Sensata Technologies Holding plc [ST] Filings

10-Q 1 st-20220331.htm 10-Q st-20220331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________________________________

FORM 10-Q

_________________________________________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 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 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.)

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

☐

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.

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TABLE OF CONTENTS


PART I
	Item 1.	Financial Statements (unaudited):
		Condensed Consolidated Balance Sheets as of March 3 1 , 202 2 and December 31, 202 1	3
		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021	4
		Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021	5
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021	6
		Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 2022 and 2021	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4.	Controls and Procedures	29

PART II
	Item 1.	Legal Proceedings	30
	Item 1A.	Risk Factors	30
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 3.	Defaults Upon Senior Securities	30
	Item 5.	Other Information	31
	Item 6.	Exhibits	32
		Signatures	33

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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.

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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.

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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.

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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)


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.

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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.

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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

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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

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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

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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.

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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).

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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,

Table of Contents

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