nVent Electric plc

Previous wording

This report contains statements that we believe to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "targets," "plans," "believes," "expects," "intends," "will," "likely," "may," "anticipates," "estimates," "projects," "forecasts," "should," "would," "could," "positioned," "strategy," "future," "are confident," or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Among these factors are adverse effects on our business operations or financial results, including due to the ability to complete the pending sale of the Thermal Management business on anticipated terms and timetable; the overall global economic and business conditions impacting our business; the ability to achieve the benefits of our restructuring plans; the ability to successfully identify, finance, complete and integrate acquisitions, including the Trachte, ECM Industries and other recent acquisitions; competition and pricing pressures in the markets we serve, including the impacts of tariffs; volatility in currency exchange rates, interest rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; inability to mitigate material and other cost inflation; risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging and transportation; increased risks associated with operating foreign businesses, including risks associated with military conflicts, such as that between Russia and Ukraine, and related sanctions; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission (the "SEC"), including this Quarterly Report on Form 10-Q and ITEM 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023. All forward-looking statements speak only as of the date of this report. nVent Electric plc assumes no obligation, and disclaims any obligation, to update the information contained in this report.

Current wording

This report contains statements that we believe to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "targets," "plans," "believes," "expects," "intends," "will," "likely," "may," "anticipates," "estimates," "projects," "forecasts," "should," "would," "could," "positioned," "strategy," "future," "are confident," or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Among these factors are adverse effects on our business operations or financial results, including the ability to complete the pending sale of the Thermal Management business on anticipated terms and timetable; the overall global economic and business conditions impacting our business; the ability to achieve the benefits of our restructuring plans; the ability to successfully identify, finance, complete and integrate acquisitions, including the Trachte, ECM Industries and other recent acquisitions; competition and pricing pressures in the markets we serve, including the impacts of tariffs; volatility in currency exchange rates, interest rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; inability to mitigate material and other cost inflation; risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging and transportation; increased risks associated with operating foreign businesses, including risks associated with military conflicts, such as that between Russia and Ukraine, and related sanctions; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission (the "SEC"), including this Quarterly Report on Form 10-Q and ITEM 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023. All forward-looking statements speak only as of the date of this report. nVent Electric plc assumes no obligation, and disclaims any obligation, to update the information contained in this report.

Previous wording

The terms "us," "we," "our," "the Company" or "nVent" refer to nVent Electric plc. nVent is a leading global provider of electrical connection and protection solutions. We believe our inventive electrical solutions enable safer systems and ensure a more secure world. We design, manufacture, market, install and service high performance products and solutions that connect and protect mission critical equipment, buildings and essential processes. We offer a comprehensive range of enclosures, electrical fastening solutions and thermal management solutions across industry-leading brands that are recognized globally for quality, reliability and innovation.

Current wording

The terms "us," "we," "our," "the Company" or "nVent" refer to nVent Electric plc. nVent is a leading global provider of electrical connection and protection solutions. We believe our inventive electrical solutions enable safer systems and ensure a more secure world. We design, manufacture, market, install and service high performance products and solutions that connect and protect mission critical equipment, buildings and essential processes. We offer a comprehensive range of enclosures and electrical fastening solutions across industry-leading brands that are recognized globally for quality, reliability and innovation.

Previous wording

We classify our operations into business segments based primarily on types of products offered and markets served. We operate across three segments: Enclosures, Electrical & Fastening Solutions and Thermal Management, which represented approximately 50%, 34% and 16% of total revenues during the first six months of 2024, respectively.

Current wording

We classify our operations into business segments based primarily on types of products offered and markets served. We operate across two segments: Enclosures and Electrical & Fastening Solutions, which represented approximately 60% and 40% of total revenues during the first nine months of 2024, respectively.

Previous wording

On May 18, 2023, as part of our Electrical & Fastening Solutions segment, we completed the acquisition of ECM Investors, LLC, the parent of ECM Industries, LLC ("ECM Industries"), for approximately $1.1 billion in cash, subject to customary adjustments. ECM Industries is a leading provider of high-value electrical connectors, tools and test instruments and cable management. The purchase price was funded primarily through borrowings under the 2033 Notes and 2023 Term Loan Facility (as defined below).

Current wording

On May 18, 2023, as part of our Electrical & Fastening Solutions reporting segment, we completed the acquisition of ECM Investors, LLC, the parent of ECM Industries, LLC ("ECM Industries"), for approximately $1.1 billion in cash, subject to customary purchase price adjustments. ECM Industries is a leading provider of high-value electrical connectors, tools and test instruments and cable management. The purchase price was funded primarily through borrowings under the 2033 Notes and 2023 Term Loan Facility (as defined below).

Previous wording

On July 10, 2023, we acquired TEXA Industries for approximately $34.8 million in cash, subject to customary purchase price adjustments. TEXA Industries is an Italian manufacturer of industrial cooling applications that we are marketing as part of the nVent HOFFMAN product line within our Enclosures segment.

Current wording

On July 10, 2023, we acquired TEXA Industries for approximately $34.8 million in cash, subject to customary purchase price adjustments. TEXA Industries is an Italian manufacturer of industrial cooling applications that we are marketing as part of the nVent HOFFMAN product line within our Enclosures reporting segment.

Previous wording

On July 16, 2024, we completed the acquisition of the parent of Trachte, LLC ("Trachte") as part of our Enclosures reporting segment, for approximately $695.0 million in cash, subject to customary purchase price adjustments. Trachte is a leading manufacturer of custom-engineered control building solutions designed to protect critical infrastructure assets. The purchase price was funded primarily through borrowings under the 2024 Term Loan Facility and Revolving Credit Facility (as defined below).

Current wording

On July 16, 2024, we completed the acquisition of the Trachte, LLC ("Trachte") as part of our Enclosures reporting segment, for approximately $691.3 million in cash, subject to customary purchase price adjustments. Trachte is a leading manufacturer of custom-engineered control building solutions designed to protect critical infrastructure assets. The purchase price was funded primarily through borrowings under the 2024 Term Loan Facility and Revolving Credit Facility (as defined below).

Previous wording

On July 31, 2024, we entered into a definitive agreement to sell the Thermal Management business to BCP Acquisitions LLC, an affiliate of funds managed by Brookfield Asset Management, for a purchase price of $1.7 billion in cash, subject to certain customary adjustments. We expect the Thermal Management business to be classified as held for sale in the third quarter of 2024. The transaction is expected to close by early 2025, subject to customary conditions, including regulatory approvals.

Current wording

On July 31, 2024, we entered into a definitive agreement to sell our Thermal Management business to BCP Acquisitions LLC, an affiliate of funds managed by Brookfield Asset Management, for a purchase price of $1.7 billion in cash, subject to certain customary purchase price adjustments. We expect the transaction to close by early 2025, subject to customary conditions, including regulatory approvals. The results of the Thermal Management business are reported as a discontinued operation in our Condensed Consolidated Financial Statements for all periods presented. The assets and liabilities of this business have been reclassified as held for sale in the Condensed Consolidated Balance Sheets for all periods presented. The Thermal Management business was previously disclosed as a stand-alone reporting segment.

Previous wording

The following trends and uncertainties affected our financial performance in 2023 and the first six months of 2024 and will likely impact our results in the future:

Current wording

The following trends and uncertainties affected our financial performance in 2023 and the first nine months of 2024 and will likely impact our results in the future:

Previous wording

•During 2023 and the first six months of 2024, we have experienced inflationary increases, primarily related to labor and raw material costs. While we have taken pricing actions and we have implemented and plan to continue to implement productivity improvements that could help offset these cost increases, we expect inflationary cost increases to continue in the remainder of 2024, which could negatively impact our results of operations.

Current wording

•During 2023 and the first nine months of 2024, we have experienced inflationary increases, primarily related to labor and raw material costs. While we have taken pricing actions and we have implemented and plan to continue to implement productivity improvements that could help offset these cost increases, we expect inflationary cost increases to continue in the remainder of 2024, which could negatively impact our results of operations.

Previous wording

The consolidated results of operations for the six months ended June 30, 2024 and 2023 were as follows:

Current wording

The consolidated results of operations for the nine months ended September 30, 2024 and 2023 were as follows:

Previous wording

The 9.6 and 13.7 percent increases in net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Current wording

The 9.4 and 13.9 percent increases in net sales in the third quarter and first nine months of 2024 from 2023, respectively, were primarily the result of:

Previous wording

The 0.5 and 0.1 percentage point increases in gross profit as a percentage of net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Current wording

The 0.6 percentage point decrease and flat change in gross profit as a percentage of net sales in the third quarter and first nine months of 2024 from 2023, respectively, were primarily the result of:

Previous wording

•$5.9 million of expense related to inventory step-up recorded in the second quarter and first half of 2023 as a result of the ECM Industries acquisition.

Current wording

•$11.8 million and $17.7 million of expense related to inventory step-up recorded in the third quarter and first nine months of 2023 as a result of the ECM Industries acquisition.

Previous wording

The 0.5 and 1.2 percentage point decreases in SG&A expense as a percentage of net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Current wording

The 0.1 and 0.9 percentage point decreases in SG&A expense as a percentage of net sales in the third quarter and first nine months of 2024 from 2023, respectively, were primarily the result of:

Previous wording

•intangible amortization expense of $24.4 million and $49.6 million in the second quarter and first half of 2024, respectively, compared to $21.3 million and $38.9 million in the second quarter and first half of 2023, respectively, as a result of the ECM Industries and TEXA Industries acquisitions; and

Current wording

•intangible amortization expense of $26.8 million and $66.7 million in the third quarter and first nine months of 2024, respectively, compared to $20.5 million and $49.2 million in the third quarter and first nine months of 2023, respectively, as a result of the ECM Industries, Trachte and TEXA Industries acquisitions; and

Previous wording

The increases in net interest expense in the second quarter and first half of 2024 from 2023 were the result of:

Current wording

The increases in net interest expense in the third quarter and first nine months of 2024 from 2023 were the result of:

Previous wording

•increased debt due to the acquisition of ECM Industries.

Current wording

•increased debt due to the acquisitions of ECM Industries and Trachte.

Previous wording

In the second quarter of 2023, we recorded a $10.2 million gain related to the sale of a $3.8 million equity investment recorded on a cost basis, of which the cash proceeds were received in the third quarter of 2023.

Current wording

In the first nine months of 2023, we recorded a $10.2 million gain related to the sale of a $3.8 million equity investment recorded on a cost basis, of which the cash proceeds were received in the third quarter of 2023.

Previous wording

The 6.5 and 5.4 percentage point increases in the effective tax rate in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Current wording

The 4.7 and 5.4 percentage point increases in the effective tax rate in the third quarter and first nine months of 2024 from 2023, respectively, were primarily the result of:

Previous wording

•a $4.3 million non-cash benefit related to the release of a valuation allowance on certain foreign deferred tax assets recorded in the second quarter of 2023; and

Current wording

•a $4.3 million non-cash benefit related to the release of a valuation allowance on certain foreign deferred tax assets recorded in the first nine months of 2023; and

Previous wording

The summary that follows provides a discussion of the results of operations of each of our three reportable segments (Enclosures, Electrical & Fastening Solutions and Thermal Management). Each of these segments comprises various product offerings that serve multiple end users.

Current wording

The summary that follows provides a discussion of the results of operations of each of our two reportable segments (Enclosures and Electrical & Fastening Solutions). Each of these segments comprises various product offerings that serve multiple end users.

Previous wording

The 10.2 and 11.3 percent increases in Enclosures net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Current wording

The 15.6 and 12.8 percent increases in Enclosures net sales in the third quarter and first nine months of 2024 from 2023, respectively, were primarily the result of:

Previous wording

The 1.0 and 0.8 percentage point increases in segment income for Enclosures as a percentage of net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Current wording

The 0.2 and 0.5 percentage point increases in segment income for Enclosures as a percentage of net sales in the third quarter and first nine months of 2024 from 2023, respectively, were primarily the result of:

Previous wording

•organic sales decline of approximately 3.5% and 2.0% from our commercial & residential business in the second quarter and first half of 2024 from 2023, respectively.

Current wording

•organic sales decline of approximately 2.0% from our commercial & residential business.

Previous wording

The 1.5 and 1.2 percentage point decreases in segment income for Electrical & Fastening Solutions as a percentage of net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Current wording

The 1.9 and 1.5 percentage point decreases in segment income for Electrical & Fastening Solutions as a percentage of net sales in the third quarter and first nine months of 2024 from 2023, respectively, were primarily the result of:

Previous wording

The primary source of liquidity for our business is cash flows provided by operations. We expect to continue to have cash requirements to support working capital needs and capital expenditures, to pay interest and service debt and to pay dividends to shareholders quarterly. We believe we have the ability and sufficient capacity to meet these cash requirements by using available cash, internally generated funds and borrowing under committed credit facilities. We are focused on increasing our cash flow, while continuing to fund our research and development, sales and marketing and capital investment initiatives. Our intent is to maintain investment grade metrics and a solid liquidity position. As of June 30, 2024, we had $274.0 million of cash on hand, of which $33.4 million is held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences.

Current wording

The primary source of liquidity for our business is cash flows provided by operations. We expect to continue to have cash requirements to support working capital needs and capital expenditures, to pay interest and service debt and to pay dividends to shareholders quarterly. We believe we have the ability and sufficient capacity to meet these cash requirements by using available cash, internally generated funds and borrowing under committed credit facilities. We are focused on increasing our cash flow, while continuing to fund our research and development, sales and marketing and capital investment initiatives. Our intent is to maintain investment grade metrics and a solid liquidity position. As of September 30, 2024, we had $137.1 million of cash on hand, of which $34.7 million is held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences.

Previous wording

We experience seasonal cash flows primarily due to increased demand for Electrical & Fastening Solutions products during the spring and summer months in the Northern Hemisphere and increased demand for Thermal Management products and services during the fall and winter months in the Northern Hemisphere.

Current wording

We experience seasonal cash flows primarily due to increased demand for Electrical & Fastening Solutions products during the spring and summer months in the Northern Hemisphere.

Previous wording

Net cash provided by operating activities was $146.6 million in the first six months of 2023, which primarily reflects net income, net of non-cash depreciation, amortization and changes in deferred taxes, of $264.8 million, partially offset by a $117.2 million increase in net working capital.

Current wording

Net cash provided by operating activities from continuing operations was $324.1 million in the first nine months of 2024, which primarily reflects net income, net of non-cash depreciation, amortization, and changes in deferred taxes, of $362.1 million, partially offset by a $60.3 million increase in net working capital.

Previous wording

Net cash provided by operating activities was $220.8 million in the first six months of 2024, which primarily reflects net income, net of non-cash depreciation, amortization, changes in deferred taxes, of $294.2 million, partially offset by a $87.3 million increase in net working capital.

Current wording

Net cash provided by operating activities from continuing operations was $232.5 million in the first nine months of 2023, which primarily reflects net income, net of non-cash depreciation, amortization and changes in deferred taxes, of $322.1 million, partially offset by a $98.4 million increase in net working capital.

Previous wording

Net cash used for investing activities of $34.3 million in the first six months of 2024 relates primarily to capital expenditures of $34.6 million.

Current wording

Net cash used for investing activities from continuing operations of $724.7 million in the first nine months of 2024 relates primarily to cash paid for the Trachte acquisition of $677.7 million, net of cash acquired, and capital expenditures of $47.5 million.

Previous wording

Net cash used for investing activities of $1,120.8 million in the first six months of 2023 relates primarily to cash paid for the ECM Industries acquisition of $1,091.8 million, net of cash acquired and capital expenditures of $32.3 million.

Current wording

Net cash used for investing activities from continuing operations of $1,147.3 million in the first nine months of 2023 relates primarily to cash paid for the ECM Industries acquisition of $1,119.7 million, net of cash acquired, and capital expenditures of $44.8 million.

Previous wording

Net cash provided by financing activities of $811.2 million in the first six months of 2023 relates primarily to receipts from long-term debt of $800.0 million and net receipts from the revolving long-term credit facility of $100.0 million, offset by dividends paid of $58.5 million and share repurchases of $15.2 million.

Current wording

Net cash provided by financing activities from continuing operations of $672.1 million in the first nine months of 2023 relates primarily to receipts from long-term debt of $800.0 million, offset by dividends paid of $87.6 million and share repurchases of $15.2 million.

Previous wording

In June 2024, nVent and nVent Finance entered into a new loan agreement among nVent Finance, as borrower, nVent as guarantor, and the lenders and agents party thereto, providing for a two-year $500.0 million senior unsecured term loan facility (the "2024 Term Loan Facility"). As of June 30, 2024, the borrowing capacity under the 2024 Term Loan Facility was $500.0 million. On July 16, 2024, we partially financed the acquisition of Trachte using the 2024 Term Loan Facility. The 2024 Term Loan Facility bears interest at a rate equal to an adjusted base rate or adjusted term SOFR plus, in each case, an applicable margin.

Current wording

In June 2024, nVent and nVent Finance entered into a new loan agreement among nVent Finance, as borrower, nVent as guarantor, and the lenders and agents party thereto, providing for a two-year $500.0 million senior unsecured term loan facility (the "2024 Term Loan Facility"). In July 2024, we partially financed the acquisition of Trachte using the 2024 Term Loan Facility. The 2024 Term Loan Facility bears interest at a rate equal to an adjusted base rate or adjusted term SOFR plus, in each case, an applicable margin.

Previous wording

Our debt agreements contain certain financial covenants, the most restrictive of which are in the Senior Credit Facilities and the 2023 Term Loan Facility, including that we may not permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash in excess of $5.0 million but not to exceed $250.0 million) to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense ("EBITDA") on the last day of any period of four consecutive fiscal quarters (each a "testing period") to exceed 3.75 to 1.00 (or, at nVent Finance's election and subject to certain conditions, 4.25 to 1.00 for four testing periods in connection with certain material acquisitions) and (ii) the ratio of our EBITDA to our consolidated interest expense for the same period to be less than 3.00 to 1.00. In addition, subject to certain qualifications and exceptions, the Senior Credit Facilities and the 2023 Term Loan Facility also contain covenants that, among other things, restrict our ability to create liens, merge or consolidate with another person, make acquisitions and incur subsidiary debt. As of June 30, 2024, we were in compliance with all financial covenants in our debt agreements, and there is no material uncertainty about our ongoing ability to meet those covenants.

Current wording

Our debt agreements contain certain financial covenants, the most restrictive of which are in the Senior Credit Facilities, the 2023 Term Loan Facility and 2024 Term Loan Facility, including that we may not permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash in excess of $5.0 million but not to exceed $250.0 million) to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense ("EBITDA") on the last day of any period of four consecutive fiscal quarters (each a "testing period") to exceed 3.75 to 1.00 (or, at nVent Finance's election and subject to certain conditions, 4.25 to 1.00 for four testing periods in connection with certain material acquisitions) and (ii) the ratio of our EBITDA to our consolidated interest expense for the same period to be less than 3.00 to 1.00. In addition, subject to certain qualifications and exceptions, the Senior Credit Facilities, the 2023 Term Loan Facility, and the 2024 Term Loan Facility also contain covenants that, among other things, restrict our ability to create liens, merge or consolidate with another person, make acquisitions and incur subsidiary debt. As of September 30, 2024, we were in compliance with all financial covenants in our debt agreements, and there is no material uncertainty about our ongoing ability to meet those covenants.

Previous wording

On May 14, 2021, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $300.0 million (the "2021 Authorization"). The 2021 Authorization began on July 23, 2021 and expired on July 22, 2024.

Current wording

On May 14, 2021, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $300.0 million (the "2021 Authorization"). The 2021 Authorization expired on July 22, 2024.

Previous wording

During the six months ended June 30, 2024, we did not repurchase ordinary shares under the 2021 Authorization. During the six months ended June 30, 2023, we repurchased 0.3 million of our ordinary shares for $13.2 million under the 2021 Authorization.

Current wording

During the nine months ended September 30, 2024, we repurchased 1.5 million of our ordinary shares for $100.0 million under the 2024 Authorization and we did not repurchase ordinary shares under the 2021 Authorization. During the nine months ended September 30, 2023, we repurchased 0.3 million of our ordinary shares for $13.2 million under the 2021 Authorization.

Previous wording

As of June 30, 2024, we had $81.8 million available for share repurchases under the 2021 Authorization.

Current wording

As of September 30, 2024, we had $400.0 million available for share repurchases under the 2024 Authorization.

Previous wording

During the six months ended June 30, 2024, we paid dividends of $63.6 million, or $0.38 per ordinary share. During the six months ended June 30, 2023, we paid dividends of $58.5 million, or $0.35 per ordinary share.

Current wording

During the nine months ended September 30, 2024, we paid dividends of $95.3 million, or $0.57 per ordinary share. During the nine months ended September 30, 2023, we paid dividends of $87.6 million, or $0.525 per ordinary share.

Previous wording

On May 17, 2024, the Board of Directors declared a quarterly cash dividend of $0.19 per ordinary share that was paid on August 2, 2024, to shareholders of record at the close of business on July 19, 2024. The balance of dividends payable included in Other current liabilitieson our Condensed Consolidated Balance Sheets was $32.3 million and $32.6 million at June 30, 2024 and December 31, 2023, respectively.

Current wording

On September 24, 2024, the Board of Directors declared a quarterly cash dividend of $0.19 per ordinary share that was paid on November 1, 2024, to shareholders of record at the close of business on October 18, 2024. The balance of dividends payable included in Other current liabilitieson our Condensed Consolidated Balance Sheets was $32.1 million and $32.6 million at September 30, 2024 and December 31, 2023, respectively.

Previous wording

In addition to measuring our cash flow generation or usage based upon operating, investing and financing classifications included in the Condensed Consolidated Statements of Cash Flows, we also measure our free cash flow. Free cash flow is a non-GAAP financial measure that we use to assess our cash flow performance. We believe free cash flow is an important measure of liquidity because it provides us and our investors a measurement of cash generated from operations that is available to pay dividends, make acquisitions, repay debt and repurchase shares. In addition, free cash flow is used as a criterion to measure and pay annual incentive compensation. Our measure of free cash flow may not be comparable to similarly titled measures reported by other companies.

Current wording

In addition to measuring our cash flow generation or usage based upon operating, investing and financing classifications included in the Condensed Consolidated Statements of Cash Flows, we also measure our free cash flow. Free cash flow is a non-GAAP financial measure that we use to assess our cash flow performance. Total results below reflect continuing operations combined with discontinued operations. We believe free cash flow is an important measure of liquidity because it provides us and our investors a measurement of cash generated from operations that is available to pay dividends, make acquisitions, repay debt and repurchase shares. In addition, free cash flow is used as a criterion to measure and pay annual incentive compensation. Our measure of free cash flow may not be comparable to similarly titled measures reported by other companies.