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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________________________
FORM 10-Q
_________________________________________________________________________________
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2022
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 PLC
(Exact name of registrant as specified in its charter)
_________________________________________________________________________________
| | | | | | | | | | | | | | | |
England and Wales | | 98-1386780 | |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | |
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| | | | |
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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)
_____________________________________
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 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 | ☐ |
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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 ☒
As of April 15, 2022, 156,917,754 ordinary shares were outstanding.
TABLE OF CONTENTS
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PART I | |
| Item 1. | | |
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| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
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PART II | |
| Item 1. | | |
| Item 1A. | | |
| Item 2. | | |
| Item 3. | | |
| Item 5. | | |
| Item 6. | | |
| | | |
PART I—FINANCIAL INFORMATION
Item 1.Financial Statements.
SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 1,608,481 | | | $ | 1,708,955 | |
Accounts receivable, net of allowances of $28,001 and $17,003 as of March 31, 2022 and December 31, 2021, respectively | 693,568 | | | 653,438 | |
Inventories | 641,709 | | | 588,231 | |
Prepaid expenses and other current assets | 146,342 | | | 126,370 | |
Total current assets | 3,090,100 | | | 3,076,994 | |
Property, plant and equipment, net | 822,633 | | | 820,933 | |
Goodwill | 3,555,369 | | | 3,502,063 | |
Other intangible assets, net of accumulated amortization of $2,314,755 and $2,277,393 as of March 31, 2022 and December 31, 2021, respectively | 907,315 | | | 946,731 | |
Deferred income tax assets | 104,226 | | | 105,028 | |
Other assets | 131,745 | | | 162,017 | |
Total assets | $ | 8,611,388 | | | $ | 8,613,766 | |
Liabilities and shareholders' equity | | | |
Current liabilities: | | | |
Current portion of long-term debt, finance lease and other financing obligations | $ | 6,694 | | | $ | 6,833 | |
Accounts payable | 486,432 | | | 459,093 | |
Income taxes payable | 19,249 | | | 26,517 | |
Accrued expenses and other current liabilities | 327,670 | | | 343,816 | |
Total current liabilities | 840,045 | | | 836,259 | |
Deferred income tax liabilities | 339,332 | | | 339,273 | |
Pension and other post-retirement benefit obligations | 39,089 | | | 38,758 | |
Finance lease and other financing obligations, less current portion | 26,347 | | | 26,564 | |
Long-term debt, net | 4,215,505 | | | 4,214,946 | |
Other long-term liabilities | 78,753 | | | 63,232 | |
Total liabilities | 5,539,071 | | | 5,519,032 | |
Commitments and contingencies (Note 12) | | | |
Shareholders’ equity: | | | |
Ordinary shares, €0.01 nominal value per share, 177,069 shares authorized, and 174,583 and 174,287 shares issued as of March 31, 2022 and December 31, 2021, respectively | 2,236 | | | 2,232 | |
Treasury shares, at cost, 17,576 and 16,438 shares as of March 31, 2022 and December 31, 2021, respectively | (899,697) | | | (832,439) | |
Additional paid-in capital | 1,831,497 | | | 1,812,244 | |
Retained earnings | 2,154,563 | | | 2,132,257 | |
Accumulated other comprehensive loss | (16,282) | | | (19,560) | |
| | | |
| | | |
Total shareholders' equity | 3,072,317 | | | 3,094,734 | |
Total liabilities and shareholders' equity | $ | 8,611,388 | | | $ | 8,613,766 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2022 | | March 31, 2021 | | | | |
Net revenue | $ | 975,770 | | | $ | 942,528 | | | | | |
Operating costs and expenses: | | | | | | | |
Cost of revenue | 657,080 | | | 635,349 | | | | | |
Research and development | 45,980 | | | 35,956 | | | | | |
Selling, general and administrative | 95,680 | | | 77,123 | | | | | |
Amortization of intangible assets | 37,367 | | | 32,064 | | | | | |
Restructuring and other charges, net | 13,733 | | | 4,582 | | | | | |
Total operating costs and expenses | 849,840 | | | 785,074 | | | | | |
Operating income | 125,930 | | | 157,454 | | | | | |
Interest expense, net | (45,445) | | | (44,043) | | | | | |
Other, net | (50,456) | | | (39,397) | | | | | |
Income before taxes | 30,029 | | | 74,014 | | | | | |
Provision for income taxes | 7,588 | | | 20,281 | | | | | |
Net income | $ | 22,441 | | | $ | 53,733 | | | | | |
Basic net income per share | $ | 0.14 | | | $ | 0.34 | | | | | |
Diluted net income per share | $ | 0.14 | | | $ | 0.34 | | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)
| | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2022 | | March 31, 2021 | | | | |
Net income | $ | 22,441 | | | $ | 53,733 | | | | | |
Other comprehensive income: | | | | | | | |
Cash flow hedges | 2,850 | | | 14,278 | | | | | |
Defined benefit and retiree healthcare plans | 428 | | | 1,712 | | | | | |
Other comprehensive income | 3,278 | | | 15,990 | | | | | |
Comprehensive income | $ | 25,719 | | | $ | 69,723 | | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
| | | | | | | | | | | |
| For the three months ended |
| March 31, 2022 | | March 31, 2021 |
Cash flows from operating activities: | | | |
Net income | $ | 22,441 | | | $ | 53,733 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation | 31,531 | | | 31,197 | |
Amortization of debt issuance costs | 1,716 | | | 1,711 | |
| | | |
Share-based compensation | 6,540 | | | 5,099 | |
Loss on debt financing | — | | | 30,066 | |
Amortization of intangible assets | 37,367 | | | 32,064 | |
Deferred income taxes | (340) | | | 130 | |
Acquisition-related compensation payments | (7,500) | | | — | |
Mark-to-market loss on equity investments, net | 59,279 | | | — | |
Unrealized (gain)/loss on derivative instruments and other | (517) | | | 8,797 | |
Changes in operating assets and liabilities, net of the effects of acquisitions: | | | |
Accounts receivable, net | (49,821) | | | (62,198) | |
Inventories | (53,004) | | | (16,857) | |
Prepaid expenses and other current assets | (8,807) | | | (4,971) | |
Accounts payable and accrued expenses | 13,488 | | | 26,409 | |
Income taxes payable | (7,268) | | | 2,283 | |
Other | 2,250 | | | (2,952) | |
Net cash provided by operating activities | 47,355 | | | 104,511 | |
Cash flows from investing activities: | | | |
Acquisitions, net of cash received | (48,441) | | | (20,406) | |
Additions to property, plant and equipment and capitalized software | (35,711) | | | (27,172) | |
Investment in debt and equity securities | (6,853) | | | (1,799) | |
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Other | 152 | | | 340 | |
Net cash used in investing activities | (90,853) | | | (49,037) | |
Cash flows from financing activities: | | | |
Proceeds from exercise of stock options and issuance of ordinary shares | 13,348 | | | 10,556 | |
Payment of employee restricted stock tax withholdings | (135) | | | (221) | |
Proceeds from borrowings on debt | — | | | 750,000 | |
| | | |
Payments on debt | (2,931) | | | (752,753) | |
Payments to repurchase ordinary shares | (67,258) | | | — | |
Payments of debt financing costs | — | | | (31,110) | |
| | | |
Net cash used in financing activities | (56,976) | | | (23,528) | |
Net change in cash and cash equivalents | (100,474) | | | 31,946 | |
Cash and cash equivalents, beginning of year | 1,708,955 | | | 1,861,980 | |
Cash and cash equivalents, end of period | $ | 1,608,481 | | | $ | 1,893,926 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
SENSATA TECHNOLOGIES HOLDING 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 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 | — | | | — | | | (3) | | | (135) | | | — | | | — | | | — | | | | | | | (135) | |
Stock options exercised | 290 | | | 4 | | | — | | | — | | | 12,713 | | | — | | | — | | | | | | | 12,717 | |
Vesting of restricted securities | 9 | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | — | |
Repurchase of ordinary shares | — | | | — | | | (1,138) | | | (67,258) | | | — | | | — | | | — | | | | | | | (67,258) | |
Retirement of ordinary shares | (3) | | | — | | | 3 | | | 135 | | | — | | | (135) | | | — | | | | | | | — | |
Share-based compensation | — | | | — | | | — | | | — | | | 6,540 | | | — | | | — | | | | | | | 6,540 | |
| | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 22,441 | | | — | | | | | | | 22,441 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 3,278 | | | | | | | 3,278 | |
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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Treasury Shares | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | | | | | Total Shareholders' Equity |
| Number | | Amount | | Number | | Amount | | | |
Balance as of December 31, 2020 | 173,266 | | | $ | 2,220 | | | (15,631) | | | $ | (784,596) | | | $ | 1,759,668 | | | $ | 1,777,729 | | | $ | (49,535) | | | | | | | $ | 2,705,486 | |
Surrender of shares for tax withholding | — | | | — | | | (4) | | | (221) | | | — | | | — | | | — | | | | | | | (221) | |
Stock options exercised | 259 | | | 3 | | | — | | | — | | | 10,553 | | | — | | | — | | | | | | | 10,556 | |
Vesting of restricted securities | 12 | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | — | |
| | | | | | | | | | | | | | | | | | | |
Retirement of ordinary shares | (4) | | | — | | | 4 | | | 221 | | | — | | | (221) | | | — | | | | | | | — | |
Share-based compensation | — | | | — | | | — | | | — | | | 5,099 | | | — | | | — | | | | | | | 5,099 | |
| | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | — | | | 53,733 | | | — | | | | | | | 53,733 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 15,990 | | | | | | | 15,990 | |
Balance as of March 31, 2021 | 173,533 | | | $ | 2,223 | | | (15,631) | | | $ | (784,596) | | | $ | 1,775,320 | | | $ | 1,831,241 | | | $ | (33,545) | | | | | | | $ | 2,790,643 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
SENSATA TECHNOLOGIES HOLDING PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements reflect the financial position, results of operations, comprehensive income, cash flows, and changes in shareholders' equity of Sensata Technologies Holding plc, a public limited company incorporated under the laws of England and Wales, and its consolidated subsidiaries, collectively referred to as the "Company," "Sensata," "we," "our," or "us."
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("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 financial information reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the interim period results. 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, 2021 filed with the U.S. Securities and Exchange Commission (the "SEC") on February 10, 2022 (the "2021 Annual Report").
All U.S. dollar ("USD") and share amounts presented, except per share amounts, are stated in thousands, unless otherwise indicated.
2. New Accounting Standards
There are no recently issued accounting standards that have been adopted in the current period or will be adopted in future periods that have had or are expected to have a material impact on our consolidated financial position or results of operations.
3. Revenue Recognition
The following table presents net revenue disaggregated by segment and end market for the three months ended March 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended March 31, 2022 | | For the three months ended March 31, 2021 |
| | Performance Sensing | | Sensing Solutions | | Total | | Performance Sensing | | Sensing Solutions | | Total |
Automotive | | $ | 502,362 | | | $ | 9,285 | | | $ | 511,647 | | | $ | 536,713 | | | $ | 11,500 | | | $ | 548,213 | |
HVOR (1) | | 215,335 | | | — | | | 215,335 | | | 177,799 | | | — | | | 177,799 | |
Industrial | | — | | | 114,619 | | | 114,619 | | | — | | | 90,475 | | | 90,475 | |
Appliance and HVAC (2) | | — | | | 58,825 | | | 58,825 | | | — | | | 59,916 | | | 59,916 | |
Aerospace | | — | | | 33,270 | | | 33,270 | | | — | | | 32,677 | | | 32,677 | |
Other | | — | | | 42,074 | | | 42,074 | | | — | | | 33,448 | | | 33,448 | |
Total | | $ | 717,697 | | | $ | 258,073 | | | $ | 975,770 | | | $ | 714,512 | | | $ | 228,016 | | | $ | 942,528 | |
________________________
(1) Heavy vehicle and off-road
(2) Heating, ventilation and air conditioning
4. Share-Based Payment Plans
The following table presents the components of non-cash compensation expense related to our equity awards for the three months ended March 31, 2022 and 2021:
| | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2022 | | March 31, 2021 | | | | |
Stock options | $ | 307 | | | $ | 460 | | | | | |
Restricted securities | 6,233 | | | 4,639 | | | | | |
Share-based compensation expense | $ | 6,540 | | | $ | 5,099 | | | | | |
5. Restructuring and Other Charges, Net
The following table presents the components of restructuring and other charges, net for the three months ended March 31, 2022 and 2021:
| | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2022 | | March 31, 2021 | | | | |
Q2 2020 Global Restructure Program charges | $ | — | | | $ | 1,824 | | | | | |
Other restructuring and other charges, net | | | | | | | |
Severance costs, net | 587 | | | 186 | | | | | |
Facility and other exit costs | 1,048 | | | 666 | | | | | |
| | | | | | | |
Other (1) | 12,098 | | | 1,906 | | | | | |
Restructuring and other charges, net | $ | 13,733 | | | $ | 4,582 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
________________________
(1) Primarily includes expenses related to acquisition-related incentive compensation, partially offset by a gain resulting from reduction of the liability for contingent consideration for Spear Power Systems ("Spear"). Refer to Note 16: Acquisitions for additional information.
The following table presents a rollforward of the severance portion of our restructuring obligations for the three months ended March 31, 2022.
| | | | | | | | | | | | | | | | | |
| Q2 2020 Global Restructure Program | | Other | | Total |
Balance as of December 31, 2021 | $ | 3,853 | | | $ | 3,380 | | | $ | 7,233 | |
Charges, net of reversals | — | | | 587 | | | 587 | |
Payments | (2,955) | | | (1,130) | | | (4,085) | |
Foreign currency remeasurement | (6) | | | 12 | | | 6 | |
Balance as of March 31, 2022 | $ | 892 | | | $ | 2,849 | | | $ | 3,741 | |
The severance liability as of March 31, 2022 was entirely recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheet.
6. Other, Net
The following table presents the components of other, net for the three months ended March 31, 2022 and 2021:
| | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2022 | | March 31, 2021 | | | | |
Currency remeasurement loss on net monetary assets | $ | (67) | | | $ | (1,477) | | | | | |
Loss on foreign currency forward contracts | (1,243) | | | (958) | | | | | |
Gain/(loss) on commodity forward contracts | 9,424 | | | (1,153) | | | | | |
Loss on debt financing | — | | | (30,066) | | | | | |
Mark-to-market loss on investments, net | (59,279) | | | — | | | | | |
Net periodic benefit cost, excluding service cost | (755) | | | (2,410) | | | | | |
Other | 1,464 | | | (3,333) | | | | | |
Other, net | $ | (50,456) | | | $ | (39,397) | | | | | |
7. Income Taxes
The following table presents the provision for income taxes for the three months ended March 31, 2022 and 2021:
| | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2022 | | March 31, 2021 | | | | |
| | | | | | | |
| | | | | | | |
Provision for income taxes | $ | 7,588 | | | $ | 20,281 | | | | | |
The decrease in total tax for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was predominantly related to the overall decrease in income before taxes, driven in part by the mark-to-market loss on our investment in Quanergy as discussed in Note 14: Fair Value Measures.
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 represents adjustments in book-to-tax basis differences primarily related to (a) book versus tax basis in intangible assets, (b) changes in net operating loss carryforwards, (c) changes in tax rates, and (d) changes in our assessment of the realizability of our deferred tax assets.
8. Net Income per Share
Basic and diluted net income per share are calculated by dividing net income by the number of basic and diluted weighted-average ordinary shares outstanding during the period. For the three months ended March 31, 2022 and 2021 the weighted-average ordinary shares outstanding used to calculate basic and diluted net income per share were as follows:
| | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2022 | | March 31, 2021 | | | | |
Basic weighted-average ordinary shares outstanding | 157,422 | | | 157,764 | | | | | |
Dilutive effect of stock options | 473 | | | 708 | | | | | |
Dilutive effect of unvested restricted securities | 735 | | | 758 | | | | | |
Diluted weighted-average ordinary shares outstanding | 158,630 | | | 159,230 | | | | | |
Certain potential ordinary shares were excluded from our calculation 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 which the contingency had not been satisfied. These potential ordinary shares were as follows:
| | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2022 | | March 31, 2021 | | | | |
Anti-dilutive shares excluded | 4 | | | 6 | | | | | |
Contingently issuable shares excluded | 1,002 | | | 950 | | | | | |
9. Inventories
The following table presents the components of inventories as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Finished goods | $ | 222,375 | | | $ | 201,424 | |
Work-in-process | 114,496 | | | 101,558 | |
Raw materials | 304,838 | | | 285,249 | |
Inventories | $ | 641,709 | | | $ | 588,231 | |
10. Pension and Other Post-Retirement Benefits
The following table presents the components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the three months ended March 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Plans | | Non-U.S. Plans | | |
| Defined Benefit | | Retiree Healthcare | | Defined Benefit | | Total |
| 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
Service cost | $ | — | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | 956 | | | $ | 978 | | | $ | 958 | | | $ | 980 | |
Interest cost | 113 | | | 120 | | | 46 | | | 21 | | | 424 | | | 404 | | | 583 | | | 545 | |
Expected return on plan assets | (195) | | | (226) | | | — | | | — | | | (244) | | | (178) | | | (439) | | | (404) | |
Amortization of net loss | 141 | | | 401 | | | — | | | — | | | 278 | | | 459 | | | 419 | | | 860 | |
Amortization of prior service (credit)/cost | — | | | — | | | (100) | | | (159) | | | 2 | | | 3 | | | (98) | | | (156) | |
Loss on settlement | 290 | | | 1,565 | | | — | | | — | | | — | | | — | | | 290 | | | 1,565 | |
| | | | | | | | | | | | | | | |
Net periodic benefit cost/(credit) | $ | 349 | | | $ | 1,860 | | | $ | (52) | | | $ | (136) | | | $ | 1,416 | | | $ | 1,666 | | | $ | 1,713 | | | $ | 3,390 | |
Components of net periodic benefit cost/(credit) other than service cost are presented in other, net in the condensed consolidated statements of operations. Refer to Note 6: Other, Net.
11. Debt
The following table presents the components of long-term debt, finance lease and other financing obligations as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | | | | | | | | | | |
| | Maturity Date | | March 31, 2022 | | December 31, 2021 |
Term Loan | | September 20, 2026 | | $ | 450,308 | | | $ | 451,465 | |
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 | |
| | | | | | |
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 | |
| | | | | | |
| | | | | | |
Less: debt discount, net of premium | | | | (4,763) | | | (5,207) | |
Less: deferred financing costs | | | | (25,410) | | | (26,682) | |
Less: current portion | | | | (4,630) | | | (4,630) | |
Long-term debt, net | | | | $ | 4,215,505 | | | $ | 4,214,946 | |
| | | | | | |
Finance lease and other financing obligations | | | | $ | 28,411 | | | $ | 28,767 | |
Less: current portion | | | | (2,064) | | | (2,203) | |
Finance lease and other financing obligations, less current portion | | | | $ | 26,347 | | | $ | 26,564 | |
As of March 31, 2022, we had $416.1 million available under our $420.0 million revolving credit facility (the "Revolving Credit Facility"), 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 March 31, 2022, no amounts had been drawn against these outstanding letters of credit.
In the three months ended March 31, 2021, in connection with the redemption of $750.0 million aggregate principal amount of 6.25% senior notes due 2026 (the "6.25% Senior Notes"), we recognized a loss of $30.1 million, which included $23.4 million in premiums paid, with the remaining loss representing write-off of debt discounts and deferred financing costs.
Accrued Interest
Accrued interest associated with our outstanding debt is included as a component of accrued expenses and other current liabilities in the condensed consolidated balance sheets. As of March 31, 2022 and December 31, 2021, accrued interest totaled $63.1 million and $45.1 million, respectively.
12. Commitments and Contingencies
We are regularly involved in a number of claims and litigation matters that arise in the ordinary course of business. 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 results of operations, financial condition, and/or cash flows.
13. Shareholders' Equity
Treasury Shares
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, we announced that our Board of Directors had authorized a new $500.0 million ordinary share repurchase program (the “January 2022 Program”), which replaced the previous $500.0 million program approved in July 2019, which had availability of $254.5 million as of December 31, 2021. As of March 31, 2022, $449.5 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 three months ended March 31, 2022:
| | | | | | | | | | | | | | | | | | | | |
| | Cash Flow Hedges | | Defined Benefit and Retiree Healthcare Plans | | Accumulated Other Comprehensive Loss |
Balance as of December 31, 2021 | | $ | 16,831 | | | $ | (36,391) | | | $ | (19,560) | |
Other comprehensive income before reclassifications, net of tax | | 7,965 | | | — | | | 7,965 | |
Reclassifications from accumulated other comprehensive loss, net of tax | | (5,115) | | | 428 | | | (4,687) | |
Other comprehensive income | | 2,850 | | | 428 | | | 3,278 | |
Balance as of March 31, 2022 | | $ | 19,681 | | | $ | (35,963) | | | $ | (16,282) | |
The following table presents the amounts reclassified from accumulated other comprehensive loss for the three months ended March 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended March 31, | | | | Affected Line in Condensed Consolidated Statements of Operations |
Component | | 2022 | | 2021 | | | | | |
Derivative instruments designated and qualifying as cash flow hedges: | | | | | | | | | | |
Foreign currency forward contracts | | $ | (4,264) | | | $ | 4,407 | | | | | | | Net revenue (1) |
Foreign currency forward contracts | | (2,629) | | | (743) | | | | | | | Cost of revenue (1) |
| | | | | | | | | | |
Total, before taxes | | (6,893) | | | 3,664 | | | | | | | Income before taxes |
Income tax effect | | 1,778 | | | (916) | | | | | | | Provision for income taxes |
Total, net of taxes | | $ | (5,115) | | | $ | 2,748 | | | | | | | Net income |
| | | | | | | | | | |
Defined benefit and retiree healthcare plans | | $ | 611 | | | $ | 2,269 | | | | | | | Other, net (2) |
| | | | | | | | | | |
| | | | | | | | | | |
Income tax effect | | (183) | | | (557) | | | | | | | Provision for income taxes |
Total, net of taxes | | $ | 428 | | | $ | 1,712 | | | | | | | Net income |
__________________________
(1) Refer to Note 15: Derivative Instruments and Hedging Activities for additional information on amounts to be reclassified from accumulated other comprehensive loss in future periods.
(2) Refer to Note 10: Pension and Other Post-Retirement Benefits for additional information on net periodic benefit cost/(credit).
14. Fair Value Measures
Measured on a Recurring Basis
The fair values of our assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 are shown in the below table. All fair value measures presented are categorized in Level 2 of the fair value hierarchy.
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Assets | | | |
Foreign currency forward contracts | $ | 29,063 | | | $ | 25,112 | |
Commodity forward contracts | 8,474 | | | 2,979 | |
Total | $ | 37,537 | | | $ | 28,091 | |
| | | |
Liabilities | | | |
Foreign currency forward contracts | $ | 3,682 | | | $ | 3,073 | |
Commodity forward contracts | 1,752 | | | 4,492 | |
Total | $ | 5,434 | | | $ | 7,565 | |
Refer to Note 15: Derivative Instruments and Hedging Activities for additional information related to our forward contracts.
Quanergy
As of December 31, 2021, we held a $50.0 million investment in Quanergy Systems, Inc. ("Quanergy") Series B Preferred Stock. This equity investment did not have a readily determinable fair value and it was held using the measurement alternative prescribed in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 321, Investments - Equity Securities. Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.
On June 22, 2021, Quanergy announced that it had entered into a definitive business combination agreement with CITIC Capital Acquisition Corp ("CITIC") (NYSE: CCAC). On July 16, 2021, CITIC filed a Registration Statement on Form S-4 with the SEC, the effectiveness of which was a condition to closing of the business combination. At December 31, 2021, we assessed our investment in Quanergy based on the proposed terms of the business combination agreement and concluded that there were no indicators of impairment.
On January 6, 2022, the related Registration Statement on Form S-4 was declared effective by the SEC. An Extraordinary General Meeting of shareholders of CITIC was held on January 31, 2022, at which time the business combination was approved. The business combination closed on February 8, 2022. Beginning on February 9, 2022, the combined company, which retained the name "Quanergy Systems, Inc.," was listed on the New York Stock Exchange (the "NYSE") under the ticker symbol QNGY.
Upon closing of the business combination, our investment in Quanergy comprised the following:
•5.0 million common shares, which represented the conversion of our $50 million Series B Preferred Stock investment (at a $10 per share implied valuation);
•750,000 unregistered common shares, representing a $7.5 million private investment in public equity ("PIPE") contribution; and
•2.5 million common shares (the "Warrant Shares"), representing the conversion of 2.5 million warrants provided by Quanergy as up-front consideration for a four-year technical and marketing support agreement (the "Support Agreement").
The 5.75 million common share investment in Quanergy (excluding the Warrant Shares) have a historical cost basis of $57.5 million. The Warrant Shares were converted at a share price of $7.05 per share (the closing market price on February 8, 2022), or approximately $17.6 million, which was recorded as deferred income. Refer to below discussion for additional details on the Support Agreement. Refer to the below table for a summary of our investment in Quanergy as of March 31, 2022,
February 8, 2022, and December 31, 2021, which is presented in other assets on our consolidated balance sheets as of March 31, 2022 and December 31, 2021.
| | | | | | | | | | | | | | | | | | | | |
| | As of |
| | March 31, 2022 | | February 8, 2022 | | December 31, 2021 |
Series B Preferred Stock | | $ | — | | | $ | — | | | $ | 50,000 | |
Common shares | | 9,200 | | | 50,000 | | | — | |
PIPE investment | | 1,380 | | | 7,500 | | | — | |
Warrant Shares | | 4,575 | | | 17,600 | | | — | |
Total equity investment in Quanergy | | $ | 15,155 | | | $ | 75,100 | | | $ | 50,000 | |
| | | | | | |
| | | | | | For the three months ended March 31, 2022 |
Mark-to-market loss | | | | | | $ | 59,945 | |
The mark-to-market loss presented in the table above is presented in other, net, and is the result of the decline in Quanergy share price to $1.84 per share on March 31, 2022.
In exchange for the Warrant Shares, we entered into the Support Agreement, whereby we agreed to provide technical and marketing assistance to Quanergy for a term of four years from the effective date of February 8, 2022. We will recognize the consideration ($17.6 million) for the Support Agreement on a straight-line basis over the term of the agreement. We recognized approximately $0.7 million of income in the three months ended March 31, 2022 and will recognize approximately $1.1 million of income each quarter through the end of the term of the Support Agreement.
Measured on a Nonrecurring Basis
We evaluated our goodwill and other indefinite-lived intangible assets for impairment as of October 1, 2021 and determined that they were not impaired. During the three months ended March 31, 2022, no events or changes in circumstances occurred that would have triggered the need for an additional impairment review of these assets.
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 March 31, 2022 and December 31, 2021. All fair value measures presented are categorized in Level 2 of the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Carrying Value (1) | | Fair Value | | Carrying Value (1) | | Fair Value |
Liabilities | | | | | | | |
Term Loan | $ | 450,308 | | | $ | 449,182 | | | $ | 451,465 | | | $ | 450,901 | |
4.875% Senior Notes | $ | 500,000 | | | $ | 512,500 | | | $ | 500,000 | | | $ | 526,250 | |
5.625% Senior Notes | $ | 400,000 | | | $ | 416,000 | | | $ | 400,000 | | | $ | 438,000 | |
5.0% Senior Notes | $ | 700,000 | | | $ | 714,875 | | | $ | 700,000 | | | $ | 759,500 | |
| | | | | | | |
4.375% Senior Notes | $ | 450,000 | | | $ | 432,000 | | | $ | 450,000 | | | $ | 479,250 | |
3.75% Senior Notes | $ | 750,000 | |