UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________________________________________
FORM 10-Q
______________________________________________________________________________________________________________________
(Mark One)
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| | | | |
ý☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20172023
OR
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| | | | |
¨☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-34652
______________________________________________________________________________________________________________________
SENSATA TECHNOLOGIES HOLDING N.V.PLC
(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)its charter)
_____________________________________
_________________________________________________________________________________ | | | | | | | | | | | | | | | |
England and Wales | | 98-1386780 | |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | |
| |
| | |
THE NETHERLANDS | | 98-0641254 |
(State or other jurisdiction of
incorporation or organization)
| | (I.R.S. Employer
Identification No.)
| | |
| | | | |
Jan Tinbergenstraat 80, 7559 SP Hengelo
The Netherlands
| | 31-74-357-8000 | | |
(Address of Principal Executive Offices, including Zip Code) | | (Registrant’s Telephone Number, Including Area Code) |
529 Pleasant Street
Attleboro, Massachusetts, 02703, United States
(Address of principal executive offices, including zip code)
+1 (508) 236 3800
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report.report)
_____________________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of exchange on which registered |
Ordinary Shares - nominal value €0.01 per share | ST | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by sectionSection 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 ý☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý☒ 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 (Check one):
| | | | | | | | | | | | | | |
Large accelerated filer | ☒ | | Accelerated filer | ☐ |
| | | | |
Large accelerated filer | ý | | Accelerated filer | ¨ |
| | | | |
Non-accelerated filer | ¨☐ | (Do not check if a smaller reporting company) | 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 ý☒
As of October 13, 2017, 171,296,417July 14, 2023, 152,422,440 ordinary shares were outstanding.
TABLE OF CONTENTS
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PART I | |
| Item 1. | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
| | | |
PART II | |
| Item 1. | | |
| Item 1A. | | |
| Item 2. | | |
| Item 3. | | |
| Item 6.5. | | |
| Item 6. | | |
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PART I—FINANCIAL INFORMATION
| |
Item 1. | Financial Statements. |
Item 1.Financial Statements. SENSATA TECHNOLOGIES HOLDING N.V.PLC
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
| | | September 30, 2017 | | December 31, 2016 | | June 30, 2023 | | December 31, 2022 |
Assets | | | | Assets | | | |
Current assets: | | | | Current assets: | |
Cash and cash equivalents | $ | 612,972 |
| | $ | 351,428 |
| Cash and cash equivalents | $ | 857,312 | | | $ | 1,225,518 | |
Accounts receivable, net of allowances of $12,561 and $11,811 as of September 30, 2017 and December 31, 2016, respectively | 569,881 |
| | 500,211 |
| |
Accounts receivable, net of allowances of $32,409 and $24,246 as of June 30, 2023 and December 31, 2022, respectively | | Accounts receivable, net of allowances of $32,409 and $24,246 as of June 30, 2023 and December 31, 2022, respectively | 772,427 | | | 742,382 | |
Inventories | 447,486 |
| | 389,844 |
| Inventories | 660,082 | | | 644,875 | |
Prepaid expenses and other current assets | 100,935 |
| | 100,002 |
| Prepaid expenses and other current assets | 186,807 | | | 162,268 | |
| Total current assets | 1,731,274 |
| | 1,341,485 |
| Total current assets | 2,476,628 | | | 2,775,043 | |
Property, plant and equipment, net | 735,924 |
| | 724,046 |
| Property, plant and equipment, net | 858,760 | | | 840,819 | |
Goodwill | 3,005,464 |
| | 3,005,464 |
| Goodwill | 3,861,872 | | | 3,911,224 | |
Other intangible assets, net of accumulated amortization of $1,727,644 and $1,607,269 as of September 30, 2017 and December 31, 2016, respectively | 958,972 |
| | 1,075,431 |
| |
Other intangible assets, net of accumulated amortization of $2,444,191 and $2,352,813 as of June 30, 2023 and December 31, 2022, respectively | | Other intangible assets, net of accumulated amortization of $2,444,191 and $2,352,813 as of June 30, 2023 and December 31, 2022, respectively | 961,180 | | | 999,722 | |
Deferred income tax assets | 26,678 |
| | 20,695 |
| Deferred income tax assets | 93,782 | | | 100,539 | |
Other assets | 79,625 |
| | 73,855 |
| Other assets | 140,378 | | | 128,873 | |
Total assets | $ | 6,537,937 |
| | $ | 6,240,976 |
| Total assets | $ | 8,392,600 | | | $ | 8,756,220 | |
Liabilities and shareholders’ equity | | | | |
Liabilities and shareholders' equity | | Liabilities and shareholders' equity | | | |
Current liabilities: | | | | Current liabilities: | |
Current portion of long-term debt, capital lease and other financing obligations | $ | 13,176 |
| | $ | 14,643 |
| |
Current portion of long-term debt, finance lease and other financing obligations | | Current portion of long-term debt, finance lease and other financing obligations | $ | 1,809 | | | $ | 256,471 | |
Accounts payable | 324,119 |
| | 299,198 |
| Accounts payable | 523,968 | | | 531,572 | |
Income taxes payable | 27,031 |
| | 23,889 |
| Income taxes payable | 31,920 | | | 43,987 | |
Accrued expenses and other current liabilities | 263,611 |
| | 245,566 |
| Accrued expenses and other current liabilities | 323,201 | | | 346,942 | |
| Total current liabilities | 627,937 |
| | 583,296 |
| Total current liabilities | 880,898 | | | 1,178,972 | |
Deferred income tax liabilities | 404,575 |
| | 392,628 |
| Deferred income tax liabilities | 390,743 | | | 364,593 | |
Pension and other post-retirement benefit obligations | 36,192 |
| | 34,878 |
| Pension and other post-retirement benefit obligations | 38,960 | | | 36,086 | |
Capital lease and other financing obligations, less current portion | 29,990 |
| | 32,369 |
| |
Finance lease and other financing obligations, less current portion | | Finance lease and other financing obligations, less current portion | 23,771 | | | 24,742 | |
Long-term debt, net | 3,224,684 |
| | 3,226,582 |
| Long-term debt, net | 3,770,507 | | | 3,958,928 | |
Other long-term liabilities | 32,034 |
| | 29,216 |
| Other long-term liabilities | 77,949 | | | 82,092 | |
Total liabilities | 4,355,412 |
| | 4,298,969 |
| Total liabilities | 5,182,828 | | | 5,645,413 | |
Commitments and contingencies (Note 10) |
|
|
| |
Commitments and contingencies (Note 11) | | Commitments and contingencies (Note 11) | |
Shareholders’ equity: | | | | Shareholders’ equity: | |
Ordinary shares, €0.01 nominal value per share, 400,000 shares authorized; 178,437 shares issued | 2,289 |
| | 2,289 |
| |
Treasury shares, at cost, 7,140 and 7,557 shares as of September 30, 2017 and December 31, 2016, respectively | (290,894 | ) | | (306,505 | ) | |
Ordinary shares, €0.01 nominal value per share, 177,069 shares authorized, and 175,793 and 175,207 shares issued as of June 30, 2023 and December 31, 2022, respectively | | Ordinary shares, €0.01 nominal value per share, 177,069 shares authorized, and 175,793 and 175,207 shares issued as of June 30, 2023 and December 31, 2022, respectively | 2,249 | | | 2,242 | |
Treasury shares, at cost, 23,371 and 22,781 shares as of June 30, 2023 and December 31, 2022, respectively | | Treasury shares, at cost, 23,371 and 22,781 shares as of June 30, 2023 and December 31, 2022, respectively | (1,149,838) | | | (1,124,713) | |
Additional paid-in capital | 1,658,574 |
| | 1,643,449 |
| Additional paid-in capital | 1,889,234 | | | 1,866,201 | |
Retained earnings | 862,954 |
| | 636,841 |
| Retained earnings | 2,472,281 | | | 2,383,341 | |
Accumulated other comprehensive loss | (50,398 | ) | | (34,067 | ) | Accumulated other comprehensive loss | (4,154) | | | (16,264) | |
Total shareholders’ equity | 2,182,525 |
| | 1,942,007 |
| |
Total liabilities and shareholders’ equity | $ | 6,537,937 |
| | $ | 6,240,976 |
| |
| Total shareholders' equity | | Total shareholders' equity | 3,209,772 | | | 3,110,807 | |
Total liabilities and shareholders' equity | | Total liabilities and shareholders' equity | $ | 8,392,600 | | | $ | 8,756,220 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
SENSATA TECHNOLOGIES HOLDING N.V.PLC
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Net revenue | $ | 1,062,112 | | | $ | 1,020,548 | | | $ | 2,060,287 | | | $ | 1,996,318 | |
Operating costs and expenses: | | | | | | | |
Cost of revenue | 732,108 | | | 686,603 | | | 1,402,579 | | | 1,343,683 | |
Research and development | 44,857 | | | 47,971 | | | 90,796 | | | 93,951 | |
Selling, general and administrative | 91,312 | | | 97,329 | | | 177,462 | | | 193,009 | |
Amortization of intangible assets | 54,563 | | | 36,805 | | | 95,337 | | | 74,172 | |
Restructuring and other charges, net | 21,259 | | | 12,897 | | | 27,258 | | | 26,630 | |
Total operating costs and expenses | 944,099 | | | 881,605 | | | 1,793,432 | | | 1,731,445 | |
Operating income | 118,013 | | | 138,943 | | | 266,855 | | | 264,873 | |
Interest expense, net | (38,105) | | | (44,842) | | | (78,196) | | | (90,287) | |
Other, net | (10,924) | | | (39,240) | | | (9,532) | | | (89,696) | |
Income before taxes | 68,984 | | | 54,861 | | | 179,127 | | | 84,890 | |
Provision for income taxes | 19,873 | | | 20,020 | | | 43,599 | | | 27,608 | |
Net income | $ | 49,111 | | | $ | 34,841 | | | $ | 135,528 | | | $ | 57,282 | |
Basic net income per share | $ | 0.32 | | | $ | 0.22 | | | $ | 0.89 | | | $ | 0.36 | |
Diluted net income per share | $ | 0.32 | | | $ | 0.22 | | | $ | 0.88 | | | $ | 0.36 | |
|
| | | | | | | | | | | | | | | |
| For the three months ended | | For the nine months ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
Net revenue | $ | 819,054 |
| | $ | 789,798 |
| | $ | 2,466,199 |
| | $ | 2,413,892 |
|
Operating costs and expenses: | | | | | | | |
Cost of revenue | 527,432 |
| | 508,944 |
| | 1,601,190 |
| | 1,574,763 |
|
Research and development | 34,002 |
| | 31,601 |
| | 97,032 |
| | 95,240 |
|
Selling, general and administrative | 75,972 |
| | 75,046 |
| | 227,256 |
| | 224,637 |
|
Amortization of intangible assets | 40,317 |
| | 50,562 |
| | 121,578 |
| | 151,572 |
|
Restructuring and special charges | 1,329 |
| | 837 |
| | 18,768 |
| | 3,167 |
|
Total operating costs and expenses | 679,052 |
| | 666,990 |
| | 2,065,824 |
| | 2,049,379 |
|
Profit from operations | 140,002 |
| | 122,808 |
| | 400,375 |
| | 364,513 |
|
Interest expense, net | (40,263 | ) | | (41,176 | ) | | (120,578 | ) | | (125,201 | ) |
Other, net | 3,112 |
| | (726 | ) | | 7,190 |
| | 4,892 |
|
Income before taxes | 102,851 |
| | 80,906 |
| | 286,987 |
| | 244,204 |
|
Provision for income taxes | 14,816 |
| | 11,121 |
| | 47,759 |
| | 48,297 |
|
Net income | $ | 88,035 |
| | $ | 69,785 |
| | $ | 239,228 |
| | $ | 195,907 |
|
Basic net income per share: | $ | 0.51 |
| | $ | 0.41 |
| | $ | 1.40 |
| | $ | 1.15 |
|
Diluted net income per share: | $ | 0.51 |
| | $ | 0.41 |
| | $ | 1.39 |
| | $ | 1.14 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
SENSATA TECHNOLOGIES HOLDING N.V.PLC
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Net income | $ | 49,111 | | | $ | 34,841 | | | $ | 135,528 | | | $ | 57,282 | |
Other comprehensive income: | | | | | | | |
Cash flow hedges | 8,686 | | | 9,183 | | | 11,493 | | | 12,033 | |
Defined benefit and retiree healthcare plans | 224 | | | 380 | | | 617 | | | 808 | |
Other comprehensive income | 8,910 | | | 9,563 | | | 12,110 | | | 12,841 | |
Comprehensive income | $ | 58,021 | | | $ | 44,404 | | | $ | 147,638 | | | $ | 70,123 | |
|
| | | | | | | | | | | | | | | |
| For the three months ended | | For the nine months ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
Net income | $ | 88,035 |
| | $ | 69,785 |
| | $ | 239,228 |
| | $ | 195,907 |
|
Other comprehensive loss, net of tax: | | | | | | | |
Deferred loss on derivative instruments, net of reclassifications | (6,784 | ) | | (8,485 | ) | | (17,820 | ) | | (25,010 | ) |
Defined benefit and retiree healthcare plans | 274 |
| | 24 |
| | 1,489 |
| | 291 |
|
Other comprehensive loss | (6,510 | ) | | (8,461 | ) | | (16,331 | ) | | (24,719 | ) |
Comprehensive income | $ | 81,525 |
| | $ | 61,324 |
| | $ | 222,897 |
| | $ | 171,188 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
SENSATA TECHNOLOGIES HOLDING N.V.PLC
Condensed Consolidated Statements of Cash Flows
(In thousands)
| | | For the nine months ended | | For the six months ended |
| September 30, 2017 | | September 30, 2016 | | June 30, 2023 | | June 30, 2022 |
Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
Net income | $ | 239,228 |
| | $ | 195,907 |
| Net income | $ | 135,528 | | | $ | 57,282 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation | 82,014 |
| | 77,649 |
| Depreciation | 63,560 | | | 62,882 | |
Amortization of deferred financing costs and original issue discounts | 5,528 |
| | 5,501 |
| |
Gain on sale of assets | (1,180 | ) | | — |
| |
Amortization of debt issuance costs | | Amortization of debt issuance costs | 3,421 | | | 3,433 | |
Gain on sale of business | | Gain on sale of business | (5,877) | | | — | |
Share-based compensation | 15,106 |
| | 13,279 |
| Share-based compensation | 17,607 | | | 15,739 | |
Amortization of inventory step-up to fair value | — |
| | 2,319 |
| |
Loss on debt financing | | Loss on debt financing | 857 | | | — | |
Amortization of intangible assets | 121,578 |
| | 151,572 |
| Amortization of intangible assets | 95,337 | | | 74,172 | |
Deferred income taxes | 11,836 |
| | 15,706 |
| Deferred income taxes | 13,449 | | | (5,211) | |
Unrealized loss on hedges and other non-cash items | 5,844 |
| | 660 |
| |
Changes in operating assets and liabilities, net of effects of acquisitions: | | | | |
Mark-to-market loss on equity investments, net | | Mark-to-market loss on equity investments, net | 302 | | | 71,100 | |
Unrealized loss on derivative instruments and other | | Unrealized loss on derivative instruments and other | 14,674 | | | 20,669 | |
Changes in operating assets and liabilities, net of the effects of acquisitions: | | Changes in operating assets and liabilities, net of the effects of acquisitions: | |
Accounts receivable, net | (69,670 | ) | | (65,373 | ) | Accounts receivable, net | (30,045) | | | (102,845) | |
Inventories | (58,476 | ) | | (20,624 | ) | Inventories | (19,036) | | | (69,379) | |
Prepaid expenses and other current assets | (19,251 | ) | | 2,320 |
| Prepaid expenses and other current assets | (13,408) | | | (17,762) | |
Accounts payable and accrued expenses | 40,144 |
| | 33,371 |
| Accounts payable and accrued expenses | (39,665) | | | 56,767 | |
Income taxes payable | 3,142 |
| | (6,361 | ) | Income taxes payable | (12,067) | | | (11,384) | |
Other | (3,564 | ) | | (9,575 | ) | Other | (3,615) | | | 1,425 | |
Acquisition-related compensation payments | | Acquisition-related compensation payments | (8,380) | | | (15,000) | |
Net cash provided by operating activities | 372,279 |
| | 396,351 |
| Net cash provided by operating activities | 212,642 | | | 141,888 | |
Cash flows from investing activities: | | | | Cash flows from investing activities: | | | |
Acquisition of CST, net of cash received | — |
| | 4,688 |
| |
Acquisitions, net of cash received | | Acquisitions, net of cash received | — | | | (48,989) | |
Additions to property, plant and equipment and capitalized software | (103,536 | ) | | (94,584 | ) | Additions to property, plant and equipment and capitalized software | (84,444) | | | (74,069) | |
Investment in equity securities | — |
| | (50,000 | ) | |
Proceeds from the sale of assets | 8,862 |
| | 751 |
| |
Investment in debt and equity securities | | Investment in debt and equity securities | (390) | | | (6,878) | |
Proceeds from the sale of business, net of cash sold | | Proceeds from the sale of business, net of cash sold | 19,000 | | | — | |
| Other | (3,000 | ) | | — |
| Other | — | | | 152 | |
Net cash used in investing activities | (97,674 | ) | | (139,145 | ) | Net cash used in investing activities | (65,834) | | | (129,784) | |
Cash flows from financing activities: | | | | Cash flows from financing activities: | | | |
Proceeds from exercise of stock options and issuance of ordinary shares | 5,332 |
| | 3,306 |
| Proceeds from exercise of stock options and issuance of ordinary shares | 5,346 | | | 14,577 | |
Payment of employee restricted stock tax withholdings | | Payment of employee restricted stock tax withholdings | (11,470) | | | (7,577) | |
| Payments on debt | (14,459 | ) | | (297,698 | ) | Payments on debt | (448,390) | | | (5,664) | |
Dividends paid | | Dividends paid | (35,113) | | | (17,225) | |
Payments to repurchase ordinary shares | (2,817 | ) | | (4,672 | ) | Payments to repurchase ordinary shares | (25,076) | | | (144,279) | |
Payments of debt issuance costs | (137 | ) | | (518 | ) | |
Other | (980 | ) | | — |
| |
| Payments of debt financing costs | | Payments of debt financing costs | (311) | | | (2,313) | |
| Net cash used in financing activities | (13,061 | ) | | (299,582 | ) | Net cash used in financing activities | (515,014) | | | (162,481) | |
Net change in cash and cash equivalents | 261,544 |
| | (42,376 | ) | Net change in cash and cash equivalents | (368,206) | | | (150,377) | |
Cash and cash equivalents, beginning of period | 351,428 |
| | 342,263 |
| |
Cash and cash equivalents, beginning of year | | Cash and cash equivalents, beginning of year | 1,225,518 | | | 1,708,955 | |
Cash and cash equivalents, end of period | $ | 612,972 |
| | $ | 299,887 |
| Cash and cash equivalents, end of period | $ | 857,312 | | | $ | 1,558,578 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
SENSATA TECHNOLOGIES HOLDING N.V.PLC
Condensed Consolidated Statements of Changes in Shareholders' Equity
(In thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Treasury Shares | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | | | | | Total Shareholders' Equity |
| Number | | Amount | | Number | | Amount | | | |
Balance as of March 31, 2023 | 175,298 | | | $ | 2,243 | | | (22,781) | | | $ | (1,124,713) | | | $ | 1,876,168 | | | $ | 2,452,858 | | | $ | (13,064) | | | | | | | $ | 3,193,492 | |
Surrender of shares for tax withholding | — | | | — | | | (231) | | | (11,347) | | | — | | | — | | | — | | | | | | | (11,347) | |
Stock options exercised | 76 | | | 1 | | | — | | | — | | | 2,665 | | | — | | | — | | | | | | | 2,666 | |
Vesting of restricted securities | 650 | | | 7 | | | — | | | — | | | — | | | (7) | | | — | | | | | | | — | |
Cash dividends paid | — | | | — | | | — | | | — | | | — | | | (18,336) | | | — | | | | | | | (18,336) | |
Repurchase of ordinary shares | — | | | — | | | (590) | | | (25,125) | | | — | | | — | | | — | | | | | | | (25,125) | |
Retirement of ordinary shares | (231) | | | (2) | | | 231 | | | 11,347 | | | — | | | (11,345) | | | — | | | | | | | — | |
Share-based compensation | — | | | — | | | — | | | — | | | 10,401 | | | — | | | — | | | | | | | 10,401 | |
| | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 49,111 | | | — | | | | | | | 49,111 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 8,910 | | | | | | | 8,910 | |
Balance as of June 30, 2023 | 175,793 | | | $ | 2,249 | | | (23,371) | | | $ | (1,149,838) | | | $ | 1,889,234 | | | $ | 2,472,281 | | | $ | (4,154) | | | | | | | $ | 3,209,772 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | |
Balance as of December 31, 2022 | 175,207 | | | $ | 2,242 | | | (22,781) | | | $ | (1,124,713) | | | $ | 1,866,201 | | | $ | 2,383,341 | | | $ | (16,264) | | | | | | | $ | 3,110,807 | |
Surrender of shares for tax withholding | — | | | — | | | (233) | | | (11,470) | | | — | | | — | | | — | | | | | | | (11,470) | |
Stock options exercised | 158 | | | 2 | | | — | | | — | | | 5,426 | | | — | | | — | | | | | | | 5,428 | |
Vesting of restricted securities | 661 | | | 7 | | | — | | | — | | | — | | | (7) | | | — | | | | | | | — | |
Cash dividends paid | — | | | — | | | — | | | — | | | — | | | (35,113) | | | — | | | | | | | (35,113) | |
Repurchase of ordinary shares | — | | | — | | | (590) | | | (25,125) | | | — | | | — | | | — | | | | | | | (25,125) | |
Retirement of ordinary shares | (233) | | | (2) | | | 233 | | | 11,470 | | | — | | | (11,468) | | | — | | | | | | | — | |
Share-based compensation | — | | | — | | | — | | | — | | | 17,607 | | | — | | | — | | | | | | | 17,607 | |
| | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 135,528 | | | — | | | | | | | 135,528 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 12,110 | | | | | | | 12,110 | |
Balance as of June 30, 2023 | 175,793 | | | $ | 2,249 | | | (23,371) | | | $ | (1,149,838) | | | $ | 1,889,234 | | | $ | 2,472,281 | | | $ | (4,154) | | | | | | | $ | 3,209,772 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Treasury Shares | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | | | | | Total Shareholders' Equity |
| Number | | Amount | | Number | | Amount | | | |
Balance as of March 31, 2022 | 174,583 | | | $ | 2,236 | | | (17,576) | | | $ | (899,697) | | | $ | 1,831,497 | | | $ | 2,154,563 | | | $ | (16,282) | | | | | | | $ | 3,072,317 | |
Surrender of shares for tax withholding | — | | | — | | | (148) | | | (7,442) | | | — | | | — | | | — | | | | | | | (7,442) | |
Stock options exercised | 39 | | | — | | | — | | | — | | | 1,229 | | | — | | | — | | | | | | | 1,229 | |
Vesting of restricted securities | 450 | | | 5 | | | — | | | — | | | — | | | (5) | | | — | | | | | | | — | |
Cash dividends paid | — | | | — | | | — | | | — | | | — | | | (17,225) | | | — | | | | | | | (17,225) | |
Repurchase of ordinary shares | — | | | — | | | (1,693) | | | (78,898) | | | — | | | — | | | — | | | | | | | (78,898) | |
Retirement of ordinary shares | (148) | | | (2) | | | 148 | | | 7,442 | | | — | | | (7,440) | | | — | | | | | | | — | |
Share-based compensation | — | | | — | | | — | | | — | | | 9,199 | | | — | | | — | | | | | | | 9,199 | |
| | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 34,841 | | | — | | | | | | | 34,841 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 9,563 | | | | | | | 9,563 | |
Balance as of June 30, 2022 | 174,924 | | | $ | 2,239 | | | (19,269) | | | $ | (978,595) | | | $ | 1,841,925 | | | $ | 2,164,734 | | | $ | (6,719) | | | | | | | $ | 3,023,584 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | |
Balance as of December 31, 2021 | 174,287 | | | $ | 2,232 | | | (16,438) | | | $ | (832,439) | | | $ | 1,812,244 | | | $ | 2,132,257 | | | $ | (19,560) | | | | | | | $ | 3,094,734 | |
Surrender of shares for tax withholding | — | | | — | | | (151) | | | (7,577) | | | — | | | — | | | — | | | | | | | (7,577) | |
Stock options exercised | 329 | | | 4 | | | — | | | — | | | 13,942 | | | — | | | — | | | | | | | 13,946 | |
Vesting of restricted securities | 459 | | | 5 | | | — | | | — | | | — | | | (5) | | | — | | | | | | | — | |
Cash dividends paid | — | | | — | | | — | | | — | | | — | | | (17,225) | | | — | | | | | | | (17,225) | |
Repurchase of ordinary shares | — | | | — | | | (2,831) | | | (146,156) | | | — | | | — | | | — | | | | | | | (146,156) | |
Retirement of ordinary shares | (151) | | | (2) | | | 151 | | | 7,577 | | | — | | | (7,575) | | | — | | | | | | | — | |
Share-based compensation | — | | | — | | | — | | | — | | | 15,739 | | | — | | | — | | | | | | | 15,739 | |
| | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 57,282 | | | — | | | | | | | 57,282 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 12,841 | | | | | | | 12,841 | |
Balance as of June 30, 2022 | 174,924 | | | $ | 2,239 | | | (19,269) | | | $ | (978,595) | | | $ | 1,841,925 | | | $ | 2,164,734 | | | $ | (6,719) | | | | | | | $ | 3,023,584 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
SENSATA TECHNOLOGIES HOLDING PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts, or unless otherwise noted)
(unaudited)
1. Business Description and Basis of Presentation
Description of Business
The accompanying unaudited condensed consolidated financial statements reflect the financial position, results of operations, comprehensive income, and cash flows, and changes in shareholders' equity of Sensata Technologies Holding N.V. ("Sensata N.V.")plc, a public limited company incorporated under the laws of England and Wales, and its wholly-ownedconsolidated subsidiaries, collectively referred to as the "Company," "Sensata," "we," "our," or "us."
Sensata N.V. is incorporated under the laws of the Netherlands and conducts its operations through subsidiary companies that operate business and product development centers primarily in the United States (the "U.S."), the Netherlands, Belgium, China, Germany, Japan, South Korea, and the United Kingdom (the "U.K."); and manufacturing operations primarily in China, Malaysia, Mexico, Bulgaria, France, Germany, the U.K., and the U.S. We organize our operations into two businesses, Performance Sensing and Sensing Solutions.
On September 28, 2017, the board of directors of Sensata N.V. unanimously approved a plan to change our parent company’s location of incorporation from the Netherlands to the U.K. To effect this change, the shareholders of Sensata N.V. will be asked to approve a cross-border merger between Sensata N.V. and Sensata Technologies Holding plc (“Sensata U.K.”), a newly formed, public limited company incorporated under the laws of England and Wales, with Sensata U.K. being the surviving entity (the “Merger”). If approved by our shareholders, we would expect to complete the Merger during the first quarter of 2018, which would result in Sensata U.K. becoming the publicly-traded parent of the subsidiary companies that are currently controlled by Sensata N.V.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("U.S. GAAP") for interim financial information and the instructions to Form 10-Q. Accordingly, these interim financial statements do not include all of the information and note disclosures required by U.S. GAAP for complete financial statements. The accompanying interim financial information reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the interim period results. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year, nor were the results of operations of the comparable periods in 2016 necessarily representative of those actually experienced for the full year 2016. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016.
All intercompany balances2022, filed with the U.S. Securities and transactions have been eliminated.Exchange Commission (the "SEC") on February 13, 2023 (the "2022 Annual Report").
All U.S. dollar ("USD") and share amounts presented, except per share amounts, are stated in thousands, unless otherwise indicated.
Certain reclassifications have been made to prior periods to conform to current period presentation.
2. New Accounting Standards
In May 2014, the Financial Accounting Standards Board (the "FASB")There are no recently issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which creates one Accounting Standards Codification ("ASC") Topic (FASB ASC 606, Revenue from Contracts with Customers)accounting standards that replaceshave been adopted in the current guidance found in FASB ASC 605, Revenue Recognition, and various other revenue accounting standards for specialized transactions and industries. FASB ASU No. 2014-09 outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goodsperiod or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. FASB ASU No. 2014-09 may be applied using either a full retrospective approach, under which all years included in the financial statements will be presented under the revised guidance,adopted in future periods that have had or a modified retrospective approach, under which financial statements will be prepared under the revised guidance for the year of adoption, but not for prior years. Under the latter method, entities will recognize a cumulative catch-up adjustmentare expected to the opening balance of retained earnings at the effective date for contracts that still require performance by the entity.
In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date, which defers the effective date of FASB ASU No. 2014-09 by one year. FASB ASU No. 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. We have developed an implementation plan to adopt this new guidance. As part of this plan, we are currently assessing the impact of the new guidance on our financial position and results of operations. Based on our procedures performed to date, nothing has come to our attention that would indicate that the adoption of FASB ASU No. 2014-09 will have a material impact on our consolidated financial position or results of operations. However,
3. Revenue Recognition
The following tables present net revenue disaggregated by segment and end market for the three and six months ended June 30, 2023 and 2022 for our two reportable segments, Performance Sensing ("PS") and Sensing Solutions ("SS"):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended June 30, 2023 | | For the three months ended June 30, 2022 (3) |
| | PS | | SS | | | | Total | | PS | | SS | | | | Total |
Automotive | | $ | 530,268 | | | $ | 9,550 | | | | | $ | 539,818 | | | $ | 506,232 | | | $ | 9,932 | | | | | $ | 516,164 | |
HVOR (1) | | 227,176 | | | — | | | | | 227,176 | | | 225,413 | | | — | | | | | 225,413 | |
Industrial | | — | | | 185,202 | | | | | 185,202 | | | — | | | 137,331 | | | | | 137,331 | |
Appliance and HVAC (2) | | — | | | 50,952 | | | | | 50,952 | | | — | | | 57,675 | | | | | 57,675 | |
Aerospace | | — | | | 46,832 | | | | | 46,832 | | | — | | | 38,558 | | | | | 38,558 | |
Other | | — | | | 12,132 | | | | | 12,132 | | | — | | | 45,407 | | | | | 45,407 | |
Total | | $ | 757,444 | | | $ | 304,668 | | | | | $ | 1,062,112 | | | $ | 731,645 | | | $ | 288,903 | | | | | $ | 1,020,548 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the six months ended June 30, 2023 (3) | | For the six months ended June 30, 2022 (3) |
| | PS | | SS | | | | Total | | PS | | SS | | | | Total |
Automotive | | $ | 1,047,152 | | | $ | 17,684 | | | | | $ | 1,064,836 | | | $ | 1,008,594 | | | $ | 19,217 | | | | | $ | 1,027,811 | |
HVOR (1) | | 448,560 | | | — | | | | | 448,560 | | | 425,746 | | | — | | | | | 425,746 | |
Industrial | | — | | | 333,714 | | | | | 333,714 | | | — | | | 266,952 | | | | | 266,952 | |
Appliance and HVAC (2) | | — | | | 98,426 | | | | | 98,426 | | | — | | | 116,500 | | | | | 116,500 | |
Aerospace | | — | | | 91,158 | | | | | 91,158 | | | — | | | 71,828 | | | | | 71,828 | |
Other | | — | | | 23,593 | | | | | 23,593 | | | — | | | 87,481 | | | | | 87,481 | |
Total | | $ | 1,495,712 | | | $ | 564,575 | | | | | $ | 2,060,287 | | | $ | 1,434,340 | | | $ | 561,978 | | | | | $ | 1,996,318 | |
(1) Heavy vehicle and off-road
(2) Heating, ventilation and air conditioning
(3) Effective April 1, 2023, we will continuemoved our material handling products from the HVOR operating segment (in the Performance Sensing reportable segment) to evaluatethe Sensing Solutions operating segment to align with new management reporting. The amounts previously reported in the tables above for the three and six months ended June 30, 2022 have been retrospectively recast to reflect this assessment through the remainder of 2017.change. In addition, the adoptionsix months ended June 30, 2023 includes amounts for the three months ended March 31, 2023 that have been retrospectively adjusted for this change.
4. Share-Based Payment Plans
The following table presents the components of FASB ASU No. 2014-09 requires new disclosuresnon-cash compensation expense related to revenue recognition, which we are continuingour equity awards for the three and six months ended June 30, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Stock options | $ | (205) | | | $ | 2 | | | $ | (86) | | | $ | 309 | |
Restricted securities | 10,606 | | | 9,197 | | | 17,693 | | | 15,430 | |
Share-based compensation expense | $ | 10,401 | | | $ | 9,199 | | | $ | 17,607 | | | $ | 15,739 | |
Equity Awards
We granted the following restricted stock units ("RSUs" and each, an "RSU") and performance-based restricted stock units ("PRSUs" and each, a "PRSU") under the Sensata Technologies Holding plc 2021 Equity Incentive Plan during the six months ended June 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | |
Awards Granted To: | | Type of Award | | Number of Units Granted (in thousands) | | | | Weighted Average Grant Date Fair Value |
| | | | | | | | |
Directors | | RSU (1) | | 33 | | | | | $ | 40.95 | |
Various executives and employees | | RSU (2) | | 547 | | | | | $ | 49.57 | |
Various executives and employees | | PRSU (3) | | 241 | | | | | $ | 49.53 | |
Various executives and employees | | PRSU (4) | | 102 | | | | | $ | 55.50 | |
(1) These RSUs cliff vest one year from the grant date (May and June 2024).
(2) These RSUs vest ratably over three years, one-third per year beginning on the first anniversary of the grant date. These RSUs will fully vest on various dates between January 2026 and June 2026.
(3) ThesePRSUs vest on various dates between April 2026 and June 2026. The number of units that ultimately vest will be between 0% and 150% and is dependent on the achievement of certain performance criteria.
(4) These awards include certain PRSUs with market performance conditions that will be evaluated relative to evaluate. We intendthe performance of certain peers as defined in the award agreement. The number of units that ultimately vest (in April 2026) will be from 0% to adopt FASB ASU No. 2014-09150%, depending on January 1, 2018achievement of these performance criteria. Total grant date value of these PRSUs is approximately $5.6 million and was valued using the modified retrospective transitionMonte Carlo method. Related share-based compensation expense recognized in the three and six months ended June 30, 2023 was $0.6 million.
5. Restructuring and Other Charges, Net
The following table presents the components of restructuring and other charges, net for the three and six months ended June 30, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
| | | | | | | |
| | | | | | | |
Severance costs, net (1) | $ | 4,749 | | | $ | — | | | $ | 8,962 | | | $ | 587 | |
Facility and other exit costs | 310 | | | 1,241 | | | 535 | | | 2,289 | |
Gain on sale of business | — | | | — | | | (5,877) | | | — | |
Acquisition-related compensation arrangements (2) | 3,330 | | | 12,834 | | | 10,602 | | | 31,089 | |
Other (1)(2)(3) | 12,870 | | | (1,178) | | | 13,036 | | | (7,335) | |
Restructuring and other charges, net | $ | 21,259 | | | $ | 12,897 | | | $ | 27,258 | | | $ | 26,630 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
(1) The three and six months ended June 30, 2023 include certain costs to exit the marine energy storage business (the "Marine Business") of Spear Power Systems (“Spear”) as discussed below.
(2) We have reclassified acquisition-related compensation arrangements for the three and six months ended June 30, 2022 from the "other" caption within restructuring and other charges, net, to correspond to current period presentation.
(3) The six months ended June 30, 2022 primarily includes gains related to changes in the fair value of acquisition-related contingent consideration amounts.
On June 6, 2023, we announced that we had made the decision to exit the Marine Business, which was included in the Sensing Solutions reportable segment. Exiting the Marine Business resulted in a charge of $38.3 million in the three and six months ended June 30, 2023. The charge included $13.5 million of accelerated amortization of definite-lived intangible assets, presented in amortization of intangible assets, and a $10.5 million write-down of inventory, presented in cost of revenue. In February 2016,addition, certain of these charges are presented in restructuring and other charges, net, including $1.2 million of severance costs, $1.7 million related to the FASB issued ASU No. 2016-02, Leases (Topic 842)write-down of property, plant, and equipment, $2.3 million related to the write-down of accounts receivables, and $9.1 million of other charges, including contract termination costs.
The following table presents a rollforward of our severance liability for the six months ended June 30, 2023:
| | | | | | | | | | | |
| | | | | Severance |
Balance as of December 31, 2022 | | | | | $ | 8,617 | |
Charges, net of reversals | | | | | 8,962 | |
Payments | | | | | (12,344) | |
Foreign currency remeasurement | | | | | 166 | |
Balance as of June 30, 2023 | | | | | $ | 5,401 | |
The severance liability as of June 30, 2023 and December 31, 2022 was entirely recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheets.
6. Other, Net
The following table presents the components of other, net for the three and six months ended June 30, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Currency remeasurement loss on net monetary assets | $ | (9,307) | | | $ | (14,090) | | | $ | (10,566) | | | $ | (14,157) | |
Gain on foreign currency forward contracts | 4,423 | | | 3,165 | | | 4,607 | | | 1,922 | |
Loss on commodity forward contracts | (6,269) | | | (18,254) | | | (4,370) | | | (8,830) | |
Loss on debt financing | (372) | | | — | | | (857) | | | — | |
Mark-to-market loss on equity investments, net | (302) | | | (11,821) | | | (302) | | | (71,100) | |
Net periodic benefit cost, excluding service cost | (810) | | | (639) | | | (1,781) | | | (1,394) | |
Other | 1,713 | | | 2,399 | | | 3,737 | | | 3,863 | |
Other, net | $ | (10,924) | | | $ | (39,240) | | | $ | (9,532) | | | $ | (89,696) | |
7. Income Taxes
The following table presents the provision for income taxes for the three and six months ended June 30, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
| | | | | | | |
| | | | | | | |
Provision for income taxes | $ | 19,873 | | | $ | 20,020 | | | $ | 43,599 | | | $ | 27,608 | |
The provision for income taxes consists of (1) current tax expense, which relates primarily to our profitable operations in tax jurisdictions with limited or no net operating loss carryforwards and withholding taxes related to management fees, royalties, and the repatriation of foreign earnings; and (2) deferred tax expense (or benefit), which establishes new accounting and disclosure requirements for leases. FASB ASU No. 2016-02 requires lessees to classify most leases as either finance or operating leases and to initially recognize a lease liability and right-of-use asset. Entities may elect to account for certain short-term leases (with a term of 12 months or less) using a method similar to the current operating lease model. The statements of operations will include, for finance leases, separate recognition of interest on the lease liability and amortization of the right-of-use asset and for operating leases, a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis. At December 31, 2016, we were contractually obligated to make future payments of $69.8 million under our operating lease obligationsrepresents adjustments in existence as of that date,book-to-tax basis differences primarily related to long-term facility leases. While(a) book versus tax basis in intangible assets, (b) changes in net operating loss carryforwards, and (c) changes in withholding taxes on unremitted earnings. Other items impacting deferred tax expense include changes in tax rates and changes in our assessment of the realizability of our deferred tax assets.
We recorded a partial valuation allowance against certain interest carryforwards in the U.S. at both December 31, 2022 and December 31, 2021. We are continually evaluating both the positive and negative evidence for this partial valuation allowance. We believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of this deferred tax asset and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability and future utilization of this attribute that we are inable to actually achieve.
8. Net Income per Share
Basic and diluted net income per share are calculated by dividing net income by the early stagesnumber of basic and diluted weighted-average ordinary shares outstanding during the period. For the three and six months ended June 30, 2023 and 2022 the weighted-average ordinary shares outstanding used to calculate basic and diluted net income per share were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Basic weighted-average ordinary shares outstanding | 152,700 | | | 156,477 | | | 152,609 | | | 156,950 | |
Dilutive effect of stock options | 55 | | | 190 | | | 103 | | | 331 | |
Dilutive effect of unvested restricted securities | 309 | | | 327 | | | 482 | | | 531 | |
Diluted weighted-average ordinary shares outstanding | 153,064 | | | 156,994 | | | 153,194 | | | 157,812 | |
Certain potential ordinary shares were excluded from our implementation processcalculation of diluted weighted-average ordinary shares outstanding because either they would have had an anti-dilutive effect on net income per share or they related to equity awards that were contingently issuable for FASB ASU No. 2016-02, and havewhich the contingency had not yet determined its impact on our consolidated financial statements, these leases would potentially be required to be presented on the balance sheet in accordance with the requirements of FASB ASU No. 2016-02. FASB ASU No. 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods, with early adoption permitted. FASB ASU No. 2016-02 must be applied using a modified retrospective approach, which requires recognition and measurement of leases at the beginning of the earliest period presented, with certain practical expedients available.been satisfied. These potential ordinary shares were as follows:
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), which changes both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results, in order to better align an entity’s risk management activities and financial reporting for hedging relationships. The amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. FASB ASU No. 2017-12 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods, with early adoption permitted. We are still evaluating the impact that this guidance will have on our consolidated financial statements, and we have not yet determined whether we will early adopt FASB ASU No. 2017-12. | | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Anti-dilutive shares excluded | 1,625 | | | 1,426 | | | 1,003 | | | 715 | |
Contingently issuable shares excluded | 1,366 | | | 1,383 | | | 1,317 | | | 1,192 | |
3.9. Inventories
The following table presents the components of inventories as of SeptemberJune 30, 20172023 and December 31, 2016 were as follows:2022:
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Finished goods | $ | 223,295 | | | $ | 202,531 | |
Work-in-process | 109,297 | | | 117,691 | |
Raw materials | 327,490 | | | 324,653 | |
Inventories | $ | 660,082 | | | $ | 644,875 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Finished goods | $ | 191,165 |
| | $ | 169,304 |
|
Work-in-process | 91,569 |
| | 74,810 |
|
Raw materials | 164,752 |
| | 145,730 |
|
Inventories | $ | 447,486 |
| | $ | 389,844 |
|
11
4. Shareholders' Equity
Treasury Shares
Ordinary shares repurchased by us are recorded at cost, as treasury shares, and result in a reduction of shareholders' equity. We reissue treasury shares as part of our share-based compensation programs. The cost of reissued shares is determined using the first-in, first-out method. During the nine months ended September 30, 2017, we reissued 0.5 million treasury shares, and as a result, we recognized a reduction in Retained earnings of $13.1 million.
Accumulated Other Comprehensive Loss10. Debt
The following is a roll forward oftable presents the components of Accumulated other comprehensive loss for the nine months ended September 30, 2017:
|
| | | | | | | | | | | | |
| | Cash Flow Hedges | | Defined Benefit and Retiree Healthcare Plans | | Accumulated Other Comprehensive Loss |
Balance as of December 31, 2016 | | $ | 23 |
| | $ | (34,090 | ) | | $ | (34,067 | ) |
Other comprehensive loss before reclassifications, net of tax | | (25,078 | ) | | — |
| | (25,078 | ) |
Amounts reclassified from accumulated other comprehensive loss, net of tax | | 7,258 |
| | 1,489 |
| | 8,747 |
|
Net current period other comprehensive (loss)/income | | (17,820 | ) | | 1,489 |
| | (16,331 | ) |
Balance as of September 30, 2017 | | $ | (17,797 | ) | | $ | (32,601 | ) | | $ | (50,398 | ) |
The details of the amounts reclassified from Accumulated other comprehensive loss for the three and nine months ended September 30, 2017 and 2016 are as follows:
|
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | Amount of Loss/(Gain) Reclassified from Accumulated Other Comprehensive Loss | | Affected Line in Condensed Consolidated Statements of Operations |
| | For the three months ended | | For the nine months ended | |
Component | | September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 | |
Derivative instruments designated and qualifying as cash flow hedges | | | | | | | | | | |
Foreign currency forward contracts | | $ | 4,075 |
| | $ | (2,771 | ) | | $ | (3,678 | ) | | $ | (15,075 | ) | | Net revenue (1) |
Foreign currency forward contracts | | 1,953 |
| | 4,834 |
| | 13,356 |
| | 14,857 |
| | Cost of revenue (1) |
Total, before taxes | | 6,028 |
| | 2,063 |
| | 9,678 |
| | (218 | ) | | Income before taxes |
Income tax effect | | (1,507 | ) | | (514 | ) | | (2,420 | ) | | 55 |
| | Provision for income taxes |
Total, net of taxes | | $ | 4,521 |
| | $ | 1,549 |
| | $ | 7,258 |
| | $ | (163 | ) | | Net income |
| | | | | | | | | | |
Defined benefit and retiree healthcare plans | | $ | 297 |
| | $ | (5 | ) | | $ | 1,557 |
| | $ | 324 |
| | Various (2) |
Income tax effect | | (23 | ) | | 29 |
| | (68 | ) | | (33 | ) | | Provision for income taxes |
Total, net of taxes | | $ | 274 |
| | $ | 24 |
| | $ | 1,489 |
| | $ | 291 |
| | Net income |
| |
(1) | See Note 12, "Derivative Instruments and Hedging Activities," for additional details on amounts to be reclassified in the future from Accumulated other comprehensive loss. |
| |
(2) | Amounts related to defined benefit and retiree healthcare plans reclassified from Accumulated other comprehensive loss affect the Cost of revenue, Research and development, and Selling, general and administrative ("SG&A") expense line items in the condensed consolidated statements of operations. The amounts reclassified are included in the computation of net periodic benefit cost. See Note 8, "Pension and Other Post-Retirement Benefits," for additional details of net periodic benefit cost. |
5. Restructuring and Special Charges
Restructuring and special charges for the three and nine months ended September 30, 2017 were $1.3 million and $18.8 million, respectively, which related primarily to the closing of our facility in Minden, Germany that was part of the acquisition of certain subsidiaries of Custom Sensors & Technologies Ltd. ("CST"), facility exit costs related to a limited number of other line moves and exit activities, and severance costs related to the termination of a limited number of employees. Charges related to the closing of our facility in Minden, Germany for the three and nine months ended September 30, 2017 consisted of (i) severance charges of $0.0 million and $8.4 million, respectively, and (ii) facility exit costs of $1.3 million and $2.4 million, respectively.
Restructuring and special charges for the three and nine months ended September 30, 2016 were $0.8 million and $3.2 million, respectively, which consisted primarily of facility exit costs related to the relocation of manufacturing lines from our facility in the Dominican Republic to a manufacturing facility in Mexico, and severance charges recorded in connection with acquired businesses and the termination of a limited number of employees. We completed the cessation of manufacturing in our Dominican Republic facility in the third quarter of 2016.
Changes to the severance portion of our restructuring liability during the nine months ended September 30, 2017 were as follows:
|
| | | | |
| | Severance |
Balance at December 31, 2016 | | $ | 17,350 |
|
Charges, net of reversals | | 11,747 |
|
Payments | | (20,072 | ) |
Impact of changes in foreign currency exchange rates | | 1,529 |
|
Balance at September 30, 2017 | | $ | 10,554 |
|
6. Debt
Our long-term debt, and capitalfinance lease and other financing obligations as of SeptemberJune 30, 20172023 and December 31, 2016 consisted2022:
| | | | | | | | | | | | | | | | | | | | |
| | Maturity Date | | June 30, 2023 | | December 31, 2022 |
Term Loan (1) | | September 20, 2026 | | $ | — | | | $ | 446,834 | |
| | | | | | |
5.625% Senior Notes | | November 1, 2024 | | 400,000 | | | 400,000 | |
5.0% Senior Notes | | October 1, 2025 | | 700,000 | | | 700,000 | |
| | | | | | |
4.375% Senior Notes | | February 15, 2030 | | 450,000 | | | 450,000 | |
3.75% Senior Notes | | February 15, 2031 | | 750,000 | | | 750,000 | |
4.0% Senior Notes | | April 15, 2029 | | 1,000,000 | | | 1,000,000 | |
5.875% Senior Notes | | September 1, 2030 | | 500,000 | | | 500,000 | |
| | | | | | |
Less: debt discount, net of premium | | | | (2,355) | | | (3,360) | |
Less: deferred financing costs | | | | (27,138) | | | (29,916) | |
Less: current portion | | | | — | | | (254,630) | |
Long-term debt, net | | | | $ | 3,770,507 | | | $ | 3,958,928 | |
| | | | | | |
Finance lease and other financing obligations | | | | $ | 25,580 | | | $ | 26,583 | |
Less: current portion | | | | (1,809) | | | (1,841) | |
Finance lease and other financing obligations, less current portion | | | | $ | 23,771 | | | $ | 24,742 | |
(1) On February 6, 2023, we prepaid $250.0 million of outstanding principal on our Term Loan balance. Accordingly, that portion of the following:principal balance outstanding on the Term Loan as of December 31, 2022 was presented as current portion of long-term debt. On May 3, 2023, we prepaid $196.8 million of outstanding principal on the Term Loan, representing the remaining balance on the Term Loan as of that date plus $0.5 million in interest.
|
| | | | | | | | | | |
| | Maturity Date | | September 30, 2017 | | December 31, 2016 |
Term Loan | | October 14, 2021 | | $ | 927,794 |
| | $ | 937,794 |
|
4.875% Senior Notes | | October 15, 2023 | | 500,000 |
| | 500,000 |
|
5.625% Senior Notes | | November 1, 2024 | | 400,000 |
| | 400,000 |
|
5.0% Senior Notes | | October 1, 2025 | | 700,000 |
| | 700,000 |
|
6.25% Senior Notes | | February 15, 2026 | | 750,000 |
| | 750,000 |
|
Less: discount | | | | (15,812 | ) | | (17,655 | ) |
Less: deferred financing costs | | | | (29,971 | ) | | (33,656 | ) |
Less: current portion | | | | (7,327 | ) | | (9,901 | ) |
Long-term debt, net | | | | $ | 3,224,684 |
| | $ | 3,226,582 |
|
| | | | | | |
Capital lease and other financing obligations | | | | $ | 35,839 |
| | $ | 37,111 |
|
Less: current portion | | | | (5,849 | ) | | (4,742 | ) |
Capital lease and other financing obligations, less current portion | | | | $ | 29,990 |
| | $ | 32,369 |
|
Our debt consists of secured credit facilities and various tranches of senior unsecured notes. Refer to Note 14: Debt of the audited consolidated financial statements and notes thereto included in the 2022 Annual Report for additional information regarding our existing indebtedness.As of SeptemberJune 30, 2017, there was $415.32023, we had $746.1 million of availabilityavailable under our $420.0$750.0 million revolving credit facility (the "Revolving Credit Facility"), net of $4.7$3.9 million of obligations in respect of outstanding letters of credit.credit issued thereunder. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of SeptemberJune 30, 2017,2023, no amounts had been drawn against these outstanding letters of credit, which are scheduled to expire on various dates in 2017 and 2018.
credit.
Accrued Interest
Accrued interest associated with our outstanding debt is included as a component of Accruedaccrued expenses and other current liabilities in the condensed consolidated balance sheets. As of SeptemberJune 30, 20172023 and December 31, 2016,2022, accrued interest totaled $45.7$48.9 million and $36.8$50.1 million, respectively.
7. Income Taxes
We recorded a Provision for income taxes for the three months ended September 30, 2017 and 2016 of $14.8 million and $11.1 million, respectively, and for the nine months ended September 30, 2017 and 2016 of $47.8 million and $48.3 million, respectively. The Provision for income taxes consists of current tax expense, which relates primarily to our profitable operations in non-U.S. tax jurisdictions, and deferred tax expense, which relates to adjustments in book-to-tax basis differences primarily due to the step-up in fair value of fixed and intangible assets, including goodwill, acquired in connection with business combination transactions, and the utilization of net operating losses.
During the three and nine months ended September 30, 2016, we recognized a benefit from income taxes of $5.1 million and $3.7 million, respectively, related to the change in our U.S. valuation allowance associated with the acquisition of CST, for which deferred tax liabilities were established related primarily to the step-up of tangible assets for book purposes.
8. Pension and Other Post-Retirement Benefits
We provide various pension and other post-retirement benefit plans for current and former employees, including defined benefit, defined contribution, and retiree healthcare benefit plans.
The components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the three months ended September 30, 2017 and 2016 were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Plans | | Non-U.S. Plans | | |
| Defined Benefit | | Retiree Healthcare | | Defined Benefit | | Total |
| September 30, | | September 30, | | September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
Service cost | $ | — |
| | $ | — |
| | $ | 21 |
| | $ | 25 |
| | $ | 661 |
| | $ | 697 |
| | $ | 682 |
| | $ | 722 |
|
Interest cost | 385 |
| | 332 |
| | 80 |
| | 94 |
| | 273 |
| | 298 |
| | 738 |
| | 724 |
|
Expected return on plan assets | (527 | ) | | (659 | ) | | — |
| | — |
| | (230 | ) | | (249 | ) | | (757 | ) | | (908 | ) |
Amortization of net loss | 291 |
| | 118 |
| | 8 |
| | 46 |
| | 64 |
| | 42 |
| | 363 |
| | 206 |
|
Amortization of prior service (credit) | — |
| | — |
| | (334 | ) | | (334 | ) | | (1 | ) | | (18 | ) | | (335 | ) | �� | (352 | ) |
Loss on settlement | 269 |
| | 140 |
| | — |
| | — |
| | — |
| | 1 |
| | 269 |
| | 141 |
|
Net periodic benefit cost/(credit) | $ | 418 |
| | $ | (69 | ) | | $ | (225 | ) | | $ | (169 | ) | | $ | 767 |
| | $ | 771 |
| | $ | 960 |
| | $ | 533 |
|
The components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the nine months ended September 30, 2017 and 2016 were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Plans | | Non-U.S. Plans | | |
| Defined Benefit | | Retiree Healthcare | | Defined Benefit | | Total |
| September 30, | | September 30, | | September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
Service cost | $ | — |
| | $ | — |
| | $ | 64 |
| | $ | 76 |
| | $ | 1,917 |
| | $ | 2,003 |
| | $ | 1,981 |
| | $ | 2,079 |
|
Interest cost | 1,214 |
| | 1,109 |
| | 239 |
| | 283 |
| | 784 |
| | 887 |
| | 2,237 |
| | 2,279 |
|
Expected return on plan assets | (1,617 | ) | | (2,006 | ) | | — |
| | — |
| | (677 | ) | | (714 | ) | | (2,294 | ) | | (2,720 | ) |
Amortization of net loss | 854 |
| | 355 |
| | 32 |
| | 142 |
| | 202 |
| | 89 |
| | 1,088 |
| | 586 |
|
Amortization of prior service (credit)/cost | — |
| | — |
| | (1,001 | ) | | (1,001 | ) | | (3 | ) | | 8 |
| | (1,004 | ) | | (993 | ) |
Loss on settlement | 1,473 |
| | 730 |
| | — |
| | — |
| | — |
| | 1 |
| | 1,473 |
| | 731 |
|
Net periodic benefit cost/(credit) | $ | 1,924 |
| | $ | 188 |
| | $ | (666 | ) | | $ | (500 | ) | | $ | 2,223 |
| | $ | 2,274 |
| | $ | 3,481 |
| | $ | 1,962 |
|
9. Share-Based Payment Plans
Share-Based Compensation Expense
The table below presents non-cash compensation expense related to our equity awards, which is recorded within SG&A expense in the condensed consolidated statements of operations, during the identified periods: |
| | | | | | | | | | | | | | | |
| For the three months ended | | For the nine months ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
Stock options | $ | 1,575 |
| | $ | 1,621 |
| | $ | 5,055 |
| | $ | 5,547 |
|
Restricted securities | 3,522 |
| | 3,136 |
| | 10,051 |
| | 7,732 |
|
Share-based compensation expense | $ | 5,097 |
| | $ | 4,757 |
| | $ | 15,106 |
| | $ | 13,279 |
|
Share-Based Compensation Awards
We grant share-based compensation awards for which vesting is subject only to continued employment and the passage of time (options and restricted stock units ("RSUs" and each an "RSU")), as well as those for which vesting also depends on the attainment of certain performance criteria (performance-based options and performance-based restricted stock units ("PRSUs" and each a "PRSU")).
We granted the following options under the Sensata Technologies Holding N.V. 2010 Equity Incentive Plan (the "2010 Equity Plan") during the nine months ended September 30, 2017:
|
| | | | | | |
Options Granted to | | Number of Options Granted (in thousands) | | Weighted- Average Grant Date Fair Value | | Vesting Period |
Various executives and employees | | 387 | | $14.50 | | 25% per year over four years |
We granted the following RSUs and PRSUs under the 2010 Equity Plan during the nine months ended September 30, 2017:
|
| | | | | | | | |
Awards Granted to | | Type of Award | | Number of Units Granted (in thousands) | | Percentage of PRSUs Awarded That May Vest
| | Weighted- Average Grant Date Fair Value |
Various executives and employees | | RSU (1) | | 147 | | N/A | | $43.67 |
Directors | | RSU (1) | | 34 | | N/A | | $41.10 |
Various executives and employees | | PRSU (2) | | 183 | | 0.0% - 172.5% | | $43.67 |
Various executives and employees | | PRSU (2) | | 53 | | 0.0% - 200.0% | | $43.33 |
| |
(1)
| RSUs granted during the nine months ended September 30, 2017 vest on various dates between June 2018 and July 2020. |
| |
(2)
| PRSUs granted during the nine months ended September 30, 2017 vest on various dates between April and May 2020, with the amount ultimately vesting within the range shown in the table above, dependent on the extent to which certain performance criteria are met. |
Option Exercises
During the nine months ended September 30, 2017, 266 stock options were exercised, all of which were settled with shares reissued from treasury.
10.11. Commitments and Contingencies
Legal Proceedings and Claims
We are regularly involved in a number of claims and litigation matters that arise in the ordinary course of business. Most of our litigation matters are third-party claims for property damage allegedly caused by our products but some involve allegations of personal injury or wrongful death. Although it is not feasible to predict the outcome of these matters, based upon our experience and current information known to us, we do not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on our resultresults of operations, financial position, condition, and/or cash flows.
12. Shareholders' Equity
Cash Dividends
In the three and six months ended June 30, 2023, we paid aggregate cash dividends of $18.3 million and $35.1 million, respectively, compared to $17.2 million in each of the three and six months ended June 30, 2022. On July 20, 2023, we announced that our Board of Directors approved a quarterly dividend of $0.12 per share, payable on August 23, 2023 to shareholders of record as of August 9, 2023.
Treasury Shares
11.From time to time, our Board of Directors has authorized various share repurchase programs, which may be modified or terminated by the Board at any time. On January 20, 2022, our Board of Directors authorized a $500.0 million ordinary share repurchase program (the “January 2022 Program”), which replaced the previous $500.0 million program approved in July 2019.
In the three and six months ended June 30, 2023, we repurchased 0.6 million ordinary shares (for an aggregate value of $25.1 million). We did not repurchase any ordinary shares under this program in the three months ended March 31, 2023. In the three and six months ended June 30, 2022, we repurchased 1.7 million ordinary shares (for an aggregate value of $78.9 million) and 2.8 million ordinary shares (for an aggregate value of $146.2 million), respectively. All share repurchases in these periods were made under the January 2022 Program. As of June 30, 2023, $199.4 million remained available for repurchase under the January 2022 Program.
Accumulated Other Comprehensive Loss
The following table presents the components of accumulated other comprehensive loss for the six months ended June 30, 2023:
| | | | | | | | | | | | | | | | | | | | |
| | Cash Flow Hedges | | Defined Benefit and Retiree Healthcare Plans | | Accumulated Other Comprehensive Loss |
Balance as of December 31, 2022 | | $ | 15,665 | | | $ | (31,929) | | | $ | (16,264) | |
Other comprehensive income before reclassifications, net of tax | | 24,206 | | | — | | | 24,206 | |
Reclassifications from accumulated other comprehensive loss, net of tax | | (12,713) | | | 617 | | | (12,096) | |
Other comprehensive income | | 11,493 | | | 617 | | | 12,110 | |
Balance as of June 30, 2023 | | $ | 27,158 | | | $ | (31,312) | | | $ | (4,154) | |
The following table presents the amounts reclassified from accumulated other comprehensive loss for the three and six months ended June 30, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended June 30, | | For the six months ended June 30, | | Affected Line in Condensed Consolidated Statements of Operations |
Component | | 2023 | | 2022 | | 2023 | | 2022 | |
Derivative instruments designated and qualifying as cash flow hedges: | | | | | | | | | | |
Foreign currency forward contracts | | $ | (4,394) | | | $ | (9,476) | | | $ | (11,033) | | | $ | (13,740) | | | Net revenue (1) |
Foreign currency forward contracts | | (4,403) | | | (2,603) | | | (6,100) | | | (5,232) | | | Cost of revenue (1) |
| | | | | | | | | | |
Total, before taxes | | (8,797) | | | (12,079) | | | (17,133) | | | (18,972) | | | Income before taxes |
Income tax effect | | 2,269 | | | 3,116 | | | 4,420 | | | 4,894 | | | Provision for income taxes |
Total, net of taxes | | $ | (6,528) | | | $ | (8,963) | | | $ | (12,713) | | | $ | (14,078) | | | Net income |
| | | | | | | | | | |
Defined benefit and retiree healthcare plans | | $ | 311 | | | $ | 519 | | | $ | 848 | | | $ | 1,130 | | | Other, net |
| | | | | | | | | | |
| | | | | | | | | | |
Income tax effect | | (87) | | | (139) | | | (231) | | | (322) | | | Provision for income taxes |
Total, net of taxes | | $ | 224 | | | $ | 380 | | | $ | 617 | | | $ | 808 | | | Net income |
(1) Refer to Note 14: Derivative Instruments and Hedging Activities for additional information regarding amounts to be reclassified from accumulated other comprehensive loss in future periods.
13. Fair Value Measures
Our assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with FASB ASC 820, Fair Value Measurement.
Measured on a Recurring Basis
The following table presents information aboutfair values of our assets and liabilities measured at fair value on a recurring basis as of SeptemberJune 30, 20172023 and December 31, 2016, aggregated by the level2022 are shown in the fair value hierarchy within which those measurements fell:below table.
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Assets | | | |
Cash equivalents (Level 1) | $ | 380,130 | | | $ | 860,034 | |
Foreign currency forward contracts (Level 2) | 43,046 | | | 31,126 | |
Commodity forward contracts (Level 2) | 2,011 | | | 4,181 | |
Total | $ | 425,187 | | | $ | 895,341 | |
| | | |
Liabilities | | | |
Foreign currency forward contracts (Level 2) | $ | 8,162 | | | $ | 9,866 | |
Commodity forward contracts (Level 2) | 5,260 | | | 4,671 | |
Total | $ | 13,422 | | | $ | 14,537 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets | | | | | | | | | | | |
Foreign currency forward contracts | $ | — |
| | $ | 8,869 |
| | $ | — |
| | $ | — |
| | $ | 32,757 |
| | $ | — |
|
Commodity forward contracts | — |
| | 4,847 |
| | — |
| | — |
| | 2,639 |
| | — |
|
Total | $ | — |
| | $ | 13,716 |
| | $ | — |
| | $ | — |
| | $ | 35,396 |
| | $ | — |
|
Liabilities | | | | | | | | | | | |
Foreign currency forward contracts | $ | — |
| | $ | 31,911 |
| | $ | — |
| | $ | — |
| | $ | 27,201 |
| | $ | — |
|
Commodity forward contracts | — |
| | 1,666 |
| | — |
| | — |
| | 3,790 |
| | — |
|
Total | $ | — |
| | $ | 33,577 |
| | $ | — |
| | $ | — |
| | $ | 30,991 |
| | $ | — |
|
Refer to Note 14: Derivative Instruments and Hedging Activities for additional information regarding our forward contracts. Cash equivalents consist of U.S. Government Treasury money market funds and are classified as Level 1 as they are exchange traded in an active market.Measured on a Nonrecurring Basis
We evaluated our goodwill and other indefinite-lived intangible assets for impairment as of October 1, 20162022 and determined that these assetsthey were not impaired. AsIn the three months ended June 30, 2023, we exited the Marine Business, as discussed further in Note 5: Restructuring and Other Charges, Net. We considered the exit of September 30, 2017, nothe Marine Business and determined that goodwill related to the Clean Energy Solutions reporting unit was not impaired as of the date of the exit. No other events or changes in circumstances occurred in the six months ended June 30, 2023 that would have triggered the need for an additional impairment review of our goodwill orand other indefinite-lived intangible assets.
A long-lived asset, which includes Property, plant, and equipment ("PP&E"), is considered held for sale when it meets certain criteria described in FASB ASC 360, Property, Plant, and Equipment. A long-lived asset classified as held for sale is initially measured at the lower of its carrying amount or fair value less cost to sell, and a loss is recognized for any initial adjustment of the asset's carrying amount to its fair value less cost to sell in the period the held for sale criteria are met. In the period that a long-lived asset is considered held for sale it is presented within Prepaid expenses and other current assets on our balance sheet where it remains until it is either sold or no longer meets the held for sale criteria. For comparative purposes, the prior year carrying amount of a long-lived asset considered held for sale is presented within Other assets on our balance sheet.
In the first quarter of 2017, we determined that one of our facilities met the held for sale criteria and recorded it at its fair value less costs to sell of $1.7 million (which approximated its net carrying value at that time). In the third quarter of 2017, we sold the asset for an immaterial gain.
The fair value of assets held for sale is considered to be a Level 3 fair value measurement and is determined based on the use of appraisals, input from market participants, our experience selling similar assets, internally developed cash flow models, or a combination thereof.
Financial Instruments Not Recorded at Fair Value
The following table presents the carrying values and fair values of financial instruments not recorded at fair value in the condensed consolidated balance sheets as of SeptemberJune 30, 20172023 and December 31, 2016:2022. All fair value measures presented are categorized in Level 2 of the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
| Carrying Value(1) | | Fair Value | | Carrying Value(1) | | Fair Value |
Liabilities | | | | | | | |
Term Loan | $ | — | | | $ | — | | | $ | 446,834 | | | $ | 443,483 | |
| | | | | | | |
5.625% Senior Notes | $ | 400,000 | | | $ | 396,000 | | | $ | 400,000 | | | $ | 398,000 | |
5.0% Senior Notes | $ | 700,000 | | | $ | 679,910 | | | $ | 700,000 | | | $ | 684,250 | |
| | | | | | | |
4.375% Senior Notes | $ | 450,000 | | | $ | 400,500 | | | $ | 450,000 | | | $ | 400,500 | |
3.75% Senior Notes | $ | 750,000 | | | $ | 635,625 | | | $ | 750,000 | | | $ | 626,250 | |
4.0% Senior Notes | $ | 1,000,000 | | | $ | 882,500 | | | $ | 1,000,000 | | | $ | 875,000 | |
5.875% Senior Notes | $ | 500,000 | | | $ | 481,250 | | | $ | 500,000 | | | $ | 473,750 | |
| | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| Carrying Value (1) | | Fair Value | | Carrying Value (1) | | Fair Value |
| | Level 1 | | Level 2 | | Level 3 | | | Level 1 | | Level 2 | | Level 3 |
Liabilities | | | | | | | | | | | | | | | |
Term Loan | $ | 927,794 |
| | $ | — |
| | $ | 932,433 |
| | $ | — |
| | $ | 937,794 |
| | $ | — |
| | $ | 942,483 |
| | $ | — |
|
4.875% Senior Notes | $ | 500,000 |
| | $ | — |
| | $ | 525,000 |
| | $ | — |
| | $ | 500,000 |
| | $ | — |
| | $ | 514,375 |
| | $ | — |
|
5.625% Senior Notes | $ | 400,000 |
| | $ | — |
| | $ | 440,000 |
| | $ | — |
| | $ | 400,000 |
| | $ | — |
| | $ | 417,752 |
| | $ | — |
|
5.0% Senior Notes | $ | 700,000 |
| | $ | — |
| | $ | 736,750 |
| | $ | — |
| | $ | 700,000 |
| | $ | — |
| | $ | 686,000 |
| | $ | — |
|
6.25% Senior Notes | $ | 750,000 |
| | $ | — |
| | $ | 819,375 |
| | $ | — |
| | $ | 750,000 |
| | $ | — |
| | $ | 786,098 |
| | $ | — |
|
(1) Carrying value excludes Excluding any related debt discounts, premiums, and deferred financing costs.
TheIn addition to the above, we hold certain equity investments that do not have readily determinable fair values of the Term Loan and senior notes are primarily determined using observable prices in markets where these instruments are generally not traded on a daily basis.
Cash and cash equivalents, accounts receivable, and accounts payable are carried at their cost, which approximates fair value, because of their short-term nature.
In March 2016, we acquired $50.0 million of Series B Preferred Stock of Quanergy Systems, Inc.,for which we recognized as a cost method investment on our balance sheet.use the measurement alternative prescribed in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 321, Investments—Equity Securities. As of SeptemberJune 30, 2017,2023 and December 31, 2022, we held equity investments under the fair valuemeasurement alternative of this asset has not$18.3 million and $15.0 million, respectively, which are presented in other assets in the condensed consolidated balance sheets. There were no impairments or changes resulting from observable transactions for these investments in the three and six months ended June 30, 2023 and 2022 and no adjustments have been estimated,made to their carrying values as there are no indicators of impairment,June 30, 2023 and it is not practicable to estimate its fair value due to the restricted marketabilityDecember 31, 2022.
12.14. Derivative Instruments and Hedging Activities
Hedges of Foreign Currency Risk
We are exposed to fluctuations in various foreign currencies against our functional currency, the U.S. dollar. We use foreign currency forward agreements to manage this exposure. We currently have outstanding foreign currency forward contracts that qualify as cash flow hedges intended to offset the effect of exchange rate fluctuations on forecasted sales and certain manufacturing costs. We also have outstanding foreign currency forward contracts that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are not designated for hedge accounting treatment in accordance with FASB ASC 815, Derivatives and Hedging. Foreign currency forward contracts not designated as hedges are not speculative and are used to manage our exposure to foreign exchange movements.
For the three and ninesix months ended SeptemberJune 30, 20172023 and 2016,2022, amounts excluded from the ineffective portionassessment of the changes in the fair valueeffectiveness of our foreign currency forward agreementscontracts that are designated as cash flow hedges waswere not material and no amounts were excluded from the assessment of effectiveness.material. As of SeptemberJune 30, 2017,2023, we estimateestimated that $18.4$30.1 million of net lossesgains will be reclassified from Accumulatedaccumulated other comprehensive loss to earnings during the twelve-month period ending SeptemberJune 30, 2018.2024.
As of SeptemberJune 30, 2017,2023, we had the following outstanding foreign currency forward contracts:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notional (in millions) | | Effective Date(s) | | Maturity Date(s) | | Index (Exchange Rates) | | Weighted-Average Strike Rate | | Hedge Designation (1) |
11.0 EUR | | June 21, 2023 | | July 31, 2023 | | Euro ("EUR") to USD | | 1.09 USD | | Not designated |
375.0 EUR | | Various from July 2021 to June 2023 | | Various from July 2023 to June 2025 | | EUR to USD | | 1.09 USD | | Cash flow hedge |
770.0 CNY | | June 21, 2023 | | July 31, 2023 | | USD to Chinese Renminbi ("CNY") | | 7.16 CNY | | Not designated |
300.0 CNY | | Various in January 2023 | | Various from July 2023 to September 2023 | | USD to CNY | | 6.74 CNY | | Cash flow hedge |
| | | | | | | | | | |
436.0 JPY | | June 21, 2023 | | July 31, 2023 | | USD to Japanese Yen ("JPY") | | 141.47 JPY | | Not designated |
26,312.5 KRW | | Various from August 2021 to June 2023 | | Various from July 2023 to May 2025 | | USD to Korean Won ("KRW") | | 1,273.23 KRW | | Cash flow hedge |
| | | | | | | | | | |
25.0 MYR | | June 21, 2023 | | July 31, 2023 | | USD to Malaysian Ringgit ("MYR") | | 4.63 MYR | | Not designated |
| | | | | | | | | | |
| | | | | | | | | | |
Notional
(in millions) 4,318.3 MXN | | Effective Date(s) | | Maturity Date(s) | | Index | | Weighted- Average Strike Rate | | Hedge Designation |
65.0 EUR | | September 27, 2017 | | October 31, 2017 | | Euro to U.S. Dollar Exchange Rate | | 1.18 USD | | Not designated |
461.6 EUR | | Various from April 2015July 2021 to September 2017June 2023 | | Various from October 2017July 2023 to December 2019June 2025 | | Euro to U.S. Dollar Exchange Rate | | 1.14 USD | | Designated |
500.0 CNY | | September 26, 2017 | | October 31, 2017 | | U.S. Dollar to Chinese Renminbi Exchange Rate | | 6.68 CNY | | Not designated |
132.0 CNY | | Various in February 2017 | | Various from October to December 2017 | | U.S. Dollar to Chinese Renminbi Exchange Rate | | 7.05 CNY | | Designated |
110.0 JPY | | September 27, 2017 | | October 31, 2017 | | U.S. Dollar to Japanese Yen Exchange Rate | | 112.80 JPY | | Not designated |
237.0 JPY | | January 5, 2017 | | Various from October to December 2017 | | U.S. Dollar to Japanese Yen Exchange Rate | | 113.71 JPY | | Designated |
45,258.3 KRW | | Various from April 2015 to September 2017 | | Various from October 2017 to August 2019 | | U.S. Dollar to Korean Won Exchange Rate | | 1,140.77 KRW | | Designated |
36.5 MYR | | Various from April 2015 to November 2016 | | Various from October 2017 to October 2018 | | U.S. Dollar to Malaysian Ringgit Exchange Rate | | 4.19 MYR | | Designated |
182.0 MXN | | September 27, 2017 | | October 31, 2017 | | U.S. Dollar to Mexican Peso Exchange Rate("MXN") | | 18.2420.78 MXN | | Not designatedCash flow hedge |
2,166.8 MXN5.2 GBP | | Various from April 2015 to September 2017June 21, 2023 | | Various from October 2017 to August 2019July 31, 2023 | | U.S. Dollar to Mexican Peso Exchange Rate | | 19.94 MXN | | Designated |
44.5 GBP | | Various from April 2015 to September 2017 | | Various from October 2017 to August 2019 | | British Pound Sterling ("GBP") to U.S. Dollar Exchange RateUSD | | 1.331.27 USD | | DesignatedNot designated |
58.6 GBP | | Various from July 2021 to June 2023 | | Various from July 2023 to June 2025 | | GBP to USD | | 1.23 USD | | Cash flow hedge |
The notional amounts above represent the total quantities we have outstanding over the remaining contracted periods.
Hedges of Commodity Risk
Our objective in using commodity forward contracts is to offset a portion of our exposure to the potential change in prices associated with certain commodities used in the manufacturing of our products, including silver, gold, nickel, aluminum, copper, platinum, and palladium. The terms of these forward contracts fix the price at a future date for various notional amounts associated with these commodities. These(1) Derivative financial instruments are not designated for hedge accounting treatment in accordance with FASB ASC 815. Commodity forward contracts not designated as hedges are not speculative and are used to manage our exposure to commodity price movements.currency exchange rate risk. They are intended to preserve economic value, and they are not used for trading or speculative purposes.
WeHedges of Commodity Risk
As of June 30, 2023, we had the following outstanding commodity forward contracts, none of which were designated as derivativesfor hedge accounting treatment in qualifying hedging relationships, as of September 30, 2017:
accordance with FASB ASC Topic 815, Derivatives and Hedging: |
| | | | | | | | | | | | | | | | | | | |
Commodity | | Notional | | Remaining Contracted Periods | | Weighted-Average Strike Price Per Unit |
Silver | | 1,109,455862,162 troy oz. | | October 2017 - August 2019July 2023 to May 2025 | | $17.6923.31 |
Gold | | 12,1507,169 troy oz. | | October 2017 - August 2019July 2023 to May 2025 | | $1,269.401,932.48 |
Nickel | | 287,659200,265 pounds | | October 2017 - August 2019July 2023 to May 2025 | | $4.6811.47 |
Aluminum | | 5,554,3703,902,120 pounds | | October 2017 - August 2019July 2023 to May 2025 | | $0.841.19 |
Copper | | 7,394,0187,730,119 pounds | | October 2017 - August 2019July 2023 to May 2025 | | $2.543.98 |
Platinum | | 8,0369,047 troy oz. | | October 2017 - August 2019July 2023 to May 2025 | | $996.80982.97 |
Palladium | | 1,9271,221 troy oz. | | October 2017 - August 2019July 2023 to May 2025 | | $759.111,944.38 |
The notional amounts above represent the total quantities we have outstanding over the remaining contracted periods.
Financial Instrument Presentation
The following table presents the fair values of our derivative financial instruments and their classification in the condensed consolidated balance sheets as of SeptemberJune 30, 20172023 and December 31, 2016:2022:
| | | Asset Derivatives | | Liability Derivatives | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value | | Fair Value | | Asset Derivatives | | Liability Derivatives |
| Balance Sheet Location | | September 30, 2017 | | December 31, 2016 | | Balance Sheet Location | | September 30, 2017 | | December 31, 2016 | | Balance Sheet Location | | June 30, 2023 | | December 31, 2022 | | Balance Sheet Location | | June 30, 2023 | | December 31, 2022 |
Derivatives designated as hedging instruments | | | | | | | | | Derivatives designated as hedging instruments | | | | | | |
Foreign currency forward contracts | Prepaid expenses and other current assets | | $ | 6,909 |
| | $ | 24,796 |
| | Accrued expenses and other current liabilities | | $ | 23,838 |
| | $ | 20,990 |
| Foreign currency forward contracts | Prepaid expenses and other current assets | | $ | 35,280 | | | $ | 27,114 | | | Accrued expenses and other current liabilities | | $ | 6,184 | | | $ | 6,586 | |
Foreign currency forward contracts | Other assets | | 1,956 |
| | 5,693 |
| | Other long-term liabilities | | 7,327 |
| | 3,814 |
| Foreign currency forward contracts | Other assets | | 6,357 | | | 3,763 | | | Other long-term liabilities | | 1,908 | | | 3,280 | |
Total | | $ | 8,865 |
| | $ | 30,489 |
| | $ | 31,165 |
| | $ | 24,804 |
| Total | | $ | 41,637 | | | $ | 30,877 | | | $ | 8,092 | | | $ | 9,866 | |
Derivatives not designated as hedging instruments | | | | | | | | | Derivatives not designated as hedging instruments | | | | | | |
Commodity forward contracts | Prepaid expenses and other current assets | | $ | 4,173 |
| | $ | 2,097 |
| | Accrued expenses and other current liabilities | | $ | 1,400 |
| | $ | 2,764 |
| Commodity forward contracts | Prepaid expenses and other current assets | | $ | 1,584 | | | $ | 2,542 | | | Accrued expenses and other current liabilities | | $ | 4,120 | | | $ | 4,066 | |
Commodity forward contracts | Other assets | | 674 |
| | 542 |
| | Other long-term liabilities | | 266 |
| | 1,026 |
| Commodity forward contracts | Other assets | | 427 | | | 1,639 | | | Other long-term liabilities | | 1,140 | | | 605 | |
Foreign currency forward contracts | Prepaid expenses and other current assets | | 4 |
| | 2,268 |
| | Accrued expenses and other current liabilities | | 746 |
| | 2,397 |
| Foreign currency forward contracts | Prepaid expenses and other current assets | | 1,409 | | | 249 | | | Accrued expenses and other current liabilities | | 70 | | | — | |
Total | | $ | 4,851 |
| | $ | 4,907 |
| | $ | 2,412 |
| | $ | 6,187 |
| Total | | $ | 3,420 | | | $ | 4,430 | | | $ | 5,330 | | | $ | 4,671 | |
These fair value measurements arewere all categorized within Level 2 of the fair value hierarchy.
The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive income for the three months ended SeptemberJune 30, 20172023 and 2016:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives designated as hedging instruments | | Amount of Deferred Gain/(Loss) Recognized in Other Comprehensive Income | | Location of Net Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income | | Amount of Net Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income |
| 2023 | | 2022 | | | 2023 | | 2022 |
Foreign currency forward contracts | | $ | 4,872 | | | $ | 28,192 | | | Net revenue | | $ | 4,394 | | | $ | 9,476 | |
Foreign currency forward contracts | | $ | 15,631 | | | $ | (3,765) | | | Cost of revenue | | $ | 4,403 | | | $ | 2,603 | |
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | |
Derivatives designated as hedging instruments | | Amount of Deferred (Loss)/Gain Recognized in Other Comprehensive Loss | | Location of Net (Loss)/Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income | | Amount of Net (Loss)/Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income |
| | September 30, 2017 | | September 30, 2016 | | | | September 30, 2017 | | September 30, 2016 |
Foreign currency forward contracts | | $ | (16,688 | ) | | $ | (6,929 | ) | | Net revenue | | $ | (4,075 | ) | | $ | 2,771 |
|
Foreign currency forward contracts | | $ | 1,614 |
| | $ | (6,450 | ) | | Cost of revenue | | $ | (1,953 | ) | | $ | (4,834 | ) |
|
| | | | | | | | | | |
Derivatives not designated as hedging instruments | | Amount of Gain/(Loss) Recognized in Net Income | | Location of Gain/(Loss) Recognized in Net Income |
| | September 30, 2017 | | September 30, 2016 | | |
Commodity forward contracts | | $ | 2,956 |
| | $ | 1,318 |
| | Other, net |
Foreign currency forward contracts | | $ | (3,865 | ) | | $ | (3,827 | ) | | Other, net |
| | | | | | | | | | | | | | | | | | | | |
Derivatives not designated as hedging instruments | | Amount of (Loss)/Gain Recognized in Net Income | | Location of (Loss)/Gain Recognized in Net Income |
| 2023 | | 2022 | |
Commodity forward contracts | | $ | (6,269) | | | $ | (18,254) | | | Other, net |
Foreign currency forward contracts | | $ | 4,423 | | | $ | 3,165 | | | Other, net |
The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive income for the ninesix months ended SeptemberJune 30, 20172023 and 2016:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives designated as hedging instruments | | Amount of Deferred Gain Recognized in Other Comprehensive Income | | Location of Net Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income | | Amount of Net Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income |
| 2023 | | 2022 | | | 2023 | | 2022 |
Foreign currency forward contracts | | $ | 1,284 | | | $ | 33,778 | | | Net revenue | | $ | 11,033 | | | $ | 13,740 | |
Foreign currency forward contracts | | $ | 31,339 | | | $ | 1,380 | | | Cost of revenue | | $ | 6,100 | | | $ | 5,232 | |
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | |
Derivatives designated as hedging instruments | | Amount of Deferred (Loss)/Gain Recognized in Other Comprehensive Loss | | Location of Net Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Net Income | | Amount of Net Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Net Income |
| | September 30, 2017 | | September 30, 2016 | | | | September 30, 2017 | | September 30, 2016 |
Foreign currency forward contracts | | $ | (56,479 | ) | | $ | (12,810 | ) | | Net revenue | | $ | 3,678 |
| | $ | 15,075 |
|
Foreign currency forward contracts | | $ | 23,041 |
| | $ | (20,319 | ) | | Cost of revenue | | $ | (13,356 | ) | | $ | (14,857 | ) |
| | Derivatives not designated as hedging instruments | | Amount of Gain/(Loss) Recognized in Net Income | | Location of Gain/(Loss) Recognized in Net Income | Derivatives not designated as hedging instruments | | Amount of (Loss)/Gain Recognized in Net Income | | Location of (Loss)/Gain Recognized in Net Income |
| | September 30, 2017 | | September 30, 2016 | | | |
Derivatives not designated as hedging instruments | | Derivatives not designated as hedging instruments | | 2023 | | 2022 | | Location of (Loss)/Gain Recognized in Net Income |
| $ | 6,439 |
| | $ | 12,049 |
| | Other, net | | $ | (4,370) | | | $ | (8,830) | | |
Foreign currency forward contracts | | $ | (10,542 | ) | | $ | (7,912 | ) | | Other, net | Foreign currency forward contracts | | $ | 4,607 | | | $ | 1,922 | | | Other, net |
Credit Risk Related Contingent Features
We have agreements with certain of our derivative counterparties that contain a provision whereby if we default on our indebtedness and where repayment of the indebtedness has been accelerated by the lender, then we could also be declared in default on our derivative obligations.
As of SeptemberJune 30, 2017,2023, the termination value of outstanding derivatives in a liability position, excluding any adjustment for non-performance risk, was $33.8$13.6 million. As of SeptemberJune 30, 2017,2023, we havehad not posted any cash collateral related to these agreements. If we breach any of the default provisions on any of our indebtedness as described above, we could be required to settle our obligations under the derivative agreements at their termination values.
13. Other, Net15. Acquisitions and Divestitures
Other, net consistedAcquisitions
Elastic M2M
On February 11, 2022, we acquired all of the following gains/(losses)equity interests of Elastic M2M Inc. ("Elastic M2M") for an aggregate cash purchase price of $51.6 million, subject to certain post-closing items. In addition to the aggregate cash purchase price, the previous shareholders of Elastic M2M are entitled to up to $30.0 million of additional acquisition-related incentive compensation, which was pending the completion of certain technical milestones in fiscal year 2022 and achievement of financial targets in fiscal years 2022 and 2023. All technical milestones were completed in fiscal year 2022. As of December 31, 2022, we had recognized $24.7 million of this acquisition-related incentive compensation. In the three and six months ended June 30, 2023, we recognized an additional $0.2 million and $3.5 million, respectively, of this acquisition-related incentive compensation. This acquisition-related incentive compensation is recorded in restructuring and other charges, net.
Elastic M2M is an innovator of connected intelligence for operational assets across heavy-duty transport, warehouse, supply chain and logistics, industrial, light-duty passenger car, and a variety of other industry segments. Elastic M2M primarily serves telematics service providers and resellers, enabling them to leverage Elastic M2M’s cloud platform and analytics capabilities to deliver sensor-based operational insights to their end users. This acquisition augments our cloud capabilities critical to delivering actionable sensor-based insights, an increasingly important capability in this fast-growing industry segment. We are integrating Elastic M2M into the Performance Sensing reportable segment.
The allocation of the purchase price related to this acquisition was finalized in the three months ended March 31, 2023. The following table summarizes the final allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed:
| | | | | | | | |
Net working capital, excluding cash | | $ | 35 | |
Goodwill | | 28,211 | |
Other intangible assets | | 27,700 | |
Deferred income tax liabilities | | (5,925) | |
Fair value of net assets acquired, excluding cash and cash equivalents | | 50,021 | |
Cash and cash equivalents | | 1,597 | |
Fair value of net assets acquired | | $ | 51,618 | |
The goodwill recognized as a result of this acquisition represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships. The goodwill recognized in this acquisition will not be deductible for tax purposes.
In connection with the allocation of purchase price to the assets acquired and liabilities assumed, we identified certain definite-lived intangible assets. The following table presents the acquired intangible assets, their estimated fair values, and weighted-average lives:
| | | | | | | | | | | | | | |
| | Acquisition Date Fair Value | | Weighted-Average Lives (years) |
Acquired definite-lived intangible assets | | | | |
Customer relationships | | $ | 17,500 | | | 13 |
Completed technologies | | 10,200 | | | 10 |
| | | | |
| | | | |
Total definite-lived intangible assets acquired | | $ | 27,700 | | | 12 |
The definite-lived intangible assets were valued using the income approach. We primarily used the relief-from-royalty method to value completed technologies, and we used the multi-period excess earnings method to value customer relationships. These valuation methods incorporate assumptions including expected discounted future net cash flows resulting from either the future estimated after-tax royalty payments avoided as a result of owning the completed technologies or the future earnings related to existing customer relationships.
Dynapower
On July 12, 2022, we completed the acquisition of all of the outstanding equity interests of DP Acquisition Corp ("Dynapower"), a leader in power conversion systems including inverters, converters, and rectifiers for renewable energy generation, green hydrogen production, electric vehicle charging stations, and microgrid applications, as well as industrial and defense applications, for an aggregate cash purchase price of $577.5 million, subject to certain post-closing items. Dynapower also provides aftermarket sales and service to maintain its equipment in the field.
Dynapower is a foundational addition to our Clean Energy Solutions strategy and complements our recent acquisitions of GIGAVAC, Lithium Balance, and Spear. We are integrating Dynapower into our Sensing Solutions reportable segment.
We recorded measurement period adjustments in the three months ended June 30, 2023 that predominantly reflected an updated valuation of definite-lived intangible assets. Accordingly, definite-lived intangible assets increased $57.2 million (primarily customer relationships). Along with other adjustments, including the associated deferred income tax liability on acquired intangibles, goodwill decreased $41.0 million. The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed:
| | | | | | | | |
Net working capital, excluding cash | | $ | 12,514 | |
Property, plant and equipment | | 1,846 | |
Goodwill | | 377,267 | |
Other intangible assets | | 221,600 | |
Other assets | | 1,656 | |
Deferred income tax liabilities | | (40,785) | |
Other long-term liabilities | | (1,035) | |
Fair value of net assets acquired, excluding cash and cash equivalents | | 573,063 | |
Cash and cash equivalents | | 4,410 | |
Fair value of net assets acquired | | $ | 577,473 | |
The allocation of purchase price of Dynapower is preliminary and is based on management’s judgments after evaluating several factors, including preliminary valuation assessments of intangible assets. The final allocation of the purchase price to the assets acquired will be completed when the final valuations are completed. The preliminary goodwill recognized as a result of this acquisition represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships. The goodwill recognized in this acquisition will not be deductible for tax purposes.
In connection with the preliminary allocation of purchase price to the assets acquired and liabilities assumed, we identified certain definite-lived intangible assets. The following table presents the acquired intangible assets, their estimated fair values, and weighted-average lives:
| | | | | | | | | | | | | | |
| | Acquisition Date Fair Value | | Weighted-Average Lives (years) |
Acquired definite-lived intangible assets | | | | |
Customer relationships | | $ | 79,800 | | | 16 |
Backlog | | 15,500 | | | 3 |
Completed technologies | | 92,100 | | | 15 |
Tradenames | | 34,200 | | | 18 |
| | | | |
Total definite-lived intangible assets acquired | | $ | 221,600 | | | 15 |
The definite-lived intangible assets were valued using the income approach. We primarily used the relief-from-royalty method to value completed technologies and tradenames, and we used the multi-period excess earnings method to value customer relationships. These valuation methods incorporate assumptions including expected discounted future net cash flows resulting from either the future estimated after-tax royalty payments avoided as a result of owning the completed technologies or the future earnings related to existing customer relationships.
Divestiture - Qinex Business
On May 27, 2022, we executed an asset purchase agreement (the "APA") whereby we agreed to sell various assets and liabilities comprising our semiconductor test and thermal business (collectively, the "Qinex Business") to LTI Holdings, Inc. ("LTI") in exchange for consideration of approximately $219.0 million, subject to working capital and other adjustments. Concurrent with the execution of the APA, the parties entered into a Contract Manufacturing Agreement ("CMA") and a Transition Services Agreement ("TSA"), each for nominal consideration.
The CMA commenced at closing of the transaction ("Closing") and had a term of either six or nine months, depending on the manufacturing site. LTI also had the option of extending each contract for an additional three months. The period from Closing to the end of the CMA term (including extensions, if any) is referred to as the "Transition Period." The terms of the CMA required that we provide manufacturing and distribution services for the Transition Period. The TSA commenced at Closing and had a term that varied depending on the nature of the support services, ranging from one month to the entirety of the Transition Period. The terms of the TSA required that we provide various forms of commercial, operational, and back-office support to LTI. The Transition Period ended in the three months ended March 31, 2023.
Closing occurred in July 2022, at which time assets of approximately $70 million (including allocated goodwill of $45 million) and liabilities of approximately $2 million transferred to LTI. Transferred assets and liabilities excluded inventories and accounts payable, which transferred to LTI at the end of the Transition Period. We received cash consideration of $198.8 million at Closing and recognized a pre-tax gain of $135.1 million in the three months ended September 30, 20172022. Cash consideration received at Closing excluded amounts held in escrow until various milestones were met through the Transition Period. In the three months ended June 30, 2023, we received an escrow payment of $15.0 million, which includes $10.0 million (presented in cash flows from operating activities) related to the transfer of inventory. Approximately $4.0 million remains in escrow as of June 30, 2023.
The Qinex Business manufactured semiconductor burn-in test sockets and 2016:thermal control solutions and was formed through the combination of Sensata’s semiconductor interconnect business with Wells-CTI in 2012. The Qinex Business was included in our Sensing Solutions segment (and Industrial Solutions reporting unit). We allocated goodwill to the Qinex Business based on its fair value relative to the total fair value of the Industrial Solutions reporting unit.
|
| | | | | | | | | | | | | | | |
| For the three months ended | | For the nine months ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
Currency remeasurement gain on net monetary assets | $ | 3,989 |
| | $ | 1,707 |
| | $ | 11,010 |
| | $ | 550 |
|
Loss on foreign currency forward contracts | (3,865 | ) | | (3,827 | ) | | (10,542 | ) | | (7,912 | ) |
Gain on commodity forward contracts | 2,956 |
| | 1,318 |
| | 6,439 |
| | 12,049 |
|
Other | 32 |
| | 76 |
| | 283 |
| | 205 |
|
Other, net | $ | 3,112 |
| | $ | (726 | ) | | $ | 7,190 |
| | $ | 4,892 |
|
14.16. Segment Reporting
We organize our business intopresent financial information for two reportable segments, Performance Sensing and Sensing Solutions. The Performance Sensing reportable segment consists of two operating segments, Automotive and HVOR, which meet the criteria for aggregation in FASB ASC Topic 280, Segment Reporting. The Sensing Solutions each of whichreportable segment is also an operating segment. Effective April 1, 2023, we moved our material handling products from the HVOR operating segment (in the Performance Sensing reportable segment) to the Sensing Solutions operating segment to align with new management reporting. This product move resulted in a reallocation of $57.1 million of goodwill from the HVOR reporting unit to the Industrial Solutions reporting unit based on its fair value relative to the total fair value of the HVOR reporting unit.
Our operating segments are businesses that we manage as components of an enterprise, for which separate financial information is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and assess performance.
An operating segment’s performance is primarily evaluated based on Segment profit,segment operating income, which excludes amortization expense,of intangible assets, restructuring and specialother charges, net, certain costs associated with our strategic megatrend initiatives, and certain corporate costs/costs or credits not associated with the operations of the segment, including share-based compensation expense and a portion of depreciation expense associated with assets recordedrecognized in connection with acquisitions. In addition, an operating segment’s performance excludes results from discontinued operations, if any. Corporate costsand other expenses excluded from an operating (and reportable) segment’s performance are separately stated below and also include costs that are related to functional areas such as finance, information technology, legal, and human resources. We believe that Segment profit,segment operating income, as defined above, is an appropriate measure for evaluating the operating performance of our segments. However, this measure should be considered in addition to, and not as a substitute for, or superior to, profit from operationsoperating income or other measures of financial performance prepared in accordance with U.S. GAAP. The accounting policies of each of our reportingoperating and reportable segments are materially consistent with those in the summary of significant accounting policies as described in Note 2, "Significant2: Significant Accounting Policies" of the audited consolidated financial statements and notes thereto included in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016.Report.
The following table presents Netnet revenue and Segment profitsegment operating income for the reportedour reportable segments and other operating results not allocated to the reportedour reportable segments for the three and ninesix months ended SeptemberJune 30, 20172023 and 2016:
|
| | | | | | | | | | | | | | | |
| For the three months ended | | For the nine months ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
Net revenue: | | | | | | | |
Performance Sensing | $ | 603,932 |
| | $ | 584,650 |
| | $ | 1,825,904 |
| | $ | 1,797,395 |
|
Sensing Solutions | 215,122 |
| | 205,148 |
| | 640,295 |
| | 616,497 |
|
Total net revenue | $ | 819,054 |
| | $ | 789,798 |
| | $ | 2,466,199 |
| | $ | 2,413,892 |
|
Segment profit (as defined above): | | | | | | | |
Performance Sensing | $ | 162,655 |
| | $ | 155,228 |
| | $ | 483,491 |
| | $ | 453,540 |
|
Sensing Solutions | 72,372 |
| | 67,314 |
| | 209,911 |
| | 198,737 |
|
Total segment profit | 235,027 |
| | 222,542 |
| | 693,402 |
| | 652,277 |
|
Corporate and other | (53,379 | ) | | (48,335 | ) | | (152,681 | ) | | (133,025 | ) |
Amortization of intangible assets | (40,317 | ) | | (50,562 | ) | | (121,578 | ) | | (151,572 | ) |
Restructuring and special charges | (1,329 | ) | | (837 | ) | | (18,768 | ) | | (3,167 | ) |
Profit from operations | 140,002 |
| | 122,808 |
| | 400,375 |
| | 364,513 |
|
Interest expense, net | (40,263 | ) | | (41,176 | ) | | (120,578 | ) | | (125,201 | ) |
Other, net | 3,112 |
| | (726 | ) | | 7,190 |
| | 4,892 |
|
Income before taxes | $ | 102,851 |
| | $ | 80,906 |
| | $ | 286,987 |
| | $ | 244,204 |
|
15. Net Income per Share
Basic and diluted net income per share are calculated by dividing Net income by2022. The amounts previously reported in the number of basic and diluted weighted-average ordinary shares outstanding during the period. Fortable below for the three and ninesix months ended SeptemberJune 30, 2017 and 2016,2022 have been retrospectively recast to reflect the weighted-average ordinary shares outstandingmove of the material handling products between operating segments as described above. In addition, the six months ended June 30, 2023 includes amounts for basic and diluted net income per share were as follows:the three months ended March 31, 2023 that have been retrospectively adjusted for this change.
| | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Net revenue: | | | | | | | |
Performance Sensing | $ | 757,444 | | | $ | 731,645 | | | $ | 1,495,712 | | | $ | 1,434,340 | |
Sensing Solutions | 304,668 | | | 288,903 | | | 564,575 | | | 561,978 | |
Total net revenue | $ | 1,062,112 | | | $ | 1,020,548 | | | $ | 2,060,287 | | | $ | 1,996,318 | |
Segment operating income (as defined above): | | | | | | | |
Performance Sensing | $ | 191,147 | | | $ | 179,293 | | | $ | 373,887 | | | $ | 353,507 | |
Sensing Solutions | 84,152 | | | 85,714 | | | 159,468 | | | 164,653 | |
Total segment operating income | 275,299 | | | 265,007 | | | 533,355 | | | 518,160 | |
Corporate and other | (81,464) | | | (76,362) | | | (143,905) | | | (152,485) | |
Amortization of intangible assets | (54,563) | | | (36,805) | | | (95,337) | | | (74,172) | |
Restructuring and other charges, net | (21,259) | | | (12,897) | | | (27,258) | | | (26,630) | |
Operating income | 118,013 | | | 138,943 | | | 266,855 | | | 264,873 | |
Interest expense, net | (38,105) | | | (44,842) | | | (78,196) | | | (90,287) | |
Other, net | (10,924) | | | (39,240) | | | (9,532) | | | (89,696) | |
Income before taxes | $ | 68,984 | | | $ | 54,861 | | | $ | 179,127 | | | $ | 84,890 | |
|
| | | | | | | | | | | |
| For the three months ended | | For the nine months ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
Basic weighted-average ordinary shares outstanding | 171,269 |
| | 170,840 |
| | 171,116 |
| | 170,656 |
|
Dilutive effect of stock options | 618 |
| | 431 |
| | 567 |
| | 504 |
|
Dilutive effect of unvested restricted securities | 358 |
| | 207 |
| | 340 |
| | 199 |
|
Diluted weighted-average ordinary shares outstanding | 172,245 |
| | 171,478 |
| | 172,023 |
| | 171,359 |
|
Net income and net income per share are presented in the condensed consolidated statements of operations.
Certain potential ordinary shares were excluded from our calculation of diluted weighted-average ordinary shares outstanding because they would have had an anti-dilutive effect on net income per share or because they related to share-based awards that were contingently issuable, for which the contingency had not been satisfied. These potential ordinary shares are as follows:
|
| | | | | | | | | | | |
| For the three months ended | | For the nine months ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
Anti-dilutive shares excluded | 1,584 |
| | 1,355 |
| | 1,635 |
| | 1,418 |
|
Contingently issuable shares excluded | 884 |
| | 735 |
| | 783 |
| | 632 |
|
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995Cautionary Statements Concerning Forward-Looking Statements
This report containsQuarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). All statements, other than statements of historical facts included in this report, are1995. These forward-looking statements including information concerning our possible or assumed future results or operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operation performance, improvements, acquisitions, divestitures, the effects of competition, and the effects of future legislation or regulations. Forward-looking statements are typicallymay be identified by use of termsterminology such as "may," "believe,"will," "could," "should," "expect," "anticipate," "intend,"believe," "estimate," "predict," "project," "target,"forecast," "goal,"continue," "intend," "plan," "should,"potential," "will," "predict,"opportunity," "guidance," "potential," "forecast," "outlook," "could," "budget," "objectives," "strategy" and similar expressions that convey the uncertainty of future eventsterms or outcomes.
phrases. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future financial and operating results, objectives, business and market outlook, megatrends, priorities, growth, shareholder value, capital expenditures, cash flows, demand for products and services, share repurchases, and Sensata’s strategic initiatives, including those relating to acquisitions and dispositions and the impact of such transactions on our strategic and operational plans and financial results. These statements are subject to risks, uncertainties, and assumptions. Actual results may differ materially from those expressed inother important factors relating to our operations and business environment, and we can give no assurances that these forward-looking statements. statements will prove to be correct.
A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements, including, but not limited to, risks related to public health crises, instability and changes in the global markets, supplier interruption or non-performance, the acquisition or disposition of businesses, adverse conditions or competition in the industries upon which we are dependent, intellectual property, product liability, warranty and recall claims, market acceptance of new product introductions and product innovations, labor disruptions or increased labor costs, and changes in existing environmental or safety laws, regulations, and programs.
Investors and others should carefully consider the foregoing factors and other uncertainties, risks, and potential events including, but not place undue reliancelimited to, those described in Item 1A: Risk Factors included in our 2022 Annual Report and as may be updated from time to time in Item 1A: Risk Factors included in our quarterly reports on anyForm 10-Q or other subsequent filings with the United States Securities and Exchange Commission. All such forward-looking statements. Westatements speak only as of the date they are made, and we do not haveundertake any intention or obligation to update forward-lookingthese statements after we file this report exceptother than as required by law.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, this information is based upon assumptions and anticipated results that are subject to numerous uncertainties and risks. The following and other risks described in greater detail in “Part 1. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, could cause our results to differ materially from those expressed in forward-looking statements:
conditions affecting demand for our products in the industries we serve, particularly the automotive industry;
competition and pricing pressure;
raw material availability, quality, and cost;
financial condition of, and relationships with, customers and vendors;
reliance on third-party suppliers;
changes to current policies by the U.S. government;
changes in tax rates;
conditions in the global markets we operate in and serve, including the impact of the anticipated exit of the United Kingdom from the European Union;
risks associated with current and future acquisitions and divestitures;
labor disputes or increased labor costs;
global risks of business interruptions, such as natural disasters and political, economic, and military instability;
risks associated with security breaches and other disruptions to our information technology infrastructure;
risks related to compliance with current and future laws and regulations;
our ability to protect our intellectual property rights;
risks of litigation;
our level of indebtedness and ability to operate within the limitations imposed by our debt instruments; and
various risks associated with being a Dutch corporation.
There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect that may cause actual results to differ materially from those contained in any forward-looking statements we may make and that may affect our operating and financial performance.
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations supplements, and should be read in conjunction with, the audited consolidated financial statementsdiscussion in Item 7: Management's Discussion and notes theretoAnalysis of Financial Condition and Results of Operations included in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016, filedReport. The following discussion should also be read in conjunction with the U.S. Securities and Exchange Commission on February 2, 2017, and the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Amounts and percentages in the following discussions have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
Overview
Net revenue for the three months ended June 30, 2023 was $1,062.1 million, an increase of 4.1% compared to $1,020.5 million in the three months ended June 30, 2022. Excluding a decrease of 1.4% attributed to changes in foreign currency exchange rates and an increase of 2.1% due to the net effect of acquisitions and divestitures, net revenue increased 3.4% on an organic basis. Organic revenue growth (or decline), discussed throughout this Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations (this "MD&A"), is a financial measure not presented in accordance with U.S. GAAP. Refer to Non-GAAP Financial Measures included elsewhere in this MD&A for additional information regarding our use of organic revenue growth (or decline).
Net revenue for the six months ended June 30, 2023 was $2,060.3 million, an increase of 3.2% compared to $1,996.3 million in the six months ended June 30, 2022. Excluding a decrease of 1.9% attributed to changes in foreign currency exchange rates and an increase of 1.1% due to the net effect of acquisitions and divestitures, net revenue increased 4.0% on an organic basis.
Operating income for the three months ended June 30, 2023 decreased $20.9 million, or 15.1%, to $118.0 million (11.1% of net revenue) from $138.9 million (13.6% of net revenue) in the three months ended June 30, 2022. This decline was largely driven by our decision to exit the Marine Business in the second quarter of 2023 (reflecting $38.3 million of charges incurred, including those related to accelerated amortization of intangible assets, write-down of inventory, and other restructuring charges), partially offset by the net impacts of pricing recoveries from customers, inflation on material and logistics costs, and volume leverage. Refer to Note 5: Restructuring and Other Charges, Net, of our unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information regarding the exit of the Marine Business.
Operating income for the six months ended June 30, 2023 increased $2.0 million, or 0.7%, to $266.9 million (13.0% of net revenue) compared to $264.9 million (13.3% of net revenue) in the six months ended June 30, 2022, as the charges incurred related to the Marine Business were more than offset by the net impacts of pricing recoveries from customers, inflation on material and logistics costs, and volume leverage.
Refer to Results of Operations included elsewhere in this MD&A for additional discussion of our earnings results for the three and six months ended June 30, 2023 compared to the prior year period.
We generated $212.6 million of operating cash flows in the six months ended June 30, 2023, ending the quarter with $857.3 million in cash and cash equivalents. In the six months ended June 30, 2023, we used approximately $448.4 million to pay down the remaining balance on our variable-rate Term Loan, bringing our gross indebtedness to $3.8 billion as of June 30, 2023 (a net leverage ratio of 3.2x) compared to $4.3 billion as of December 31, 2022 (a net leverage ratio of 3.4x). In the six months ended June 30, 2023, we used cash of approximately $84.4 million for capital expenditures, $35.1 million for payment of dividends, and $25.1 million for share repurchases as part of our share repurchase plan. In the three months ended June 30, 2023, we increased our cash dividends to $0.12 per share, first paid to shareholders of record in May 2023. In fiscal year 2023, we will continue to return capital to shareholders through our dividend and opportunistic share repurchases. We expect improving free cash flow will naturally allow leverage to decline and returns on invested capital to improve over time.
Results of Operations
The tablestable below presentpresents our historical results of operations, in millions of dollars and as a percentage of net revenue, for the three and ninesix months ended SeptemberJune 30, 20172023 compared to the three and ninesix months ended SeptemberJune 30, 2016.2022. We have derived the results of operations from the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Amounts and percentages in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not addappear to recalculate due to the effect of rounding.
Three Months Ended September 30, 2017 Compared to | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
| Amount | | Margin (1) | | Amount | | Margin (1) | | Amount | | Margin (1) | | Amount | | Margin (1) |
Net revenue: | | | | | | | | | | | | | | | |
Performance Sensing | $ | 757.4 | | | 71.3 | % | | $ | 731.6 | | | 71.7 | % | | $ | 1,495.7 | | | 72.6 | % | | $ | 1,434.3 | | | 71.8 | % |
Sensing Solutions | 304.7 | | | 28.7 | | | 288.9 | | | 28.3 | | | 564.6 | | | 27.4 | | | 562.0 | | | 28.2 | |
Net revenue | 1,062.1 | | | 100.0 | | | 1,020.5 | | | 100.0 | | | 2,060.3 | | | 100.0 | | | 1,996.3 | | | 100.0 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Operating costs and expenses | 944.1 | | | 88.9 | | | 881.6 | | | 86.4 | | | 1,793.4 | | | 87.0 | | | 1,731.4 | | | 86.7 | |
Operating income | 118.0 | | | 11.1 | | | 138.9 | | | 13.6 | | | 266.9 | | | 13.0 | | | 264.9 | | | 13.3 | |
Interest expense, net | (38.1) | | | (3.6) | | | (44.8) | | | (4.4) | | | (78.2) | | | (3.8) | | | (90.3) | | | (4.5) | |
Other, net | (10.9) | | | (1.0) | | | (39.2) | | | (3.8) | | | (9.5) | | | (0.5) | | | (89.7) | | | (4.5) | |
Income before taxes | 69.0 | | | 6.5 | | | 54.9 | | | 5.4 | | | 179.1 | | | 8.7 | | | 84.9 | | | 4.3 | |
Provision for income taxes | 19.9 | | | 1.9 | | | 20.0 | | | 2.0 | | | 43.6 | | | 2.1 | | | 27.6 | | | 1.4 | |
Net income | $ | 49.1 | | | 4.6 | % | | $ | 34.8 | | | 3.4 | % | | $ | 135.5 | | | 6.6 | % | | $ | 57.3 | | | 2.9 | % |
(1) Represents the Three Months Ended September 30, 2016amount presented divided by total net revenue.
|
| | | | | | | | | | | | | |
| For the three months ended |
| September 30, 2017 | | September 30, 2016 |
($ in millions) | Amount | | Percent of Net Revenue | | Amount | | Percent of Net Revenue |
Net revenue: | | | | | | | |
Performance Sensing | $ | 603.9 |
| | 73.7 | % | | $ | 584.7 |
| | 74.0 | % |
Sensing Solutions | 215.1 |
| | 26.3 |
| | 205.1 |
| | 26.0 |
|
Net revenue | 819.1 |
| | 100.0 |
| | 789.8 |
| | 100.0 |
|
Operating costs and expenses: | | | | | | | |
Cost of revenue | 527.4 |
| | 64.4 |
| | 508.9 |
| | 64.4 |
|
Research and development | 34.0 |
| | 4.2 |
| | 31.6 |
| | 4.0 |
|
Selling, general and administrative | 76.0 |
| | 9.3 |
| | 75.0 |
| | 9.5 |
|
Amortization of intangible assets | 40.3 |
| | 4.9 |
| | 50.6 |
| | 6.4 |
|
Restructuring and special charges | 1.3 |
| | 0.2 |
| | 0.8 |
| | 0.1 |
|
Total operating costs and expenses | 679.1 |
| | 82.9 |
| | 667.0 |
| | 84.5 |
|
Profit from operations | 140.0 |
| | 17.1 |
| | 122.8 |
| | 15.5 |
|
Interest expense, net | (40.3 | ) | | (4.9 | ) | | (41.2 | ) | | (5.2 | ) |
Other, net | 3.1 |
| | 0.4 |
| | (0.7 | ) | | (0.1 | ) |
Income before taxes | 102.9 |
| | 12.6 |
| | 80.9 |
| | 10.2 |
|
Provision for income taxes | 14.8 |
| | 1.8 |
| | 11.1 |
| | 1.4 |
|
Net income | $ | 88.0 |
| | 10.7 | % | | $ | 69.8 |
| | 8.8 | % |
Net revenue
Net revenue for the three months ended SeptemberJune 30, 20172023 increased $29.3 million, or 3.7%,4.1% compared to $819.1 million from $789.8 million for the three months ended September 30, 2016. This increase in netprior period. Net revenue was composedincreased 3.4% on an organic basis, which excludes a decrease of a 3.3% increase in Performance Sensing and a 4.9% increase in Sensing Solutions. Excluding a 0.1% increase due1.4% attributed to changes in foreign currency exchange rates organicand an increase of 2.1% due to the net effect of acquisitions and divestitures.
Net revenue growth was 3.6% whenfor the six months ended June 30, 2023 increased 3.2% compared to the prior period. Net revenue increased 4.0% on an organic basis, which excludes a decrease of 1.9% attributed to changes in foreign currency exchange rates and an increase of 1.1% due to the net effect of acquisitions and divestitures.
Effective April 1, 2023, we moved our material handling products from the HVOR operating segment (in the Performance Sensing reportable segment) to the Sensing Solutions operating segment to align with new management reporting. In the table above and the discussion below, the revenue previously reported for our Performance Sensing and Sensing Solutions reportable segments for the three and six months ended June 30, 2022 have been retrospectively recast to reflect this change. In addition, the six months ended June 30, 2023 includes amounts for the three months ended September 30, 2016. Organic revenue growth is a non-GAAP financial measure. Refer to the section entitled Non-GAAP Financial MeasuresMarch 31, 2023 that have been retrospectively adjusted for further information on our usethis change.
Performance Sensing
Performance Sensing net revenue for the three months ended SeptemberJune 30, 20172023 increased $19.3 million, or 3.3%,3.5% compared to $603.9 million from $584.7 million for the three months ended September 30, 2016.prior period. Excluding a 0.2% increase duedecrease of 1.7% attributed to changes in foreign currency exchange rates, Performance Sensing net revenue increased 5.2% on an organic basis. Both automotive and HVOR contributed to these results as discussed below.
Automotive net revenue growth was 3.1% when compared tofor the three months ended SeptemberJune 30, 2016. This2023 grew 4.7% compared to the prior period. Excluding a decline of 2.0% attributed to changes in foreign currency exchange rates, automotive net revenue grew 6.7% on an organic revenue growth wasbasis, primarily driven by our heavy vehicle off road ("HVOR") business, including content growth, most notably in the construction and agriculture markets, as well asdue to market growth principallyand improved pricing. HVOR net revenue for the three months ended June 30, 2023 grew 0.8% compared to the prior period. Excluding a decline of 1.0% attributed to changes in foreign currency exchange rates, HVOR net revenue grew 1.8% on an organic basis, primarily due to market growth, partially offset by channel inventory de-stocking.
Performance Sensing net revenue for the on-road truck marketssix months ended June 30, 2023 increased 4.3% compared to the prior period. Excluding a decrease of 2.1% attributed to changes in North Americaforeign currency exchange rates and China. In general, regulatory requirementsan increase of 0.2% due to the effect of acquisitions, Performance Sensing net revenue increased 6.2% on an organic basis. Both automotive and HVOR contributed to these results as discussed below.
Automotive net revenue for safer vehicles, higher fuel efficiency,the six months ended June 30, 2023 grew 3.8% compared to the prior period. Excluding a decrease of 2.5% attributed to changes in foreign currency exchange rates, automotive net revenue grew 6.3% on an organic basis, primarily due to market growth and lower emissions, such asimproved pricing. HVOR net revenue for the Corporate Average Fuel Economy ("CAFE") requirementssix months ended June 30, 2023 grew 5.4% compared to the prior period. Excluding a decrease of 1.4% attributed to changes in foreign currency exchange rates and an increase of 0.7% due to the U.S., "Euro 6d" requirements in Europe,effect of acquisitions, HVOR net revenue grew 6.1% on an organic basis, primarily due to market growth and "China National 6" requirements in Asia, as well as consumer demand for operator productivity and convenience,outgrowth, partially offset by channel inventory de-stocking.
drive the need for advancements in engine management, safety features, efficiency, and operator controls that in turn can lead to a growing demand for our sensors.Sensing Solutions
Sensing Solutions net revenue for the three months ended SeptemberJune 30, 20172023 increased $10.0 million, or 4.9%,5.5% compared to $215.1 million from $205.1 million for the three months ended September 30, 2016.prior period. Excluding a 0.3% decline dueof 0.9% attributed to changes in foreign currency exchange rates and an increase of 7.6% due to the net effect of acquisitions and divestitures, Sensing Solutions net revenue declined 1.2% on an organic basis, which primarily reflects weakness in our appliance and HVAC markets, partially offset by growth in the aerospace markets.
Sensing Solutions net revenue growth was 5.2% whenfor the six months ended June 30, 2023 increased 0.5% compared to the three months ended September 30, 2016. The organic revenue growth was primarily dueprior period. Excluding a decline of 1.2% attributed to market strength across all of our key end-markets, particularly in China, as well as content growth, primarily in the heating, ventilation and air-conditioning ("HVAC") and industrial markets.
Cost of revenue
Cost of revenue for the three months ended September 30, 2017 and 2016 was $527.4 million (64.4% of net revenue) and $508.9 million (64.4% of net revenue), respectively.
Research and development expense
Research and development ("R&D") expense for the three months ended September 30, 2017 and 2016 was $34.0 million and $31.6 million, respectively. We invest in R&D to support new platform and technology developments, both in our recently acquired and existing businesses, in order to drive future revenue growth. The level of R&D expense is related to the number of products in development, the stage of such products in the development process, the complexity of the underlying technology, the potential scale of the product upon successful commercialization, and the level of our exploratory research.
Selling, general and administrative expense
Selling, general and administrative ("SG&A") expense for the three months ended September 30, 2017 and 2016 was $76.0 million and $75.0 million, respectively. SG&A expense consists of all expenditures incurred in connection with the sales and marketing of our products, as well as administrative overhead costs. These costs are fixed or variable in nature, and we may at times experience increased or decreased variable costs for reasons other than increased or decreased net revenue. As a result, SG&A expense will not necessarily remain consistent as a percentage of revenue.
Amortization of intangible assets
Amortization expense associated with definite-lived intangible assets for the three months ended September 30, 2017 and 2016 was $40.3 million and $50.6 million, respectively. Definite-lived intangible assets are amortized on an economic benefit basis according to the useful lives of the assets, or on a straight-line basis if a pattern of economic benefits cannot be reliably determined. In general, the economic benefit of an intangible asset is concentrated towards the beginning of that intangible asset's useful life. Amortization expense decreased as certain intangible assets, primarily related to the Sensors & Controls and High Temperature Sensing acquisitions in 2006 and 2011, respectively, are at, or are nearing, the end of their useful lives.
Restructuring and special charges
Restructuring and special charges for the three months ended September 30, 2017 and 2016 were $1.3 million and $0.8 million, respectively. The restructuring and special charges for the three months ended September 30, 2017 consisted primarily of facility exit costs of $1.3 million related to the closing of our facility in Minden, Germany that was part of the acquisition of certain subsidiaries of Custom Sensors & Technologies Ltd. ("CST"). The restructuring and special charges for the three months ended September 30, 2016 consisted primarily of facility exit costs related to the relocation of manufacturing lines from our facility in the Dominican Republic to a manufacturing facility in Mexico, and severance charges recorded in connection with acquired businesses and the termination of a limited number of employees. We completed the cessation of manufacturing in our Dominican Republic facility in the third quarter of 2016.
Interest expense, net
Interest expense, net for the three months ended September 30, 2017 and 2016 was $40.3 million and $41.2 million, respectively.
Other, net
Other, net for the three months ended September 30, 2017 and 2016 represented a net gain of $3.1 million and a net loss of $0.7 million, respectively. The change in Other, net relates to fluctuationschanges in foreign currency exchange rates netand an increase of any offsetting hedge gain or loss and fluctuations in commodity prices relative3.3% due to the strike pricesnet effect of acquisitions and divestitures, Sensing Solutions net revenue declined 1.6% on outstanding forward contracts.an organic basis, which primarily reflects weakness in our appliance and HVAC markets, partially offset by growth in the aerospace markets.
Operating costs and expenses
Operating costs and expenses for the three and six months ended June 30, 2023 and 2022 are presented, in millions of dollars and as a percentage of net revenue, in the following table. Amounts and percentages in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | For the six months ended |
| June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
| Amount | | Margin (1) | | Amount | | Margin (1) | | Amount | | Margin (1) | | Amount | | Margin (1) |
Operating costs and expenses: | | | | | | | | | | | | | | | |
Cost of revenue | $ | 732.1 | | | 68.9 | % | | $ | 686.6 | | | 67.3 | % | | $ | 1,402.6 | | | 68.1 | % | | $ | 1,343.7 | | | 67.3 | % |
Research and development | 44.9 | | | 4.2 | | | 48.0 | | | 4.7 | | | 90.8 | | | 4.4 | | | 94.0 | | | 4.7 | |
Selling, general and administrative | 91.3 | | | 8.6 | | | 97.3 | | | 9.5 | | | 177.5 | | | 8.6 | | | 193.0 | | | 9.7 | |
Amortization of intangible assets | 54.6 | | | 5.1 | | | 36.8 | | | 3.6 | | | 95.3 | | | 4.6 | | | 74.2 | | | 3.7 | |
Restructuring and other charges, net | 21.3 | | | 2.0 | | | 12.9 | | | 1.3 | | | 27.3 | | | 1.3 | | | 26.6 | | | 1.3 | |
Total operating costs and expenses | $ | 944.1 | | | 88.9 | % | | $ | 881.6 | | | 86.4 | % | | $ | 1,793.4 | | | 87.0 | % | | $ | 1,731.4 | | | 86.7 | % |
(1) Represents the amount presented divided by total net revenue.
Cost of revenue
For the three months ended June 30, 2023, cost of revenue as a percentage of net revenue increased from the prior period, primarily due to (1) the $10.5 million write-down of inventory as a result of our decision to exit the Marine Business, (2) the unfavorable effect of acquisitions and divestitures on gross margin, (3) the unfavorable effect of product mix, and (4) the unfavorable effect of changes in foreign currency exchange rates, partially offset by the net impacts of pricing recoveries from customers, inflation on material and logistics costs, and volume leverage. Refer to Note 13, "Other,5: Restructuring and Other Charges, Net", of our unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for a detail ofadditional details regarding the components of Other, net.
Provision for income taxes
Provision for income taxes for the three months ended September 30, 2017 and 2016 was $14.8 million and $11.1 million, respectively. The provision for income taxes consists of current tax expense, which relates primarily to our profitable operations in non-U.S. tax jurisdictions and withholding taxes on interest and royalty income, and deferred tax expense, which relates to adjustments in book-to-tax basis differences primarilycharges related to the step-up in fair valueexit of fixed and intangible assets, including goodwill, acquired in connection with business combination transactions, and the utilizationMarine Business.
For the six months ended June 30, 2023, cost of revenue as a percentage of net operating losses.
The change inrevenue increased from the provision for income taxes wasprior period, primarily due to (1) the unfavorable effect of product mix, (2) the $10.5 million write-down of inventory as a change inresult of our decision to exit the amountMarine Business, (3) the unfavorable effect of acquisitions and distribution of income recorded in various jurisdictions,divestitures on gross margin, and (4) the impactunfavorable effect of changes in foreign currency exchange rates, partially offset by the net impacts of pricing recoveries, inflation, and a change in our U.S. valuation allowance associated with the acquisition of CST, for which deferred tax liabilities were established related primarily to the step-up of tangible assets for book purposes, for which we recorded a benefit from income taxes of $5.1 million duringvolume leverage.
Research and development expense
For the three months ended SeptemberJune 30, 2016.2023, research and development ("R&D") expense decreased from the prior period, primarily due to lower costs as a result of repositioning actions taken in fiscal year 2022, partially offset by higher spend to support increased revenue.
Nine Months Ended September 30, 2017 Compared toFor the Nine Months Ended September 30, 2016
|
| | | | | | | | | | | | | |
| For the nine months ended |
| September 30, 2017 | | September 30, 2016 |
($ in millions) | Amount | | Percent of Net Revenue | | Amount | | Percent of Net Revenue |
Net revenue: | | | | | | | |
Performance Sensing | $ | 1,825.9 |
| | 74.0 | % | | $ | 1,797.4 |
| | 74.5 | % |
Sensing Solutions | 640.3 |
| | 26.0 |
| | 616.5 |
| | 25.5 |
|
Net revenue | 2,466.2 |
| | 100.0 |
| | 2,413.9 |
| | 100.0 |
|
Operating costs and expenses: | | | | | | | |
Cost of revenue | 1,601.2 |
| | 64.9 |
| | 1,574.8 |
| | 65.2 |
|
Research and development | 97.0 |
| | 3.9 |
| | 95.2 |
| | 3.9 |
|
Selling, general and administrative | 227.3 |
| | 9.2 |
| | 224.6 |
| | 9.3 |
|
Amortization of intangible assets | 121.6 |
| | 4.9 |
| | 151.6 |
| | 6.3 |
|
Restructuring and special charges | 18.8 |
| | 0.8 |
| | 3.2 |
| | 0.1 |
|
Total operating costs and expenses | 2,065.8 |
| | 83.8 |
| | 2,049.4 |
| | 84.9 |
|
Profit from operations | 400.4 |
| | 16.2 |
| | 364.5 |
| | 15.1 |
|
Interest expense, net | (120.6 | ) | | (4.9 | ) | | (125.2 | ) | | (5.2 | ) |
Other, net | 7.2 |
| | 0.3 |
| | 4.9 |
| | 0.2 |
|
Income before taxes | 287.0 |
| | 11.6 |
| | 244.2 |
| | 10.1 |
|
Provision for income taxes | 47.8 |
| | 1.9 |
| | 48.3 |
| | 2.0 |
|
Net income | $ | 239.2 |
| | 9.7 | % | | $ | 195.9 |
| | 8.1 | % |
Net revenue
Net revenue for the ninesix months ended SeptemberJune 30, 2017 increased $52.3 million, or 2.2%,2023, R&D expense decreased from the prior period, primarily due to $2,466.2 million from $2,413.9 million for(1) lower costs as a result of repositioning actions taken in fiscal year 2022 and (2) the nine months ended September 30, 2016. This increase in net revenue was composedfavorable effect of a 1.6% increase in Performance Sensing and 3.9% increase in Sensing Solutions. Excluding a 1.4% decline due to changes in foreign currency exchange rates, particularly related to the Euro and Chinese Renminbi, organic revenue growth was 3.6% when compared to the nine months ended September 30, 2016. Organic revenue growth is a non-GAAP financial measure. Refer to the section entitled Non-GAAP Financial Measures for further information on our use of this measure.
Performance Sensing net revenue for the nine months ended September 30, 2017 increased $28.5 million, or 1.6%, to $1,825.9 million from $1,797.4 million for the nine months ended September 30, 2016. Excluding a 1.6% decline due to changes in foreign currency exchange rates, particularly related to the Euro and Chinese Renminbi, organic revenue growth was 3.2% when compared to the nine months ended September 30, 2016. This organic revenue growth was primarily drivenpartially offset by our HVOR business, primarily as a result of content growth in the construction and agriculture markets, as well as the on-road truck markets in North America and China. In addition, we believe that the major end-markets within HVOR have been recovering, including the North American Class 8 truck market, which has been particularly weak in prior quarters and
represents a significant part of our HVOR business. Our automotive end-markets in Asia, primarily in China, experienced growth from both content and an expanding market.
Sensing Solutions net revenue for the nine months ended September 30, 2017 increased $23.8 million, or 3.9%, to $640.3 million from $616.5 million for the nine months ended September 30, 2016. Excluding a 0.7% decline due to changes in foreign currency exchange rates, particularly related to the Chinese Renminbi, organic revenue growth was 4.6% when compared to the nine months ended September 30, 2016. The organic revenue growth was primarily due to market strength across all of our key end-markets, particularly in China, as well as content growth in our HVAC and industrial markets.
Cost of revenue
Cost of revenue for the nine months ended September 30, 2017 and 2016 was $1,601.2 million (64.9% of net revenue) and $1,574.8 million (65.2% of net revenue), respectively.
Research and development expense
R&D expense for the nine months ended September 30, 2017 and 2016 was $97.0 million and $95.2 million, respectively. We invest in R&Dhigher spend to support new platform and technology developments, both in our recently acquired and existing businesses, in order to drive future revenue growth. The level of R&D expense is related to the number of products in development, the stage of such products in the development process, the complexity of the underlying technology, the potential scale of the product upon successful commercialization, and the level of our exploratory research.increased revenue.
Selling, general and administrative expense
For the three months ended June 30, 2023, selling, general and administrative ("SG&A") expense decreased from the prior period, primarily as a result of (1) cost savings as a result of repositioning actions taken in fiscal year 2022, and (2) lower transaction costs as a result of reduced mergers and acquisitions activity, partially offset by (1) increased SG&A expense for the nine months ended September 30, 2017from our acquisitions (net of divestitures) and 2016 was $227.3 million(2) increased share-based compensation expense. Refer to Note 15: Acquisitions and $224.6 million, respectively. SG&A expense consists of all expenditures incurred in connection with the salesDivestitures and marketingNote 4: Share-Based Payment Plans of our products, as well as administrative overhead costs. These costs are fixed or variable in nature, and we may at times experience increased or decreased variable costs for reasons other than increased or decreased net revenue. As a result, SG&A expense will not necessarily remain consistent as a percentage of revenue.
Amortization of intangible assets
Amortization expense associated with definite-lived intangible assets for the nine months ended September 30, 2017 and 2016 was $121.6 million and $151.6 million, respectively. Definite-lived intangible assets are amortized on an economic benefit basis according to the useful lives of the assets, or on a straight-line basis if a pattern of economic benefits cannot be reliably determined. In general, the economic benefit of an intangible asset is concentrated towards the beginning of that intangible asset's useful life. Amortization expense decreased as certain intangible assets, primarily related to the Sensors & Controls and High Temperature Sensing acquisitions in 2006 and 2011, respectively, are at, or are nearing, the end of their useful lives.
Restructuring and special charges
Restructuring and special charges for the nine months ended September 30, 2017 and 2016 were $18.8 million and $3.2 million, respectively. The restructuring and special charges for the nine months ended September 30, 2017 consisted primarily of severance charges of $8.4 million and facility exit costs of $2.4 million recorded in connection with the closing of our facility in Minden, Germany that was part of the acquisition of CST, facility exit costs related to a limited number of other line moves and exit activities, and severance costs related to the termination of a limited number of employees. The restructuring and special charges for the nine months ended September 30, 2016 consisted primarily of facility exit costs related to the relocation of manufacturing lines from our facility in the Dominican Republic to a manufacturing facility in Mexico, and severance charges recorded in connection with acquired businesses and the termination of a limited number of employees. We completed the cessation of manufacturing in our Dominican Republic facility in the third quarter of 2016.
Interest expense, net
Interest expense, net for the nine months ended September 30, 2017 and 2016 was $120.6 million and $125.2 million, respectively.
Other, net
Other, net for the nine months ended September 30, 2017 and 2016 represented net gains of $7.2 million and $4.9 million, respectively. The change in Other, net relates to fluctuations in foreign currency exchange rates net of any offsetting hedge gain or loss and fluctuations in commodity prices relative to the strike prices on outstanding forward contracts. Refer to Note 13,
"Other, Net," of ourunaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information regarding acquired businesses and share-based compensation.
For the six months ended June 30, 2023, SG&A expense decreased from the prior period, primarily as a detailresult of (1) cost savings as a result of repositioning actions taken in fiscal year 2022, (2) lower transaction costs as a result of reduced mergers and acquisitions activity, and (3) the favorable effect of changes in foreign currency exchange rates, partially offset by increased SG&A expense from our acquisitions (net of divestitures).
Amortization of intangible assets
For the three and six months ended June 30, 2023, amortization of intangible assets increased from the prior period, primarily due to (1) a charge of $13.5 million for accelerated amortization of intangible assets as a result of our exit from the Marine Business and (2) increased amortization due to newly acquired intangible assets. Refer to Note 5: Restructuring and Other Charges, Net, of our unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional details regarding the charges regarding the exit of the Marine Business.
Restructuring and other charges, net
For the three months ended June 30, 2023, restructuring and other charges, net increased from the prior period, primarily due to (1) charges incurred as a result of our exit from the Marine Business and (2) an increase in severance charges that were not the result of initiation of a larger restructuring plan, partially offset by lower acquisition-related deferred compensation. Refer to Note 5: Restructuring and Other Charges, Net of our unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information regarding the components of restructuring and other charges, net, including the exit of the Marine Business.
For the six months ended June 30, 2023, restructuring and other charges, net increased slightly from the prior period, as negative factors such as (1) charges incurred as a result of our exit from the Marine Business, (2) the non-recurrence of a gain recognized in the first quarter of 2022 related to the reduction of the liability for contingent consideration for Spear, and (3) an increase in severance charges that were not the result of initiation of a larger restructuring plan, were largely offset by positive factors such as (1) a reduction in expense for acquisition-related compensation arrangements and (2) the gain on sale of a business in the first quarter of 2023.
Operating income
For the three months ended June 30, 2023, operating income decreased compared to the prior period, primarily due to (1) $38.3 million of charges incurred as a result of our exit from the Marine Business, (2) the unfavorable effect of changes in foreign currency exchange rates, (3) the dilutive impact of acquisitions and divestitures, and (4) unfavorable product mix, partially offset by (1) the net impacts of pricing recoveries, inflation, and volume leverage, (2) cost savings as a result of repositioning actions taken in fiscal year 2022, and (3) lower acquisition-related deferred compensation.
For the six months ended June 30, 2023, operating income increased compared to the prior period, primarily due to (1) the net impacts of pricing recoveries, inflation, and volume leverage, (2) cost savings as a result of repositioning actions taken in fiscal year 2022, (3) lower acquisition-related deferred compensation, and (4) the gain on the sale of a business in the first quarter of 2023. These drivers were partially offset by (1) $38.3 million of charges incurred as a result of our exit from the Marine Business, (2) the dilutive impact of acquisitions and divestitures, (3) the unfavorable effect of changes in foreign currency exchange rates, (4) unfavorable product mix, (5) the impact of the non-recurrence of a gain recognized in the first quarter of 2022 related to the reduction of the liability for contingent consideration for Spear, and (6) an increase in severance charges that were not the result of initiation of a larger restructuring plan.
Interest expense, net
For the three months ended June 30, 2023, interest expense, net decreased $6.7 million from the prior period, primarily due to (1) increased interest income as a result of increasing interest rates and (2) lower interest expense on the Term Loan due to the early payment on the Term Loan in the first and second quarters of 2023, partially offset by increased interest expense due to the net impact of the early redemption of the 4.875% Senior Notes and the issuance of the 5.875% Senior Notes in the third quarter of 2022. Refer to Note 14: Debt of the audited consolidated financial statements and notes thereto included in the 2022 Annual Report and Note 10: Debt, of our unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information regarding these debt transactions.
For the six months ended June 30, 2023, interest expense, net decreased $12.1 million from the prior period, primarily due to increased interest income as a result of increasing interest rates, partially offset by increased interest expense due to the net impact of the early redemption of the 4.875% Senior Notes and the issuance of the 5.875% Senior Notes in the third quarter of 2022.
Other, net
Other, net primarily includes currency remeasurement gains and losses on net monetary assets, gains and losses on foreign currency and commodity forward contracts not designated as hedging instruments, mark-to-market gains and losses on investments, losses related to debt refinancing, and the portion of our net periodic benefit cost excluding service cost. Refer to Note 6: Other, Net of our unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for more details regarding the components of other, net.
For the three months ended June 30, 2023, other, net represented a net loss of $10.9 million, a favorable impact on earnings of $28.3 million compared to a net loss of $39.2 million in the prior period. This favorable impact was primarily due to (1) the non-recurrence of mark-to-market losses on equity investments, primarily our investment in Quanergy Systems Inc. ("Quanergy"), in the second quarter of 2022, (2) lower losses on commodity forward contracts, and (3) lower currency remeasurement loss on net monetary assets.
For the six months ended June 30, 2023, other, net represented a net loss of $9.5 million, a favorable impact on earnings of $80.2 million compared to a net loss of $89.7 million in the prior period. This was largely due to (1) the non-recurrence of mark-to-market losses on equity investments, primarily our investment in Quanergy, in the six months ended June 30, 2022, (2) the combined impact of lower currency remeasurement loss on net monetary assets and higher gains on foreign currency forward contracts, and (3) lower losses on commodity forward contracts.
Provision for income taxes
Provision for income taxes for the nine months ended September 30, 2017 and 2016 was $47.8 million and $48.3 million, respectively. The provision for income taxes consists of (1) current tax expense, which relates primarily to our profitable operations in non-U.S. tax jurisdictions with limited or no net operating loss carryforwards and withholding taxes on interestrelated to management fees, royalties, and royalty income,the repatriation of foreign earnings; and (2) deferred tax expense (or benefit), which relates torepresents adjustments in book-to-tax basis differences primarily related to the step-up(a) book versus tax basis in fair value of fixed and intangible assets, including goodwill, acquired(b) changes in connection with business combination transactions, and the utilization of net operating losses.loss carryforwards, and (c) changes in withholding taxes on unremitted earnings. Other items impacting deferred tax expense include changes in tax rates and changes in our assessment of the realizability of our deferred tax assets.
The change inFor the three months ended June 30, 2023, the provision for income taxes was primarilydecreased $0.1 million from the prior period, predominantly due to a changethe inability to benefit the 2022 mark-to-market loss on our investment in Quanergy.
For the amount and distribution ofsix months ended June 30, 2023, the provision for income recorded in various jurisdictions,taxes increased $16.0 million from the impact of changes in foreign currency exchange rates, and a change in our U.S. valuation allowance associated with the acquisition of certain subsidiaries of CST, for which deferred tax liabilities were established related primarilyprior period, predominantly due to the step-up of tangible assets for book purposes, for which we recorded aincrease in profit before tax and the inability to benefit from income taxes of $3.7 million during the nine months ended September 30, 2016.2022 mark-to-market loss on our investment in Quanergy.
Non-GAAP Financial Measures
This Quarterly Report on Form 10-Q includes references tosection provides additional information regarding certain non-GAAP financial measures, including organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted earnings per share ("EPS"), free cash flow, net leverage ratio, and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"), which is aare used by our management, Board of Directors, and investors. We use these non-GAAP financial measure. measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance, and as a factor in determining compensation for certain employees.
The use of our non-GAAP financial measures has limitations. They should be considered as supplemental in nature and are not intended to be considered in isolation from, or as an alternative to, reported net revenue growth (or decline), operating income, operating margin, net income, diluted EPS, net cash provided by operating activities, or total debt, finance lease and other financing obligations, respectively, calculated in accordance with U.S. GAAP. In addition, our measures of organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted EPS, free cash flow, net leverage ratio, and adjusted EBITDA may not be the same as, or comparable to, similar non-GAAP financial measures presented by other companies.
Organic revenue growth (or decline) and market outgrowth
Organic revenue growth (or decline) is defined as the reported percentage change in net revenue, calculated in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"),GAAP, excluding the period-over-period impact of acquisitions, net of exited businesses that occurred within the previous 12 months and the effect of differences in foreign currency exchange rates betweenrate differences as well as the currentnet impact of material acquisitions and prior period.divestitures for the 12-month period following the respective transaction date(s).
We believe that organic revenue growth (or decline) provides investors with helpful information with respect to our operating performance, and we use organic revenue growth (or decline) to evaluate our ongoing operations andas well as for internal planning and forecasting purposes. We believe that organic revenue growth (or decline) provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior yearprior-year period.
However,Market outgrowth is calculated as organic revenue growth should be consideredless our weighted market growth. Our weighted market growth is calculated using our regional and platform sales mix, as supplementalapplicable, in naturethe corresponding prior period. Market outgrowth is used to describe the impact of an increasing quantity and value of our products used in customer systems and applications above market growth. We believe this provides a more meaningful comparison of our revenue growth relative to the markets we serve.
Adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS
We define adjusted operating income as operating income, determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described under the heading Non-GAAP Adjustments below. Adjusted operating margin is not intended to be considered in isolation or as a substitute forcalculated by dividing adjusted operating income by net revenue growth prepareddetermined in accordance with U.S. GAAP. In addition, our measureWe define adjusted net income as follows: net income (or loss) determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described under the heading Non-GAAP Adjustments below. Adjusted EPS is calculated by dividing adjusted net income by the number of organic revenue growthdiluted weighted-average ordinary shares outstanding in the period.
We may not bealso refer to certain of these measures, or changes in these measures, on a constant currency basis. Adjusted operating margin calculated on a constant currency basis is determined by stating revenues and expenses at prior period foreign currency exchange rates and excludes the impact of foreign currency exchange rates on all hedges. Adjusted EPS on a constant currency basis is determined in the same manner as adjusted operating margin, but also excludes the change in gain or comparableloss on the remeasurement of monetary assets and liabilities.
Management uses adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS (and the constant currency equivalent of each) as measures of operating performance, for planning purposes (including the preparation of our annual operating budget), to similarallocate resources to enhance the financial performance of our business, to evaluate the effectiveness of our business strategies, in communications with our Board of Directors and investors concerning our financial performance, and as factors in determining compensation for certain employees. We believe investors and securities analysts also use these non-GAAP financial measures in their evaluation of our performance and the performance of other similar companies. These non-GAAP financial measures are not measures of liquidity.
Free cash flow
Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software. We believe free cash flow is useful to management and investors as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to, among other things, fund acquisitions, repurchase ordinary shares, and (or) accelerate the repayment of debt obligations.
Adjusted EBITDA
Adjusted EBITDA is defined as net income (or loss), determined in accordance with U.S. GAAP, excluding interest expense, net, provision for (or benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable: (1) restructuring related and other, (2) financing and other transaction costs, and (3) deferred loss or gain on derivative instruments. Refer to Non-GAAP Adjustments below for additional discussion of these adjustments. We believe that this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.
Net leverage ratio
Net leverage ratio represents net debt (total debt, finance lease and other financing obligations less cash and cash equivalents) divided by last twelve months ("LTM") adjusted EBITDA. We believe that the net leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.
Non-GAAP adjustments
Many of our non-GAAP adjustments relate to a series of strategic initiatives developed by our management aimed at better positioning us for future revenue growth and an improved cost structure. These initiatives have been modified from time to time to reflect changes in overall market conditions and the competitive environment facing our business. These initiatives include, among other items, acquisitions, divestitures, restructurings of certain business, supply chain or corporate activities, and various financing transactions. We describe these adjustments in more detail below, each of which is net of current tax impacts, as applicable.
•Restructuring related and other: includes net charges related to certain restructuring and other exit activities as well as other costs (or income) that we believe are either unique or unusual to the identified reporting period, and that we believe impact comparisons to prior period operating results. Such costs include charges related to optimization of our manufacturing processes to increase productivity. This type of activity occurs periodically, however each action is unique, discrete, and driven by various facts and circumstances. Such amounts are excluded from internal financial statements and analyses that management uses in connection with financial planning and in its review and assessment of our operating and financial performance, including the performance of our segments.
•Financing and other transaction costs: includes losses or gains related to debt financing transactions, losses or gains related to the divestiture of a business, costs incurred, including for legal, accounting, and other professional services, that are directly related to an acquisition, divestiture, or equity financing transaction, mark-to-market losses or gains on our equity investments, expenses related to compensation arrangements entered into concurrent with the closing of an acquisition, and gains related to changes in the fair value of acquisition-related contingent consideration amounts.
•Deferred loss or gain on derivative instruments: includes unrealized losses or gains on derivative instruments that do not qualify for hedge accounting as well as the impact of commodity prices on our raw material costs relative to the strike price on our commodity forward contracts.
•Step-up depreciation and amortization: includes depreciation expense associated with the step-up in fair value of assets acquired in connection with a business combination (e.g., property, plant and equipment and inventories) and amortization of intangible assets.
•Deferred taxes and other tax related: includes adjustments for book-to-tax basis differences due primarily to the step-up in fair value of fixed and intangible assets and goodwill, the utilization of net operating losses, and adjustments to our valuation allowance in connection with certain acquisitions and tax law changes. Other tax related items include certain adjustments to unrecognized tax benefits and withholding tax on repatriation of foreign earnings.
•Amortization of debt issuance costs:represents interest expense related to the amortization of deferred financing costs as well as debt discounts, net of premiums.
•Where applicable, the current income tax effect of non-GAAP adjustments.
Our definition of adjusted net income excludes the deferred provision for (or benefit from) income taxes and other tax related items described above. As we treat deferred income taxes as an adjustment to compute adjusted net income, the deferred income tax effect associated with the reconciling items presented below would not change adjusted net income for any period presented.
Non-GAAP reconciliations
The following tables present reconciliations of certain financial measures calculated in accordance with U.S. GAAP to the related non-GAAP financial measures for the three months ended June 30, 2023 and 2022. Refer to the Non-GAAP Adjustments section above for additional information regarding these adjustments. Amounts and percentages in the tables below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended June 30, 2023 | | |
(Dollars in millions, except per share amounts) | | Operating Income | | Operating Margin | | Income Taxes | | Net Income | | Diluted EPS | | | | | | | | |
Reported (GAAP) | | $ | 118.0 | | | 11.1 | % | | $ | 19.9 | | | $ | 49.1 | | | $ | 0.32 | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | | | | | | | |
Restructuring related and other | | 31.1 | | | 2.9 | | | (0.6) | | | 30.4 | | | 0.20 | | | | | | | | | |
Financing and other transaction costs | | 4.3 | | | 0.4 | | | (0.1) | | | 3.9 | | | 0.03 | | | | | | | | | |
Step-up depreciation and amortization | | 53.3 | | | 5.0 | | | — | | | 53.3 | | | 0.35 | | | | | | | | | |
Deferred (gain)/loss on derivative instruments | | (0.9) | | | (0.1) | | | (1.1) | | | 4.2 | | | 0.03 | | | | | | | | | |
Amortization of debt issuance costs | | — | | | — | | | — | | | 1.7 | | | 0.01 | | | | | | | | | |
Deferred taxes and other tax related | | — | | | — | | | 6.4 | | | 6.4 | | | 0.04 | | | | | | | | | |
Total adjustments | | 87.7 | | | 8.3 | | | 4.6 | | | 100.0 | | | 0.65 | | | | | | | | | |
Adjusted (non-GAAP) | | $ | 205.7 | | | 19.4 | % | | $ | 15.3 | | | $ | 149.2 | | | $ | 0.97 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | For the three months ended June 30, 2022 |
(Dollars in millions, except per share amounts) | | | | | | | | | | Operating Income | | Operating Margin | | Income Taxes | | Net Income | | Diluted EPS |
Reported (GAAP) | | | | | | | | | | $ | 138.9 | | | 13.6 | % | | $ | 20.0 | | | $ | 34.8 | | | $ | 0.22 | |
Non-GAAP adjustments: | | | | | | | | | | | | | | | | | | |
Restructuring related and other | | | | | | | | | | 3.9 | | | 0.4 | | | 0.0 | | | 4.3 | | | 0.03 | |
Financing and other transaction costs | | | | | | | | | | 14.4 | | | 1.4 | | | (0.5) | | | 28.3 | | | 0.18 | |
Step-up depreciation and amortization | | | | | | | | | | 35.3 | | | 3.5 | | | — | | | 35.3 | | | 0.22 | |
Deferred loss on derivative instruments | | | | | | | | | | 1.2 | | | 0.1 | | | (4.0) | | | 15.4 | | | 0.10 | |
Amortization of debt issuance costs | | | | | | | | | | — | | | — | | | — | | | 1.7 | | | 0.01 | |
Deferred taxes and other tax related | | | | | | | | | | — | | | — | | | 9.7 | | | 9.7 | | | 0.06 | |
Total adjustments | | | | | | | | | | 54.8 | | | 5.4 | | | 5.2 | | | 94.7 | | | 0.60 | |
Adjusted (non-GAAP) | | | | | | | | | | $ | 193.8 | | | 19.0 | % | | $ | 14.9 | | | $ | 129.5 | | | $ | 0.83 | |
The following tables present reconciliations of certain financial measures calculated in accordance with U.S. GAAP to the related non-GAAP financial measures for the six months ended June 30, 2023 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the six months ended June 30, 2023 | | |
(Dollars in millions, except per share amounts) | | Operating Income | | Operating Margin | | Income Taxes | | Net Income | | Diluted EPS | | | | | | | | |
Reported (GAAP) | | $ | 266.9 | | | 13.0 | % | | $ | 43.6 | | | $ | 135.5 | | | $ | 0.88 | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | | | | | | | |
Restructuring related and other | | 34.0 | | | 1.7 | | | (1.3) | | | 32.7 | | | 0.21 | | | | | | | | | |
Financing and other transaction costs | | 8.5 | | | 0.4 | | | 2.8 | | | 11.5 | | | 0.08 | | | | | | | | | |
Step-up depreciation and amortization | | 92.5 | | | 4.5 | | | — | | | 92.5 | | | 0.60 | | | | | | | | | |
Deferred (gain)/loss on derivative instruments | | (3.2) | | | (0.2) | | | (0.2) | | | 0.9 | | | 0.01 | | | | | | | | | |
Amortization of debt issuance costs | | — | | | — | | | — | | | 3.4 | | | 0.02 | | | | | | | | | |
Deferred taxes and other tax related | | — | | | — | | | 13.2 | | | 13.2 | | | 0.09 | | | | | | | | | |
Total adjustments | | 131.8 | | | 6.4 | | | 14.5 | | | 154.3 | | | 1.01 | | | | | | | | | |
Adjusted (non-GAAP) | | $ | 398.6 | | | 19.3 | % | | $ | 29.1 | | | $ | 289.8 | | | $ | 1.89 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | For the six months ended June 30, 2022 |
(Dollars in millions, except per share amounts) | | | | | | | | | | Operating Income | | Operating Margin | | Income Taxes | | Net Income | | Diluted EPS |
Reported (GAAP) | | | | | | | | | | $ | 264.9 | | | 13.3 | % | | $ | 27.6 | | | $ | 57.3 | | | $ | 0.36 | |
Non-GAAP adjustments: | | | | | | | | | | | | | | | | | | |
Restructuring related and other | | | | | | | | | | 8.0 | | | 0.4 | | | (0.1) | | | 8.3 | | | 0.05 | |
Financing and other transaction costs | | | | | | | | | | 30.3 | | | 1.5 | | | (1.0) | | | 102.8 | | | 0.65 | |
Step-up depreciation and amortization | | | | | | | | | | 71.3 | | | 3.6 | | | — | | | 71.3 | | | 0.45 | |
Deferred loss on derivative instruments | | | | | | | | | | 1.8 | | | 0.1 | | | (2.2) | | | 8.5 | | | 0.05 | |
Amortization of debt issuance costs | | | | | | | | | | — | | | — | | | — | | | 3.4 | | | 0.02 | |
Deferred taxes and other tax related | | | | | | | | | | — | | | — | | | 1.3 | | | 1.3 | | | 0.01 | |
Total adjustments | | | | | | | | | | 111.4 | | | 5.6 | | | (2.0) | | | 195.7 | | | 1.24 | |
Adjusted (non-GAAP) | | | | | | | | | | $ | 376.3 | | | 18.8 | % | | $ | 29.6 | | | $ | 253.0 | | | $ | 1.60 | |
The following table provides a reconciliation of net cash provided by operating activities in accordance with U.S. GAAP to free cash flow.
| | | | | | | | | | | | | | | | |
| | For the six months ended June 30, |
(In millions) | | 2023 | | 2022 | | |
Net cash provided by operating activities (GAAP) | | $ | 212.6 | | | $ | 141.9 | | | |
Additions to property, plant and equipment and capitalized software | | (84.4) | | | (74.1) | | | |
Free cash flow (non-GAAP) | | $ | 128.2 | | | $ | 67.8 | | | |
The following table provides a reconciliation of corporate and other companies.expenses in accordance with U.S. GAAP to adjusted corporate and other expenses.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended June 30, | | For the six months ended June 30, |
(In millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Corporate and other expenses (GAAP) | | $ | (81.5) | | | $ | (76.4) | | | $ | (143.9) | | | $ | (152.5) | |
Restructuring related and other | | 13.1 | | | 2.6 | | | 11.7 | | | 5.2 | |
Financing and other transaction costs | | 1.0 | | | 2.8 | | | 3.6 | | | 6.5 | |
Step-up depreciation and amortization | | 0.3 | | | 0.3 | | | 0.3 | | | 0.6 | |
Deferred (gain)/loss on derivative instruments | | (0.9) | | | 1.2 | | | (3.2) | | | 1.8 | |
Total adjustments | | 13.4 | | | 6.9 | | | 12.4 | | | 14.1 | |
Adjusted corporate and other expenses (non-GAAP) | | $ | (68.1) | | | $ | (69.4) | | | $ | (131.5) | | | $ | (138.4) | |
The following table provides a reconciliation of net income in accordance with U.S. GAAP to Adjusted EBITDA.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | For the three months ended June 30, | | For the six months ended June 30, |
(In millions) | | LTM | | 2023 | | 2022 | | 2023 | | 2022 |
Net income | | $ | 388.9 | | | $ | 49.1 | | | $ | 34.8 | | | $ | 135.5 | | | $ | 57.3 | |
Interest expense, net | | 166.7 | | | 38.1 | | | 44.8 | | | 78.2 | | | 90.3 | |
Provision for income taxes | | 102.0 | | | 19.9 | | | 20.0 | | | 43.6 | | | 27.6 | |
Depreciation expense | | 127.9 | | | 32.6 | | | 31.4 | | | 63.6 | | | 62.9 | |
Amortization of intangible assets | | 175.0 | | | 54.6 | | | 36.8 | | | 95.3 | | | 74.2 | |
EBITDA | | 960.5 | | | 194.3 | | | 167.9 | | | 416.2 | | | 312.2 | |
Non-GAAP adjustments | | | | | | | | | | |
Restructuring related and other | | 63.6 | | | 31.1 | | | 4.3 | | | 34.0 | | | 8.5 | |
Financing and other transaction costs | | (87.6) | | | 4.0 | | | 28.7 | | | 8.8 | | | 103.8 | |
Deferred (gain)/loss on derivative instruments | | (7.6) | | | 5.3 | | | 19.4 | | | 1.2 | | | 10.7 | |
Adjusted EBITDA | | $ | 928.8 | | | $ | 234.7 | | | $ | 220.4 | | | $ | 460.2 | | | $ | 435.2 | |
The following table provides a reconciliation of total debt, finance lease and other financing obligations in accordance with U.S. GAAP to net leverage ratio.
| | | | | | | | | | | | | | | | |
(Dollars in millions) | | June 30, 2023 | | December 31, 2022 | | |
Current portion of long-term debt, finance lease and other financing obligations | | $ | 1.8 | | | $ | 256.5 | | | |
Finance lease and other financing obligations, less current portion | | 23.8 | | | 24.7 | | | |
Long-term debt, net | | 3,770.5 | | | 3,958.9 | | | |
Total debt, finance lease and other financing obligations | | 3,796.1 | | | 4,240.1 | | | |
Less: debt discount, net of premium | | (2.4) | | | (3.4) | | | |
Less: deferred financing costs | | (27.1) | | | (29.9) | | | |
Total gross indebtedness | | 3,825.6 | | | 4,273.4 | | | |
Less: cash and cash equivalents | | 857.3 | | | 1,225.5 | | | |
Net debt | | $ | 2,968.3 | | | $ | 3,047.9 | | | |
| | | | | | |
Adjusted EBITDA (LTM) | | $ | 928.8 | | | $ | 903.9 | | | |
Net leverage ratio | | 3.2 | | 3.4 | | |
Liquidity and Capital Resources
WeAs of June 30, 2023 and December 31, 2022, we held cash and cash equivalents of $613.0 million and $351.4 million at September 30, 2017 and December 31, 2016, respectively, of which $174.0 million and $37.8 million, respectively, was held in the Netherlands, $7.0 million and $5.7 million, respectively, was held by U.S. subsidiaries, and $432.0 million and $307.9 million, respectively, was held by other foreign subsidiaries. following regions:
| | | | | | | | | | | |
(In millions) | June 30, 2023 | | December 31, 2022 |
United Kingdom | $ | 11.7 | | | $ | 15.7 | |
United States | 13.8 | | | 16.1 | |
The Netherlands | 400.3 | | | 861.3 | |
China | 350.1 | | | 210.0 | |
Other | 81.4 | | | 122.5 | |
Total | $ | 857.3 | | | $ | 1,225.5 | |
The amount of cash and cash equivalents held in the Netherlands and in our U.S. and other foreign subsidiariesthese geographic regions fluctuates throughout the year due to a variety of factors, includingsuch as our use of intercompany loans and dividends and the timing of cash receipts and disbursements in the normal course of business. Our earnings are not considered to be permanently reinvested in certain jurisdictions in which they were earned. We recognize a deferred tax liability on these unremitted earnings to the extent the remittance of such earnings cannot be recovered in a tax-free manner.
In certain jurisdictions, our cash balances are subject to withholding taxes immediately upon withdrawal of funds to a different jurisdiction. In addition, in order to take advantage of incentive programs offered by various jurisdictions, including tax incentives, we are required to maintain minimum cash balances in these jurisdictions. The transfer of cash from these jurisdictions could result in loss of incentives or higher cash tax expense, but those impacts are not expected to be material.
Our cash and cash equivalents balances are held in the following significant currencies (amounts in the tables below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2023 |
(In millions) | USD | | EUR | | GBP | | CNY | | Other |
United Kingdom | $ | (1.8) | | | € | 0.0 | | | £ | 10.5 | | | ¥ | — | | | |
United States | 13.6 | | | 0.2 | | | — | | | — | | | |
The Netherlands | 385.4 | | | 12.4 | | | 1.0 | | | — | | | |
China | 134.8 | | | — | | | — | | | 1,557.6 | | | |
Other | 62.7 | | | 2.1 | | | 0.1 | | | — | | | |
Total | $ | 594.6 | | | € | 14.7 | | | £ | 11.6 | | | ¥ | 1,557.6 | | | |
USD Equivalent | | | $ | 16.0 | | | $ | 14.6 | | | $ | 215.3 | | | $ | 16.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2022 |
(In millions) | USD | | EUR | | GBP | | CNY | | Other |
United Kingdom | $ | 2.7 | | | € | 0.0 | | | £ | 10.7 | | | ¥ | — | | | |
United States | 16.1 | | | — | | | — | | | — | | | |
The Netherlands | 848.6 | | | 10.9 | | | 0.2 | | | — | | | |
China | 95.0 | | | — | | | — | | | 794.4 | | | |
Other | 99.9 | | | 2.3 | | | — | | | — | | | |
Total | $ | 1,062.3 | | | € | 13.2 | | | £ | 10.9 | | | ¥ | 794.4 | | | |
USD Equivalent | | | $ | 14.0 | | | $ | 13.2 | | | $ | 115.2 | | | $ | 20.8 | |
Cash Flows:
The table below summarizes our primary sources and uses of cash for the ninesix months ended SeptemberJune 30, 20172023 and 2016.2022. We have derived thethese summarized statements of cash flows from the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not addappear to recalculate due to the effect of rounding.
| | | | | | | | | | | |
| For the six months ended |
(In millions) | June 30, 2023 | | June 30, 2022 |
Net cash provided by/(used in): | | | |
Operating activities: | | | |
Net income adjusted for non-cash items | $ | 338.9 | | | $ | 300.1 | |
Changes in operating assets and liabilities, net | (117.8) | | | (143.2) | |
Cash operating activities | (8.4) | | | (15.0) | |
Operating activities | 212.6 | | | 141.9 | |
Investing activities | (65.8) | | | (129.8) | |
Financing activities | (515.0) | | | (162.5) | |
Net change | $ | (368.2) | | | $ | (150.4) | |
|
| | | | | | | |
| For the nine months ended |
(in millions) | September 30, 2017 | | September 30, 2016 |
Net cash provided by/(used in): | | | |
Operating activities: | | | |
Net income adjusted for non-cash items | $ | 480.0 |
| | $ | 462.6 |
|
Changes in operating assets and liabilities, net of effects of acquisitions | (107.7 | ) | | (66.2 | ) |
Operating activities | 372.3 |
| | 396.4 |
|
Investing activities | (97.7 | ) | | (139.1 | ) |
Financing activities | (13.1 | ) | | (299.6 | ) |
Net change | $ | 261.5 |
| | $ | (42.4 | ) |
Operating activities. Net cash provided by operating activities for the ninesix months ended SeptemberJune 30, 20172023 increased compared to the corresponding period of the prior year, primarily due to higher net income and 2016timing of supplier payments and customer receipts. The increase was $372.3 million and $396.4 million, respectively. The decrease in cash provided by operating activities relates primarily to a build up of inventory to support anticipated line moves, higher cash paid for interest, and higher cash paid related to severance obligations, partially offset by improved operating profitability. The higheradditional cash paid foron interest relatesof $15.2 million in the six months ended June 30, 2023 compared to the 6.25% Senior Notes, for which interest payments are due semi-annually on February 15 and August 15 of each year. The payment made on February 15, 2016 did not represent payment for a full six-month period, as the 6.25% Senior Notes were issued on November 27, 2015.prior period.
Investing activities. Net cash used in investing activities for the ninesix months ended SeptemberJune 30, 20172023 decreased compared to the corresponding period of the prior year, primarily due to (1) the fact that there were no acquisitions in the six months ended June 30, 2023 (compared to $49.0 million paid for Elastic M2M in the prior period) and 2016 was $97.7(2) we paid $0.4 million to invest in debt and $139.1equity securities (compared to $6.9 million respectively, which included $103.5 million and $94.6 million, respectively,in the prior period), partially offset by an increase in capital expenditures.expenditures of $10.4 million. In 2017,addition, we received cash proceeds of $19.0 million from the sale of businesses in the six months ended June 30, 2023. For fiscal year 2023, we anticipate capital expenditures of approximately $130$170.0 million to $150$180.0 million, which we expect to be fundedfund with net cash provided by operating activities. Net cash used in investing activities for the nine months ended September 30, 2016 also included an investmenton hand.
Financing activities. Net cash used in financing activities for the ninesix months ended SeptemberJune 30, 20172023 increased primarily due to (1) the early payment of the entire Term Loan balance made in the six months ended June 30, 2023 and 2016 was $13.1(2) an increase in cash paid to shareholders in the form of cash dividends of $17.9 million, and $299.6 million, respectively, which consisted primarilypartially offset by lower cash paid to repurchase ordinary shares as part of $14.5 million and $297.7 million, respectively, in payments on debt.our share repurchase program.
Indebtedness and Liquidity:Liquidity
Our liquidity requirements are significant due to our highly leveraged nature. As of SeptemberJune 30, 2017,2023, we had $3,313.6 million$3.8 billion in gross indebtedness, which includes capitalfinance lease and other financing obligations and excludes debt discounts, premiums, and deferred financing costs.
Capital Resources
Senior Secured Credit Facilities
27
A summary of our indebtedness as of September 30, 2017 is as follows:
|
| | | | | |
(in thousands) | Maturity Date | | September 30, 2017 |
Term Loan | October 14, 2021 | | $ | 927,794 |
|
4.875% Senior Notes | October 15, 2023 | | 500,000 |
|
5.625% Senior Notes | November 1, 2024 | | 400,000 |
|
5.0% Senior Notes | October 1, 2025 | | 700,000 |
|
6.25% Senior Notes | February 15, 2026 | | 750,000 |
|
Less: discount | | | (15,812 | ) |
Less: deferred financing costs | | | (29,971 | ) |
Less: current portion | | | (7,327 | ) |
Long-term debt, net | | | $ | 3,224,684 |
|
| | | |
Capital lease and other financing obligations | | | $ | 35,839 |
|
Less: current portion | | | (5,849 | ) |
Capital lease and other financing obligations, less current portion | | | $ | 29,990 |
|
As of September 30, 2017, there was $415.3 million of availability underthe Term Loan, the Revolving Credit Facility, netand incremental availability (the "Accordion") under which additional secured credit facilities could be issued under certain circumstances. In the six months ended June 30, 2023, we repaid the Term Loan balance in full.
Sources of $4.7 million in letters of credit. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of September 30, 2017, no amounts had been drawn against these outstanding letters of credit, which are scheduled to expire on various dates in 2017 and 2018.
Capital Resourcesliquidity
Our sources of liquidity include cash on hand, cash flows from operations, and available capacity under the Revolving Credit Facility. In addition, our senior secured credit facilities provide for incremental facilities (the "Accordion"),As of June 30, 2023, we had $746.1 million available under which additional term loans may be issued or the capacity of the Revolving Credit Facility, may be increased.net of $3.9 million of obligations in respect of outstanding letters of credit issued thereunder. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of SeptemberJune 30, 2017, $230.0 million remained available for issuance2023, no amounts had been drawn against these outstanding letters of credit. Availability under the Accordion.Accordion varies each period based on our attainment of certain financial metrics as set forth in the terms of the Credit Agreement and the indentures under which our senior notes were issued (the "Senior Notes Indentures"). As of June 30, 2023, availability under the Accordion was approximately $1.2 billion.
We believe, based on our current level of operations as reflected in our results of operations for the three and nine months ended September 30, 2017, and taking into consideration the restrictions and covenants discussed below,included in the Credit Agreement and Senior Notes Indentures, that thesethe sources of liquidity described above will be sufficient to fund our operations, capital expenditures, dividend payments, ordinary share repurchases, and debt service for at least the next twelve months. However, we cannot make assurances that our business will generate sufficient cash flows from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Further, our highly leveragedhighly-leveraged nature may limit our ability to procure additional financing in the future.
Our ability to raise additional financing, and our borrowing costs, may be impacted by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by certain credit metrics such as interest coverage and leverage ratios. As of October 23, 2017,July 21, 2023, Moody’s Investors Service’s corporate credit rating for Sensata Technologies B.V. ("STBV")STBV was Ba2 with a stable outlook, and Standard & Poor’s corporate credit rating for STBV was BB+ with a stable outlook. The Standard & Poor’s corporate credit rating represents an upgrade, effective on October 23, 2017, from the previous rating of BB with a positive outlook. Any future downgrades to STBV's credit ratings may increase our future borrowing costs but will not reduce availability under the Credit Agreement.
Restrictions and Covenants
The Credit Agreement provides that if our credit agreement datedsenior secured net leverage ratio exceeds a specified level, we are required to use a portion of our excess cash flow, as defined in the Credit Agreement, generated by operating, investing, or financing activities to prepay some or all of May 12, 2011 (as amended, the "Credit Agreement")outstanding borrowings under the Senior Secured Credit Facilities. The Credit Agreement also requires mandatory prepayments of the outstanding borrowings under the Senior Secured Credit Facilities upon certain asset dispositions and casualty events, in each case subject to certain reinvestment rights, and upon the incurrence of certain indebtedness (excluding any permitted indebtedness). These provisions were not triggered during the six months ended June 30, 2023.
The Credit Agreement and the indentures under which our senior notes were issuedSenior Notes Indentures contain restrictions and covenants that limit the ability of our wholly-owned subsidiary, STBV, and certain of its subsidiaries to, among other things, incur subsequent indebtedness, sell assets, make capital expenditures, pay dividends, and make other restricted payments. For a full discussion of these restrictions and covenants, refer to Part II, Item 7, "Management’s7: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources" included in our 2022 Annual Report on Form 10-K forReport. These restrictions and covenants, which are subject to important exceptions and qualifications set forth in the year ended December 31, 2016.
Credit Agreement and Senior Notes Indentures, were taken into consideration when we established our share repurchase programs and will be evaluated periodically with respect to future potential funding of those programs. As of SeptemberJune 30, 2017,2023, we believe we were in compliance with all covenants and default provisions under our credit arrangements.
Share repurchase programs
From time to time, our Board of Directors has authorized various share repurchase programs, which may be modified or terminated by our Board at any time. We currently have authorization for the January 2022 Program, under which approximately $199.4 million remained available as of June 30, 2023. In the six months ended June 30, 2023 and 2022, we repurchased 0.6 million and 2.8 million ordinary shares, respectively, under the January 2022 Program.
Dividends
In the second quarter of 2022, we began paying cash dividends of $0.11 per share to our shareholders. In the second quarter of 2023, we increased the dividends to $0.12 per share. In the six months ended June 30, 2023 and 2022, we paid aggregate cash dividends of $35.1 million and $17.2 million, respectively. On July 20, 2023, we announced that our Board of Directors approved a quarterly dividend of $0.12 per share, payable on August 23, 2023 to shareholders of record as of August 9, 2023.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (the "FASB")There are no recently issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which creates one Accounting Standards Codification ("ASC")
Topic (FASB ASC 606, Revenue from Contracts with Customers)accounting standards that replaceshave been adopted in the current guidance found in FASB ASC 605, Revenue Recognition, and various other revenue accounting standards for specialized transactions and industries. FASB ASU No. 2014-09 outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goodsperiod or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. FASB ASU No. 2014-09 may be applied using either a full retrospective approach, under which all years included in the financial statements will be presented under the revised guidance,adopted in future periods that have had or a modified retrospective approach, under which financial statements will be prepared under the revised guidance for the year of adoption, but not for prior years. Under the latter method, entities will recognize a cumulative catch-up adjustmentare expected to the opening balance of retained earnings at the effective date for contracts that still require performance by the entity.
In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date, which defers the effective date of FASB ASU No. 2014-09 by one year. FASB ASU No. 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. We have developed an implementation plan to adopt this new guidance. As part of this plan, we are currently assessing the impact of the new guidance on our financial position and results of operations. Based on our procedures performed to date, nothing has come to our attention that would indicate that the adoption of FASB ASU No. 2014-09 will have a material impact on our consolidated financial position or results of operations. However, we will continue to evaluate this assessment through the remainder of 2017. In addition, the adoption of FASB ASU No. 2014-09 requires new disclosures related to revenue recognition, which we are continuing to evaluate. We intend to adopt FASB ASU No. 2014-09 on January 1, 2018 using the modified retrospective transition method.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes new accounting and disclosure requirements for leases. FASB ASU No. 2016-02 requires lessees to classify most leases as either finance or operating leases and to initially recognize a lease liability and right-of-use asset. Entities may elect to account for certain short-term leases (with a term of 12 months or less) using a method similar to the current operating lease model. The statements of operations will include, for finance leases, separate recognition of interest on the lease liability and amortization of the right-of-use asset and for operating leases, a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis. At December 31, 2016, we were contractually obligated to make future payments of $69.8 million under our operating lease obligations in existence as of that date, primarily related to long-term facility leases. While we are in the early stages of our implementation process for FASB ASU No. 2016-02, and have not yet determined its impact on our consolidated financial statements, these leases would potentially be required to be presented on the balance sheet in accordance with the requirements of FASB ASU No. 2016-02. FASB ASU No. 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods, with early adoption permitted. FASB ASU No. 2016-02 must be applied using a modified retrospective approach, which requires recognition and measurement of leases at the beginning of the earliest period presented, with certain practical expedients available.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), which changes both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results, in order to better align an entity’s risk management activities and financial reporting for hedging relationships. The amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. FASB ASU No. 2017-12 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods, with early adoption permitted. We are still evaluating the impact that this guidance will have on our consolidated financial statements, and we have not yet determined whether we will early adopt FASB ASU No. 2017-12.
Critical Accounting Policies and Estimates
For a discussion of the critical accounting policies that require the use of significant judgments and estimates by management, refer to Part II, Item 7, "Management’s7: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" included in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016.Report.
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
There have been noItem 3.Quantitative and Qualitative Disclosures About Market Risk.
No significant changes to our market risk have occurred since December 31, 2016.2022. For a discussion of market riskrisks affecting us, refer to Part II, Item 7A—"7A: Quantitative and Qualitative Disclosures About Market Risk" included in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016.Report.
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Item 4. | Controls and Procedures. |
Item 4.Controls and Procedures.
The required certifications of our Chief Executive Officer, Chief Financial Officer, and Chief FinancialAccounting Officer are included as exhibits to this Quarterly Report on Form 10-Q. The disclosures set forth in this Item 4 contain information concerning the evaluation of our disclosure controls and procedures and changes in internal control over financial reporting referred to in these certifications. These certifications should be read in conjunction with this Item 4 for a more complete understanding of the matters covered by the certifications.
Evaluation of Disclosure Controls and Procedures
With the participation of our Chief Executive Officer, Chief Financial Officer, and Chief FinancialAccounting Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of SeptemberJune 30, 2017.2023. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S.United States Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of SeptemberJune 30, 2017,2023, our Chief Executive Officer, Chief Financial Officer, and Chief FinancialAccounting Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the ninethree months ended SeptemberJune 30, 20172023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
There are inherent limitations to the effectiveness of any system of internal control over financial reporting. Accordingly, even an effective system of internal control over financial reporting can only provide reasonable assurance with respect to financial statement preparation and presentation in accordance with U.S.United States generally accepted accounting principles. Our internal controls over financial reporting are subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may be inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time.
PART II—OTHER INFORMATION
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Item 1. | Legal Proceedings. |
As discussed in Part I, Item 3—"1.Legal Proceedings," in our Annual Report on Form 10-K for the year ended December 31, 2016, weProceedings.
We are regularly involved in a number of claims and litigation matters that arise in the ordinary course of business. Most of our litigation matters are third-party claims related to patent infringement allegations or for property damage allegedly caused by our products, but some involve allegations of personal injury or wrongful death. From time to time, we are also involved in disagreements with vendors and customers. Although it is not feasible to predict the outcome of these matters, based upon our experience and current information known to us, we do not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on our resultresults of operations, financial position, condition, and/or cash flows.
Item 1A.Risk Factors.
Information regarding risk factors appears in Part I, Item 1A—"1A: Risk Factors", included in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016.Report. There have been no material changes to the risk factors disclosed therein.
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
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Period | | Total Number of Shares Purchased (in shares) (1) | | Weighted-Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Programs (in millions) |
April 1 through April 30, 2023 | | 210,572 | | | $ | 50.02 | | | — | | | $ | 224.5 | |
May 1 through May 31, 2023 | | 323,381 | | | $ | 41.14 | | | 305,514 | | | $ | 211.9 | |
June 1 through June 30, 2023 | | 286,164 | | | $ | 44.16 | | | 284,382 | | | $ | 199.4 | |
Quarter total | | 820,117 | | | $ | 44.47 | | | 589,896 | | | $ | 199.4 | |
(1) The total number of ordinary shares purchased includes ordinary shares that were withheld upon the vesting of restricted securities to cover payment of employee withholding tax. These withholdings took place outside of a publicly announced repurchase plan. There were 210,572, 17,867, and 1,782 ordinary shares withheld in April 2023, May 2023, and June 2023, respectively, representing a total aggregate fair value of $11.3 million based on the closing price of our ordinary shares on the date of withholdings.
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Period | | Total Number of Shares Purchased (in shares) | | Weighted-Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Programs (in millions) |
July 1 through July 31, 2017 | | 2,117 |
| (1) | $ | 45.03 |
| | — |
| | $ | 250.0 |
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August 1 through August 31, 2017 | | — |
| | $ | — |
| | — |
| | $ | 250.0 |
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September 1 through September 30, 2017 | | — |
| | $ | — |
| | — |
| | $ | 250.0 |
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Total | | 2,117 |
| | $ | 45.03 |
| | — |
| | $ | 250.0 |
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(1)
| Pursuant to the "withhold to cover" method for collecting and paying withholding taxes for our employees upon the vesting of restricted securities, we withheld from certain employees the shares noted in the table above to cover such tax withholdings. These transactions took place outside of a publicly-announced repurchase plan. The weighted-average price per share listed in the above table is the weighted-average of the fair market prices at which we calculated the number of shares withheld to cover tax for the employees. |
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Item 3. | Defaults Upon Senior Securities. |
Item 3.Defaults Upon Senior Securities.
None.
Item 5.Other Information.
None.
Item 6.Exhibits.
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Item 6.Exhibit No. | Exhibits. |
Description |
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Exhibit No.3.1 | | Description |
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3.1 | | |
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4.1 | | |
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4.2 | | |
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4.3 | | |
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4.4 | | |
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31.1 | | |
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31.1 | | |
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31.2 | | |
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32.131.3 | | |
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32.1 | | |
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101 | | The following materials from the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements. |
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101.INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH | | Inline XBRL Taxonomy Extension Schema Document. * |
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101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. * |
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101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. * |
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101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. * |
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101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. * |
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104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
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___________________________
* Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: October 24, 2017
SENSATA TECHNOLOGIES HOLDING N.V.
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SENSATA TECHNOLOGIES HOLDING PLC |
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/s/ Martha SullivanJeff Cote |
(Martha Sullivan)Jeff Cote) President and Chief Executive Officer and President
(Principal Executive Officer) |
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/s/ Paul Vasington |
(Paul Vasington) Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
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/s/ Maria Freve |
(Maria Freve) Vice President and Chief Accounting Officer (Principal Accounting Officer) |
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