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What changed in Vontier Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Vontier Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+258 added−252 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-17)

Top changes in Vontier Corp's 2023 10-K

258 paragraphs added · 252 removed · 181 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

39 edited+24 added−23 removed24 unchanged
Biggest changeOur car wash solutions are marketed under a variety of brands, including Patheon, SiteWatch, Suds, TunnelWatch, NoPileups, FastPass, Washify, InvoMax, Auto Data and Sage Microsystems. 4 Table of Contents • Telematics: Our telematics products include vehicle tracking and fleet management hardware and software solutions offered as SaaS that fleet managers use to position and dispatch vehicles, manage fuel consumption and promote vehicle and driver safety, compliance, operating efficiency and productivity.
Biggest changeWe provide an end-to-end technology platform combining embedded point-of-sale, workflow and monitoring software, customer support, digital marketing and payment facilitation services. Our car wash solutions are marketed under a variety of brands, including Patheon, SiteWatch, Suds, TunnelWatch, NoPileups, FastPass, Washify, InvoMax, Auto Data and Sage Microsystems.
We are guided by our shared purpose to mobilize the future to create a better world and we are united by our culture of continuous improvement and bias for actions that embody the Vontier Business System (“VBS”).
We are guided by our shared purpose to mobilize the future to create a better world and are united by a culture of continuous improvement and bias for actions that embody the Vontier Business System (“VBS”).
Most of our sales in non-U.S. markets are made by our subsidiaries located outside the United States, though we also sell directly from the United States into non-U.S. markets through various representatives and distributors and, in some cases, directly. In countries with low sales volumes, we generally sell through representatives and distributors.
Most of our sales in non-U.S. markets are made by our subsidiaries located outside the United States, though we also sell directly from the United States into non-U.S. markets through sales to various representatives and distributors and, in some cases, directly. In countries with low sales volumes, we generally sell to representatives and distributors.
Human Capital Resources The Company’s key human capital management objectives are to attract, motivate, retain and develop the highest quality talent, united by a common culture in pursuit of continuous improvement.
Human Capital Resources The Company’s key human capital management objectives are to attract, motivate, retain and develop the highest quality talent, united by VBS and a common culture in pursuit of continuous improvement.
We believe that DRB’s market leading integrated technology, superior reliability, high customer retention and unique business model position us well to capitalize on numerous paths for accelerated growth, including customer consolidation, continued shift from full service to express car washes, increasing adoption of workflow technology-as-a-service, shorter upgrade cycles, and water efficiency programs and usage restrictions.
We believe that DRB’s market leading integrated technology, superior reliability, high customer retention and unique business model position us well to capitalize on numerous paths for accelerated growth, including customer consolidation, continued shift from full service to express car washes, increasing adoption of workflow technology-as-a-service, shorter upgrade cycles, labor challenges and water efficiency programs and usage restrictions.
Government Contracts Although the substantial majority of our revenue in 2022 was from customers other than governmental entities, we have agreements relating to the sale of products to government entities. As a result, we are subject to various statutes and regulations that apply to companies doing business with governments and government-owned entities.
Government Contracts Although the substantial majority of our revenue in 2023 was from customers other than governmental entities, we have agreements relating to the sale of products to government entities. As a result, we are subject to various statutes and regulations that apply to companies doing business with governments and government-owned entities.
Our commitment to VBS and goal of creating long-term shareholder value has enabled us to drive customer satisfaction and profitability, significant improvements in innovation, growth and operating margins, and disciplined acquisitions to execute our strategy and expand our portfolio into new and attractive markets.
Our commitment to VBS and goal of creating long-term shareholder value has enabled us to drive customer satisfaction and profitability, significant improvements in innovation, growth and disciplined acquisitions to execute our strategy and expand our portfolio into new and attractive markets.
Department of Commerce, Bureau of Industry and Security, which, among other things, impose licensing requirements on the export, in-country transfer and re-export of certain dual-use goods, technology and software (which are items that have both commercial and military or proliferation applications); 7 Table of Contents • the regulations administered by the U.S.
Department of Commerce, Bureau of Industry and Security, which, among other things, impose licensing requirements on the export, in-country transfer and re-export of certain dual-use goods, technology and software (which are items that have both commercial and military or proliferation applications); • the regulations administered by the U.S.
Vontier Corporation is a Delaware corporation that was incorporated in 2019 in connection with the separation of Vontier from Fortive Corporation (“Fortive” or “Former Parent”) on October 9, 2020, as an independent, publicly-traded company, listed on the New York Stock Exchange (the “Separation”).
Vontier Corporation is a Delaware corporation that was incorporated in 2019 in connection with the separation of Vontier from Fortive Corporation (“Fortive”) on October 9, 2020, as an independent, publicly-traded company, listed on the New York Stock Exchange (the “Separation”).
For a discussion of the environmental laws and regulations that our operations, products and services are subject to and other environmental contingencies, please refer to Note 17. Litigation and Contingencies to the Consolidated and Combined Financial Statements included in this Annual Report.
For a discussion of the environmental laws and regulations that our operations, products and services are subject to and other environmental contingencies, please refer to Note 18. Litigation and Contingencies to the Consolidated Financial Statements included in this Annual Report.
We seek to continue to attract, develop and retain world-class leaders and employees globally and to drive their engagement with our customer-centric approach. As of December 31, 2022, we employed approximately 8,100 persons, of whom approximately 3,900 were employed in the United States and approximately 4,200 were employed outside of the United States.
We seek to continue to attract, develop and retain world-class leaders and employees globally and to drive their engagement with our customer-centric approach. As of December 31, 2023, we employed approximately 8,000 persons, of whom approximately 3,900 were employed in the United States and approximately 4,100 were employed outside of the United States.
For a discussion of risks related to our intellectual property, please refer to “Item 1A. Risk Factors.” 5 Table of Contents Competition We believe that we are a leader in many of our served markets.
For a discussion of risks related to our intellectual property, please refer to “Item 1A. Risk Factors.” Competition We believe that we are a leader in many of our served markets.
In 2022, over 4,000 Vontier employees around the world participated in Day of Caring initiatives supporting disaster relief, education, and fighting hunger and homelessness. • Safety. Our robust safety program prioritizes employee safety and wellbeing across all workplace environments.
In 2023, over 4,200 Vontier employees around the world participated in Day of Caring initiatives supporting disaster relief, education, and fighting hunger and homelessness. • Safety. Our robust safety program prioritizes employee safety and wellbeing across all workplace environments.
Research and development costs are expensed as incurred. Materials Our manufacturing operations employ a wide variety of raw materials, including electronic components, steel, plastics and other resins, cast iron, aluminum and copper. Prices of oil and gas affect our costs for freight and utilities. We purchase raw materials from a large number of independent sources around the world.
Materials Our manufacturing operations employ a wide variety of raw materials, including electronic components, steel, plastics and other resins, cast iron, aluminum and copper. Prices of oil and gas affect our costs for freight and utilities. We purchase raw materials from a large number of independent sources around the world.
Of our United States employees, approximately 950 were hourly-rated, unionized employees. Outside the United States, we have government-mandated collective bargaining arrangements and union contracts in certain countries, particularly in Europe where certain of our employees are represented by unions and/or works councils.
Of our United States employees, approximately 850 were hourly-rated, unionized employees. Outside the United States, we have government-mandated collective bargaining arrangements and union contracts in certain countries, particularly in Europe where certain of our employees are represented by unions and/or works councils. The Company believes that its relationship with employees is good.
We utilize a number of techniques to address potential disruption in and other risks relating to our supply chain, including in certain cases the use of safety stock, alternative materials and qualification of multiple supply sources. During 2022, we experienced supply chain constraints related to certain raw materials, including resins, semiconductors and electronic components.
We utilize a number of techniques to address potential disruption in and other risks relating to our supply chain, including in certain cases the use of safety stock, alternative materials and qualification of multiple supply sources.
Given the relatively short delivery periods and rapid inventory turnover that are characteristic of most of our products and the shortening of product life cycles, we believe that backlog in 2022 is indicative of short-term sales performance but not necessarily a reliable indicator of medium or long-term sales performance.
Given the relatively short delivery periods that are characteristic of most of our products, we believe that our backlog is indicative of short-term sales performance but not necessarily a reliable indicator of medium or long-term sales performance.
One primary way we do this is through our unique employee connection programs – Vontier Cares and Day of Caring. Throughout the year, employees make a positive impact in their local communities through volunteering and other support.
We are committed to providing comfort to those in need and opportunity to those who want to improve their world. One primary way we do this is through our unique employee connection programs – Vontier Cares and Day of Caring. Throughout the year, employees make a positive impact in their local communities through volunteering and other support.
Our smart city solutions are provided under a variety of brands, including GTT and Opticom. Customers in this line of business choose suppliers based on several factors, including product features, performance and functionality, the supplier’s geographic coverage and the other factors described under “Competition.” Sales are generally made through independent distributors and our direct sales personnel.
Customers in this segment choose suppliers based on several factors, including product features, performance and functionality, the supplier’s geographic coverage and the other factors described under “Competition.” Sales are generally made to independent distributors or through our direct sales personnel.
The Company believes that its relationship with employees is good. 6 Table of Contents Some examples of key programs and initiatives that are focused to attract, motivate, develop and retain our diverse workforce include: • Inclusion, diversity and equity (ID&E) .
Some examples of key programs and initiatives that are focused to attract, motivate, develop and retain our diverse workforce include: • Inclusion, diversity and equity (ID&E) .
Our business in Russia and Ukraine was not material to our results and accounted for less than 10 basis points of our total revenue for the year ended December 31, 2022.
Our business in Russia, Ukraine and Israel was not material to our results. We did not have any sales in Russia during the year ended December 31, 2023. Sales in Ukraine and Israel accounted for less than 60 basis points of our total sales for the year ended December 31, 2023.
After the secondary offering, Fortive no longer owned any of the Company’s outstanding common stock. In this Annual Report on Form 10-K, the terms “Vontier” or the “Company” refer to either Vontier Corporation or to Vontier Corporation and its consolidated subsidiaries, as the context requires.
In this Annual Report on Form 10-K, the terms “Vontier” or the “Company” refer to either Vontier Corporation or to Vontier Corporation and its consolidated subsidiaries, as the context requires.
Backlog as of December 31, 2022 and 2021 was $677.3 million and $733.9 million, respectively. We expect that a majority of the unfilled orders as of December 31, 2022 will be delivered to customers within the first half of 2023.
We expect that a majority of the unfilled orders as of December 31, 2023 will be delivered to customers within the first half of 2024.
We also generate sales from initial and recurring franchise fees as well as various financing programs that include installment sales to franchisees. We believe that Matco’s integrated workflow and diagnostic solutions are well positioned to capitalize on the increasing complexity of vehicles as advanced driver-assistance systems and other vehicle automation systems become prevalent.
We believe that Matco Tools’ integrated workflow and diagnostic solutions are well positioned to capitalize on the increasing complexity of vehicles as advanced driver-assistance systems and other vehicle automation systems become prevalent.
For example, capital equipment sales are often stronger in the fourth calendar quarter and sales to original equipment manufacturers (“OEMs”) are often stronger immediately preceding and following the launch of new products. However, as a whole, we are not subject to material seasonality. Working Capital We maintain an adequate level of working capital to support our business needs.
For example, capital equipment sales are often stronger in the fourth calendar quarter and sales to original equipment manufacturers (“OEMs”) are often stronger immediately preceding and following the launch of new products.
In addition, we believe that our future growth depends in part on our ability to continue developing products and sales models that successfully target high-growth markets. The manner in which our products and services are sold outside the United States differs by business and by region.
In addition, we believe that our future growth depends in part on our ability to continue developing products and sales models that successfully target high-growth markets, which we define as developing markets of the world experiencing extended periods of accelerated growth in gross domestic product and infrastructure, which include Eastern Europe, the Middle East, Africa, Latin America and Asia Pacific (with the exception of Japan and Australia). 7 Table of Contents The manner in which our products and services are sold outside the United States differs by business and by region.
We market our products and services to retail and commercial fueling operators, convenience store and in-bay car wash operators, tunnel car wash businesses, commercial vehicle repair businesses, municipal governments and public safety entities and fleet owners/operators on a global basis.
Vontier markets its products and services to retail and commercial fueling operators, convenience store operators, car wash operators, commercial vehicle repair businesses, fleet owners/operators and electric vehicle charging network operators on a global basis.
We prioritize and invest in creating opportunities to help employees grow and build their careers, through a multitude of training and development programs. These include online, instructor-led and on-the-job learning formats as well as executive talent and succession planning paired with an individualized development approach.
These include online, instructor-led and on-the-job learning formats as well as executive talent and succession planning paired with an individualized development approach.
For a further discussion of risks related to the materials and components required for our operations, please refer to “Item 1A. Risk Factors.” Intellectual Property We own numerous patents, trademarks, copyrights and trade secrets and licenses to intellectual property owned by others.
Risk Factors.” Intellectual Property We own numerous patents, trademarks, copyrights and trade secrets and licenses to intellectual property owned by others.
Customers in this line of business choose suppliers based on several factors, including relevant innovative features, convenience and the other factors described under “Competition.” Research and Development We conduct research and development activities for the purpose of developing new products, enhancing the functionality, effectiveness, ease of use and reliability of our existing products and expanding the applications for which uses of our products are appropriate.
Research and Development We conduct research and development activities for the purpose of developing new products, enhancing the functionality, effectiveness, ease of use and reliability of our existing products and expanding the applications for which uses of our products are appropriate. Research and development costs are expensed as incurred.
ITEM 1. BUSINESS General Vontier Corporation (“Vontier,” the “Company,” “we,” or “our”) is a global industrial technology company at the forefront of solving next-generation mobility challenges.
ITEM 1. BUSINESS General Vontier Corporation (“Vontier,” the “Company,” “we,” or “our”) is a global industrial technology company uniting productivity, automation and multi-energy technologies to meet the needs of a rapidly evolving, more connected mobility ecosystem.
We supply a wide range of solutions spanning advanced environmental sensors; fueling equipment; field payment hardware; point-of sale, workflow and monitoring software; vehicle tracking and fleet management; software solutions for traffic light control; and vehicle mechanics’ and technicians’ equipment.
The Company serves a diverse set of end markets across the mobility ecosystem, supplying a wide range of solutions spanning advanced environmental sensing and monitoring equipment, fueling equipment, field payment hardware, point-of-sale, workflow and monitoring software, vehicle tracking and fleet management, software platform for EV charging, alternative fuel dispensing solutions and vehicle service technicians’ equipment.
Franchisees purchase vehicle repair tools, equipment and services from us and resell to end customers directly. To complement our offering of Matco vehicle repair tools, we have developed a SaaS suite of diagnostic tools and software to enhance repair shop workflow and strengthen relationships with our customers.
To complement our offering of vehicle repair tools, we have developed a software as a service (“SaaS”) suite of diagnostic tools and software to enhance repair shop workflow and strengthen relationships with our customers. We also generate sales from initial and recurring franchise fees as well as various financing programs that include installment sales to franchisees.
Through our DRB business, we primarily provide solutions to the car wash industry. We provide an end-to-end technology platform combining embedded point-of-sale, workflow and monitoring software, customer support, digital marketing and payment facilitation services. We serve individual customer sites and have long-standing relationships with the majority of the top 20 car wash platforms in North America.
We serve individual customer sites and have long-standing relationships with the majority of the top 20 car wash platforms in North America.
Diagnostics and Repair Technologies Products and Solutions Our products consist of: • Vehicle Repair: We manufacture and distribute vehicle repair tools, toolboxes and automotive diagnostic equipment and software through our network of franchised mobile distributors, who sell primarily to professional mechanics under the Matco brand. • Wheel-Service Equipment: We produce a full line of wheel-service equipment for automotive tire installation and repair shops, including tire changers, wheel balancers, wheel aligners, lifts and inspection lane systems sold through direct sales personnel and independent distributors and distributed under the Coats brand.
Under the Matco Tools brand, we manufacture and distribute vehicle repair tools, toolboxes and automotive diagnostic equipment and software through our network of franchised mobile distributors, who purchase vehicle repair tools, equipment and services from us and resell primarily to professional mechanics directly.
There are no unusual industry practices or requirements relating to working capital items. In addition, our sales and payment terms are generally similar to those of our competitors. Backlog Backlog includes unfilled orders and the annual average contract value of signed contracts for our SaaS product offerings.
However, as a whole, we are not subject to material seasonality. 5 Table of Contents Working Capital We maintain an adequate level of working capital to support our business needs. There are no unusual industry practices or requirements relating to working capital items. In addition, our sales and payment terms are generally similar to those of our competitors.
In 2022, the ERGs launched a cross-ERG initiative, Journey to Allyship, designed to empower employees and build more inclusive workplaces across our organization; and ◦ Our CEO took two pledges: the CEO Action for Diversity and Inclusion and The Valuable 500. • Health, wellness and family resources.
Our 2023 ERG participation rate increased four times from 2022 participation rates; and ▪ Our CEO took two pledges: the CEO Action for Diversity and Inclusion and The Valuable 500. • Health, wellness and family resources. Our benefit offerings are designed to meet the varied and evolving needs of a diverse workforce across businesses and geographies.
We believe that our differentiated technology and software solutions are positioned to benefit from increasing regulations worldwide governing driver safety, hours of service and recording and monitoring requirements. 3 Table of Contents Through our GTT business, we provide smart city solutions focused on improving safety, travel times, fuel costs and on-time performance of public transit and emergency vehicles.
We believe that our differentiated technology and software solutions are positioned to benefit from increasing regulations worldwide governing driver safety, hours of service, recording and monitoring requirements and the adoption of alternative fuels. ANGI provides equipment, software and services to commercial and government fleet operators as well as retail gaseous full station developers and operators.
We have a large installed customer base with pay-at-pump devices and convenience stores utilizing our point-of-sale technology globally. We believe our substantial scale and sophisticated technology offerings strategically position us to capitalize on key market trends, including increasing vehicle ownership and infrastructure buildout, particularly in high-growth markets where we believe we have significant opportunities to expand our customer base.
We believe our substantial scale and sophisticated technology offerings strategically position us to capitalize on key market trends, including fueling site consolidation and complexity, increasing regulatory requirements and global regulations, and aging infrastructure.
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Guided by the Vontier Business System and an unwavering commitment to our customers, we deliver smart, sustainable solutions for the road ahead by focusing on critical technical equipment, components, and software and services for manufacturing, repair and servicing in the mobility ecosystem worldwide.
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Leveraging leading market positions, decades of domain expertise and unparalleled portfolio breadth, Vontier enables the way the world moves, delivering smart, safe and sustainable solutions to our customers and the planet.
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We market our products and services globally, with $419.1 million of our 2022 sales coming from high-growth markets, which we define as developing markets of the world experiencing extended periods of accelerated growth in gross domestic product and infrastructure, which include Eastern Europe, the Middle East, Africa, Latin America and Asia Pacific (with the exception of Japan and Australia).
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Through our VBS-led execution of our Connected Mobility strategy, we are accelerating the transformation to a connected, smart mobility ecosystem by creating enhanced and interconnected platforms throughout our segments. Segments In the first quarter of 2023, we realigned our internal organization to align with our strategy, resulting in changes to our operating segments.
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In the mobility technologies market, we are a leading global provider of solutions and services focused on environmental compliance, fuel dispensing, remote fuel management, point-of-sale and payment systems, vehicle tracking and fleet management (“telematics”), and traffic management (“smart city solutions”), with products marketed under the Gilbarco, Veeder-Root, Orpak, DRB, Teletrac Navman and Global Traffic Technologies (“GTT”) brands.
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We now operate through three reportable segments comprised of three operating segments. Our three operating segments, and businesses within, are as follows: • Mobility Technologies: Invenco by GVR, DRB, Teletrac Navman, ANGI and EVolve. • Repair Solutions: Matco Tools. • Environmental & Fueling Solutions: Gilbarco Veeder-Root.
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We serve our major markets with local manufacturing, sales, and service capabilities that offer tailored solutions for local customers based on their unique needs. With research and development for our mobility technologies products supporting our local presence in global markets, we deliver innovative solutions to customers around the world.
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The Company’s Global Traffic Technologies and Coats (formerly part of Hennessy) businesses, which were divested during April 2023 and January 2024, respectively, are presented in Other for periods prior to the divestitures. Mobility Technologies Mobility Technologies provides digitally enabled equipment and operating software solutions to drive automation, productivity and compliance across the mobility ecosystem.
Removed
Through our Gilbarco, Veeder-Root and Orpak businesses, we serve owners and operators of retail fuel stations and convenience stores globally. We market a suite of products, software and services to improve safety, environmental compliance and efficiency across our customers’ forecourts, stores and fuel supply chains.
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Offerings include convenience retail operating platform, point-of-sale and payment solutions, remote diagnostics and site-management tools, IoT-based fleet telematics and workflow automation solutions, data analytics, operating software platform for electric vehicle charging networks and integrated solutions for alternative fuel dispensing.
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Through our Teletrac Navman business, we provide telematics solutions which are delivered as software-as-a-service (“SaaS”) to commercial and government fleet operators to provide visibility into vehicle location, fuel usage, speed, mileage and other insights into their mobile workforce in order to improve safety and productivity.
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Mobility Technologies serves major markets with tailored solutions for customers based on their unique needs. 3 Table of Contents Invenco by GVR serves convenience retail stores and energy retailing providers globally.
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Our solutions connect and communicate with intersections, vehicles and emergency/transit operating systems to monitor, assess and take real-time action to change traffic flow so that emergency and transit vehicles get to their destinations as quickly and safely as possible.
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We provide a network of connected solutions including devices, software, APIs and services to improve productivity, automation, compliance and safety to help our customers deliver better consumer experiences, increase revenue yield and generate higher margins.
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We believe our smart city solutions help make cities safer and more livable by improving response times of emergency service vehicles and the efficiency of public transport. During the three months ended July 1, 2022, we reached the strategic decision to exit our GTT business.
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Our end-to-end solutions ensure uninterrupted operations for our customers’ site covering forecourts, stores and other on-site services including quick service restaurants, car washes and EV charging. We have a large installed customer base with point-of-sale and self-checkout technology, payment processing and workflow software, payment terminals, site automation services, media capabilities, loyalty, remote site management, and fuel logistics offerings.
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In the diagnostics and repair technologies market, we deliver a broad set of vehicle repair tools and equipment for professional mechanics and technicians under the Matco and Coats brands. Matco markets its products and services to automotive dealers, repair shops and fleet maintenance facilities through a network of franchised mobile distributors.
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Our universally compatible, modular, composable cloud-connected solutions are designed to integrate seamlessly with one-another as well as third-party offerings, enabling our customers to extend and rapidly deploy new features across their network.
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Through its Coats brands, our Hennessy business produces and markets a full line of wheel-service equipment including tire changers, wheel balancers, wheel aligners, lifts and inspection lane systems.
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We believe we are uniquely positioned to deliver end-to-end technology solutions at-scale to customers, enabling them to manage changing consumer preferences, labor shortages, increasing site complexity and technology investments, and the rising cost of compliance. DRB provides integrated technology solutions to the car wash industry.
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Hennessy delivers its solutions directly to customers, through a strong distributor network to reach its primary customer base of tire installation and repair shops and through its nationwide network of mobile service technicians that provide installation and repair services. During the three months ended July 1, 2022, we reached the strategic decision to exit our Hennessy business.
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Teletrac Navman offers telematics hardware and software solutions to commercial and government fleet operators. We provide vehicle tracking devices, telematics hardware and software solutions, and end-to-end sustainable fleet management solutions.
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The Separation was effectuated through a pro-rata distribution on October 9, 2020, of 80.1% of the then-outstanding shares of common stock of Vontier Corporation to the holders of common stock of Fortive as of September 25, 2020. In January 2021, Fortive sold a total of 33.5 million shares of the Company’s common stock as part of a secondary offering.
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Our global customer base leverages our suite of solutions for data-driven insights into fleet operations, vehicle and equipment maintenance and asset utilization to improve fleet safety and productivity, optimize business performance and deliver on sustainability or decarbonization commitments.
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Reportable Segment Vontier operates through one reportable segment comprised of two operating segments: (i) mobility technologies, which is a leading worldwide provider of environmental compliance, solutions and services focused on fuel dispensing, remote fuel management, point-of-sale and payment systems, telematics and smart city solutions, and (ii) diagnostics and repair technologies, which manufactures and distributes vehicle repair tools, toolboxes and automotive diagnostic equipment and software and a full line of wheel-service equipment.
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Our full-site integrated solutions span compressed natural gas (“CNG”), renewable natural gas (“RNG”), hydrogen (H2) and biogas compression and dispensing. We offer scalable, modular systems, including dispensing, compression, storage, service, and automation solutions to support global fleet decarbonization.
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Given the interrelationships of the products, technologies and customers and the resulting similar long-term economic characteristics, we meet the aggregation criteria and have combined our two operating segments into a single reportable segment.
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We believe our industry leading alternative energy fueling offerings strategically position us to capitalize on key market trends, including infrastructure buildout and decarbonization at scale. EVolve, made up of our Driivz and Sparkion businesses, serves charge point operators and fleet operators, globally.
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Mobility Technologies Products and Solutions Through our mobility technologies products, we are a leading worldwide provider of solutions and services focused on environmental compliance, fuel dispensing, remote fuel management, point-of-sale and payment systems, telematics, and smart city solutions.
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Our interoperable electric vehicle charging and energy management platform solutions enable customers to facilitate EV charging economically at scale, secure energy resiliency and deliver on sustainability or decarbonization commitments. We believe our market leading technologies position us to capitalize on key market trends, including the investment in and adoption of electrified fleets, alternative fueling, and infrastructure buildout.
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Our mobility technologies products are comprised of: • Retail/Commercial Fueling: Our products include environmental monitoring and leak detection systems; vapor recovery equipment; fuel dispenser systems for petroleum and compressed natural gas; point-of-sale and secure and automated electronic payment technologies for retail petroleum stations; submersible turbine pumps; and remote monitoring and outsourced fuel management SaaS offerings, including compliance services, fuel system maintenance, fleet management software solutions, and inventory planning and supply chain support.
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Repair Solutions Repair Solutions comprises the Matco Tools business, a leading manufacturer and distributor of aftermarket vehicle repair tools, toolboxes, automotive diagnostic equipment and software through a robust network of mobile franchisees.
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Typical users of these products include independent and company-owned retail petroleum stations, high-volume retailers, convenience stores and commercial vehicle fleets. Our products are marketed under a variety of brands, including ANGI, Gilbarco, Orpak, Red Jacket and Veeder-Root. • Car Wash Solutions: Our car wash solutions include point-of-sale, workflow and monitoring hardware and software.
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Customers in this segment choose suppliers based on several factors, including relevant innovative features, convenience and the other factors described under “Competition.” 4 Table of Contents Environmental & Fueling Solutions Environmental & Fueling Solutions is a leading manufacturer and provider of solutions to improve safety, environmental compliance and fueling efficiency globally.
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Typical users of these solutions span tunnel and convenience store in-bay car wash operators.
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Through brands including Gilbarco, Veeder-Root, and Fafnir, we serve independent and company owned retail and commercial fueling operators with industry-leading environmental monitoring and leak detection systems, forecourt controllers, vapor recovery equipment and fuel dispenser systems for petroleum. Our large installed base of products provides a recurring revenue stream for aftermarket parts and service offerings.
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Typical users of these solutions span large and small fleet owners in a variety of industries and include businesses and other organizations that manage vehicle fleets.
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Customers in this segment choose suppliers based on several factors, including product features, performance and functionality, the supplier’s geographic coverage and the other factors described under “Competition.” Sales are generally made to independent distributors or through our direct sales personnel.
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Our telematics products are marketed under a variety of brands, including Teletrac Navman. • Smart City: Our smart city solutions focus on improving public transportation and emergency vehicle travel times, fuel costs and on-time performance.
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During 2023, we experienced normalizing supply chain conditions, with the supply chain constraints that we experienced in 2022 for certain raw materials, including resins, semiconductors and electronic components, easing during the year. For a further discussion of risks related to the materials and components required for our operations, please refer to “Item 1A.
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Solutions connect and communicate with intersections, vehicles and emergency/transit operating systems to monitor, assess and take real-time action to change traffic flow so that emergency and transit vehicles get to their destinations as quickly and safely as possible. Typical users of these solutions include public transit and emergency vehicles with applications in broader public transport.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

47 edited+11 added−22 removed143 unchanged
Biggest changeCertain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the acquired company before we acquired it. In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities.
Biggest changeThe indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities. Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the acquired company before we acquired it.
These acquisitions, investments, joint ventures and strategic relationships involve a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following, any of which could adversely affect our business and our financial statements: • any business, technology, service or product that we acquire or invest in could under-perform relative to our expectations and the price that we paid for it, or not perform in accordance with our anticipated timetable, or we could fail to operate any such business profitably; • we may incur or assume significant debt in connection with our acquisitions, investments, joint ventures or strategic relationships, which could also cause a deterioration of our credit ratings, result in increased borrowing costs and interest expense and diminish our future access to the capital markets; • acquisitions, investments, joint ventures or strategic relationships could cause our financial results to differ from our own or the investment community’s expectations in any given period, or over the long-term; • pre-closing and post-closing earnings charges could adversely impact operating results in any given period, and the impact may be substantially different from period to period; 11 Table of Contents • acquisitions, investments, joint ventures or strategic relationships could create demands on our management, operational resources and financial and internal control systems that we are unable to effectively address; • we may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition, investment, joint venture or strategic relationship; • we may assume unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater than anticipated, internal control deficiencies or exposure to regulatory sanctions resulting from the acquired company’s or investee’s activities.
These acquisitions, investments, joint ventures and strategic relationships involve a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following, any of which could adversely affect our business and our financial statements: • any business, technology, service or product that we acquire or invest in could under-perform relative to our expectations and the price that we paid for it, or not perform in accordance with our anticipated timetable, or we could fail to operate any such business profitably; • we may incur or assume significant debt in connection with our acquisitions, investments, joint ventures or strategic relationships, which could also cause a deterioration of our credit ratings, result in increased borrowing costs and interest expense and diminish our future access to the capital markets; • acquisitions, investments, joint ventures or strategic relationships could cause our financial results to differ from our own or the investment community’s expectations in any given period, or over the long-term; • pre-closing and post-closing earnings charges could adversely impact operating results in any given period, and the impact may be substantially different from period to period; • acquisitions, investments, joint ventures or strategic relationships could create demands on our management, operational resources and financial and internal control systems that we are unable to effectively address; • we may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition, investment, joint venture or strategic relationship; • we may assume unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater than anticipated, internal control deficiencies or exposure to regulatory sanctions resulting from the acquired company’s or investee’s activities.
Our international business (and particularly our business in high-growth markets) is subject to risks that are customarily encountered in non-U.S. operations, including: • interruption in the transportation of materials to us and finished goods to our customers; • differences in terms of sale, including payment terms; • local product preferences and product requirements; • changes in a country’s or region’s political or economic conditions, including changes in relationship with the U.S.; 15 Table of Contents • trade protection measures, embargoes and import or export restrictions and requirements; • unexpected changes in laws or regulatory requirements, including changes in tax laws; • capital controls and limitations on ownership and on repatriation of earnings and cash; • epidemics or pandemics, such as the COVID-19 pandemic, that adversely impact travel, production or demand; • the potential for nationalization of enterprises; • limitations on legal rights and our ability to enforce such rights; • difficulty in staffing and managing widespread operations; • differing labor regulations; • difficulties in implementing restructuring actions on a timely or comprehensive basis; • differing protection of intellectual property; and • greater uncertainty, risk, expense and delay in commercializing products in certain foreign jurisdictions, including with respect to product and other regulatory approvals.
Our international business (and particularly our business in high-growth markets) is subject to risks that are customarily encountered in non-U.S. operations, including: • interruption in the transportation of materials to us and finished goods to our customers; • differences in terms of sale, including payment terms; • local product preferences and product requirements; • changes in a country’s or region’s political or economic conditions, including changes in relationship with the U.S.; • trade protection measures, embargoes and import or export restrictions and requirements; • unexpected changes in laws or regulatory requirements, including changes in tax laws; • capital controls and limitations on ownership and on repatriation of earnings and cash; • epidemics or pandemics, such as the COVID-19 pandemic, that adversely impact travel, production or demand; • the potential for nationalization of enterprises; • limitations on legal rights and our ability to enforce such rights; • difficulty in staffing and managing widespread operations; • differing labor regulations; • difficulties in implementing restructuring actions on a timely or comprehensive basis; • differing protection of intellectual property; and • greater uncertainty, risk, expense and delay in commercializing products in certain foreign jurisdictions, including with respect to product and other regulatory approvals.
If we cannot purchase sufficient products at competitive prices and quality and on a timely enough basis to meet increasing demand, we may not be able to satisfy market demand, product shipments may be delayed, our costs may increase or we may breach our contractual commitments and incur liabilities.
If we cannot purchase sufficient products at competitive prices and quality and on a timely enough basis to meet demand, we may not be able to satisfy market demand, product shipments may be delayed, our costs may increase or we may breach our contractual commitments and incur liabilities.
Section 203 provides that, subject to limited exceptions, 20 Table of Contents persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation (an “interested stockholder”) shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which the person became an interested stockholder, unless (i) prior to such time, the Board of Directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of such corporation at the time the transaction commenced (excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) the voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan); or (iii) on or subsequent to such time the business combination is approved by the Board of Directors of such corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder.
Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation (an “interested stockholder”) shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which the person became an interested stockholder, unless (i) prior to such time, the Board of Directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of such corporation at the time the transaction commenced (excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) the voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan); or (iii) on or subsequent to such time the business combination is approved by the Board of Directors of such corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder.
These provisions include, among others: • the inability of our stockholders to call a special meeting; • the inability of our stockholders to act by written consent; • rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; • the right of the Board to issue preferred stock without stockholder approval; • until our 2025 Annual Meeting of Stockholders, the division of the Board into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult; • provision that stockholders may only remove directors with cause; • the ability of our directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of the Board) on the Board.
These provisions include, among others: • the inability of our stockholders to call a special meeting; • the inability of our stockholders to act by written consent; • rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; 19 Table of Contents • the right of the Board to issue preferred stock without stockholder approval; • until our 2025 Annual Meeting of Stockholders, the division of the Board into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult; • provision that stockholders may only remove directors with cause; • the ability of our directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of the Board) on the Board.
If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we 19 Table of Contents could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
In addition, we may incur costs related to remedial efforts or alleged environmental damage associated with past or current waste disposal practices or other hazardous materials handling practices.
In addition, we may incur costs related to remedial efforts for alleged environmental damage associated with past or current waste disposal practices or other hazardous materials handling practices.
Failure to comply (or any alleged or perceived failure to comply) with the regulations referenced above or any other regulations could result in civil and criminal, monetary and non-monetary penalties, and any such failure or alleged failure (or 17 Table of Contents becoming subject to a regulatory enforcement investigation) could also damage our reputation, disrupt our business, limit our ability to manufacture, import, export and sell products and services, result in loss of customers and disbarment from selling to certain federal agencies and cause us to incur significant legal and investigatory fees.
Failure to comply (or any alleged or perceived failure to comply) with the regulations referenced above or any other regulations could result in civil and criminal, monetary and non-monetary penalties, and any such failure or alleged failure (or becoming subject to a regulatory enforcement investigation) could also damage our reputation, disrupt our business, limit our ability to manufacture, import, export and sell products and services, result in loss of customers and disbarment from selling to certain federal agencies and cause us to incur significant legal and investigatory fees.
For example, new regulations addressing emissions of greenhouse gasses due to impacts of climate change could result in product standard requirements and could adversely impact the cost, production, sales and financial performance of our operations. 16 Table of Contents Our businesses are subject to extensive regulation; failure to comply with those regulations could adversely affect our financial statements and our business, including our reputation.
For example, new regulations addressing emissions of greenhouse gasses due to impacts of climate change could result in product standard requirements and could adversely impact the cost, production, sales and financial performance of our operations. Our businesses are subject to extensive regulation; failure to comply with those regulations could adversely affect our financial statements and our business, including our reputation.
Any or all of these problems could result in the loss of customers, provide an opportunity for competing products to gain market acceptance and otherwise adversely affect our profitability. Our growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products and services based on technological innovation.
Any or all of these problems could result in the loss of customers, provide an opportunity for competing products to gain market acceptance and otherwise adversely affect our profitability. 8 Table of Contents Our growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products and services based on technological innovation.
These forum selection provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors, officers, employees and stockholders. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
These forum selection provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors, officers, employees and stockholders. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. 20 Table of Contents
Furthermore, as our customer base as a whole progresses or completes the implementation of such regulations or standards the incremental demand generated by the initial adoption thereof will abate and our revenue will decline incrementally as demand drops, which may have an adverse impact on our financial results.
Furthermore, as our customer base as a 15 Table of Contents whole progresses or completes the implementation of such regulations or standards the incremental demand generated by the initial adoption thereof will abate and our revenue will decline incrementally as demand drops, which may have an adverse impact on our financial results.
As a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our business.
As a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our 17 Table of Contents business.
In addition, the steps that we and our licensors have taken to maintain and protect our intellectual property may not prevent it from being challenged, invalidated, circumvented, designed-around or becoming subject to compulsory licensing, particularly in countries where intellectual property rights are not highly developed or protected.
In addition, the steps that we and our licensors have taken to maintain and protect our intellectual property may not prevent it from being challenged, invalidated, circumvented, designed-around or becoming 13 Table of Contents subject to compulsory licensing, particularly in countries where intellectual property rights are not highly developed or protected.
Since our growth strategy depends in part on our ability to further penetrate markets outside the U.S. and increase the localization of our products and services, we expect to continue to increase our sales and presence outside the U.S., particularly in high-growth markets.
Since our growth strategy depends in part on our ability to further penetrate markets 14 Table of Contents outside the U.S. and increase the localization of our products and services, we expect to continue to increase our sales and presence outside the U.S., particularly in high-growth markets.
Our income could be adversely impacted if we are unable to adjust our purchases and supply chain management to reflect any supply chain disruptions or changes in customer demand and market fluctuations, including those caused by the COVID-19 pandemic, increases in demand outpacing supply chain capabilities, labor shortages, seasonality or cyclicality.
Our income could be adversely impacted if we are unable to adjust our purchases and supply chain management to reflect any supply chain disruptions or changes in customer demand and market fluctuations, including those caused by a pandemic, increases in demand outpacing supply chain capabilities, labor shortages, seasonality or cyclicality.
Risks Related to Our Tax and Accounting Matters We may be required to recognize impairment charges for our goodwill and other intangible assets. As of December 31, 2022, the net carrying value of our goodwill and other intangible assets totaled approximately $2.4 billion.
Risks Related to Our Accounting and Tax Matters We may be required to recognize impairment charges for our goodwill and other intangible assets. As of December 31, 2023, the net carrying value of our goodwill and other intangible assets totaled approximately $2.3 billion.
Slower global economic growth, actual or anticipated default on sovereign debt, changes in global trade policies, volatility in the currency and credit markets, high levels of unemployment or underemployment, inflation or deflation, supply interruptions, reduced levels of capital expenditures, changes in government fiscal and monetary policies, government deficit reduction and budget negotiation dynamics, sequestration, other austerity measures, political and social instability, natural disasters, terrorist attacks, and other challenges that affect the global economy adversely affect us and our distributors, customers and suppliers, including having the effect of: • reducing demand for our products, software and services, limiting the financing available to our customers and suppliers, increasing order cancellations and resulting in longer sales cycles and slower adoption of new technologies; • increasing the difficulty in collecting accounts receivable and the risk of excess and obsolete inventories; • increasing price competition in our served markets; • supply interruptions, which could disrupt our ability to produce our products; • increasing the risk of impairment of goodwill and other long-lived assets, and the risk that we may not be able to fully recover the value of other assets such as real estate and tax assets; • increasing the risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations which, in addition to increasing the risks identified above, could result in preference actions against us; and • increasing the risk of credit defaults under the extensions of credit that we provide in connection with our diagnostics and repair technologies operations. 12 Table of Contents In addition, adverse general economic conditions may lead to instability in U.S. and global capital and credit markets, including market disruptions, limited liquidity and interest rate volatility.
Slower global economic growth, actual or anticipated default on sovereign debt, changes in global trade policies, volatility in the currency and credit markets, high levels of unemployment or underemployment, inflation or deflation, supply interruptions, reduced levels of capital expenditures, changes in government fiscal and monetary policies, government deficit reduction and budget negotiation dynamics, sequestration, other austerity measures, political and social instability, natural disasters, terrorist attacks, and other challenges that affect the global economy adversely affect us and our distributors, customers and suppliers, including having the effect of: • reducing demand for our products, software and services, limiting the financing available to our customers and suppliers, increasing order cancellations and resulting in longer sales cycles and slower adoption of new technologies; • increasing the difficulty in collecting accounts receivable and the risk of excess and obsolete inventories; • increasing price competition in our served markets; • supply interruptions, which could disrupt our ability to produce our products; • increasing the risk of impairment of goodwill and other long-lived assets, and the risk that we may not be able to fully recover the value of other assets such as real estate and tax assets; • increasing the risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations which, in addition to increasing the risks identified above, could result in preference actions against us; and • increasing the risk of credit defaults under the extensions of credit that we provide in our Repair Solutions segment.
For example, the California legislature’s passage of Assembly Bill 5, which codifies a new test for determining employee or independent contractor status in California, may impact the treatment of franchisees in our diagnostics and repair technologies business in California. In addition, it is possible that other jurisdictions may enact similar laws.
For example, the California legislature’s passage of Assembly Bill 5, which codifies a new test for determining employee or independent contractor status in California, may impact the treatment of franchisees in our Repair Solutions segment in California. In addition, it is possible that other jurisdictions may enact similar laws.
If regulatory authorities or courts determine that our franchisees are not independent contractors, we may be required to withhold and pay certain taxes in respect of such franchisees, may be liable for unpaid past taxes, unpaid wages and potential penalties, and may be subject to wage and hour laws and requirements (such as those pertaining to minimum wage and overtime), claims for employee benefits, social security contributions, and workers’ compensation and unemployment insurance, which could have an adverse effect on our business and financial position.
If regulatory authorities or courts determine that our franchisees are not independent contractors, we may be required to withhold and pay certain taxes in respect of such franchisees, may be liable for unpaid past taxes, unpaid wages and potential penalties, and may be subject to wage and hour laws and requirements (such as those pertaining to minimum wage and overtime), claims for employee benefits, social security contributions, and workers’ compensation and unemployment insurance, which could have an adverse effect on our business and financial position. 16 Table of Contents These are not the only regulations that our businesses must comply with.
As of December 31, 2022, we have outstanding indebtedness of approximately $2.6 billion and the ability to incur an additional $750.0 million of indebtedness under the Revolving Credit Facility and in the future we may incur additional indebtedness. This indebtedness could adversely affect our businesses and our ability to meet our obligations and pay dividends.
This indebtedness could adversely affect our businesses and our ability to meet our obligations and pay dividends. As of December 31, 2023, we have outstanding indebtedness of approximately $2.3 billion, and have the ability to incur an additional $750.0 million of indebtedness under the Revolving Credit Facility.
These are not the only regulations that our businesses must comply with. The regulations we are subject to have tended to become more stringent over time and may be inconsistent across jurisdictions. We, our representatives and the industries in which we operate may at times be under review and/or investigation by regulatory authorities.
The regulations we are subject to have tended to become more stringent over time and may be inconsistent across jurisdictions. We, our representatives and the industries in which we operate may at times be under review and/or investigation by regulatory authorities.
In 2022, 28.4% of our sales were derived from customers outside the U.S. In addition, many of our manufacturing operations, suppliers and employees are located outside the U.S.
In 2023, 30% of our sales were derived from customers outside the U.S. In addition, many of our manufacturing operations, suppliers and employees are located outside the U.S.
These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that the Board determines is not in the best interests of us and our stockholders.
However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that the Board determines is not in the best interests of us and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
In recent years, we have implemented restructuring activities across our businesses to adjust our cost structure, and we may engage in similar restructuring activities in the future.
Our restructuring actions could have long-term adverse effects on our business. In recent years, we have implemented restructuring activities across our businesses to adjust our cost structure, and we may engage in similar restructuring activities in the future.
If we are not able to realize the value of these assets, we may be required to incur impairment charges; and • we may have interests that diverge from those of our joint venture partners or other strategic partners and we may not be able to direct the management and operations of the joint venture or other strategic relationship in the manner we believe is most appropriate, exposing us to additional risk.
If we are not able to realize the value of these assets, we may be required to incur impairment charges; and • we may have interests that diverge from those of our joint venture partners or other strategic partners and we may not be able to direct the management and operations of the joint venture or other strategic relationship in the manner we believe is most appropriate, exposing us to additional risk. 11 Table of Contents Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we or our predecessors have sold could adversely affect our financial statements.
Our cash flow from operations may not be sufficient to service our outstanding debt or to repay the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to service or refinance our debt. 10 Table of Contents We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our cash flow from operations may not be sufficient to service our outstanding debt or to repay the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to service or refinance our debt.
In addition, delays in implementing planned restructuring activities or other productivity improvements, unexpected costs or failure to meet targeted improvements may diminish the operational or financial benefits we realize from such actions. Any of the circumstances described above could adversely impact our business and financial statements.
In addition, delays in implementing planned restructuring activities or other productivity improvements, unexpected costs or failure to meet targeted improvements may diminish the operational or financial benefits we realize from such actions.
As further discussed in the section entitled “Business—Materials,” our manufacturing and other operations employ a wide variety of components, raw materials and other commodities. Prices for and availability of these components, raw materials and other commodities have fluctuated significantly in the past. Any sustained interruption in the supply of these items could adversely affect our business.
Prices for and availability of these components, raw materials and other commodities have fluctuated significantly in the past. Any sustained interruption in the supply of these items could adversely affect our business.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, may materially adversely affect our business, financial condition and results of operations and our ability to satisfy our obligations under our indebtedness or pay dividends on our common stock.
In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness. 10 Table of Contents Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, may materially adversely affect our business, financial condition and results of operations and our ability to satisfy our obligations under our indebtedness or pay dividends on our common stock.
In addition, technological advances in alternative power systems may reduce the frequency of required maintenance for vehicles, resulting in lower demand for our vehicle repair tools. 9 Table of Contents Furthermore, if we fail to accurately predict future customer needs and preferences or fail to produce viable technologies, we may invest heavily in research and development of products and services that do not lead to significant sales, which would adversely affect our profitability.
Furthermore, if we fail to accurately predict future customer needs and preferences or fail to produce viable technologies, we may invest heavily in research and development of products and services that do not lead to significant sales, which would adversely affect our profitability.
Fortive and its affiliates have been approved as an interested stockholder of ours and therefore are not subject to Section 203. We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with the Board and by providing the Board with more time to assess any acquisition proposal.
We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with the Board and by providing the Board with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers.
In addition, compliance with the varying data privacy regulations across the United States and around the world has required significant expenditures and may require additional expenditures, and may require further changes in our products or business models that increase competition or reduce revenue. 18 Table of Contents Our operations, products and services expose us to the risk of environmental, health and safety liabilities, costs and violations that could adversely affect our business, reputation and financial statements.
In addition, compliance with the varying data privacy regulations across the United States and around the world has required significant expenditures and may require additional expenditures, and may require further changes in our products or business models that increase competition or reduce revenue.
If we cannot adjust our manufacturing capacity, supply chain management or the purchases required for our manufacturing activities to reflect changes in market conditions, customer demand and supply chain or transportation disruptions, our profitability may suffer. In addition, our reliance upon sole or limited sources of supply for certain materials, components and services could cause production interruptions, delays and inefficiencies.
Risks Related to Our Business and Industry If we cannot adjust our manufacturing capacity, supply chain management or the purchases required for our manufacturing activities to reflect changes in market conditions, customer demand and supply chain or transportation disruptions, our profitability may suffer.
Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property or detect or prevent circumvention or unauthorized use of such property and the cost of enforcing our intellectual property rights could adversely impact our business, including our competitive position, and financial statements. 14 Table of Contents Third parties may claim that we are infringing or misappropriating their intellectual property rights and we could suffer significant litigation expenses, losses or licensing expenses or be prevented from selling products or services .
Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property or detect or prevent circumvention or unauthorized use of such property and the cost of enforcing our intellectual property rights could adversely impact our business, including our competitive position, and financial statements.
Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of infringement or misappropriation.
Any dispute or litigation regarding intellectual property could be costly and time-consuming due to the complexity of many of our technologies and the uncertainty of intellectual property litigation. Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of infringement or misappropriation.
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
We cannot assure you that our liabilities in connection with litigation and other legal and regulatory proceedings will not exceed our estimates or adversely affect our financial statements and business. 18 Table of Contents If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance or purchasing patterns, could adversely affect our financial statements. The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, can also significantly impact our results of operations in any given period.
Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance or purchasing patterns, could adversely affect our financial statements.
As of December 31, 2022, we have outstanding indebtedness of approximately $2.6 billion, and have the ability to incur an additional $750.0 million of indebtedness under the Revolving Credit Facility.
Any of the circumstances described above could adversely impact our business and financial statements. 9 Table of Contents As of December 31, 2023, we have outstanding indebtedness of approximately $2.3 billion and the ability to incur an additional $750.0 million of indebtedness under the Revolving Credit Facility and in the future we may incur additional indebtedness.
Many of our businesses operate in industries that are intensely competitive and have been subject to consolidation. Because of the range of the products and services we sell and the variety of markets we serve, we encounter a wide variety of competitors.
Because of the range of the products and services we sell and the variety of markets we serve, we encounter a wide variety of competitors.
We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial statements. Our restructuring actions could have long-term adverse effects on our business.
In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities. We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial statements.
We purchase materials, components and equipment from third parties for use in our manufacturing operations.
In addition, our reliance upon sole or limited sources of supply for certain materials, components and services could cause production interruptions, delays and inefficiencies. We purchase materials, components and equipment from third parties for use in our manufacturing operations.
Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from Fortive. Our growth could suffer if the markets into which we sell our products and services decline, do not grow as anticipated or experience cyclicality.
Our growth could suffer if the markets into which we sell our products and services decline, do not grow as anticipated or experience cyclicality. Many of our businesses operate in industries that are intensely competitive and have been subject to consolidation.
Even if we successfully innovate and develop new and enhanced products and services, we may incur substantial costs in doing so, and our profitability may suffer. The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities.
Even if we successfully innovate and develop new and enhanced products and services, we may incur substantial costs in doing so, and our profitability may suffer. Changes in our software and subscription businesses may adversely impact our business, financial condition and results of operations.
In addition, the consolidation of distributors and customers in certain of our served industries could adversely impact our profitability. Our financial results are subject to fluctuations in the cost and availability of commodities that we use in our operations.
Our financial results are subject to fluctuations in the cost and availability of commodities that we use in our operations. As further discussed in the section entitled “Business—Materials,” our manufacturing and other operations employ a wide variety of components, raw materials and other commodities.
From time to time, we receive notices from third parties alleging intellectual property infringement or misappropriation. Any dispute or litigation regarding intellectual property could be costly and time-consuming due to the complexity of many of our technologies and the uncertainty of intellectual property litigation.
Third parties may claim that we are infringing or misappropriating their intellectual property rights and we could suffer significant litigation expenses, losses or licensing expenses or be prevented from selling products or services . From time to time, we receive notices from third parties alleging intellectual property infringement or misappropriation.
Removed
Risks Related to Our Business and Industry The effect of the COVID-19 pandemic on our global operations and the operations of our customers, suppliers, and vendors is having, and is expected to continue to have, a significant impact on our business and results of operations.
Added
In addition, technological advances in alternative power systems may reduce the frequency of required maintenance for vehicles, resulting in lower demand for our vehicle repair tools.
Removed
Our global operations expose us broadly to the COVID-19 pandemic, which has and may continue to spread worldwide in the form of variants to COVID-19.
Added
An increasing portion of our revenue is generated through software maintenance and subscription revenue, which includes SaaS and new subscription services for integrated solutions. Our customers have no obligation to renew their agreements for our software maintenance or subscription services after the expiration of their initial contract period, which typically ranges from three to five years.
Removed
In particular, continued efforts to mitigate the spread of the virus have caused us, our suppliers, and customers to reduce commercial activities and utilization of facilities and manufacturing sites, resulting in reduction in demand for our products and services, our ability to source required materials and components, and our ability to manufacture, sell, and service our products.
Added
Our customer acquisition and renewal rates may decline or fluctuate as a result of a number of factors, including overall economic conditions, the health of their businesses, competitive offerings, and customer dissatisfaction with our services. If customers do not renew their contracts for our products, our maintenance and subscription revenue will decline, and our financial results will suffer.
Removed
In addition, implementation of measures to help control the spread of the virus, including internal work-from-home policies to protect the health of our employees and community, government-imposed social distancing measures, travel restrictions, school closures, and re-opening restrictions have negatively impacted our collaboration efforts with our global colleagues, customers, vendors, and service providers.
Added
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Removed
The pandemic has also increased the risk and cost of protecting against cyber-attacks. Government-imposed orders and restrictions to control the spread of COVID-19 have significantly impacted our ability, and the ability of our franchisees, to make in-person sales and service visits to customers.
Added
In addition, adverse general economic conditions may lead to instability in U.S. and global capital and credit markets, including market disruptions, limited liquidity and interest rate volatility.
Removed
Furthermore, the volatility and disruption in the capital markets from the COVID-19 pandemic and its impact on the global economy has adversely effected the cost of, and access to, capital.
Added
The levels of inventory maintained by our 12 Table of Contents distributors and other channel partners, and changes in those levels, can also significantly impact our results of operations in any given period. In addition, the consolidation of distributors and customers in certain of our served industries could adversely impact our profitability.
Removed
In addition, it has become more difficult to retain employees and future government regulations could increase costs or lead to attrition, which may impact our ability to operate our business in the ordinary course or result in increased costs to do so.
Added
We have programs in place that are intended to detect, contain, and respond to data security incidents and that provide at least annual employee awareness training regarding phishing, malware, and other cyber risks.
Removed
While we continue to implement global and local response teams and business continuity efforts internally and with our customers, suppliers, and vendors as new COVID-19 8 Table of Contents variants emerge and government responses continue to be implemented, the duration and extent of the operational and financial impact of the COVID-19 pandemic remains highly uncertain.
Added
However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect, we may be unable to anticipate these techniques or implement adequate preventive measures.
Removed
The degree to which COVID-19 impacts us going forward will depend on future developments that are highly uncertain and therefore cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, or the actions taken to contain the spread and impact of COVID-19, and how quickly and to what extent normal economic, market, and operating conditions resume.
Added
If our security measures are breached or fail, unauthorized persons may be able to obtain access to or acquire personal or other confidential data.
Removed
Even after the COVID-19 pandemic has subsided as a public health matter, we may experience material adverse impacts to our business as a result of its adverse impact on the global economy and consumer confidence.
Added
Depending on the nature of the information compromised, we may also have obligations to notify consumers and/or employees about the incident, and we may need to provide some form of remedy, such as a subscription to a credit monitoring service, for the individuals affected by the incident.
Removed
In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.
Added
Our operations, products and services expose us to the risk of environmental, health and safety liabilities, costs and violations that could adversely affect our business, reputation and financial statements.
Removed
Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we or our predecessors have sold could adversely affect our financial statements.
Removed
We have a limited history of operating as a separate, publicly traded company, and our historical financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.
Removed
The historical information about us in this Form 10-K for periods prior to the separation refers to our businesses as operated by and integrated with Fortive. Our historical financial information included in this Form 10-K for periods prior to the separation is derived from the consolidated financial statements and accounting records of Fortive.
Removed
Accordingly, the historical financial information included for periods prior to the separation does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented, or those that we will achieve in the future, primarily as a result of the factors described below: • our businesses have been operated by Fortive as part of its broader corporate organization, rather than as a separate, publicly traded company.
Removed
Fortive or one of its affiliates performed various corporate functions for us such as legal, treasury, accounting, auditing, human resources, corporate affairs and finance.
Removed
Our historical financial results reflect allocations of corporate expenses from Fortive for such functions and are likely to be less than the expenses we would have incurred had we operated as a separate, publicly traded company; 13 Table of Contents • historically, we have shared economies of scope and scale in costs, employees, vendor relationships and customer relationships.
Removed
Although we have entered into transition agreements with Fortive, these arrangements may not fully capture the benefits we have previously enjoyed as a result of being integrated with Fortive and may result in paying higher charges than in the past for these services.
Removed
This could have an adverse effect on our results of operations and financial condition; • generally, our working capital requirements and capital for general corporate purposes, including acquisitions and capital expenditures, have historically been satisfied as part of the corporate-wide cash management policies of Fortive.
Removed
We may now need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements; and • the cost of capital for our businesses may be higher as a separate, publicly traded company than Fortive’s cost of capital.
Removed
We cannot assure you that our liabilities in connection with litigation and other legal and regulatory proceedings will not exceed our estimates or adversely affect our financial statements and business.
Removed
These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeApproximately 15 of these facilities are located in the United States and approximately 15 are located outside the United States. We own an approximately 660,000 square foot mixed use facility that serves as manufacturing and office space in Greensboro, North Carolina.
Biggest changeApproximately 15 of these facilities are located in the United States and approximately 15 are located outside the United States. We own an approximately 0.7 million square foot mixed use facility in Greensboro, North Carolina that provides manufacturing and office space utilized by businesses within our Mobility Technologies and Environmental & Fueling Solutions segments.
ITEM 2. PROPERTIES Our corporate headquarters are located in Raleigh, North Carolina in a facility that we lease. As of December 31, 2022, our facilities included approximately 30 significant facilities, which are used for manufacturing, distribution, warehousing, research and development, general administrative and/or sales functions.
ITEM 2. PROPERTIES Our corporate headquarters are located in Raleigh, North Carolina in a facility that we lease. As of December 31, 2023, our facilities included approximately 30 significant facilities, which are used for manufacturing, distribution, warehousing, research and development, general administrative and/or sales functions.
Leases to the Consolidated and Combined Financial Statements for additional information with respect to our lease commitments. 21 Table of Contents
Leases to the Consolidated Financial Statements for additional information with respect to our lease commitments. 21 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeBased upon our experience, current information and applicable law, we do not believe that these proceedings and claims will have a material effect on our financial position, results of operations or cash flows. Please refer to Note 17. Litigation and Contingencies to the Consolidated and Combined Financial Statements for more information.
Biggest changeBased upon our experience, current information and applicable law, we do not believe that these proceedings and claims will have a material effect on our financial position, results of operations or cash flows. Please refer to Note 18. Litigation and Contingencies to the Consolidated Financial Statements for more information.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeRowen has served as our Senior Vice President, Chief Legal and Administrative Officer since January 1, 2022 and served as our Senior Vice President and General Counsel from September 2020 through January 1, 2022. Prior to that, Ms.
Biggest changeShe served as our Senior Vice President, Chief Legal and Sustainability Officer from June 2023 through January 2024, as our Senior Vice President, Chief Legal and Administrative Officer from January 2022 through June 2023 and as our Senior Vice President and General Counsel from September 2020 through January 2022. Prior to that, Ms.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 22 Table of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below are the names, ages, positions and experience of our executive officers as of February 17, 2023. All of our executive officers hold office at the pleasure of our Board. Name Age Position Officer Since Mark D.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 22 Table of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below are the names, ages, positions and experience of our executive officers as of February 15, 2024. All of our executive officers hold office at the pleasure of our Board. Name Age Position Officer Since Mark D.
Morelli 59 President and Chief Executive Officer 2020 Anshooman Aga 47 Senior Vice President, Chief Financial Officer 2022 Kathryn K. Rowen 44 Senior Vice President, Chief Legal and Administrative Officer 2020 Mark D. Morelli has served as our President and Chief Executive Officer since January 2020. Mr.
Morelli 60 President and Chief Executive Officer 2020 Anshooman Aga 48 Senior Vice President, Chief Financial Officer 2022 Kathryn K. Rowen 45 Senior Vice President, Chief Administrative Officer 2020 Mark D. Morelli has served as our President and Chief Executive Officer since January 2020. Mr.
He also held a series of financial leadership positions at Siemens, from July 2006 to May 2015, including Chief Financial Officer of the Energy Automation business based in Nuremburg, Germany, in addition to similar financial roles for Siemen’s Rail Electrification and TurboCare business units. Kathryn K.
He also held a series of financial leadership positions at Siemens, from July 2006 to May 2015, including Chief Financial Officer of the Energy Automation business based in Nuremburg, Germany, in addition to similar financial roles for Siemen’s Rail Electrification and TurboCare business units. Kathryn K. Rowen has served as our Senior Vice President, Chief Administrative Officer since January 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table sets forth our share repurchase activity for the three months ended December 31, 2022: Period Total Number of Shares Purchased (in millions) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (in millions) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ($ in millions) October 1, 2022 to October 28, 2022 — $ — — $ 469.0 October 29, 2022 to November 25, 2022 1.6 19.13 1.6 439.0 November 26, 2022 to December 31, 2022 0.5 19.23 0.5 429.0 Total 2.1 2.1 Recent Issuances of Unregistered Securities None. 24 Table of Contents Company Stock Performance The following graph shows a comparison from October 8, 2020 (the date trading commenced on our common stock on the New York Stock Exchange) through December 31, 2022 of the cumulative return of our common stock, the S&P 500 Index and the S&P Industrials Index.
Biggest changeThe following table sets forth our share repurchase activity for the three months ended December 31, 2023: Period Total Number of Shares Purchased (in millions) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (in millions) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ($ in millions) September 30, 2023 to October 27, 2023 0.2 $ 29.78 0.2 $ 362.3 October 28, 2023 to November 24, 2023 — — — 362.3 November 25, 2023 to December 31, 2023 0.2 34.71 0.2 354.3 Total 0.4 0.4 Recent Issuances of Unregistered Securities None. 24 Table of Contents Company Stock Performance The following graph shows a comparison from October 8, 2020 (the date trading commenced on our common stock on the New York Stock Exchange) through December 31, 2023 of the cumulative return of our common stock, the S&P 500 Index and the S&P Industrials Index.
Issuer Purchases of Equity Securities On May 24, 2022, the Company’s Board of Directors approved a replenishment of the Company’s previously approved share repurchase program announced in May 2021, bringing the total amount authorized for future share repurchases back up to $500.0 million.
Issuer Purchases of Equity Securities On May 24, 2022, the Company’s Board of Directors approved a replenishment of the Company’s previously approved share repurchase program announced in May 2021, bringing the total amount authorized for future share repurchases to $500.0 million.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the New York Stock Exchange under the symbol VNT. As of February 14, 2023, there were 914 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the New York Stock Exchange under the symbol VNT. As of February 12, 2024, there were 840 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs of the filing date of this report, we do not believe they are material. 26 Table of Contents RESULTS OF OPERATIONS Comparison of Results of Operations Year Ended ($ in millions) December 31, 2022 December 31, 2021 Total sales $ 3,184.4 $ 2,990.7 Total cost of sales (1,756.1) (1,657.6) Gross profit 1,428.3 1,333.1 Operating costs: Selling, general and administrative expenses (“SG&A”) (705.8) (621.6) Research and development expenses (“R&D”) (144.6) (129.3) Operating profit $ 577.9 $ 582.2 Gross profit as a % of sales 44.9 % 44.6 % SG&A as a % of sales 22.2 % 20.8 % R&D as a % of sales 4.5 % 4.3 % Operating profit as a % of sales 18.1 % 19.5 % Components of Sales Growth 2022 vs 2021 Total sales growth (GAAP) 6.5 % Existing businesses (Non-GAAP) (a) 2.6 % Acquisitions (Non-GAAP) 6.5 % Currency exchange rates (Non-GAAP) (2.6) % (a) The impact of price increases is reflected as a component of the change in sales.
Biggest changeAs of the filing date of this report, we do not believe they are material. 26 Table of Contents RESULTS OF OPERATIONS Comparison of Results of Operations Year Ended December 31, ($ in millions) 2023 % of Sales 2022 % of Sales 2021 % of Sales Sales $ 3,095.2 $ 3,184.4 $ 2,990.7 Operating costs and expenses: Cost of sales (a) (1,664.0) 53.8 % (1,756.1) 55.1 % (1,657.6) 55.4 % Selling, general and administrative expenses (“SG&A”) (643.1) 20.8 % (627.8) 19.7 % (579.2) 19.4 % Research and development expenses (“R&D”) (163.5) 5.3 % (144.6) 4.5 % (129.3) 4.3 % Amortization of acquisition-related intangible assets (81.2) 2.6 % (78.0) 2.4 % (42.4) 1.4 % Operating profit $ 543.4 17.6 % $ 577.9 18.1 % $ 582.2 19.5 % (a) Excluding amortization of acquisition-related intangible assets.
Financing Activities Net cash used in financing activities was $347.9 million during the year ended December 31, 2022, driven primarily by repurchases of the Company’s common stock of $328.0 million.
Net cash used in financing activities was $347.9 million during the year ended December 31, 2022, driven primarily by repurchases of the Company’s common stock of $328.0 million.
We have generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this risk. Both positive and negative movements in currency exchange rates against the U.S. dollar will therefore continue to affect the reported amount of sales, profit, and assets and liabilities in our Consolidated and Combined Financial Statements.
We have generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this risk. Both positive and negative movements in currency exchange rates against the U.S. dollar will therefore continue to affect the reported amount of sales, profit, and assets and liabilities in our Consolidated Financial Statements.
For a detailed discussion on the application of these and other accounting estimates, refer to Note 2. Basis of Presentation and Summary of Significant Accounting Policies to the Consolidated and Combined Financial Statements. Accounts and Financing Receivables We maintain allowances for credit losses to reflect expected credit losses inherent in our portfolio of receivables.
For a detailed discussion on the application of these and other accounting estimates, refer to Note 2. Basis of Presentation and Summary of Significant Accounting Policies to the Consolidated Financial Statements. Accounts and Financing Receivables We maintain allowances for credit losses to reflect expected credit losses inherent in our portfolio of receivables.
Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected in our Consolidated and Combined Statements of Earnings and Comprehensive Income.
Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected in our Consolidated Statements of Earnings and Comprehensive Income.
Notwithstanding these efforts, the current distress in the global economy may increase the difficulty in collecting receivables. The assumptions used in evaluating our exposure to credit losses associated with our financing receivables portfolio involve estimates and significant judgment.
Notwithstanding these efforts, distress in the global economy may increase the difficulty in collecting receivables. The assumptions used in evaluating our exposure to credit losses associated with our financing receivables portfolio involve estimates and significant judgment.
Financing to the Consolidated and Combined Financial Statements for further details on our contractual obligations and the timing of expected future payments under our lease and debt agreements, respectively.
Financing to the Consolidated Financial Statements for further details on our contractual obligations and the timing of expected future payments under our lease and debt agreements, respectively.
Approximately 60% of our cash was held outside of the United States. We have made an assertion regarding the amount of earnings that we do not intend to repatriate due to local working capital needs, local law restrictions, high foreign remittance costs, previous investments in physical assets and acquisitions, or future growth needs.
Approximately 50% of our cash was held outside of the United States. We have made an assertion regarding the amount of earnings that we do not intend to repatriate due to local working capital needs, local law restrictions, high foreign remittance costs, previous investments in physical assets and acquisitions, or future growth needs.
As of December 31, 2022, we had $750.0 million of borrowing capacity under our revolving credit facility. We also may from time to time access the capital markets, including to take advantage of favorable interest rate environments or other market conditions. As of December 31, 2022, we believe that we have sufficient liquidity to satisfy our cash needs.
As of December 31, 2023, we had $750.0 million of borrowing capacity under our revolving credit facility. We also may from time to time access the capital markets, including to take advantage of favorable interest rate environments or other market conditions. As of December 31, 2023, we believe that we have sufficient liquidity to satisfy our cash needs.
If the reserves established with respect to these contingent liabilities are 35 Table of Contents inadequate, we would be required to incur an expense equal to the amount of the loss incurred in excess of the reserves, which would adversely affect our financial statements. Revenue Recognition We derive revenues from the sale of products and services.
If the reserves established with respect to these contingent liabilities are inadequate, we would be required to incur an expense equal to the amount of the loss incurred in excess of the reserves, which would adversely affect our financial statements. Revenue Recognition We derive revenues from the sale of products and services.
Critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited 36 Table of Contents to, estimates about future results such as revenues, margin, net working capital and other valuation assumptions such as useful lives, royalty rates, attrition rates and discount rates.
Critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to, estimates about future results such as revenues, margin, net working capital and other valuation assumptions such as useful lives, royalty rates, attrition rates and discount rates.
Holding other estimates constant, a hypothetical 100 basis points increase in the expected loss rate on the financing receivables portfolio would have resulted in an increase in the allowance for credit losses of approximately $5.0 million as of December 31, 2022. No customer accounted for more than 10% of sales during all periods presented.
Holding other estimates constant, a hypothetical 100 basis points increase in the expected loss rate on the financing receivables portfolio would have resulted in an increase in the allowance for credit losses of approximately $6.0 million as of December 31, 2023. No customer accounted for more than 10% of sales during all periods presented.
Commodity Price Risk For a discussion of risks relating to commodity prices, refer to “Item 1A. Risk Factors.” 30 Table of Contents LIQUIDITY AND CAPITAL RESOURCES We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities.
Commodity Price Risk For a discussion of risks relating to commodity prices, refer to “Item 1A. Risk Factors.” LIQUIDITY AND CAPITAL RESOURCES We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities.
Estimating the net realizable value of inventory is inherently uncertain because levels of demand, technological advances and pricing competition in many of our markets can fluctuate significantly from period to 34 Table of Contents period due to circumstances beyond our control.
Estimating the net realizable value of inventory is inherently uncertain because levels of demand, technological advances and pricing competition in many of our markets can fluctuate significantly from period to period due to circumstances beyond our control.
Capital Stock and Earnings Per Share to the Consolidated and Combined Financial Statements for a description of the Company’s stock repurchase program. Dividends We paid regular quarterly cash dividends of $0.025 per share during the year ended December 31, 2022.
Capital Stock and Earnings per Share to the Consolidated Financial Statements for a description of the Company’s share repurchase program. Dividends We paid regular quarterly cash dividends of $0.025 per share during the year ended December 31, 2023.
In addition, our broad-based business activities help to reduce the impact that volatility in any particular area or related areas may have on our operating profit as a whole. 29 Table of Contents Interest Rate Risk We are exposed to interest rate risk through fluctuations in interest rates on our debt obligations.
In addition, our broad-based business activities help to reduce the impact that volatility in any particular area or related areas may have on our operating profit as a whole. Interest Rate Risk We are exposed to interest rate risk through fluctuations in interest rates on our debt obligations.
Factors we consider in the qualitative assessment include general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying value of the net assets of our reporting units, information related to market multiples of peer companies and other relevant entity specific events.
Factors we considered in the qualitative assessment included general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying value of the net assets of our reporting units, information related to market multiples of peer companies and other relevant entity specific events.
When evaluating for impairment, the Company may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit or indefinite-lived intangible asset is impaired.
When evaluating for impairment, we may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit or indefinite-lived intangible asset is impaired.
Management believes that reporting the non-GAAP financial measure of sales from existing businesses provides useful information to investors by helping identify underlying growth trends in our business and facilitating easier comparisons of our sales performance with our performance in prior and future periods and to our peers.
Management believes that reporting the non-GAAP financial measure of core sales provides useful information to investors by helping identify underlying growth trends in our business and facilitating easier comparisons of our sales performance with our performance in prior and future periods and to our peers.
The Notes and the guarantees thereof are the Company’s and the guarantors’ senior unsecured obligations and: • rank without preference or priority among themselves and equally in right of payment with our existing and any future unsecured and unsubordinated indebtedness, including, without limitation, indebtedness under our credit agreement; • are senior in right of payment to any of our existing and future indebtedness that is subordinated to the notes; • are effectively subordinated to any of our existing and future secured indebtedness to the extent of the assets securing such indebtedness; and 32 Table of Contents • are structurally subordinated to all existing and any future indebtedness and any other liabilities of our non-Guarantor Subsidiaries.
The registered notes and the guarantees thereof are the Company’s and the Guarantor Subsidiaries’ senior unsecured obligations and: • rank without preference or priority among themselves and equally in right of payment with our existing and any future unsecured and unsubordinated indebtedness, including, without limitation, indebtedness under our credit agreement; • are senior in right of payment to any of our existing and future indebtedness that is subordinated to the notes; • are effectively subordinated to any of our existing and future secured indebtedness to the extent of the assets securing such indebtedness; and • are structurally subordinated to all existing and any future indebtedness and any other liabilities of our Non-Guarantor Subsidiaries.
Currency exchange rates negatively impacted reported sales for the year ended December 31, 2022 by 2.6% as compared to the prior year, as the U.S. dollar was, on average, stronger against most major currencies during the year ended December 31, 2022 as compared to exchange rate levels during the prior year.
Currency exchange rates negatively impacted reported sales for the year ended December 31, 2023 by 0.6% as compared to the prior year, as the U.S. dollar was, on average, stronger against most major currencies during the year ended December 31, 2023 as compared to exchange rate levels during the prior year.
Litigation and Contingencies to the Consolidated and Combined Financial Statements for information regarding legal proceedings, contingencies, and guarantees. For a discussion of risks related to legal proceedings and contingencies, refer to “Item 1A.
LEGAL PROCEEDINGS Refer to Note 18. Litigation and Contingencies to the Consolidated Financial Statements for information regarding legal proceedings, contingencies, and guarantees. For a discussion of risks related to legal proceedings and contingencies, refer to “Item 1A.
The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results.
The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results. NEW ACCOUNTING STANDARDS Refer to Note 2.
Risk Factors.” CRITICAL ACCOUNTING ESTIMATES Management’s discussion and analysis of our financial condition and results of operations is based upon our Consolidated and Combined Financial Statements, which have been prepared in accordance with GAAP.
Risk Factors.” 36 Table of Contents CRITICAL ACCOUNTING ESTIMATES Management’s discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP.
For a discussion of our outstanding indebtedness, refer to Note 11. Financing to the Consolidated and Combined Financial Statements. 28 Table of Contents INCOME TAXES General Income tax expense and deferred tax assets and liabilities reflect management’s assessment of future taxes expected to be paid on items reflected in our financial statements.
For a discussion of our outstanding indebtedness, refer to Note 11. Financing to the Consolidated Financial Statements. INCOME TAXES General Income tax expense and deferred tax assets and liabilities reflect management’s assessment of current and future taxes expected to be paid on items reflected in our financial statements.
As of December 31, 2022, we had $1.0 billion outstanding of debt that was subject to variable interest rates. As a result, increases in interest rates could increase the cost of servicing our debt and could materially reduce our profitability and cash flows. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.
As of December 31, 2023, we had $700.0 million outstanding of debt that was subject to variable interest rates. As a result, increases in interest rates could increase the cost of servicing our debt and could materially reduce our profitability and cash flows. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.
The year-over-year change in operating cash flows was primarily attributable to the following factors: • The aggregate of accounts receivable and long-term financing receivables used $76.9 million of operating cash flows during the year ended December 31, 2022 as compared to using $4.2 million in the prior year.
The year-over-year change in operating cash flows was primarily attributable to the following factors: • The aggregate of accounts receivable and long-term financing receivables used $6.9 million of operating cash flows during the year ended December 31, 2023 as compared to using $76.9 million in the prior year.
A hypothetical 100 basis points increase in market interest rates as of December 31, 2022 on our variable-rate debt obligations as of December 31, 2022 would increase our annual interest expense by approximately $10.0 million.
A hypothetical 100 basis points increase in market interest rates as of December 31, 2023 on our variable-rate debt obligations as of December 31, 2023 would increase our annual interest expense by approximately $7.0 million.
We continue to monitor the macroeconomic and geopolitical conditions which may impact our business, including the COVID-19 pandemic, monetary and fiscal policies, international trade and relations between the U.S., China and other nations, and investment and taxation policy initiatives being considered in the United States and by the Organization for Economic Co-operation and Development.
We continue to monitor the macroeconomic and geopolitical conditions which may impact our business, including monetary and fiscal policies, changes in the banking system, international trade and relations between the U.S., China and other nations, and investment and taxation policy initiatives being considered in the United States and by the Organization for Economic Co-operation and Development (the “OECD”).
A 10% change in major currencies relative to the U.S. dollar as of December 31, 2022 would have resulted in an impact to equity of approximately $88 million.
A 10% change in major currencies relative to the U.S. dollar as of December 31, 2023 would have resulted in an impact to equity of approximately $85 million.
Our outlook is subject to various assumptions and risks, including but not limited to the resilience and durability of the economies of the United States and other critical regions, ongoing challenges with global logistics and supply chain including the availability of electronic components, the impact of the COVID-19 pandemic, the impact of the Russia-Ukraine conflict, market conditions in key end product segments, and the impact of energy disruption in Europe.
Our outlook is subject to various assumptions and risks, including but not limited to the resilience and durability of the economies of the United States and other critical regions, ongoing challenges with global logistics and supply chain including the availability of electronic components, the impact of international conflicts, including Russia-Ukraine and Israel-Hamas, market conditions in key end product segments, and the impact of energy disruption in Europe.
We also refinanced $600.0 million of our term loans and made borrowings and repayments under our revolving credit facility, which had net zero impact to financing activities during the year ended December 31, 2022.
We also refinanced $600.0 million of our term loans and made borrowings and repayments under our revolving credit facility, which had net zero impact to financing activities during the year ended December 31, 2022. Share Repurchase Program Refer to Note 20.
Our effective tax rate for 2022 differs from the U.S. federal statutory rate of 21.0% due primarily to the effect of recurring items including state taxes, foreign derived intangible income, and foreign taxable earnings at a rate different from the U.S. federal statutory rate. Additionally, there was a favorable impact related to non-taxable income.
Our effective tax rate for the year ended December 31, 2022 differs from the U.S. federal statutory rate of 21.0% primarily due to the effect of recurring items including state taxes, foreign derived intangible income and foreign taxable earnings at a rate different from the U.S. federal statutory rate. Additionally, there were favorable impacts related to non-taxable income.
If the Company does not perform a qualitative assessment, or if it determines that it is not more likely than not that the fair value of the reporting unit or indefinite-lived intangible asset exceeds its carrying amount, the Company will calculate the estimated fair value of the reporting unit or indefinite-lived intangible asset.
If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of the reporting unit or indefinite-lived intangible asset exceeds its carrying amount, we will calculate the estimated fair value of the reporting unit or indefinite-lived intangible asset.
Basis of Presentation and Summary of Significant Accounting Policies and Note 15. Income Taxes to the Consolidated and Combined Financial Statements. Comparison of the Years Ended December 31, 2022 and 2021 Our effective tax rate for the years ended December 31, 2022 and 2021 was 23.9% and 22.7%, respectively.
Basis of Presentation and Summary of Significant Accounting Policies and Note 15. Income Taxes to the Consolidated Financial Statements. 31 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 Our effective tax rate for the years ended December 31, 2023 and 2022 was 22.0% and 23.9%, respectively.
Financing to the Consolidated and Combined Financial Statements for additional information regarding the terms of our Notes and the Term Loans.
Refer to Note 11. Financing to the Consolidated Financial Statements for additional information regarding the terms of our notes and the term loans.
NON-GAAP FINANCIAL MEASURES Sales from Existing Businesses We define sales from existing businesses as total sales excluding (i) sales from acquired and certain divested businesses; (ii) the impact of currency translation; and (iii) certain other items. • References to sales attributable to acquisitions or acquired businesses refer to GAAP sales from acquired businesses recorded prior to the first anniversary of the acquisition less the amount of sales attributable to certain divested businesses or product lines not considered discontinued operations. • The portion of sales attributable to the impact of currency translation is calculated as the difference between (a) the period-to-period change in sales (excluding sales from acquired businesses) and (b) the period-to-period change in sales, including foreign operations, (excluding sales from acquired businesses) after applying the current period foreign exchange rates to the prior year period. • The portion of sales attributable to other items is calculated as the impact of those items which are not directly correlated to sales from existing businesses which do not have an impact on the current or comparable period.
NON-GAAP FINANCIAL MEASURES Core Sales We define core sales as total sales excluding (i) sales from acquired and certain divested businesses; (ii) the impact of currency translation; and (iii) certain other items. • References to sales attributable to acquisitions or acquired businesses refer to GAAP sales from acquired businesses recorded prior to the first anniversary of the acquisition less the amount of sales attributable to certain divested or exited businesses or product lines not considered discontinued operations. • The portion of sales attributable to the impact of currency translation is calculated as the difference between (a) the period-to-period change in sales (excluding sales from acquired businesses) and (b) the period-to-period change in sales, including foreign operations (excluding sales from acquired businesses), after applying the current period foreign exchange rates to the prior year period. • The portion of sales attributable to other items is calculated as the impact of those items which are not directly correlated to core sales which do not have an impact on the current or comparable period. 30 Table of Contents Core sales should be considered in addition to, and not as a replacement for or superior to, total sales, and may not be comparable to similarly titled measures reported by other companies.
Supplemental Guarantor Financial Information As of December 31, 2022, we had $1.6 billion in aggregate principal amount of the Notes and $1.0 billion in aggregate principal amount outstanding of the Term Loans.
Supplemental Guarantor Financial Information As of December 31, 2023, we had $1.6 billion in aggregate principal amount of registered notes and $700.0 million in aggregate principal amount outstanding of term loans.
We also continue to monitor the Russia-Ukraine Conflict and the impact on our business and operations.
We also continue to monitor the Russia-Ukraine and Israel-Hamas conflicts and the impact on our business and operations.
As part of our 2022 annual impairment analysis, we elected to apply the qualitative goodwill impairment assessment guidance in ASC 350-20, Goodwill , for all 7 of our reporting units, or approximately $1.8 billion of goodwill as of the assessment date (which includes reporting units that are held for sale).
As part of our 2023 annual impairment analysis, we elected to apply the qualitative goodwill impairment assessment guidance in ASC 350-20, Goodwill , for all four of our reporting units as of the assessment date, or approximately $1.7 billion of goodwill as of the assessment date.
In these analyses management considers general macroeconomic conditions, industry and market conditions, cost factors, financial performance and other entity and asset specific events and may require management to make judgments and estimates about future revenues, expenses, market conditions and discount rates related to these assets.
We also test intangible assets with indefinite lives at least annually for impairment. In these analyses management considers general macroeconomic conditions, industry and market conditions, cost factors, financial performance and other entity and asset specific events and may require management to make judgments and estimates about future revenues, expenses, market conditions and discount rates related to these assets.
If actual market conditions are less favorable than those projected, we could be required to reduce the value of our inventory, which would adversely impact our financial statements. Goodwill and Other Intangible Assets Goodwill and other intangible assets result from our acquisition of existing businesses.
If actual market conditions are less favorable than those projected, we could be required to reduce the value of our inventory, which would adversely impact our financial statements. Goodwill and Other Intangible Assets Goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and intangible assets acquired less assumed liabilities.
The Company’s decision to perform a qualitative impairment assessment for an individual reporting unit in a given year is influenced by a number of factors, inclusive of the size of the reporting unit's goodwill, the significance of the excess of the reporting unit's estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments and the date of acquisition.
Our decision to perform a qualitative impairment assessment for an individual reporting unit in a given year is influenced by a number of factors, inclusive of the size of the reporting unit's goodwill, the significance of the excess of the reporting unit's estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments and the date of acquisition. 37 Table of Contents In the first quarter of 2023, we realigned our internal organization, as further discussed in Note 16.
Overview of Cash Flows and Liquidity Following is an overview of our cash flows and liquidity: Year Ended December 31, ($ in millions) 2022 2021 Net cash provided by operating activities $ 321.2 $ 481.1 Cash paid for acquisitions, net of cash received $ (277.5) $ (955.8) Payments for additions to property, plant and equipment (60.0) (47.8) Proceeds from sale of property 0.4 — Cash paid for equity investments (11.8) (11.3) Proceeds from sale of equity securities 19.0 — Cash received for settlement of investment — 7.2 Net cash used in investing activities $ (329.9) $ (1,007.7) Proceeds from issuance of long-term debt $ 1,167.0 $ 2,186.5 Repayment of long-term debt (1,167.0) (1,400.0) Net proceeds from (repayments of) short-term borrowings 0.4 (7.0) Payments for debt issuance costs (0.8) (5.1) Payments of common stock cash dividend (15.9) (12.7) Purchases of treasury stock (328.0) — Proceeds from stock option exercises 2.5 7.5 Acquisition of noncontrolling interest — (1.9) Net transfers to Former Parent — (35.6) Other financing activities (6.1) (6.2) Net cash (used in) provided by financing activities $ (347.9) $ 725.5 31 Table of Contents Operating Activities Cash flows from operating activities can fluctuate significantly from period to period as working capital needs and the timing of payments for income taxes, restructuring activities and other items impact reported cash flows.
Capital Stock and Earnings per Share to the Consolidated Financial Statements for more information related to our share repurchases. 33 Table of Contents Overview of Cash Flows and Liquidity Following is an overview of our cash flows and liquidity: Year Ended December 31, ($ in millions) 2023 2022 Net cash provided by operating activities $ 455.0 $ 321.2 Proceeds from sale of business, net of cash provided $ 107.5 $ — Cash paid for acquisitions, net of cash received — (277.5) Payments for additions to property, plant and equipment (60.1) (60.0) Proceeds from sale of property 4.5 0.4 Cash paid for equity investments (3.0) (11.8) Proceeds from sale of equity securities 20.4 19.0 Net cash provided by (used in) investing activities $ 69.3 $ (329.9) Proceeds from issuance of long-term debt $ — $ 1,167.0 Repayment of long-term debt (300.0) (1,167.0) Net proceeds from short-term borrowings 1.9 0.4 Payments for debt issuance costs — (0.8) Payments of common stock cash dividend (15.5) (15.9) Purchases of treasury stock (74.7) (328.0) Proceeds from stock option exercises 10.4 2.5 Other financing activities (9.9) (6.1) Net cash used in financing activities $ (387.8) $ (347.9) Operating Activities Cash flows from operating activities can fluctuate significantly from period to period as working capital needs and the timing of payments for income taxes, restructuring activities and other items impact reported cash flows.
Our obligations to pay principal and interest on the Notes and Term Loans are fully and unconditionally guaranteed on a joint and several basis on an unsecured, unsubordinated basis by the Guarantors. Our other subsidiaries do not guarantee any such indebtedness (collectively, “Non-Guarantor Subsidiaries”). Refer to Note 11.
Our obligations to pay principal and interest on the registered notes and term loans are fully and unconditionally guaranteed on a joint and several basis on an unsecured, unsubordinated basis by Gilbarco Inc. and Matco Tools Corporation, two of Vontier’s wholly-owned subsidiaries (the “Guarantor Subsidiaries”). Our other subsidiaries do not guarantee any such indebtedness (collectively, the “Non-Guarantor Subsidiaries”).
As of December 31, 2022, we had purchase obligations of $246.3 million, with $228.6 million payable in the next 12 months. 33 Table of Contents With respect to our cash requirements, we generally intend to use available cash and internally generated funds to meet these cash requirements, but in the event that additional liquidity is required, particularly in connection with acquisitions, we may also borrow under our credit facilities, enter into new credit facilities and borrow directly thereunder and/or access the capital markets.
With respect to our cash requirements, we generally intend to use available cash and internally generated funds to meet these cash requirements, but in the event that additional liquidity is required, particularly in connection with acquisitions, we may also borrow under our credit facilities, enter into new credit facilities and borrow directly thereunder and/or access the capital markets.
If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated, and a charge would need to be taken against net earnings which would adversely affect our financial statements.
If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated, and a charge would need to be taken against net earnings which would adversely affect our financial statements. No goodwill or other intangible assets impairment charges were recorded during the years ended December 31, 2023, 2022 and 2021.
Our existing businesses in our mobility technologies platform experienced growth from price increases, as well as strong demand across the alternative energy and environmental and aftermarket businesses, which were partially offset by the lower rate of demand related to the end of the upgrade cycle for enhanced credit card security requirements for outdoor payment systems based on the EMV global standards as well as the end of the Mexico fiscal regulation upgrades.
The increase in core sales was primarily due to growth from price increases, as well as strong demand in the alternative energy business, which were partially offset by the lower rate of demand related to the end of the U.S. upgrade cycle for enhanced credit card security requirements for outdoor payment systems based on the EMV global standards as well as the end of the Mexico fiscal regulation upgrades.
Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary.
Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary. The IRS started an examination of the Company’s initial U.S. federal income tax return for the post-Separation period in 2020.
Comprehensive income for the year ended December 31, 2022 includes a gain on previously held equity interests from combination of business of $32.7 million which relates to a gain recognized on our interest in Driivz prior to acquiring the remaining outstanding shares. Refer to Note 3.
Comprehensive income for the year ended December 31, 2022 includes a gain on previously held equity interests from combination of business of $32.7 million which relates to a gain recognized on our interest in Driivz prior to acquiring the remaining outstanding shares, unrealized and realized losses on equity securities measured at fair value of $8.7 million and $3.1 million, respectively, and unfavorable foreign currency translation adjustments of $77.1 million.
As of December 31, Summarized Balance Sheet Data ($ in millions) 2022 Assets Current assets $ 428.0 Intercompany receivables 1,099.3 Noncurrent assets 612.7 Total assets $ 2,140.0 Liabilities Current liabilities $ 378.7 Intercompany payables 286.6 Noncurrent liabilities 2,642.8 Total liabilities $ 3,308.1 Cash and Cash Requirements As of December 31, 2022, we held approximately $204.5 million of cash and cash equivalents that were held in either operating accounts or invested in highly liquid investment-grade instruments with a maturity of 90 days or less with an annual effective rate generally around 4.0% as of December 31, 2022.
(c) Includes intercompany pretax income of $20.5 million. 35 Table of Contents Summarized Balance Sheet Data ($ in millions) December 31, 2023 Assets Current assets $ 383.1 Intercompany receivables 1,722.0 Noncurrent assets 641.6 Total assets $ 2,746.7 Liabilities Current liabilities $ 437.4 Intercompany payables 279.9 Noncurrent liabilities 2,242.7 Total liabilities $ 2,960.0 Cash and Cash Requirements As of December 31, 2023, we held approximately $340.9 million of cash and cash equivalents that were held in either operating accounts or invested in highly liquid investment-grade instruments with a maturity of 90 days or less with an annual effective rate generally around 5.0% as of December 31, 2023.
As a result, originations of certain financing receivables are non-cash transactions. • The aggregate of other operating assets and liabilities used $93.1 million of cash during the year ended December 31, 2022 as compared to using $6.6 million in the prior year.
As a result, originations of certain financing receivables are non-cash transactions. • The aggregate of other operating assets and liabilities generated $6.8 million of cash during the year ended December 31, 2023 compared to using $93.1 million in the prior year. This difference is due primarily to working capital needs and the timing of accruals and payments and tax-related amounts.
INTEREST COSTS Interest expense, net was $69.6 million during the year ended December 31, 2022 as compared to $47.8 million during the prior year, an increase of $21.8 million, driven primarily by higher average debt balances during the year and the impact of increases in interest rates on our variable-rate debt obligations.
INTEREST COSTS Interest expense, net was $93.7 million during the year ended December 31, 2023 as compared to $69.6 million during the prior year, an increase of $24.1 million, driven primarily by the impact of increases in interest rates on our variable-rate debt obligations, partially offset by a decrease in our outstanding debt obligations between periods.
The IRA implements, among other provisions, a new 15% corporate alternative minimum tax on corporations with over $1 billion of financial statement income and a new 1% excise tax on the aggregate fair market value of stock repurchased by public corporations. We will not be subject to the 15% corporate alternative minimum tax.
On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law, effective January 1, 2023. The IRA implements, among other provisions, a new 15% corporate alternative minimum tax on corporations with over $1 billion of financial statement income and a new 1% excise tax on the aggregate fair market value of stock repurchased by public corporations.
Customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs, are considered in determining the transaction price for the contract. Significant judgment is exercised in determining product returns, customer allowances and rebates, which are estimated based on historical experience and known trends.
Customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs, are considered in determining the transaction price for the contract.
We exclude the effect of currency translation and certain other items from sales from existing businesses because these items are either not under management’s control or relate to items not directly correlated to sales from existing businesses.
We exclude the effect of currency translation and certain other items from core sales because these items are either not under management’s control or relate to items not directly correlated to core sales. Management believes the exclusion of these items from core sales may facilitate assessment of underlying business trends and may assist in comparisons of long-term performance.
We generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity will be sufficient to allow us to continue to invest in existing businesses, consummate strategic acquisitions, make interest payments on our outstanding indebtedness, and manage our capital structure on a short and long-term basis. Refer also to Note 11.
We generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity will be sufficient to allow us to continue to support working capital needs, capital expenditures, pay interest and service debt, pay taxes and any related interest or penalties, fund our restructuring activities and pension plans as required, invest in existing businesses, consummate strategic acquisitions, manage our capital structure on a short and long-term basis and support other business needs or objectives.
Discussion and analysis of our financial condition and results of operations as of and for the year ended December 31, 2021 compared to December 31, 2020 is included under the heading “Item 7.
Our MD&A should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements included elsewhere in this Annual Report. Discussion and analysis of our financial condition and results of operations as of and for the year ended December 31, 2022 compared to December 31, 2021 is included under the heading “Item 7.
Fair Value Measurements to the Consolidated and Combined Financial Statements for additional information on our investments. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT We are exposed to market risk from changes in interest rates, foreign currency exchange rates, credit risk and commodity prices, each of which could impact our financial statements.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT We are exposed to market risk from changes in interest rates, foreign currency exchange rates, credit risk and commodity prices, each of which could impact our financial statements. We generally address our exposure to these risks through our normal operating and financing activities.
Year Ended December 31, Summarized Results of Operations Data ($ in millions) 2022 Net sales (a) $ 1,725.9 Gross profit (b) 851.6 Net income (c) $ 546.6 (a) Includes intercompany sales of $97.8 million for the year ended December 31, 2022. (b) Includes intercompany gross profit of $28.8 million for the year ended December 31, 2022.
Summarized Results of Operations Data ($ in millions) Year Ended December 31, 2023 Net sales (a) $ 1,499.9 Operating profit (b) 551.7 Net income (c) $ 379.4 (a) Includes intercompany sales of $31.1 million. (b) Includes intercompany operating profit of $23.6 million.
Cash flows from operating activities were $321.2 million during the year ended December 31, 2022, a decrease of $159.9 million as compared to the prior year.
Cash flows from operating activities were $455.0 million during the year ended December 31, 2023, an increase of $133.8 million as compared to the prior year.
Determining whether an impairment loss occurred requires a comparison of the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset. We also test intangible assets with indefinite lives at least annually for impairment.
We review identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment loss occurred requires a comparison of the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset.
Our effective tax rate for 2021 differs from the U.S. federal statutory rate of 21.0% due primarily to the effect of recurring items including state taxes, foreign derived intangible income, and foreign taxable earnings at a rate different from the U.S. federal statutory rate. Additionally, there was a favorable impact related to non-taxable income.
Our effective tax rate for the year ended December 31, 2023 differs from the U.S. federal statutory rate of 21.0% primarily due to the effect of state taxes, foreign derived intangible income, and tax credits. Additionally, there were favorable impacts related to non-taxable income and business reorganizations and divestitures which were offset by an increase to uncertain tax positions.
The Company remains subject to tax audit for its separate company tax returns in various U.S. states for the tax years 2011 to 2021. Our operations in certain foreign jurisdictions remain subject to routine examination for the tax years 2009 to 2021. On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law, effective January 1, 2023.
The Company remains subject to tax audits for its separate company tax returns in various U.S. states for the tax years 2011 to 2022. Our operations in certain foreign jurisdictions remain subject to routine examinations for the tax years 2014 to 2022.
Total sales and sales from existing businesses within our diagnostics and repair technologies platform increased low single digits during the year ended December 31, 2022 as compared to the prior year, driven primarily by growth from price increases and continued strong demand across most product categories, most notably hardline and powered tools, which were partially offset by a decrease from the discontinuance of our wheel weights product line.
Total sales and core sales within our Repair Solutions segment increased 2.9% and 3.0%, respectively, during the year ended December 31, 2022, as compared to the prior year, primarily due to growth from price increases and continued strong demand across most product categories, most notably hardline and powered tools.
R&D expense as a percentage of sales was relatively flat during the year ended December 31, 2022, as compared to the prior year. Operating Profit Operating profit decreased $4.3 million, or 0.7%, during the year ended December 31, 2022, as compared to the prior year, and operating profit margins decreased 140 basis points during the same period.
Operating profit decreased $4.3 million, or 0.7%, during the year ended December 31, 2022, as compared to the prior year, and operating profit margins decreased 140 basis points during the same period. Segment operating profit is used as a performance metric by the chief operating decision maker (“CODM”) in determining how to allocate resources and assess performance.
Cost of Sales Cost of sales increased $98.5 million, or 5.9%, during the year ended December 31, 2022, as compared to the prior year, primarily due to our recent acquisitions as well as increased costs from inflationary pressures.
Corporate & other unallocated costs increased $29.6 million, or 16.9%, during the year ended December 31, 2022, as compared to the prior year, primarily due to an increase in intangible asset amortization from our recent acquisitions.
We anticipate being subject to the 1% excise tax on stock repurchases, however, we do not expect it to have a significant impact on our consolidated financial position. We will continue to monitor as new guidance becomes available. For a description of our income tax accounting policies, refer to Note 2.
We are not subject to the 15% corporate alternative minimum tax but are subject to the 1% excise tax on stock repurchases, however, it did not have a significant impact on our financial results for the year ended December 31, 2023. For a description of our income tax accounting policies, refer to Note 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed for the fiscal year ended December 31, 2021 with the Securities and Exchange Commission on February 24, 2022. OVERVIEW General Vontier is a global industrial technology company at the forefront of solving next-generation mobility challenges.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed for the fiscal year ended December 31, 2022 with the Securities and Exchange Commission on February 17, 2023, as supplemented by the discussion herein of our new segments’ sales and segment operating profit.
In general, weakening of the U.S. dollar against other major currencies would positively impact our sales and results of operations on an overall basis and strengthening of the U.S. dollar against other major currencies would adversely impact our sales and results of operations.
If the exchange rates in effect as of December 31, 2023 were to prevail throughout the year ended December 31, 2024, currency exchange rates would not have a material impact on our estimated sales for the year ended December 31, 2024 as compared to the year ended December 31, 2023. 32 Table of Contents In general, weakening of the U.S. dollar against other major currencies would positively impact our sales and results of operations on an overall basis and strengthening of the U.S. dollar against other major currencies would adversely impact our sales and results of operations.
In addition, the expenses reflected in the financial statements may not be indicative of expenses that will be incurred in the future by us. NEW ACCOUNTING STANDARDS Refer to Note 2. Basis of Presentation and Summary of Significant Accounting Policies to the Consolidated and Combined Financial Statements for information regarding new accounting standards.
Basis of Presentation and Summary of Significant Accounting Policies to the Consolidated Financial Statements for information regarding new accounting standards.
Gross profit margin increased slightly during the year ended December 31, 2022, as compared to the prior year. 27 Table of Contents Operating Costs and Other Expenses SG&A expenses increased $84.2 million, or 13.5%, during the year ended December 31, 2022, as compared to the prior year and as a percentage of sales, increased 140 basis points during the same period.
Segment operating profit for our Mobility Technologies segment increased $31.9 million, or 20.5%, during the year ended December 31, 2022, as compared to the prior year, and segment operating profit margin decreased 30 basis points during the same period.
Outlook We expect overall sales and sales from existing businesses to decline on a year-over-year basis in 2023 due to the lower rate of demand related to the end of the upgrade cycle for enhanced credit card security requirements for outdoor payment systems based on the EMV global standards.
The increase in core sales was primarily due to solid demand in our car wash technologies and alternative energy solutions, which were partially offset by the lower rate of demand related to the end of the U.S. upgrade cycle for enhanced credit card security requirements for outdoor payment systems based on the EMV global standards.
The increase in total sales was primarily driven by a 6.5% increase from our recent acquisitions and a 2.6% increase in sales from existing businesses, partially offset by changes in foreign currency exchange rates which negatively impacted our sales growth by 2.6% during the year ended December 31, 2022 as compared to the prior year.
Total sales within our Mobility Technologies segment increased 22.8% during the year ended December 31, 2022, as compared to the prior year, driven by a 0.7% increase in core sales and a 26.1% increase from our recent acquisitions, partially offset by a 4.0% decrease due to the impact of currency translation.
Our long-term debt requires, among others, that we maintain certain financial covenants, and we were in compliance with all of these covenants as of December 31, 2022. Refer to Note 11. Financing to the Consolidated and Combined Financial Statements for more information related to our long-term indebtedness and to Note 19.
Refer to Note 11. Financing to the Consolidated Financial Statements for more information related to our long-term indebtedness and Note 20.
Total sales within our mobility technologies platform increased high single digits during the year ended December 31, 2022 as compared to the prior year.
Corporate & other unallocated costs as a percentage of total sales increased 70 basis points during the year ended December 31, 2022, as compared to the prior year.
R&D expenses (consisting principally of internal and contract engineering personnel costs) increased $15.3 million, or 11.8%, during the year ended December 31, 2022, as compared to the prior year, primarily due to the impact of our recent acquisitions.
R&D expenses increased $18.9 million, or 13.1%, during the year ended December 31, 2023, as compared to the prior year and as a percentage of sales, increased 80 basis points during the same period, primarily due to the impact of our recent acquisitions and continued growth investments in our Mobility Technologies segment.
These guarantees have been provided in connection with certain arrangements with vendors, customers, financing counterparties, and governmental entities to secure the Company’s obligations and/or performance requirements related to specific transactions. The Company believes that if the obligations under these instruments were triggered, they would not have a material effect on the financial statements. LEGAL PROCEEDINGS Refer to Note 17.
Guarantees As of December 31, 2023, the Company had guarantees consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds of $79.2 million. These guarantees have been provided in connection with certain arrangements with vendors, customers, financing counterparties, and governmental entities to secure the Company’s obligations and/or performance requirements related to specific transactions.
Certain customer arrangements include multiple performance obligations, typically hardware, installation, training, consulting, services and/or post-contract customer support (“PCS”).
Significant judgment is exercised in determining product returns, customer allowances and rebates, which are estimated based on historical experience and known trends. 38 Table of Contents Certain customer arrangements, including our SaaS product offerings, include multiple performance obligations, typically hardware, installation, training, consulting, services and/or post-contract customer support (“PCS”).
This increase was primarily driven by SG&A expenses from our recent acquisitions, as well as a $35.6 million increase in intangible asset amortization expense and a $21.9 million increase in transaction- and deal-related costs during the year ended December 31, 2022, as compared to the prior year.
Corporate & Other Unallocated Costs Corporate & other unallocated costs increased $2.3 million, or 1.1%, during the year ended December 31, 2023, as compared to the prior year, primarily due to an increase in costs associated with restructuring activities, intangible asset amortization and variable and stock-based compensation expense, partially offset by a decrease in transaction and deal-related costs.

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