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Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 4, 2025
OR
| ☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-41770
VERALTO CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 92-1941413 | ||||||||||
| (State of Incorporation) | (I.R.S. Employer Identification Number) | ||||||||||
| 225 Wyman Street, Suite 250 | 02451 | ||||||||||
| Waltham, | Massachusetts | ||||||||||
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: 781-755-3655
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common stock, $0.01 par value | VLTO | New York Stock Exchange | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | |||||||||||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | ☐ | |||||||||||||||||
| Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
The number of shares of common stock outstanding at April 22, 2025 was 247,861,167.
VERALTO CORPORATION
TABLE OF CONTENTS
FORM 10-Q
VERALTO CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in millions, except per share amounts)
(unaudited)
| April 4, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,239 | $ | 1,101 | |||||||
| Trade accounts receivable, less allowance for credit losses of $37 as of both dates | 832 | 812 | |||||||||
| Inventories: | |||||||||||
| Finished goods | 141 | 122 | |||||||||
| Work in process | 43 | 39 | |||||||||
| Raw materials | 126 | 127 | |||||||||
| Total inventories | 310 | 288 | |||||||||
| Prepaid expenses and other current assets | 177 | 186 | |||||||||
| Total current assets | 2,558 | 2,387 | |||||||||
| Property, plant and equipment, net of accumulated depreciation of $494 and $485, respectively | 274 | 268 | |||||||||
| Other long-term assets | 544 | 523 | |||||||||
| Goodwill | 2,738 | 2,693 | |||||||||
| Other intangible assets, net | 531 | 535 | |||||||||
| Total assets | $ | 6,645 | $ | 6,406 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Trade accounts payable | $ | 407 | $ | 395 | |||||||
| Accrued expenses and other liabilities | 763 | 850 | |||||||||
| Total current liabilities | 1,170 | 1,245 | |||||||||
| Other long-term liabilities | 536 | 517 | |||||||||
| Long-term debt | 2,630 | 2,599 | |||||||||
| Stockholders' Equity: | |||||||||||
| Preferred stock - $0.01 par value as of April 4, 2025 and December 31, 2024, 15 million shares authorized as of both dates; and 0 shares issued and outstanding as of both dates | — | — | |||||||||
| Common stock - $0.01 par value as of April 4, 2025 and December 31, 2024, 1.0 billion shares authorized as of both dates; and 247.8 million and 247.4 million shares issued and outstanding, respectively | 2 | 2 | |||||||||
| Additional paid-in capital | 2,199 | 2,190 | |||||||||
| Retained earnings | 1,114 | 917 | |||||||||
| Accumulated other comprehensive loss | (1,013) | (1,071) | |||||||||
| Total Veralto stockholders' equity | 2,302 | 2,038 | |||||||||
| Noncontrolling interests | 7 | 7 | |||||||||
| Total stockholders' equity | 2,309 | 2,045 | |||||||||
| Total liabilities and stockholders' equity | $ | 6,645 | $ | 6,406 |
See the accompanying Notes to the Consolidated Condensed Financial Statements.
VERALTO CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
($ and shares in millions, except per share amounts)
(unaudited)
| Three-Month Period Ended | |||||||||||||||||||||||||||||
| April 4, 2025 | March 29, 2024 | ||||||||||||||||||||||||||||
| Sales | $ | 1,332 | $ | 1,246 | |||||||||||||||||||||||||
| Cost of sales | (527) | (499) | |||||||||||||||||||||||||||
| Gross profit | 805 | 747 | |||||||||||||||||||||||||||
| Operating costs: | |||||||||||||||||||||||||||||
| Selling, general and administrative expenses | (419) | (394) | |||||||||||||||||||||||||||
| Research and development expenses | (64) | (60) | |||||||||||||||||||||||||||
| Operating profit | 322 | 293 | |||||||||||||||||||||||||||
| Nonoperating income (expense): | |||||||||||||||||||||||||||||
| Other income (expense), net | (6) | (15) | |||||||||||||||||||||||||||
| Interest expense, net | (27) | (28) | |||||||||||||||||||||||||||
| Earnings before income taxes | 289 | 250 | |||||||||||||||||||||||||||
| Income taxes | (64) | (66) | |||||||||||||||||||||||||||
| Net earnings | $ | 225 | $ | 184 | |||||||||||||||||||||||||
| Net earnings per common share: | |||||||||||||||||||||||||||||
| Basic | $ | 0.91 | $ | 0.75 | |||||||||||||||||||||||||
| Diluted | $ | 0.90 | $ | 0.74 | |||||||||||||||||||||||||
| Average common stock and common equivalent shares outstanding: | |||||||||||||||||||||||||||||
| Basic | 247.9 | 246.9 | |||||||||||||||||||||||||||
| Diluted | 250.1 | 248.8 | |||||||||||||||||||||||||||
See the accompanying Notes to the Consolidated Condensed Financial Statements.
VERALTO CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
($ in millions)
(unaudited)
| Three-Month Period Ended | |||||||||||||||||||||||
| April 4, 2025 | March 29, 2024 | ||||||||||||||||||||||
| Net earnings | $ | 225 | $ | 184 | |||||||||||||||||||
| Other comprehensive income (loss), net of income taxes: | |||||||||||||||||||||||
| Foreign currency translation adjustments | 81 | (36) | |||||||||||||||||||||
| Pension and post-retirement plan benefit adjustments | (1) | — | |||||||||||||||||||||
| Unrealized gain (loss) on net investment hedge | (22) | 9 | |||||||||||||||||||||
| Total other comprehensive income (loss), net of income taxes | 58 | (27) | |||||||||||||||||||||
| Comprehensive income | $ | 283 | $ | 157 |
See the accompanying Notes to the Consolidated Condensed Financial Statements.
VERALTO CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
($ and shares in millions)
(unaudited)
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | 247.4 | $ | 2 | $ | 2,190 | $ | 917 | $ | (1,071) | $ | 7 | ||||||||||||||||||||||||||||||||||||
| Net earnings for the period | — | — | — | 225 | — | — | |||||||||||||||||||||||||||||||||||||||||
| Dividends declared | — | — | — | (28) | — | — | |||||||||||||||||||||||||||||||||||||||||
| Separation related adjustments | — | — | (9) | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 58 | — | |||||||||||||||||||||||||||||||||||||||||
| Common stock-based award activity | 0.4 | — | 18 | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance, April 4, 2025 | 247.8 | $ | 2 | $ | 2,199 | $ | 1,114 | $ | (1,013) | $ | 7 | ||||||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | 246.3 | $ | 2 | $ | 2,157 | $ | 178 | $ | (954) | $ | 6 | ||||||||||||||||||||||||||||||||||||
| Net earnings for the period | — | — | — | 184 | — | — | |||||||||||||||||||||||||||||||||||||||||
| Dividends declared | — | — | — | (22) | — | — | |||||||||||||||||||||||||||||||||||||||||
| Separation related adjustments | — | — | (54) | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | (27) | — | |||||||||||||||||||||||||||||||||||||||||
| Common stock-based award activity | 0.5 | — | 18 | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance, March 29, 2024 | 246.8 | $ | 2 | $ | 2,121 | $ | 340 | $ | (981) | $ | 6 | ||||||||||||||||||||||||||||||||||||
See the accompanying Notes to the Consolidated Condensed Financial Statements.
VERALTO CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($ in millions)
(unaudited)
| Three-Month Period Ended | |||||||||||
| April 4, 2025 | March 29, 2024 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings | $ | 225 | $ | 184 | |||||||
| Noncash items: | |||||||||||
| Depreciation | 10 | 10 | |||||||||
| Amortization of intangible assets | 9 | 11 | |||||||||
| Stock-based compensation expense | 16 | 15 | |||||||||
| Loss on product line dispositions | 6 | 15 | |||||||||
| Change in trade accounts receivable, net | (9) | 4 | |||||||||
| Change in inventories | (20) | (13) | |||||||||
| Change in trade accounts payable | 10 | (26) | |||||||||
| Change in prepaid expenses and other assets | (19) | (9) | |||||||||
| Change in accrued expenses and other liabilities | (71) | (76) | |||||||||
| Net cash provided by operating activities | 157 | 115 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Payments for additions to property, plant and equipment | (15) | (13) | |||||||||
| All other investing activities | 4 | (10) | |||||||||
| Net cash used in investing activities | (11) | (23) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Payment of dividends | (27) | (22) | |||||||||
| Proceeds from the issuance of common stock in connection with stock-based compensation | 1 | 2 | |||||||||
| Net cash used in financing activities | (26) | (20) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 18 | (7) | |||||||||
| Net change in cash and cash equivalents | 138 | 65 | |||||||||
| Beginning balance of cash and cash equivalents | 1,101 | 762 | |||||||||
| Ending balance of cash and cash equivalents | $ | 1,239 | $ | 827 | |||||||
| Supplemental disclosures: | |||||||||||
| Cash interest payments | $ | 57 | $ | 57 | |||||||
| Cash income tax payments | $ | 38 | $ | 32 |
See the accompanying Notes to the Consolidated Condensed Financial Statements.
VERALTO CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. GENERAL
Veralto Corporation’s (“Veralto” or the “Company”) unifying purpose is Safeguarding the World’s Most Vital Resources**TM. Its diverse group of associates and leading operating companies provide essential technology solutions that monitor, enhance and protect key resources around the globe. The Company is committed to the advancement of public health and safety and believes it is positioned to support its customers as they address large global challenges including environmental resource sustainability, water scarcity, management of severe weather events and food and pharmaceutical security, and the impact of an aging workforce. Through its core offerings in water analytics, water treatment, marking and coding and packaging and color, customers look to the Company’s solutions to help ensure the safety, quality, efficiency and reliability of their products, processes and people globally. The Company operates through two segments – Water Quality (“WQ”) and Product Quality & Innovation (“PQI”). Through the Water Quality segment, the Company improves the quality and reliability of water through its leading brands including Hach, Trojan Technologies and ChemTreat. Through the Product Quality & Innovation segment, the Company promotes consumer trust in products and helps enable product innovation through leading brands including Videojet, Linx, Esko, X-Rite and Pantone.
Basis of Presentation—Veralto prepared the unaudited Consolidated Condensed Financial Statements included herein in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, the Company believes the disclosures are adequate to make the information presented not misleading. The Consolidated Condensed Financial Statements included herein should be read in conjunction with the audited annual Consolidated Financial Statements as of and for the year ended December 31, 2024 and the Notes thereto included within the 2024 Annual Report on Form 10-K.
In the opinion of the Company, the accompanying financial statements contain all adjustments necessary to fairly present the financial position of the Company as of April 4, 2025 and December 31, 2024, and its results of operations for the three-month periods ended April 4, 2025 and March 29, 2024 and its cash flows for each of the quarters then ended.
There have been no changes to the Company’s significant accounting policies described within the 2024 Annual Report on Form 10-K that have a material impact on the Company’s Consolidated Condensed Financial Statements and the related Notes.
Recent Accounting Pronouncements—In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement — reporting Comprehensive Income — Expense Disaggregation Disclosures. The ASU requires entities to provide disaggregated disclosures of certain categories of expenses on an annual and interim basis including purchases of inventory, employee compensation, depreciation and intangible asset amortization for each income statement line item that contains those expenses. This ASU is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027 with early adoption permitted. The Company is currently assessing the impact of this ASU on its disclosures in the Consolidated Financial Statements.
On March 6, 2024, the SEC adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which requires registrants to disclose material climate-related risks, activities to mitigate or adapt to such risks, information about board oversight of climate-related risks and climate-related targets or goals that are material to the registrant’s business, results of operations or financial condition. In April 2024, the SEC voluntarily stayed the final rules pending the resolution of certain legal challenges. The Company will continue to monitor developments and analyze the potential impact of the new rules on disclosures.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which enhances the transparency of income tax disclosures in ASC 740, Income Taxes, primarily related to the rate reconciliation and income taxes paid information. The ASU is effective for fiscal years beginning after December 15, 2024, and may
be applied retrospectively with early adoption being permitted. The Company is currently assessing the impact on its annual Consolidated Financial Statements and related income tax disclosures for the year ending December 31, 2025, when the guidance will become effective.
Cash and Cash Equivalents—The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.
Operating Leases—As of April 4, 2025 and December 31, 2024, operating lease right-of-use assets where the Company was the lessee were $175 million and $159 million, respectively, and are included within other long-term assets in the accompanying Consolidated Condensed Balance Sheets. The associated operating lease liabilities were $184 million and $168 million as of April 4, 2025 and December 31, 2024, respectively, and are included in accrued expenses and other liabilities and other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets.
Prepaid Expenses and Other Current Assets—Prepaid expenses and other current assets primarily result from advance payments to vendors for goods and services and are capitalized until the related goods are received or services are performed. Included in the Company’s prepaid expenses and other current assets are prepaid expenses of $121 million and $110 million as of April 4, 2025 and December 31, 2024, respectively.
NOTE 2. NET EARNINGS PER COMMON SHARE
Basic net earnings per common share (“EPS”) is calculated by dividing net earnings by the weighted average number of shares of common stock outstanding for the applicable period. Diluted EPS is computed based on the weighted average number of shares of common stock outstanding increased by the number of additional shares that would have been outstanding had the potentially dilutive shares of common stock been issued and reduced by the number of shares the Company could have repurchased with the proceeds from the issuance of the potentially dilutive shares.
Information related to the calculation of net earnings per common share for the three-month periods ended April 4, 2025 and March 29, 2024 is summarized as follows:
| Three-Month Period Ended | |||||||||||||||||||||||
| ($ and shares in millions, except per share amounts) | April 4, 2025 | March 29, 2024 | |||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net earnings | $ | 225 | $ | 184 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average common shares outstanding used in Basic EPS | 247.9 | 246.9 | |||||||||||||||||||||
| Incremental shares from assumed exercise of dilutive options and vesting of dilutive restricted stock units ("RSUs") and performance stock units ("PSUs") | 2.2 | 1.9 | |||||||||||||||||||||
| Weighted average common shares outstanding used in Diluted EPS | 250.1 | 248.8 | |||||||||||||||||||||
| Basic EPS | $ | 0.91 | $ | 0.75 | |||||||||||||||||||
| Diluted EPS | $ | 0.90 | $ | 0.74 |
NOTE 3. REVENUE
The following tables present the Company’s revenues disaggregated by geographical region and revenue type for the three-month periods ended April 4, 2025 and March 29, 2024. Sales taxes and other usage-based taxes collected from customers are excluded from revenue.
| ($ in millions) | Water Quality | Product Quality & Innovation | Total | ||||||||||||||
| For the Three-Month Period Ended April 4, 2025: | |||||||||||||||||
| Geographical region: | |||||||||||||||||
| North America(a) | $ | 469 | $ | 186 | $ | 655 | |||||||||||
| Western Europe | 141 | 161 | 302 | ||||||||||||||
| Other developed markets | 16 | 13 | 29 | ||||||||||||||
| High-growth markets(b) | 168 | 178 | 346 | ||||||||||||||
| Total | $ | 794 | $ | 538 | $ | 1,332 | |||||||||||
| Revenue type: | |||||||||||||||||
| Recurring | $ | 472 | $ | 344 | $ | 816 | |||||||||||
| Nonrecurring | 322 | 194 | 516 | ||||||||||||||
| Total | $ | 794 | $ | 538 | $ | 1,332 | |||||||||||
| For the Three-Month Period Ended March 29, 2024: | |||||||||||||||||
| Geographical region: | |||||||||||||||||
| North America(a) | $ | 435 | $ | 168 | $ | 603 | |||||||||||
| Western Europe | 131 | 150 | 281 | ||||||||||||||
| Other developed markets | 15 | 12 | 27 | ||||||||||||||
| High-growth markets(b) | 168 | 167 | 335 | ||||||||||||||
| Total | $ | 749 | $ | 497 | $ | 1,246 | |||||||||||
| Revenue type: | |||||||||||||||||
| Recurring | $ | 442 | $ | 316 | $ | 758 | |||||||||||
| Nonrecurring | 307 | 181 | 488 | ||||||||||||||
| Total | $ | 749 | $ | 497 | $ | 1,246 |
(a) The Company defines North America as the United States and Canada.
(b) The Company defines high-growth markets as developing markets of the world which include Asia (with the exception of Japan, Australia and New Zealand), Latin America (including Mexico), the Middle East, Eastern Europe and Africa. The Company defines developed markets as all markets of the world that are not high-growth markets.
The Company sells equipment to customers as well as consumables and services, some of which customers purchase on a recurring basis. Consumables sold for use with the equipment sold by the Company are typically critical to the use of the equipment and are typically used on a one-time or limited basis, requiring frequent replacement in the customer’s operating cycle. Examples of these consumables include chemistries for water testing instruments and cartridges for marking and coding equipment. Additionally, some of the Company’s consumables are used on a stand-alone basis, such as water treatment solutions. The Company separates its goods and services between those typically sold to a customer on a recurring basis and those typically sold to a customer on a nonrecurring basis. Recurring revenue includes revenue from consumables, services, spare parts and operating-type leases (“OTLs”). Nonrecurring revenue includes sales of equipment and sales-type leases (“STLs”). OTLs and STLs are included in the above revenue amounts. For the three-month periods ended April 4, 2025 and March 29, 2024, lease revenue was $22 million and $19 million, respectively. Service and software revenue was immaterial for all periods presented. Software revenues for point-in-time licenses are nonrecurring while revenues for Software as a Service and over time licenses are recurring.
Remaining performance obligations related to Topic 606, Revenue from Contracts with Customers, represent the aggregate transaction price allocated to performance obligations with an original contract term greater than one year which are fully or partially unsatisfied at the end of the period. As of April 4, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $310 million. The Company expects to
recognize revenue on approximately 42% of the remaining performance obligations over the next 12 months, 33% over the subsequent 12 months, and the remainder recognized thereafter.
The Company often receives cash payments from customers in advance of the Company’s performance, resulting in contract liabilities that are classified as either current or long-term in the Consolidated Condensed Balance Sheets based on the timing of when the Company expects to recognize revenue. As of April 4, 2025 and December 31, 2024, contract liabilities were $285 million and $254 million, respectively, and are included within accrued expenses and other liabilities and other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets. Revenue recognized during the three-month periods ended April 4, 2025 and March 29, 2024 that was included in the opening contract liability balance was $118 million and $101 million, respectively.
NOTE 4. SEGMENT INFORMATION
The Company operates and reports its results in two separate business segments consisting of the Water Quality and Product Quality & Innovation segments.
The Company’s Water Quality segment provides proprietary precision instrumentation, consumables, software, services and advanced water treatment technologies to help measure, analyze and treat the world’s water in municipal, industrial, commercial, residential, research and natural resource applications.
The Company’s Product Quality & Innovation segment provides equipment, consumables, software and services for various marking and coding, traceability, printing, packaging design and quality management, packaging converting and color and appearance management applications for consumer packaged goods and industrial products.
Resources are allocated and performance is assessed by the President & Chief Executive Officer (CEO), whom the Company has determined to be the Chief Operating Decision Maker (“CODM”). The CODM evaluates the performance of its segments and allocates resources to them based on operating profit. The CODM also compares actual results to expectations in assessing performance of the segments. Operating profit represents total revenues less operating expenses, excluding nonoperating income and expense and income taxes. Operating profit amounts in the Other segment consist of unallocated corporate costs and other costs not considered part of management’s evaluation of reportable segment operating performance.
The identifiable assets by segment are those used in each segment’s operations. Intersegment amounts are not significant and are eliminated to arrive at combined totals.
Detailed segment data for the three-month periods ended April 4, 2025 and March 29, 2024 is as follows:
| Three-Month Period Ended | |||||||||||||||||||||||
| ($ in millions) | April 4, 2025 | March 29, 2024 | |||||||||||||||||||||
| Sales: | |||||||||||||||||||||||
| Water Quality | $ | 794 | $ | 749 | |||||||||||||||||||
| Product Quality & Innovation | 538 | 497 | |||||||||||||||||||||
| Total | $ | 1,332 | $ | 1,246 | |||||||||||||||||||
| Operating profit: | |||||||||||||||||||||||
| Water Quality | $ | 198 | $ | 181 | |||||||||||||||||||
| Product Quality & Innovation | 146 | 133 | |||||||||||||||||||||
| Other | (22) | (21) | |||||||||||||||||||||
| Total | $ | 322 | $ | 293 | |||||||||||||||||||
| Depreciation and amortization of intangible assets: | |||||||||||||||||||||||
| Water Quality | $ | 8 | $ | 11 | |||||||||||||||||||
| Product Quality & Innovation | 11 | 10 | |||||||||||||||||||||
| Other | — | — | |||||||||||||||||||||
| Total | $ | 19 | $ | 21 | |||||||||||||||||||
| Capital expenditures: | |||||||||||||||||||||||
| Water Quality | $ | 8 | $ | 7 | |||||||||||||||||||
| Product Quality & Innovation | 7 | 4 | |||||||||||||||||||||
| Other | — | 2 | |||||||||||||||||||||
| Total | $ | 15 | $ | 13 |
Identifiable assets by segment as of April 4, 2025 and December 31, 2024 are as follows:
| ($ in millions) | April 4, 2025 | December 31, 2024 | |||||||||||||||||||||
| Water Quality | $ | 2,539 | $ | 2,450 | |||||||||||||||||||
| Product Quality & Innovation | 2,670 | 2,657 | |||||||||||||||||||||
| Other | 1,436 | 1,299 | |||||||||||||||||||||
| Total | $ | 6,645 | $ | 6,406 |
Reconciliations of total segment sales to total segment operating profit and of total segment operating profit to total consolidated earnings before income taxes, for the three-month periods ended April 4, 2025 and March 29, 2024 are as follows:
| Three-Month Period Ended April 4, 2025 | ||||||||||||||||||||||||||
| ($ in millions) | Water Quality | Product Quality & Innovation | Other | Total | ||||||||||||||||||||||
| Sales | $ | 794 | $ | 538 | $ | — | $ | 1,332 | ||||||||||||||||||
| Less: other segment items | (596) | (392) | (22) | (1,010) | ||||||||||||||||||||||
| Segment operating profit | $ | 198 | $ | 146 | $ | (22) | $ | 322 | ||||||||||||||||||
| Other income (expense), net | (6) | |||||||||||||||||||||||||
| Interest expense, net | (27) | |||||||||||||||||||||||||
| Earnings before income taxes | $ | 289 |
| Three-Month Period Ended March 29, 2024 | ||||||||||||||||||||||||||
| ($ in millions) | Water Quality | Product Quality & Innovation | Other | Total | ||||||||||||||||||||||
| Sales | $ | 749 | $ | 497 | $ | — | $ | 1,246 | ||||||||||||||||||
| Less: other segment items | (568) | (364) | (21) | (953) | ||||||||||||||||||||||
| Segment operating profit | $ | 181 | $ | 133 | $ | (21) | $ | 293 | ||||||||||||||||||
| Other income (expense), net | (15) | |||||||||||||||||||||||||
| Interest expense, net | (28) | |||||||||||||||||||||||||
| Earnings before income taxes | $ | 250 |
NOTE 5. INCOME TAXES
The following table summarizes the Company’s effective tax rate:
| Three-Month Period Ended | |||||||||||||||||||||||
| April 4, 2025 | March 29, 2024 | ||||||||||||||||||||||
| Effective tax rate | 22.1 | % | 26.4 | % |
The Company operates globally, including in certain jurisdictions with higher statutory tax rates than the United States (“U.S.”). Therefore, based on earnings mix, the impact of operating in such jurisdictions contributes to a higher effective tax rate compared to the U.S. federal statutory tax rate.
The effective tax rate for the three-month period ended April 4, 2025 differs from the U.S. federal statutory rate of 21% principally due to the geographic mix of earnings described above, the unfavorable impact of a non-deductible loss on the sale of a product line of $2 million, and a net discrete benefit of $2 million related primarily to the impact of excess tax benefits from stock-based compensation. The net discrete items had no impact on the effective tax rate for the three-month period ended April 4, 2025.
The effective tax rate for the three-month period ended March 29, 2024 differs from the U.S. federal statutory rate of 21% principally due to the geographic mix of earnings described above, the unfavorable impact of a non-deductible loss on the sale of a product line of $3 million, and a net discrete benefit of $1 million related primarily to excess tax benefits from stock-based compensation. The net discrete benefits reduced the effective tax rate by 1.6% for the three-month period ended March 29, 2024.
For a description of the Company’s significant tax matters, reference is made to the financial statements as of and for the year ended December 31, 2024 and Note 6 to the financial statements included within the 2024 Annual Report on Form 10-K.
NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS
The following is a rollforward of the Company’s goodwill:
| ($ in millions) | |||||
| Balance, December 31, 2024 | $ | 2,693 | |||
| Attributable to 2025 divestitures | (2) | ||||
| Foreign currency translation and other | 47 | ||||
| Balance, April 4, 2025 | $ | 2,738 |
The carrying value of goodwill by segment is summarized as follows:
| ($ in millions) | April 4, 2025 | December 31, 2024 | |||||||||
| Water Quality | $ | 1,278 | $ | 1,256 | |||||||
| Product Quality & Innovation | 1,460 | 1,437 | |||||||||
| Total | $ | 2,738 | $ | 2,693 |
The Company has not identified any goodwill impairment indicators in the three-month period ended April 4, 2025.
The Company reviews identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company has not identified any impairment triggers in the three-month period ended April 4, 2025.
NOTE 7. FAIR VALUE MEASUREMENTS
Accounting standards define fair value based on an exit price model, establish a framework for measuring fair value for assets and liabilities required to be carried at fair value and provide for certain disclosures related to the valuation methods used within the valuation hierarchy as established within the accounting standards. This hierarchy prioritizes the inputs into three broad levels as follows.
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Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
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Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, or other observable characteristics for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principally from, or corroborated by, observable market data through correlation.
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Level 3 inputs are unobservable inputs based on the Company’s assumptions. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
A summary of financial liabilities that are measured at fair value on a recurring basis were as follows:
| ($ in millions) | Quoted Prices in Active Market (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||
| April 4, 2025 | |||||||||||||||||||||||
| Deferred compensation liabilities | $ | 33 | $ | — | $ | — | $ | 33 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Deferred compensation liabilities | $ | 32 | $ | — | $ | — | $ | 32 |
Certain management employees participate in the Company’s nonqualified deferred compensation programs, which permit such employees to defer a portion of their compensation, on a pretax basis, until after their termination of employment. All amounts deferred under such plans are unfunded, unsecured obligations and are presented as a component of the compensation and benefits accrual included in other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets. Participants may choose among alternative earnings rates for the amounts they defer, which are primarily based on investment options within the defined contribution plans for the benefit of U.S. employees (“401(k) Programs”) (except that the earnings rates for amounts contributed unilaterally by the Company are entirely based on changes in the value of the Company’s common stock). Changes in the
deferred compensation liability under these programs are recognized based on changes in the fair value of the participants’ accounts, which are based on the applicable earnings rates.
Fair Value of Financial Instruments
The carrying amounts and fair values of the Company’s financial instruments were as follows:
| April 4, 2025 | December 31, 2024 | ||||||||||||||||||||||
| ($ in millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
| Long-term debt | $ | 2,630 | $ | 2,695 | $ | 2,599 | $ | 2,638 |
As of April 4, 2025, long-term borrowings were categorized as Level 1. The fair value of long-term borrowings was based on quoted market prices. The fair values of borrowings with original maturities of one year or less, as well as cash and cash equivalents, trade accounts receivable, net and trade accounts payable, generally approximate their carrying amounts due to the short-term maturities of these instruments.
NOTE 8. FINANCING
As of April 4, 2025, the Company was in compliance with all of its debt covenants. The components of the Company’s debt were as follows:
| ($ in millions) | Outstanding Amount | |||||||||||||
| Description and Aggregate Principal Amount | April 4, 2025 | December 31, 2024 | ||||||||||||
| 5.50% senior unsecured notes due 9/18/2026 ($700 million) (the "2026 Notes") | $ | 698 | $ | 697 | ||||||||||
| 5.35% senior unsecured notes due 9/18/2028 ($700 million) (the "2028 Notes") | 696 | 696 | ||||||||||||
| 4.15% senior unsecured notes due 9/19/2031 (€500 million) (the "2031 Notes") | 543 | 513 | ||||||||||||
| 5.45% senior unsecured notes due 9/18/2033 ($700 million) (the "2033 Notes") | 693 | 693 | ||||||||||||
| Long-term debt | $ | 2,630 | $ | 2,599 |
Unamortized debt discounts and debt issuance costs totaled $17 million and $19 million as of April 4, 2025 and December 31, 2024, respectively. Debt discounts and issuance costs are presented as a reduction of debt in the Consolidated Condensed Balance Sheets and are amortized as a component of interest expense over the term of the related debt. Refer to Note 12 of the 2024 Annual Report on Form 10-K for a description of the Company’s debt financing.
There were no amounts outstanding under the credit facility or commercial paper program as of April 4, 2025.
NOTE 9. HEDGING TRANSACTIONS
The Company is neither a dealer nor a trader in derivative instruments. The Company has generally accepted the exposure to transactional exchange rate movements without using derivative instruments to manage this risk. The Company has €500 million of foreign currency denominated long-term debt that is designated as a partial hedge of its net investment in foreign operations against adverse movements in exchange rates between the U.S. dollar and the euro. This foreign currency denominated long-term debt issuance is designated and qualifies as a nonderivative hedging instrument. Accordingly, the foreign currency translation of this debt instrument is recorded in accumulated other comprehensive income (loss), offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in accumulated other comprehensive income (loss). This instrument matures in September 2031.
The following table summarizes the notional values as of April 4, 2025 and March 29, 2024 and pretax impact of changes in the fair values of instruments designated as net investment hedges in accumulated other comprehensive income (“OCI”) for the three-month periods ended April 4, 2025 and March 29, 2024:
| ($ in millions) | Notional Amount Outstanding | Gain (Loss) Recognized in OCI | Amounts Reclassified from OCI | ||||||||||||||||||||
| For the Three-Month Period Ended April 4, 2025: | |||||||||||||||||||||||
| Net investment hedges: | |||||||||||||||||||||||
| Foreign currency denominated debt | $ | 543 | $ | (29) | $ | — | |||||||||||||||||
| For the Three-Month Period Ended March 29, 2024 | |||||||||||||||||||||||
| Net investment hedges: | |||||||||||||||||||||||
| Foreign currency denominated debt | $ | 535 | $ | 12 | $ | — | |||||||||||||||||
The Company did not reclassify any other deferred gains or losses related to the net investment hedge from accumulated other comprehensive income (loss) to earnings during the three-month periods ended April 4, 2025 and March 29, 2024. In addition, the Company did not have any ineffectiveness related to the net investment hedge during the three-month periods ended April 4, 2025 and March 29, 2024, and should they arise, any ineffective portions of the hedge would be reclassified from accumulated other comprehensive income (loss) into earnings during the period of change.
The Company’s nonderivative debt instrument designated and qualifying as a net investment hedge, was classified in the Company’s Consolidated Condensed Balance Sheets within Long-term debt as of April 4, 2025.
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company reviews the adequacy of its legal reserves on a quarterly basis and establishes reserves for loss contingencies that are both probable and reasonably estimable. For a further description of the Company’s litigation and contingencies, refer to Note 16 of the Company’s financial statements as of and for the year ended December 31, 2024 included within the 2024 Annual Report on Form 10-K.
The Company generally accrues estimated warranty costs at the time of sale. In general, manufactured products are warranted against defects in material and workmanship when properly used for their intended purpose, installed correctly and appropriately maintained. Warranty periods depend on the nature of the product and range from the date of such sale up to twenty years. The amount of the accrued warranty liability is determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor and in certain instances estimated property damage. As of April 4, 2025 and December 31, 2024, the Company had accrued warranty liabilities of $30 million for both periods.
NOTE 11. STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION
For a description of the stock-based compensation programs in which certain employees of the Company participate, reference is made to Note 17 of the Company’s financial statements as of and for the year ended December 31, 2024 included within the 2024 Annual Report on Form 10-K.
The Company’s stock-based compensation expense for the three-month periods ended April 4, 2025 and March 29, 2024 was $16 million and $15 million, respectively.
Stock-based compensation has been recognized as a component of selling, general and administrative expenses in the accompanying Consolidated Condensed Statements of Earnings. As of April 4, 2025, $71 million of total unrecognized compensation cost related to RSUs and PSUs is expected to be recognized over a weighted average period of approximately two years. As of April 4, 2025, $56 million of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted average period of approximately two years. Future compensation amounts will be adjusted for any changes in estimated forfeitures.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) refers to certain gains and losses that under GAAP are included in comprehensive income (loss) but are excluded from net earnings as these amounts are initially recorded as an adjustment to stockholders’ equity. Foreign currency translation adjustments are generally not adjusted for income
taxes as they relate to indefinite investments in non-U.S. subsidiaries. Net investment hedge adjustments reflect the gains or losses on the foreign currency denominated long-term debt issuance designated as a nonderivative hedging instrument. Pension and postretirement plan benefit adjustments relate to unrecognized prior service credits and actuarial losses.
The changes in accumulated other comprehensive income (loss) by component are summarized below:
| ($ in millions) | Foreign Currency Translation Adjustments | Net Investment Hedges | Pension and Postretirement Plan Benefit Adjustments | Accumulated Comprehensive Income (Loss) | |||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | (1,078) | $ | 12 | $ | (5) | $ | (1,071) | |||||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||||||||
| Increase (decrease) | 81 | (29) | (1) | 51 | |||||||||||||||||||||||||
| Income tax impact | — | 7 | — | 7 | |||||||||||||||||||||||||
| Net other comprehensive income (loss), net of income taxes | 81 | (22) | (1) | 58 | |||||||||||||||||||||||||
| Balance, April 4, 2025 | $ | (997) | $ | (10) | $ | (6) | $ | (1,013) | |||||||||||||||||||||
| Balance, December 31, 2023 | $ | (939) | $ | (14) | $ | (1) | $ | (954) | |||||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||||||||
| Increase (decrease) | (36) | 12 | — | (24) | |||||||||||||||||||||||||
| Income tax impact | — | (3) | — | (3) | |||||||||||||||||||||||||
| Net other comprehensive income (loss), net of income taxes | (36) | 9 | — | (27) | |||||||||||||||||||||||||
| Balance, March 29, 2024 | $ | (975) | $ | (5) | $ | (1) | $ | (981) | |||||||||||||||||||||
Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS