.S. Government securities
Short-term investments and other (1)
Total
Actual
Allocations
Mid-point of
Target
Allocation
Range
2022
2021
2022
68 %
6 %
15 %
8 %
3 %
67 %
6 %
15 %
10 %
2 %
65 %
6 %
15 %
12 %
2 %
100 %
100 %
100 %
___________________________________________________________________
(1) Short-term investments are generally invested in actively managed common trust funds or interest-bearing accounts.
87
Foreign Pension Plans
Global equity common trust funds
Fixed income common trust funds
Commingled global fund allocation
Non-U.S. Government securities
Short-term investments (1)
Total
Actual
Allocations
Mid-point of
Target
Allocation
Range
2022
2021
2022
11 %
65 %
23 %
— %
1 %
9 %
61 %
27 %
— %
3 %
11 %
66 %
23 %
— %
— %
100 %
100 %
100 %
___________________________________________________________________
(1) Short-term investments are generally invested in actively managed common trust funds or interest-bearing accounts.
The fair values of pension plan assets at December 31, 2022, by asset class, were as follows:
Asset class:
Debt securities:
Fixed income common trust funds (1) (2)
Non-U.S. Government securities
U.S. Government securities
Equity securities:
Global equity common trust funds (1) (3)
Alternative investments:
Commingled global fund allocations (1) (4)
Other:
Short-term investments (5)
Other
Total
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Total
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
196.4 $
0.3
13.9
38.0
37.2
— $
—
—
196.4 $
0.3
13.9
—
—
38.0
37.2
6.0
0.9
292.7 $
6.0
—
6.0 $
—
—
285.8 $
—
—
—
—
—
—
0.9
0.9
88
The fair values of pension plan assets at December 31, 2021, by asset class, were as follows:
Asset class:
Debt securities:
Fixed income common trust funds (1) (2)
Non-U.S. Government securities
U.S. Government securities
Equity securities:
Global equity common trust funds (1) (3)
Alternative Investments:
Commingled global fund allocations (1) (4)
Other:
Short-term investments (5)
Other
Total
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
291.2 $
0.3
25.8
58.0
67.4
— $
—
—
291.2 $
0.3
25.8
—
—
58.0
67.4
10.4
0.9
454.0 $
10.4
—
10.4 $
—
—
442.7 $
—
—
—
—
—
—
0.9
0.9
___________________________________________________________________
(1) Common/commingled trust funds are similar to mutual funds, with a daily net asset value per share measured by the
fund sponsor and used as the basis for current transactions. These investments, however, are not registered with the U.S.
Securities and Exchange Commission and participation is not open to the public. The funds are valued at the net asset
value per share multiplied by the number of shares held as of the measurement date.
(2) This class represents investments in actively managed common trust funds that invest in a variety of fixed income
investments, which may include corporate bonds, both U.S. and non-U.S. municipal and government securities, interest
rate swaps, options and futures.
(3) This class represents investments in actively managed common trust funds that invest primarily in equity securities,
which may include common stocks, options and futures.
(4) This class represents investments in actively managed common trust funds with investments in both equity and debt
securities. The investments may include common stock, corporate bonds, U.S. and non-U.S. municipal securities,
interest rate swaps, options and futures.
(5) Short-term investments are valued at $1.00/unit, which approximates fair value. Amounts are generally invested in
actively managed common trust funds or interest-bearing accounts.
Employer Contributions — We currently fund U.S. pension plans in amounts equal to the minimum funding requirements
of the Employee Retirement Income Security Act of 1974, plus additional amounts that may be approved from time to time.
During 2022, we made no contributions to our qualified domestic pension plans, and direct benefit payments of $5.6 to our non-
qualified domestic pension plans. In 2023, we do not expect to make any minimum required funding contributions to our
qualified domestic pension plans and expect to make direct benefit payments of $5.3 to our non-qualified domestic pension
plans.
In 2022, we made contributions of $1.0 to our foreign pension plans. In 2023, we expect to make contributions of $0.9 to
our foreign pension plans.
Estimated Future Benefit Payments — Following is a summary, as of December 31, 2022, of the estimated future benefit
payments for our pension plans in each of the next five fiscal years and in the aggregate for five fiscal years thereafter. Benefit
payments are paid from plan assets or directly by us for our non-funded plans. The expected benefit payments are estimated
based on the same assumptions used at December 31, 2022 to measure our obligations and include benefits attributable to
estimated future employee service.
89
2023
2024
2025
2026
2027
Subsequent five years
Estimated future benefit payments:
(Domestic and foreign pension plans)
Domestic
Pension
Benefits
Foreign
Pension
Benefits
$
24.1 $
24.2
23.0
24.5
23.6
92.4
6.6
5.5
6.5
6.3
6.7
35.5
Obligations and Funded Status — The funded status of our pension plans is dependent upon many factors, including
returns on invested assets and the level of market interest rates. Our non-funded pension plans account for $47.3 of the current
underfunded status, as these plans are not required to be funded. The following tables show the domestic and foreign pension
plans’ funded status and amounts recognized in our consolidated balance sheets:
Change in projected benefit obligation:
Projected benefit obligation — beginning of year
Service cost
Interest cost
Actuarial gains
Settlements
Benefits paid
Foreign exchange and other
Projected benefit obligation — end of year
Domestic Pension
Plans
Foreign Pension
Plans
2022
2021
2022
2021
$
$
335.4 $
—
10.5
(66.4)
(17.1)
(15.5)
—
246.9 $
364.7 $
—
8.4
(12.9)
(10.5)
(14.3)
—
335.4 $
182.4 $
—
3.7
(52.7)
—
(6.9)
(17.0)
109.5 $
192.2
—
3.4
(4.8)
(3.0)
(5.1)
(0.3)
182.4
The actuarial gains and losses for all pension plans in 2022 and 2021 were primarily related to a change in the discount rate
used to measure the benefit obligations of those plans.
Change in plan assets:
Fair value of plan assets — beginning of year
Actual return on plan assets
Contributions (employer and employee)
Settlements
Benefits paid
Foreign exchange and other
Fair value of plan assets — end of year
Funded status at year-end
Amounts recognized in the consolidated balance sheets consist of:
Other assets
Accrued expenses
Other long-term liabilities
$
$
$
$
Net amount recognized
Amount recognized in accumulated other comprehensive income (pre-
tax) consists of — net prior service costs (credits)
$
$
Domestic Pension
Plans
Foreign Pension
Plans
2022
2021
2022
2021
260.4 $
(56.6)
5.6
(17.1)
(15.5)
—
176.8 $
(70.1) $
1.8 $
(5.1)
(66.8)
(70.1) $
279.8 $
(0.1)
5.5
(10.5)
(14.3)
—
260.4 $
(75.0) $
2.2 $
(5.2)
(72.0)
(75.0) $
193.6 $
(54.4)
1.0
—
(6.9)
(17.4)
115.9 $
6.4 $
6.5 $
—
(0.1)
6.4 $
198.3
3.6
0.9
(3.0)
(5.1)
(1.1)
193.6
11.2
11.4
—
(0.2)
11.2
— $
(0.1) $
1.0 $
1.2
90
The following is information about our pension plans that had accumulated benefit obligations in excess of the fair value of
their plan assets at December 31, 2022 and 2021:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Domestic Pension
Plans
Foreign Pension
Plans
2022
2021
2022
2021
$
242.1 $
242.1
170.2
329.0 $
329.0
251.8
0.1 $
0.1
—
0.2
0.2
—
The accumulated benefit obligation for all domestic and foreign pension plans was $246.9 and $109.5, respectively, at
December 31, 2022 and $335.4 and $182.4, respectively, at December 31, 2021.
Components of Net Periodic Pension Benefit (Income) Expense — Net periodic pension benefit (income) expense for our
domestic and foreign pension plans included the following components:
Domestic Pension Plans
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized prior service credits
Recognized net actuarial (gains) losses (1)
Total net periodic pension benefit (income) expense
Year ended December 31,
2022
2021
2020
$
$
— $
10.5
(8.2)
(0.1)
(1.6)
0.6 $
— $
8.4
(8.7)
(0.1)
(4.2)
(4.6) $
—
10.8
(9.5)
(0.1)
4.7
5.9
___________________________________________________________________
(1) Consists primarily of our reported actuarial (gains) losses, the difference between actual and expected returns on plan
assets, and settlement losses.
Foreign Pension Plans
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized prior service costs
Recognized net actuarial (gains) losses (1)
Total net periodic pension benefit (income) expense
Year ended December 31,
2022
2021
2020
$
$
— $
3.7
(5.6)
0.1
6.4
4.6 $
— $
3.4
(5.8)
—
(1.8)
(4.2) $
—
3.8
(5.7)
—
0.2
(1.7)
___________________________________________________________________
(1) Consists of our reported actuarial (gains) losses and the difference between actual and expected returns on plan assets.
91
Assumptions — Actuarial assumptions used in accounting for our domestic and foreign pension plans were as follows:
Domestic Pension Plans
Weighted-average actuarial assumptions used in determining net periodic
pension expense:
Discount rate (1)
Rate of increase in compensation levels
Expected long-term rate of return on assets
Weighted-average actuarial assumptions used in determining year-end
benefit obligations:
Discount rate
Rate of increase in compensation levels
Foreign Pension Plans
Weighted-average actuarial assumptions used in determining net periodic
pension expense:
Discount rate
Rate of increase in compensation levels
Expected long-term rate of return on assets
Weighted-average actuarial assumptions used in determining year-end
benefit obligations:
Discount rate
Rate of increase in compensation levels
___________________________________________________________________
Year ended December 31,
2022
2021
2020
3.99 %
N/A
3.23 %
5.54 %
N/A
2.19 %
N/A
3.44 %
5.15 %
N/A
2.35 %
N/A
3.22 %
2.83 %
N/A
1.76 %
N/A
3.31 %
2.19 %
N/A
3.16 %
N/A
3.75 %
2.35 %
N/A
2.27 %
N/A
3.81 %
1.76 %
N/A
(1) The discount rate for the year ended December 31, 2022 includes adjustments due to remeasurements in the U.S. Plan
during the second and third quarters.
We review the pension assumptions annually. Pension income or expense for the year is determined using assumptions as
of the beginning of the year (except for the effects of recognizing changes in the fair value of plan assets and actuarial gains and
losses in the fourth quarter of each year), while the funded status is determined using assumptions as of the end of the year. We
determined assumptions and established them at the respective balance sheet date using the following principles: (i) the expected
long-term rate of return on plan assets is established based on forward looking long-term expectations of asset returns over the
expected period to fund participant benefits based on the target investment mix of our plans and (ii) the discount rate is primarily
determined by matching the expected projected benefit obligation cash flows for each of the plans to a yield curve that is
representative of long-term, high-quality (rated AA or higher) fixed income debt instruments as of the measurement date.
Postretirement Benefit Plans
Transfer of Retiree Life Insurance Benefits - On February 17, 2022, we transferred our existing liability under the SPX
Postretirement Benefit Plans (the “Plans”) for a group of participants with retiree life insurance benefits to an insurance carrier
for consideration paid to the insurance carrier of $10.0. This transaction resulted in a settlement loss of $0.7 recorded to “Other
income (expense), net” during 2022. In addition, and in connection with this transfer, we remeasured the assets and liabilities of
the Plans as of the transfer date, which resulted in an actuarial gain of $0.4 recorded to “Other income (expense), net”.
92
Employer Contributions and Future Benefit Payments — Our postretirement medical plans are unfunded and have no plan
assets, but are instead funded by us on a pay-as-you-go basis in the form of direct benefit payments or policy premium payments.
In 2022, we made benefit payments of $4.4 to our postretirement benefit plans. Following is a summary, as of December 31,
2022, of the estimated future benefit payments for our postretirement plans in each of the next five fiscal years and in the
aggregate for five fiscal years thereafter. The expected benefit payments are estimated based on the same assumptions used at
December 31, 2022 to measure our obligations and include benefits attributable to estimated future employee service.
2023
2024
2025
2026
2027
Subsequent five years
Postretirement Payments
$
4.1
3.7
3.3
3.0
2.7
10.1
Obligations and Funded Status — The following tables show the postretirement plans’ funded status and amounts
recognized in our consolidated balance sheets:
Change in projected postretirement benefit obligation:
Projected postretirement benefit obligation — beginning of year
Interest cost
Loss on settlement of retiree life insurance benefits
Actuarial gains
Transfer to insurance carrier for cash consideration
Benefits paid
Projected postretirement benefit obligation — end of year
Funded status at year-end
Amounts recognized in the consolidated balance sheets consist of:
Accrued expenses
Other long-term liabilities
Net amount recognized
Amount recognized in accumulated other comprehensive income (pre-tax) consists of — net prior service
credits
Postretirement
Plans
2022
2021
$
$
$
$
$
$
51.7 $
1.1
0.7
(7.0)
(10.0)
(4.4)
32.1 $
(32.1) $
(4.0) $
(28.1)
(32.1) $
60.5
1.0
—
(3.9)
—
(5.9)
51.7
(51.7)
(5.9)
(45.8)
(51.7)
(11.1) $
(15.5)
The actuarial gains and losses for our postretirement benefit plans in 2022 and 2021 were primarily related to a change in
the discount rate used to measure the benefit obligations of those plans.
The net periodic postretirement benefit (income) expense included the following components:
Service cost
Interest cost
Amortization of unrecognized prior service credits
Settlement loss (1)
Recognized net actuarial (gains) losses
Net periodic postretirement benefit income
___________________________________________________________________
(1) Relates to the transfer of the retiree life insurance benefits obligation.
Year ended December 31,
2022
2021
2020
$
$
— $
1.1
(4.4)
0.7
(7.0)
(9.6) $
— $
1.0
(4.7)
—
(3.9)
(7.6) $
—
1.6
(4.7)
—
1.9
(1.2)
93
Actuarial assumptions used in accounting for our domestic postretirement plans were as follows:
Assumed health care cost trend rates:
Health care cost trend rate for next year
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
Discount rate used in determining net periodic postretirement benefit expense (1)
Discount rate used in determining year-end postretirement benefit obligation
___________________________________________________________________
Year ended December 31,
2022
2021
2020
7.00 %
5.00 %
2031
2.84 %
5.50 %
6.25 %
5.00 %
2027
2.00 %
2.56 %
6.50 %
5.00 %
2027
2.97 %
2.00 %
(1) The discount rate for the year ended December 31, 2022 includes an adjustment due to a remeasurement in the Plans that took
place in the first quarter.
The accumulated postretirement benefit obligation was determined using the terms and conditions of our various plans,
together with relevant actuarial assumptions and health care cost trend rates. It is our policy to review the postretirement
assumptions annually. The assumptions are determined by us and are established based on our prior experience and our
expectations that future health care cost trend rates will decline. In addition, we consider advice from independent actuaries.
Defined Contribution Retirement Plans
We maintain a defined contribution retirement plan (the “DC Plan”) pursuant to Section 401(k) of the U.S. Internal
Revenue Code. Under the DC Plan, eligible U.S. employees may voluntarily contribute up to 50% of their compensation into the
DC Plan and we match a portion of participating employees’ contributions. Our matching contributions are primarily made in
newly issued shares of SPX common stock and are issued at the prevailing market price. The matching contributions vest with
the employee immediately upon the date of the match and there are no restrictions on the resale of SPX common stock held by
employees.
Under the DC Plan, we contributed 0.149, 0.135 and 0.192 shares of our common stock to employee accounts in 2022,
2021 and 2020, respectively. Compensation expense is recorded based on the market value of shares as the shares are contributed
to employee accounts. We recorded $7.8 in 2022, $7.8 in 2021 and $7.7 in 2020 as compensation expense related to the
matching contribution.
Certain collectively-bargained employees participate in the DC Plan with company contributions not being made in SPX
common stock, although SPX common stock is offered as an investment option under these plans.
We also maintain a Supplemental Retirement Savings Plan (“SRSP”), which permits certain members of our senior
management and executive groups to defer eligible compensation in excess of the amounts allowed under the DC Plan. We
match a portion of participating employees’ deferrals to the extent allowable under the SRSP provisions. The matching
contributions vest with the participant immediately. Our funding of the participants’ deferrals and our matching contributions are
held in certain mutual funds (as allowed under the SRSP), as directed by the participant. The fair values of these assets, which
totaled $13.8 and $18.3 at December 31, 2022 and 2021, respectively, are based on quoted prices in active markets for identical
assets (Level 1). In addition, the assets under the SRSP are available to the general creditors in the event of our bankruptcy and,
thus, are maintained on our consolidated balance sheets within “Other assets,” with a corresponding amount in “Other long-term
liabilities” for our obligation to the participants. Lastly, these assets are accounted for as trading securities. During 2022, 2021
and 2020, we recorded compensation expense of $0.2, $0.2 and $0.2, respectively, relating to our matching contributions to the
SRSP.
94
(12)
Income Taxes
Income (loss) from continuing operations before income taxes and the (provision for) benefit from income taxes consisted
of the following:
Income (loss) from continuing operations:
United States
Foreign
(Provision for) benefit from income taxes:
Current:
United States
Foreign
Total current
Deferred and other:
United States
Foreign
Total deferred and other
Total provision
Year ended December 31,
2022
2021
2020
$
$
$
$
(37.7) $
64.8
27.1 $
(18.9) $
(9.8)
(28.7)
17.2
4.2
21.4
(7.3) $
17.2 $
52.7
69.9 $
(5.4) $
(6.9)
(12.3)
0.8
0.6
1.4
(10.9) $
39.6
39.0
78.6
(0.7)
(3.8)
(4.5)
(0.3)
—
(0.3)
(4.8)
The reconciliation of income tax computed at the U.S. federal statutory tax rate to our effective income tax rate was as
follows:
Tax at U.S. federal statutory rate
State and local taxes, net of U.S. federal benefit
U.S. credits and exemptions
Foreign earnings/losses taxed at different rates
Nondeductible expenses
Adjustments to uncertain tax positions
Changes in valuation allowance (1)
Share-based compensation
Capital loss (1)
Goodwill impairment and basis adjustments
Statutory rate changes
Adjustments to contingent consideration
Non-deductible loss on Asbestos Portfolio Sale (2)
Other
Year ended December 31,
2022
2021
2020
21.0 %
9.6 %
(13.4) %
(9.7) %
7.7 %
(9.4) %
(19.6) %
(6.4) %
— %
(3.9) %
— %
(0.9) %
53.7 %
(1.8) %
26.9 %
21.0 %
0.4 %
(20.4) %
12.6 %
3.3 %
(2.4) %
47.9 %
(1.8) %
(42.5) %
7.3 %
2.1 %
(8.9) %
— %
(3.0) %
15.6 %
21.0 %
1.8 %
(4.4) %
(4.6) %
2.2 %
(4.4) %
(0.6) %
(3.6) %
— %
— %
— %
— %
— %
(1.3) %
6.1 %
___________________________________________________________________
(1) During the fourth quarter of 2021, we generated a capital loss in connection with the liquidation of certain recently
acquired entities. All but $2.0 of the income tax benefit associated with the capital loss has been reflected in “Gain (loss)
from discontinued operations, net of tax” in the accompanying consolidated statement of operations for the year ended
December 31, 2021. As such, the capital loss had only a minimal impact on our effective income tax rate for continuing
operations during the year ended December 31, 2021.
(2) The income tax benefit associated with the loss of $73.9 on the Asbestos Portfolio Sale totaled $1.1.
95
Significant components of our deferred tax assets and liabilities were as follows:
Deferred tax assets:
NOL and credit carryforwards
Pension, other postretirement and postemployment benefits
Payroll and compensation
Legal, environmental and self-insurance accruals
Working capital accruals
Research and experimental expenditures
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Intangible assets recorded in acquisitions
Basis difference in affiliates
Accelerated depreciation
Deferred income
Other
Total deferred tax liabilities
General Matters
As of December 31,
2022
2021
77.3 $
26.1
15.6
15.7
17.5
13.6
8.1
173.9
(69.1)
104.8
84.5
15.3
14.4
—
16.2
130.4
(25.6) $
118.6
31.1
16.3
35.9
17.0
—
9.8
228.7
(89.8)
138.9
79.4
19.8
13.3
20.2
16.8
149.5
(10.6)
$
$
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. We periodically assess deferred tax
assets to determine if they are likely to be realized and the adequacy of deferred tax liabilities, incorporating the results of local,
state, federal and foreign tax audits in our estimates and judgments.
At December 31, 2022, we had $24.9 of federal, $242.9 of state, and $171.0 of foreign tax loss carryforwards available.
We also had federal and state tax credit carryforwards of $6.9. Of these amounts, $8.4 expire in 2023 and $235.7 expire at
various times between 2024 and 2040. The remaining carryforwards have no expiration date.
Realization of deferred tax assets, including those associated with net operating loss and credit carryforwards, is dependent
upon generating sufficient taxable income in the appropriate tax jurisdiction. We believe that it is more likely than not that we
may not realize the benefit of certain of these deferred tax assets and, accordingly, have established a valuation allowance against
these deferred tax assets. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely
than not that the deferred tax assets will be realized through future taxable earnings or tax planning strategies. However, deferred
tax assets could be reduced in the near term if our estimates of taxable income are significantly reduced or tax planning strategies
are no longer viable. Our valuation allowance decreased by $20.7 in 2022 and by $2.2 in 2021. The 2022 decrease was primarily
driven by the utilization of certain attributes in foreign jurisdictions.
The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions.
These deductions can vary from year-to-year, and, consequently, the amount of income taxes paid in future years will vary from
the amounts paid in prior years.
Undistributed Foreign Earnings
In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations. As of
December 31, 2022, we had $225.6 of undistributed earnings of our foreign subsidiaries. The majority of these earnings have
already been reinvested in our overseas businesses. Further, we believe future domestic cash generation will be sufficient to
meet future domestic cash needs. For this reason, we have not recorded a provision for U.S. or foreign withholding taxes on the
excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially
permanent in duration. Generally, such amounts may become subject to U.S. taxation upon the remittance of dividends and
under certain other circumstances. It is not practicable to estimate the amount of a deferred tax liability related to the
96
undistributed earnings of our foreign subsidiaries in the event that these earnings are no longer considered to be indefinitely
reinvested, due to the hypothetical nature of the calculation.
Unrecognized Tax Benefits
As of December 31, 2022, we had gross and net unrecognized tax benefits of $4.5 and $4.0, respectively. All of these net
unrecognized tax benefits would impact our effective tax rate from continuing operations if recognized. Similarly, at
December 31, 2021 and 2020, we had gross unrecognized tax benefits of $7.1 (net unrecognized tax benefits of $6.4) and $13.6
(net unrecognized tax benefits of $11.0), respectively.
We classify interest and penalties related to unrecognized tax benefits as a component of our income tax provision/benefit.
As of December 31, 2022, gross accrued interest totaled $1.9 (net accrued interest of $1.7), while the related amounts as of
December 31, 2021 and 2020 were $2.6 (net accrued interest of $2.2) and $3.8 (net accrued interest of $3.0), respectively. Our
income tax provision for the years ended December 31, 2022, 2021, and 2020 included gross interest income of $0.6, $1.0, and
$0.2, respectively, resulting from adjustments to our liability for uncertain tax positions. As of December 31, 2022, 2021, and
2020, 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 believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits
could decrease by up to $3.0. The previously unrecognized tax benefits relate to a variety of tax matters including transfer
pricing and various state matters.
The aggregate changes in the balance of unrecognized tax benefits for the years ended December 31, 2022, 2021, and 2020
were as follows:
Unrecognized tax benefit — opening balance
Gross increases — tax positions in prior period
Gross decreases — tax positions in prior period
Gross increases — tax positions in current period
Settlements
Statute expirations
Change due to foreign currency exchange rates
Unrecognized tax benefit — ending balance
$
Other Tax Matters
Year ended December 31,
2022
2021
2020
$
7.1 $
13.6 $
—
(0.7)
0.1
—
(1.9)
(0.1)
4.5 $
0.7
(6.4)
0.2
—
(1.1)
0.1
7.1 $
17.2
0.3
(2.2)
0.2
(0.3)
(1.7)
0.1
13.6
During 2022, our income tax provision was impacted most significantly by (i) the loss on the Asbestos Portfolio Sale (see
Note 4) which generated a tax benefit of only $1.1, (ii) a tax benefit of $4.7 related to the release of valuation allowances
recognized against certain deferred tax assets, as we now expect to realize these deferred tax assets, primarily due to the 2022
Holding Company Reorganization (see Note 1), (iii) $3.0 of tax benefits related to statute expirations and other revisions to
liabilities for uncertain tax positions, and (iv) $1.7 of excess tax benefits associated with stock-based compensation awards that
vested and/or were exercised during the year.
During 2021, our income tax provision was impacted most significantly by (i) earnings in jurisdictions with lower statutory
tax rates, (ii) $4.3 of income tax benefits related to various valuation allowance adjustments, primarily due to foreign tax credits
for which the future realization is now considered likely, and (iii) a benefit of $3.5 related to the resolution of certain liabilities
for uncertain tax positions and interest associated with various refund claims, partially offset by $13.2 of tax expense associated
with global intangible low-taxed income created by the liquidation of various entities.
During 2020, our income tax provision was impacted most significantly by (i) earnings in jurisdictions with lower statutory
tax rates, (ii) $4.2 of tax benefits related to various audit settlements, statute expirations, and other adjustments to liabilities for
uncertain tax positions, and (iii) $2.8 of excess tax benefits resulting from stock-based compensation awards that vested and/or
were exercised during the year.
We perform reviews of our income tax positions on a continuous basis and accrue for potential uncertain positions when
we determine that a tax 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 consolidated
97
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.
The Internal Revenue Service (“IRS”) concluded its audit of our 2013, 2014, 2015, 2016 and 2017 federal income tax
returns. In connection with such, we recorded a tax benefit of $2.2 during 2021 related to the resolution of certain liabilities for
uncertain tax positions and interest associated with various refund claims.
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 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.
We 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 adverse effect 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.
(13) Indebtedness
The following summarizes our debt activity (both current and non-current) for the year ended December 31, 2022:
Revolving loans
Term loan (1)(2)
Trade receivables financing arrangement (3)
Other indebtedness (4)
Total debt
Less: short-term debt
Less: current maturities of long-term debt
Total long-term debt
December 31,
2021
Borrowings
Repayments
Other (5)
December 31,
2022
— $
245.0
—
0.1
245.1 $
— $
(243.7)
—
(0.9)
(244.6) $
$
$
— $
242.7
—
3.3
246.0 $
2.2
13.0
230.8
— $
0.3
—
—
0.3
$
—
244.3
—
2.5
246.8
1.8
2.0
243.0
_____________________________________________________________
(1) As noted below, we amended our senior credit agreement on August 12, 2022. The amendment made available a new term loan
facility in the amount of $245.0, the proceeds of which were primarily used to repay the outstanding balance of $237.4 under the
then-existing term loan facility.
(2)
The term loan is repayable in quarterly installments equal to 0.625% of the initial term loan balance of $245.0, beginning in
December 2023 and in each of the first three quarters of 2024, and 1.25% during the fourth quarter of 2024, all quarters of 2025 and
2026, and the first two quarters of 2027. The remaining balance is payable in full on August 12, 2027. Balances are net of
unamortized debt issuance costs of $0.7 and $1.0 at December 31, 2022 and December 31, 2021, respectively.
(3) Under this arrangement, we can borrow, on a continuous basis, up to $50.0, as available. Borrowings under this arrangement are
collateralized by eligible trade receivables of certain of our businesses. At December 31, 2022, we had $45.7 of available borrowing
capacity under this facility.
(4)
(5)
Primarily includes balances under a purchase card program of $1.8 and $2.2 and finance lease obligations of $0.7 and $1.1 at
December 31, 2022 and December 31, 2021, respectively. The purchase card program allows for payment beyond the normal
payment terms for goods and services acquired under the program. As this arrangement extends the payment of these purchases
beyond their normal payment terms through third-party lending institutions, we have classified these amounts as short-term debt.
“Other” includes the impact of amortization of debt issuance costs associated with the term loan.
Maturities of long-term debt payable during each of the five years subsequent to December 31, 2022 are $2.0, $7.9, $12.3,
$12.3, and $211.2 respectively.
Senior Credit Facilities
On August 12, 2022, we entered into the Credit Agreement to, among other things, extend the term of the facilities under
the Credit Agreement (with the aggregate of each facility comprising the “Senior Credit Facilities”) and provide for committed
senior secured financing with an aggregate amount of $770.0 which consists of the following facilities at December 31, 2022
(each with a final maturity of August 12, 2027):
98
•
•
•
•
•
•
A term loan facility in an aggregate principal amount of $245.0;
A multicurrency revolving credit facility, available for loans and letters of credit in Dollars, Euro, Sterling and other
currencies, in an aggregate principal amount up to the equivalent of $500.0 (with sub-limits equal to the equivalents of
$200.0 for financial letters of credit, $50.0 for non-financial letters of credit, and $150.0 for non-U.S. exposure); and
A bilateral foreign credit instrument facility, available for performance letters of credit and bank undertakings, in an
aggregate principal amount in various currencies up to the equivalent of $25.0.
The Credit Agreement also:
Requires that we maintain a Consolidated Leverage Ratio (defined in the Credit Agreement) as of the last day of any
fiscal quarter of not more than 3.75 to 1.00 (or (i) 4.00 to 1.00 for the four fiscal quarters after certain permitted
acquisitions or (ii) 4.25 to 1.00 for the four fiscal quarters after certain permitted acquisitions with a minimum amount
financed by unsecured debt);
Requires that we maintain a Consolidated Interest Coverage Ratio (defined in the Credit Agreement) as of the last day
of any fiscal quarter of at least 3.00 to 1.00;
Allows SPX to seek additional commitments, without consent from the existing lenders, to add incremental term loan
facilities and/or increase the commitments in respect of the revolving credit facility and/or the bilateral foreign credit
instrument facility by up to an aggregate principal amount not to exceed (x) the greater of (i) $200.0 and (ii) the amount
of Consolidated EBITDA (as defined in the Credit Agreement) for the four fiscal quarters ended most recently before
the date of determination, plus (y) an unlimited amount so long as, immediately after giving effect thereto, our
Consolidated Senior Secured Leverage Ratio (defined in the Credit Agreement generally as the ratio of consolidated
total debt (excluding the face amount of undrawn letters of credit, bank undertakings, or analogous instruments and net
of unrestricted cash and cash equivalents) at the date of determination secured by liens to Consolidated EBITDA for the
four fiscal quarters ended most recently before such date) does not exceed 2.75:1.00, plus (z) an amount equal to all
voluntary prepayments of the term loan facility and voluntary prepayments accompanied by permanent commitment
reductions of the revolving credit facility and foreign credit instrument facility; and
•
Establishes per annum fees charged and applies interest rate margins, as follows:
Consolidated
Leverage
Ratio
Revolving
Commitment
Fee
Financial
Letter of
Credit Fee
Foreign Credit
Instrument
(“FCI”)
Commitment
Fee
FCI Fee and
Non-Financial
Letter of Credit
Fee
Term Secured
Overnight
Financing Rate
(“SOFR”) Loans/
Alternative
Currency Loans
Greater than or equal to
3.00 to 1.00
Between 2.00 to 1.00 and
3.00 to 1.00
Between 1.50 to 1.00 and
2.00 to 1.00
Less than 1.50 to 1.00
0.275 %
1.750 %
0.275 %
0.250 %
1.500 %
0.250 %
0.225 %
0.200 %
1.375 %
1.250 %
0.225 %
0.200 %
1.000 %
0.875 %
0.800 %
0.750 %
1.750 %
1.500 %
1.375 %
1.250 %
ABR Loans
0.750 %
0.500 %
0.375 %
0.250 %
The interest rates applicable to loans under the Senior Credit Facilities are, at our option, equal to either (i) an alternate
base rate (the highest of (a) the federal funds effective rate plus 0.5%, (b) the prime rate of Bank of America, N.A., and (c) the
one-month Term SOFR rate plus 1.0%) or (ii) the Term SOFR rate for the applicable interest period plus 0.1%, plus, in each
case, an applicable margin percentage, which varies based on the Consolidated Leverage Ratio (defined in the Credit Agreement
generally as the ratio of consolidated total debt (excluding the face amount of undrawn letters of credit, bank undertakings or
analogous instruments and net of unrestricted cash and cash equivalents) at the date of determination to Consolidated EBITDA
for the four fiscal quarters ended most recently before such date). The interest rates applicable to loans in other currencies under
the Senior Credit Facilities are, at the applicable borrower’s option, equal to either (a) an adjusted alternative currency daily rate
or (b) an adjusted alternative currency term rate for the applicable interest period, plus, in each case, the applicable margin
percentage. The borrowers may elect interest periods of one, three or six months (and, if consented to by all relevant lenders, any
other period not greater than twelve months) for term rate borrowings, subject in each case to availability in the applicable
currency.
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The weighted-average interest rate of outstanding borrowings under our Senior Credit Facilities was approximately 5.8% at
December 31, 2022.
The fees and bilateral foreign credit commitments are as specified above for foreign credit commitments unless otherwise
agreed with the bilateral foreign issuing lender. We also pay fronting fees on the outstanding amounts of letters of credit and
foreign credit instruments (in the participation facility) at the rates of 0.125% per annum and 0.25% per annum, respectively.
SPX Enterprises, LLC, the direct wholly owned subsidiary of the Company, is the borrower under each of above facilities,
and SPX may designate certain foreign subsidiaries to be borrowers under the revolving credit facility and the foreign credit
instrument facility. All borrowings and other extensions of credit under the Credit Agreement are subject to the satisfaction of
customary conditions, including absence of defaults and accuracy in material respects of representations and warranties.
The letters of credit under the revolving credit facility are stand-by letters of credit requested by SPX on behalf of any of
our subsidiaries or certain joint ventures. The foreign credit instrument facility is used to issue foreign credit instruments,
including bank undertakings to support our operations.
The Credit Agreement requires mandatory prepayments in amounts equal to the net proceeds from the sale or other
disposition of (including from any casualty to, or governmental taking of) property in excess of specified values (other than in
the ordinary course of business and subject to other exceptions) by SPX. Mandatory prepayments will be applied first to repay
amounts outstanding under any term loans and then to amounts outstanding under the revolving credit facility (without reducing
the commitments thereunder). No prepayment is required generally to the extent the net proceeds are reinvested (or committed to
be reinvested) in permitted acquisitions, permitted investments or assets to be used in the business of SPX within 360 days (and
if committed to be reinvested, actually reinvested within 180 days after the end of such 360-day period) of the receipt of such
proceeds.
We may voluntarily prepay loans under the Credit Agreement, in whole or in part, without premium or penalty. Any
voluntary prepayment of loans will be subject to reimbursement of the lenders’ breakage costs in the case of a prepayment of
term rate borrowings other than on the last day of the relevant interest period. Indebtedness under the Credit Agreement is
guaranteed by:
•
•
Each existing and subsequently acquired or organized domestic material subsidiary with specified exceptions; and
SPX with respect to the obligations of our foreign borrower subsidiaries under the revolving credit facility and the
bilateral foreign credit instrument facility.
Indebtedness under the Credit Agreement is secured by a first priority pledge and security interest in 100% of the capital
stock of our domestic subsidiaries (with certain exceptions) or our domestic subsidiary guarantors and 65% of the voting capital
stock (and 100% of the non-voting capital stock) of material first-tier foreign subsidiaries (with certain exceptions). If SPX
obtains a corporate credit rating from Moody’s and S&P and such corporate credit rating is less than “Ba2” (or not rated) by
Moody’s and less than “BB” (or not rated) by S&P, then SPX and our domestic subsidiary guarantors are required to grant
security interests, mortgages and other liens on substantially all of their assets. If SPX’s corporate credit rating is “Baa3” or
better by Moody’s or “BBB-” or better by S&P and no defaults would exist, then all collateral security is to be released and the
indebtedness under the Credit Agreement will be unsecured.
The Credit Agreement also contains covenants that, among other things, restrict our ability to incur additional
indebtedness, grant liens, make investments, loans, guarantees, or advances, make restricted junior payments, including
dividends, redemptions of capital stock, and voluntary prepayments or repurchase of certain other indebtedness, engage in
mergers, acquisitions or sales of assets, enter into sale and leaseback transactions, or engage in certain transactions with
affiliates, and otherwise restrict certain corporate activities. The Credit Agreement contains customary representations,
warranties, affirmative covenants and events of default.
We are permitted under the Credit Agreement to repurchase capital stock and pay cash dividends in an unlimited amount if
our Consolidated Leverage Ratio is (after giving pro forma effect to such payments) less than 2.75 to 1.00. If our Consolidated
Leverage Ratio is (after giving pro forma effect to such payments) greater than or equal to 2.75 to 1.00, the aggregate amount of
such repurchases and dividend declarations cannot exceed (A) $100.0 in any fiscal year plus (B) an additional amount for all
such repurchases and dividend declarations made after September 1, 2015 equal to the sum of (i) $100.0 plus (ii) a positive
amount equal to 50% of cumulative Consolidated Net Income (as defined in the Credit Agreement generally as consolidated net
income subject to certain adjustments solely for the purposes of determining this basket) during the period from September 1,
2015 to the end of the most recent fiscal quarter preceding the date of such repurchase or dividend declaration for which
financial statements have been (or were required to be) delivered (or, in case such Consolidated Net Income is a deficit, minus
100
100% of such deficit) plus (iii) certain other amounts, less our previous usage of such additional amount for certain other
investments and restricted junior payments.
At December 31, 2022, we had $489.0 of available borrowing capacity under our revolving credit facilities, after giving
effect to $11.0 reserved for outstanding letters of credit. In addition, at December 31, 2022, we had $10.2 of available issuance
capacity under our foreign credit instrument facilities after giving effect to $14.8 reserved for outstanding letters of credit.
At December 31, 2022, we were in compliance with all covenants of our Credit Agreement.
In connection with the August 2022 amendment of the Credit Agreement, we recorded charges of $1.1 to “Loss on
amendment/refinancing of senior credit agreement” related to the write-off of unamortized deferred financing costs totaling $0.7
and transaction costs of $0.4. Additionally, $1.5 of fees paid in connection with the August 2022 amendment were capitalized,
with $1.2 related to our revolving loans and $0.3 related to the term loan. During 2021, we reduced the issuance capacity of our
then-existing foreign credit instrument facilities resulting in a charge of $0.2 to “Loss on amendment/refinancing of senior credit
agreement” associated with the write-off of unamortized deferred financing costs.
Other Borrowings and Financing Activities
Certain of our businesses purchase goods and services under a purchase card program allowing for payment beyond their
normal payment terms. As of December 31, 2022 and 2021, the participating businesses had $1.8 and $2.2, respectively,
outstanding under this arrangement.
We are party to a trade receivables financing agreement, whereby we can borrow, on a continuous basis, up to $50.0.
Availability of funds may fluctuate over time given, among other things, changes in eligible receivable balances, but will not
exceed the $50.0 program limit. The facility contains representations, warranties, covenants and indemnities customary for
facilities of this type. The facility does not contain any covenants that we view as materially constraining to the activities of our
business.
In addition, we maintain uncommitted line of credit facilities in China and South Africa available to fund operations in
these regions, when necessary, and at the discretion of the lender. At December 31, 2022, the aggregate amount of borrowing
capacity under these facilities was $20.0, while there were no borrowings outstanding.
(14) Derivative Financial Instruments and Concentrations of Credit Risk
Interest Rate Swaps
We previously maintained interest rate swap agreements that matured in March 2021 and effectively converted borrowings
under our senior credit facilities to a fixed rate of 2.535%, plus the applicable margin.
In February 2020, and as a result of a December 2019 amendment that extended the maturity date of our senior credit
facilities to December 17, 2024, we entered into additional interest swap agreements (“Swaps”). The Swaps have a remaining
notional amount of $231.3, cover the period through November 2024, and effectively convert this portion of the borrowings
under our senior credit facilities to a fixed rate of 1.077%, plus the applicable margin.
In connection with entering into the Credit Agreement, the Swaps were amended to be based on SOFR as opposed to
LIBOR. As mentioned in Note 3, we applied the optional expedient per ASU No. 2020-04 and No. 2021-01 and, thus, continue
to designate and account for our interest rate swap agreements as cash flow hedges. As of December 31, 2022 and 2021, the
unrealized gain, net of tax, recorded in AOCI was $11.0 and $0.5, respectively. In addition, the fair value of our interest rate
swap agreements was $14.7 (with $8.7 recorded as a current asset and $6.0 as a non-current asset) as of December 31, 2022, and
$0.6 (with $2.5 recorded as a non-current asset and $1.9 as a current liability) as of December 31, 2021. Changes in fair value of
our interest rate swap agreements are 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 (“GBP”), and Euro.
101
From time to time, we enter into forward contracts to manage the exposure on contracts with forecasted transactions
denominated in non-functional currencies and to manage the risk of transaction gains and losses associated with assets/liabilities
denominated in currencies other than the functional currency of certain subsidiaries (“FX forward contracts”).
We had FX forward contracts with an aggregate notional amount of $6.9 and $8.7 outstanding as of December 31, 2022
and 2021, respectively, with all of the $6.9 scheduled to mature within one year. The fair value of our FX forward contracts was
less than $0.1 at December 31, 2022 and 2021.
Commodity Contracts
For our Transformer Solutions business, we historically entered into commodity contracts to manage the exposure on
forecasted purchases of commodity raw materials. As discussed in Note 1, on October 1, 2021, we completed the sale of
Transformer Solutions, which has been presented within discontinued operations. Immediately prior to the sale, we extinguished
the existing commodity contracts and reclassified from AOCI a net loss of $0.6 to “Gain (loss) on disposition of discontinued
operations, net of tax” within our consolidated statement of operations for the year ended December 31, 2021. Prior to
extinguishment, we designated and accounted for these contracts as cash flow hedges and, to the extent the commodity contracts
were effective in offsetting the variability of the forecasted purchases, the change in fair value was included in AOCI. We
reclassified amounts associated with our commodity contracts out of AOCI when the forecasted transaction impacted earnings.
Concentrations of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and equivalents,
trade accounts receivable, and interest rate swap and foreign currency forward contracts. These financial instruments, other than
trade accounts receivable, are placed with high-quality financial institutions throughout the world. We periodically evaluate the
credit standing of these financial institutions.
We maintain cash levels in bank accounts that, at times, may exceed federally-insured limits. We have not experienced
significant loss, and believe we are not exposed to significant risk of loss, in these accounts.
We have credit loss exposure in the event of nonperformance by counterparties to the above financial instruments, but have
no other off-balance-sheet credit risk of accounting loss. We anticipate, however, that counterparties will be able to fully satisfy
their obligations under the contracts. We do not obtain collateral or other security to support financial instruments subject to
credit risk, but we do monitor the credit standing of counterparties.
Concentrations of credit risk arising from trade accounts receivable are due to selling to customers in a particular industry.
Credit risks are mitigated by performing ongoing credit evaluations of our customers’ financial conditions and obtaining
collateral, advance payments, or other security when appropriate. No one customer, or group of customers that to our knowledge
are under common control, accounted for more than 10% of our revenues for any period presented.
(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, product liability matters
(which, prior to the Asbestos Portfolio Sale, were predominately associated with alleged exposure to asbestos-containing
materials), and other risk management matters (e.g., general liability, automobile, and workers’ compensation claims).
Additionally, we may become subject to other claims of which we are currently unaware, which may be significant, or the claims
of which we are aware may result in our incurring significantly greater loss than we anticipate. 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 liabilities related to these matters totaled $39.5 and $658.8 at December 31, 2022 and 2021, respectively. Of
these amounts, $30.8 and $584.3 are included in “Other long-term liabilities” within our consolidated balance sheets at
December 31, 2022 and 2021, respectively, with the remainder included in “Accrued expenses.” The decline in liabilities is
primarily related to the Asbestos Portfolio Sale. The liabilities we record for these matters are based on a number of assumptions,
including historical claims and payment experience. While we base our assumptions on facts currently known to us, they entail
inherently subjective judgments and uncertainties. As a result, our current assumptions for estimating these liabilities may not
102
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.
Asbestos Matters
Prior to the Asbestos Portfolio Sale, our asbestos-related claims were typical in certain of the industries in which we
operate or pertain to legacy businesses we no longer operate. Our recorded assets and liabilities related to asbestos-related claims
were as follows at December 31, 2021:
Insurance recovery assets (1)
Liabilities for claims (2)
_____________________________________________________________
December 31,
2021
$
526.2
616.5
(1) Of these amounts, $473.6 are included in “Other assets” at December 31, 2021, while the remainder is included in
“Other current assets.”
(2) Of these amounts, $561.4 are included in “Other long-term liabilities” at December 31, 2021, while the remainder is
included in “Accrued expenses.”
The liabilities we recorded for asbestos-related claims were based on a number of assumptions. In estimating our liabilities
for asbestos-related claims, we considered, among other things, the following:
•
The number of pending claims by disease type and jurisdiction.
• Historical information by disease type and jurisdiction with regard to:
◦ Average number of claims settled with payment (versus dismissed without payment); and
◦ Average claim settlement amounts.
•
The period over which we could reasonably project asbestos-related claims (projected through 2057 at December 31,
2021).
The assets we recorded for asbestos-related claims represented amounts that we believe we were entitled to recover under
agreements we had with insurance companies. The amount of these assets was based on a number of assumptions, including the
continued solvency of the insurers and our legal interpretation of our rights for recovery under the agreements we had with the
insurers.
During the years ended December 31, 2022, 2021, and 2020, our (receipts) payments for asbestos-related claims, net of
respective insurance recoveries of $31.6, $53.9, and $35.4, were $20.1, $(0.3) and $19.3, respectively. The year ended
December 31, 2021 includes insurance proceeds of $15.0, associated with the settlement of an asbestos insurance coverage
matter.
During the years ended December 31, 2022, 2021, and 2020, we recorded charges of $24.2, $51.2, and $21.3, respectively,
as a result of changes in estimates associated with the liabilities and assets related to asbestos-related claims. Of these charges,
$18.8, $48.6 and $19.2 were reflected in “Income from continuing operations before income taxes” for the years ended
December 31, 2022, 2021, and 2020, respectively, and $5.4, $2.6, and $2.1, respectively, were reflected in “Gain (loss) on
disposition of discontinued operations, net of tax.”
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 substantially completed its scope of work. Over such time, the business environment surrounding these projects was
difficult, as DBT, along with many other contractors on the projects, experienced delays, cost over-runs, and various other
challenges associated with a complex set of contractual relationships among the end customer, prime contractors, various
subcontractors (including DBT and its subcontractors), and various suppliers. DBT’s remaining responsibilities relate largely to
resolution of various claims, primarily between itself and one of its prime contractors, Mitsubishi Heavy Industries Power—ZAF
(f.k.a. Mitsubishi-Hitachi Power Systems Africa (PTY) LTD), or “MHI.”
The challenges related to the projects have resulted in (i) significant adjustments to our revenue and cost estimates for the
projects, (ii) DBT’s submission of numerous change orders to the prime contractors, (iii) various claims and disputes between
103
DBT and other parties involved with the projects (e.g., prime contractors, subcontractors, suppliers, etc.), and (iv) the possibility
that DBT may become subject to additional claims, which could be significant. It is possible that some outstanding claims may
not be resolved until after the prime contractors complete their scopes of work. Our future financial position, operating results,
and cash flows could be materially impacted by the resolution of current and any future claims.
Claims by DBT - DBT has asserted claims against MHI of approximately South African Rand 1,000.0 (or $58.4). As DBT
prepares these claims for dispute resolution processes, the amounts, along with the characterization, of the claims could change.
Of these claims, South African Rand 732.6 (or $42.8), which is inclusive of the amounts awarded in the adjudications referred to
below, are currently proceeding through contractual dispute resolution processes and DBT is likely to initiate additional dispute
resolution processes. DBT is also pursuing several claims to force MHI to abide by its contractual obligations and provide DBT
with certain benefits that MHI may have received from its customer on the projects. In addition to existing asserted claims, DBT
believes it has additional claims and rights to recovery based on its performance under the contracts with, and actions taken by,
MHI. DBT is continuing to evaluate the claims and the amounts owed to it under the contracts based on MHI's failure to comply
with its contractual obligations. The amounts DBT may recover for current and potential future claims against MHI are not
currently known given (i) the extent of current and potential future claims by MHI against DBT (see below for further
discussion) and (ii) the unpredictable nature of any dispute resolution processes that may occur in connection with these current
and potential future claims. No revenue has been recorded in the accompanying consolidated financial statements with respect to
current or potential future claims against MHI.
On July 23, 2020, a dispute adjudication panel issued a ruling in favor of DBT on certain matters related to the Kusile and
Medupi projects. The panel (i) ruled that DBT had achieved takeover on 9 of the units; (ii) ordered MHI to return $2.3 of bonds
(which have been subsequently returned by MHI); (iii) ruled that DBT is entitled to the return of an additional $4.3 of bonds
upon the completion of certain administrative milestones; (iv) ordered MHI to pay South African Rand 18.4 (or $1.1 at the time
of the ruling) in incentive payments for work performed by DBT (which MHI has subsequently paid); and (v) ruled that MHI
waived its rights to assert delay damages against DBT on one of the units of the Kusile project. The ruling is subject to MHI’s
rights to seek further arbitration in the matter, as provided in the contracts. As such, the incentive payments noted above have not
been recorded in our accompanying consolidated statements of operations.
On February 22, 2021, a dispute adjudication panel issued a ruling in favor of DBT related to costs incurred in connection
with delays on two units of the Kusile project. In connection with the ruling, MHI paid DBT South African Rand 126.6 (or $8.6
at the time of payment). This ruling is subject to MHI’s rights to seek further arbitration in the matter and, thus, the amount
awarded has not been reflected in our accompanying consolidated statements of operations. On July 5, 2021, DBT received
notice from MHI of its intent to seek final and binding arbitration in this matter. The hearing on this matter occurred in
December 2022, with the ruling from such hearing yet to be received.
On April 28, 2021, a dispute adjudication panel issued a ruling in favor of DBT related to costs incurred in connection with
delays on two units of the Medupi project. In connection with the ruling, MHI paid DBT South African Rand 82.0 (or $6.0 at the
time of payment). This ruling is subject to MHI’s rights to seek further arbitration in the matter and, thus, the amount awarded
has not been reflected in our accompanying consolidated statements of operations.
Claims by MHI - On February 26, 2019, DBT received notification of an interim claim consisting of both direct and
consequential damages from MHI alleging, among other things, that DBT (i) provided defective product and (ii) failed to meet
certain project milestones. In September 2020, MHI made a demand on certain bonds issued in its favor by DBT, based solely on
these alleged defects, but without further substantiation or other justification (see further discussion below). On December 30,
2020, MHI notified DBT of its intent to take these claims to binding arbitration even though the vast majority of these claims had
not been brought appropriately before a dispute adjudication board as required under the relevant subcontracts. On June 4, 2021,
in connection with the arbitration, DBT received a revised version of the claim. Similar to the interim claim, we believe the vast
majority of the damages summarized in the revised claim are unsubstantiated and, thus, any loss for the majority of these claims
is considered remote. The remainder of the claims in both the interim notification and the revised version largely appear to be
direct in nature (approximately South African Rand 790.0 or $46.1). On September 21, 2022, an arbitration tribunal ruled that
only South African Rand 349.6 (or $20.4) of MHI's revised claim had been brought appropriately before a dispute adjudication
board as required under the relevant subcontracts, with MHI's other claims dismissed from the arbitration proceedings. On
November 25, 2022, MHI notified DBT of its intent to refer the claims dismissed from the arbitration to a new dispute
adjudication panel. DBT has numerous defenses and, thus, we do not believe that DBT has a probable loss associated with any of
these claims. As such, no loss has been recorded in the accompanying consolidated financial statements with respect to these
claims. DBT intends to vigorously defend itself against these claims. Although it is reasonably possible that some loss may be
incurred in connection with these claims, we currently are unable to estimate the potential loss or range of potential loss
associated with these claims due to the (i) lack of support provided by MHI for these claims; (ii) complexity of contractual
104
relationships between the end customer, MHI, and DBT; (iii) legal interpretation of the contract provisions and application of
South African law to the contracts; and (iv) unpredictable nature of any dispute resolution processes that may occur in
connection with these claims.
In April and July 2019, DBT received notifications of intent to claim liquidated damages totaling South African Rand
407.2 (or $23.8) from MHI alleging that DBT failed to meet certain project milestones related to the construction of the filters
for both the Kusile and Medupi projects. DBT has numerous defenses against these claims and, thus, we do not believe that DBT
has a probable loss associated with these claims. As such, no loss has been recorded in the accompanying consolidated financial
statements with respect to these claims. Although it is reasonably possible that some loss may be incurred in connection with
these claims, we currently are unable to estimate the potential loss or range of potential loss.
MHI has made other claims against DBT totaling South African Rand 176.2 (or $10.3) and has also alleged that it has
incurred additional remedial costs related to portions of DBT’s scope of work. DBT has numerous defenses against these claims,
as well as claims, if any, that may result from the above unsubstantiated allegations, and, thus, we do not believe that DBT has a
probable loss associated with these claims. As such, no loss has been recorded in the accompanying consolidated financial
statements with respect to these claims and allegations.
Bonds Issued in Favor of MHI - DBT is obligated with respect to bonds issued by banks in favor of MHI. In September of
2020, MHI made a demand, and received payment of South African Rand 239.6 (or $14.3 at the time of payment), on certain of
these bonds. In May 2021, MHI made an additional demand, and received payment of South African Rand 178.7 (or $12.5 at
time of payment), on certain of the remaining bonds at such time. In both cases, we funded the payment as required under the
terms of the bonds and our senior credit agreement. In its demands, MHI purported that DBT failed to carry out its obligations to
rectify certain alleged product defects and that DBT failed to meet certain project milestones. DBT denies liability for such
allegations and, thus, fully intends to seek, and believes it is legally entitled to, reimbursement of the South African Rand 418.3
(or $24.4) that has been paid. On October 11, 2022, a dispute adjudication panel ruled MHI drew on amounts in excess of the
bond values stipulated in the contracts and was required to refund DBT South African Rand 90.8 (or $5.0 at the time of payment)
of the previously demanded amounts, plus interest of South African Rand 12.5 (or $0.7 at the time of payment). MHI paid these
amounts on October 14, 2022. We have reflected the remaining South African Rand 327.5 (or $19.1) within “Assets of DBT and
Heat Transfer” on the accompanying consolidated balance sheet as of December 31, 2022.
The remaining bond of South African Rand 29.2 (or $1.7) was issued to MHI as a performance guarantee in the event of a
breach of DBT’s contractual obligations. In the event that MHI were to receive payment on a portion, or all, of the remaining
bond, we would be required to reimburse the issuing bank.
In addition, SPX Technologies, Inc. has guaranteed DBT’s performance on these projects to the prime contractors,
including MHI.
Claim against Surety - On February 5, 2021, DBT received payment of $6.7 on bonds issued in support of performance by
one of DBT’s sub-contractors. The sub-contractor maintains a right to seek recovery of such amount and, thus, the amount
received by DBT has not been reflected in our consolidated statements of operations.
Claim for Contingent Consideration Related to ULC Acquisition
In connection with our acquisition of ULC in September 2020, the seller of ULC was eligible for additional cash
consideration of up to $45.0 upon achievement of certain operating and financial performance milestones. At the time of the
acquisition, we recorded a liability of $24.3, which represented the estimated fair value of the contingent consideration. During
the third quarter of 2021, we concluded that the operational and financial performance milestones noted above were not
achieved. As a result, we reversed the liability of $24.3 during the third quarter of 2021, with the offset recorded to “Other
operating (income) expense, net.”
On August 23, 2022, the seller of ULC initiated a breach-of-contract lawsuit against us in the United States District Court
for the Eastern District of New York claiming that it is entitled to a portion of the additional cash consideration totaling $15.0
linked to certain operating performance milestones. SPX has numerous defenses against this claim and, thus, we do not believe
we have a probable loss associated with the claim.
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 give assurance that these proceedings or claims will not have a material effect on
our financial position, results of operations or cash flows.
105
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 17 sites, that we own or control, as of December 31, 2022 (18 sites as
of December 31, 2021). 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 it 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 December 31, 2022 and December 31, 2021, 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 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, 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.
Executive Agreements
The Board of Directors has approved an employment agreement for our President and Chief Executive Officer. This
agreement had an initial term through December 31, 2017 and, thereafter, rolling terms of one year, and specifies the executive’s
current compensation, benefits and perquisites, severance entitlements, and other employment rights and responsibilities. The
Compensation Committee of the Board of Directors has approved severance benefit agreements for our other six executive
officers. These agreements cover each executive’s entitlements in the event that the executive’s employment is terminated for
106
other than cause, death or disability, or the executive resigns with good reason. The Compensation Committee of the Board of
Directors has also approved change of control agreements for each of our executive officers, which cover each executive’s
entitlements following a change of control.
(16) Stockholders’ Equity and Long-Term Incentive Compensation
Income Per Share
The following table sets forth the computations of the components used for the calculation of basic and diluted income per
share:
Numerator:
Income from continuing operations
Income (loss) from discontinued operations, net of tax
Denominator:
Year ended December 31,
2022
2021
2020
$
$
19.8 $
(19.6) $
59.0 $
366.4 $
73.8
25.2
Weighted-average number of common shares used in basic income per share
45.345
45.289
44.628
Dilutive securities — Employee stock options and restricted stock units
0.876
1.206
1.138
Weighted-average number of common shares and dilutive securities used in diluted
income per share
46.221
46.495
45.766
For the years ended December 31, 2022, 2021, and 2020, 0.240, 0.245, and 0.300, respectively, of unvested restricted stock
units were excluded from the computation of diluted earnings per share as the assumed proceeds for these instruments exceeded
the average market value of the underlying common stock for the related years. For the years ended December 31, 2022, 2021,
and 2020, 0.695, 0.627, and 0.793, respectively, of outstanding stock options were excluded from the computation of diluted
earnings per share as the assumed proceeds for these instruments exceeded the average market value of the underlying common
stock for the related years.
Common Stock and Treasury Stock
On May 10, 2022, our Board of Directors re-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 Credit Agreement.
Pursuant to this re-authorization, during the second quarter of 2022, we repurchased 0.707 shares of our common stock for
aggregate cash payments of $33.7. As of December 31, 2022, the remaining maximum approximate amount of our common
stock that may be purchased under this authorization is $66.3.
At December 31, 2022, we had 200.0 authorized shares of common stock (par value $0.01). Common shares issued,
treasury shares and shares outstanding are summarized in the table below.
Balance at December 31, 2019
Restricted stock units
Other
Balance at December 31, 2020
Restricted stock units
Other
Balance at December 31, 2021
Restricted stock units
Share repurchases
Other
Balance at December 31, 2022
Common Stock
Issued
Treasury
Stock
Shares
Outstanding
52.017
—
0.688
52.705
—
0.306
53.011
—
—
0.340
53.351
(7.814)
0.141
—
(7.673)
0.130
—
(7.543)
0.191
(0.707)
—
(8.059)
44.203
0.141
0.688
45.032
0.130
0.306
45.468
0.191
(0.707)
0.340
45.292
107
Long-Term Incentive Compensation
On May 9, 2019, our stockholders approved our 2019 Stock Compensation Plan (the “2019 Plan”) which replaced our
2002 Stock Compensation Plan, as amended in 2006, 2011, 2012 and 2015 (the “Prior Plan”). As a result of the approval of the
2019 Plan, no further awards were permitted to be made under the Prior Plan. Up to 3.851 shares of our common stock were
available for grant at December 31, 2022 under the 2019 Plan. The 2019 Plan permits the issuance of new shares or shares from
treasury upon the exercise of options, vesting of time-based restricted stock units (“RSU’s”) and performance stock units
(“PSU’s”). Each RSU and PSU granted reduces availability by two shares. Similar awards were permitted to be granted under
the Prior Plan before the approval of the 2019 Plan.
PSU’s and RSU’s may be granted to certain eligible employees or non-employee directors in accordance with applicable
equity compensation plan documents and agreements. Subject to participants’ continued employment and other plan terms and
conditions, the restrictions lapse and awards generally vest over a period of time, generally one or three years. In some instances,
such as death, disability, or retirement, stock may vest concurrently with or following an employee’s termination. PSU’s are
eligible to vest at the end of the performance period, with performance based on the total return of our stock over the three-year
performance period against a peer group within the S&P 600 Capital Goods Index, while the RSU’s vest based on the passage of
time since grant date. PSU’s and RSU’s that do not vest within the applicable vesting period are forfeited.
We grant RSU’s to non-employee directors under the 2019 Plan. The 2022, 2021 and 2020 grants to non-employee
directors generally vest over a 1 year-period, with the 2022 grants scheduled to vest in their entirety immediately prior to the
annual meeting of stockholders in May 2023.
Stock options may be granted to key employees in the form of incentive stock options or non-qualified stock options. The
option price per share may be no less than the fair market value of our common stock at the close of business the day prior to the
date of grant. Upon exercise, the employee has the option to surrender previously owned shares at current value in payment of
the exercise price and/or for withholding tax obligations.
The recognition of compensation expense for share-based awards, including stock options, is based on their grant date fair
values. The fair value of each award is amortized over the lesser of the award’s requisite or derived service period, which is
generally up to three years. Compensation expense within income from continuing operations related to PSU’s, RSU’s and stock
options totaled $10.9, $12.9 and $12.0 for the years ended December 31, 2022, 2021 and 2020, respectively, with the related tax
benefit being $1.7, $2.2 and $2.0 for the years ended December 31, 2022, 2021 and 2020, respectively.
In years prior to 2020, annual long-term cash awards were granted to executive officers and other members of senior
management. These awards were eligible to vest at the end of a three-year performance measurement period, with performance
based on our achievement of a target segment income amount over the three-year measurement period. Long-term incentive
compensation expense for 2022, 2021, and 2020 included $0.0, $(0.1) and $1.1, respectively, associated with long-term cash
awards.
108
We use the Monte Carlo simulation model valuation technique to determine fair value of our restricted stock awards that
contain a market condition (i.e., the PSU’s). The Monte Carlo simulation model utilizes multiple input variables that determine
the probability of satisfying the market condition stipulated in the award and calculates the fair value of each PSU. We issued
PSU’s to eligible participants on March 1, 2022 and 2021, and February 20, 2020. We used the following assumptions in
determining the fair value of these awards:
March 1, 2022
SPX
Peer group within S&P 600 Capital Goods Index
March 1, 2021
SPX
Peer group within S&P 600 Capital Goods Index
February 20, 2020
SPX
Peer group within S&P 600 Capital Goods Index
Annual
Expected
Stock Price
Volatility
Annual
Expected
Dividend Yield
Risk-Free
Interest Rate
43.04 %
50.98 %
42.88 %
51.25 %
29.47 %
34.93 %
— %
n/a
— %
n/a
— %
n/a
1.44 %
1.44 %
0.25 %
0.25 %
1.35 %
1.35 %
Correlation
Between Total
Shareholder
Return for SPX
and the
Applicable
S&P Index
62.44 %
60.24 %
35.47 %
Annual expected stock price volatility is based on the three-year historical volatility. There is no annual expected dividend
yield as we discontinued dividend payments in 2015 and do not expect to pay dividends for the foreseeable future. The average
risk-free interest rate is based on the one-year through three-year daily treasury yield curve rate as of the grant date.
The following table summarizes the PSU and RSU activity from December 31, 2019 through December 31, 2022:
December 31, 2019
Granted
Vested
Forfeited
December 31, 2020
Granted
Vested
Forfeited
December 31, 2021
Granted
Vested
Forfeited
December 31, 2022
Weighted-
Average
Grant-Date
Fair
Value Per
Share
Unvested PSU’s
and RSU’s
0.606 $
0.277
(0.233)
(0.006)
0.644
0.243
(0.219)
(0.032)
0.636
0.307
(0.332)
(0.081)
0.530 $
36.17
46.61
31.49
41.37
42.32
57.24
37.40
53.69
49.14
48.72
44.16
53.41
51.38
As of December 31, 2022, there was $9.8 of unrecognized compensation cost related to PSU’s and RSU’s. We expect this
cost to be recognized over a weighted-average period of 1.9 years.
109
Stock Options
On March 1, 2022 and 2021, and February 20, 2020, we granted stock options totaling 0.105, 0.105, and 0.125,
respectively. The exercise price per share of these options is $48.97, $58.34, and $50.09, respectively, and the maximum
contractual term of these options is ten years.
The fair value of each stock option granted on March 1 2022 and 2021, and February 20, 2020 was $19.33, $23.49, and
$17.40, respectively. The fair value of each option grant was estimated using a Black-Scholes option-pricing model with the
following assumptions:
Annual expected stock price volatility
Annual expected dividend yield
Risk-free interest rate
Expected life of stock option (in years)
March 1, 2022
March 1, 2021
February 20, 2020
38.62 %
— %
1.61 %
6.0
41.15 %
— %
0.91 %
6.0
33.48 %
— %
1.41 %
6.0
Annual expected stock price volatility for the March 1 2022 and 2021, and February 20, 2020 grants were based on a
weighted average of SPX’s stock volatility since the Spin-Off and an average of the most recent six-year historical volatility of a
peer company group. There is no annual expected dividend yield as we discontinued dividend payments in 2015 and do not
expect to pay dividends for the foreseeable future. The average risk-free interest rate is based on the five-year and seven-year
treasury constant maturity rates. The expected option life is based on a three-year pro-rata vesting schedule and represents the
period of time that awards are expected to be outstanding.
The following table shows stock option activity from December 31, 2019 through December 31, 2022.
Options outstanding at December 31, 2019
Exercised
Forfeited
Granted
Options outstanding at December 31, 2020
Exercised
Forfeited
Granted
Options outstanding at December 31, 2021
Exercised
Forfeited
Granted
Options outstanding at December 31, 2022
Weighted-
Average
Exercise
Price
Shares
1.692 $
(0.412)
—
0.139
1.419
(0.123)
(0.008)
0.105
1.393
(0.191)
(0.043)
0.127
1.286 $
19.05
14.97
—
49.57
23.21
15.82
50.11
58.34
26.35
26.64
51.32
50.14
27.82
As of December 31, 2022, 1.092 of the above stock options were exercisable and there was $2.2 of unrecognized
compensation cost related to the outstanding stock options. We expect this cost to be recognized over a weighted-average period
of 2.4 years.
110
Accumulated Other Comprehensive Income
The changes in the components of accumulated other comprehensive income, net of tax, for the year ended December 31,
2022 were as follows:
Balance at December 31, 2021
$
252.7 $
0.5 $
10.7 $
263.9
Foreign
Currency
Translation
Adjustment
Net Unrealized
Gains on
Qualifying
Cash
Flow
Hedges(1)
Pension and
Postretirement
Liability
Adjustment(2)
Total
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income
Current-period other comprehensive income (loss)
(13.6)
11.7
0.1
—
(13.6)
(1.2)
10.5
11.0 $
(3.4)
(3.3)
(1.8)
(4.6)
(6.4)
Balance at December 31, 2022
$
239.1 $
7.4 $
257.5
__________________________________________________________________
(1) Net of tax provision of $3.7 and $0.1 as of December 31, 2022 and 2021, respectively.
(2) Net of tax provision of $2.7 and $3.7 as of December 31, 2022 and 2021, respectively. The balances as of December 31,
2022 and 2021 include unamortized prior service credits.
The changes in the components of accumulated other comprehensive income, net of tax, for the year ended December 31,
2021 were as follows:
Balance at December 31, 2020
$
238.6 $
(4.4) $
14.3 $
248.5
Foreign
Currency
Translation
Adjustment
Net Unrealized
Gains (Losses) on
Qualifying
Cash
Flow
Hedges (1)
Pension and
Postretirement
Liability
Adjustment (2)
Total
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income (loss)
Current-period other comprehensive income (loss)
Balance at December 31, 2021
$
252.7 $
__________________________________________________________________
(5.8)
5.3
—
(0.5)
19.9
14.1
(0.4)
4.9
0.5 $
(3.6)
(3.6)
10.7 $
15.9
15.4
263.9
(1) Net of tax (provision) benefit of $(0.1) and $1.4 as of December 31, 2021 and 2020, respectively.
(2) Net of tax provision of $3.7 and $4.9 as of December 31, 2021 and 2020, respectively. The balances as of December 31,
2021 and 2020 include unamortized prior service credits.
111
The following summarizes amounts reclassified from each component of accumulated comprehensive income for the years
ended December 31, 2022 and 2021:
(Gains) losses on qualifying cash flow hedges:
FX forward contracts
Commodity contracts
Swaps
Pre-tax
Income taxes
Affected
Line Items
in the
Consolidated Statements of
Operations
Amount
Reclassified
from
AOCI
Year ended
December 31,
2022
2021
$
(0.1) $
— Revenues
—
(1.5)
(1.6)
0.4
$
(1.2) $
Income from discontinued
operations, net of tax
(3.8)
3.2
Interest expense
(0.6)
0.2
(0.4)
Gains on pension and postretirement items:
Amortization of unrecognized prior service credits - Pre-tax
$
(4.4) $
(4.8) Other income (expense), net
Income taxes
1.0
$
(3.4) $
1.2
(3.6)
Loss on reclassification of foreign currency translation
adjustments:
DBT
Income taxes
Common Stock in Treasury
Gain (loss) on disposition of
discontinued operations, net
of tax
$
$
— $
—
— $
19.9
—
19.9
During the years ended December 31, 2022, 2021 and 2020, “Common stock in treasury” was decreased by the settlement
of restricted stock units, net of recipient tax withholdings, issued from treasury stock of $12.1, $7.7 and $8.4, respectively.
During the year ended December 31, 2022, “Common stock in treasury” was increased by the previously mentioned repurchase
of our common stock for aggregate cash payments of $33.7.
Preferred Stock
None of our 3.0 shares of authorized no par value preferred stock was outstanding at December 31, 2022, 2021 or 2020.
(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.
112
There were no changes during the periods presented to the valuation techniques we use to measure asset and liability fair
values on a recurring basis. There were no transfers between the three levels of the fair value hierarchy for the periods presented.
Valuation Methods Used to Measure Fair Value on a Non-Recurring Basis
Parent Guarantees and Bonds Associated with Balcke Dürr — In connection with the 2016 sale of Balcke Dürr, existing
parent company guarantees and bank surety bonds, which totaled approximately Euro 79.0 and Euro 79.0, respectively, remained
in place at the time of sale. These guarantees and bonds provided protections for Balcke Dürr customers in regard to advance
payments, performance, and warranties on projects in existence at the time of sale. In addition, certain bonds related to lease
obligations and foreign tax matters in existence at the time of sale. Balcke Dürr and the acquirer of Balcke Dürr provided us an
indemnity in the event that any of the bonds were called or payments were made under the guarantees. Also, at the time of sale,
Balcke Dürr provided cash collateral of Euro 4.0 and the parent company of the buyer provided a guarantee of Euro 5.0 as a
security for the above indemnifications (Euro 0.0 and Euro 0.0, respectively, at December 31, 2022). In connection with the sale,
we recorded a liability for the estimated fair value of the guarantees and bonds and an asset for the estimated fair value of the
cash collateral and indemnities provided. As of December 31, 2021, the guarantees had expired and bonds had been returned.
Summarized below are the liability (related to the parent company guarantees and bank and surety bonds) and asset (related to
the cash collateral and guarantee provided by the parent company of the buyer) recorded at the time of sale, along with the
change in the liability and the asset during 2021 and 2020.
Balance at beginning of year
Reduction/Amortization for the period (2)
Impact of changes in foreign currency rates
Balance at end of period
___________________________
Year ended
December 31, 2021
December 31, 2020
Guarantees
and Bonds
Liability (1)
Indemnification
Assets (1)
Guarantees
and Bonds
Liability (1)
Indemnification
Assets (1)
$
$
1.8 $
— $
(1.7)
(0.1)
—
—
— $
— $
2.0 $
(0.4)
0.2
1.8 $
0.3
(0.3)
—
—
(1)
In connection with the sale, we estimated the fair value of the existing parent company guarantees and bank and surety bonds
considering the probability of default by Balcke Dürr and an estimate of the amount we would be obligated to pay in the event of a
default. Additionally, we estimated the fair value of the cash collateral provided by Balcke Dürr and the guarantee provided by the
parent company of the buyer based on the terms and conditions and relative risk associated with each of these securities
(unobservable inputs - Level 3).
(2) We reduced the liability generally at the earlier of the completion of the related underlying project milestones or the expiration of the
guarantees or bonds. We amortized the asset based on the expiration terms of each of the securities. We recorded the reduction of the
liability and the amortization of the asset to “Other income (expense), net.”
Contingent Consideration for Sensors & Software, ECS, and ULC Acquisitions — In connection with the acquisition of
Sensors & Software, the sellers were eligible for additional cash consideration of up to $3.7, with payment of such contingent
consideration dependent upon the achievement of certain milestones. The estimated fair value of such contingent consideration
totaled $1.3 as of December 31, 2021 with the amount reflected as a liability within the respective consolidated balance sheet.
The $1.3 was paid during 2022.
As it relates to the ULC acquisition, and as indicated in Note 1, we concluded during the third quarter of 2021 that the
operating and financial milestones related to the ULC contingent consideration were not achieved, resulting in the reversal of the
related liability of $24.3.
In connection with the acquisition of ECS, the seller was eligible for additional cash consideration of up to $15.0, with
payment of such contingent consideration dependent upon the achievement of certain milestones. The estimated fair value of
such contingent consideration was $8.2 as of the date of acquisition. During 2021, we concluded that the probability of achieving
the financial performance milestone had lessened due to a delay in the execution of certain large orders, resulting in a reduction
of the contingent fair value/liability of $6.7. During 2022, we further reduced the fair value/liability by $1.3. The estimated fair
value of such contingent consideration was $0.0 and $1.5 at December 31, 2022 and December 31, 2021, respectively, with the
latter amount reflected as a liability within the respective consolidated balance sheet.
We estimate the fair value of contingent consideration based on the probability of the acquired business achieving the
applicable milestones.
113
Goodwill, Indefinite-Lived Intangible and Other Long-Lived Assets — Certain of our non-financial assets are subject to
impairment analysis, 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 resulting asset impairment would require that the
instrument be recorded at its fair value. Refer to Note 10 for additional details.
Valuation Methods Used to Measure Fair Value on a Recurring Basis
Derivative Financial Instruments — Our financial derivative assets and liabilities include commodity contracts (until the
sale of Transformer Solutions), interest rate swaps, and FX forward contracts, valued using models based on observable market
inputs such as forward rates, interest 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 December 31, 2022, there had 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 had 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.
During the years ended December 31, 2022, 2021, and 2020, we recorded gains (losses) of $(3.0), $11.8 and $8.6,
respectively, to “Other income (expense), net” related to changes in the estimated fair value of such equity security. In addition,
we received a distribution during 2020 of $3.5 included within “cash flows from operating activities” in our consolidated
statement of cash flows. As of December 31, 2022 and 2021, the equity security had an estimated fair value of $35.8 and $38.8,
respectively. We are restricted from transferring this investment without approval of the manager of the investee.
Indebtedness — The estimated fair value of our debt instruments as of December 31, 2022 and December 31, 2021
approximated the related carrying values due primarily to the variable market-based interest rates for such instruments. See Note
13 for further details.
(18) Quarterly Results (Unaudited)
Revenues
Gross profit
Income (loss) from continuing operations,
net of tax (1)
Income (loss) from discontinued
operations, net of tax (1)(2)
Net income (loss)
Basic income (loss) per share of common
stock:
First (3)
Second (3)
Third (3)
Fourth (3)
2022
2021
2022
2021
2022
2021
2022
2021
$ 307.1 $ 287.2 $ 354.0 $ 296.6 $ 370.5 $ 285.7 $ 429.3 $ 350.0
104.0
104.4
124.6
102.3
133.1
95.8
162.2
129.3
13.0
23.0
19.1
17.7
12.5
13.9
(24.8)
(1.6)
3.8
(6.1)
44.2
(9.4)
316.4
(2.5)
$
11.4 $
26.8 $
13.0 $
61.9 $
3.1 $ 330.3 $
(27.3) $
Continuing operations, net of tax
$
0.29 $
0.51 $
0.42 $
0.39 $
0.28 $
0.31 $
(0.55) $
Discontinued operations, net of tax
(0.04)
0.08
(0.13)
0.98
(0.21)
6.98
(0.05)
Net income (loss)
$
0.25 $
0.59 $
0.29 $
1.37 $
0.07 $
7.29 $
(0.60) $
Diluted income (loss) per share of common
stock:
Continuing operations, net of tax
$
0.28 $
0.50 $
0.41 $
0.38 $
0.27 $
0.30 $
(0.55) $
Discontinued operations, net of tax
(0.03)
0.08
(0.13)
0.95
(0.20)
6.78
(0.05)
Net income (loss)
$
0.25 $
0.58 $
0.28 $
1.33 $
0.07 $
7.08 $
(0.60) $
___________________________________________________________________
114
4.4
2.0
6.4
0.10
0.04
0.14
0.10
0.04
0.14
Note: The sum of the quarters' income per share may not equal the full year per share amounts.
(1) During the second and third quarters of 2022, we recognized pre-tax actuarial losses of $3.8 and $2.4, respectively,
associated with our pension and postretirement benefit plans.
During the fourth quarter of 2022 and 2021, we recognized pre-tax actuarial gains of $8.0 and $9.9, respectively,
associated with our pension and postretirement benefit plans.
During the third quarter of 2022, we recorded charges of $21.7 ($16.5 to continuing operations and $5.2 to discontinued
operations) as a result of changes in estimates associated with the assets recorded for asbestos product liability matters.
During the fourth quarter of 2021, we recorded charges of $46.3 ($44.6 to continuing operations and $1.7 to
discontinued operations) as a result of changes in estimates associated with the assets and liabilities recorded for
asbestos product liability matters. See Note 15 for additional details.
During the fourth quarter of 2022, we recorded a loss of $73.9 as a result of the Asbestos Portfolio Sale.
During the fourth quarter of 2022, we recorded impairment charges of $13.4 related to (i) the goodwill and indefinite-
lived intangible assets of ULC ($12.9) and (ii) certain other indefinite-lived intangible assets ($0.5).
During the fourth quarter of 2021, we recorded impairment charges of $5.7 related to (i) the goodwill and indefinite-
lived intangible assets of ULC ($5.2) and (ii) certain other indefinite-lived intangible assets ($0.5).
(2) During the second quarter of 2021, we recorded tax benefits of $33.0 in “Income from discontinued operations, net of
tax” including (i) $28.6 for the excess tax basis in the stock of Transformer Solutions and (ii) $4.4 for previously
unrecognized state net operating losses, each as a result of the definitive agreement to sell the business.
As discussed in Note 1, on October 1, 2021, we completed the sale of Transformer Solutions for net cash proceeds of
$620.6. In connection with the sale, we recorded a gain of $357.7 to “Gain (loss) on disposition of discontinued
operations, net of tax” within our consolidated statement of operations for the third quarter 2021.
During the fourth quarter of 2021, we increased the gain on the sale of Transformer Solutions by $24.5, with the
additional gain related primarily to the utilization of income tax benefits associated with liquidating certain recently
acquired entities.
In the fourth quarter of 2021, and in connection with the completion of the wind-down of our DBT business, we
recorded a charge of $19.9 to discontinued operations to reflect the write-off of historical currency translation amounts
associated with DBT that had been previously reported within “Stockholders’ equity.”
(3) 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 2022 were
April 2, July 2 and October 1, compared to the respective April 3, July 3 and October 2, 2021 dates. This practice only
affects the quarterly reporting periods and not the annual reporting period. We had one less day in the first quarter of
2022 and had one more day in the fourth quarter of 2022 than in the respective 2021 periods.
115
ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Disclosure Controls and Procedures
ITEM 9A. Controls and Procedures
SPX management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the
effectiveness of disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(b), as of December 31, 2022. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures are effective as of December 31, 2022.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our
internal control framework and processes were designed to provide reasonable assurance to management and the Board of
Directors regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external
purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
Provide reasonable assurance that transactions are recorded properly to allow for the preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are
being made only in accordance with authorizations of our management and the Board of Directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of our assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable
assurance and may not prevent or detect misstatements. Further, because of changing conditions, effectiveness of internal
control over financial reporting may vary over time.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, at the
reasonable assurance level described above. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework
(2013). Based on this assessment, our Chief Executive Officer and Chief Financial Officer concluded that our internal control
over financial reporting was effective as of December 31, 2022.
Management excluded from its assessment of internal control over financial reporting as of December 31, 2022, the
internal control over financial reporting of ITL, which was acquired on March 31, 2022. This exclusion is consistent with
guidance issued by the U.S. Securities and Exchange Commission that an assessment of a recently acquired business may be
omitted from the scope of management's report on internal control over financial reporting in the year of acquisition. The total
assets (excluding goodwill and intangible assets, which are included within the scope of our assessment) and revenues of ITL
represented less than 1% of our consolidated total assets and revenues for the year ended December 31, 2022. See a discussion
of this acquisition in Note 1 of the Notes to the Consolidated Financial Statements contained in Item 8 of this Annual Report on
Form 10-K.
The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their report included in this Form 10-K.
116
Changes in Internal Control Over Financial Reporting
As a result of the Asbestos Portfolio Sale, the associated risks and controls related to the insurance recovery assets for the
alleged asbestos-containing materials no longer exist, nor does the corresponding material weakness identified to have existed
at December 31, 2021.
In connection with the evaluation by SPX management, including the Chief Executive Officer and the Chief Financial
Officer, pursuant to Exchange Act Rule 13a-15(d), other than the divestiture effected by the Asbestos Portfolio Sale, as noted
above, there have been no changes in our internal control over financial reporting during the quarter ended December 31, 2022
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
117
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of SPX Technologies, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of SPX Technologies, Inc. and subsidiaries (the “Company”) as of
December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal
Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our
report dated February 23, 2023, expressed an unqualified opinion on those financial statements.
As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment
the internal control over financial reporting at International Tower Lighting, LLC (“ITL”), which was acquired on March 31,
2022, and whose aggregate total assets (excluding goodwill and intangible assets, which were integrated into the Company’s
control environment) and aggregate revenues constitute less than 1% of the related amounts in the Company’s consolidated
financial statements as of and for the year ended December 31, 2022. Accordingly, our audit did not include the internal control
over financial reporting at ITL.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 23, 2023
118
ITEM 9B. Other Information
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Not applicable.
119
P A R T I I I
ITEM 10. Directors, Executive Officers and Corporate Governance
a)
Directors of the company.
This information is included in our definitive proxy statement for the 2023 Annual Meeting of Stockholders under the
heading “Election of Directors” and is incorporated herein by reference.
b)
Executive Officers of the company.
Eugene J. Lowe, III, 54, President and Chief Executive Officer and a member of the Board of Directors since
September 2015. Mr. Lowe joined SPX in 2008, was appointed an officer of the company in December 2014, and
previously served as President, Thermal Equipment and Services from February 2013 to September 2015, President,
Global Evaporative Cooling from March 2010 to February 2013, and Vice President of Global Business Development
and Marketing, Thermal Equipment and Services from June 2008 to March 2010. Prior to joining SPX, Mr. Lowe held
positions with Milliken & Company, Lazard Technology Partners, Bain & Company, and Andersen Consulting.
Mark A. Carano, 53, Vice President, Chief Financial Officer and Treasurer since January 2023. Mr. Carano joined
SPX from Insteel Industries Inc., where he served as Senior Vice President and Chief Financial Officer for two years.
Mr. Carano was the Chief Financial Officer for Big River Steel from 2019 to 2020. Before joining Big River Steel in
2019, Mr. Carano spent six years with Babcock & Wilcox Enterprises, Inc., where he served most recently as Senior
Vice President, Finance & Controller, for the Industrial Segment. His career with Babcock & Wilcox included roles as
Senior Vice President, Corporate Development, Strategy and Corporate Treasurer. Before joining the industrial sector,
Mr. Carano held executive roles within the financial services providers including Bank of America, Deutsche Bank and
First Union Securities. He began his career with FMI, a consulting and trade organization.
J. Randall Data, 57, President, South Africa and Global Operations since August 2015 and was appointed an officer of
the company in September 2015. Prior to joining SPX, Mr. Data spent over 27 years with The Babcock & Wilcox
Company. Most recently, he was President and Chief Operating Officer of Babcock & Wilcox Power Generation
Group, Inc., a subsidiary of The Babcock & Wilcox Company, from April 2012 to July 2015. While at The Babcock &
Wilcox Company, Mr. Data held numerous leadership positions in the global operations of the steam generating and
environmental equipment businesses.
Sean McClenaghan, 57, President, Global Cooling since September 2022. Mr. McClenaghan joined SPX from
Reliance Worldwide Corporation (“RWC”) where he served as Chief Executive Officer for the Americas business for 8
years. Before joining RWC in 2014, Mr. McClenaghan spent over fifteen years in various strategic consulting and
business development roles with McKinsey & Company, CHB Capital Partners, and Egon Zehnder. He began his career
with DuPont holding positions ranging from Process Control Design Engineer to Plant Manager to Global Business
Manager. He received an MBA from Harvard University and a Bachelor of Chemical Engineering from The Georgia
Institute of Technology. Mr. McClenaghan is a member of the Board of Directors for Sto Corp.
John W. Nurkin, 53, Vice President, General Counsel and Secretary since September 2015. Mr. Nurkin joined SPX in
2005, was appointed an officer of the company in September 2015, and previously served as Segment General Counsel,
Industrial Products and Services and Corporate Commercial from September 2013 to September 2015, Vice President
of New Venture Development and Assistant General Counsel from January 2011 to September 2013, Segment General
Counsel, Industrial Products and Services from January 2007 to January 2011, and Group General Counsel, Industrial
Products and Services from October 2005 to January 2007. Prior to joining SPX, Mr. Nurkin was a partner at the law
firm of Moore & Van Allen.
John W. Swann, III, 52, President, Weil-McLain and Marley Engineered Products since August 2013, President,
Radiodetection since September 2015 and President, Heating and Location & Inspection since 2018. Mr. Swann joined
SPX in 2004, was appointed an officer of the company in September 2015, and previously served as President,
Hydraulic Technologies from January 2011 to August 2013, Vice President of New Venture Development from
February 2010 to January 2011, and Director of Business Development from August 2004 to February 2010. Prior to
joining SPX, Mr. Swann held positions with PricewaterhouseCoopers and Andersen Business Consulting.
NaTausha H. White, 51, Vice President and Chief Human Resources Officer since April 2015 and was appointed an
officer of the company in September 2015. Ms. White returned to SPX in April 2015 after serving as the Vice President
of Human Resources for Integrated Network Solutions at Harris Corporation from June 2013 to April 2015. Prior to
that, she was responsible for the Human Resources function at SPX’s Global Evaporative Cooling business from July
2012 to June 2013. From 2006 to 2012, she served in various human resources leadership positions within United
Technologies Corporation. Ms. White began her career at Georgia-Pacific Corporation, spending 12 years in a variety
of human resource management roles.
120
c)
Section 16(a) Beneficial Ownership Reporting Compliance.
This information is included in our definitive proxy statement for the 2023 Annual Meeting of Stockholders under the
heading “Section 16(a) Reports” and is incorporated herein by reference.
d)
Code of Ethics.
We have adopted a Code of Ethics and Business Conduct that applies to all our directors, officers, and employees,
including our chief executive officer and senior financial and accounting officers. Our Code of Ethics and Business Conduct
requires each director, officer, and employee to avoid conflicts of interest; comply with all laws and other legal requirements,
conduct business in an honest and ethical manner, and otherwise act with integrity and in the best interest of our Company and
our stockholders. In addition, our Code of Ethics and Business Conduct acknowledges special ethical obligations for financial
reporting. We maintain a current copy of our Code of Ethics and Business Conduct, and we will promptly post any amendments
to or waivers of our Code of Ethics and Business Conduct regarding our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions, on our website (www.spx.com) under the
heading “Investor Relations—Corporate Governance—Commitment to Ethics and Compliance.”
e)
Information regarding our Audit Committee and Governance and Sustainability Committee is set forth in our definitive
proxy statement for the 2023 Annual Meeting of Stockholders under the headings “Corporate Governance” and “Board
Committees” and is incorporated herein by reference.
121
ITEM 11. Executive Compensation
This information is included in our definitive proxy statement for the 2023 Annual Meeting of Stockholders under the
headings “Executive Compensation” (other than the information appearing under the heading “Pay Versus Performance”) and
“Director Compensation” and is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
This information is included in our definitive proxy statement for the 2023 Annual Meeting of Stockholders under the
headings “Ownership of Common Stock” and “Equity Compensation Plan Information” and is incorporated herein by
reference.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
This information is included in our definitive proxy statement for the 2023 Annual Meeting of Stockholders under the
heading “Corporate Governance” and is incorporated herein by reference.
ITEM 14. Principal Accountant Fees and Services
This information is included in our definitive proxy statement for the 2023 Annual Meeting of Stockholders under the
heading “Ratification of the Appointment of Independent Public Accountants” and is incorporated herein by reference.
122
P A R T I V
ITEM 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this Form 10-K:
1.
2.
3.
All financial statements. See Index to Consolidated Financial Statements on page 53 of this Form 10-K.
Financial Statement Schedules. None required. See page 53 of this Form 10-K.
Exhibits. See Index to Exhibits.
123
We have chosen not to include an optional summary of the information required by this Form 10-K. For a reference to the
information in this Form 10-K, investors should refer to the Table of Contents to this Form 10-K.
ITEM 16. Form 10-K Summary
124
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 23rd day of February, 2023.
SIGNATURES
SPX TECHNOLOGIES, INC.
(Registrant)
By
/s/ MARK A. CARANO
Mark A. Carano
Vice President, Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities indicated on this 23rd day of February, 2023.
/s/ EUGENE J. LOWE, III
Eugene J. Lowe, III
President and Chief Executive Officer
/s/ MARK A. CARANO
Mark A. Carano
Vice President, Chief Financial Officer and Treasurer
/s/ PATRICK J. O’LEARY
Patrick J. O’Leary
Director
/s/ DAVID A. ROBERTS
David A. Roberts
Director
/s/ ROBERT B. TOTH
Robert B. Toth
Director
/s/ MEENAL A. SETHNA
Meenal A. Sethna
Director
/s/ RICKY D. PUCKETT
Ricky D. Puckett
Director
/s/ RUTH G. SHAW
Ruth G. Shaw
Director
/s/ ANGEL S. WILLIS
Angel S. Willis
Director
/s/ TANA L. UTLEY
Tana L. Utley
Director
/s/ MICHAEL A. REILLY
Michael A. Reilly
Chief Accounting Officer and Vice President, Finance
125
Exhibit No.
INDEX TO EXHIBITS
Description
2.1 — Agreement and Plan of Merger, dated as of August 11, 2022, by and among SPX Corporation, SPX
Technologies, Inc. and SPX Merger, LLC, incorporated by reference to Exhibit 2.1 to our Current Report
on Form 8-K filed on August 15, 2022 (File no. 1-6948).
2.2 — Sale and Purchase Agreement, dated as of November 1, 2022, among SPX Technologies, Inc., SPX, LLC,
The Marley-Wylain Company, LLC, SPX Cooling Technologies, LLC, and Canvas Holdco, LLC,
incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on November 7, 2022
(File no. 1-6948).
2.3 — Separation and Distribution Agreement, dated as of September 22, 2015, by and between SPX FLOW,
Inc. and SPX Corporation, incorporated by reference from the Current Report on Form 8-K of SPX
Corporation filed on September 28, 2015 (File no. 1-6948).
2.4 — Stock Purchase Agreement among SPX Corporation, SPX Transformer Solutions, Inc., GE Prolec
Transformers, Inc. and Prolec GE Internacional, S. DE RL. DE CV. dated as of June 8, 2021, incorporated
by reference from the Current Report on Form 8-K of SPX Corporation filed on June 9, 2021 (File no.
1-6948).
3.1 — Amended and Restated Certificate of Incorporation of SPX Technologies, Inc., dated August 15, 2022,
incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on August 15, 2022
(File no. 1-6948).
3.2 — By-laws of SPX Technologies, Inc., Amended and Restated on December 12, 2022, incorporated by
reference to Exhibit 3.1 to our Current Report on Form 8-K filed on December 13, 2022 (File no. 1-6948).
4.1 — Description of Capital Stock, incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-
K filed on August 15, 2022 (File no. 1-6948).
10.1 — Amended and Restated Credit Agreement, dated as of August 12, 2022, by and among SPX Enterprises,
LLC, as the U.S. Borrower, SPX Corporation, as the Parent, the Foreign Subsidiary Borrowers party
thereto, Bank of America, N.A., as the Administrative Agent and the Swingline Lender, Deutsche Bank
AG, as the Foreign Trade Facility Agent, and the Issuing Lenders, FCI Issuing Lenders and Lenders party
thereto, incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on August 15,
2022 (File no. 1-6948).
10.2 — Assumption Agreement, dated as of August 23, 2022, among SPX Technologies, Inc., the other loan
parties party thereto, and Bank of America, N.A., as Administrative Agent, incorporated by reference to
Exhibit 10.1 to our Current Report on Form 8-K filed on August 24, 2022 (File no. 1-6948).
10.3 — First Amendment to Amended and Restated Credit Agreement and Amendment to Amended and Restated
Guarantee and Collateral Agreement, dated as of August 23, 2022, between SPX Enterprises, LLC and
Bank of America, N.A., as Administrative Agent, incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K filed on August 24, 2022 (File no. 1-6948).
†10.6 — Trademark License Agreement, dated as of September 26, 2015, by and between SPX FLOW, Inc. and
SPX Corporation, incorporated by reference from the Current Report on Form 8-K of SPX Corporation
filed on September 28, 2015 (File no. 1-6948).
*†10.7 — SPX 2006 Non-Employee Directors’ Stock Incentive Plan, incorporated by reference to Appendix E of
the definitive proxy statement of SPX Corporation for its 2006 Annual Meeting of Stockholders, filed
April 3, 2006 (File no. 1-6948).
*†10.08 — Amendment to the SPX 2006 Non-Employee Directors’ Stock Incentive Plan, incorporated by reference
to the Quarterly Report on Form 10-Q of SPX Corporation for the quarter ended September 30, 2006 (File
no. 1-6948).
*10.09 — Form of Restricted Stock Agreement under the SPX 2006 Non-Employee Directors’ Stock Incentive Plan,
incorporated by reference from the Annual Report on Form 10-K of SPX Corporation for the year ended
December 31, 2010 (File no. 1-6948).
*†10.10 — SPX 2019 Stock Compensation Plan, incorporated by reference to Appendix A of the definitive proxy
statement of SPX Corporation for its 2019 Annual Meeting of Stockholders, filed March 28, 2019 (File
no. 1-6948).
*10.11 — Form of Performance-Based Restricted Stock Unit Agreement (Pre-August 2022) under the SPX 2019
Stock Compensation Plan, incorporated by reference from the Current Report on Form 8-K of SPX
Corporation filed on May 10, 2019 (File no. 1-6948).
*10.12 — Form of Time-Based Restricted Stock Unit Agreement (Pre-August 2022) under the SPX 2019 Stock
Compensation Plan, incorporated by reference from the Current Report on Form 8-K of SPX Corporation
filed on May 10, 2019 (File no. 1-6948).
*10.13 — Form of Cash-Settled Performance Unit Agreement (Pre-August 2022) under the SPX 2019 Stock
Compensation Plan, incorporated by reference from the Current Report on Form 8-K of SPX Corporation
filed on May 10, 2019 (File no. 1-6948).
126
*10.14 — Form of Stock Option Agreement (Pre-August 2022) under the SPX 2019 Stock Compensation Plan,
incorporated by reference from the Current Report on Form 8-K of SPX Corporation filed on May 10,
2019 (File no. 1-6948)
*10.15 — Form of Time-Based Restricted Stock Unit Agreement for Non-Employee Directors (Pre-August 2022)
under the SPX 2019 Stock Compensation Plan, incorporated by reference from the Current Report on
Form 8-K of SPX Corporation filed on May 10, 2019 (File no. 1-6948).
*10.16 — Form of Time-based Restricted Stock Unit Award Agreement under the SPX 2019 Stock Compensation
Plan, incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 2,
2022 (File no. 1-6948).
*10.17 — Form of Cash-Settled Performance Unit Award Agreement under the SPX 2019 Stock Compensation
Plan, incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on November 2,
2022 (File no. 1-6948).
*10.18 — Form of Performance-Based Restricted Stock Unit Award Agreement under the SPX 2019 Stock
Compensation Plan, incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on
November 2, 2022 (File no. 1-6948).
*10.19 — Form of Stock Option Award Agreement under the SPX 2019 Stock Compensation Plan, incorporated by
reference to Exhibit 10.4 to our Current Report on Form 8-K filed on November 2, 2022 (File no.
1-6948).
*10.20 — Form of Time-Based Restricted Stock Unit Award Agreement for Non-Employee Directors under the
SPX 2019 Stock Compensation Plan, incorporated by reference to Exhibit 10.5 to our Current Report on
Form 8-K filed on November 2, 2022 (File no. 1-6948).
*10.21 — SPX 2002 Stock Compensation Plan (As Amended and Restated Effective May 3, 2012), incorporated by
reference to Appendix A of the definitive proxy statement of SPX Corporation for its 2012 Annual
Meeting of Stockholders, filed March 22, 2012 (File no. 1-6948).
*†10.22 — SPX 2002 Stock Compensation Plan (As Amended and Restated Effective May 8, 2015), incorporated by
reference to Appendix A of the definitive proxy statement of SPX Corporation for its 2015 Annual
Meeting of Stockholders, filed March 26, 2015 (File no. 1-6948).
*†10.23 — Amendment of the SPX 2002 Stock Compensation Plan (As Amended and Restated Effective May 8,
2015), effective as of February 21, 2017, incorporated by reference from the Annual Report on Form 10-
K of SPX Corporation for the year ended December 31, 2016 (File no. 1-6948).
*†10.24 — SPX Executive Annual Bonus Plan, incorporated by reference to Appendix A of the definitive proxy
statement of SPX Corporation for its 2016 Annual Meeting of Stockholders, filed April 12, 2016 (File no.
1-6948).
*†10.25 — SPX Executive Long-Term Disability Plan, as Amended and Restated Effective July 1, 2015,
incorporated by reference from the Annual Report on Form 10-K of SPX Corporation for the year ended
December 31, 2017 (File no. 1-6948).
*†10.26 — SPX Life Insurance Plan for Key Managers, as Amended and Restated September 26, 2015, incorporated
by reference from the Annual Report on Form 10-K of SPX Corporation for the year ended December 31,
2017 (File no. 1-6948).
*10.27 — SPX Supplemental Retirement Savings Plan (as amended and restated effective August 15, 2022),
incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K filed on November 2, 2022
(File no. 1-6948).
*10.28 — SPX Supplemental Individual Account Retirement Plan (as amended and restated effective August 15,
2022), incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K filed on November 2,
2022 (File no. 1-6948).
*10.29 — SPX Supplemental Retirement Plan for Top Management (as amended and restated effective August 15,
2022), incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed on November 2,
2022 (File no. 1-6948).
*10.30 — Employment Agreement between Eugene Joseph Lowe, III and SPX Corporation, incorporated by
reference from the Current Report on Form 8-K of SPX Corporation filed on October 1, 2015 (File no.
1-6948).
*10.31 — Change of Control Agreement between Eugene Joseph Lowe, III and SPX Corporation, incorporated by
reference from the Current Report on Form 8-K of SPX Corporation filed on October 1, 2015 (File no.
1-6948).
*10.32 — Amendment to Confidentiality Agreement, Employment Agreement and Change of Control Agreement
dated October 5, 2022 between Eugene J. Lowe III and SPX Technologies, Inc., incorporated by reference
to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the period ended October 1, 2022 (File no.
1-6948).
127
*10.33 — Form of Confidentiality and Non-Competition Agreement for Executive Officers (Pre-August 2022),
incorporated by reference from the Current Report on Form 8-K of SPX Corporation filed on October 6,
2006 (File no. 1-6948).
*10.34 — Form of Confidentiality and Non-Competition Agreement for Executive Officers (Pre-August 2022),
incorporated by reference from the Annual Report on Form 10-K of SPX Corporation for the year ended
December 31, 2016 (File no. 1-6948).
*10.35 — Form of Severance Benefit Agreement (Pre-August 2022), incorporated by reference from the Current
Report on Form 8-K of SPX Corporation filed on October 1, 2015 (File no. 1-6948).
*10.36 — Form of Change of Control Agreement (Pre-August 2022), incorporated by reference from the Current
Report on Form 8-K of SPX Corporation filed on October 1, 2015 (File no. 1-6948).
*10.37 — Form of Amendment to Confidentiality Agreement, Severance Benefit Agreement and Change of Control
Agreement between SPX Enterprises, LLC and certain officers of SPX Technologies, Inc., incorporated
by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the period ended October 1, 2022
(File no. 1-6948).
*10.38 — Form of Change-in Control Agreement, incorporated by reference to Exhibit 10.4 to our Quarterly Report
on Form 10-Q for the period ended October 1, 2022 (File no. 1-6948).
*10.39 — Form of Confidentiality and Non-Competition Agreement, incorporated by reference to Exhibit 10.5 to
our Quarterly Report on Form 10-Q for the period ended October 1, 2022 (File no. 1-6948).
*10.40 — Form of Officer Severance Benefit Agreement, incorporated by reference to Exhibit 10.6 to our Quarterly
Report on Form 10-Q for the period ended October 1, 2022 (File no. 1-6948).
21.1 — Subsidiaries.
23.1 — Consent of Independent Registered Public Accounting Firm — Deloitte & Touche LLP.
31.1 — Rule 13a-14(a) Certification.
31.2 — Rule 13a-14(a) Certification.
32.1 — Section 1350 Certifications.
101.INS — Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document)
101.SCH — Inline XBRL Taxonomy Extension Schema Document
101.CAL — Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF — Inline XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB — Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE — Inline XBRL Taxonomy Extension Presentation Linkbase Document
104.1 — Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data File
submitted as (Exhibit 101.1)
__________________________________________________________________
Denotes management contract or compensatory plan or arrangement.
*
† Pursuant to the Plan of Merger dated as of August 11, 2022 among SPX Corporation, SPX Technologies, Inc., and
SPX Merger, LLC, on August 15, 2022, SPX Technologies, Inc. assumed the sponsorship and obligations thereunder as
successor to SPX Corporation.
128
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NON-GAAP RECONCILIATION - CONSOLIDATED SEGMENT INCOME, NET INCOME, AND DILUTED
EARNINGS PER SHARE (“EPS”)
(in millions, except per share data)
SEGMENT INCOME
HVAC segment income
Detection & Measurement segment income
Consolidated segment income
2022
2021
$ 135.5 54% $ 107.7 54%
114.1
46%
92.9
46%
$ 249.6 100% $ 200.6 100%
NET INCOME AND DILUTED EPS
U.S. GAAP net income from continuing operations
U.S. GAAP diluted EPS from continuing operations
Exclude:
Other adjustments(1)
Amortization expense(2)
Adjusted net income from continuing operations
Adjusted diluted earnings per share from continuing operations
Weighted average diluted shares outstanding
OPERATING INCOME RECONCILIATION
Consolidated segment income
Include:
Corporate expense
Acquisition-related and other costs(3)
Long-term incentive compensation expense
Amortization of intangible assets(2)
Impairment of goodwill and intangible assets
Special charges, net
Other operating (income) expense, net
$ 19.8
$ 0.43
95.0
28.5
$ 143.3
$ 3.10
46.221
$ 59.0
$
1.27
27.6
21.6
$ 108.2
$ 2.33
46.495
$ 249.6
$ 200.6
68.6
1.9
10.9
28.5
13.4
0.4
74.9
60.5
5.1
12.8
21.6
30.0
1.0
(4.1)
Consolidated operating income
$ 51.0
$ 73.7
(1) Amounts for 2022 and 2021 exclude acquisition and strategic/transformation related costs (including inventory step-up charges) ($16.4 and $7.9,
respectively), asset impairment charges ($0.3 and $2.0, respectively), impairment of goodwill and intangible assets ($13.4 and $30.0, respectively),
costs associated with our South Africa business in 2022 and Transformers Solutions and South Africa businesses in 2021 that could not be
allocated to discontinued operations for U.S. GAAP purposes ($0.8 and $3.1, respectively), gains on revisions of liabilities associated with
contingent consideration on recent acquisitions ($1.3 and $30.4, respectively), charges resulting from changes in estimates associated with
asbestos product liability matters, including the loss related to the Asbestos Portfolio Sale in 2022 ($92.7 and $47.3, respectively), gains and
(losses) on an equity security associated with fair value adjustments (($3.0) and $11.8, respectively), non-service pension and postretirement gains
and (losses) (($0.1) and $11.6, respectively), gain on the sale of an equity security in 2021 of ($0.4), expenses incurred in connection with an
amendment to our senior credit agreement ($1.1 and $0.2, respectively), removal of a gain associated with long-term incentive compensation
forfeitures in 2022 ($0.8), and the tax impacts of these items, as well as certain discrete tax items that are considered non-recurring ($30.7 and
$8.7, respectively).
(2) Excludes amortization expense associated with acquired intangible assets.
(3) Represents (i) additional “Cost of products sold” ($1.1 and $2.6) during 2022 and 2021, respectively, associated with the ITL acquisition (2022)
and the Cincinnati Fan, ECS, Sealite, and Sensors and Software acquisitions (2021); (ii) a non-cash impairment charge ($1.8) during 2021; and (iii)
integration costs ($0.8 and $0.7) during 2022 and 2021, respectively.
130
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D E A R F E L L O W S H A R E H O L D E R S ,
In August, we adopted the name SPX Technologies to reflect our commitment to leveraging technology
solutions that enhance customers’ experiences, and enable success in a rapidly changing world. Each
of our platforms is focused on developing innovative designs, products, and solutions to allow our
customers to be safer, more efficient, and more sustainable.
I am very proud of our team for their accomplishments across both segments last year. In our HVAC
Heating platform, we continued our focus on customer efficiency and increasing penetration of digital
solutions and high-efficiency products. Our new PROTOOLS™ tech mobile app helps technicians in the
field become hydronics experts by putting our boiler product information at their fingertips in a mobile
environment, while our interactive, mobile-friendly parts catalog makes it easier and faster than ever to
locate precision components for our Weil-McLain business’ full line of residential and commercial boilers.
Our HVAC Cooling platform marked an important anniversary in 2022: 100 years since the founding of
our Marley Cooling Towers brand, the originator of the cooling tower, and a global leader in cooling
solutions. Our company has a strong tradition of innovation in HVAC, evolving early cooling towers
into one of the most efficient means of cooling available. Last year we continued to see customer
traction with new innovations, such as our CoolSpec™ software, an intuitive tool that helps compare
and select cooling products faster and easier than ever before. We also advanced our continuous
improvement initiatives, and benefitted from a solid performance in our Cincinnati Fan business,
which we acquired in 2021.
In our Detection & Measurement segment, we further extended our Aids to Navigation platform with
the acquisition of International Tower Lighting, LLC ("ITL"), a widely recognized provider of high-quality
obstruction lighting solutions. We also continued to see strong customer demand for our portable
S P X T E C H N O L O G I E S 2 0 2 2 A R
51320_1CV-SPX2022AR.indd 5-8
51320_1CV-SPX2022AR.indd 5-8
Consolidated Segment
Income1 (M)
Adjusted EPS1
$250
$3.10
$201
$2.33
Another Year of
Strong Growth
2021
2022
2021
2022
expeditionary airfield lighting systems which are rapidly deployable and eliminate the logistical
challenges of generators, cables and battery charging with self-sustaining solar-powered operation.
Our Location & Inspection platform continued to see strong growth and customer interest in
technology-enabled offerings, such as our CUES GraniteNet solution, a powerful software platform
that helps municipalities locate and remediate maintenance priorities using traditional and LIDAR-
enabled robotics as well as AI solutions.
In our CommTech platform, the integration of Enterprise Control Systems Ltd ("ECS"), which we acquired
in 2021, was a great success. In 2022 we received tens of millions of dollars of orders for products that
combine proprietary technologies from ECS and our flagship TCI business to create innovative defensive
intelligence applications. Also, in our Transportation platform, our Genfare business continued to
expand its innovative fare collection solutions for municipalities and began to see the benefits of an
emerging wave of demand related to infrastructure spending that we expect to continue for years.
SPX Technologies made considerable strides in our Environmental Social and Governance (ESG) journey
during 2022. We formally incorporated ESG as a key element of our strategic planning process for each
business, and adopted company-wide sustainability commitments, including a 30% reduction in green-
house gas emissions intensity by 2030, and more robust disclosures of Diversity & Inclusion metrics.
I am proud of what we have accomplished, and am pleased with our momentum and direction as a
company, and as a team. Today SPX Technologies is in a very strong position to continue successfully
executing on our value-creation roadmap which has guided our journey since late 2015. We entered
2023 with a robust backlog, solid customer demand for our products, and a strong balance sheet that
supports our growth plans for our strategic platforms. With a pipeline of attractive acquisition pros-
pects and a strong team to execute and manage integrations, I am very excited about the growth
opportunities ahead.
Looking forward, I am confident in the strength and future of SPX Technologies, and excited about the
opportunities that lie ahead. I am also confident that we have the right strategy and the right team in
place to continue generating value for years to come. Finally, I would like to thank you, our shareholders,
for your support and valuable feedback which helps guide our journey.
GENE LOWE
President and Chief Executive Officer
C O R P O R AT E I N F O R M AT I O N
Officers
NaTausha H. White, Vice President and
Chief Human Resources Officer
John W. Nurkin, Vice President, General Counsel
and Secretary
Mark A. Carano, Vice President, Chief Financial Officer
and Treasurer
Directors
T E C H N O L O G I E S
ANNUAL MEETING
SPX Technologies Annual
Meeting of Stockholders
May 9th, 2023, 8 a.m. ET*
Virtual Meeting
CORPORATE OFFICE
SPX Technologies
6325 Ardrey Kell Road, Suite 400
Charlotte, NC 28277
980-474-3700 | www.spx.com
TRANSFER AGENT
AND REGISTRAR
Computershare Investor Services
PO Box 505000
Louisville, KY 40233-5000
Inside the United States:
877-498-8861
Outside the United States:
781-575-2879
TDD/TTY for hearing impaired:
800-952-9245
Operators are available Monday–
Friday 9:00 a.m. to 5:00 p.m.
Eastern Time.
An interactive automated system is
available around the clock every day.
www.computershare.com
AUDITORS
Deloitte & Touche LLP
Charlotte, NC
STOCK EXCHANGE LISTING
New York Stock Exchange
Symbol “SPXC”
* Please consult Notice or proxy
card for details
3/13/23 11:01 AM
3/13/23 11:01 AM
SPX Technologies had another exciting year with numerous successes in 2022. We accelerated our organic and inorganic growth initiatives, significantly reduced our exposure to legacy liabilities, made additional progress on our continuousimprovement and digital initiatives, and adopted sustainability commitments thatalign with our culture and values. These successes did not come without challenges. Our teams worked hard to overcome continued supply chain and labor constraints, leveragingour businesssystemtomeet stronglevelsofcustomer demand,and reflecting our solutions-oriented and people-focused culture.1 Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the reconciliations on page 130.LEFT TO RIGHTLEFT TO RIGHTMeenal A. Sethna, Audit Committee Chair, Executive Vice President and Chief Financial Officer, Littelfuse, Inc. David A. Roberts, Retired Executive Chairman, President and Chief Executive Officer, Carlisle Companies, Inc. Dr. Ruth G. Shaw, Governance & Sustainability Committee Chair, Former President and Chief Executive Officer, Duke Power Ricky D. Puckett, Compensation Committee Chair, Retired Executive Vice President, Chief Financial Officer, Treasurer and Chief Administrative Officer, Snyder’s-Lance, Inc. Robert B. Toth, Former Chairman, Chief Executive Officer and President, Polypore International, Inc. Eugene J. Lowe, III, President and Chief Executive Officer, SPX Technologies Angel Shelton Willis, Vice President, General Counsel & Secretary, Sealed Air Corporation Tana L. Utley, Retired Vice President of Large Power Systems Division, Caterpillar Inc. Patrick J. O’Leary, Chairman, Retired Executive Vice President, Finance, Treasurer and Chief Financial Officer, SPX Corporation (now SPX Technologies)J. Randall Data, President, Heating and Global OperationsSean McClenaghan, President, Global CoolingEugene J. Lowe, III, President and Chief Executive OfficerJohn W. Swann, III, President, Detection & Measurement Segment 2
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T E C H N O L O G I E S
6325 ARDREY KELL ROAD, SUITE 400, CHARLOTTE, NC 28277
980-474-3700 • WWW.SPX.COM