Content analysis
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H.S. junior Avg
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New words:
AMI, broader, expressed, involve, July, led, long, outflow, portfolio, presidential, robust, steady
Removed:
headwind, labor
Financial report summary
?Risks
- Inflation and other adverse conditions may adversely affect our business results of operations and financial condition.
- We operate in markets that are subject to competitive pressures that could affect selling prices or demand for our products.
- Our ability to effectively develop and introduce new products could adversely affect our ability to compete.
- We manufacture and source products and materials from various countries throughout the world. A disruption in the availability, price or quality of these products or materials could adversely affect our operating results.
- We may be required to recognize impairment charges for our goodwill and other intangible assets.
- We engage in acquisitions and strategic investments and may encounter difficulty in obtaining appropriate acquisitions and in integrating these businesses.
- We may fail to realize all of the anticipated benefits of the Systems Control Acquisition or those benefits may take longer to realize than expected.
- We may not be able to successfully implement initiatives, including our restructuring activities that improve productivity and streamline operations to control or reduce costs.
- We are subject to risks surrounding our information technology systems failures, network disruptions, breaches in data security and compliance with data privacy laws or regulations.
- Our ability to access capital markets or failure to maintain our credit ratings may adversely affect our business.
- Deterioration in the credit quality of, loss of, significant decline in business with, or pricing pressure from, our customers could have a material adverse effect on our operating results and financial condition.
- If the underlying investments of our defined benefit plans do not perform as expected, we may have to make additional contributions to these plans.
- Because tax laws and regulations are subject to interpretation and uncertainty, tax payments may ultimately differ from amounts currently recorded by the Company.
- Significant developments from the recent and potential changes in U.S. trade policies could have a material adverse effect on us.
- Our business and results of operations may be materially adversely effected by compliance with import and export laws.
- We could incur significant and/or unexpected costs in our efforts to successfully avoid, manage, defend and litigate intellectual property matters.
- We are subject to litigation and environmental regulations that may adversely impact our operating results.
- Our reputation and our ability to conduct business may be impaired by improper conduct by any of our employees, agents or business partners.
- Regulations related to conflict-free minerals may cause us to incur additional expenses and may create challenges with our customers.
- We face the potential harms of natural disasters, terrorism, acts of war, international conflicts or other disruptions to our operations.
- Global economic uncertainty could adversely affect us.
- Our success depends on attracting and retaining qualified personnel.
Management Discussion
- Net sales of $5,372.9 million in 2023 increased by $425.0 million, or 8.6%, compared to 2022. Organic net sales increased by 6.6%, which was composed of a high single digit percentage increase in price realization, partially offset by a low single digit percentage decrease in volumes. Net sales also increased by 1.9% from acquisitions and by 0.1% from foreign exchange.
- As a percentage of Net sales, cost of goods sold decreased by 540 basis points to 64.9% in 2023 as compared to 70.3% in 2022, resulting in a related 540 basis point increase in Gross profit margin in 2023, which increased to 35.1% as compared to 29.7% in 2022. The increase in the Gross profit margin primarily reflects approximately nine percentage points of margin expansion driven by favorable price realization, improved operational productivity and lower material costs. Operational productivity was driven by improving supply chain conditions and reduced rates of absenteeism as compared to the prior year. Those increases were offset by approximately four percentage points of margin headwind driven by continued non-material cost inflation, increased investment in capacity, innovation and productivity, as well as lower unit volumes.
- S&A expense in 2023 was $849.6 million and increased by $87.1 million compared to the prior year. S&A expense as a percentage of Net sales increased by 40 basis points to 15.8% in 2023. The increase in S&A expense as a percentage of Net sales is primarily due to the impact of higher personnel cost and other cost inflation that was partially offset by a benefit from the increase in Net sales.