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Financial report summary
?Competition
DnowRisks
- Adverse conditions in the global economy and disruptions of financial and commodities markets could negatively impact us and our customers.
- Our global operations expose us to political, economic, legal, currency and other risks.
- Our business and operations have been and may continue to be adversely affected by the COVID-19 pandemic, and the duration and extent to which COVID variants or other pandemics will affect our business, financial condition, results of operations, cash flows, liquidity, and stock price remains uncertain.
- We are subject to various laws and regulations globally and any failure to comply could adversely affect our business.
- Fluctuations in foreign currency have an effect on our results from operations.
- Expansion into new business activities, industries, product lines or geographic areas could subject the Company to increased costs and risks and may not achieve the intended results.
- Our strategic and operational initiatives, including our digital transformation initiatives, are subject to various risks and uncertainties, and we may be unable to implement the initiatives successfully.
- We may not be able to fully realize the anticipated benefits and cost savings of mergers and acquisitions.
- Any future acquisitions that we may undertake will involve a number of inherent risks, any of which could cause us not to realize the anticipated benefits.
- Any significant disruption or failure of our information systems could lead to interruptions in our operations, which may materially adversely affect our business operations, financial condition, and results of operations.
- We may not be able to realize the anticipated benefits and cost savings of our digital transformation initiatives or enhancing existing, and deploying new, technology, digital products and information systems in our operations.
- Our business depends on cloud-based services operated by various third-party service providers, and any disruption in or interference with our use of these services could have adverse effects on our business, operational results, and financial condition.
- We may experience a failure in or breach of our information security systems, or those of our third-party product suppliers or service providers, as a result of cyber-attacks or information security breaches.
- We could incur significant and unexpected costs in our efforts to successfully avoid, manage, defend and litigate intellectual property matters.
- Loss of key suppliers could decrease sales, profit margins and earnings.
- We have been and may continue to be adversely affected by supply chain challenges, including product shortages, delays and price increases, which could decrease sales, profit margins and earnings.
- Product cost fluctuations could decrease sales, profit margins and earnings.
- Challenges in managing working capital and inventory in response to evolving customer demands, supply chain disruptions, and market fluctuations could significantly impact our cash flow, profit margins, and overall business performance.
- A decline in project volume could adversely affect our sales and earnings.
- We have risks associated with the sale of nonconforming products and services.
- Disruptions to our logistics capability, or our failure to effectively manage supply chain logistics during periods of disruption, may have an adverse impact on our operations.
- Our reliance on third-party service providers for outsourced functions could negatively impact our reputation, operations or financial results.
- An increase in competition could decrease sales, profit margins, and earnings.
- Our continued success may depend on our ability to execute environmental, social and governance (“ESG”) programs as planned and may impact our reputation and operating costs.
- Changes in tax laws or challenges to the Company's tax positions by taxing authorities could adversely impact the Company's results of operations and financial condition.
- Our outstanding indebtedness requires debt service commitments that could adversely affect our ability to fulfill our obligations and could limit our growth and impose restrictions on our business, and fluctuations in interest rates could affect the cost of our indebtedness.
- Our debt agreements contain restrictive covenants that may limit our ability to operate our business.
- We are subject to costs and risks associated with global laws and regulations affecting our business, as well as litigation for product liability or other matters affecting our business.
- We must attract, retain and motivate our employees, and the failure to do so may adversely affect our business.
Management Discussion
- Note: Organic sales growth is a non-GAAP financial measure of sales performance. Organic sales growth is calculated by deducting the percentage impact from acquisitions and divestitures for one year following the respective transaction, fluctuations in foreign exchange rates and number of workdays from the reported percentage change in consolidated net sales. Workday impact represents the change in the number of operating days period-over-period after adjusting for weekends and public holidays in the United States; 2023 had one less workday compared to 2022.
- Net sales were $22.4 billion for 2023 compared with $21.4 billion for 2022, an increase of 4.5%. Adjusting for the favorable impact from the acquisition of Rahi Systems of 2.1%, the unfavorable impacts from fluctuations in foreign exchange rates of 0.4% and the number of workdays of 0.4%, organic sales for 2023 grew by 3.2%. The increase was primarily due to the impact of changes in price, which favorably impacted organic sales by approximately 3%. Volume growth did not have a material impact on the year-over-year increase in organic sales, as increases in sales volume in the CSS and UBS operating segments were offset by a decrease in sales volume in the EES segment.
- Cost of goods sold for 2023 was $17.5 billion compared to $16.8 billion for 2022. Cost of goods sold as a percentage of net sales was 78.4% and 78.2% for 2023 and 2022, respectively. The unfavorable increase of 20 basis points reflects a shift in sales mix and lower supplier volume rebates, partially offset by our continued focus on a strategy of pricing products and services to realize the value that we provide to our customers as a result of our broad portfolio of product and service offerings, global footprint and capabilities (“value-driven pricing”).