Item 1. Financial Statements
Item 1.
Financial Statements.
SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
(unaudited)
June 30,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents
$
1,242,949
$
774,119
Accounts receivable, net of allowances of $17,655 and $15,129 as of June 30, 2020 and December 31, 2019, respectively
443,712
557,874
Inventories
488,807
506,678
Prepaid expenses and other current assets
103,696
126,981
Total current assets
2,279,164
1,965,652
Property, plant and equipment, net
815,872
830,998
Goodwill
3,093,598
3,093,598
Other intangible assets, net of accumulated amortization of $2,105,318 and $2,039,436 as of June 30, 2020 and December 31, 2019, respectively
706,102
770,904
Deferred income tax assets
29,011
21,150
Other assets
161,138
152,217
Total assets
$
7,084,885
$
6,834,519
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt, finance lease and other financing obligations
$
407,042
$
6,918
Accounts payable
250,219
376,968
Income taxes payable
866
35,234
Accrued expenses and other current liabilities
268,432
215,626
Total current liabilities
926,559
634,746
Deferred income tax liabilities
254,230
251,033
Pension and other post-retirement benefit obligations
31,900
36,100
Finance lease and other financing obligations, less current portion
28,243
28,810
Long-term debt, net
3,220,833
3,219,885
Other long-term liabilities
129,715
90,190
Total liabilities
4,591,480
4,260,764
Commitments and contingencies (Note 12)
Shareholders’ equity:
Ordinary shares, €0.01 nominal value per share, 177,069 shares authorized, and 172,844 and 172,561 shares issued, as of June 30, 2020 and December 31, 2019, respectively
2,215
2,212
Treasury shares, at cost, 15,631 and 14,733 shares as of June 30, 2020 and December 31, 2019, respectively
( 784,596
)
( 749,421
)
Additional paid-in capital
1,735,826
1,725,091
Retained earnings
1,579,931
1,616,357
Accumulated other comprehensive loss
( 39,971
)
( 20,484
)
Total shareholders’ equity
2,493,405
2,573,755
Total liabilities and shareholders’ equity
$
7,084,885
$
6,834,519
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
For the six months ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Net revenue
$
576,505
$
883,726
$
1,350,774
$
1,754,225
Operating costs and expenses:
Cost of revenue
412,443
575,235
978,849
1,156,041
Research and development
30,239
36,685
64,692
71,781
Selling, general and administrative
64,730
72,026
141,951
142,575
Amortization of intangible assets
32,743
36,031
65,835
72,174
Restructuring and other charges, net
38,218
16,310
42,716
21,619
Total operating costs and expenses
578,373
736,287
1,294,043
1,464,190
Operating (loss)/income
( 1,868
)
147,439
56,731
290,035
Interest expense, net
( 40,808
)
( 39,608
)
( 80,211
)
( 78,861
)
Other, net
1,576
( 3,554
)
( 10,705
)
( 365
)
(Loss)/income before taxes
( 41,100
)
104,277
( 34,185
)
210,809
Provision for/(benefit from) income taxes
1,441
30,841
( 75
)
52,308
Net (loss)/income
$
( 42,541
)
$
73,436
$
( 34,110
)
$
158,501
Basic net (loss)/income per share:
$
( 0.27
)
$
0.45
$
( 0.22
)
$
0.98
Diluted net (loss)/income per share:
$
( 0.27
)
$
0.45
$
( 0.22
)
$
0.97
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 (Loss)/Income
(In thousands)
(unaudited)
For the three months ended
For the six months ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Net (loss)/income
$
( 42,541
)
$
73,436
$
( 34,110
)
$
158,501
Other comprehensive (loss)/income, net of tax:
Cash flow hedges
( 5,167
)
( 4,646
)
( 24,501
)
5,414
Defined benefit and retiree healthcare plans
1,672
83
5,014
166
Other comprehensive (loss)/income
( 3,495
)
( 4,563
)
( 19,487
)
5,580
Comprehensive (loss)/income
$
( 46,036
)
$
68,873
$
( 53,597
)
$
164,081
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 six months ended
June 30, 2020
June 30, 2019
Cash flows from operating activities:
Net (loss)/income
$
( 34,110
)
$
158,501
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
Depreciation
65,288
55,182
Amortization of debt issuance costs
3,263
3,718
Share-based compensation
9,590
12,425
Amortization of intangible assets
65,835
72,174
Deferred income taxes
1,500
13,213
Loss on litigation judgment
41,314
—
Unrealized loss on derivative instruments and other
8,035
16,717
Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable, net
114,162
( 53,775
)
Inventories
17,871
2,196
Prepaid expenses and other current assets
14,790
( 1,645
)
Accounts payable and accrued expenses
( 99,467
)
( 27,157
)
Income taxes payable
( 34,368
)
( 2,241
)
Other
( 3,431
)
2,858
Net cash provided by operating activities
170,272
252,166
Cash flows from investing activities:
Acquisitions, net of cash received
—
( 1,681
)
Additions to property, plant and equipment and capitalized software
( 56,697
)
( 81,549
)
Other
( 3,798
)
305
Net cash used in investing activities
( 60,495
)
( 82,925
)
Cash flows from financing activities:
Proceeds from exercise of stock options and issuance of ordinary shares
1,146
7,099
Payment of employee restricted stock tax withholdings
( 2,314
)
( 6,778
)
Proceeds from borrowings on Revolving Credit Facility
400,000
—
Payments on debt
( 4,604
)
( 8,248
)
Payments to repurchase ordinary shares
( 35,175
)
( 168,198
)
Payments of debt and equity issuance costs
—
( 1,876
)
Net cash provided by/(used in) financing activities
359,053
( 178,001
)
Net change in cash and cash equivalents
468,830
( 8,760
)
Cash and cash equivalents, beginning of period
774,119
729,833
Cash and cash equivalents, end of period
$
1,242,949
$
721,073
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 March 31, 2020
172,596
$
2,212
( 15,631
)
$
( 784,596
)
$
1,731,884
$
1,624,773
$
( 36,476
)
$
2,537,797
Surrender of shares for tax withholding
—
—
( 83
)
( 2,299
)
—
—
—
( 2,299
)
Stock options exercised
21
1
—
—
436
—
—
437
Vesting of restricted securities
310
3
—
—
—
( 3
)
—
—
Retirement of ordinary shares
( 83
)
( 1
)
83
2,299
—
( 2,298
)
—
—
Share-based compensation
—
—
—
—
3,506
—
—
3,506
Net loss
—
—
—
—
—
( 42,541
)
—
( 42,541
)
Other comprehensive loss
—
—
—
—
—
—
( 3,495
)
( 3,495
)
Balance as of June 30, 2020
172,844
$
2,215
( 15,631
)
$
( 784,596
)
$
1,735,826
$
1,579,931
$
( 39,971
)
$
2,493,405
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, 2019
172,561
$
2,212
( 14,733
)
$
( 749,421
)
$
1,725,091
$
1,616,357
$
( 20,484
)
$
2,573,755
Surrender of shares for tax withholding
—
—
( 83
)
( 2,314
)
—
—
—
( 2,314
)
Stock options exercised
55
1
—
—
1,145
—
—
1,146
Vesting of restricted securities
311
3
—
—
—
( 3
)
—
—
Repurchase of ordinary shares
—
—
( 898
)
( 35,175
)
—
—
—
( 35,175
)
Retirement of ordinary shares
( 83
)
( 1
)
83
2,314
—
( 2,313
)
—
—
Share-based compensation
—
—
—
—
9,590
—
—
9,590
Net loss
—
—
—
—
—
( 34,110
)
—
( 34,110
)
Other comprehensive loss
—
—
—
—
—
—
( 19,487
)
( 19,487
)
Balance as of June 30, 2020
172,844
$
2,215
( 15,631
)
$
( 784,596
)
$
1,735,826
$
1,579,931
$
( 39,971
)
$
2,493,405
Ordinary Shares
Treasury Shares
Additional
Paid-In
Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Number
Amount
Number
Amount
Balance as of March 31, 2019
171,987
$
2,206
( 10,607
)
$
( 550,166
)
$
1,702,940
$
1,425,426
$
( 16,035
)
$
2,564,371
Surrender of shares for tax withholding
—
—
( 138
)
( 6,503
)
—
—
—
( 6,503
)
Stock options exercised
64
—
—
—
1,286
—
—
1,286
Vesting of restricted securities
412
5
—
—
—
( 5
)
—
—
Repurchase of ordinary shares
—
—
( 379
)
( 17,449
)
—
—
—
( 17,449
)
Retirement of ordinary shares
( 138
)
( 2
)
138
6,503
—
( 6,501
)
—
—
Share-based compensation
—
—
—
—
6,485
—
—
6,485
Net income
—
—
—
—
—
73,436
—
73,436
Other comprehensive loss
—
—
—
—
—
—
( 4,563
)
( 4,563
)
Balance as of June 30, 2019
172,325
$
2,209
( 10,986
)
$
( 567,615
)
$
1,710,711
$
1,492,356
$
( 20,598
)
$
2,617,063
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, 2018
171,719
$
2,203
( 7,571
)
$
( 399,417
)
$
1,691,190
$
1,340,636
$
( 26,178
)
$
2,608,434
Surrender of shares for tax withholding
—
—
( 144
)
( 6,778
)
—
—
—
( 6,778
)
Stock options exercised
312
3
—
—
7,096
—
—
7,099
Vesting of restricted securities
438
5
—
—
—
( 5
)
—
—
Repurchase of ordinary shares
—
—
( 3,415
)
( 168,198
)
—
—
—
( 168,198
)
Retirement of ordinary shares
( 144
)
( 2
)
144
6,778
—
( 6,776
)
—
—
Share-based compensation
—
—
—
—
12,425
—
—
12,425
Net income
—
—
—
—
—
158,501
—
158,501
Other comprehensive income
—
—
—
—
—
—
5,580
5,580
Balance as of June 30, 2019
172,325
$
2,209
( 10,986
)
$
( 567,615
)
$
1,710,711
$
1,492,356
$
( 20,598
)
$
2,617,063
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 (loss)/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 wholly-owned 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, 2019 .
All U.S. dollar (" USD ") and share amounts presented, except per share amounts, are stated in thousands, unless otherwise indicated.
Certain reclassifications have been made to prior periods to conform to current period presentation.
2. New Accounting Standards
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 tables present net revenue disaggregated by segment and end market for the three and six months ended June 30, 2020 and 2019 :
For the three months ended June 30, 2020
For the three months ended June 30, 2019
Performance Sensing
Sensing Solutions
Total
Performance Sensing
Sensing Solutions
Total
Automotive
$
286,499
$
7,279
$
293,778
$
498,296
$
10,672
$
508,968
HVOR (1)
98,708
—
98,708
146,220
—
146,220
Industrial
—
79,264
79,264
—
95,818
95,818
Appliance and HVAC (2)
—
43,689
43,689
—
55,832
55,832
Aerospace
—
27,193
27,193
—
44,902
44,902
Other
—
33,873
33,873
—
31,986
31,986
Total
$
385,207
$
191,298
$
576,505
$
644,516
$
239,210
$
883,726
________________________
(1) Heavy vehicle and off-road
(2) Heating, ventilation and air conditioning
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For the six months ended June 30, 2020
For the six months ended June 30, 2019
Performance Sensing
Sensing Solutions
Total
Performance Sensing
Sensing Solutions
Total
Automotive
$
724,202
$
15,515
$
739,717
$
990,311
$
22,100
$
1,012,411
HVOR
229,694
—
229,694
294,233
—
294,233
Industrial
—
159,863
159,863
—
188,459
188,459
Appliance and HVAC
—
89,085
89,085
—
107,536
107,536
Aerospace
—
69,317
69,317
—
87,881
87,881
Other
—
63,098
63,098
—
63,705
63,705
Total
$
953,896
$
396,878
$
1,350,774
$
1,284,544
$
469,681
$
1,754,225
4. Share-Based Payment Plans
The following table presents the components of non-cash compensation expense related to our equity awards for the three and six months ended June 30, 2020 and 2019 .
For the three months ended
For the six months ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Stock options
$
53
$
1,964
$
2,542
$
3,488
Restricted securities
3,453
4,521
7,048
8,937
Share-based compensation expense
$
3,506
$
6,485
$
9,590
$
12,425
Equity Awards
We granted the following restricted stock units (" RSU s" and each, an " RSU ") and performance-based restricted stock units (" PRSU s" and each, a " PRSU ") under the Sensata Technologies Holding p lc First Amended and Restated 2010 Equity Incentive Plan during the six months ended June 30, 2020 :
Awards Granted To:
Type of Award
Number of Units Granted (in thousands)
Percentage of PRSUs Awarded That May Vest
Weighted- Average Grant Date Fair Value
Various executives and employees
RSU (1)
10
N/A
$
36.67
Directors
RSU (1)
39
N/A
$
36.45
Various executives and employees
RSU (2)
717
N/A
$
27.92
Various executives and employees
PRSU (3)
395
0.0% - 172.5%
$
27.99
__________________________
(1)
These RSU s generally cliff vest between one year and three years from the grant date (various dates between April 2021 and March 2023).
(2)
Beginning in April 2020, we began granting RSU s that vest ratably over three years, one-third per year beginning on the first anniversary of the grant date. These RSU s will fully vest on various dates between April 2023 and June 2023.
(3)
These PRSU s vest on various dates between April 2023 and June 2023. The number of units that ultimately vest is dependent on the achievement of certain performance criteria.
5. Restructuring and Other Charges, Net
During the three months ended June 30, 2020 , we analyzed the potential long-term impact of the global financial and health crisis caused by the coronavirus pandemic (" COVID-19 ") on our business and, as a result, committed to a plan to reorganize our business (the “ Q2 2020 Global Restructure Program ”). The Q2 2020 Global Restructure Program , consisting of voluntary and involuntary reductions-in-force and certain site closures , was commenced in order to align our cost structure to the demand levels that we anticipate over the coming quarters. The majority of the actions under the Q2 2020 Global Restructure Program are expected to be completed on or before June 30, 2021 .
The reductions-in-force, which are subject to the laws and regulations of the countries in which the actions are planned, are expected to impact approximately 980 positions. Over the life of the Q2 2020 Global Restructure Program , we expect to incur restructuring charges of between $ 35.0 million and $ 39.0 million related to reductions-in-force and between $ 8.0 million and $ 10.0 million related to site closures. We expect to settle these charges with cash on hand.
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We expect these restructuring charges to impact our business segments and corporate functions as follows:
Reductions-in-Force
Site Closures
(Dollars in millions)
Positions
Minimum
Maximum
Minimum
Maximum
Performance Sensing
214
$
12.6
$
14.0
$
3.0
$
4.0
Sensing Solutions
335
10.2
11.3
5.0
6.0
Corporate and other
431
12.2
13.7
—
—
Total
980
$
35.0
$
39.0
$
8.0
$
10.0
Amounts accrued in the three months ended June 30, 2020 related to the Q2 2020 Global Restructure Program are detailed by segment below. All charges related to this program incurred in the three months ended June 30, 2020 were related to severance costs and recorded in restructuring and other charges, net.
Total
Performance Sensing
$
7,609
Sensing Solutions
7,181
Corporate and other
9,330
Restructuring and other charges, net
$
24,120
The following table presents the components of restructuring and other charges, net for the three and six months ended June 30, 2020 and 2019 :
For the three months ended
For the six months ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Q2 2020 Global Restructure Program charges
$
24,120
$
—
$
24,120
$
—
Other restructuring charges
Severance costs, net (1)
—
14,631
3,897
17,486
Facility and other exit costs
—
37
—
37
Other (2)
14,098
1,642
14,699
4,096
Restructuring and other charges, net
$
38,218
$
16,310
$
42,716
$
21,619
___________________________________
(1)
Severance costs, net (excluding those related to the Q2 2020 Global Restructure Program ) for the six months ended June 30, 2020 were related to termination benefits arising from the shutdown and relocation of an operating site in Northern Ireland. Severance costs, net for the three and six months ended June 30, 2019 were primarily related to benefits provided for under a voluntary retirement incentive program offered to a limited number of eligible employees in the U.S.
(2)
Other charges in the three and six months ended June 30, 2020 were primarily related to a $ 12.1 million pre-judgment interest-related award granted by the court on behalf of the plaintiffs, Wasica Finance GmbH ("Wasica"), in connection with a patent infringement case against Schrader. Refer to Note 12, "Commitments and Contingencies," for additional information related to this matter. Other charges in the three and six months ended June 30, 2019 were primarily related to deferred compensation incurred in connection with the acquisition of GIGAVAC, LLC (" GIGAVAC ").
The following table presents a rollforward of the severance portion of our restructuring liabilities during the six months ended June 30, 2020 . The only charges that were incurred under the Q2 2020 Global Restructure Program related to severance. The components of our other restructuring liabilities not related to severance were immaterial. All balances at June 30, 2020 are recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheets.
Q2 2020 Global Restructure Program
Other Severance
Total
Balance at December 31, 2019
$
—
$
14,779
$
14,779
Charges, net of reversals
24,120
3,897
28,017
Payments
( 2,606
)
( 10,802
)
( 13,408
)
Foreign currency remeasurement
—
( 486
)
( 486
)
Balance at June 30, 2020
$
21,514
$
7,388
$
28,902
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6. Other, Net
The following table presents the components of other, net for the three and six months ended June 30, 2020 and 2019 :
For the three months ended
For the six months ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Currency remeasurement (loss)/gain on net monetary assets
$
( 1,097
)
$
( 4,326
)
$
456
$
( 2,461
)
Gain/(loss) on foreign currency forward contracts
417
1,039
( 3,364
)
1,517
Gain/(loss) on commodity forward contracts
5,427
( 102
)
( 148
)
1,021
Net periodic benefit cost, excluding service cost
( 2,516
)
( 287
)
( 6,897
)
( 574
)
Other
( 655
)
122
( 752
)
132
Other, net
$
1,576
$
( 3,554
)
$
( 10,705
)
$
( 365
)
7. Income Taxes
The following table presents the provision for/(benefit from) income taxes for the three and six months ended June 30, 2020 and 2019 :
For the three months ended
For the six months ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Provision for/(benefit from) income taxes
$
1,441
$
30,841
$
( 75
)
$
52,308
The decrease in total tax from the prior periods was predominantly related to the overall decrease in income before tax as impacted by the mix of profits in the various jurisdictions in which we operate.
In response to the global financial and health crisis caused by COVID-19 , the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the " CARES Act ") on March 27, 2020. Federal limitations on interest deductions were reduced in connection with this legislation, and we recorded a deferred tax benefit of $ 7.5 million in the three months ended March 31, 2020, as we were able to utilize additional interest expense that was previously subject to a valuation allowance.
The provision for/(benefit from) income taxes consists of:
•
current tax expense, which relates primarily to our profitable operations in non- U.S. tax jurisdictions and withholding taxes related to management fees, royalties, and the repatriation of foreign earnings; and
•
deferred tax expense (or benefit), which represents adjustments in book-to-tax basis differences primarily related to (1) the step-up in fair value of fixed and intangible assets acquired in connection with business combination transactions, (2) changes in net operating loss carryforwards, (3) changes in tax rates, and (4) changes in our assessment of the realizability of our deferred tax assets.
8. Net (Loss)/Income per Share
Basic and diluted net (loss)/income per share are calculated by dividing net (loss)/income by the number of basic and diluted weighted-average ordinary shares outstanding during the period. For the three and six months ended June 30, 2020 and 2019 the weighted-average ordinary shares outstanding used to calculate basic and diluted net (loss)/income per share were as follows:
For the three months ended
For the six months ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Basic weighted-average ordinary shares outstanding
157,186
161,618
157,392
162,433
Dilutive effect of stock options (1)
—
568
—
601
Dilutive effect of unvested restricted securities (1)
—
292
—
466
Diluted weighted-average ordinary shares outstanding
157,186
162,478
157,392
163,500
___________________________________
(1)
In the three and six months ended June 30, 2020 , potential ordinary shares of approximately 66 thousand and 200 thousand , respectively, related to stock options and approximately 353 thousand and 403 thousand , respectively, related to unvested restricted securities were excluded from the calculation of diluted weighted-average ordinary shares outstanding as a result of the net loss incurred in those periods.
11
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Net (loss)/income and net (loss)/income per share are presented in the condensed consolidated statements of operations .
Certain potential ordinary shares were excluded from our calculation of diluted weighted-average ordinary shares outstanding because either they would have had an anti–dilutive effect on net (loss)/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
For the six months ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Anti-dilutive shares excluded
2,959
1,358
2,172
1,185
Contingently issuable shares excluded
1,251
794
923
635
9. Inventories
The following table presents the components of inventories as of June 30, 2020 and December 31, 2019 :
June 30, 2020
December 31, 2019
Finished goods
$
190,142
$
197,531
Work-in-process
91,865
104,007
Raw materials
206,800
205,140
Inventories
$
488,807
$
506,678
10. Pension and Other Post-Retirement Benefits
The components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the three months ended June 30, 2020 and 2019 were as follows:
U.S. Plans
Non-U.S. Plans
Defined Benefit
Retiree Healthcare
Defined Benefit
Total
2020
2019
2020
2019
2020
2019
2020
2019
Service cost
$
—
$
—
$
3
$
2
$
939
$
632
$
942
$
634
Interest cost
206
399
36
53
396
338
638
790
Expected return on plan assets
( 293
)
( 451
)
—
—
( 172
)
( 176
)
( 465
)
( 627
)
Amortization of net loss
300
245
9
11
359
192
668
448
Amortization of prior service (credit)/cost
—
—
( 197
)
( 327
)
3
3
( 194
)
( 324
)
Loss on settlement
310
—
—
—
1,559
—
1,869
—
Net periodic benefit cost/(credit)
$
523
$
193
$
( 149
)
$
( 261
)
$
3,084
$
989
$
3,458
$
921
The components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the six months ended June 30, 2020 and 2019 were as follows:
U.S. Plans
Non-U.S. Plans
Defined Benefit
Retiree Healthcare
Defined Benefit
Total
2020
2019
2020
2019
2020
2019
2020
2019
Service cost
$
—
$
—
$
5
$
4
$
1,708
$
1,363
$
1,713
$
1,367
Interest cost
473
798
73
106
711
676
1,257
1,580
Expected return on plan assets
( 726
)
( 902
)
—
—
( 346
)
( 351
)
( 1,072
)
( 1,253
)
Amortization of net loss
595
490
19
22
595
383
1,209
895
Amortization of prior service (credit)/cost
—
—
( 393
)
( 654
)
5
6
( 388
)
( 648
)
Loss on settlement
4,332
—
—
—
1,559
—
5,891
—
Net periodic benefit cost/(credit)
$
4,674
$
386
$
( 296
)
$
( 522
)
$
4,232
$
2,077
$
8,610
$
1,941
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 ."
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11. Debt
Our long-term debt, finance lease, and other financing obligations as of June 30, 2020 and December 31, 2019 consisted of the following:
Maturity Date
June 30, 2020
December 31, 2019
Term Loan
September 20, 2026
$
458,411
$
460,725
4.875% Senior Notes
October 15, 2023
500,000
500,000
5.625% Senior Notes
November 1, 2024
400,000
400,000
5.0% Senior Notes
October 1, 2025
700,000
700,000
6.25% Senior Notes
February 15, 2026
750,000
750,000
4.375% Senior Notes
February 15, 2030
450,000
450,000
Revolving Credit Facility
March 27, 2024
400,000
—
Less: discount
( 10,681
)
( 11,758
)
Less: deferred financing costs
( 22,266
)
( 24,452
)
Less: current portion
( 404,631
)
( 4,630
)
Long-term debt, net
$
3,220,833
$
3,219,885
Finance lease and other financing obligations
$
30,654
$
31,098
Less: current portion
( 2,411
)
( 2,288
)
Finance lease and other financing obligations, less current portion
$
28,243
$
28,810
To enhance our financial flexibility given the general uncertainty associated with COVID-19 , we withdrew $ 400.0 million of our $ 420.0 million revolving credit facility (the " Revolving Credit Facility ") on April 1, 2020 . As of June 30, 2020 , we had $ 16.1 million available under the Revolving Credit Facility , net of $ 3.9 million of obligations related to outstanding letters of credit issued thereunder. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of June 30, 2020 , no amounts had been drawn against these outstanding letters of credit.
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 June 30, 2020 and December 31, 2019 , accrued interest totaled $ 43.4 million and $ 42.8 million , respectively.
12. Commitments and Contingencies
We are a defendant in a lawsuit, Wasica Finance Gmbh et al v. Schrader International Inc. et al, Case No. 13-1353-CPS, U.S.D.C., Delaware, in which the claimant alleges infringement of their patent (US 5,602,524) in connection with certain of our tire pressure monitoring system products. The patent in question has expired, and as a result, the claimant seeks damages for past alleged infringement with interest and costs. The asserted patent is the U.S. counterpart of a German patent that had been previously asserted against Schrader. Schrader succeeded in proving that German patent to be invalid. On February 14, 2020 , the federal jury trial related to this lawsuit concluded, and the jury found Schrader International Inc. liable for damages in the amount of $ 31.2 million . We recorded a loss of $ 29.2 million in the three months ended March 31, 2020 in cost of revenue. On July 6, 2020 , the court awarded an additional $ 12.1 million for plaintiffs and against us for pre-judgment interest-related damages. In the three months ended June 30, 2020 , we recorded a loss of $ 12.1 million through restructuring and other charges, net, to reflect the court's order. We continue to deny any wrongdoing in this matter and intend to appeal this ruling along with the court's pre-judgment interest award. As of June 30, 2020 , we have recorded an accrual of $ 43.3 million related to this matter in other long-term liabilities, based on timing of expected payment if our appeal is unsuccessful.
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 our Board at any time. We currently have an authorized $ 500.0 million share repurchase program under which approximately $ 302.3 million remained available as of June 30, 2020 . On April 2, 2020 , we announced a temporary suspension of this share repurchase program, which will continue to remain on hold until end market conditions show greater improvement and stability.
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Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss for the six months ended June 30, 2020 were as follows:
Cash Flow Hedges
Defined Benefit and Retiree Healthcare Plans
Accumulated Other Comprehensive Loss
Balance at December 31, 2019
$
16,546
$
( 37,030
)
$
( 20,484
)
Other comprehensive (loss)/income before reclassifications, net of tax
( 13,559
)
—
( 13,559
)
Reclassifications from accumulated other comprehensive loss, net of tax
( 10,942
)
5,014
( 5,928
)
Other comprehensive (loss)/income
( 24,501
)
5,014
( 19,487
)
Balance at June 30, 2020
$
( 7,955
)
$
( 32,016
)
$
( 39,971
)
The amounts reclassified from accumulated other comprehensive loss for the three and six months ended June 30, 2020 and 2019 were as follows:
For the three months ended June 30,
For the six months ended June 30,
Affected Line in Condensed Consolidated Statements of Operations
Component
2020
2019
2020
2019
Derivative instruments designated and qualifying as cash flow hedges:
Foreign currency forward contracts
$
( 6,392
)
$
( 6,493
)
$
( 13,015
)
$
( 9,712
)
Net revenue (1)
Foreign currency forward contracts
193
( 941
)
( 1,575
)
( 1,069
)
Cost of revenue (1)
Total, before taxes
( 6,199
)
( 7,434
)
( 14,590
)
( 10,781
)
(Loss)/income before taxes
Income tax effect
1,550
1,524
3,648
2,210
Provision for/(benefit from) income taxes
Total, net of taxes
$
( 4,649
)
$
( 5,910
)
$
( 10,942
)
$
( 8,571
)
Net (loss)/income
Defined benefit and retiree healthcare plans
$
2,343
$
124
$
6,712
$
247
Other, net (2)
Income tax effect
( 671
)
( 41
)
( 1,698
)
( 81
)
Provision for/(benefit from) income taxes
Total, net of taxes
$
1,672
$
83
$
5,014
$
166
Net (loss)/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 June 30, 2020 and December 31, 2019 are shown in the below table. All fair value measures presented are categorized in Level 2 of the fair value hierarchy.
June 30, 2020
December 31, 2019
Assets
Foreign currency forward contracts
$
10,140
$
23,561
Commodity forward contracts
3,526
3,623
Total
$
13,666
$
27,184
Liabilities
Foreign currency forward contracts
$
17,210
$
1,959
Commodity forward contracts
1,225
462
Total
$
18,435
$
2,421
Refer to Note 15, " Derivative Instruments and Hedging Activities ," for additional information related to our forward contracts.
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Measured on a Nonrecurring Basis
We evaluated our goodwill and other indefinite-lived intangible assets for impairment as of October 1, 2019 and determined that they were not impaired. As of June 30, 2020 , we have assessed the current and expected market impact of COVID-19 , including the impact on our forecasts, and have determined that our intangible assets (including goodwill) were not impaired as of June 30, 2020 .
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 June 30, 2020 and December 31, 2019 . All fair value measures presented are categorized in Level 2 of the fair value hierarchy.
June 30, 2020
December 31, 2019
Carrying Value (1)
Fair Value
Carrying Value (1)
Fair Value
Liabilities
Term Loan
$
458,411
$
453,827
$
460,725
$
464,181
4.875% Senior Notes
$
500,000
$
520,000
$
500,000
$
532,500
5.625% Senior Notes
$
400,000
$
425,000
$
400,000
$
444,000
5.0% Senior Notes
$
700,000
$
745,500
$
700,000
$
759,500
6.25% Senior Notes
$
750,000
$
781,875
$
750,000
$
808,125
4.375% Senior Notes
$
450,000
$
445,500
$
450,000
$
457,875
Revolving Credit Facility
$
400,000
$
400,000
$
—
$
—
___________________________________
(1) Excluding any related debt discounts and deferred financing costs.
Cash and cash equivalents are carried at cost, which approximates fair value because of their short-term nature.
In addition to the above, we hold certain equity investments that do not have readily determinable fair values for which we use the measurement alternative prescribed in FASB 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. There were no impairments or changes resulting from observable transactions for any of these investments, and no adjustments were made to their carrying values.
Refer to the table below for a detail of the carrying values of these investments, each of which were included as a component of other assets in the condensed consolidated balance sheets.
June 30, 2020
December 31, 2019
Quanergy Systems, Inc.
$
50,000
$
50,000
Lithium Balance
—
3,700
Total
$
50,000
$
53,700
15. Derivative Instruments and Hedging Activities
Hedges of Foreign Currency Risk
For the three and six months ended June 30, 2020 and 2019 , amounts excluded from the assessment of effectiveness of our foreign currency forward contracts that are designated as cash flow hedges were not material. As of June 30, 2020 , we estimated that $ 5.5 million of net losses will be reclassified from accumulated other comprehensive loss to earnings during the twelve-month period ending June 30, 2021 .
15
Table of Contents
As of June 30, 2020 , we had the following outstanding foreign currency forward contracts:
Notional
(in millions)
Effective Date(s)
Maturity Date(s)
Index (Exchange Rates)
Weighted-Average Strike Rate
Hedge
Designation (1)
10.0 EUR
June 26, 2020
July 31, 2020
Euro ("EUR") to USD
1.12 USD
Not designated
287.2 EUR
Various from August 2018 to June 2020
Variance from July 2020 to May 2022
EUR to USD
1.15 USD
Cash flow hedge
423.0 CNY
June 23, 2020
July 31, 2020
USD to Chinese Renminbi ("CNY")
7.09 CNY
Not designated
570.6 CNY
Various from December 2019 to January 2020
Various from July to December 2020
USD to CNY
7.00 CNY
Cash flow hedge
272.0 JPY
June 26, 2020
July 31, 2020
USD to Japanese Yen ("JPY")
107.08 JPY
Not designated
19,267.1 KRW
Various from August 2018 to June 2020
Various from July 2020 to May 2022
USD to Korean Won ("KRW")
1,163.13 KRW
Cash flow hedge
11.0 MYR
June 25, 2020
July 30, 2020
USD to Malaysian Ringgit ("MYR")
4.29 MYR
Not designated
192.0 MXN
June 26, 2020
July 31, 2020
USD to Mexican Peso ("MXN")
23.00 MXN
Not designated
2,821.1 MXN
Various from August 2018 to June 2020
Various from July 2020 to May 2022
USD to MXN
21.92 MXN
Cash flow hedge
7.0 GBP
June 26, 2020
July 31, 2020
British Pound Sterling ("GBP") to USD
1.24 USD
Not Designated
49.6 GBP
Various from August 2018 to June 2020
Various from July 2020 to May 2022
GBP to USD
1.28 USD
Cash flow hedge
_________________________
(1)
Derivative financial instruments not designated as hedges are used to manage our exposure to currency exchange rate risk. They are intended to preserve economic value, and they are not used for trading or speculative purposes.
Hedges of Commodity Risk
As of June 30, 2020 , we had the following outstanding commodity forward contracts, none of which were designated for hedge accounting treatment in accordance with FASB ASC Topic 815 , Derivatives and Hedging :
Commodity
Notional
Remaining Contracted Periods
Weighted-Average Strike Price Per Unit
Silver
743,321 troy oz.
July 2020 - June 2022
$ 16.96
Gold
7,095 troy oz.
July 2020 - June 2022
$ 1,525.01
Nickel
183,689 pounds
July 2020 - June 2022
$ 6.20
Aluminum
2,543,429 pounds
July 2020 - June 2022
$ 0.86
Copper
1,915,045 pounds
July 2020 - June 2022
$ 2.65
Platinum
7,071 troy oz.
July 2020 - June 2022
$ 889.56
Palladium
832 troy oz.
July 2020 - June 2022
$ 1,698.72
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Financial Instrument Presentation
The following table presents the fair values of our derivative financial instruments and their classification in the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019 :
Asset Derivatives
Liability Derivatives
Balance Sheet Location
June 30, 2020
December 31, 2019
Balance Sheet Location
June 30, 2020
December 31, 2019
Derivatives designated as hedging instruments
Foreign currency forward contracts
Prepaid expenses and other current assets
$
8,547
$
20,957
Accrued expenses and other current liabilities
$
12,966
$
1,055
Foreign currency forward contracts
Other assets
1,514
2,530
Other long-term liabilities
4,157
428
Total
$
10,061
$
23,487
$
17,123
$
1,483
Derivatives not designated as hedging instruments
Commodity forward contracts
Prepaid expenses and other current assets
$
2,732
$
3,069
Accrued expenses and other current liabilities
$
986
$
394
Commodity forward contracts
Other assets
794
554
Other long-term liabilities
239
68
Foreign currency forward contracts
Prepaid expenses and other current assets
79
74
Accrued expenses and other current liabilities
87
476
Total
$
3,605
$
3,697
$
1,312
$
938
These fair value measurements were all categorized within Level 2 of the fair value hierarchy.
The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive (loss)/income for the three months ended June 30, 2020 and 2019 :
Derivatives designated as
hedging instruments
Amount of Deferred (Loss)/Gain Recognized in Other Comprehensive (Loss)/Income
Location of Net Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Net (Loss)/Income
Amount of Net Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Net (Loss)/Income
2020
2019
2020
2019
Foreign currency forward contracts
$
( 5,954
)
$
1,209
Net revenue
$
6,392
$
6,493
Foreign currency forward contracts
$
5,267
$
382
Cost of revenue
$
( 193
)
$
941
Derivatives not designated as
hedging instruments
Amount of Gain/(Loss) Recognized in Net (Loss)/Income
Location of Gain/(Loss) Recognized in Net (Loss)/Income
2020
2019
Commodity forward contracts
$
5,427
$
( 102
)
Other, net
Foreign currency forward contracts
$
417
$
1,039
Other, net
The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive (loss)/income for the six months ended June 30, 2020 and 2019 :
Derivatives designated as
hedging instruments
Amount of Deferred Gain/(Loss) Recognized in Other Comprehensive (Loss)/Income
Location of Net Gain Reclassified from Accumulated Other Comprehensive Loss into Net (Loss)/Income
Amount of Net Gain Reclassified from Accumulated Other Comprehensive Loss into Net (Loss)/Income
2020
2019
2020
2019
Foreign currency forward contracts
$
6,590
$
10,327
Net revenue
$
13,015
$
9,712
Foreign currency forward contracts
$
( 24,363
)
$
6,460
Cost of revenue
$
1,575
$
1,069
Derivatives not designated as
hedging instruments
Amount of (Loss)/Gain Recognized in Net (Loss)/Income
Location of (Loss)/Gain Recognized in Net (Loss)/Income
2020
2019
Commodity forward contracts
$
( 148
)
$
1,021
Other, net
Foreign currency forward contracts
$
( 3,364
)
$
1,517
Other, net
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Credit Risk Related Contingent Features
We have agreements with certain of our derivative counterparties that contain a provision whereby if we default on our indebtedness and repayment of the indebtedness has been accelerated by the lender, then we could also be declared in default on our derivative obligations.
As of June 30, 2020 , the termination value of outstanding derivatives in a liability position, excluding any adjustment for non-performance risk, was $ 18.5 million . As of June 30, 2020 , we had no t posted any cash collateral related to these agreements. If we breach any of the default provisions on any of our indebtedness as described above, we could be required to settle our obligations under the derivative agreements at their termination values.
16. Segment Reporting
I n the three months ended June 30, 2020 , we altered the way we measure segment operating income in order to align with a change to the performance measures provided to and used by our chief operating decision maker for purposes of assessing performance and deciding how to allocate resources to each segment. Whereas research and development ("R&D") and selling, general and administrative ("SG&A") expenses related to our megatrend initiatives were historically allocated to our operating segments, beginning in the second quarter these amounts are presented within corporate and other. Prior period information has been recast to reflect this revised presentation.
We operate in, and report financial information for, the following two reportable segments, Performance Sensing and Sensing Solutions, each of which is also an operating segment. Our operating segments are businesses that we manage as components of an enterprise, for which separate financial information is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and assess performance.
An operating segment’s performance is primarily evaluated based on segment operating income, which excludes amortization of intangible assets, restructuring and other charges, net, certain costs associated with our strategic megatrend initiatives, and certain corporate costs/credits not associated with the operations of the segment, including share-based compensation expense and a portion of depreciation expense associated with assets recorded in connection with acquisitions. Corporate and other costs excluded from an operating segment’s performance are separately stated below and also include costs that are related to functional areas, such as finance, information technology, legal, and human resources. We believe that segment operating income, as defined above, is an appropriate measure for evaluating the operating performance of our segments. However, this measure should be considered in addition to, and not as a substitute for, or superior to, operating income or other measures of financial performance prepared in accordance with U.S. GAAP . The accounting policies of each of our reporting segments are materially consistent with those in the summary of significant accounting policies as described in Note 2, "Significant Accounting Policies" included in our Annual Report on Form 10-K for the year ended December 31, 2019 .
18
Table of Contents
The following table presents net revenue and segment operating income for the reported segments and other operating results not allocated to the reported segments for the three and six months ended June 30, 2020 and 2019 (recast to reflect realignment of performance measures as discussed above):
For the three months ended
For the six months ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Net revenue:
Performance Sensing
$
385,207
$
644,516
$
953,896
$
1,284,544
Sensing Solutions
191,298
239,210
396,878
469,681
Total net revenue
$
576,505
$
883,726
$
1,350,774
$
1,754,225
Segment operating income (as defined above):
Performance Sensing
$
60,756
$
173,420
$
195,802
$
328,742
Sensing Solutions
55,787
77,731
112,316
153,256
Total segment operating income
116,543
251,151
308,118
481,998
Corporate and other
( 47,450
)
( 51,371
)
( 142,836
)
( 98,170
)
Amortization of intangible assets
( 32,743
)
( 36,031
)
( 65,835
)
( 72,174
)
Restructuring and other charges, net
( 38,218
)
( 16,310
)
( 42,716
)
( 21,619
)
Operating (loss)/income
( 1,868
)
147,439
56,731
290,035
Interest expense, net
( 40,808
)
( 39,608
)
( 80,211
)
( 78,861
)
Other, net
1,576
( 3,554
)
( 10,705
)
( 365
)
(Loss)/income before taxes
$
( 41,100
)
$
104,277
$
( 34,185
)
$
210,809
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Cautionary Statements Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q , including any documents incorporated by reference herein, includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These forward-looking statements also relate to our future prospects, developments, and business strategies and may be identified by terminology such as "may," "will," "could," "should," "expect," "anticipate," "believe," "estimate," "predict," "project," "forecast," "continue," "intend," "plan," and similar terms or phrases, or the negative of such terminology, including references to assumptions. However, these terms are not the exclusive means of identifying such statements.
Forward-looking statements contained herein, or in other statements made by us, are made based on management’s expectations and beliefs concerning future events impacting us. These statements are subject to uncertainties and other important factors relating to our operations and business environment, all of which are difficult to predict, and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurances that any of the events anticipated by these forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition.
We believe that the following important factors, among others (including those set forth here and described in Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019 ), could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf:
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Future risks and existing uncertainties associated with the COVID-19 pandemic, which continues to have a significant adverse impact on our business and operations including: (i) full or partial shutdowns of our facilities as mandated by government decrees, (ii) limited ability to adjust certain costs due to government actions, (iii) significant travel restrictions and “work-from-home” orders limiting the availability of our workforce, (iv) supplier constraints and supply-chain interruptions, (v) logistics challenges and limitations, (vi) reduced demand from certain customers, (vi) uncertainties associated with a protracted economic slowdown that could negatively affect the financial condition of our customers and suppliers, and (vii) uncertainties and volatility in the global capital markets;
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business disruptions due to natural disasters or other disasters outside our control, such as the global COVID-19 pandemic.
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instability and changes in the global markets, including regulatory, political, economic, governmental, and military matters, such as the recent exit of the United Kingdom (the " U.K. ") from the European Union (the " EU ");
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adverse conditions or competition in the industries upon which we are dependent, including the automotive industry;
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competitive pressure from customers that could require us to reduce prices or result in reduced demand;
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losses and costs as a result of intellectual property, product liability, warranty, and recall claims;
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market acceptance of new product introductions and product innovations;
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supplier interruption or non-performance, limiting our access to manufactured components or raw materials;
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risks related to the acquisition or disposition of businesses, or the restructuring of our business;
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labor disruptions or increased labor costs;
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inability to realize all of the revenue or achieve anticipated gross margins from products subject to existing purchase orders for which we are currently engaged in development;
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security breaches, cyber theft of our intellectual property, and other disruptions to our information technology infrastructure, or improper disclosure of confidential, personal, or proprietary data;
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foreign currency risks, changes in socio-economic conditions, or changes to monetary and fiscal policies;
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our level of indebtedness, or our inability to meet debt service obligations or comply with the covenants contained in the credit agreement and senior notes indentures;
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changes to current policies, such as trade tariffs, by the U.S. government;
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risks related to the potential for goodwill impairment;
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the impact of challenges by taxing authorities of our historical and future tax positions or our allocation of taxable income among our subsidiaries, and challenges to the sovereign taxation regimes of EU member states by the European Commission and the Organization for Economic Co-operation and Development;
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changes to, or inability to comply with, various regulations, including tax laws, import/export regulations, anti-bribery laws, environmental, health, and safety laws, and other governmental regulations; and
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risks related to our domicile in the U.K.
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In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments, such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.
All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements contained in this Quarterly Report on Form 10-Q . We undertake no obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. We urge readers to review carefully the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2019 and in the other documents that we file with the U.S. Securities and Exchange Commission. You can read these documents at www.sec.gov or on our website at www.sensata.com .
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