Sensata Technologies Holding plc 10-Q

Item 1. Financial Statements. SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Balance Sheets (In thousands, except per share amounts) (unaudited) September 30, 2020 December 31, 2019 Assets Current assets: Cash and cash equivalents $ 1,610,191 $ 774,119 Accounts receivable, net of allowances of $ 17,151 and $ 15,129 as of September 30, 2020 and December 31, 2019, respectively 565,184 557,874 Inventories 438,188 506,678 Prepaid expenses and other current assets 100,316 126,981 Total current assets 2,713,879 1,965,652 Property, plant and equipment, net 807,092 830,998 Goodwill 3,117,569 3,093,598 Other intangible assets, net of accumulated amortization of $ 2,137,916 and $ 2,039,436 as of September 30, 2020 and December 31, 2019, respectively 715,797 770,904 Deferred income tax assets 29,714 21,150 Other assets 175,443 152,217 Total assets $ 7,559,494 $ 6,834,519 Liabilities and shareholders’ equity Current liabilities: Current portion of long-term debt, finance lease and other financing obligations $ 7,049 $ 6,918 Accounts payable 319,424 376,968 Income taxes payable 11,428 35,234 Accrued expenses and other current liabilities 288,514 215,626 Total current liabilities 626,415 634,746 Deferred income tax liabilities 241,554 251,033 Pension and other post-retirement benefit obligations 31,090 36,100 Finance lease and other financing obligations, less current portion 28,360 28,810 Long-term debt, net 3,963,076 3,219,885 Other long-term liabilities 94,355 90,190 Total liabilities 4,984,850 4,260,764 Commitments and contingencies (Note 12) Shareholders’ equity: Ordinary shares, € 0.01 nominal value per share, 177,069 shares authorized, and 172,875 and 172,561 shares issued, as of September 30, 2020 and December 31, 2019, respectively 2,216 2,212 Treasury shares, at cost, 15,631 and 14,733 shares as of September 30, 2020 and December 31, 2019, respectively ( 784,596 ) ( 749,421 ) Additional paid-in capital 1,741,538 1,725,091 Retained earnings 1,656,639 1,616,357 Accumulated other comprehensive loss ( 41,153 ) ( 20,484 ) Total shareholders’ equity 2,574,644 2,573,755 Total liabilities and shareholders’ equity $ 7,559,494 $ 6,834,519 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (unaudited) For the three months ended For the nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Net revenue $ 788,313 $ 849,715 $ 2,139,087 $ 2,603,940 Operating costs and expenses: Cost of revenue 530,255 554,910 1,509,104 1,710,951 Research and development 33,423 38,189 98,115 109,970 Selling, general and administrative 75,747 68,158 217,698 210,733 Amortization of intangible assets 32,562 35,905 98,397 108,079 Restructuring and other charges, net ( 10,519 ) 6,421 32,197 28,040 Total operating costs and expenses 661,468 703,583 1,955,511 2,167,773 Operating income 126,845 146,132 183,576 436,167 Interest expense, net ( 44,129 ) ( 39,556 ) ( 124,340 ) ( 118,417 ) Other, net 9,194 ( 7,560 ) ( 1,511 ) ( 7,925 ) Income before taxes 91,910 99,016 57,725 309,825 Provision for income taxes 15,181 28,341 15,106 80,649 Net income $ 76,729 $ 70,675 $ 42,619 $ 229,176 Basic net income per share $ 0.49 $ 0.44 $ 0.27 $ 1.42 Diluted net income per share $ 0.49 $ 0.44 $ 0.27 $ 1.41 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Comprehensive Income (In thousands) (unaudited) For the three months ended For the nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Net income $ 76,729 $ 70,675 $ 42,619 $ 229,176 Other comprehensive (loss)/income: Cash flow hedges ( 2,197 ) 6,917 ( 26,698 ) 12,331 Defined benefit and retiree healthcare plans 1,015 83 6,029 249 Other comprehensive (loss)/income ( 1,182 ) 7,000 ( 20,669 ) 12,580 Comprehensive income $ 75,547 $ 77,675 $ 21,950 $ 241,756 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) For the nine months ended September 30, 2020 September 30, 2019 Cash flows from operating activities: Net Income $ 42,619 $ 229,176 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 94,216 84,354 Amortization of debt issuance costs 5,026 5,573 Share-based compensation 14,212 15,188 Loss on debt financing — 4,364 Amortization of intangible assets 98,397 108,079 Deferred income taxes ( 11,600 ) 20,313 Unrealized loss on derivative instruments and other 5,876 23,545 Changes in operating assets and liabilities, net of the effects of acquisitions: Accounts receivable, net ( 5,205 ) ( 12,119 ) Inventories 71,207 ( 7,192 ) Prepaid expenses and other current assets 15,689 4,281 Accounts payable and accrued expenses ( 10,939 ) ( 40,092 ) Income taxes payable ( 23,806 ) 2,028 Other ( 2,354 ) ( 3,971 ) Net cash provided by operating activities 293,338 433,527 Cash flows from investing activities: Acquisitions, net of cash received ( 64,452 ) ( 32,315 ) Additions to property, plant and equipment and capitalized software ( 79,939 ) ( 123,206 ) Investment in debt and equity securities ( 24,794 ) ( 9,950 ) Other 10,717 4,947 Net cash used in investing activities ( 158,468 ) ( 160,524 ) Cash flows from financing activities: Proceeds from exercise of stock options and issuance of ordinary shares 2,237 10,309 Payment of employee restricted stock tax withholdings ( 2,335 ) ( 6,953 ) Proceeds from borrowings on debt 1,150,000 450,000 Payments on debt ( 406,568 ) ( 461,190 ) Payments to repurchase ordinary shares ( 35,175 ) ( 265,846 ) Payments of debt and equity issuance costs ( 6,957 ) ( 7,770 ) Net cash provided by/(used in) financing activities 701,202 ( 281,450 ) Net change in cash and cash equivalents 836,072 ( 8,447 ) Cash and cash equivalents, beginning of period 774,119 729,833 Cash and cash equivalents, end of period $ 1,610,191 $ 721,386 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents 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 June 30, 2020 172,844 $ 2,215 ( 15,631 ) $ ( 784,596 ) $ 1,735,826 $ 1,579,931 $ ( 39,971 ) $ 2,493,405 Surrender of shares for tax withholding — — — ( 21 ) — — — ( 21 ) Stock options exercised 29 1 — — 1,090 — — 1,091 Vesting of restricted securities 2 — — — — — — — Retirement of ordinary shares — — — 21 — ( 21 ) — — Share-based compensation — — — — 4,622 — — 4,622 Net income — — — — — 76,729 — 76,729 Other comprehensive loss — — — — — — ( 1,182 ) ( 1,182 ) Balance as of September 30, 2020 172,875 $ 2,216 ( 15,631 ) $ ( 784,596 ) $ 1,741,538 $ 1,656,639 $ ( 41,153 ) $ 2,574,644 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 ) ( 2,335 ) — — — ( 2,335 ) Stock options exercised 84 2 — — 2,235 — — 2,237 Vesting of restricted securities 313 3 — — — ( 3 ) — — Repurchase of ordinary shares — — ( 898 ) ( 35,175 ) — — — ( 35,175 ) Retirement of ordinary shares ( 83 ) ( 1 ) 83 2,335 — ( 2,334 ) — — Share-based compensation — — — — 14,212 — — 14,212 Net income — — — — — 42,619 — 42,619 Other comprehensive loss — — — — — — ( 20,669 ) ( 20,669 ) Balance as of September 30, 2020 172,875 $ 2,216 ( 15,631 ) $ ( 784,596 ) $ 1,741,538 $ 1,656,639 $ ( 41,153 ) $ 2,574,644 Ordinary Shares Treasury Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Number Amount Number Amount 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 Surrender of shares for tax withholding — — ( 4 ) ( 175 ) — — — ( 175 ) Stock options exercised 93 2 — — 3,208 — — 3,210 Vesting of restricted securities 13 — — — — — — — Repurchase of ordinary shares — — ( 2,098 ) ( 97,648 ) — — — ( 97,648 ) Retirement of ordinary shares ( 4 ) — 4 175 — ( 175 ) — — Share-based compensation — — — — 2,763 — — 2,763 Net income — — — — — 70,675 — 70,675 Other comprehensive income — — — — — — 7,000 7,000 Balance as of September 30, 2019 172,427 $ 2,211 ( 13,084 ) $ ( 665,263 ) $ 1,716,682 $ 1,562,856 $ ( 13,598 ) $ 2,602,888 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 — — ( 148 ) ( 6,953 ) — — — ( 6,953 ) Stock options exercised 405 5 — — 10,304 — — 10,309 Vesting of restricted securities 451 5 — — — ( 5 ) — — Repurchase of ordinary shares — — ( 5,513 ) ( 265,846 ) — — — ( 265,846 ) Retirement of ordinary shares ( 148 ) ( 2 ) 148 6,953 — ( 6,951 ) — — Share-based compensation — — — — 15,188 — — 15,188 Net income — — — — — 229,176 — 229,176 Other comprehensive income — — — — — — 12,580 12,580 Balance as of September 30, 2019 172,427 $ 2,211 ( 13,084 ) $ ( 665,263 ) $ 1,716,682 $ 1,562,856 $ ( 13,598 ) $ 2,602,888 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents 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 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 table presents net revenue disaggregated by segment and end market for the three months ended September 30, 2020 and 2019: For the three months ended September 30, 2020 For the three months ended September 30, 2019 Performance Sensing Sensing Solutions Total Performance Sensing Sensing Solutions Total Automotive $ 456,200 $ 7,801 $ 464,001 $ 493,675 $ 10,738 $ 504,413 HVOR (1) 124,736 — 124,736 134,918 — 134,918 Industrial — 87,174 87,174 — 83,718 83,718 Appliance and HVAC (2) — 47,618 47,618 — 49,724 49,724 Aerospace — 31,740 31,740 — 41,962 41,962 Other — 33,044 33,044 — 34,980 34,980 Total $ 580,936 $ 207,377 $ 788,313 $ 628,593 $ 221,122 $ 849,715 ________________________ (1) Heavy vehicle and off-road (2) Heating, ventilation and air conditioning 8 Table of Contents The following table presents net revenue disaggregated by segment and end market for the nine months ended September 30, 2020 and 2019: For the nine months ended September 30, 2020 For the nine months ended September 30, 2019 Performance Sensing Sensing Solutions Total Performance Sensing Sensing Solutions Total Automotive $ 1,180,402 $ 23,316 $ 1,203,718 $ 1,483,986 $ 32,838 $ 1,516,824 HVOR 354,430 — 354,430 429,151 — 429,151 Industrial — 247,037 247,037 — 272,177 272,177 Appliance and HVAC — 136,703 136,703 — 157,260 157,260 Aerospace — 101,057 101,057 — 129,843 129,843 Other — 96,142 96,142 — 98,685 98,685 Total $ 1,534,832 $ 604,255 $ 2,139,087 $ 1,913,137 $ 690,803 $ 2,603,940 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 nine months ended September 30, 2020 and 2019: For the three months ended For the nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Stock options $ 179 $ 1,499 $ 2,721 $ 4,987 Restricted securities 4,443 1,264 11,491 10,201 Share-based compensation expense $ 4,622 $ 2,763 $ 14,212 $ 15,188 Equity Awards We granted the following restricted stock units ("RSUs" and each, an "RSU") and performance-based restricted stock units ("PRSUs" and each, a "PRSU") under the Sensata Technologies Holding plc First Amended and Restated 2010 Equity Incentive Plan during the nine months ended September 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) 748 N/A $ 28.37 Various executives and employees PRSU (3) 401 0.0 % - 172.5 % $ 28.22 __________________________ (1) These RSUs 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 RSUs that vest ratably over three years , one-third per year beginning on the first anniversary of the grant date. These RSUs will fully vest on various dates between April 2023 and September 2023. (3) These PRSUs vest on various dates between April 2023 and September 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. 9 Table of Contents 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 $ 38.0 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. 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 $ 13.7 $ 3.0 $ 4.0 Sensing Solutions 335 10.2 10.9 5.0 6.0 Corporate and other 431 12.2 13.4 — — Total 980 $ 35.0 $ 38.0 $ 8.0 $ 10.0 Charges recognized in the nine months ended September 30, 2020 related to the Q2 2020 Global Restructure Program are presented by segment below. All charges related to severance costs and were recorded in restructuring and other charges, net. For the nine months ended September 30, 2020 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 nine months ended September 30, 2020 and 2019: For the three months ended For the nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Q2 2020 Global Restructure Program charges $ — $ — $ 24,120 $ — Other restructuring charges Severance costs, net (1) 206 5,549 4,103 23,035 Facility and other exit costs 423 208 423 245 Other (2) ( 11,148 ) 664 3,551 4,760 Restructuring and other charges, net $ ( 10,519 ) $ 6,421 $ 32,197 $ 28,040 ___________________________________ (1) Severance costs, net (excluding those related to the Q2 2020 Global Restructure Program) for the nine months ended September 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 nine months ended September 30, 2019 included termination benefits provided in connection with workforce reductions of manufacturing, engineering, and administrative positions including the elimination of certain positions related to site consolidations. Severance costs, net for the three months ended September 30, 2019 also included $ 6.5 million of termination benefits provided under a one-time benefit arrangement related to the shutdown and relocation of an operating site in Germany. Severance costs, net for the nine months ended September 30, 2019 also included approximately $ 12.7 million of benefits provided under a voluntary retirement incentive program offered to a limited number of eligible employees in the U.S. (2) In the three months ended September 30, 2020, we settled a patent infringement case brought by Wasica Finance GmbH ("Wasica") against Schrader, and released $ 11.7 million of the related liability, which is presented in restructuring and other charges, net. Refer to Note 12, "Commitments and Contingencies," for additional information related to this matter. For the nine months ended September 30, 2020, this release largely offset a charge of $ 12.1 million resulting from a prejudgment interest-related award granted by the court on behalf of Wasica in the three months ended June 30, 2020. Other charges in the three and nine months ended September 30, 2020 and 2019 primarily related to deferred compensation incurred in connection with the acquisition of GIGAVAC, LLC. 10 Table of Contents The following table presents a rollforward of the severance portion of our restructuring obligations for the nine months ended September 30, 2020. All balances at September 30, 2020 are presented in accrued expenses and other current liabilities on our condensed consolidated balance sheets. Q2 2020 Global Restructure Program Other Total Balance at December 31, 2019 $ — $ 14,779 $ 14,779 Charges, net of reversals 24,120 4,103 28,223 Payments ( 11,601 ) ( 12,972 ) ( 24,573 ) Foreign currency remeasurement 333 ( 224 ) 109 Balance at September 30, 2020 $ 12,852 $ 5,686 $ 18,538 6. Other, Net The following table presents the components of other, net for the three and nine months ended September 30, 2020 and 2019: For the three months ended For the nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Currency remeasurement gain/(loss) on net monetary assets $ 5,422 $ ( 6,031 ) $ 5,878 $ ( 8,492 ) (Loss)/gain on foreign currency forward contracts ( 1,060 ) 1,289 ( 4,424 ) 2,806 Gain on commodity forward contracts 6,138 1,786 5,990 2,807 Loss on debt refinancing — ( 4,364 ) — ( 4,364 ) Net periodic benefit cost, excluding service cost ( 1,506 ) ( 272 ) ( 8,403 ) ( 846 ) Other 200 32 ( 552 ) 164 Other, net $ 9,194 $ ( 7,560 ) $ ( 1,511 ) $ ( 7,925 ) 7. Income Taxes The following table presents the provision for income taxes for the three and nine months ended September 30, 2020 and 2019: For the three months ended For the nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Provision for income taxes $ 15,181 $ 28,341 $ 15,106 $ 80,649 The decrease in total tax from the prior periods was predominantly related to the overall decrease in income before taxes 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 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. 11 Table of Contents 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 and nine months ended September 30, 2020 and 2019 the weighted-average ordinary shares outstanding used to calculate basic and diluted net income per share were as follows: For the three months ended For the nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Basic weighted-average ordinary shares outstanding 157,220 160,458 157,335 161,774 Dilutive effect of stock options 233 530 211 578 Dilutive effect of unvested restricted securities 526 320 444 417 Diluted weighted-average ordinary shares outstanding 157,979 161,308 157,990 162,769 Net income and net income per share are presented in the condensed consolidated statements of operations. Certain potential ordinary shares were excluded from our calculation of diluted weighted-average ordinary shares outstanding because 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 For the nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Anti-dilutive shares excluded 1,680 1,381 1,868 1,251 Contingently issuable shares excluded 1,183 767 1,010 679 9. Inventories The following table presents the components of inventories as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Finished goods $ 162,186 $ 197,531 Work-in-process 90,117 104,007 Raw materials 185,885 205,140 Inventories $ 438,188 $ 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 September 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 $ — $ — $ 2 $ 2 $ 777 $ 715 $ 779 $ 717 Interest cost 206 394 37 48 294 332 537 774 Expected return on plan assets ( 292 ) ( 442 ) — — ( 177 ) ( 175 ) ( 469 ) ( 617 ) Amortization of net loss 311 242 ( 1 ) 7 257 191 567 440 Amortization of prior service (credit)/cost — — ( 196 ) ( 327 ) 2 2 ( 194 ) ( 325 ) Loss on settlement 31 — — — 785 — 816 — Loss on curtailment — — 249 — — — 249 — Net periodic benefit cost/(credit) $ 256 $ 194 $ 91 $ ( 270 ) $ 1,938 $ 1,065 $ 2,285 $ 989 12 Table of Contents The components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the nine months ended September 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 $ — $ — $ 7 $ 6 $ 2,485 $ 2,078 $ 2,492 $ 2,084 Interest cost 679 1,192 110 154 1,005 1,008 1,794 2,354 Expected return on plan assets ( 1,018 ) ( 1,344 ) — — ( 523 ) ( 526 ) ( 1,541 ) ( 1,870 ) Amortization of net loss 906 732 18 29 852 574 1,776 1,335 Amortization of prior service (credit)/cost — — ( 589 ) ( 981 ) 7 8 ( 582 ) ( 973 ) Loss on settlement 4,363 — — — 2,344 — 6,707 — Loss on curtailment — — 249 — — — 249 — Net periodic benefit cost/(credit) $ 4,930 $ 580 $ ( 205 ) $ ( 792 ) $ 6,170 $ 3,142 $ 10,895 $ 2,930 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 Our long-term debt, finance lease, and other financing obligations as of September 30, 2020 and December 31, 2019 consisted of the following: Maturity Date September 30, 2020 December 31, 2019 Term Loan September 20, 2026 $ 457,254 $ 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 3.75 % Senior Notes February 15, 2031 750,000 — Less: discount ( 10,143 ) ( 11,758 ) Less: deferred financing costs ( 29,404 ) ( 24,452 ) Less: current portion ( 4,631 ) ( 4,630 ) Long-term debt, net $ 3,963,076 $ 3,219,885 Finance lease and other financing obligations $ 30,778 $ 31,098 Less: current portion ( 2,418 ) ( 2,288 ) Finance lease and other financing obligations, less current portion $ 28,360 $ 28,810 Revolving Credit Facility On April 1, 2020, in order to enhance our financial flexibility given the general uncertainty associated with COVID-19, we withdrew $ 400.0 million from our $ 420.0 million revolving credit facility (the "Revolving Credit Facility"). On August 17, 2020, we repaid these borrowings using a portion of the proceeds from issuance of the 3.75 % Senior Notes, as detailed below. As of September 30, 2020, we had $ 416.1 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 September 30, 2020, no amounts had been drawn against these outstanding letters of credit. 13 Table of Contents 3.75 % Senior Notes On August 17, 2020, our indirect, wholly-owned subsidiary, Sensata Technologies, Inc. ("STI"), completed the issuance and sale of $ 750.0 million aggregate principal amount of 3.75 % senior notes due 2031 (the " 3.75 % Senior Notes"). A portion of the proceeds of the issuance of the 3.75 % Senior Notes was used to repay approximately $ 400.0 million of outstanding borrowings under the Revolving Credit Facility as well as to pay fees and expenses in connection with the offering of the 3.75 % Senior Notes and related transactions. The 3.75 % Senior Notes were issued under an indenture dated as of August 17, 2020 among STI, as issuer, The Bank of New York Mellon, as trustee, and our guarantor subsidiaries named therein (the "3.75% Senior Notes Indenture"). The 3.75% Senior Notes Indenture contains covenants that limit the ability of our indirect, wholly-owned subsidiary, Sensata Technologies B.V. ("STBV") and its subsidiaries (including STI) to, among other things: incur liens; engage in sale and leaseback transactions; with respect to any subsidiary of STBV (other than STI), incur indebtedness without such subsidiary’s guaranteeing the 3.75 % Senior Notes; or consolidate, merge with, or sell, assign, convey, transfer, lease, or otherwise dispose of all or substantially all of their properties or assets to, another person. These covenants are subject to important exceptions and qualifications set forth in the 3.75% Senior Notes Indenture. The 3.75 % Senior Notes bear interest at 3.75 % per year and mature on February 15, 2031. Interest is payable semi-annually on February 15 and August 15 of each year, commencing on February 15, 2021. The 3.75 % Senior Notes are guaranteed by STBV and all of the subsidiaries of STBV (other than STI) that guarantee the obligations of (1) STI under its senior secured credit facilities and 4.375 % Senior Notes due 2030, (2) STBV under the 4.875 % Senior Notes due 2023, 5.625 % Senior Notes due 2024, and 5.0 % Senior Notes due 2025, and (3) Sensata Technologies UK Financing Co. plc under the 6.25 % Senior Notes due 2026. At any time, and from time to time, prior to February 15, 2026, STI may redeem the 3.75 % Senior Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount of the 3.75 % Senior Notes being redeemed, plus a “make whole” premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time on or after February 15, 2026, STI may redeem the 3.75 % Senior Notes, in whole or in part, at the following prices (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, up to but excluding the redemption date. Period beginning February 15, Price 2026 101.875 % 2027 100.938 % 2028 and thereafter 100.000 % In addition, at any time prior to August 15, 2023, STI may redeem up to 40 % of the principal amount of the outstanding 3.75 % Senior Notes (including additional 3.75 % Senior Notes, if any) with the net cash proceeds of certain equity offerings at a redemption price (expressed as a percentage of principal amount) of 103.75 %, plus accrued and unpaid interest, if any, up to but excluding the redemption date, provided that at least 60 % of the aggregate principal amount of the 3.75 % Senior Notes (including additional 3.75 % Senior Notes, if any) remains outstanding immediately after each such redemption. Upon the occurrence of certain changes in control, each holder of the 3.75 % Senior Notes will have the right to require STI to repurchase the 3.75 % Senior Notes at 101 % of their principal amount plus accrued and unpaid interest, if any, up to but excluding the date of repurchase. Upon changes in certain tax laws or treaties, or any change in the official application, administration, or interpretation thereof, STI may, at its option, redeem the 3.75 % Senior Notes, in whole but not in part, at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest, if any, up to but excluding the redemption date, and all Additional Amounts (as defined in the 3.75% Senior Notes Indenture), if any, then due and which will become due on the date of redemption. Accounting for Debt Financing Transactions We account for our debt financing transactions as disclosed in Note 2, "Significant Accounting Policies" of the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019. In connection with of the issuance of the 3.75 % Senior Notes, we recognized $ 8.4 million of deferred financing costs, which are presented as a reduction of long-term debt on our condensed consolidated balance sheets. 14 Table of Contents 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 September 30, 2020 and December 31, 2019, accrued interest totaled $ 50.4 million and $ 42.8 million, respectively. 12. Commitments and Contingencies We were 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 alleged 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 sought damages for past alleged infringement with interest and costs. The asserted patent was 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, a jury found us liable for damages in the amount of $ 31.2 million. As a result, we recorded a loss of $ 29.2 million in the three months ended March 31, 2020 through cost of revenue. On July 6, 2020, the court awarded an additional $ 12.1 million for plaintiffs and against us for prejudgment interest-related damages, and as a result, 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. The parties executed and closed a Litigation Settlement & License Agreement on September 18, 2020 to settle the matter for $ 31.6 million. As a result of this settlement, in the three months ended September 30, 2020, we recognized a gain of $ 11.7 million, presented in restructuring and other charges, net. The lawsuit was formally dismissed by the District Court (D. Del) on September 22, 2020, and the U.S. Court of Appeals for the Federal Circuit on September 24, 2020. 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 September 30, 2020. On April 2, 2020, we announced a temporary suspension of this share repurchase program, which will continue to remain on hold until market conditions show greater improvement and stability. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss for the nine months ended September 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 before reclassifications, net of tax ( 17,815 ) — ( 17,815 ) Reclassifications from accumulated other comprehensive loss, net of tax ( 8,883 ) 6,029 ( 2,854 ) Other comprehensive (loss)/income ( 26,698 ) 6,029 ( 20,669 ) Balance at September 30, 2020 $ ( 10,152 ) $ ( 31,001 ) $ ( 41,153 ) 15 Table of Contents The amounts reclassified from accumulated other comprehensive loss for the three and nine months ended September 30, 2020 and 2019 were as follows: For the three months ended September 30, For the nine months ended September 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 $ ( 625 ) $ ( 7,615 ) $ ( 13,640 ) $ ( 17,327 ) Net revenue (1) Foreign currency forward contracts 3,371 ( 968 ) 1,796 ( 2,037 ) Cost of revenue (1) Total, before taxes 2,746 ( 8,583 ) ( 11,844 ) ( 19,364 ) Income before taxes Income tax effect ( 687 ) 1,760 2,961 3,970 Provision for income taxes Total, net of taxes $ 2,059 $ ( 6,823 ) $ ( 8,883 ) $ ( 15,394 ) Net income Defined benefit and retiree healthcare plans $ 1,438 $ 115 $ 8,150 $ 362 Other, net (2) Income tax effect ( 423 ) ( 32 ) ( 2,121 ) ( 113 ) Provision for income taxes Total, net of taxes $ 1,015 $ 83 $ 6,029 $ 249 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 September 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. September 30, 2020 December 31, 2019 Assets Foreign currency forward contracts $ 5,601 $ 23,561 Commodity forward contracts 7,266 3,623 Total $ 12,867 $ 27,184 Liabilities Foreign currency forward contracts $ 16,919 $ 1,959 Commodity forward contracts 870 462 Total $ 17,789 $ 2,421 Refer to Note 15, "Derivative Instruments and Hedging Activities," for additional information related to our forward contracts. 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. We assessed the current and expected market impact of COVID-19, including the impact on our forecasts, as of June 30, 2020, and determined that our intangible assets (including goodwill) were not impaired. During the three months September 30, 2020, no events or changes in circumstances occurred that would have triggered the need for an additional impairment review of these assets. 16 Table of Contents 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 September 30, 2020 and December 31, 2019. All fair value measures presented are categorized in Level 2 of the fair value hierarchy. September 30, 2020 December 31, 2019 Carrying Value (1) Fair Value Carrying Value (1) Fair Value Liabilities Term Loan $ 457,254 $ 452,681 $ 460,725 $ 464,181 4.875 % Senior Notes $ 500,000 $ 525,000 $ 500,000 $ 532,500 5.625 % Senior Notes $ 400,000 $ 429,000 $ 400,000 $ 444,000 5.0 % Senior Notes $ 700,000 $ 749,000 $ 700,000 $ 759,500 6.25 % Senior Notes $ 750,000 $ 776,250 $ 750,000 $ 808,125 4.375 % Senior Notes $ 450,000 $ 469,125 $ 450,000 $ 457,875 3.75 % Senior Notes $ 750,000 $ 744,375 $ — $ — ___________________________________ (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 the carrying values of equity investments using the measurement alternative, which are presented as a component of other assets in the condensed consolidated balance sheets. September 30, 2020 December 31, 2019 Quanergy Systems, Inc. $ 50,000 $ 50,000 Other 15,000 3,700 Total $ 65,000 $ 53,700 15. Derivative Instruments and Hedging Activities Hedges of Foreign Currency Risk For the three and nine months ended September 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 September 30, 2020, we estimated that $ 10.5 million of net losses will be reclassified from accumulated other comprehensive loss to earnings during the twelve-month period ending September 30, 2021. 17 Table of Contents As of September 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) 305.8 EUR Various from November 2018 to September 2020 Various from October 2020 to September 2022 Euro ("EUR") to USD 1.16 USD Cash flow hedge 509.0 CNY September 25, 2020 October 30, 2020 USD to Chinese Renminbi ("CNY") 6.87 CNY Not designated 330.6 CNY Various from December 2019 to January 2020 Various from October to December 2020 USD to CNY 7.01 CNY Cash flow hedge 700.0 JPY September 28, 2020 October 30, 2020 USD to Japanese Yen ("JPY") 105.43 JPY Not designated 18,310.5 KRW Various from November 2018 to September 2020 Various from October 2020 to September 2022 USD to Korean Won ("KRW") 1,172.15 KRW Cash flow hedge 10.0 MYR September 25, 2020 October 30, 2020 USD to Malaysian Ringgit ("MYR") 4.16 MYR Not designated 193.0 MXN September 28, 2020 October 30, 2020 USD to Mexican Peso ("MXN") 22.34 MXN Not designated 2,991.8 MXN Various from November 2018 to September 2020 Various from October 2020 to September 2022 USD to MXN 22.38 MXN Cash flow hedge 7.0 GBP September 28, 2020 October 30, 2020 British Pound Sterling ("GBP") to USD 1.29 USD Not Designated 47.8 GBP Various from November 2018 to September 2020 Various from October 2020 to September 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 September 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 672,759 troy oz. October 2020 - August 2022 $ 18.39 Gold 6,562 troy oz. October 2020 - August 2022 $ 1,623.38 Nickel 157,338 pounds October 2020 - August 2022 $ 6.26 Aluminum 2,027,231 pounds October 2020 - August 2022 $ 0.85 Copper 1,666,157 pounds October 2020 - August 2022 $ 2.66 Platinum 6,660 troy oz. October 2020 - August 2022 $ 893.48 Palladium 752 troy oz. October 2020 - August 2022 $ 1,799.61 18 Table of Contents 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 September 30, 2020 and December 31, 2019: Asset Derivatives Liability Derivatives Balance Sheet Location September 30, 2020 December 31, 2019 Balance Sheet Location September 30, 2020 December 31, 2019 Derivatives designated as hedging instruments Foreign currency forward contracts Prepaid expenses and other current assets $ 3,420 $ 20,957 Accrued expenses and other current liabilities $ 13,309 $ 1,055 Foreign currency forward contracts Other assets 2,171 2,530 Other long-term liabilities 3,567 428 Total $ 5,591 $ 23,487 $ 16,876 $ 1,483 Derivatives not designated as hedging instruments Commodity forward contracts Prepaid expenses and other current assets $ 5,876 $ 3,069 Accrued expenses and other current liabilities $ 451 $ 394 Commodity forward contracts Other assets 1,390 554 Other long-term liabilities 419 68 Foreign currency forward contracts Prepaid expenses and other current assets 10 74 Accrued expenses and other current liabilities 43 476 Total $ 7,276 $ 3,697 $ 913 $ 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 income for the three months ended September 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 Income Amount of Net Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Net Income 2020 2019 2020 2019 Foreign currency forward contracts $ ( 12,666 ) $ 19,797 Net revenue $ 625 $ 7,615 Foreign currency forward contracts $ 7,021 $ ( 2,514 ) Cost of revenue $ ( 3,371 ) $ 968 Derivatives not designated as hedging instruments Amount of Gain/(Loss) Recognized in Net Income Location of Gain/(Loss) Recognized in Net Income 2020 2019 Commodity forward contracts $ 6,138 $ 1,786 Other, net Foreign currency forward contracts $ ( 1,060 ) $ 1,289 Other, net The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive income for the nine months ended September 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 Income Amount of Net Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Net Income 2020 2019 2020 2019 Foreign currency forward contracts $ ( 6,076 ) $ 30,124 Net revenue $ 13,640 $ 17,327 Foreign currency forward contracts $ ( 17,342 ) $ 3,946 Cost of revenue $ ( 1,796 ) $ 2,037 Derivatives not designated as hedging instruments Amount of Gain/(Loss) Recognized in Net Income Location of Gain/(Loss) Recognized in Net Income 2020 2019 Commodity forward contracts $ 5,990 $ 2,807 Other, net Foreign currency forward contracts $ ( 4,424 ) $ 2,806 Other, net 19 Table of Contents Credit Risk Related Contingent Features We have agreements with 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 September 30, 2020, the termination value of outstanding derivatives in a liability position, excluding any adjustment for non-performance risk, was $ 17.9 million. As of September 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 In 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 or 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" of the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019. 20 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 nine months ended September 30, 2020 and 2019 (recast to reflect realignment of performance measures as discussed above): For the three months ended For the nine months ended September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019 Net revenue: Performance Sensing $ 580,936 $ 628,593 $ 1,534,832 $ 1,913,137 Sensing Solutions 207,377 221,122 604,255 690,803 Total net revenue $ 788,313 $ 849,715 $ 2,139,087 $ 2,603,940 Segment operating income (as defined above): Performance Sensing $ 151,626 $ 170,240 $ 347,428 $ 498,982 Sensing Solutions 58,229 71,570 170,545 224,826 Total segment operating income 209,855 241,810 517,973 723,808 Corporate and other ( 60,967 ) ( 53,352 ) ( 203,803 ) ( 151,522 ) Amortization of intangible assets ( 32,562 ) ( 35,905 ) ( 98,397 ) ( 108,079 ) Restructuring and other charges, net 10,519 ( 6,421 ) ( 32,197 ) ( 28,040 ) Operating income 126,845 146,132 183,576 436,167 Interest expense, net ( 44,129 ) ( 39,556 ) ( 124,340 ) ( 118,417 ) Other, net 9,194 ( 7,560 ) ( 1,511 ) ( 7,925 ) Income before taxes $ 91,910 $ 99,016 $ 57,725 $ 309,825 21 Table of Contents 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: • 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; • business disruptions due to natural disasters or other disasters outside our control, such as the global COVID-19 pandemic. • 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"); • adverse conditions or competition in the industries upon which we are dependent, including the automotive industry; • competitive pressure from customers that could require us to reduce prices or result in reduced demand; • losses and costs as a result of intellectual property, product liability, warranty, and recall claims; • market acceptance of new product introductions and product innovations; • supplier interruption or non-performance, limiting our access to manufactured components or raw materials; • risks related to the acquisition or disposition of businesses, or the restructuring of our business; • labor disruptions or increased labor costs; • 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; • 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; • foreign currency risks, changes in socioeconomic conditions, or changes to monetary and fiscal policies; • 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; • changes to current policies, such as trade tariffs, by the U.S. government; 22 Table of Contents • risks related to the potential for goodwill impairment; • the impact of challenges by taxing authorities of our historical and future tax positions or our allocation of taxable income among our subsidiaries, unfavorable developments in taxation sentiments in countries where we do business, and challenges to the sovereign taxation regimes of EU member states by the European Commission and the Organization for Economic Co-operation and Development; • 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 • risks related to our domicile in the U.K. 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 .