NATIONAL INSTRUMENTS CORP [NATI] Filings

10-Q 1 nati-20220630.htm 10-Q nati-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: June 30, 2022

☐ 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: 000-25426

NATIONAL INSTRUMENTS CORPORATION

(Exact name of registrant as specified in its charter)


Delaware						74-1871327
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

11500 North MoPac Expressway
Austin,						78759
Texas
(Address of principal executive offices)						(Zip code)

Registrant's telephone number, including area code: (512) 683-0100

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of exchange on which registered
Common Stock, $0.01 par value	NATI	Nasdaq Stock Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


Class			Outstanding at July 25, 2022
Common Stock, $0.01 par value			132,316,344

NATIONAL INSTRUMENTS CORPORATION

INDEX


PART I. FINANCIAL INFORMATION		Page No.

Item 1	Financial Statements:

	Condensed Consolidated Balance Sheets
	June 30, 2022 (unaudited) and December 31, 2021	3

	Condensed Consolidated Statements of Income
	(unaudited) for the three and six months ended June 30, 2022 and 2021	4

	Condensed Consolidated Statements of Comprehensive Income
	(unaudited) for the three and six months ended June 30, 2022 and 2021	5

	Condensed Consolidated Statements of Cash Flows
	(unaudited) for the six months ended June 30, 2022 and 2021	6

	Condensed Consolidated Statements of Stockholders' Equity
	(unaudited) for the three and six months ended June 30, 2022 and 2021	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3	Quantitative and Qualitative Disclosures about Market Risk	51

Item 4	Controls and Procedures	52


PART II. OTHER INFORMATION

Item 1	Legal Proceedings	52

Item 1A	Risk Factors	52

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3	Defaults Upon Senior Securities	54

Item 4	Mine Safety Disclosures	54

Item 5	Other Information	54

Item 6	Exhibits	55

	Signatures and Certifications	56

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NATIONAL INSTRUMENTS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	June 30,		December 31,
	2022		2021
Assets	(unaudited)
Cash and cash equivalents	$	110,873	$	211,106

Accounts receivable, net	356,077		341,275
Inventories, net	343,627		289,243
Prepaid expenses and other current assets	122,361		89,925
Total current assets	932,938		931,549
Property and equipment, net	258,155		253,668
Goodwill	603,793		575,992
Intangible assets, net	237,059		220,418
Operating lease right-of-use assets	64,476		58,641

Other long-term assets	71,435		74,717
Total assets	$	2,167,856	$	2,114,985
Liabilities and stockholders' equity
Accounts payable and accrued expenses	$	91,227	$	83,218
Accrued compensation	50,199		111,261
Deferred revenue - current	122,029		137,818
Operating lease liabilities - current	14,813		13,137
Other taxes payable	51,958		59,109

Other current liabilities	44,148		40,671
Total current liabilities	374,374		445,214

Deferred income taxes	16,575		14,249
Income tax payable - non-current	40,646		54,195
Deferred revenue - non-current	42,943		32,822
Operating lease liabilities - non-current	34,520		30,468
Debt, non-current	475,000		300,000
Other long-term liabilities	15,291		14,340
Total liabilities	999,349		891,288
Commitments and contingencies
Stockholders' equity:
Preferred stock: par value $0.01; 5,000,000 shares authorized; none issued and outstanding	—		—
Common stock: par value $0.01; 360,000,000 shares authorized; 132,316,344 shares and 132,293,898 shares issued and outstanding, respectively	1,323		1,323
Additional paid-in capital	1,173,131		1,129,647
Retained earnings	21,533		112,858
Accumulated other comprehensive loss	(27,480)		(20,131)
Total stockholders’ equity	1,168,507		1,223,697
Total liabilities and stockholders’ equity	$	2,167,856	$	2,114,985

The accompanying notes are an integral part of the financial statements.

NATIONAL INSTRUMENTS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021

Net sales:
Product	$	354,805	$	306,490	$	698,489	$	601,583
Software maintenance	40,710		40,206		82,281		80,295
Total net sales	395,515		346,696		780,770		681,878

Cost of sales:
Product	123,307		95,722		238,332		187,379
Software maintenance	4,167		3,516		8,370		7,273
Total cost of sales	127,474		99,238		246,702		194,652

Gross profit	268,041		247,458		534,068		487,226

Operating expenses:
Sales and marketing	124,908		111,199		245,064		227,983
Research and development	85,589		81,434		167,750		161,520
General and administrative	36,772		30,277		69,949		63,636

Total operating expenses	247,269		222,910		482,763		453,139

Operating income	20,772		24,548		51,305		34,087

Other expense	(3,505)		(2,963)		(3,473)		(8,031)
Income before income taxes	17,267		21,585		47,832		26,056
Provision for income taxes	4,833		4,279		10,162		4,254

Net income	$	12,434	$	17,306	$	37,670	$	21,802

Basic earnings per share	$	0.09	$	0.13	$	0.29	$	0.17

Weighted average shares outstanding - basic	131,973		132,498		132,039		131,996

Diluted earnings per share	$	0.09	$	0.13	$	0.28	$	0.16

Weighted average shares outstanding - diluted	132,708		133,539		132,948		133,157

Dividends declared per share	$	0.28	$	0.27	$	0.56	$	0.54

The accompanying notes are an integral part of these financial statements.

NATIONAL INSTRUMENTS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021

Net income	$	12,434	$	17,306	$	37,670	$	21,802
Other comprehensive (loss) income, before tax and net of reclassification adjustments:
Foreign currency translation adjustment	(9,640)		2,284		8,027		(4,911)
Unrealized loss on securities available-for-sale	—		(54)		—		(141)
Unrealized gain (loss) on derivative instruments	6,161		2,381		(13,446)		14,362
Other comprehensive (loss) income, before tax	(3,479)		4,611		(5,419)		9,310
Tax expense related to items of other comprehensive income	1,507		498		1,930		3,259
Other comprehensive (loss) income, net of tax	(4,986)		4,113		(7,349)		6,051
Comprehensive income	$	7,448	$	21,419	$	30,321	$	27,853

The accompanying notes are an integral part of these financial statements.

NATIONAL INSTRUMENTS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended
	June 30,
	2022		2021
Cash flow from operating activities:
Net income	$	37,670	$	21,802
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization	45,742		50,024
Stock-based compensation	40,804		37,208
(Gain) loss from equity-method investees	(131)		5,360

Deferred income taxes	943		1,301
Changes in operating assets and liabilities	(169,930)		(63,372)
Net cash (used in) provided by operating activities	(44,902)		52,323

Cash flow from investing activities:
Acquisitions, net of cash received	(72,802)		(19,784)
Capital expenditures	(24,509)		(17,411)


Capitalization of internally developed software	(187)		(721)
Additions to other intangibles	(2,478)		(1,519)

Payments to acquire equity-method investments	—		(12,551)

Sales and maturities of short-term investments	—		45,671
Net cash used in investing activities	(99,976)		(6,315)

Cash flow from financing activities:
Proceeds from revolving line of credit	175,000		100,000



Payments on term loan	—		(98,750)
Debt issuance costs	—		(1,993)
Proceeds from issuance of common stock	17,859		17,239
Repurchase of common stock	(70,000)		—
Dividends paid	(74,034)		(71,428)
Net cash provided by (used in) financing activities	48,825		(54,932)

Effect of exchange rate changes on cash	(4,180)		(887)

Net change in cash and cash equivalents	(100,233)		(9,811)
Cash and cash equivalents at beginning of period	211,106		260,232
Cash and cash equivalents at end of period	$	110,873	$	250,421

The accompanying notes are an integral part of these financial statements.

NATIONAL INSTRUMENTS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data and per share data)

(unaudited)




	Common Stock Shares	Common Stock Amount		Additional-Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)		Total Stockholders' Equity
Balance at March 31, 2022	131,876,464	$	1,319	$	1,152,349	$	76,264	$	(22,494)	$	1,207,438
Net income	—	—		—		12,434		—		12,434
Other comprehensive loss, net of tax	—	—		—		—		(4,986)		(4,986)
Issuance of common stock under employee plans	1,426,756	14		8,601		—		—		8,615
Stock-based compensation	—	—		20,609		—		—		20,609

Repurchase of common stock	(986,876)	(10)		(8,428)		(30,107)		—		(38,545)


Dividends paid (1)	—	—		—		(37,058)		—		(37,058)
Balance at June 30, 2022	132,316,344	1,323		1,173,131		21,533		(27,480)		1,168,507

	Common Stock Shares	Common Stock Amount		Additional-Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balance at December 31, 2021	132,293,898	1,323		1,129,647		112,858		(20,131)		1,223,697
Net income	—	—		—		37,670		—		37,670
Other comprehensive loss, net of tax	—	—		—		—		(7,349)		(7,349)
Issuance of common stock under employee plans	1,781,374	18		17,841		—		—		17,859
Stock-based compensation	—	—		40,664		—		—		40,664

Repurchase of common stock	(1,758,928)	(18)		(15,021)		(54,961)		—		(70,000)


Dividends paid (1)	—	—		—		(74,034)		—		(74,034)
Balance at June 30, 2022	132,316,344	$	1,323	$	1,173,131	$	21,533	$	(27,480)	$	1,168,507

(1) Cash dividends declared per share of common stock were $0.28 for the three months ended June 30, 2022, and $0.56 for the six months ended June 30, 2022.

The accompanying notes are an integral part of these financial statements.




	Common Stock Shares	Common Stock Amount		Additional-Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)		Total Stockholders' Equity
Balance at March 31, 2021	131,607,036	$	1,316	$	1,059,018	$	180,063	$	(18,888)	$	1,221,509
Net income	—	—		—		17,306		—		17,306
Other comprehensive gain, net of tax	—	—		—		—		4,113		4,113
Issuance of common stock under employee plans	1,373,896	14		8,660		—		—		8,674
Stock-based compensation	—	—		19,944		—		—		19,944



Dividends paid (1)	—	—		—		(35,894)		—		(35,894)
Balance at June 30, 2021	132,980,932	1,330		1,087,622		161,475		(14,775)		1,235,652

	Common Stock Shares	Common Stock Amount		Additional-Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)		Total Stockholders' Equity
Balance at December 31, 2020	131,246,615	1,312		1,033,284		211,101		(20,826)		1,224,871
Net income	—	—		—		21,802		—		21,802
Other comprehensive gain, net of tax	—	—		—		—		6,051		6,051
Issuance of common stock under employee plans	1,734,317	18		17,221		—		—		17,239
Stock-based compensation	—	—		37,117		—		—		37,117



Dividends paid (1)	—	—		—		(71,428)		—		(71,428)
Balance at June 30, 2021	132,980,932	$	1,330	$	1,087,622	$	161,475	$	(14,775)	$	1,235,652

(1) Cash dividends declared per share of common stock were $0.27 for the three months ended June 30, 2021, and $0.54 for the six months ended June 30, 2021.

The accompanying notes are an integral part of these financial statements.

NATIONAL INSTRUMENTS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of presentation

The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 31, 2021, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 22, 2022 (the "Form 10-K"). In our opinion, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring items) considered necessary to state fairly our financial position at June 30, 2022 and December 31, 2021, the results of our operations and comprehensive income for the three and six months ended June 30, 2022 and 2021, our cash flows for the six months ended June 30, 2022 and 2021 and our statement of stockholders' equity for the three and six months ended June 30, 2022 and 2021. Our operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08—Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with ASC Topic 606 as if the acquirer had originated the contracts. We early adopted the standard on January 1, 2022. The adoption of this accounting standard update did not have a material effect on our consolidated financial statements and related disclosures.

In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-10 (“ASU 2021-10”), Government Assistance, to increase transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. ASU 2021-10 is effective for annual periods beginning after December 15, 2021. Early adoption is permitted. We are currently evaluating the impact of this accounting standard update on our annual financial statement disclosures.

Although there are several other accounting pronouncements recently issued by the FASB, we do not expect the adoption of any of these accounting pronouncements to have material impact on our consolidated financial statements.

Summary of Significant Accounting Policies

There were no material changes to our significant accounting policies during the three and six months ended June 30, 2022 compared to the significant accounting policies described in our Form 10-K.

Other (Expense) Income

Other (expense) income, net consisted of the following amounts:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	(Unaudited)				(Unaudited)
	2022		2021		2022		2021
Interest income	$	58	$	113	$	104	$	274
Interest expense	(2,500)		(1,224)		(3,792)		(1,927)
(Loss) gain from equity-method investments	(471)		(867)		131		(5,360)
Net foreign exchange loss	(769)		(896)		(1,935)		(1,455)
Other	177		(89)		2,019		437
Other expense, net	$	(3,505)	$	(2,963)	$	(3,473)	$	(8,031)

Other Current Liabilities

Other current liabilities on our consolidated balance sheet includes the following amounts (in thousands):


	As of June 30, 2022		As of December 31,
	(unaudited)		2021
Income taxes payable - current	$	11,071	$	14,457
Hedge payable - current	7,523		7,091
Payroll taxes - current	5,711		5,785
Other	19,843		13,338
Total	$	44,148	$	40,671

Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net income by the weighted average number of common shares and common share equivalents outstanding (if dilutive) during each period. The number of common share equivalents, which includes restricted stock units ("RSUs"), is computed using the treasury stock method.

The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the three and six months ended June 30, 2022 and 2021 are as follows (in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	(Unaudited)		(Unaudited)
	2022	2021	2022	2021
Weighted average shares outstanding-basic	131,973	132,498	132,039	131,996
Plus: Common share equivalents
RSUs	735	1,041	909	1,161
Weighted average shares outstanding-diluted	132,708	133,539	132,948	133,157

Shares issuable upon vesting of RSU awards of 2,026,000 shares and 1,369,000 shares for the three months ended June 30, 2022 and 2021, respectively, and 1,324,000 shares and 166,000 shares for the six months ended June 30, 2022 and 2021, respectively, were excluded in the computations of diluted EPS because the effect of including the stock awards would have been anti-dilutive.

Note 2 - Revenue

Revenue Recognition

Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of our products or services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Disaggregation of Revenues

We disaggregate revenue from contracts with customers based on the timing of transfer of goods or services to customers (point-in-time or over time), geographic region based on the billing location of the customer and customer industry grouping.

Total net sales based on the timing of transfer of goods or services to customers and geographic region are as follows:


			Three Months Ended June 30,
			(Unaudited)
	2022						2021
(In thousands)
Net sales:	Point-in-Time(1)		Over Time		Total		Point-in-Time(1)		Over Time		Total
Americas	$	134,337	$	26,080	$	160,417	$	112,215	$	22,455	$	134,670
EMEA	76,092		20,591		96,683		67,252		21,917		89,169
APAC	127,858		10,557		138,415		111,894		10,963		122,857
Total net sales(1)	$	338,287	$	57,228	$	395,515	$	291,361	$	55,335	$	346,696
(1) Net sales contains hedging gains and losses, which do not represent revenues recognized from customers. See Note 5 - Derivative instruments and hedging activities of Notes to Consolidated Financial Statements for more information on the impact of our hedging activities on our results of operations.


			Six Months Ended June 30,
			(Unaudited)
	2022						2021
(In thousands)
Net sales:	Point-in-Time(1)		Over Time		Total		Point-in-Time(1)		Over Time		Total
Americas	$	267,326	$	52,302	$	319,628	$	216,801	$	44,602	$	261,403
EMEA	155,331		41,720		197,051		132,355		42,336		174,691
APAC	242,853		21,238		264,091		224,524		21,260		245,784
Total net sales(1)	$	665,510	$	115,260	$	780,770	$	573,680	$	108,198	$	681,878
(1) Net sales contains hedging gains and losses, which do not represent revenues recognized from customers. See Note 5 - Derivative instruments and hedging activities of Notes to Consolidated Financial Statements for more information on the impact of our hedging activities on our results of operations.

The industry grouping used to disaggregate net sales is determined at the customer account level. Accounts assigned to one of our three industry-specific groupings are either designated as Semiconductor and Electronics, Transportation, or Aerospace, Defense and Government ("ADG"). We are able to leverage the investments in these areas to also serve a broad base of diverse customers in the other industries we serve, which are included in our Portfolio grouping. Our recent acquisitions described in Note 17 are presented within the "Transportation" industry grouping below.


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	(Unaudited)
Industry Grouping	2022		2021		2022		2021
Portfolio	$	113,239	$	111,283	$	239,822	$	223,635
Semiconductor & Electronics	116,231		99,292		219,241		198,222
Aerospace, Defense & Government	100,256		87,296		192,928		163,565
Transportation	65,789		48,825		128,779		96,456
Total net sales	$	395,515	$	346,696	$	780,770	$	681,878

Information about Contract Balances

Amounts collected in advance of services being provided are accounted for as deferred revenue. Nearly all of our deferred revenue balance is related to extended hardware and software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 90 days of contract inception. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers, such as invoicing at the beginning of a subscription term with a portion of the revenue recognized ratably over the contract period, or to provide customers with financing, such as multi-year on-premises licenses that are invoiced annually with revenue recognized upfront.

Changes in deferred revenue, current and non-current, during the six months ended June 30, 2022 were as follows:



(In thousands)	Amount
Balance as of December 31, 2021	$	170,640
Deferral of revenue billed in current period, net of recognition	94,592
Recognition of revenue deferred in prior periods	(93,219)

Foreign currency translation impact	(7,041)
Balance as of June 30, 2022 (unaudited)	$	164,972

For the six months ended June 30, 2022, revenue recognized from performance obligations satisfied in prior periods (for example, due to changes in transaction price) was not material. Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables. Unbilled receivables which are anticipated to be invoiced in the next twelve months are included in "Other current assets" on the consolidated balance sheet. Based on the nature of our contracts with customers, we do not typically recognize unbilled receivables related to revenues recognized in excess of amounts billed. For the six months ended June 30, 2022 and December 31, 2021, the amounts recorded that were related to unbilled receivables were not material.

Unsatisfied Performance Obligations

Revenue expected to be recognized in any future period related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less and contracts where revenue is recognized as invoiced, was approximately $80 million as of June 30, 2022. Because we typically invoice customers at contract inception, this amount is included in our current and non-current deferred revenue balances and primarily relates to multi-year payments for hardware service and software service offerings. As of June 30, 2022, we expect to recognize approximately 24% of the revenue related to these unsatisfied performance obligations during the remainder of 2022, 39% during 2023, and 37% thereafter.

Assets Recognized from the Costs to Obtain a Contract with a Customer

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs meet the requirements to be capitalized. Capitalized incremental costs related to initial contracts and renewals are amortized over the same period because the commissions paid on both the initial contract and renewals are commensurate with one another. Total capitalized costs to obtain a contract were not material during the periods presented and are included in other long-term assets on our consolidated balance sheets.

Note 3 – Investments

Equity-Method Investments

The carrying value of our equity method investments was $30 million and $32 million as of June 30, 2022 and December 31, 2021, respectively. During the three months ended June 30, 2022 and 2021, net sales to our equity-method investees were approximately $1.3 million and $1.3 million, respectively. During the six months ended June 30, 2022 and 2021, net sales to our equity-method investees were approximately $2.8 million and $1.6 million, respectively. During the three and six months ended June 30, 2022 and 2021, purchases from our equity-method investees were not material.

We recorded a $3.5 million impairment loss related to an equity-method investment during the three months ended March 31, 2021. Our proportionate share of the income/(loss) from equity-method investments is included within "Other expense". Refer to Note 1 - Basis of Presentation of Notes to Consolidated Financial Statements for additional information on these amounts for the three and six months ended June 30, 2022 and 2021.

Note 4 – Fair value measurements

We define fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market that market participants may use when pricing the asset or liability.

We follow a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value measurement is determined based on the lowest level input that is significant to the fair value measurement. The three values of the fair value hierarchy are the following:

Level 1 – Quoted prices in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3 – Inputs that are not based on observable market data

Assets and liabilities measured at fair value on a recurring basis are summarized below:


	Fair Value Measurements at Reporting Date Using
(In thousands)	(Unaudited)
Description	June 30, 2022		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Money market funds	$	2,046	$	2,046	$	—	$	—


Other assets:



Derivatives	21,842		—		21,842		—
Total Assets	$	23,888	$	2,046	$	21,842	$	—

Liabilities