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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D. C. 20549 |
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FORM 10-Q |
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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Quarterly period ended September 30, 2024 |
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☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from __to__ |
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Commission File No. 001-38518 |
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Vertiv Holdings Co |
(Exact name of registrant as specified in its charter) |
| Delaware (State or other jurisdiction of incorporation or organization) | | 81-2376902 (I.R.S Employer Identification No.) | |
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505 N. Cleveland Ave., Westerville, Ohio 43082 |
(Address of principal executive offices including zip code) |
614-888-0246 |
(Registrant’s telephone number, including area code) |
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Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Class A common stock, $0.0001 par value per share | | VRT | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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Large accelerated filer | ☒ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of October 21, 2024, there were 375,335,992 shares of the Company’s Class A common stock, par value $0.0001, outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
VERTIV HOLDINGS CO
(Dollars in millions except for per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, 2024 | | Three months ended September 30, 2023 | | Nine months ended September 30, 2024 | | Nine months ended September 30, 2023 |
Net sales | | | | | | | |
Net sales - products | $ | 1,653.7 | | | $ | 1,381.3 | | | $ | 4,479.2 | | | $ | 3,928.2 | |
Net sales - services | 419.8 | | | 361.3 | | | 1,186.2 | | | 1,069.6 | |
Net sales | 2,073.5 | | | 1,742.6 | | | 5,665.4 | | | 4,997.8 | |
Costs and expenses | | | | | | | |
Cost of sales - products | 1,066.3 | | | 894.2 | | | 2,875.6 | | | 2,626.6 | |
Cost of sales - services | 250.8 | | | 220.8 | | | 725.8 | | | 654.1 | |
Cost of sales | 1,317.1 | | | 1,115.0 | | | 3,601.4 | | | 3,280.7 | |
Operating expenses | | | | | | | |
Selling, general and administrative expenses | 334.6 | | | 327.2 | | | 1,012.4 | | | 963.5 | |
Amortization of intangibles | 45.3 | | | 45.5 | | | 137.1 | | | 136.1 | |
Restructuring costs | 6.3 | | | 1.3 | | | 4.1 | | | 23.5 | |
Foreign currency (gain) loss, net | 5.3 | | | 2.7 | | | 8.7 | | | 13.3 | |
| | | | | | | |
Other operating expense (income) | (6.7) | | | — | | | (8.5) | | | (6.3) | |
Operating profit (loss) | 371.6 | | | 250.9 | | | 910.2 | | | 587.0 | |
Interest expense, net | 35.9 | | | 43.5 | | | 119.7 | | | 137.2 | |
Loss on extinguishment of debt | — | | | — | | | 1.1 | | | — | |
Change in fair value of warrant liabilities | 67.2 | | | 61.6 | | | 269.2 | | | 103.4 | |
Income (loss) before income taxes | 268.5 | | | 145.8 | | | 520.2 | | | 346.4 | |
Income tax expense (benefit) | 91.9 | | | 51.7 | | | 171.4 | | | 118.8 | |
Net income (loss) | $ | 176.6 | | | $ | 94.1 | | | $ | 348.8 | | | $ | 227.6 | |
| | | | | | | |
Earnings (loss) per share: | | | | | | | |
Basic | $ | 0.47 | | | $ | 0.25 | | | $ | 0.93 | | | $ | 0.60 | |
Diluted | $ | 0.46 | | | $ | 0.24 | | | $ | 0.90 | | | $ | 0.59 | |
Weighted-average shares outstanding: | | | | | | | |
Basic | 375,203,364 | | 380,899,419 | | 376,353,335 | | 379,666,002 |
Diluted | 384,316,065 | | 388,240,664 | | 386,106,229 | | 383,832,268 |
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
VERTIV HOLDINGS CO
(Dollars in millions)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, 2024 | | Three months ended September 30, 2023 | | Nine months ended September 30, 2024 | | Nine months ended September 30, 2023 |
Net income (loss) | $ | 176.6 | | | $ | 94.1 | | | $ | 348.8 | | | $ | 227.6 | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Foreign currency translation | 124.9 | | | (63.5) | | | 64.8 | | | (23.5) | |
Interest rate swaps | (22.4) | | | 4.1 | | | (19.0) | | | 0.8 | |
Pension | — | | | (0.2) | | | (0.1) | | | (0.5) | |
Foreign currency exchange forwards | (4.3) | | | — | | | (8.1) | | | — | |
Other comprehensive income (loss), net of tax | 98.2 | | | (59.6) | | | 37.6 | | | (23.2) | |
Comprehensive income (loss) | $ | 274.8 | | | $ | 34.5 | | | $ | 386.4 | | | $ | 204.4 | |
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
VERTIV HOLDINGS CO
(Dollars in millions)
| | | | | | | | | | | |
| September 30, 2024 | | December 31, 2023 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 908.7 | | | $ | 780.4 | |
Accounts receivable, less allowances of $26.3 and $29.1, respectively | 2,328.5 | | | 2,118.1 | |
Inventories | 1,255.2 | | | 884.3 | |
Other current assets | 312.2 | | | 218.7 | |
Total current assets | 4,804.6 | | | 4,001.5 | |
Property, plant and equipment, net | 593.2 | | | 560.1 | |
Other assets: | | | |
Goodwill | 1,348.9 | | | 1,330.3 | |
Other intangible assets, net | 1,572.9 | | | 1,672.9 | |
Deferred income taxes | 296.9 | | | 159.8 | |
Right-of-use assets, net | 186.6 | | | 173.5 | |
Other | 88.3 | | | 100.4 | |
Total other assets | 3,493.6 | | | 3,436.9 | |
Total assets | $ | 8,891.4 | | | $ | 7,998.5 | |
LIABILITIES AND EQUITY | | | |
Current liabilities: | | | |
Current portion of long-term debt | $ | 21.2 | | | $ | 21.8 | |
Current portion of warrant liabilities | 464.2 | | | — | |
Accounts payable | 1,239.7 | | | 986.4 | |
Deferred revenue | 1,016.2 | | | 638.9 | |
Accrued expenses and other liabilities | 623.7 | | | 611.8 | |
Income taxes | 124.2 | | | 46.5 | |
Total current liabilities | 3,489.2 | | | 2,305.4 | |
Long-term debt, net | 2,909.6 | | | 2,919.1 | |
Deferred income taxes | 240.0 | | | 159.5 | |
Warrant liabilities | — | | | 195.0 | |
Long-term lease liabilities | 155.3 | | | 142.6 | |
Other long-term liabilities | 283.6 | | | 262.0 | |
Total liabilities | 7,077.7 | | | 5,983.6 | |
Equity | | | |
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding | — | | | — | |
Common stock, $0.0001 par value, 700,000,000 shares authorized, 375,249,753 and 381,788,876 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | — | | | — | |
| | | |
Additional paid-in capital | 2,151.8 | | | 2,711.3 | |
Accumulated deficit | (371.2) | | | (691.9) | |
Accumulated other comprehensive income (loss) | 33.1 | | | (4.5) | |
Total equity | 1,813.7 | | | 2,014.9 | |
Total liabilities and equity | $ | 8,891.4 | | | $ | 7,998.5 | |
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
VERTIV HOLDINGS CO
(Dollars in millions) | | | | | | | | | | | |
| Nine months ended September 30, 2024 | | Nine months ended September 30, 2023 |
Cash flows from operating activities: | | | |
Net income (loss) | $ | 348.8 | | | $ | 227.6 | |
Adjustments to reconcile net income (loss) to net cash used for operating activities: | | | |
Depreciation | 60.7 | | | 54.6 | |
Amortization | 145.3 | | | 147.5 | |
Deferred income taxes | (53.1) | | | (0.7) | |
Amortization of debt discount and issuance costs | 5.5 | | | 6.3 | |
| | | |
Change in fair value of warrant liabilities | 269.2 | | | 103.4 | |
| | | |
Changes in operating working capital | 69.2 | | | (17.8) | |
Stock-based compensation | 25.8 | | | 18.8 | |
Other | 22.7 | | | 4.6 | |
Net cash provided by (used for) operating activities | 894.1 | | | 544.3 | |
Cash flows from investing activities: | | | |
Capital expenditures | (106.3) | | | (80.1) | |
Investments in capitalized software | (14.4) | | | (3.4) | |
| | | |
Proceeds from disposition of property, plant and equipment | — | | | 12.4 | |
Net cash provided by (used for) investing activities | (120.7) | | | (71.1) | |
Cash flows from financing activities: | | | |
Borrowings from ABL revolving credit facility and short-term borrowings | 270.0 | | | 224.6 | |
Repayments of ABL revolving credit facility and short-term borrowings | (270.0) | | | (459.6) | |
Repayment of long-term debt | (15.9) | | | (21.8) | |
| | | |
| | | |
| | | |
| | | |
Dividend payment | (28.1) | | | — | |
Repurchase of common stock | (599.9) | | | — | |
Exercise of employee stock options | 25.0 | | | 22.9 | |
Employee taxes paid from shares withheld | (21.5) | | | (2.8) | |
Net cash provided by (used for) financing activities | (640.4) | | | (236.7) | |
Effect of exchange rate changes on cash and cash equivalents | (4.2) | | | (4.7) | |
Increase (decrease) in cash, cash equivalents and restricted cash | 128.8 | | | 231.8 | |
Beginning cash, cash equivalents and restricted cash | 788.6 | | | 273.2 | |
Ending cash, cash equivalents and restricted cash | $ | 917.4 | | | $ | 505.0 | |
Changes in operating working capital | | | |
Accounts receivable | $ | (190.4) | | | $ | (143.9) | |
Inventories | (364.8) | | | (101.5) | |
Other current assets | (47.1) | | | 35.7 | |
Accounts payable | 258.9 | | | (44.9) | |
Deferred revenue | 371.7 | | | 184.6 | |
Accrued expenses and other liabilities | 17.2 | | | 45.5 | |
Income taxes | 23.7 | | | 6.7 | |
Total changes in operating working capital | $ | 69.2 | | | $ | (17.8) | |
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
VERTIV HOLDINGS CO
(Dollars in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Share Capital | | | | | | | | | | |
| | Shares | | Amount | | | | | | Additional Paid in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Total |
Balance at December 31, 2022 | | 377,368,837 | | | $ | — | | | | | | | $ | 2,630.7 | | | $ | (1,142.6) | | | $ | (46.2) | | | $ | 1,441.9 | |
Net income (loss) | | — | | | — | | | | | | | — | | | 50.3 | | | — | | | 50.3 | |
Exercise of employee stock options | | 246,653 | | | — | | | | | | | 2.2 | | | — | | | — | | | 2.2 | |
Stock-based compensation, net of withholding for tax(1) | | 14,730 | | | — | | | | | | | 5.4 | | | — | | | — | | | 5.4 | |
Employee 401K match with Vertiv stock | | 135,245 | | | — | | | | | | | 2.1 | | | — | | | — | | | 2.1 | |
Exercise of warrants(2) | | 1,368,194 | | | — | | | | | | | 21.6 | | | — | | | — | | | 21.6 | |
Other comprehensive income (loss), net of tax | | — | | | — | | | | | | | — | | | — | | | 27.3 | | | 27.3 | |
Balance at March 31, 2023 | | 379,133,659 | | | $ | — | | | | | | | $ | 2,662.0 | | | $ | (1,092.3) | | | $ | (18.9) | | | $ | 1,550.8 | |
Net income (loss) | | — | | | $ | — | | | | | | | $ | — | | | $ | 83.2 | | | $ | — | | | $ | 83.2 | |
Exercise of employee stock options | | 649,884 | | | — | | | | | | | 7.8 | | | — | | | — | | | 7.8 | |
Stock-based compensation, net of withholding for tax(3) | | 365,055 | | | — | | | | | | | 4.4 | | | — | | | — | | | 4.4 | |
Employee 401K match with Vertiv stock | | 217,041 | | | — | | | | | | | 2.8 | | | — | | | — | | | 2.8 | |
Other comprehensive income (loss), net of tax | | — | | | — | | | | | | | — | | | — | | | 9.1 | | | 9.1 | |
Balance at June 30, 2023 | | 380,365,639 | | | $ | — | | | | | | | $ | 2,677.0 | | | $ | (1,009.1) | | | $ | (9.8) | | | $ | 1,658.1 | |
Net income (loss) | | — | | | $ | — | | | | | | | $ | — | | | $ | 94.1 | | | $ | — | | | $ | 94.1 | |
Exercise of employee stock options | | 892,030 | | | — | | | | | | | 12.9 | | | — | | | — | | | 12.9 | |
Stock-based compensation, net of withholding for tax(4) | | 6,465 | | | — | | | | | | | 6.2 | | | — | | | — | | | 6.2 | |
Employee 401K match with Vertiv stock | | 85,022 | | | — | | | | | | | 2.2 | | | — | | | — | | | 2.2 | |
Other comprehensive income (loss), net of tax | | — | | | — | | | | | | | — | | | — | | | (59.6) | | | (59.6) | |
Balance at September 30, 2023 | | 381,349,156 | | | $ | — | | | | | | | $ | 2,698.3 | | | $ | (915.0) | | | $ | (69.4) | | | $ | 1,713.9 | |
(1)Net stock compensation activity includes 14,730 shares withheld for taxes valued at $0.1 and stock-based compensation of $5.5.
(2)On February 24, 2023, GS Sponsor LLC elected to exercise 5,266,666 warrants on a cashless basis pursuant to the agreement governing the warrants, in exchange for which the Company issued 1,368,194 shares of Class A common stock.
(3)Net stock compensation activity includes 562,320 vested shares offset by 197,265 shares withheld for taxes valued at $2.4 and stock-based compensation of $6.8.
(4)Net stock compensation activity includes 10,707 vested shares offset by 4,242 shares withheld for taxes valued at $0.3 and stock-based compensation of $6.5.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
VERTIV HOLDINGS CO
(Dollars in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Share Capital | | Treasury Share Capital | | | | | | | | |
| | Shares | | Amount | | Treasury Stock | | Amount | | Additional Paid in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Total |
Balance at December 31, 2023 | | 381,788,876 | | | $ | — | | | — | | | $ | — | | | $ | 2,711.3 | | | $ | (691.9) | | | $ | (4.5) | | | $ | 2,014.9 | |
Net income (loss) | | — | | | — | | | — | | | — | | | — | | | (5.9) | | | — | | | (5.9) | |
Exercise of employee stock options | | 1,109,113 | | | — | | | — | | | — | | | 14.4 | | | — | | | — | | | 14.4 | |
Stock-based compensation, net of withholding for tax(1) | | 102,833 | | | — | | | — | | | — | | | 17.3 | | | — | | | — | | | 17.3 | |
Employee 401K match with Vertiv stock | | 44,968 | | | — | | | — | | | — | | | 2.2 | | | — | | | — | | | 2.2 | |
Dividend | | — | | | — | | | — | | | — | | | — | | | (9.3) | | | — | | | (9.3) | |
Repurchase of common stock | | (9,076,444) | | | — | | | 9,076,444 | | | (605.9) | | | — | | | — | | | — | | | (605.9) | |
Other comprehensive income (loss), net of tax | | — | | | — | | | — | | | — | | | — | | | — | | | (34.3) | | | (34.3) | |
Balance at March 31, 2024 | | 373,969,346 | | | $ | — | | | 9,076,444 | | | $ | (605.9) | | | $ | 2,745.2 | | | $ | (707.1) | | | $ | (38.8) | | | $ | 1,393.4 | |
Net income (loss) | | — | | | $ | — | | | — | | | $ | — | | | $ | — | | | $ | 178.1 | | | $ | — | | | $ | 178.1 | |
Exercise of employee stock options | | 693,261 | | | — | | | — | | | — | | | 9.2 | | | — | | | — | | | 9.2 | |
Stock-based compensation, net of withholding for tax(2) | | 412,459 | | | — | | | — | | | — | | | (10.7) | | | — | | | — | | | (10.7) | |
Employee 401K match with Vertiv stock | | 38,061 | | | — | | | — | | | — | | | 3.2 | | | — | | | — | | | 3.2 | |
Dividend | | — | | | — | | | — | | | — | | | — | | | (9.4) | | | — | | | (9.4) | |
Retirement of treasury stock | | — | | | — | | | (9,076,444) | | | 605.9 | | | (605.9) | | | — | | | — | | | — | |
Other comprehensive income (loss), net of tax | | — | | | — | | | — | | | — | | | — | | | — | | | (26.3) | | | (26.3) | |
Balance at June 30, 2024 | | 375,113,127 | | | $ | — | | | — | | | $ | — | | | $ | 2,141.0 | | | $ | (538.4) | | | $ | (65.1) | | | $ | 1,537.5 | |
Net income (loss) | | — | | | $ | — | | | — | | | $ | — | | | $ | — | | | $ | 176.6 | | | $ | — | | | $ | 176.6 | |
Exercise of employee stock options | | 100,303 | | | — | | | — | | | — | | | 1.4 | | | — | | | — | | | 1.4 | |
Stock-based compensation, net of withholding for tax(3) | | 10,299 | | | — | | | — | | | — | | | 7.0 | | | — | | | — | | | 7.0 | |
Employee 401K match with Vertiv stock | | 26,024 | | | — | | | — | | | — | | | 2.4 | | | — | | | — | | | 2.4 | |
Dividend | | — | | | — | | | — | | | — | | | — | | | (9.4) | | | — | | | (9.4) | |
Other comprehensive income (loss), net of tax | | — | | | — | | | — | | | — | | | — | | | — | | | 98.2 | | | 98.2 | |
Balance at September 30, 2024 | | 375,249,753 | | | $ | — | | | — | | | $ | — | | | $ | 2,151.8 | | | $ | (371.2) | | | $ | 33.1 | | | $ | 1,813.7 | |
(1)Net stock compensation activity includes 146,095 vested shares offset by 43,262 shares withheld for taxes valued at $3.0 and stock-based compensation of $9.2.
(2)Net stock compensation activity includes 606,060 vested shares offset by 193,601 shares withheld for taxes valued at $18.1 and stock-based compensation of $8.5.
(3)Net stock compensation activity includes 15,583 vested shares offset by 5,284 shares withheld for taxes valued at $0.4 and stock-based compensation of $8.1.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
Vertiv Holdings Co
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share amounts)
(1) DESCRIPTION OF BUSINESS
Vertiv Holdings Co (“Holdings Co”, and together with its majority-owned subsidiaries, “Vertiv”, “we”, “our”, or “the Company”), formerly known as GS Acquisition Holdings Corp (“GSAH”), provides mission-critical digital infrastructure technologies and life cycle services primarily for data centers, communication networks, and commercial and industrial environments. Vertiv’s offerings include AC and DC power management products, switchgear and busbar products, thermal management products, integrated rack systems, modular solutions, management systems for monitoring and controlling digital infrastructure, and service. Vertiv manages and reports results of operations for three business segments: Americas; Asia Pacific; and Europe, Middle East & Africa.
(2) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. and the rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of the Company and its subsidiaries in which the Company has a controlling interest. Investments in joint ventures and 20% to 50% owned affiliates where Vertiv has the ability to exert significant influence are accounted for under the equity method. Vertiv has no significant equity method investments during the periods presented. These unaudited condensed consolidated interim financial statements do not include all of the information and footnotes required for complete financial statements. In management’s opinion, these financial statements reflect all adjustments of a normal, recurring nature necessary for a fair presentation of the results for the interim periods presented. The presentation of certain prior period amounts have been reclassed to conform with current year presentation.
The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from the estimates. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates. Results for these interim periods are not necessarily indicative of results to be expected for the full year due to, among other reasons, the continued uncertainty of general economic conditions that have impacted, and may continue to impact, the Company's sales channels, supply chain, manufacturing operations, workforce, or other key aspects of the Company’s operations.
The notes included herein should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 23, 2024.
Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07: Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures. This ASU provides amendments by requiring disclosure of incremental segment information on an annual and interim basis. The amendments are effective in fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company does not expect the adoption to have a material impact on its Consolidated Financial Statements.
In December 2023, the FASB issued ASU 2023-09: Income Taxes (Topic 740) Improvements to Income Tax Disclosures. This ASU provides amendments that require entities to annually disclose specific rate reconciliation categories, additional details for significant reconciling items exceeding 5%, and comprehensive breakdowns of income taxes paid by jurisdiction. The amendments are effective in fiscal years beginning after December 15, 2024. The Company does not expect the adoption to have a material impact on its Consolidated Financial Statements.
(3) REVENUE
The Company recognizes revenue from the sale of manufactured products and services when control of promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.
Disaggregation of Revenues
Prior to 2024, the Company previously reported critical infrastructure & solutions and integrated rack solutions revenue separately. In 2024, the previously reported revenue for those product and service offerings are combined and reported as products as they are now collectively managed together. Prior period amounts have been reclassified to conform with the current year presentation.
The following table disaggregates revenue by business segment, product and service offering and timing of transfer of control:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, 2024 |
| Americas | | Asia Pacific | | Europe, Middle East, & Africa | | Total |
Sales by Product and Service Offering: | | | | | | | |
Products | $ | 957.0 | | | $ | 313.9 | | | $ | 344.7 | | | $ | 1,615.6 | |
Services & spares | 241.6 | | | 118.5 | | | 97.8 | | | 457.9 | |
Total | $ | 1,198.6 | | | $ | 432.4 | | | $ | 442.5 | | | $ | 2,073.5 | |
| | | | | | | |
Timing of Revenue Recognition: | | | | | | | |
Products and services transferred at a point in time | $ | 893.7 | | | $ | 283.2 | | | $ | 247.5 | | | $ | 1,424.4 | |
Products and services transferred over time | 304.9 | | | 149.2 | | | 195.0 | | | 649.1 | |
Total | $ | 1,198.6 | | | $ | 432.4 | | | $ | 442.5 | | | $ | 2,073.5 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, 2023 |
| Americas | | Asia Pacific | | Europe, Middle East, & Africa | | Total |
Sales by Product and Service Offering: | | | | | | | |
Products | $ | 797.0 | | | $ | 285.5 | | | $ | 266.8 | | | $ | 1,349.3 | |
Services & spares | 206.2 | | | 103.1 | | | 84.0 | | | 393.3 | |
Total | $ | 1,003.2 | | | $ | 388.6 | | | $ | 350.8 | | | $ | 1,742.6 | |
| | | | | | | |
Timing of Revenue Recognition: | | | | | | | |
Products and services transferred at a point in time | $ | 772.8 | | | $ | 296.0 | | | $ | 210.4 | | | $ | 1,279.2 | |
Products and services transferred over time | 230.4 | | | 92.6 | | | 140.4 | | | 463.4 | |
Total | $ | 1,003.2 | | | $ | 388.6 | | | $ | 350.8 | | | $ | 1,742.6 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, 2024 |
| Americas | | Asia Pacific | | Europe, Middle East, & Africa | | Total |
Sales by Product and Service Offering: | | | | | | | |
Products | $ | 2,565.2 | | | $ | 831.0 | | | $ | 974.1 | | | $ | 4,370.3 | |
Services & spares | 679.5 | | | 342.8 | | | 272.8 | | | 1,295.1 | |
Total | $ | 3,244.7 | | | $ | 1,173.8 | | | $ | 1,246.9 | | | $ | 5,665.4 | |
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Timing of Revenue Recognition: | | | | | | | |
Products and services transferred at a point in time | $ | 2,448.0 | | | $ | 836.6 | | | $ | 692.4 | | | $ | 3,977.0 | |
Products and services transferred over time | 796.7 | | | 337.2 | | | 554.5 | | | 1,688.4 | |
Total | $ | 3,244.7 | | | $ | 1,173.8 | | | $ | 1,246.9 | | | $ | 5,665.4 | |
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| Nine months ended September 30, 2023 |
| Americas | | Asia Pacific | | Europe, Middle East, & Africa | | Total |
Sales by Product and Service Offering: | | | | | | | |
Products | $ | 2,222.4 | | | $ | 780.1 | | | $ | 827.2 | | | $ | 3,829.7 | |
Services & spares | 602.5 | | | 317.3 | | | 248.3 | | | 1,168.1 | |
Total | $ | 2,824.9 | | | $ | 1,097.4 | | | $ | 1,075.5 | | | $ | 4,997.8 | |
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Timing of Revenue Recognition: | | | | | | | |
Products and services transferred at a point in time | $ | 2,164.2 | | | $ | 830.6 | | | $ | 716.1 | | | $ | 3,710.9 | |
Products and services transferred over time | 660.7 | | | 266.8 | | | 359.4 | | | 1,286.9 | |
Total | $ | 2,824.9 | | | $ | 1,097.4 | | | $ | 1,075.5 | | | $ | 4,997.8 | |
The opening and closing balances of current and long-term deferred revenue as of September 30, 2024 and December 31, 2023 were as follows:
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| Balances at September 30, 2024 | | Balances at December 31, 2023 |
Deferred revenue - current | $ | 1,016.2 | | | $ | 638.9 | |
Deferred revenue - noncurrent (1) | 80.7 | | | 61.8 | |
(1) Noncurrent deferred revenue is recorded within “Other long-term liabilities” on the Unaudited Condensed Consolidated Balance Sheets.
Deferred revenue - noncurrent consists primarily of maintenance, extended warranty and other service contracts. The Company expects to recognize noncurrent deferred revenue of $40.2, $22.7 and $17.8 in the next 13 to 24 months, the next 25 to 36 months, and thereafter, respectively.
(4) RESTRUCTURING COSTS
Restructuring costs include expenses associated with the Company’s efforts to continually improve operational efficiency and reposition its assets to remain competitive on a worldwide basis. Plant closing and other costs include lease and contract termination costs of moving fixed assets, employee training, relocation, and facility costs. These costs are recorded in "Restructuring costs" on the Unaudited Condensed Consolidated Statement of Earnings (Loss).
Restructuring expense by business segment were as follows:
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| Three months ended September 30, 2024(1) | | Three months ended September 30, 2023 | | Nine months ended September 30, 2024(1) | | Nine months ended September 30, 2023 |
Americas | $ | (6.1) | | | $ | 0.6 | | | $ | (5.8) | | | $ | 1.8 | |
Asia Pacific | — | | | 0.6 | | | (2.1) | | | 11.0 | |
Europe, Middle East & Africa | 12.8 | | | 0.3 | | | 13.5 | | | 3.9 | |
Corporate | (0.4) | | | (0.2) | | | (1.5) | | | 6.8 | |
Total | $ | 6.3 | | | $ | 1.3 | | | $ | 4.1 | | | $ | 23.5 | |
(1) During the three and nine months ended September 30, 2024 restructuring reserves were adjusted due to new restructuring activities in Europe, Middle East & Africa and slightly offset by a change in restructuring plans previously recorded in Americas.
The current liability and non-current liability for estimated restructuring costs is recorded in "Accrued expenses and other liabilities” and "Other long-term liabilities", respectively, on the Unaudited Condensed Consolidated Balance Sheets. As of September 30, 2024, the non-current liability for estimated restructuring costs decreased by $6.5 due to a change in restructuring plans. The change in the current liability for the restructuring costs during the nine months ended September 30, 2024 were as follows:
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| December 31, 2023 | | Expense | | Paid/Utilized | | September 30, 2024 |
Severance and benefits | $ | 25.1 | | | $ | (2.7) | | | $ | (10.3) | | | $ | 12.1 | |
Plant closing and other | 0.1 | | | 13.2 | | | (13.2) | | | 0.1 | |
Total | $ | 25.2 | | | $ | 10.5 | | | $ | (23.5) | | | $ | 12.2 | |
The change in the current liability for the restructuring costs during the nine months ended September 30, 2023 were as follows:
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| December 31, 2022 | | Expense | | Paid/Utilized | | September 30, 2023 |
Severance and benefits | $ | 15.3 | | | $ | 22.9 | | | $ | (11.9) | | | $ | 26.3 | |
Plant closing and other | 0.1 | | | 0.6 | | | (0.6) | | | 0.1 | |
Total | $ | 15.4 | | | $ | 23.5 | | | $ | (12.5) | | | $ | 26.4 | |
(5) DEBT
Long-term debt, net, consisted of the following as of September 30, 2024 and December 31, 2023:
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| September 30, 2024 | | December 31, 2023 |
Term Loan due 2027 at 7.20% and 7.97% at September 30, 2024 and December 31, 2023, respectively | $ | 2,102.2 | | | $ | 2,118.1 | |
Senior Secured Notes due 2028 at 4.125% at both September 30, 2024 and December 31, 2023 | 850.0 | | | 850.0 | |
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Unamortized discount and issuance costs | (21.4) | | | (27.2) | |
| 2,930.8 | | | 2,940.9 | |
Less: current portion | (21.2) | | | (21.8) | |
Total long-term debt, net of current portion | $ | 2,909.6 | | | $ | 2,919.1 | |
Term Loan Amendment
On June 13, 2024, pursuant to an amendment ("Amendment No. 4") to our Term Loan Credit Agreement (the "Credit Agreement"), among other modifications, the interest rate margin for the outstanding term loans under the Credit Agreement was reduced by 0.50%, to 2.00% in respect of term loans bearing interest based on the Term SOFR rate (as defined therein) and to 1.00% in respect of term loans bearing interest based on the Base Rate (as defined therein). Additionally, pursuant to Amendment No. 4, the Term SOFR adjustments for all interest periods were removed, reducing the interest rate on term loans bearing interest based on the Term SOFR rate (a) for an interest period of one month by 0.11448%, (b) for an interest period of three months by 0.26161%, (c) for an interest period of six months by 0.42826%, and (d) for an interest period of twelve months by 0.71513%. The maturity date for all term loans under the Credit Agreement remains March 2, 2027, and all other material provisions of the Credit Agreement remain materially unchanged. The Company recognized a loss on the extinguishment of debt of $1.1 related to the interest rate reduction for the nine months ended September 30, 2024.
ABL Revolving Credit Facility
On February 16, 2024, Vertiv Group Corporation (a wholly-owned subsidiary of the Company), as the borrower, and certain subsidiaries ("Co-Borrowers") entered into Amendment No. 8 (the “Eighth Amendment”) to our Asset Based Revolving Credit Facility (the "ABL Revolving Credit Facility"), which, among other modifications, extended the maturity date of the ABL Revolving Credit Facility to be five years from the date of the Eighth Amendment (subject to an earlier springing maturity date if certain other indebtedness for borrowed money matures earlier), increased the revolving loan commitments tranche by $30.0 to a total loan commitment of $600.0 under the ABL Revolving Credit Facility, modified certain borrowing base reporting requirements and removed the French tranche and the FILO tranches from the ABL Revolving Credit Facility.
At September 30, 2024, Borrower and, “Co-Borrowers”, had $584.2 of availability under the Asset Based Revolving Credit Facility (the “ABL Revolving Credit Facility”) (subject to customary conditions, and subject to separate sublimits for letters of credit, swingline borrowings and borrowings made to certain non-U.S. Co-Borrowers), net of letters of credit outstanding in the aggregate principal amount of $15.8, and taking into account the borrowing base limitations set forth in the ABL Revolving Credit Facility. At both September 30, 2024 and December 31, 2023, there was no outstanding balance on the ABL Revolving Credit Facility.
(6) INCOME TAXES
The Company’s effective tax rate was 34.2%, 32.9%, 35.5% and 34.3% for the three and nine months ended September 30, 2024 and 2023, respectively. The effective tax rate in the three and nine months ended September 30, 2024 is primarily influenced by the negative impacts of non-deductible changes in the fair value of the warrant liabilities and discrete tax benefits related to stock compensation activity in the respective periods. The effective rate for the comparative three and nine months ended September 30, 2023 is primarily influenced by the mix of income between the Company’s U.S. and non-U.S. operations, net of changes in valuation allowances reflect the negative impacts of non-deductible changes in the fair value of the warrant liabilities and the impact of changes in our indefinite reinvestment liability.
The Company provided U.S. federal income taxes and foreign withholding taxes on all temporary differences attributed to basis differences in foreign subsidiaries that are not considered indefinitely reinvested. As of September 30, 2024, the Company has certain earnings of certain foreign affiliates that continue to be indefinitely reinvested, but it was not practicable to estimate the associated deferred tax liability, due to interaction with other tax laws and regulations in the year of inclusion.
(7) RELATED PARTY TRANSACTIONS
Transactions with Affiliates of Advisors
On August 8, 2023 (the "Stock Sale Transaction date"), VPE Holdings, LLC (the "Vertiv Stockholder"), an affiliate of Platinum Equity Advisors, LLC ("Advisors") completed the sale of 20,000,000 shares of Class A common stock of the Company (the "Stock Sale Transaction"). Subsequent to the Stock Sale Transaction, the Vertiv Stockholder held less than 5% of the outstanding Class A common stock of the Company and as such is no longer considered a related person of the Company for purposes of Item 404 of Regulation S-K by virtue of its ownership in the Company. Prior to the Stock Sale Transaction date, the Company purchased and sold goods in the ordinary course of business with affiliates of Advisors. In 2023, purchases from the start of the quarter and year through the Stock Sale Transaction date were $11.6 and $74.1, respectively. Additionally, there were sales from the start of the quarter and year through the Stock Sale Transaction date of $6.7 and $89.5, respectively.
(8) OTHER FINANCIAL INFORMATION
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| September 30, 2024 | | December 31, 2023 |
Reconciliation of cash, cash equivalents, and restricted cash | | | |
Cash and cash equivalents | $ | 908.7 | | | $ | 780.4 | |
Restricted cash included in other current assets | 8.7 | | | 8.2 | |
Total cash, cash equivalents, and restricted cash | $ | 917.4 | | | $ | 788.6 | |
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| September 30, 2024 | | December 31, 2023 |
Inventories | | | |
Finished products | $ | 406.5 | | | $ | 261.6 | |
Raw materials | 577.9 | | | 484.3 | |
Work in process | 270.8 | | | 138.4 | |
Total inventories | $ | 1,255.2 | | | $ | 884.3 | |
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| September 30, 2024 | | December 31, 2023 |
Property, plant and equipment, net | | | |
Machinery and equipment | $ | 552.3 | | | $ | 479.7 | |
Buildings | 361.3 | | | 343.6 | |
Land | 41.6 | | | 41.3 | |
Construction in progress | 65.4 | | | 67.5 | |
Property, plant and equipment, at cost | 1,020.6 | | | 932.1 | |
Less: Accumulated depreciation | (427.4) | | | (372.0) | |
Property, plant and equipment, net | $ | 593.2 | | | $ | 560.1 | |
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| September 30, 2024 | | December 31, 2023 |
Accrued expenses and other liabilities | | | |
Accrued payroll and other employee compensation | $ | 146.6 | | | $ | 165.4 | |
Restructuring (see Note 4) | 12.2 | | | 25.2 | |
Operating lease liabilities | 41.2 | | | 42.9 | |
Product warranty | 27.3 | | | 26.1 | |
Other | 396.4 | | | 352.2 | |
Total | $ | 623.7 | | | $ | 611.8 | |
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| Nine months ended September 30, 2024 | | Nine months ended September 30, 2023 |
Change in product warranty accrual | | | |
Balance at the beginning of the period | $ | 26.1 | | | $ | 25.6 | |
Provision charge to expense | 18.8 | | | 15.1 | |
Paid/utilized | (17.6) | | | (16.7) | |
Balance at the end of the period | $ | 27.3 | | | $ | 24.0 | |
(9) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
In accordance with ASC 820, the Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. Observable inputs are from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. These tiers include the following:
Level 1 — inputs include observable unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 — inputs include other than quoted prices in active markets that are either directly or indirectly observable
Level 3 — inputs include unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions
In determining fair value, the Company uses various valuation techniques and prioritizes the use of observable inputs. The availability of observable inputs varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the instrument. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management judgment. For other financial instruments, pricing inputs are less observable in the marketplace and may require management judgment.
Recurring fair value measurements
A summary of the Company’s financial instruments recognized at fair value, and the fair value measurements used are as follows:
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| | As of September 30, 2024 |
| Balance Sheet Location | Total | | Quoted prices in active markets for identical assets (Level 1) | | Other observable inputs (Level 2) | | Unobservable inputs (Level 3) |
Assets: | | | | | | | | |
Interest rate swaps | Other current assets | $ | 28.4 | | | $ | — | | | $ | 28.4 | | | $ | — | |
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Economic hedges | Other current assets | 7.8 | | | — | | | 7.8 | | | — | |
Interest rate swaps | Other noncurrent assets | 27.3 | | | — | | | 27.3 | | | — | |
Total assets | | $ | 63.5 | | | $ | — | | | $ | 63.5 | | | $ | — | |
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Liabilities: | | | | | | | | |
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Foreign currency exchange forwards | Accrued expenses and other liabilities | $ | 7.3 | | | $ | — | | | $ | 7.3 | | | $ | — | |
Private warrants | Current portion of warrant liabilities | 464.2 | | | — | | | 464.2 | | | — | |
Total liabilities | | $ | 471.5 | | | $ | — | | | $ | 471.5 | | | $ | — | |
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| | As of December 31, 2023 |
| Balance Sheet Location | Total | | Quoted prices in active markets for identical assets (Level 1) | | Other observable inputs (Level 2) | | Unobservable inputs (Level 3) |
Assets: | | | | | | | | |
Interest rate swaps | Other current assets | $ | 36.4 | | | $ | — | | | $ | 36.4 | | | $ | — | |
Interest rate swaps | Other noncurrent assets | 44.5 | | | — | | | 44.5 | | | — | |
Total assets | | $ | 80.9 | | | $ | — | | | $ | 80.9 | | | $ | — | |
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Liabilities: | | | | | | | | |
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Private warrants | Warrant liabilities | $ | 195.0 | | | $ | — | | | $ | 195.0 | | | $ | — | |
Total liabilities | | $ | 195.0 | | | $ | — | | | $ | 195.0 | | | $ | — | |
Interest rate swaps — From time to time the Company may enter into derivative financial instruments designed to hedge the variability in interest expense on floating rate debt. Derivatives are recognized as assets or liabilities in the Unaudited Condensed Consolidated Balance Sheets at their fair value. When the derivative instrument qualifies as a cash flow hedge changes in the fair value are deferred through other comprehensive income depending on the effectiveness of the instrument.
The Company uses interest rate swaps to manage the interest rate risk of the Company’s total debt portfolio and related overall cost of borrowing. At both September 30, 2024 and December 31, 2023, interest rate swap agreements designated as cash flow hedges effectively swapped a notional amount of $1,000.0 of SOFR-based floating rate debt for fixed rate debt. The Company’s interest rate swaps mature in March 2027. During the three and nine months ended September 30, 2024 and 2023, the Company recognized $10.8, $32.2, $10.8 and $28.4, respectively, within “Interest expense, net” on the Unaudited Condensed Consolidated Statements of Earnings (Loss). At September 30, 2024, the Company expects that approximately $28.4 of pre-tax net gains on cash flow hedges will be reclassified from accumulated other comprehensive income (loss) into earnings during the next twelve months.
The interest rate swaps are valued using the SOFR yield curves at the reporting date. Counterparties to these contracts are highly rated financial institutions. The fair values of the Company’s interest rate swaps are adjusted for nonperformance risk and creditworthiness of the counterparty through the Company’s credit valuation adjustment (“CVA”). The CVA is calculated at the counterparty level utilizing the fair value exposure at each payment date and applying a weighted probability of the appropriate survival and marginal default percentages.
Foreign currency exchange forwards - The Company may enter into derivative financial instruments designed to hedge the exposure to changes in foreign currency exchange rates. Derivatives are recognized as assets or liabilities in the Unaudited Condensed Consolidated Balance Sheets at their fair value. The Company values foreign currency exchange swaps using broker quotations or market transactions on the listed or over-the-counter market, as such, these derivative instruments are classified in Level 2. When the derivative instrument qualifies as a cash flow hedge changes in the fair value are deferred through other comprehensive income depending on the effectiveness of the instrument. The Company reclassifies the gain or loss associated with the cash flow hedges into earnings when the underlying exposure is recognized. At September 30, 2024, we have derivative instruments which hedge our exposure to certain foreign currency exchange rates with a notional amount of $163.0. For the three and nine months ended September 30, 2024, there were $1.4 and $0.8 realized losses, respectively, associated with the foreign currency exchange swaps within "Cost of sales - products" on the Unaudited Condensed Consolidated Statements of Earnings (Loss).
Economic hedges - At September 30, 2024, we have derivative instruments which hedge our purchases of aluminum and copper with notional amounts of 9,860.0 and 9,030.0 metric tons, respectively. The Company values these instruments using broker quotations, market transactions or option pricing model based on observable market inputs, as such, these derivative instruments are classified in Level 2. These derivative instruments are treated as economic hedges and for the three and nine months ended September 30, 2024, the Company recognized mark-to-market gains of $3.3 and $6.4, respectively, within "Other operating expense (income)" on the Unaudited Condensed Consolidated Statement of Earnings (Loss).
Private warrants — The fair value of the private warrants is considered a Level 2 valuation and is determined using the Black-Sholes-Merton valuation model. The Company recognized a loss of $67.2 and $269.2, respectively, for the three and nine months ended September 30, 2024 in "Change in the fair value of warrant liabilities" on the Unaudited Condensed Consolidated Statement of Earnings (Loss) associated with the mark-to-market adjustment on the 5,266,667 outstanding private warrants. On February 24, 2023, GS Sponsor LLC elected to exercise 5,266,666 warrants on a cashless basis pursuant to the agreement governing the warrants, in exchange for which the Company issued 1,368,194 shares of Class A common stock. For the nine months ended September 30, 2023, the Company recognized a gain of $7.7 in "Change in the fair value of warrant liabilities" on the Unaudited Condensed Consolidated Statement of Earnings (Loss) associated with the exercise of these private warrants. Additionally, the Company recognized a loss of $61.6 and $111.1, respectively, for the three and nine months ended September 30, 2023 in "Change in the fair value of warrant liabilities" on the Unaudited Condensed Consolidated Statement of Earnings (Loss) associated with the mark-to-market adjustment on the remaining 5,266,667 outstanding private warrants.
The significant assumptions which the Company used in the model are:
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Warrant valuation inputs | | September 30, 2024 | | December 31, 2023 |
Stock price | | $ | 99.49 | | | $ | 48.03 | |
Strike price | | $ | 11.50 | | | $ | 11.50 | |
Remaining life | | 0.36 | | 1.10 |
Volatility | | 97.5 | % | | 55.0 | % |
Interest rate (1) | | 4.65 | % | | 4.73 | % |
Dividend yield (2) | | 0.10 | % | | 0.21 | % |
(1) Interest rate determined from a constant maturity treasury yield.
(2) September 30, 2024 and December 31, 2023 dividend yield assumes $0.10 per share per annum.
Net investment hedge — From time to time the Company designates certain intercompany debt to hedge a portion of its investment in foreign subsidiaries and affiliates. The net impact of translation adjustments from these hedges was $(2.8), $20.4, $(1.5) and $19.5, respectively, for the three and nine months ended September 30, 2024 and 2023 and is included in “Foreign currency translation” in the Unaudited Condensed Consolidated Statement of Other Comprehensive Income (Loss). As of September 30, 2024 and December 31, 2023, $78.6 and $225.0, respectively, of the Company’s intercompany debt was designated to hedge investments in certain foreign subsidiaries and affiliates.
Other fair value measurements
The Company determines the fair value of debt using Level 2 inputs based on quoted market prices. The following table presents the estimated fair value and carrying value of long-term debt, including the current portion of long-term debt as of September 30, 2024 and December 31, 2023.
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| September 30, 2024 | | December 31, 2023 |
| Fair Value | | Par Value (1) | | Fair Value | | Par Value (1) |
Term Loan due 2027 | $ | 2,104.9 | | | $ | 2,102.2 | | | $ | 2,104.9 | | | $ | 2,118.1 | |
Senior Secured Notes due 2028 | 819.8 | | | 850.0 | | | 794.0 | | | 850.0 | |
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(1)See “Note 5 — Debt” for additional information.
(10) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Activity in accumulated other comprehensive income (loss) is as follows:
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| Three months ended September 30, 2024 | | Three months ended September 30, 2023 | | Nine months ended September 30, 2024 | | Nine months ended September 30, 2023 |
Foreign currency translation, beginning | $ | (149.9) | | | $ | (117.0) | | | $ | (89.8) | | | $ | (157.0) | |
Other comprehensive income (loss)(1) | 124.9 | | | (63.5) | | | 64.8 | | | (23.5) | |
Foreign currency translation, ending | (25.0) | | | (180.5) | | | (25.0) | | | (180.5) | |
Interest rate swaps, beginning | 91.1 | | | 106.9 | | | 87.7 | | | 110.2 | |
Unrealized gain (loss) deferred during the period (2)(3) | (22.4) | | | 4.1 | | | (19.0) | | | 0.8 | |
Interest rate swaps, ending | 68.7 | | | 111.0 | | | 68.7 | | | 111.0 | |
Pension, beginning | (2.5) | | | 0.3 | | | (2.4) | | | 0.6 | |
Actuarial gain (losses) recognized during the period, net of income taxes | — | | | (0.2) | | | (0.1) | | | (0.5) | |
Pension, ending | (2.5) | | | 0.1 | | | (2.5) | | | 0.1 | |
Foreign currency exchange forwards, beginning | (3.8) | | | — | | | — | | | — | |
Unrealized gains deferred during the period(4) | (4.3) | | | — | | | (8.1) | | | — | |
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Foreign currency exchange forwards, ending | (8.1) | | | — | | | (8.1) | | | — | |
Accumulated other comprehensive income (loss) | $ | 33.1 | | | $ | (69.4) | | | $ | 33.1 | | | $ | (69.4) | |
(1)For the three and nine months ended September 30, 2024 foreign currency translation included tax effects of $1.3 and $0.0.
(2)During the three and nine months ended September 30, 2024 and 2023, $10.8, $32.2, $10.8, and $28.4 respectively, was reclassified into earnings.
(3)For the three and nine months ended September 30, 2024 interest rate swaps included tax effects of $7.1 and $6.1.
(4)For the three and nine months ended September 30, 2024 cash flow hedges included tax effects of $2.4 and $1.2.
(11) SEGMENT INFORMATION
Operating profit (loss) is the primary income measure the Company uses to assess segment performance and make operating decisions. Segment performance is assessed exclusive of Corporate and other costs, foreign currency gain (loss), and amortization of intangibles. Corporate and other costs primarily include stock-based compensation, other incentive compensation, asset impairments, and costs that support centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, and Legal.
The Company determines its reportable segments based on how operations are managed internally for the products and services sold to customers, including how the results are reviewed by the chief operating decision maker, which includes determining resource allocation methodologies used for reportable segments.
Summarized information about the Company’s results of operations by reportable segment and product and service offering follows:
Americas includes products and services sold for applications within the data center, communication networks and commercial and industrial markets in North America and Latin America. This segment’s principal product and service offerings include:
•Products include AC and DC power management, thermal management, low/medium voltage switchgear, busbar, integrated modular solutions, racks, rack power, rack power distribution, rack thermal systems, configurable integrated solutions, and hardware for managing I.T. equipment.
•Services & spares includes preventative maintenance, acceptance testing, engineering and consulting, performance assessments, remote monitoring, training, spare parts, and critical digital infrastructure software.
Asia Pacific includes products and services sold for applications within the data center, communication networks and commercial and industrial markets throughout Greater China, India, and Asia. Products and services offered are similar to the Americas segment.
Europe, Middle East & Africa includes products and services sold for applications within the data center, communication networks and commercial and industrial markets in Europe, Middle East & Africa. Products and services offered are similar to the Americas segment.
Reportable Business Segments | | | | | | | | | | | | | | | | | | | | | | | |
Sales | Three months ended September 30, 2024 | | Three months ended September 30, 2023 | | Nine months ended September 30, 2024 | | Nine months ended September 30, 2023 |
Americas | $ | 1,210.0 | | | $ | 1,014.5 | | | $ | 3,270.2 | | | $ | 2,854.8 | |
Asia Pacific | 479.9 | | | 411.3 | | | 1,288.4 | | | 1,160.3 | |
Europe, Middle East & Africa | 597.0 | | | 423.3 | | | 1,629.7 | | | 1,235.9 | |
| 2,286.9 | | | 1,849.1 | | | |