HUBBELL INC

Previous wording

Hubbell is a global manufacturer of quality electrical products and utility solutions for a broad range of customer and end market applications. We provide utility and electrical solutions that enable our customers to operate critical infrastructure reliably and efficiently, and we empower and energize communities through innovative solutions supporting energy infrastructure In Front of the Meter, on The Edge, and Behind the Meter. In Front of the Meter is where utilities transmit and distribute energy to their customers. The Edge connects utilities with owner/operators and allows energy and data to be distributed back and forth. Behind the Meter is where owners and operators of buildings and other critical infrastructure consume energy. Products are either sourced complete, manufactured or assembled by subsidiaries in the United States, Canada, Puerto Rico, Mexico, China, the UK, Brazil, Australia, Spain, Ireland and the Republic of the Philippines. The Company also participates in joint ventures in Hong Kong and the Republic of the Philippines, and maintains offices in Singapore, Italy, China, India, Mexico, South Korea, Chile, and countries in the Middle East. The Company employed approximately 18,400 individuals worldwide as of March 31, 2024.

Current wording

Hubbell is a global manufacturer of quality electrical products and utility solutions for a broad range of customer and end market applications. We provide utility and electrical solutions that enable our customers to operate critical infrastructure reliably and efficiently, and we empower and energize communities through innovative solutions supporting energy infrastructure In Front of the Meter, on The Edge, and Behind the Meter. In Front of the Meter is where utilities transmit and distribute energy to their customers. The Edge connects utilities with owner/operators and allows energy and data to be distributed back and forth. Behind the Meter is where owners and operators of buildings and other critical infrastructure consume energy. Products are either sourced complete, manufactured or assembled by subsidiaries in the United States, Canada, Puerto Rico, Mexico, China, the UK, Brazil, Australia, Spain, Ireland and the Republic of the Philippines. The Company also participates in joint ventures in Hong Kong and the Republic of the Philippines, and maintains offices in Singapore, Italy, China, India, Mexico, South Korea, Chile, and countries in the Middle East. The Company employed approximately 18,300 individuals worldwide as of June 30, 2024.

Previous wording

Results for the three months ended March 31, 2024 by segment are included under “Segment Results” within this Management’s Discussion and Analysis.

Current wording

Results for the six months ended June 30, 2024 by segment are included under “Segment Results” within this Management’s Discussion and Analysis.

Previous wording

Productivity improvement also continues to be a key area of focus for the Company and efforts to drive productivity complement our restructuring and related activities to minimize the impact of rising material costs and other administrative cost inflation. Because material costs are approximately two thirds of our cost of goods sold, continued volatility in this area could significantly impact profitability. Our goal is to have pricing and productivity programs that offset material and other inflationary cost increases as well as pay for investments in key growth areas.

Current wording

Productivity improvement also continues to be a key area of focus for the Company and efforts to drive productivity complement our restructuring and related activities to minimize the impact of rising material costs and other administrative cost inflation. Because material costs are approximately half of our cost of goods sold, continued volatility in this area could significantly impact profitability. Our goal is to have pricing and productivity programs that offset material and other inflationary cost increases as well as pay for investments in key growth areas.

Previous wording

The following is a discussion and analysis of our business, financial condition and results of operations as of and for the three months ended March 31, 2024 and 2023. This discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and notes thereto in Item 1 of this Quarterly Report on Form 10-Q (the "Condensed Financial Statements"), and the audited consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

The following is a discussion and analysis of our business, financial condition and results of operations as of and for the three and six months ended June 30, 2024 and 2023. This discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and notes thereto in Item 1 of this Quarterly Report on Form 10-Q (the "Condensed Financial Statements"), and the audited consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Previous wording

First quarter 2024 net sales were$1,399.1 million and grew by 9%, including 2% organic growth from price realization and 6% growth from acquisitions net of divestitures.

Current wording

Second quarter 2024 net sales were$1,452.5 million and grew by 6%, including 2% organic growth from price realization and 4% growth from acquisitions net of divestitures.

Previous wording

Organic growth in the Electrical Solutions segment was strong, where electrification is driving broad-based strength across electrical products and industrial markets, with continued high rates of renewables growth. Organic growth was flat in the Utility Solutions segment as strength in grid automation products and continued backlog conversion in metering products, was offset by continued channel inventory management in distribution markets and weak Telcom markets in the quarter. Price realization continues to be positive in our segments as compared to the first quarter of 2023.

Current wording

Organic growth in the Electrical Solutions segment was strong, led by datacenter and renewables verticals as electrification drives strong project activity. Organic growth was down 1.5% in the Utility Solutions segment as strength in transmission, substation and grid automation markets was offset by continued customer inventory management in distribution markets and weak telcom markets in the quarter. Price realization remains positive in both segments as compared to the second quarter of 2023.

Previous wording

Acquisitions within Utility Solutions contributed to 8% net sales growth driven by our acquisition of Systems Control in the fourth quarter of 2023, while the divestiture of our residential lighting business from the Electrical Solutions segment was completed in the first quarter of 2024 and contributed to a 2% decline in net sales as compared to the first quarter of 2023.

Current wording

Acquisitions within Utility Solutions contributed to 8% net sales growth driven by our acquisition of Systems Control in the fourth quarter of 2023, while the divestiture of our residential lighting business from the Electrical Solutions segment was completed in the first quarter of 2024 and contributed to a 3.5% decline in net sales as compared to the second quarter of 2023.

Previous wording

Operating margin in the first quarter of 2024 was 16.3% and contracted by 310 basis points. Adjusted operating margin, which excludes amortization of acquisition-related intangibles and transaction, integration and separation costs, was 19.7% and contracted by 100 basis points. Margin contraction in the quarter was primarily driven by material and other cost inflation, lower volume and our continuing investments in the business. Margins in the first quarter of 2024 also reflect the effect of favorable price realization and benefits from operational productivity. These factors are further described within Segment Results below.

Current wording

Operating margin in the second quarter of 2024 was 20.7% and contracted by 40 basis points. Adjusted operating margin, which excludes amortization of acquisition-related intangibles and transaction, integration and separation costs, was 22.8% and expanded by 40 basis points. Margin expansion in the quarter was primarily driven by favorable price realization and benefits from operational productivity, as well as the impact of recent portfolio transformation efforts. Those factors were partially offset by higher material and other cost inflation, and investments. These factors are further described within Segment Results below.

Previous wording

In December 2023, the Company entered into a definitive agreement to sell its residential lighting business for a cash purchase price of $131 million, subject to customary adjustments. The Company concluded the business met the criteria for classification as held for sale in the fourth quarter of 2023. The residential lighting business was reported within the Electrical Solutions Segment. The transaction closed in the first quarter of 2024 and the Company recorded a pre-tax loss on the sale of $5.3 million, which is recorded within Total other expense in the Company's Condensed Consolidated Statement of Income.

Current wording

In December 2023, the Company entered into a definitive agreement to sell its residential lighting business for a cash purchase price of $131 million, subject to customary adjustments. The Company concluded the business met the criteria for classification as held for sale in the fourth quarter of 2023. The residential lighting business was reported within the Electrical Solutions Segment. The transaction closed in the first quarter of 2024 and the Company recorded a pre-tax loss on the sale of $5.3 million in the first quarter of 2024, which is recorded within Total other expense in the Company's Condensed Consolidated Statement of Income.

Previous wording

Significant items impacting comparability:

Current wording

Significant items impacting comparability comprise the following:

Previous wording

The acquisition and divestiture actions taken by the Company in the fourth quarter of 2023 have resulted in a significant increase in current period integration and separation costs. As a result, we believe excluding costs relating to these fourth quarter transactions provides useful and more comparable information to investors to better assess our operating performance.

Current wording

The acquisition and divestiture actions taken by the Company in the fourth quarter of 2023 resulted in a significant increase in integration and separation costs. As a result, we believe excluding costs relating to these fourth quarter transactions provides useful and more comparable information to investors to better assess our operating performance.

Previous wording

Certain of the Company's adjusted measures exclude these gains or losses because we believe it enhances management's and investors' ability to analyze underlying business performance and facilitates comparisons of our financial results over multiple periods. In the first quarter of 2024 the Company recognized a $5.3 million pre-tax loss on the disposition of the residential lighting business.

Current wording

Certain of the Company's adjusted measures exclude these gains or losses because we believe it enhances management's and investors' ability to analyze underlying business performance and facilitates comparisons of our financial results over multiple periods. In the first quarter of 2024 the Company recognized a$5.3 million pre-tax loss on the disposition of the residential lighting business.

Previous wording

Net sales of $1,399.1 million in the first quarter of 2024 increased by $113.7 million compared to the first quarter of 2023. Organic net sales increased by 2.3%, which was composed of a low single digit percentage increase in price realization partially offset by a low single digit percentage decrease in volume. Acquisitions net of divestitures contributed 6.2% to sales growth. The primary drivers of these changes are discussed in more detail in the Segment Results section below.

Current wording

Net sales of $1,452.5 million in the second quarter of 2024 increased by $86.6 million compared to the second quarter of 2023. Organic net sales increased by 1.9% driven by a low single digit percentage increase in price realization. The impact of volume on net sales was flat quarter over quarter. Acquisitions net of divestitures contributed 4.5% to net sales growth. These changes are discussed in more detail in the Segment Results section below.

Previous wording

Total other expense increased by $13.3 million in the first quarter of 2024 to $27.1 million, primarily due to higher net interest expense of $11.4 million in the first quarter of 2024 compared to the same period in 2023, along with the $5.3 million loss recognized on the disposition of the residential lighting business. The increase in interest expense was primarily attributable to higher debt balances (primarily related to debt incurred in connection with the Systems Control acquisition) and higher market interest rates.

Current wording

Total other expense increased by $7.0 million in the second quarter of 2024 to $21.0 million, primarily due to higher net interest expense of $10.6 million in the second quarter of 2024 compared to the same period in 2023, partially offset by $2.5 million of TSA income related to the disposal of the residential lighting business. The increase in interest expense was primarily attributable to debt incurred in connection with the acquisition of Systems Control and higher market interest rates.

Previous wording

As a percentage of Net sales, cost of goods sold increased by 290 basis points to 68.0% in the first quarter of 2024, as compared to 65.1% in the first quarter of 2023, resulting in gross profit margin of 32.0% in the first quarter of 2024 as compared to 34.9% in the first quarter of 2023. Approximately six percentage points of margin contraction was driven by higher intangible amortization expense, material and other cost inflation and lower volumes, as well as continued investments in long-term growth and productivity initiatives, which was partially offset by approximately four percentage points of margin expansion driven by favorable price realization and improved operational productivity.

Current wording

As a percentage of net sales, cost of goods sold increased by 210 basis points to 66.5% in the first six months of 2024, resulting in gross profit margin contracting to 33.5%. Approximately five percentage points of gross profit margin contraction was driven by higher intangible amortization expense, material and other cost inflation, higher restructuring and related costs, as well as continued investments in long-term growth and productivity initiatives, which was partially offset by approximately three percentage points of margin expansion driven by favorable price realization and improved operational productivity.

Previous wording

S&A expense in the first quarter of 2024 was $219.2 million and increased by $19.7 million or 9.9% compared to the prior year period. Approximately two thirds of this increase was driven by the 2023 acquisitions net of divestitures, with the remaining increase being driven by labor and other cost inflation. S&A expense as a percentage of Net sales was 15.7% in the first quarter of 2024, compared to 15.5% in the first quarter of 2023.

Current wording

S&A expense in the first six months of 2024 was $426.7 million and increased by $18.8 million or 4.6% compared to the prior year period. This increase was driven by the impact of 2023 acquisitions net of divestitures, including an increase in intangible amortization expense, partially offset by lower employee incentive cost. S&A expense as a percentage of net sales was 14.9% in the first six months of 2024, as compared to 15.4% in the first six months of 2023.

Previous wording

The effective tax rate in the first quarter of 2024 increased to 26.0% as compared to 22.0% in the first quarter of 2023, primarilydue to an income tax expense related to the closing of the sale of our residential lighting business that was divested in the first quarter of 2024, partially offset by a stock-based compensation tax benefit.

Current wording

The effective tax rate in the first six months of 2024 increased to 24.4% as compared to 23.0% in the first six months of 2023, primarily due to an income tax expense related to the sale of our residential lighting business in the first quarter of 2024, partially offset by a tax benefit from stock-based compensation.

Previous wording

Net income attributable to Hubbell Incorporated was $147.8 million in the first quarter of 2024 and decreased 18.7% as compared to the same period of the prior year, reflecting the factors described above. As a result, earnings per diluted share in the first quarter of 2024 decreased 19% as compared to the first quarter of 2023. Adjusted net income attributable to Hubbell Incorporated, which excludes amortization of acquisition-related intangibles from both periods and transaction, integration & separation costs and a loss on disposition of a business in the first quarter of 2024, was $195.2 in the first quarter of 2024 and was flat as compared to the first quarter of 2023.

Current wording

Net income attributable to Hubbell Incorporated was $361.4 million in the first six months of 2024 and decreased 7.0% as compared to the same period of the prior year, reflecting the factors described above. As a result, earnings per diluted share in the first six months of 2024 decreased 7.3% as compared to the first six months of 2023. Adjusted net income attributable to Hubbell Incorporated, which excludes amortization of acquisition-related intangibles from both periods and transaction, integration & separation costs and a loss on disposition of a business in the first six months of 2024, was $431.7 million in the first six months of 2024 and was $415.7 million in the first six months of 2023.

Previous wording

Net sales in the Utility Solutions segment in the first quarter of 2024 were $894.0 million, and increased by $112.4 million, or 14.4%, as compared to the first quarter of 2023. That increase was driven by a 13.9% increase in net sales from acquisitions and a 0.3% increase in organic net sales. The increase in organic net sales was driven by a low single digit percentage increase in price realization, partially offset by a low single digit percentage decrease in unit volume. The decrease in unit volume was largely driven by weakness in the Telcom market that results in lower demand for our enclosure products, and to a much smaller degree by channel inventory normalization in the distribution market. Transmission markets and demand for our protection and controls products were strong, and we continued to convert our backlog of metering products. Favorable price realization was driven by actions to offset inflation, as well as by our service levels.

Current wording

Net sales in the Utility Solutions segment in the first six months of 2024 were $1,820.5 million, and increased by $208.1 million, or 12.9%, as compared to the first six months of 2023. That increase was driven by a 13.5% increase in net sales from acquisitions offset by a 0.6% decrease in organic net sales. The decrease in organic net sales was driven by a low single digit percentage decrease in unit volume, partially offset by a low single digit percentage increase in price realization. The decrease in unit volume was largely driven by volume declines in enclosures products primarily driven by weakness in the telcom markets, as well as continued customer inventory management in distribution markets. These factors were partially offset by robust growth in transmission and substation markets, as well as backlog conversion in meters and AMI products. Favorable price realization was driven by actions to offset inflation, as well as by our service levels.

Previous wording

Operating income in the Utility Solutions segment for the first quarter of 2024 was $157.5 million, a decrease of 11.3% compared to the first quarter of 2023. Operating margin was 17.6% in the first quarter of 2024, as compared to 22.7% in the same period of 2023. Excluding amortization of acquisition-related intangibles and transaction, integration and separation costs, the adjusted operating margin was 21.8% in the first quarter of 2024 compared to 24.4% in the prior year period. The decrease in operating margin includes approximately four percentage points of margin expansion primarily due to favorable price realization and improved operational productivity, but that expansion was more than offset by approximately six percentage points of margin contraction primarily due to material and other cost inflation, lower unit volume and continuing investments in long-term growth and productivity initiatives. The impact of lower unit volume mentioned here includes approximately 150 basis points from weakness in the Telcom market. Operating margin also declined by approximately 260 basis points due to an increase in amortization of acquisition-related intangibles and transaction, integration and separation costs.

Current wording

Operating income in the Utility Solutions segment for the first six months of 2024 was $353.6 million, a decrease of 6.2% compared to the first six months of 2023. Operating margin declined by 400 basis points to 19.4% in the first six months of 2024, as compared to the same period of 2023. Excluding amortization of acquisition-related intangibles and transaction, integration and separation costs, the adjusted operating margin declined by 210 basis points to 22.9% as compared to the 2023 period. The decrease in operating margin includes approximately three percentage points of margin expansion primarily due to favorable price realization and improved operational productivity, but that expansion was more than offset by approximately five percentage points of margin contraction primarily due to material and other cost inflation, lower unit volume and continuing investments in long-term growth and productivity initiatives. The acquisition of Systems Control also contributed to 2024 operating margin contraction. The impact of lower unit volume includes approximately 150 basis points from enclosures products, driven primarily by weakness in the telcom market.

Previous wording

Net sales in the Electrical Solutions segment in the first quarter of 2024 were $505.1 million and increased by $1.3 million, or 0.3%, as compared to the first quarter of 2023. That increase was driven by a 5.5% increase in organic net sales and a favorable effect of foreign currency exchange, largely offset by a 5.6% decline in net sales resulting from the disposition of our residential lighting business in February 2024. The increase in organic net sales was driven by a low single digit percentage increase in unit volume and a low single digit percentage increase in price realization. Volume growth was driven by strength in markets for electrical and industrial products on electrification and renewables. Favorable price realization was driven primarily by actions to recover inflationary costs.

Current wording

Net sales in the Electrical Solutions segment in the first six months of 2024 were$1,031.1 million and decreased by$7.8 million, or 0.8%, as compared to the first six months of 2023. That decrease was driven by a 7.3% decline in net sales resulting from the disposition of our residential lighting business in the first quarter of 2024, offset by a 6.3% increase in organic net sales. The increase in organic net sales was driven by a mid-single digit percentage increase in unit volume and a low single digit percentage increase in price realization. Volume growth was driven primarily by strength in datacenter and renewables markets, while broader industrial and electrical markets were steady. Favorable price realization was driven primarily by actions to recover inflationary costs.

Previous wording

Operating income in the Electrical Solutions segment for the first quarter of 2024 was $71.0 million and decreased approximately 0.4% compared to the first quarter of 2023, while operating margin in the first quarter of 2024 decreased by 10 basis points to 14.1%. Excluding amortization of acquisition-related intangibles and transaction, integration and separation costs, which contributed 90 basis points to the decline in operating margin, the adjusted operating margin increased by 80 basis points to 15.8%. That increase is primarily due to approximately four percentage points of margin expansion from favorable price realization, improved operational productivity and higher volume, partially offset by approximately three percentage points of margin headwind driven by, higher material and other cost inflation, and investments in restructuring and related activities.

Current wording

Operating income in the Electrical Solutions segment for the first six months of 2024 was $176.1 million and increased approximately 10.3% compared to the first six months of 2023, while operating margin in the first six months of 2024 increased by 170 basis points to 17.1%. Excluding amortization of acquisition-related intangibles and transaction, integration and separation costs, the adjusted operating margin increased by 210 basis points to 18.3%. The increases are primarily due to approximately five percentage points of margin expansion from favorable price realization, improved operational productivity and higher volume. The disposition of the residential lighting business also contributed to that expansion. Those factors were partially offset by approximately three percentage points of margin contraction driven by, higher material and other cost inflation.

Previous wording

Cash provided by operating activities for the three months ended March 31, 2024 was$92.2 million compared to cash provided by operating activities of $113.7 million for the same period in 2023. The decrease was primarily due a decrease in net income, along with higher cash payments of employee incentive payments during the first three months of 2024 compared to the same period in 2023, partially offset by higher amortization and depreciation expense.

Current wording

Cash provided by operating activities for the six months ended June 30, 2024 was$331.8 million compared to cash provided by operating activities of $341.4 million for the same period in 2023. The decrease was primarily due lower net income in the current year, and an increase in investments in working capital to serve customer demand, partially offset by higher adjustments to net income for amortization and depreciation expense in 2024.

Previous wording

Cash provided by investing activities was $88.6 million in the three months ended March 31, 2024 compared to cash used of $35.1 million during the comparable period in 2023. This change was driven by the $122.9 million of proceeds received in 2024 as a result of the disposition of our residential lighting business.

Current wording

Cash provided by investing activities was $56.1 million in the six months ended June 30, 2024 compared to cash used of $128.2 million during the comparable period in 2023. This change was driven by $122.9 million cash proceeds in 2024 from the disposition of our residential lighting business as compared to a $60.0 million cash outflow in 2023 for the acquisition of EIG.

Previous wording

Cash used in financing activities was $125.3 million in the three months ended March 31, 2024 as compared to cash used of $91.8 million in the comparable period of 2023. This change primarily reflects an increase in the repayment of debt of $26.7 million in the first three months of 2024 compared to the same prior year period.

Current wording

Cash used in financing activities was $319.3 million in the six months ended June 30, 2024 as compared to cash used of $165.9 million in the comparable period of 2023. The increase in cash used primarily reflects higher payments against long and short-term borrowings in the first six months of 2024 compared to the same prior year period.

Previous wording

The unfavorable impact of foreign currency exchange rates on cash was $3.5 million for the three months ended March 31, 2024 and the change compared to prior year is primarily related to weakening of the U.S. Dollar against the Canadian Dollar, Brazilian Real and Australian Dollar.

Current wording

The unfavorable impact of foreign currency exchange rates on cash was $8.0 million for the six months ended June 30, 2024 and the change compared to prior year is primarily related to strengthening of the U.S. Dollar against the Brazilian Real, Canadian Dollar and Mexican Peso.

Previous wording

Investments in our business include cash outlays for the acquisition of businesses, to invest in capacity and innovation, as well as for expenditures on productivity initiatives and to maintain the operation of our equipment and facilities and invest in restructuring activities.

Current wording

Investments in our business include cash outlays for the acquisition of businesses, and investments in capacity and innovation, as well as for expenditures on productivity initiatives and to maintain the operation of our equipment and facilities and invest in restructuring activities.

Previous wording

During the first three months of 2024, we invested $40.3 million in capital expenditures, an increase of $6.9 million from the comparable period of 2023, as we continue to invest in footprint optimization, automation and productivity initiatives.

Current wording

During the first six months of 2024, we invested $74.2 million in capital expenditures, an increase of $5.3 million from the comparable period of 2023, as we continue to invest in footprint optimization, automation and productivity initiatives.

Previous wording

The table below presents the restructuring and related costs incurred in the first three months of 2024, additional expected costs, and the expected completion date of restructuring actions that have been initiated as of March 31, 2024 and in prior years (in millions):

Current wording

The table below presents the restructuring and related costs incurred in the first six months of 2024, additional expected costs, and the expected completion date of restructuring actions that have been initiated as of June 30, 2024 and in prior years (in millions):

Previous wording

In October 2022, the Board of Directors approved a share repurchase program that authorized the repurchase of up to $300 million of common stock, which expires in October 2025. In the first three months of 2024, the Company repurchased$10.0 million of shares of common stock authorized under the October 2022 program. At March 31, 2024, our remaining share repurchase authorization was $290.0 million. Subject to numerous factors, including market conditions and alternative uses of cash, we may conduct discretionary repurchases through open market or privately negotiated transactions, which may include repurchases under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended.

Current wording

In October 2022, the Board of Directors approved a share repurchase program that authorized the repurchase of up to $300 million of common stock, which expires in October 2025. In the firstsix months of 2024, the Company repurchased$20.0 million of shares of common stock authorized under the October 2022 program. At June 30, 2024, our remaining share repurchase authorization was $280.0 million. Subject to numerous factors, including market conditions and alternative uses of cash, we may conduct discretionary repurchases through open market or privately negotiated transactions, which may include repurchases under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended.

Previous wording

At March 31, 2024 and December 31, 2023, the Company had $1,895.7 million and $2,023.2 million, respectively, of long-term debt outstanding, net of the unamortized balance of capitalized debt issuance costs. The Company had $18.7 million and $15.0 million at March 31, 2024 and December 31, 2023 respectively of maturities due within the next 12 months related to the Term Loan Agreement described below, which were classified within short term debt in the Consolidated Balance Sheet.

Current wording

At June 30, 2024 and December 31, 2023, the Company had $1,892.7 million and $2,023.2 million, respectively, of long-term debt outstanding, net of the unamortized balance of capitalized debt issuance costs. The Company had $18.7 million and $15.0 million at June 30, 2024 and December 31, 2023 respectively of maturities due within the next 12 months related to the Term Loan Agreement described below, which were classified within short term debt in the Consolidated Balance Sheet.

Previous wording

In connection with the December 2023 acquisition of Systems Control, the Company entered into a Term Loan Agreement with a syndicate of lenders under which the Company borrowed $600 million on an unsecured basis. Borrowings under the Term Loan Agreement bear interest generally at either the adjusted term SOFR rate plus an applicable margin (determined by a ratings based grid) or the alternative base rate. Currently, the loans bear interest based on the adjusted term SOFR rate. The principal amount of borrowings under the Term Loan Agreement amortize in equal quarterly installments of 2.5% of the original outstanding principal amount in 2024, 2.5% in 2025, and, 5% in 2026, with the remaining outstanding principal amount under the Term Loan Agreement due and payable in full at maturity in December 2026. The Company may make principal payments in excess of the amortization schedule at its discretion. During the three months ended March 31, 2024, the Company made $125 million of principal payments. The sole financial covenant in the Term Loan Agreement requires that total debt not exceed 65% of total capitalization as of the last day of each fiscal quarter of the Company. The Company was in compliance with this covenant as of March 31, 2024.

Current wording

In connection with the December 2023 acquisition of Systems Control, the Company entered into a Term Loan Agreement with a syndicate of lenders under which the Company borrowed $600 million on an unsecured basis. Borrowings under the Term Loan Agreement bear interest generally at either the adjusted term SOFR rate plus an applicable margin (determined by a ratings based grid) or the alternative base rate. Currently, the loans bear interest based on the adjusted term SOFR rate. The principal amount of borrowings under the Term Loan Agreement amortize in equal quarterly installments of 2.5% of the original outstanding principal amount in 2024, 2.5% in 2025, and, 5% in 2026, with the remaining outstanding principal amount under the Term Loan Agreement due and payable in full at maturity in December 2026. The Company may make principal payments in excess of the amortization schedule at its discretion. During the six months ended June 30, 2024, the Company made $128.8 million of principal payments. The sole financial covenant in the Term Loan Agreement requires that total debt not exceed 65% of total capitalization as of the last day of each fiscal quarter of the Company. The Company was in compliance with this covenant as of June 30, 2024.

Previous wording

The carrying value of the Notes, net of unamortized discount and the unamortized balance of capitalized debt issuance costs, was $1,440.9 million and $1,440.3 million at March 31, 2024 and December 31, 2023, respectively.

Current wording

The carrying value of the Notes, net of unamortized discount and the unamortized balance of capitalized debt issuance costs, was $1,441.6 million and $1,440.3 million at June 30, 2024 and December 31, 2023, respectively.

Previous wording

The Company had $219.7 million and $117.4 million of short-term debt and current portion of long-term debt outstanding at March 31, 2024 and December 31, 2023, respectively, composed of the following:

Current wording

The Company had $110.5 million and $117.4 million of short-term debt and current portion of long-term debt outstanding at June 30, 2024 and December 31, 2023, respectively, composed of the following:

Previous wording

•$199.0 million of commercial paper borrowings outstanding at March 31, 2024, and $100 million of commercial paper borrowings outstanding at December 31, 2023, which was used to partially fund the Systems Control acquisition.

Current wording

•$90.0 million of commercial paper borrowings outstanding at June 30, 2024, and $100.0 million of commercial paper borrowings outstanding at December 31, 2023, which was used to partially fund the Systems Control acquisition.

Previous wording

•$2.0 million and $2.4 million of other short term debt outstanding at March 31, 2024 and December 31, 2023, respectively, which consisted of borrowings to support our international operations in China and amounts outstanding under our commercial card program.

Current wording

•$1.8 million and $2.4 million of other short term debt outstanding at June 30, 2024 and December 31, 2023, respectively, which consisted of borrowings to support our international operations in China and amounts outstanding under our commercial card program.

Previous wording

We measure liquidity on the basis of our ability to meet short-term and long-term operational funding needs, to fund additional investments in our business, including acquisitions, and to make dividend payments to shareholders. Significant factors affecting the management of liquidity are cash flows from operating activities, capital expenditures, cash dividend payments, stock repurchases, access to bank lines of credit and our ability to attract long-term capital with satisfactory terms. In the first three months of 2024, we returned capital to our shareholders by paying $65.5 million of dividends on our common stock and using $10.0 million of cash for share repurchases.

Current wording

We measure liquidity on the basis of our ability to meet short-term and long-term operational funding needs, to fund additional investments in our business, including acquisitions, and to make dividend payments to shareholders. Significant factors affecting the management of liquidity are cash flows from operating activities, capital expenditures, cash dividend payments, stock repurchases, access to bank lines of credit and our ability to attract long-term capital with satisfactory terms. In the first six months of 2024, we returned capital to our shareholders by paying $131.0 million of dividends on our common stock and using $20.0 million of cash for share repurchases.

Previous wording

◦Cash flows from operating activities and existing cash resources: In addition to cash flows from operating activities, we also had $388.2 million of cash and cash equivalents at March 31, 2024, of which approximately 22% was held inside the United States and the remainder held internationally.

Current wording

◦Cash flows from operating activities and existing cash resources: In addition to cash flows from operating activities, we also had $397.2 million of cash and cash equivalents at June 30, 2024, of which approximately 19% was held inside the United States and the remainder held internationally.

Previous wording

A summary of our critical accounting estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2023. We are required to make estimates and judgments in the preparation of our financial statements that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a material impact on our financial results. During the three months ended March 31, 2024, there were no material changes in our estimates and critical accounting policies.

Current wording

A summary of our critical accounting estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2023. We are required to make estimates and judgments in the preparation of our financial statements that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a material impact on our financial results. During the six months ended June 30, 2024, there were no material changes in our estimates and critical accounting policies.

Previous wording

Some of the information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Form 10-Q, contain “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. These include statements about our expectations regarding our financial results, condition and outlook, anticipated end markets, expected capital resources, liquidity, financial performance, pension funding, and results of operations and are based on our reasonable current expectations. In addition, all statements regarding the expected financial impact of the integration of acquisitions, as well as other statements that are not strictly historic in nature are forward looking. In addition, all statements regarding anticipated growth, changes in operating results, market conditions and economic conditions, adoption of updated accounting standards and any expected effects of such adoption, restructuring plans and expected associated costs and benefits, intent to continue repurchasing shares of common stock, changes in operating results, and anticipated market conditions and productivity initiatives, are also forward looking. Forward-looking statements may be identified by the use of words, such as “believe”, “expect”, “anticipate”, “intend”, “depend”, “should”, “plan”, “estimated”, “predict”, “could”, “may”, “subject to”, “continues”, “growing”, “prospective”, “forecast”, “projected”, “purport”, “might”, “if”, “contemplate”, “potential”, “pending,” “target”, “goals”, “scheduled”, “will", "will likely be”, and similar words and phrases. Discussions of strategies, plans or intentions often contain forward-looking statements. Important factors, among others, that could cause our actual results and future actions to differ materially from those described in forward-looking statements include, but are not limited to:

Current wording

Some of the information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Form 10-Q, contain “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. These statements generally relate to our expectations and beliefs regarding our financial results, condition and outlook, projections of future performance, anticipated growth and end markets, changes in operating results, market conditions and economic conditions, expected capital resources, liquidity, financial performance, pension funding and results of operations, plans, strategize, opportunities, developments and productivity initiatives, competitive positioning, and trends in particular markets or industries. In addition, all statements regarding the expected financial impact of the integration of acquisitions, adoption of updated accounting standards and any expected effects of such adoption, and intent to continue repurchasing shares of common stock, as well as other statements that are not strictly historic in nature, are forward-looking. Forward-looking statements may be identified by the use of words, such as “believe”, “expect”, “anticipate”, “intend”, “depend”, “should”, “plan”, “estimated”, “predict”, “could”, “may”, “subject to”, “continues”, “growing”, “prospective”, “forecast”, “projected”, “purport”, “might”, “if”, “contemplate”, “potential”, “pending,” “target”, “goals”, “scheduled”, “will", "will likely be”, and similar words and phrases. Such forward-looking statements are based on our current expectations and involve numerous assumptions, known and unknown risks, uncertainties and other factors, which may cause actual and future performance or the Company's achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: