What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-12 compared with 2020-02-11 · 752 added, 714 removed, 1289 unchanged (53% of the section changed)

38 unchanged sentences

Valuation of goodwill

Description of the Matter

As of December 31, 2019, the Company’s goodwill balance was $3.1 billion.

Description of the Matter As of December 31, 2020, the Company’s goodwill balance was $3.1 billion.

The Company’s goodwill is initially assigned to its reporting units as of the acquisition date.

1 unchanged sentence

The Company evaluated goodwill for impairment as of October 1, 2020.

A quantitative goodwill impairment assessment was completed for all reporting units.

Auditing management’s goodwill impairment analysis was complex and judgmental due to the estimation required in determining the fair value of the reporting units.

The Company used a combination of the quantitative and qualitative methods to assess their reporting units for impairment.

Auditing management’s goodwill impairment analysis for the reporting units for which the quantitative method was utilized was complex and judgmental due to the estimation required in determining the fair value of the reporting units.

In particular, the fair value estimates included significant assumptions such as the long-range forecasts, the selection of the discount rates, and the estimation of the multiples or long-term growth rates used in valuing the terminal year which are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s quantitative goodwill impairment review process.

For example, we tested controls over management’s review of the data used in their valuation models and reviewed significant assumptions discussed above used in determining the reporting unit fair values.

To test the estimated fair value of the Company’s reporting units, with the assistance of our valuation specialists, our audit procedures included, among others, assessing fair value methodologies and testing the significant assumptions discussed above.

To test the estimated fair value of the Company’s reporting units, with the assistance of our valuation professionals, our audit procedures included, among others, assessing fair value methodologies and testing the significant assumptions discussed above.

We compared the significant assumptions used by management to current industry and economic trends, the Company’s historical trends with consideration given to changes in the Company’s business, customer base or product mix and other relevant factors.

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Income taxes – uncertain tax positions

Description of the Matter

As discussed in Note 7, at December 31, 2019, the Company had approximately $117.6 million of unrecognized tax benefits associated with uncertain tax positions.

Description of the Matter As discussed in Note 7, at December 31, 2020, the Company had approximately $201.4 million of unrecognized tax benefits associated with uncertain tax positions.

Uncertainty in a tax position may arise as tax laws are subject to interpretation.

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Auditing the recognition and measurement of tax positions related to uncertain tax positions involved significant auditor judgment and use of tax professionals with specialized skills and knowledge because both the recognition and measurement of the tax positions are complex, highly judgmental and based on interpretations of tax laws and legal rulings.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to record the reserve for uncertain tax positions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to identify and record the reserve for uncertain tax positions.

For example, we tested controls over management’s evaluation of the technical merits of tax positions and identification of uncertain tax positions and the controls to measure the benefit of those tax positions, including management’s review of the inputs and calculations of unrecognized tax benefits resulting from uncertain tax positions.

To test the amounts recorded as uncertain tax positions we involved our tax professionals to evaluate the technical merits of the Company’s tax positions.

Our procedures included, among others, inspecting correspondence, assessments and settlements from the relevant tax authorities and evaluating income tax opinions or other third-party advice obtained by the Company.

To test the amounts recorded as uncertain tax positions we involved our tax professionals to evaluate the technical merits of the Company’s income tax positions.

Our procedures included, among others, evaluating income tax technical analysis or other third party advice obtained by the company and inspecting correspondence, assessments and settlements from the relevant tax authorities.

We also applied our knowledge and experience with the application of federal, foreign and state income tax laws to evaluate the Company’s accounting for those tax positions.

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Accounts receivable, net of allowances of $ 19,033 and $ 15,129 as of December 31, 2020 and 2019, respectively

576,647 557,874

Inventories 451,005 506,678

Prepaid expenses and other current assets 90,340 126,981

1 unchanged sentence

Property, plant and equipment, net 803,825 830,998

Goodwill 3,111,349 3,093,598

Other intangible assets, net 691,549 770,904

Deferred income tax assets 84,785 21,150

Other assets 172,722 152,217

Total assets $ 7,844,202 $ 6,834,519

Liabilities and shareholders’ equity

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Treasury shares, at cost, 15,631 and 14,733 shares as of December 31, 2020 and 2019, respectively

( 784,596 ) ( 749,421 )

Additional paid-in capital 1,759,668 1,725,091

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For the year ended December 31,

2020 2019 2018

Net revenue $ 3,045,578 $ 3,450,631 $ 3,521,627

Operating costs and expenses:

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Interest expense, net ( 171,757 ) ( 158,554 ) ( 153,679 )

Other, net ( 339 ) ( 7,908 ) ( 30,365 )

Income before taxes 165,641 390,423 526,375

Provision for/(benefit from) income taxes 1,355 107,709 ( 72,620 )

Net income $ 164,286 $ 282,714 $ 598,995

Basic net income per share $ 1.04 $ 1.76 $ 3.55

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For the year ended December 31,

Other comprehensive income/(loss), net of tax:

2020 2019 2018

Net income $ 164,286 $ 282,714 $ 598,995

Other comprehensive (loss)/income, net of tax:

Cash flow hedges ( 23,279 ) 7,362 37,363

Defined benefit and retiree healthcare plans ( 5,772 ) ( 1,668 ) ( 377 )

Other comprehensive income/(loss)

Other comprehensive (loss)/income ( 29,051 ) 5,694 36,986

Comprehensive income $ 135,235 $ 288,408 $ 635,981

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For the year ended December 31,

2020 2019 2018

Cash flows from operating activities:

Net income $ 164,286 $ 282,714 $ 598,995

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 125,680 115,862 106,014

Amortization of debt issuance costs 6,854 7,804 7,317

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Accounts receivable, net ( 16,668 ) 26,605 ( 34,877 )

Inventories 58,390 ( 10,924 ) ( 55,445 )

Prepaid expenses and other current assets 36,431 10,073 ( 11,891 )

1 unchanged sentence

Income taxes payable ( 16,019 ) 2,308 ( 353 )

Other 1,859 ( 4,239 ) ( 12,754 )

Net cash provided by operating activities 559,775 619,562 620,563

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Proceeds from sale of business, net of cash sold — — 149,777

Other 12,022 ( 5,103 ) 711

Net cash used in investing activities ( 182,092 ) ( 208,777 ) ( 237,606 )

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Payment of employee restricted stock tax withholdings ( 2,911 ) ( 6,990 ) ( 3,674 )

Proceeds from issuance of debt

Proceeds from borrowings on debt 1,150,000 450,000 —

Payments on debt ( 408,914 ) ( 464,605 ) ( 15,653 )

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Payments of debt and equity issuance costs ( 8,279 ) ( 10,050 ) ( 9,931 )

Net cash used in financing activities

Other — — 16,369

Net cash provided by/(used in) financing activities 710,178 ( 366,499 ) ( 406,213 )

Net change in cash and cash equivalents 1,087,861 44,286 ( 23,256 )

8 unchanged sentences

(In thousands)

Ordinary Shares

Treasury Shares

Retained Earnings

Ordinary Shares Treasury Shares Additional

Capital Retained Earnings Accumulated

Comprehensive

Shareholders’

Number Amount Number Amount

Balance as of December 31, 2017 178,437 $ 2,289 ( 7,076 ) $ ( 288,478 ) $ 1,663,367 $ 1,031,612 $ ( 63,164 ) $ 2,345,626

2 unchanged sentences

Vesting of restricted securities 257 3 — — — ( 3 ) — —

Retirement of ordinary shares due to Merger

( 7,018 ) ( 89 ) 7,018 286,228 — ( 286,139 ) — —

Repurchase of ordinary shares — — ( 7,571 ) ( 399,417 ) — — — ( 399,417 )

Other retirements of ordinary shares ( 71 ) ( 1 ) 71 3,674 — ( 3,673 ) — —

Share-based compensation — — — — 23,825 — — 23,825

Other comprehensive loss

Net income — — — — — 598,995 — 598,995

Other comprehensive income — — — — — — 36,986 36,986

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

2 unchanged sentences

Vesting of restricted securities 454 5 — — — ( 5 ) — —

Retirement of ordinary shares due to Merger

Repurchase of ordinary shares — — ( 7,162 ) ( 350,004 ) — — — ( 350,004 )

Other retirements of ordinary shares

Retirement of ordinary shares ( 149 ) ( 2 ) 149 6,990 — ( 6,988 ) — —

Share-based compensation — — — — 18,757 — — 18,757

Net income — — — — — 282,714 — 282,714

Other comprehensive income — — — — — — 5,694 5,694

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Share-based compensation — — — — 19,125 — — 19,125

Other comprehensive income

Net income — — — — — 164,286 — 164,286

Other comprehensive loss — — — — — — ( 29,051 ) ( 29,051 )

Balance as of December 31, 2020 173,266 $ 2,220 ( 15,631 ) $ ( 784,596 ) $ 1,759,668 $ 1,777,729 $ ( 49,535 ) $ 2,705,486

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On March 28, 2018, Sensata plc completed a cross-border merger (the "Merger") with Sensata N.V., which changed the location of our incorporation from the Netherlands to England and Wales, but did not change the business being conducted by us or our subsidiaries.

We are a global industrial technology company that develops, manufactures, and sells sensors, sensor-based solutions, controls, and other products used in mission-critical systems and applications that create valuable business insights for our customers and end users.

Our sensors are devices that translate a physical parameter, such as pressure, temperature, or position, into electronic signals that our customers’ products and solutions can act upon.

These actionable insights lead to products that are safer, cleaner and more efficient, more electrified, and increasingly more connected.

Our sensor-based solutions can be comprised of various sensors, controllers, receivers, and software, which provide comprehensive solutions to critical problems.

Our controls are devices embedded within systems to protect them from excessive heat or current.

Sensata plc conducts its operations through subsidiary companies that operate business and product development centers primarily in Belgium, Bulgaria, China, Germany, Japan, the Netherlands, South Korea, the United Kingdom (the "U.K."), and the United States (the "U.S.");

We are a global industrial technology company that develops, manufactures, and sells sensors, electrical protection products, and other products that are used in mission-critical systems and applications that create valuable business insights for our customers and end users.

Our sensors are used by our customers to translate a physical parameter, such as pressure, temperature, position, or location of an object, into electronic signals that our customers’ products and solutions can act upon.

These actionable insights lead to products that are safer, cleaner, more efficient, more electrified, and increasingly more connected.

Our electrical protection product portfolio is comprised of various sensors, controllers, receivers, and software, and includes high-voltage contactors and other products embedded within systems to maximize their efficiency and protect them from excessive heat or current.

Sensata plc conducts its operations through subsidiary companies that operate business and product development centers primarily in Belgium, Bulgaria, China, Denmark, France, India, Japan, the Netherlands, South Korea, the United Kingdom (the "U.K."), and the United States (the "U.S.");

and manufacturing operations primarily in Bulgaria, China, Malaysia, Mexico, the U.K., and the U.S.

We operate in, and report financial information for, the following two segments:

We operate in, and report financial information for, two reportable segments:

Performance Sensing and Sensing Solutions.

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GAAP requires us to exercise our judgment in the process of applying our accounting policies.

It also requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingencies at the date of the financial statements and the reported amounts of net revenue and expense during the reporting periods.

Estimates are used when accounting for certain items such as allowance for doubtful accounts and sales returns, depreciation and amortization, inventory obsolescence, asset impairments (including goodwill and other intangible assets), contingencies, the value of certain equity awards and the measurement of share-based compensation, the determination of accrued expenses, certain asset valuations including deferred tax asset valuations, the useful lives of plant and equipment, measurement of our post-retirement benefit obligations, and the identification, valuation, and determination of useful lives of identifiable intangible assets acquired in business combinations.

The accounting estimates used in the preparation of the

consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained, and as the operating environment changes.

It also requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingencies at the date of the financial statements, and the reported amounts of net revenue and expense during the reporting periods.

Estimates are used when accounting for certain items such as allowance for doubtful accounts and sales returns, inventory obsolescence, asset impairments (including goodwill and other intangible assets), contingencies, the value of certain equity awards and the measurement of share-based compensation, the determination of accrued expenses, certain asset valuations, accounting for income taxes, the useful lives of plant and equipment, measurement of our post-retirement benefit obligations, and the identification, valuation, and determination of useful lives of identifiable intangible assets acquired in business combinations.

The accounting estimates used in the preparation of the consolidated financial statements may change as new

events occur, as more experience is acquired, as additional information is obtained, and as the operating environment changes.

Actual results could differ from those estimates.

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This five step model requires us to identify the contract with the customer, identify the performance obligation(s) in the contract, determine the transaction price, allocate the transaction price to the performance obligation(s), and recognize revenue when (or as) we satisfy the performance obligation(s).

The vast majority of our contracts (as defined in FASB ASC Topic 606) are customer purchase orders ("POs" and each, a "PO") that require us to transfer specified quantities of tangible products to our customers.

The vast majority of our contracts (as defined in FASB ASC Topic 606) are customer purchase orders that require us to transfer specified quantities of tangible products to our customers.

These performance obligations are generally satisfied within a short period of time.

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Such variable consideration has not historically been material in relation to our net revenue.

Our contract terms generally require the customer to make payment shortly after (that is, less than one year) the shipment date.

Our contract terms generally require the customer to make payment shortly (that is, less than one year) after the shipment date.

In such instances, we do not consider the effects of a significant financing component in determining the transaction price.

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Products are then manufactured and sold to customers.

However, in certain cases, pre-production activities are a performance obligation in a customer PO, and revenue is recognized when the performance obligation is satisfied.

However, in certain cases, pre-production activities are a performance obligation in a customer purchase order, and revenue is recognized when the performance obligation is satisfied.

Customer arrangements do not involve post-installation or post-sale testing and acceptance.

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Share-Based Compensation

We measure at fair value any new or modified share-based compensation arrangements with employees, such as stock options and restricted securities, and recognize as compensation expense that fair value over the requisite service period as required in accordance with FASB ASC Topic 718, Compensation—Stock Compensation .

Share-based compensation expense is generally recognized as a component of selling, general and administrative ("SG&A") expense, which is consistent with where

the related employee costs are presented, however, such costs, or a portion thereof, may be capitalized provided certain criteria are met.

We measure at fair value any new or modified share-based compensation arrangements with employees, such as stock options and restricted securities, and recognize as compensation expense that fair value over the requisite service period in accordance with FASB ASC Topic 718, Compensation—Stock Compensation .

Share-based compensation expense is generally recognized as a component of selling, general and administrative ("SG&A") expense, which is consistent with where the related employee costs are presented, however, such costs, or a portion thereof, may be capitalized provided certain criteria are met.

Share-based awards may be subject to either cliff vesting (i.e., the entire award vests on a particular date) or graded vesting (i.e., portions of the award vest at different points in time).

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• Expected dividend yield.

The dividend yield of 0 % is based on our history of having never declared or paid any dividends on our ordinary shares, and our current intention of not declaring any such dividends in the foreseeable future.

The dividend yield of 0 % is based on our history of having never declared or paid any dividends on our ordinary shares as well as our current intention not to declare dividends in the foreseeable future.

Restricted securities are valued using the closing price of our ordinary shares on the NYSE on the grant date.

1 unchanged sentence

Compensation expense is recognized if it is probable that the performance condition will be achieved.

Under the fair value recognition provisions of FASB ASC Topic 718, we recognize share-based compensation net of estimated forfeitures.

We elect to recognize share-based compensation expense net of estimated forfeitures as permitted by FASB ASC Topic 718.

Accordingly, we only recognize compensation expense for those awards expected to vest over the requisite service period.

2 unchanged sentences

Financial Instruments

Our financial instruments include derivative instruments, debt instruments, debt and equity investments, and trade accounts receivable.

Our material financial instruments include derivative instruments, debt instruments, equity investments, and trade accounts receivable.

Derivative financial instruments:

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Derivative instruments may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation.

Currently, our derivative instruments that are designated as accounting hedges are all cash flow hedges.

Currently, all of our derivative instruments that are designated as accounting hedges are cash flow hedges.

We also hold derivative instruments that are not designated as accounting hedges.

The accounting for changes in the fair value of our cash flow hedges depends on whether we have elected to designate the derivative as a hedging instrument for accounting purposes and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

In accordance with FASB ASC Topic 815, both the effective and ineffective portion of

changes in the fair value of derivatives designated and qualifying as cash flow hedges is recognized in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period in which the hedged forecasted transaction affects earnings.

Changes in the fair value of derivative instruments that are not designated as accounting hedges are recognized immediately in other, net.

In accordance with FASB ASC Topic 815, both the effective and ineffective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recognized in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period in which the hedged forecasted transaction affects earnings.

Changes in the fair value of derivative instruments that are not designated as accounting hedges are recognized

immediately in other, net.

Refer to Note 16, "Shareholders' Equity," and Note 19, "Derivative Instruments and Hedging Activities," for additional information related to the reclassification of amounts from accumulated other comprehensive loss into earnings.

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Debt Instruments:

A premium or discount on a debt instrument is recognized on the balance sheet as an adjustment to the carrying amount of the debt liability.

A premium or discount on a debt instrument is recognized on the balance sheet as an adjustment to the carrying value of the debt liability.

In general, amounts paid to creditors are considered a reduction in the proceeds received from the issuance of the debt and are accounted for as a component of the premium or discount on the issuance, not as an issuance cost.

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Under the measurement alternative, such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

Refer to Note 18, "Fair Value Measures," for additional information related to our measurement of financial instruments.

Refer to Note 18, "Fair Value Measures," for additional information related to our measurement of financial instruments, including equity investments.

Trade accounts receivable:

Trade accounts receivable are recognized at invoiced amounts and do not bear interest.

Trade accounts receivable are reduced by an allowance for losses on receivables, as described elsewhere in this Note 2.

Trade accounts receivable are reduced by an allowance for losses on receivables.

Concentrations of risk with respect to trade accounts receivable are generally limited due to the large number of customers in various industries and their dispersion across several geographic areas.

Although we do not foresee that credit risk associated with these receivables will deviate from historical experience, repayment is dependent upon the financial stability of these

individual customers.

Although we do not foresee that credit risk associated with these receivables will deviate from historical experience, repayment is dependent upon the financial stability of these individual customers.

We estimate an allowance for credit losses on trade accounts receivable at an amount that represents our estimated expected credit losses over the lifetime of our receivables.

Our contract terms generally require the customer to make payment shortly after (that is, less than one year) the shipment date.

Our largest customer accounted for approximately 7 % of our net revenue for the year ended December 31, 2020.

1 unchanged sentence

The allowance for losses on receivables is used to present accounts receivable, net at an amount that represents our estimate of the related transaction price recognized as revenue in accordance with FASB ASC Topic 606.

The allowance represents an estimate of probable but unconfirmed losses in the receivable portfolio.

The allowance represents an estimate of expected credit losses over the lifetime of our receivables, even if the loss is considered remote, and reflects expected recoveries of amounts previously written-off.

We estimate the allowance on the basis of specifically identified receivables that are evaluated individually for impairment and a statistical analysis of the remaining receivables determined by reference to past default experience.

We consider the need to adjust historical information to reflect the extent to which we expect current conditions and reasonable forecasts to differ from the conditions that existed for the historical period considered.

Customers are generally not required to provide collateral for purchases.

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Intangible assets acquired may include either definite-lived or indefinite-lived intangible assets, or both.

In accordance with the requirements of FASB ASC Topic 350, Intangibles—Goodwill and Other , goodwill and intangible assets determined to have an indefinite useful life are not amortized.

In accordance with the guidance in FASB ASC Topic 350, Intangibles—Goodwill and Other , goodwill and intangible assets determined to have an indefinite useful life are not amortized.

Instead these assets are evaluated for impairment on an annual basis and whenever events or business conditions change that could indicate that the asset is impaired.

We evaluate goodwill and indefinite-lived intangible assets for impairment in the fourth quarter of each fiscal year, unless events occur which trigger the need for an earlier impairment review.

We have identified six reporting units:

Performance Sensing, Electrical Protection, Industrial Sensing, Aerospace, Power Management, and Interconnection.

These reporting units have been identified based on the definitions and guidance provided in FASB ASC Topic 350.

Our reporting units have been identified based on the definitions and guidance provided in FASB ASC Topic 350.

Identification of reporting units includes an analysis of the components that comprise each of our operating segments, which considers, among other things, the manner in which we operate our business and the availability of discrete financial information.

Components of an operating segment are aggregated to form one reporting unit if the components have similar economic characteristics.

We periodically review these reporting units to ensure that they continue to reflect the manner in which the business is operated.

Certain assets and liabilities relate to the operations of multiple reporting units.

We allocate these assets and liabilities to the related reporting units based on methods that we believe are reasonable and supportable, and we apply that allocation method on a consistent basis from year to year.

Other assets and liabilities, such as cash and cash equivalents and property, plant and equipment ("PP&E") associated with our corporate offices, and debt, we view as being corporate in nature.

Some assets and liabilities relate to the operations of multiple reporting units.

We allocate these assets and liabilities to the related reporting units based on methods that we believe are reasonable and supportable.

We apply that allocation method on a consistent basis from year to year.

Other assets and liabilities, such as debt, cash and cash equivalents, and property, plant and equipment, net ("PP&E") associated with our corporate offices, are viewed as being corporate in nature.

Accordingly, we do not assign these assets and liabilities to our reporting units.

In the event we reorganize our business, we reassign the assets and liabilities among the affected reporting units using a reasonable and supportable methodology.

As businesses are acquired, we assign assets acquired and liabilities assumed to a new or existing reporting unit as of the date of the acquisition.

In the event we reorganize our business, we reassign the assets (including goodwill) and liabilities among the affected reporting units using a reasonable and supportable methodology.

As businesses are acquired, we assign assets acquired (including goodwill) and liabilities assumed to a new or existing reporting unit as of the date of the acquisition.

In the event a disposal group meets the definition of a business, goodwill is allocated to the disposal group based on the relative fair value of the disposal group to the retained portion of the related reporting unit.

We have the option to first assess qualitative factors to determine whether a quantitative analysis must be performed.

The objective of a qualitative analysis is to determine whether it is more likely than not that the fair value of a reporting unit is less than its net book value.

If we elect not to use this option, or if we determine that it is more likely than not that the fair value of a reporting unit is less than its net book value, then we perform the first step of the quantitative analysis prescribed by FASB ASC Topic 350.

In this step we compare the estimated fair values of our reporting units to their respective net book values, including goodwill, to determine whether there is an indicator of potential impairment.

If the net book value of a reporting unit exceeds its estimated fair value, we conduct a second step in which we calculate the implied fair value of goodwill.

If the carrying value of the reporting unit’s goodwill exceeds its calculated implied fair value, an impairment loss is recognized in an amount equal to that excess.

The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.

That is, the fair value of the reporting unit is allocated to all of its identifiable assets and liabilities as if the reporting unit had been acquired in a business combination at the date of assessment, and the fair value of the reporting unit

was the purchase price paid to acquire the reporting unit.

The excess of the fair value of the reporting unit over the sum of the fair values of each of its identifiable assets and liabilities is the implied fair value of goodwill.

The fair value measurements of our reporting units are categorized in level 3 of the fair value hierarchy.

The objective of a qualitative analysis is to assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

We make this assessment based on macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other relevant factors as applicable.

If we elect not to use this option, or if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then we prepare a discounted cash flow analysis to determine whether the carrying value of reporting unit exceeds its estimated fair value.

If the carrying value of a reporting unit exceeds its estimated fair value, we recognize an impairment of goodwill for the amount of this excess, in accordance with the guidance in FASB Accounting Standards Update ("ASU") No.

2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment , which we adopted as of January 1, 2020.

Indefinite-lived intangible assets:

Similar to goodwill, we perform an annual impairment review of our indefinite-lived intangible assets in the fourth quarter of each fiscal year, unless events occur that trigger the need for an earlier impairment review.

We have the option to first assess qualitative factors in determining whether it is more likely than not that an indefinite-lived intangible asset is impaired.

If we elect not to use this option, or we determine that it is more likely than not that the asset is impaired, we perform a quantitative impairment review that requires us to estimate the fair value of the indefinite-lived intangible asset and compare that amount to its carrying value.

We estimate the fair value by using the relief-from-royalty method, which requires us to make assumptions about future conditions impacting the value of the indefinite-lived intangible assets, including projected growth rates, cost of capital, effective tax rates, and royalty rates.

If we elect not to use this option, or we determine that it is more likely than not that the asset is impaired, we perform a quantitative impairment analysis in which we estimate the fair value of the indefinite-lived intangible asset and compare that amount to its carrying value.

In this analysis, we estimate the fair value by using the relief-from-royalty method, in which we make assumptions about future conditions impacting the fair value of our indefinite-lived intangible assets, including projected growth rates, cost of capital, effective tax rates, and royalty rates.

Impairment, if any, is based on the excess of the carrying value over the fair value of these assets.

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Refer to Note 11, "Goodwill and Other Intangible Assets, Net," for additional information related to our goodwill and other intangible assets.

We estimate our provision for income taxes in each of the jurisdictions in which we operate.

The provision for income taxes includes both our current and deferred tax exposure.

We estimate our provision for (or benefit from) income taxes in each of the jurisdictions in which we operate.

The provision for (or benefit from) income taxes includes both our current and deferred tax exposure.

Our deferred tax exposure is measured using the asset and liability method, under which deferred income taxes are recognized to reflect the future tax consequences of differences between the tax bases of assets and liabilities and their financial reporting amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to reverse or settle.

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As a result, we maintain valuation allowances against the deferred tax assets in jurisdictions that have incurred losses in recent periods and in which it is more likely than not that such deferred tax assets will not be utilized in the foreseeable future.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act") was signed into law.

The Tax Reform Act introduced two new U.S.

tax base erosion provisions:

the global intangible low-taxed income ("GILTI") and the base erosion and anti-abuse tax ("BEAT").

We elected to account for GILTI in the period in which it is incurred rather than adjusting our deferred tax assets for any future impacts of this provision.

Similarly, we account for BEAT tax in the year incurred as a period expense only, and have followed the guidance found in the FASB Staff Q&A, Topic 740, No.

4, Accounting for the Base Erosion Anti-Abuse Tax , which states that an entity does not need to evaluate the potential of paying BEAT in future years on the realization of its deferred tax assets and liabilities.

We have followed this guidance in our current tax calculation and evaluation of the realizability of our deferred tax assets.

In accordance with FASB ASC Topic 740, Income Taxes , we record uncertain tax positions on the basis of a two-step process.

First, we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position.

Second, for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the relevant

tax authority.

Significant judgment is required in evaluating whether our tax positions meet this two-step process.

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We sponsor various pension and other post-retirement benefit plans covering our current and former employees in several countries.

The funded status of pension and other post-retirement benefit plans, recognized on our consolidated balance sheets as an asset, current liability, or long-term liability, is measured as the difference between the fair value of plan assets and the benefit obligation at the measurement date.

obligation at the measurement date.

In general, the measurement date coincides with our fiscal year end, however, certain significant events, such as (1) plan amendments, (2) business combinations, (3) settlements or curtailments, or (4) plan mergers, may trigger the need for an interim measurement of both the plan assets and benefit obligations.

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(1) prior service cost write-off and (2) curtailment gain or loss.

Our policy is that a curtailment event

represents one for which we expect a 10% (or greater) reduction in future years of service or an elimination of the accrual of defined benefits for some or all of the future services of 10% (or greater) of the plan's participants.

Our policy is that a curtailment event represents one for which we expect a 10% (or greater) reduction in future years of service or an elimination of the accrual of defined benefits for some or all of the future services of 10% (or greater) of the plan's participants.

Contributions made to pension and other post-retirement benefit plans are presented as cash used in operations within the consolidated statements of cash flows.

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The depreciable lives of plant and equipment are as follows:

Buildings and improvements

Machinery and equipment

Buildings and improvements 2 – 40 years

Machinery and equipment 2 – 15 years

Leasehold improvements are amortized using the straight-line method over the shorter of the remaining lease term or the estimated economic useful lives of the improvements.

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Refer to Note 10, "Property, Plant and Equipment," for additional information related to our PP&E balances.

We enter into leases agreements for many of our facilities around the world.

We occupy leased facilities with initial terms ranging up to 20 years.

Our lease agreements frequently include options to renew for additional periods or to purchase the leased assets and generally require that we pay taxes, insurance, and maintenance costs.

Depending on the specific terms of the leases, our obligations are in two forms:

finance leases and operating leases.

For both forms of leases, we recognize a related lease liability and right-of-use asset on our consolidated balance sheets.

Our lease liabilities are initially measured at the present value of the lease payments not yet paid, discounted using our incremental borrowing rate for a period that is comparable to the remaining lease term.

We use our incremental borrowing rate, adjusted for collateralization, because the discount rate implicit in our leases are generally not readily determinable.

For finance leases, the consolidated statements of operations include separate recognition of interest on the lease liability and amortization of the right-of-use asset.

For operating leases, the consolidated statements of operations include a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis.

Cash flows from operating activities include (1) interest on finance lease liabilities and (2) payments arising from operating leases.

Cash flows from financing activities include repayments of the principal portion of finance lease liabilities.

We also lease certain vehicles and equipment, which generally have a term of one year or less.

We have elected to account for leases with a term of one year or less (short-term leases) using a method similar to the operating lease model under FASB ASC Topic 840, Leases (i.e.

they are not recorded on the consolidated balance sheets) as permitted by FASB ASC Topic 842, Leases .

Refer to Note 17, "Leases," for additional information related to amounts recognized in the consolidated financial statements related to our leases.

Foreign Currency

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Recently issued accounting standards adopted in the current period:

In February 2016, the FASB issued Accounting Standards Update ("ASU") No.

2016-02, Leases (Topic 842) , which establishes new accounting and disclosure requirements for leases.

FASB ASC Topic 842, Leases , requires lessees to classify most leases as either finance or operating leases and to recognize a lease liability and right-of-use asset.

For finance leases, the statements of operations include separate recognition of interest on the lease liability and amortization of the right-of-use asset.

For operating leases, the statements of operations include a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis.

We adopted the provisions of FASB ASU No.

2016-02 on January 1, 2019 using the modified retrospective transition method.

Refer to Note 21, "Leases" for additional information related to this adoption.

No other recently issued accounting standards adopted in the current period had a material impact on our consolidated financial position or results of operations.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment in order to simplify the subsequent measurement of goodwill.

This guidance changes the method by which an impairment of goodwill is calculated.

Under the previous guidance, goodwill impairment was calculated in two steps.

In Step 1, an entity would assess whether an impairment had occurred, either qualitatively or by comparing the estimated fair values of our reporting units to their respective carrying values, including goodwill.

If the results of Step 1 indicated an impairment had occurred, Step 2 would be performed, in which the implied value of goodwill of the reporting unit would be calculated and an impairment would be recognized for the difference between the implied value of goodwill and the recorded amount of goodwill.

Under FASB ASU No.

2017-04, while Step 1 of this process has not changed, Step 2 as described above has been eliminated, and impairment charges are recorded for the amount by which the carrying value of the reporting unit exceeds its estimated fair value.

2017-04 was effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

We adopted FASB ASU No.

2017-04 as of January 1, 2020.

This adoption did not have an impact on our financial statements as none of our reporting units were determined to have carrying values in excess of fair values during the year ended December 31, 2020.

Recently issued accounting standards to be adopted in a future period:

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We recognize revenue to depict the transfer of promised goods to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods.

The vast majority of our revenue is derived from the sale of tangible products whereby control of the product transfers to the customer at a point in time, we recognize revenue at a point in time, and the underlying contract is a PO that establishes a firm purchase commitment for a short period of time.

The vast majority of our revenue is derived from the sale of tangible products whereby control of the product transfers to the customer at a point in time, we recognize revenue at a point in time, and the underlying contract is a purchase order that establishes a firm purchase commitment for a short period of time.

Our standard terms of sale provide our customers with a warranty against faulty workmanship and the use of defective materials.

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The following table presents net revenue disaggregated by segment and end market for the years ended December 31, 2020, 2019, and 2018:

Performance Sensing

Sensing Solutions

For the year ended December 31,

Performance Sensing Sensing Solutions Total

For the year ended December 31, For the year ended December 31, For the year ended December 31,

2020 2019 2018 2020 2019 2018 2020 2019 2018

Automotive $ 1,715,749 $ 1,986,537 $ 2,076,834 $ 35,621 $ 42,446 $ 49,961 $ 1,751,370 $ 2,028,983 $ 2,126,795

508,061 559,479 550,817 — — — 508,061 559,479 550,817

Industrial — — — 336,506 351,942 336,617 336,506 351,942 336,617

Appliance and HVAC (2)

— — — 189,782 201,745 208,482 189,782 201,745 208,482

Aerospace — — — 136,167 176,505 164,294 136,167 176,505 164,294

Other — — — 123,692 131,977 134,622 123,692 131,977 134,622

Net revenue $ 2,223,810 $ 2,546,016 $ 2,627,651 $ 821,768 $ 904,615 $ 893,976 $ 3,045,578 $ 3,450,631 $ 3,521,627

__________________________________________

(1) Heavy vehicle and off-road

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Accounts receivable represent our only contract asset.

Contract liabilities, whereby we receive payment from customers related to our promise to satisfy performance obligations in the future, are no t material.

Contract liabilities, whereby we receive payment from customers related to our promise to satisfy performance obligations in the future, are not material.

Share-Based Payment Plans

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Share-Based Compensation Awards

We grant option, restricted stock unit ("RSU"), and performance restricted stock unit ("PRSU") awards under the 2010 Equity Incentive Plan.

For option and RSU awards vesting is typically subject only to continued employment and the passage of time.

For PRSU awards vesting is also subject to continued employment and the passage of time, however the number of awarded units that ultimately vest also depends on the attainment of certain predefined performance criteria.

We grant option, restricted stock unit ("RSU"), and performance-based restricted stock unit ("PRSU") awards under the 2010 Equity Incentive Plan.

For option and RSU awards, vesting is typically subject only to service conditions.

For PRSU awards, vesting is also subject to service conditions, however the number of awarded units that ultimately vest also depends on the attainment of certain predefined performance criteria.

Our awards include continued vesting provisions for retirement eligible employees.

Throughout this Annual Report on Form 10-K, RSU and PRSU awards are often referred to collectively as "restricted securities."

A summary of stock option activity for the years ended December 31, 2020, 2019, and 2018 is presented in the table below (amounts have been calculated based on unrounded shares):

Number of Options (thousands)

Weighted-Average

Exercise Price Per Option

Weighted-Average

Number of Options (thousands) Weighted-Average

Exercise Price Per Option Weighted-Average

Contractual Term

(years) Aggregate

Intrinsic Value

Balance as of December 31, 2017 3,606 $ 37.69 6.0 $ 50,130

Granted 307 $ 51.83

Forfeited or expired ( 39 ) $ 45.59

Exercised ( 172 ) $ 35.31 $ 3,143

Balance as of December 31, 2018 3,702 $ 38.89 5.3 $ 27,846

Granted 382 $ 46.92

Forfeited or expired ( 83 ) $ 48.92

Exercised ( 537 ) $ 28.21 $ 11,690

Balance as of December 31, 2019 3,464 $ 41.19 5.0 $ 44,696

Forfeited or expired ( 155 ) $ 48.30

Exercised ( 452 ) $ 34.22 $ 5,117

Balance as of December 31, 2020 2,857 $ 41.90 4.4 $ 31,955

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A summary of the status of our unvested options as of December 31, 2020, and of the changes during the year then ended, is presented in the table below (amounts have been calculated based on unrounded shares):

Number of Options (thousands)

Weighted-Average Grant-Date Fair Value

Number of Options (thousands) Weighted-Average Grant-Date Fair Value

Balance as of December 31, 2019 818 $ 14.33

Granted during the year

Vested during the year ( 333 ) $ 13.17

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For options granted in or after April 2019, the same terms apply, except that fully vested options expire 90 days after termination of the participant's employment for any reason other than termination for cause (in which case the options expire on the participant's termination date), termination due to due to death or disability (in which case the options expire one year after the participant's termination date), and termination for a qualified retirement (in which case options will continue to vest and expire ten years from the grant date).

We did no t grant any options in the year ended December 31, 2020.

The weighted-average grant-date fair value per option granted during the years ended December 31, 2019 and 2018 was $ 13.90 and $ 15.70 , respectively.

The fair value of options was estimated on the date of grant using the Black-Scholes-Merton option-pricing model.

The weighted-average key assumptions used in estimating the grant-date fair value of options for the years ended December 31, 2019 , 2018 , and 2017 are as follows:

The weighted-average key assumptions used in estimating the grant-date fair value of options for the years ended December 31, 2019 and 2018 were as follows:

For the year ended December 31,

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For restricted securities granted in or after April 2019, terms include provisions allowing continued or accelerated vesting for a qualified retirement.

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 December 2023.

A summary of restricted securities granted in the years ended December 31, 2020, 2019, and 2018 is presented below:

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0.0 % to 172.5 %

0.0% to 200.0%

(Awards in thousands)

RSU Awards Granted

Weighted-Average

PRSU Awards Granted

Weighted-Average

PRSU Awards Granted

Weighted-Average

PRSU Awards Granted

Weighted-Average

(Awards in thousands) RSU Awards Granted Weighted-Average

Fair Value PRSU Awards Granted Weighted-Average

2020 806 $ 29.06 — $ — 401 $ 28.22

2019 298 $ 47.73 76 $ 46.92 138 $ 46.92

2018 218 $ 51.05 63 $ 51.83 118 $ 51.83

__________________________________________

(1) Represents the percentage range of PRSU award units granted that may vest according to the terms of the awards.

The amounts presented within this table do not reflect our current assessment of the probable outcome of vesting based on the achievement or expected achievement of performance conditions.

Compensation expense for the year ended December 31, 2019 reflects our estimate of the probable outcome of the performance conditions associated with the PRSU awards granted in fiscal years 2019 , 2018 , and 2017 .

A summary of activity related to outstanding restricted securities for fiscal years 2019 , 2018 , and 2017 is presented in the table below (amounts have been calculated based on unrounded shares):

Restricted Securities (thousands)

Weighted-Average

Compensation expense for the year ended December 31, 2020 reflects our estimate of the probable outcome of the performance conditions associated with the PRSU awards granted in the years ended December 31, 2020, 2019, and 2018.

A summary of activity related to outstanding restricted securities for the years ended December 31, 2020, 2019, and 2018 is presented in the table below (amounts have been calculated based on unrounded shares):

Restricted Securities (thousands) Weighted-Average

Balance as of December 31, 2017 1,081 $ 44.43

Granted 399 $ 51.40

Forfeited ( 121 ) $ 48.28

Vested ( 240 ) $ 53.01

Balance as of December 31, 2018 1,119 $ 44.66

Forfeited ( 115 ) $ 47.07

Vested ( 454 ) $ 39.62

Balance as of December 31, 2019 1,105 $ 47.51

Granted 1,207 $ 28.78

Forfeited ( 284 ) $ 37.89

Vested ( 349 ) $ 43.54

Balance as of December 31, 2020 1,679 $ 36.49

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As of December 31,

2020 2019 2018

Outstanding $ 88,534 $ 59,526 $ 50,161

Expected to vest $ 58,675 $ 34,717 $ 44,203

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As of December 31,

2020 2019 2018

Outstanding 1.1 1.1 1.2

Expected to vest 1.1 1.0 1.2

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For the year ended December 31,

2020 2019 2018

Stock options $ 2,868 $ 6,552 $ 5,739

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Share-based compensation expense $ 19,125 $ 18,757 $ 23,825

In fiscal years 2019 and 2018 , we recognized $ 3.2 million and $ 3.0 million of income tax benefit associated with share-based compensation expense.

We recognized no such tax benefit in fiscal year 2017 .

In the years ended December 31, 2020, 2019, and 2018, we recognized $ 2.5 million, $ 3.2 million, and $ 3.0 million, respectively, of income tax benefit associated with share-based compensation expense.

The table below presents unrecognized compensation expense at December 31, 2020 for each class of award, and the remaining expected term for this expense to be recognized:

Compensation Expense

Compensation Expense Expected

Recognition (years)

Options $ 5,280 1.0

Restricted securities 21,943 1.7

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Restructuring and Other Charges, Net

On June 30, 2020, in response to the potential long-term impact of the global financial and health crisis caused by the coronavirus ("COVID-19") pandemic on our business, we 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 anticipated in the coming quarters.

We have taken a large portion of the actions contemplated under the Q2 2020 Global Restructure Program, with the majority 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 880 positions.

Over the life of the Q2 2020 Global Restructure Program, we expect to incur restructuring charges of betwe en $ 31.0 million and $ 33.7 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 180 $ 10.7 $ 11.6 $ 3.0 $ 4.0

Sensing Solutions 286 8.9 9.6 5.0 6.0

Corporate and other 414 11.4 12.5 — —

Total 880 $ 31.0 $ 33.7 $ 8.0 $ 10.0

Charges recognized in the year ended December 31, 2020 resulting from the Q2 2020 Global Restructure Program are presented by segment below.

Approximately $ 0.6 million of these charges relate to site closures in Sensing Solutions.

For the year ended

December 31, 2020

Performance Sensing $ 9,073

Sensing Solutions 6,445

Corporate and other 8,940

Q2 2020 Global Restructure Program, net $ 24,458

Restructuring and other charges, net for the years ended December 31, 2020, 2019, and 2018 were as follows:

For the year ended December 31,

2020 2019 2018

Q2 2020 Global Restructure Program, net $ 24,458 $ — $ —

Other restructuring charges

Severance costs, net (1)

3,042 29,240 7,566

Facility and other exit costs 1,323 808 877

Gain on sale of Valves Business (2)

— — ( 64,423 )

4,271 23,512 8,162

Restructuring and other charges, net $ 33,094 $ 53,560 $ ( 47,818 )

__________________________________________

Severance costs, net for the year ended December 31, 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, 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, and $ 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 year ended December 31, 2018 were primarily related to termination benefits provided in connection with limited workforce reductions of manufacturing, engineering, and administrative positions including the elimination of certain positions related to site consolidations.

Severance costs, net recognized during the year ended December 31, 2017 included $ 8.4 million of charges related to the closure of our facility in Minden, Germany, a site we obtained in connection with the acquisition of certain subsidiaries of Custom Sensors & Technologies Ltd.

Facility and other exit costs for the year ended December 31, 2017 included $ 3.2 million of costs related to the closure of our facility in Minden, Germany and $ 3.1 million of costs associated with the consolidation of two other manufacturing sites in Europe.

(1) For each of the years ended December 31, 2020, 2019, and 2018, these charges include termination benefits provided in connection with workforce reductions of manufacturing, engineering, and administrative positions, including the elimination of certain positions related to site consolidations, net of reversals.

For the year ended December 31, 2020, these charges related to termination benefits arising from the shutdown and relocation of operating sites in Northern Ireland and Belgium.

For the year ended December 31, 2019, these charges 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., and $ 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.

(2) In the year ended December 31, 2018, we completed the sale of the capital stock of Schrader Bridgeport International, Inc.

and August France Holding Company SAS (collectively, the "Valves Business").

In the year ended December 31, 2019 , these amounts included a $ 17.8 million loss related to the termination of a supply agreement in connection with the Metal Seal Precision, Ltd.

("Metal Seal") litigation and $ 6.1 million of expense related to the deferred compensation arrangement that we entered into in connection with the acquisition of GIGAVAC, LLC ("GIGAVAC").

Refer to Note 15, "Commitments and Contingencies," for additional information related to the supply agreement termination and litigation with Metal Seal.

In the year ended December 31, 2018 , we incurred $ 5.9 million of incremental direct costs in order to transact the sale of the Valves Business and $ 2.2 million of expense related to the deferred compensation arrangement that we entered into connection with the acquisition of GIGAVAC.

Refer to Note 17, "Acquisitions and Divestitures," for additional information related to the acquisition of GIGAVAC and the divestiture of the Valves Business.

Changes to our severance liability during the years ended December 31, 2019 and 2018 were as follows:

The gain on this sale was recorded in restructuring and other charges, net.

(3) Represents charges that are not included in one of the other classifications.

In the year ended December 31, 2020, we settled intellectual property litigation brought against Schrader by Wasica Finance GmbH ("Wasica") and released $ 11.7 million of the related liability.

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.

Refer to Note 15, "Commitments and Contingencies," for additional information related to this matter.

In the year ended December 31, 2019, we recognized a $ 17.8 million loss related to the termination of a supply agreement in connection with the Metal Seal Precision, Ltd.

("Metal Seal") litigation.

In the year ended December 31, 2018, we incurred $ 5.9 million of incremental direct costs in order to transact the sale of the Valves Business.

For each of the years ended December 31, 2020, 2019, and 2018, we recorded expense related to the deferred compensation arrangement that we entered into in connection with the acquisition of GIGAVAC, LLC ("GIGAVAC") in the year ended December 31, 2018.

The following table presents a rollforward of the severance portion of our restructuring obligations for the years ended December 31, 2020 and 2019.

Q2 Plan Other Total

Balance as of December 31, 2018 $ — $ 6,591 $ 6,591

Charges, net of reversals — 29,240 29,240

Payments — ( 21,095 ) ( 21,095 )

Foreign currency remeasurement — 43 43

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Charges, net of reversals 23,824 3,042 26,866

Payments ( 13,853 ) ( 13,969 ) ( 27,822 )

Foreign currency remeasurement 871 185 1,056

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For the year ended December 31,

Currency remeasurement (loss)/gain on net monetary assets (1)

Gain/(loss) on foreign currency forward contracts (2)

2020 2019 2018

Currency remeasurement gain/(loss) on net monetary assets (1)

$ 10,833 $ ( 6,802 ) $ ( 18,905 )

(Loss)/gain on foreign currency forward contracts (2)

( 6,762 ) 2,225 2,070

Gain/(loss) on commodity forward contracts (2)

10,027 4,888 ( 8,481 )

Loss on debt financing (3)

— ( 4,364 ) ( 2,350 )

Net periodic benefit cost, excluding service cost (4)

( 9,980 ) ( 3,186 ) ( 3,585 )

Other ( 4,457 ) ( 669 ) 886

Other, net $ ( 339 ) $ ( 7,908 ) $ ( 30,365 )

__________________________________________

(1) Relates to the remeasurement of non-USD denominated net monetary assets and liabilities into USD.

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(3) Refer to Note 14, "Debt," for additional information related to our debt financing transactions.

(4) Refer to Note 13, "Pension and Other Post-Retirement Benefits," for additional information on net periodic benefit cost included in other, net.

Effective April 27, 2006 (inception), and concurrent with the completion of the acquisition of the Sensors & Controls business ("S&C") of Texas Instruments Incorporated ("TI") (the "2006 Acquisition"), we commenced filing tax returns in the Netherlands as a stand-alone entity.

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Refer to Note 2, "Significant Accounting Policies," for detailed discussion of the accounting policies related to income taxes.

Effects of the Tax Cuts and Jobs Act

The Tax Reform Act reduced the U.S.

federal corporate tax rate from 35 % to 21 % , required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and created new taxes on certain foreign sourced earnings.

In fiscal year 2017 we recognized a tax benefit related to the enactment-date effects of the Tax

Reform Act resulting from the adjustment of our deferred tax assets and liabilities, net of the impact from recognizing the one-time transition tax liability related to undistributed earnings of certain foreign subsidiaries which were not previously taxed.

Deferred tax assets and liabilities

In the year ended December 31, 2017 , we remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 % , by recognizing a tax benefit of $ 73.7 million , which was principally associated with indefinite-lived intangible assets.

Absent this deferred tax liability, we would have been in a net deferred tax asset position that was offset by a valuation allowance at December 31, 2017 .

Upon further analysis of certain aspects of the Tax Reform Act and refinement of our calculations during the year ended December 31, 2018 , we determined that no further adjustment was necessary.

Global intangible low-taxed income

The Tax Reform Act subjects a U.S.

shareholder to tax on GILTI earned by certain foreign subsidiaries.

The FASB Staff Q&A, Topic 740, No.

5, Accounting for Global Intangible Low-Taxed Income , states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only.

We have elected to account for GILTI in the year the tax is incurred.

Income before taxes

Income/(loss) before taxes for the years ended December 31, 2019 , 2018 , and 2017 was categorized by jurisdiction as follows:

Income before taxes for the years ended December 31, 2020, 2019, and 2018 was categorized by jurisdiction as follows:

2020 $ ( 80,856 ) $ 246,497 $ 165,641

2019 $ 13,183 $ 377,240 $ 390,423

2018 $ 68,027 $ 458,348 $ 526,375

Provision for/(benefit from) income taxes

P rovision for/(benefit from) income taxes for the years ended December 31, 2019 , 2018 , and 2017 was categorized by jurisdiction as follows:

Provision for/(benefit from) income taxes for the years ended December 31, 2020, 2019, and 2018 was categorized by jurisdiction as follows:

Current $ ( 2,624 ) $ 48,572 $ 307 $ 46,255

Deferred ( 14,776 ) ( 34,252 ) 4,128 ( 44,900 )

Total $ ( 17,400 ) $ 14,320 $ 4,435 $ 1,355

Current $ 5,643 $ 73,947 $ 496 $ 80,086

Deferred 9,687 17,339 597 27,623

Total $ 15,330 $ 91,286 $ 1,093 $ 107,709

Current $ 5,700 $ 64,666 $ 1,082 $ 71,448

Deferred ( 109,663 ) ( 18,770 ) ( 15,635 ) ( 144,068 )

Total $ ( 103,963 ) $ 45,896 $ ( 14,553 ) $ ( 72,620 )

Effective tax rate reconciliation

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For the year ended December 31,

Tax computed at statutory rate of 21% in 2019 and 2018, and 35% in 2017

Reserve for tax exposure

Valuation allowances

2020 2019 2018

Tax computed at statutory rate of 21% $ 34,785 $ 81,989 $ 110,539

Intangible property transfers ( 54,188 ) — —

Foreign tax rate differential ( 21,994 ) ( 19,107 ) ( 41,200 )

Valuation allowances 8,869 19,640 ( 123,426 )

Withholding taxes not creditable 12,198 9,509 8,734

Research and development incentives

Change in tax laws or rates 11,229 5,121 ( 22,264 )

Research and development incentives ( 7,408 ) ( 8,410 ) ( 19,475 )

state taxes, net of federal benefit

Unrealized foreign currency exchange losses, net

Tax Reform Act impact

3,504 863 ( 11,499 )

Unrealized foreign currency exchange losses/(gains), net 2,650 ( 43 ) 11,346

Reserve for tax exposure ( 171 ) 20,079 10,775

Nontaxable items and other 11,881 ( 1,932 ) 3,850

Provision for/(benefit from) income taxes $ 1,355 $ 107,709 $ ( 72,620 )

Valuation allowance impact on tax expense

During the year ended December 31, 2018 , we released a substantial portion of our valuation allowance against our deferred tax assets in the U.S.

We continue to maintain a valuation allowance against certain of our interest, foreign tax, and state tax credit carryforwards.

Refer to the discussion below related to the release of the valuation allowance.

Tax Reform Act Impact

As a result of the Tax Reform Act, the U.S.

statutory tax rate was lowered from 35 % to 21 % , effective on January 1, 2018 .

We were required to remeasure our U.S.

deferred tax assets and liabilities to the new tax rate.

For the year ended December 31, 2017 we recognized $ 73.7 million of income tax benefit for the remeasurement of the deferred tax liabilities associated with indefinite-lived intangible assets that will reverse at the new 21 % rate.

Absent this deferred tax liability, the U.S.

operation was in a net deferred tax asset position that was offset by a full valuation allowance at December 31, 2017 .

We reduced our net deferred tax assets excluding the indefinite-lived intangible assets and the corresponding valuation allowance by $ 120.0 million .

Intangible property transfers

The decrease in our effective tax rate for the year ended December 31, 2020, was primarily due to a $ 54.2 million net income tax benefit in the fourth quarter of 2020 related to intangible property transfers.

Foreign tax rate differential

We operate in locations outside the U.S., including Bermuda, Bulgaria, China, Malaysia, the Netherlands, South Korea, and the U.K., that historically have had statutory tax rates different than the U.S.

We operate in locations outside the U.S., including Belgium, Bermuda, Bulgaria, China, Malaysia, the Netherlands, South Korea, and the U.K., that historically have had statutory tax rates different than the U.S.

statutory tax rate.

4 unchanged sentences

The remeasurement of the deferred tax assets and liabilities is included in the change in tax laws or rates line.

Valuation allowance impact on tax expense

During the year ended December 31, 2018, we released a substantial portion of our valuation allowance against our deferred tax assets in the U.S.

We continue to maintain a valuation allowance against certain of our interest, goodwill tax basis, foreign tax, and state tax credit carryforwards.

Withholding taxes not creditable

Withholding taxes may apply to intercompany interest, royalty, management fees, and certain payments to third parties.

Such taxes are deducted if they cannot be credited against the recipient’s tax liability in its country of residence.

Additional consideration has been given to the withholding taxes associated with unremitted earnings and the recipient's ability to obtain a tax credit for such taxes.

Earnings are not considered to be indefinitely reinvested in the jurisdictions in which they were earned.

In certain jurisdictions we recognize a deferred tax liability on withholding and other taxes on intercompany payments including dividends.

Research and development incentives

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As a result of this assessment, we recognized a tax benefit of $ 10.0 million.

Prior to fiscal year 2018, the deferred tax asset related to these R&D credits would have been offset by the valuation allowance.

Withholding taxes not creditable

Withholding taxes may apply to intercompany interest, royalty, management fees, and certain payments to third parties.

Such taxes are deducted if they cannot be credited against the recipient’s tax liability in its country of residence.

Additional consideration also has been given to the withholding taxes associated with unremitted earnings and the recipient's ability to obtain a tax credit for such taxes.

Earnings are not considered to be indefinitely reinvested in the jurisdictions in which they were earned.

In certain jurisdictions we recognize a deferred tax liability on withholding and other taxes on intercompany payments including dividends.

Deferred income tax assets and liabilities

4 unchanged sentences

Prepaid and accrued expenses 67,221 67,143

Intangible assets

Inventories and related reserves

Intangible assets and goodwill 110,382 20,457

Pension liability and other 14,241 7,158

Property, plant and equipment 13,789 14,749

Share-based compensation 9,609 10,288

Pension liability and other

Inventories and related reserves 9,329 16,712

Unrealized exchange loss 3,182 1,959

5 unchanged sentences

Tax on undistributed earnings of subsidiaries ( 35,254 ) ( 31,636 )

Property, plant and equipment

Operating lease right of use assets ( 11,324 ) ( 12,522 )

Property, plant and equipment ( 16,110 ) ( 13,762 )

Unrealized exchange gain ( 643 ) ( 6,739 )

2 unchanged sentences

Valuation allowance and net operating loss carryforwards

We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized.

In measuring our deferred tax assets, we consider all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed for all or some portion of the deferred tax assets.

1 unchanged sentence

The more negative evidence that exists, the more positive evidence is necessary, and the more difficult it is to support a conclusion that a valuation allowance is not needed.

Additionally, we utilize the "more likely than not" criteria established in FASB ASC Topic 740 to determine whether the future tax benefit from the deferred tax assets should be recognized.

Additionally, we utilize the "more likely than not" criteria established in FASB ASC Topic 740 to determine whether the future

tax benefit from the deferred tax assets should be recognized.

As a result, we have established valuation allowances on the deferred tax assets in jurisdictions that have incurred net operating losses and in which it is more likely than not that such losses will not be utilized in the foreseeable future.

As of each reporting date, we consider new evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets.

In the fourth quarter of 2018 , based on reversals of existing taxable differences, projections of future taxable income, and taxable income in the current year, we determined that sufficient positive evidence existed as of December 31, 2018 , to conclude that it is more likely than not the additional deferred taxes of $ 122.1 million were realizable, and therefore, we reduced the valuation allowance accordingly.

One of the provisions of the Tax Reform Act limits the deduction for net interest expense incurred by U.S.

corporations to 30% of adjusted taxable income.

As a result of this provision, we have determined that certain of our interest carryforwards

may be subject to limitation, and as result, determined that it was appropriate to retain the valuation allowance on a significant portion of these carryforwards.

Our interest expense carryforwards in certain jurisdictions are subject to limitations.

We consider these limitations in our assessment of positive and negative evidence.

Our assessment of these limitations has resulted in the conclusion that a portion of our interest carryforwards are subject to a valuation allowance.

For tax purposes, certain goodwill and indefinite-lived intangible assets are generally amortizable over 6 to 20 years.

2 unchanged sentences

This liability may not be used to support deductible temporary differences, such as net operating loss carryforwards, which may expire within a definite period.

The total valuation allowance for the years ended December 31, 2019 and 2018 decreased $ 10.3 million and $ 120.3 million , respectively.

The total valuation allowance increased $ 55.3 million in the year ended December 31, 2020 and decreased $ 10.3 million in the year ended December 31, 2019.

In connection with our 2020 intangible property transfer, we recorded a valuation allowance of $ 43.2 million.

Subsequently reported tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2020 will be allocated to income tax benefit recognized in the consolidated statements of operations.

As of December 31, 2020, we have U.S.

federal net operating loss carryforwards of $ 472.0 million and suspended interest expense carryforwards of $ 511.4 million .

Substantially all of our U.S.

federal net operating loss carryforwards will expire from 2027 to 2037 .

Our state net operating loss carryforwards will expire from 2020 to 2037 .

Our interest carryovers have an unlimited life.

We also have non-U.S.

net operating loss carryforwards of $ 221.9 million , which will begin to expire in 2020 .

federal net operating loss carryforwards of $ 801.1 million, of which $ 446.6 million will expire from 2028 to 2037, and $ 354.5 million do not expire.

We have state net operating loss carryforwards with limited and unlimited lives.

Our limited life state net operating losses will expire beginning in 2021.

As of December 31, 2020, we have suspended interest expense carryforwards of $ 339.1 million, which have an unlimited life.

We also have net operating loss carryforwards in foreign jurisdictions of $ 239.7 million, which will begin to expire in 2021.

Unrecognized tax benefits

1 unchanged sentence

For the year ended December 31,

2020 2019 2018

Balance at beginning of year $ 117,591 $ 89,609 $ 59,884

1 unchanged sentence

Increases related to prior year tax positions 43,082 15,356 14,609

Increases related to business combinations — 450 1,000

Decreases related to settlements with tax authorities ( 5,183 ) ( 3,515 ) —

Decreases related to prior year tax positions ( 1,294 ) ( 1,773 ) ( 1,144 )

Increases related to business combinations

Decreases related to lapse of applicable statute of limitations ( 452 ) ( 87 ) —

Increases/(decreases) related to foreign currency exchange rate

Changes related to foreign currency exchange rate 1,337 173 ( 416 )

Balance at end of year $ 201,410 $ 117,591 $ 89,609

1 unchanged sentence

The table that follows presents the expense/(income) related to such interest and penalties recognized in the consolidated statements of operations during the years ended December 31, 2020, 2019, and 2018, and the amount of interest and penalties recorded on the consolidated balance sheets as of December 31, 2020 and 2019:

Statements of Operations

Balance Sheets

For the year ended December 31,

As of December 31,

Statements of Operations Balance Sheets

For the year ended December 31, As of December 31,

(In millions) 2020 2019 2018 2020 2019

Interest $ 0.4 $ 0.9 $ ( 0.2 ) $ 1.7 $ 1.3

Penalties $ 0.2 $ ( 0.1 ) $ ( 0.2 ) $ 0.4 $ 0.3

At December 31, 2020, we anticipate that the liability for unrecognized tax benefits could decrease by up to $ 56.8 million within the next twelve months due to the expiration of certain statutes of limitation or the settlement of examinations or issues with tax authorities.

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Raw materials 193,511 205,140

Inventories $ 451,005 $ 506,678

Refer to Note 2, "Significant Accounting Policies," for a discussion of our accounting policies related to inventories.

2 unchanged sentences

As of December 31,

Land $ 17,880 $ 17,880

Buildings and improvements 273,899 266,864

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The following table outlines the changes in net goodwill by segment for the years ended December 31, 2020 and 2019.

Performance Sensing

Sensing Solutions

Performance Sensing Sensing Solutions Total

Balance as of December 31, 2018 $ 2,155,633 $ 925,669 $ 3,081,302

Divestiture of Valves Business

Acquisition of GIGAVAC

GIGAVAC acquisition 16,387 ( 16,564 ) ( 177 )

Other acquisition — 12,473 12,473

Balance as of December 31, 2019 2,172,020 921,578 3,093,598

GIGAVAC purchase accounting adjustment

Other acquisition 17,751 — 17,751

1 unchanged sentence

At each of December 31, 2020, 2019, and 2018, accumulated goodwill impairment was $ 0.0 million related to Performance Sensing and $ 18.5 million related to Sensing Solutions.

Goodwill attributed to acquisitions reflects our allocation of purchase price to the estimated fair value of certain assets acquired and liabilities assumed, and has been assigned to our segments based on a methodology using anticipated future earnings of the components of business.

Goodwill attributed to the divestiture of the Valves Business is based on the relative fair value of the Valves Business to the Performance Sensing reporting unit.

Refer to Note 17, "Acquisitions and Divestitures," for additional information related to our acquisition and divestiture transactions.

We own the Klixon ® and Airpax ® tradenames, which are indefinite-lived intangible assets, as they have each been in continuous use for over 65 years , and we have no plans to discontinue using them.

Goodwill attributed to acquisitions reflects our allocation of purchase price to the estimated fair value of certain assets acquired and liabilities assumed, and has been included in our segments based on a methodology using anticipated future earnings of the components of business.

We own the Klixon ® and Airpax ® tradenames, which are indefinite-lived intangible assets as they have each been in continuous use for over 65 years and we have no plans to discontinue using either of them.

We have recorded $ 59.1 million and $ 9.4 million, respectively, on the consolidated balance sheets related to these tradenames.

We evaluated our goodwill and other indefinite-lived intangible assets for impairment as of October 1, 2019 using quantitative analyses.

Refer to Note 2, "Significant Accounting Policies," for additional information related to the methodology used.

In addition, in the year ended December 31, 2020, we recognized indefinite-lived intangible assets of $ 6.9 million related to in-process research & development acquired in a fiscal year 2020 business combination transaction.

We evaluated our goodwill and other indefinite-lived intangible assets for impairment as of October 1, 2020 using a combination of the quantitative and qualitative methods.

Under the qualitative method, we assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value based on various factors, including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance, and other relevant factors as applicable.

If the results of the qualitative analysis indicate that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, no further analysis is prepared.

Otherwise, we perform a quantitative analysis under which a discounted cash flow analysis is prepared to determine whether the fair value of the reporting unit is less than its carrying value.

Based on these analyses, we have determined that as of October 1, 2020 the fair value of each of our reporting units and indefinite-lived intangible assets exceeded their carrying values.

We consider a combination of quantitative and qualitative factors to determine whether a reporting unit is at risk of failing Step 1 of the goodwill impairment test, including:

the timing of our most recent quantitative impairment tests and the relative amount by which a reporting unit’s fair value exceeded its then carrying value, the inputs and assumptions underlying our valuation models and the sensitivity of our fair value measurements to those inputs and assumptions, the impact that adverse economic or market conditions may have on the degree of uncertainty inherent in our long-term operating forecasts, and changes in the carrying value of a reporting unit’s net assets from the time of our most recent goodwill impairment test.

Based on the results of this analysis, we do not consider any of our reporting units to be at risk of failing Step 1 of the goodwill impairment test.

The following tables outline the components of definite-lived intangible assets as of December 31, 2020 and 2019:

As of December 31, 2020

Life (years) Gross

Amount Accumulated

Amortization Accumulated

Impairment Net

Completed technologies 14 $ 781,508 $ ( 578,178 ) $ ( 2,430 ) $ 200,900

Customer relationships 11 1,858,998 ( 1,501,960 ) ( 12,144 ) 344,894

Non-compete agreements

Tradenames 21 66,654 ( 19,816 ) — 46,838

Capitalized software and other (1)

7 69,227 ( 45,680 ) — 23,547

Total 12 $ 2,776,387 $ ( 2,145,634 ) $ ( 14,574 ) $ 616,179

As of December 31, 2019

Life (years) Gross

Amount Accumulated

Amortization Accumulated

Impairment Net

Completed technologies 14 $ 770,608 $ ( 529,926 ) $ ( 2,430 ) $ 238,252

1 unchanged sentence

Non-compete agreements 8 23,400 ( 23,400 ) — —

Tradenames 21 66,654 ( 16,598 ) — 50,056

Capitalized software and other (1)

7 67,784 ( 38,997 ) — 28,787

Total 12 $ 2,756,444 $ ( 2,039,436 ) $ ( 14,574 ) $ 702,434

__________________________________________

(1) During the years ended December 31, 2020 and 2019, we wrote-off approximately $ 0.1 million and $ 0.3 million, respectively, of fully-amortized capitalized software that was not in use.

Refer to Note 17, "Acquisitions and Divestitures," for additional information related to the definite-lived intangible assets recognized as a result of the acquisition of GIGAVAC.

The following table outlines amortization of definite-lived intangible assets for the years ended December 31, 2020, 2019, and 2018:

For the year ended December 31,

2020 2019 2018

Acquisition-related definite-lived intangible assets $ 122,915 $ 136,087 $ 132,235

Capitalized software 6,634 6,799 7,091

Amortization of definite-lived intangible assets

Amortization of intangible assets $ 129,549 $ 142,886 $ 139,326

The table below presents estimated amortization of definite-lived intangible assets for each of the next five years:

For the year ended December 31,

2021 $ 117,489

2022 $ 104,101

2023 $ 90,208

2024 $ 73,544

2025 $ 45,629

Accrued Expenses and Other Current Liabilities

3 unchanged sentences

Accrued interest 53,630 42,803

Foreign currency and commodity forward contracts 19,627 1,925

Accrued severance 14,879 14,779

1 unchanged sentence

Current portion of pension and post-retirement benefit obligations 3,498 3,220

Foreign currency and commodity forward contracts

Other accrued expenses and current liabilities 136,667 88,962

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We intend to contribute amounts to the qualified defined benefit pension plan in order to meet the minimum funding requirements of federal laws and regulations, plus such additional amounts as we deem appropriate.

During the year ended December 31, 2019 , we contributed $ 3.3 million to the qualified defined benefit plan.

We do not expect to contribute to the qualified defined benefit pension plan in fiscal year 2020 .

During the year ended December 31, 2020, we did not contribute to the qualified defined benefit plan.

We expect to contribute to the qualified defined benefit pension plan in fiscal year 2021.

We also sponsor a non-qualified defined benefit pension plan, which is closed to new participants and is unfunded.

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For the year ended December 31,

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

Defined Benefit

2020 2019 2018

Plans Non-U.S.

Defined Benefit Retiree Healthcare Defined Benefit Defined Benefit Retiree Healthcare Defined Benefit Defined Benefit Retiree Healthcare Defined Benefit

$ — $ 10 $ 3,522 $ — $ 7 $ 2,836 $ — $ 50 $ 3,122

Interest cost 762 155 1,466 1,483 203 1,344 1,473 272 1,310

Expected return on plan assets

( 1,339 ) — ( 712 ) ( 1,694 ) — ( 702 ) ( 1,710 ) — ( 929 )

Amortization of net loss 1,184 16 1,204 946 — 766 1,080 5 407

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For the year ended December 31,

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

Defined Benefit

Plans Non-U.S.

Defined Benefit Retiree Healthcare Defined Benefit Defined Benefit Retiree Healthcare Defined Benefit

Change in benefit obligation:

Beginning balance $ 45,548 $ 5,588 $ 74,172 $ 45,169 $ 6,017 $ 65,691

Service cost — 10 3,522 — 7 2,836

Interest cost 762 155 1,466 1,483 203 1,344

Plan participants’ contributions — 696 35 — 474 31

Plan amendment

Actuarial loss/(gain) 7,526 ( 1,213 ) 13,006 1,711 ( 92 ) 9,344

Curtailment loss — 530 — — — —

Benefits paid ( 17,568 ) ( 719 ) ( 8,507 ) ( 2,815 ) ( 1,021 ) ( 5,235 )

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Funded status at end of year $ ( 6,614 ) $ ( 5,047 ) $ ( 39,839 ) $ ( 678 ) $ ( 5,588 ) $ ( 30,266 )

Accumulated benefit obligation at end of year

Accumulated benefit obligation at end of year $ 36,268 NA $ 77,886 $ 45,548 NA $ 65,633

The following table outlines the funded status amounts recognized in the consolidated balance sheets as of December 31, 2020 and 2019:

As of December 31,

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

Defined Benefit

Plans Non-U.S.

Defined Benefit Retiree Healthcare Defined Benefit Defined Benefit Retiree Healthcare Defined Benefit

Noncurrent assets $ — $ — $ — $ 2,788 $ — $ —

4 unchanged sentences

As of December 31,

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

Defined Benefit

2020 2019 2018

Plans Non-U.S.

Defined Benefit Retiree Healthcare Defined Benefit Defined Benefit Retiree Healthcare Defined Benefit Defined Benefit Retiree Healthcare Defined Benefit

Net prior service cost/(credit) $ — $ 1,094 $ ( 20 ) $ — $ 306 $ ( 16 ) $ — $ ( 692 ) $ ( 10 )

We expect to amortize a loss of $ 1.4 million from accumulated other comprehensive loss to net periodic benefit cost during fiscal year 2020 .

Net loss $ 19,026 $ ( 131 ) $ 22,833 $ 18,780 $ 809 $ 17,151 $ 20,759 $ 880 $ 14,425

Information for plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2020 and 2019 is as follows:

As of December 31,

Plans Non-U.S.

Projected benefit obligation $ 36,268 $ 88,312 $ 3,465 $ 74,020

Accumulated benefit obligation $ 36,268 $ 77,886 $ 3,465 $ 65,633

Plan assets $ 29,654 $ 48,473 $ — $ 43,754

Information for plans with a projected benefit obligation in excess of plan assets as of December 31, 2020 and 2019 is as follows:

As of December 31,

Plans Non-U.S.

Projected benefit obligation $ 41,315 $ 88,312 $ 9,053 $ 74,020

Plan assets $ 29,654 $ 48,473 $ — $ 43,754

Other changes in plan assets and benefit obligations, net of tax, recognized in other comprehensive income/(loss) for the years ended December 31, 2020, 2019, and 2018 are as follows:

For the year ended December 31,

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

Defined Benefit

2020 2019 2018

Plans Non-U.S.

Defined Benefit Retiree Healthcare Defined Benefit Defined Benefit Retiree Healthcare Defined Benefit Defined Benefit Retiree Healthcare Defined Benefit

Net (gain)/loss $ 4,997 $ ( 928 ) $ 8,425 $ ( 824 ) $ ( 71 ) $ 4,365 $ 2,002 $ ( 124 ) $ 3,669

Amortization of net loss

( 906 ) ( 12 ) ( 839 ) ( 723 ) — ( 539 ) ( 1,080 ) ( 5 ) ( 298 )

Amortization of net prior service credit/(cost) — 562 ( 4 ) — 998 ( 6 ) — 1,728 ( 4 )

Divestiture — — — — — — — — ( 228 )

Plan amendment — — — — — — — ( 3,243 ) —

5 unchanged sentences

As of December 31,

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

assumed discount rate

Defined Benefit Retiree Healthcare Defined Benefit Retiree Healthcare

assumed discount rate 1.65 % 1.80 % 2.60 % 2.80 %

average long-term pay progression

assumed discount rate 1.97 % NA 1.90 % NA

average long-term pay progression 2.93 % NA 2.87 % NA

Weighted-average assumptions used to calculate the net periodic benefit cost of our defined benefit and retiree healthcare benefit plans for the years ended December 31, 2020, 2019, and 2018 are as follows:

For the year ended December 31,

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

Defined Benefit

Retiree Healthcare

assumed discount rate

2020 2019 2018

Defined Benefit Retiree Healthcare Defined Benefit Retiree Healthcare Defined Benefit Retiree Healthcare

assumed discount rate 2.60 % 2.80 % 3.79 % 3.90 % 3.45 % 3.10 %

assumed discount rate 5.53 % NA 5.76 % NA 5.87 % NA

average long-term rate of return on plan assets

4.29 % NA 4.53 % NA 4.57 % NA

average long-term rate of return on plan assets

average long-term pay progression

1.61 % NA 1.77 % NA 2.26 % NA

average long-term pay progression 4.83 % NA 4.43 % NA 4.82 % NA

Assumed healthcare cost trend rates for the U.S.

1 unchanged sentence

As of December 31,

2020 2019 2018

Assumed healthcare trend rate for next year:

5 unchanged sentences

Attributed to age 65 or greater 2038 2038 2038

Assumed healthcare trend rates could have a significant effect on the amounts reported for retiree healthcare plans.

A one percentage point change in the assumed healthcare trend rates for the year ended December 31, 2019 would have the following effect:

One Percentage Point:

Effect on total service and interest cost components

Effect on post-retirement benefit obligations

The table below outlines the benefits expected to be paid to participants in each of the following years, taking into consideration expected future service, as appropriate.

1 unchanged sentence

Expected Benefit Payments

For the year ended December 31,

Defined Benefit

Retiree Healthcare

For the year ended December 31, U.S.

Defined Benefit U.S.

Retiree Healthcare Non-U.S.

Defined Benefit

2021 $ 12,177 $ 586 $ 3,546

2022 $ 3,378 $ 561 $ 3,809

2023 $ 4,221 $ 487 $ 3,777

2024 $ 2,548 $ 460 $ 3,766

2025 $ 2,506 $ 415 $ 4,639

2026 - 2030 $ 7,928 $ 1,463 $ 24,768

We hold assets for our defined benefit plans in the U.S., Japan, the Netherlands, and Belgium.

Information about the assets for each of these plans is detailed below.

Refer to Note 18, "Fair Value Measures," for additional information related to the levels of the fair value hierarchy in accordance with FASB ASC Topic 820.

Refer to Note 18, "Fair Value Measures," for additional information related to the level s of the fair value hierarchy in accordance with FASB ASC Topic 820.

Our target asset allocation for the U.S.

2 unchanged sentences

The following table presents information about the plan’s target and actual asset allocation, as of December 31, 2020:

Target Allocation

Actual Allocation as of December 31, 2019

Target Allocation Actual Allocation as of December 31, 2020

large cap equity 7 % 9 %

8 unchanged sentences

__________________________________________

As of December 31, 2019, our holdings in the Money market funds exceed the target allocation as we prepare to make payments resulting from the voluntary retirement incentive program.

Refer to Note 5, "Restructuring and Other Charges, Net" for additional information about the voluntary retirement incentive program.

The portfolio is monitored for automatic rebalancing on a monthly basis.

26 unchanged sentences

The following table presents information about the plan’s target asset allocation, as well as the actual allocation, as of December 31, 2020:

Target Allocation

Actual Allocation as of December 31, 2019

Target Allocation Actual Allocation as of December 31, 2020

Fixed income securities, cash, and cash equivalents 10 %- 90 %

2 unchanged sentences

As of December 31,

equity $ 2,736 $ 2,413

International (non-U.S.) equity 6,724 6,343

Total equity securities 9,460 8,756

fixed income 3,091 3,835

International (non-U.S.) fixed income 11,142 9,716

3 unchanged sentences

All fair value measures presented above are categorized in Level 1 of the fair value hierarchy, with the exception of U.S.

fixed income securities of $ 0.3 million and $ 0.3 million as of December 31, 2019 and 2018 , respectively, which are categorized as Level 2.

fixed income securities of $ 0.3 million of December 31, 2020 and 2019, which are categorized as Level 2.

The fair values of equity and fixed income securities are based on publicly-quoted closing stock and bond values on the last business day of the year.

30 unchanged sentences

Maturity Date 2020 2019

September 20, 2026

Term Loan September 20, 2026 $ 456,096 $ 460,725

4.875 % Senior Notes

8 unchanged sentences

February 15, 2030 450,000 450,000

3.75 % Senior Notes

February 15, 2031 750,000 —

debt discount ( 9,605 ) ( 11,758 )

5 unchanged sentences

Finance lease and other financing obligations, less current portion $ 27,931 $ 28,810

___________________________

(1) On February 3, 2021, we announced that we intended to redeem in full the $ 750.0 million aggregate principal amount outstanding on our 6.25 % Senior Notes due 2026 in March 2021.

As a result, these notes have been classified as current on our consolidated balance sheet as of December 31, 2020.

There were no outstanding borrowings on our $ 420.0 million revolving credit facility (the "Revolving Credit Facility") as of December 31, 2020 and 2019.

Secured Credit Facility

The credit agreement governing our secured credit facility (as amended, the "Credit Agreement") provides for senior secured credit facilities (the "Senior Secured Credit Facilities") consisting of a term loan facility (the "Term Loan"), a $ 420.0 million revolving credit facility (the "Revolving Credit Facility"), and incremental availability under which additional secured credit facilities could be issued under certain circumstances.

The credit agreement governing our secured credit facility (as amended, the "Credit Agreement") provides for senior secured credit facilities (the "Senior Secured Credit Facilities") consisting of a term loan facility (the "Term Loan"), the Revolving Credit Facility, and incremental availability under which additional secured credit facilities could be issued under certain circumstances.

The principal amount of the Term Loan amortizes in equal quarterly installments in an aggregate annual amount equal to 1.0 % of the aggregate principal amount of the Term Loan upon completion of the tenth amendment of the Credit Agreement entered into on September 20, 2019 (the "Tenth Amendment,") with the balance due at maturity.

In accordance with the terms of the Credit Agreement, the Term Loan may, at our option, be maintained from time to time as a Base Rate loan or a Eurodollar Rate loan (each as defined in the Credit Agreement), with each representing a different determination of interest rates.

The interest rate margins for the Term Loan are fixed at, and as of December 31, 2020 were, 0.75 % and 1.75 % for Base Rate loans and Eurodollar Rate loans, respectively, subject to floors of 1.00 % and 0.00 % for Base Rate loans and Eurodollar Rate loans, respectively.

As of December 31, 2020, we maintained the Term Loan as a Eurodollar Rate loan, which accrued interest at 1.90 %.

Revolving Credit Facility

In accordance with the terms of the Credit Agreement, borrowings under the Revolving Credit Facility may, at our option, be maintained from time to time as Base Rate loans, Eurodollar Rate loans, or EURIBOR loans (each as defined in the Credit Agreement), with each representing a different determination of interest rates.

The interest rate margins and letter of credit fees under the Revolving Credit Facility are as follows (each depending on our senior secured net leverage ratio):

(i) the interest rate margin for Base Rate loans range from 0.00 % to 0.50 %;

(ii) the interest rate margin for Eurodollar Rate and EURIBOR loans range from 1.00 % to 1.50 %;

and (iii) the letter of credit fees range from 0.875 % to 1.375 %.

We are required to pay to our revolving credit lenders, on a quarterly basis, a commitment fee on the unused portion of the Revolving Credit Facility.

The commitment fee ranges from 0.125 % to 0.250 %, depending on our senior secured net leverage ratios.

As of December 31, 2020, there was $ 416.1 million available under the Revolving Credit Facility, net of $ 3.9 million of obligations in respect of outstanding letters of credit issued thereunder.

Outstanding letters of credit are issued primarily for the benefit of certain operating activities.

As of December 31, 2020, no amounts had been drawn against these outstanding letters of credit.

Availability under the Revolving Credit Facility may be borrowed, repaid, and re-borrowed to fund our working capital needs and for other general corporate purposes.

Early redemption of the 6.25% Senior Notes

On February 3, 2021, we announced that we intended to redeem in full the $ 750.0 million aggregate principal amount outstanding on our 6.25 % Senior Notes due 2026 in March 2021.

On February 15, 2021, the “make-whole” premium with respect to the 6.25% Senior Notes will expire, and we will redeem the 6.25% Senior Notes in accordance with the terms of the 6.25% Senior Notes Indenture and the terms of the notice of redemption.

We expect to redeem the 6.25% Senior Notes on March 5, 2021 at a redemption price equal to 103.125 % of the aggregate principal amount of the outstanding 6.25% Senior Notes, plus accrued and unpaid interest to (but not including) the redemption date.

Fiscal year 2020 transactions

On April 1, 2020, in order to enhance our financial flexibility given the general uncertainty associated with the COVID-19 pandemic, we withdrew $ 400.0 million from the Revolving Credit Facility.

On August 17, 2020, we repaid these borrowings using a portion of the proceeds from issuance of $ 750.0 million aggregate principal amount of 3.75 % senior notes due 2031 (the "3.75% Senior Notes"), issued by our indirect, wholly-owned subsidiary, Sensata Technologies Inc.

Fiscal year 2019 transactions

On March 27, 2019 certain indirect, wholly-owned subsidiaries of Sensata plc, including Sensata Technologies B.V.

7 unchanged sentences

On June 13, 2019, our subsidiaries that were at the time borrowers under the Credit Agreement entered into an amendment to the Credit Agreement with the administrative agent to correct certain technical and immaterial errors in the Credit Agreement.

On September 20, 2019 certain of our subsidiaries, including STBV and its indirect, wholly-owned subsidiary, Sensata Technologies Inc.

("STI"), entered into the tenth amendment of the Credit Agreement (the "Tenth Amendment").

On September 20, 2019 certain of our subsidiaries, including STBV and STI, entered into the Tenth Amendment.

Under the terms of the Tenth Amendment, among other changes to the Credit Agreement, (i) the final maturity date of the Term Loan was extended to September 20, 2026;

8 unchanged sentences

These provisions were not triggered during the year ended December 31, 2020.

The interest rate margins for the Term Loan are fixed at, and as of December 31, 2019 were, 0.75 % and 1.75 % for Base Rate loans and Eurodollar Rate loans, respectively, subject to floors of 1.00 % and 0.00 % for Base Rate loans and Eurodollar Rate loans, respectively.

As of December 31, 2019 , we maintained the Term Loan as a Eurodollar Rate loan, which accrued interest at 3.59 % .

Revolving Credit Facility

The interest rate margins and letter of credit fees under the Revolving Credit Facility are as follows (each depending on our senior secured net leverage ratio):

(i) the interest rate margin for Eurodollar Rate loans ranges from 1.00 % to 1.50 % ;

(ii) the interest rate margin for Base Rate loans ranges from 0.00 % to 0.50 % ;

and (iii) the letter of credit fees range from 0.875 % to 1.375 % .

We are required to pay to our revolving credit lenders, on a quarterly basis, a commitment fee on the unused portion of the Revolving Credit Facility.

The commitment fee ranges from 0.125 % to 0.25 % , depending on our senior secured net leverage ratios.

As of December 31, 2019 , there was $ 416.1 million available under the Revolving Credit Facility, net of $ 3.9 million of obligations in respect of outstanding letters of credit issued thereunder.

Outstanding letters of credit are issued primarily for the benefit of certain operating activities.

As of December 31, 2019 , no amounts had been drawn against these outstanding letters of credit.

Availability under the Revolving Credit Facility may be borrowed, repaid, and re-borrowed to fund our working capital needs and for other general corporate purposes.

We have various tranches of senior notes outstanding.

These consisted of $ 500.0 million in aggregate principal amount of 4.875 % senior notes due 2023 issued by STBV (the " 4.875 % Senior Notes"), $ 400.0 million in aggregate principal amount of 5.625 % senior notes due 2024 issued by STBV (the " 5.625 % Senior Notes"), $ 700.0 million in aggregate principal amount of 5.0 % senior notes due 2025 issued by STBV (the " 5.0 % Senior Notes"), $ 750.0 million in aggregate principal amount of 6.25 % senior notes due 2026 (the " 6.25 % Senior Notes") issued by our subsidiary Sensata Technologies UK Financing Co.

plc ("STUK"), and $ 450.0 million in aggregate principal amount of 4.375 % senior notes due 2030 issued by STI (the " 4.375 % Senior Notes" and together with the other senior notes referenced above, the "Senior Notes").

4.375% Senior Notes

On September 20, 2019 , concurrently with the entry into the Tenth Amendment, we completed the issuance and sale of the 4.375 % Senior Notes.

The proceeds of the issuance of the 4.375 % Senior Notes were used to partially repay the Term Loan.

The 4.375 % Senior Notes were issued under an indenture dated as of September 20, 2019 among STI, as issuer, The Bank of New York Mellon, as trustee, and our guarantor subsidiaries named therein.

The 4.375 % Senior Notes were offered at par, and interest is payable semi-annually on February 15 and August 15 of each year, commencing on February 15, 2020 .

4.875 % Senior Notes

In April 2013 we completed the issuance and sale of the 4.875 % Senior Notes, which were issued under an indenture dated as of April 17, 2013 among STBV, as issuer, The Bank of New York Mellon, as trustee, and the guarantors named therein.

The 4.875 % Senior Notes were offered at par.

Interest on the 4.875 % Senior Notes is payable semi-annually on April 15 and October 15 of each year.

5.625 % Senior Notes

In October 2014 we completed the issuance and sale of the 5.625 % Senior Notes, which were issued under an indenture dated as of October 14, 2014, among STBV, as issuer, The Bank of New York Mellon, as trustee, and the guarantors named therein.

The 5.625 % Senior Notes were offered at par.

Interest on the 5.625 % Senior Notes is payable semi-annually on May 1 and November 1 of each year.

Information regarding these senior notes (together, the "Senior Notes") is included in the following table.

The Senior Notes were issued under indentures (the "Senior Notes Indentures") among the issuers listed in the table below, The Bank of New York Mellon, as trustee, and our guarantor subsidiaries named in the respective Senior Notes Indentures.

Each of the Senior Notes were issued at par, with interest payable semi-annually on the dates shown in the table below.

4.875% Senior Notes 5.625% Senior Notes 5.000% Senior Notes 6.250% Senior Notes (1)

4.375% Senior Notes (2)

In March 2015 we completed the issuance and sale of the 5.0 % Senior Notes, which were issued under an indenture dated as of March 26, 2015, among STBV, as issuer, The Bank of New York Mellon, as trustee, and the guarantors named therein.

The 5.0 % Senior Notes were offered at par.

Interest on the 5.0 % Senior Notes is payable semi-annually on April 1 and October 1 of each year.

3.750% Senior Notes

In November 2015, we completed the issuance and sale of the 6.25 % Senior Notes, which were issued under an indenture dated as of November 27, 2015 (the " 6.25 % Senior Notes Indenture" and, together with the indentures under which the other Senior Notes were issued, the "Senior Notes Indentures"), among STUK, as issuer, The Bank of New York Mellon, as trustee, and the guarantors named therein.

The 6.25 % Senior Notes were offered at par.

Interest on the 6.25 % Senior Notes is payable semi-annually on February 15 and August 15 of each year.

Aggregate principal amount $ 500,000 $ 400,000 $ 700,000 $ 750,000 $ 450,000 $ 750,000

Interest rate 4.875 % 5.625 % 5.000 % 6.250 % 4.375 % 3.750 %

Issuer STBV STBV STBV STUK STI STI

Issue date April 2013 October 2014 March 2015 November 2015 September 2019 August 2020

Interest due April 15 May 1 April 1 February 15 February 15 February 15

Interest due October 15 November 1 October 1 August 15 August 15 August 15

Maturity Date October 2023 November 2024 October 2025 February 2026 February 2030 February 2031

__________________________________________

(1) The 6.25% Senior Notes were issued by our indirect, wholly-owned subsidiary, Sensata Technologies UK Financing Co.

plc ("STUK") under an indenture dated as of November 27, 2015 (the "6.25% Senior Notes Indenture").

On February 3, 2021, we announced that we intended to redeem in full the $ 750.0 million aggregate principal amount outstanding on our 6.25% Senior Notes due 2026 in March 2021.

(2) The proceeds of the issuance of the 4.375% Senior Notes were used to repay a portion of the Term Loan concurrent with the entry into the Tenth Amendment.

Except as described below with respect to the 3.75% Senior Notes and the 4.375% Senior Notes, at any time, and from time to time, we may optionally redeem the Senior Notes, in whole or in part, at a price equal to 100 % of the principal amount of the notes redeemed, plus accrued and unpaid interest, if any, up to, but excluding, the date of redemption, plus a "make-whole" premium set forth in the relevant Senior Notes Indenture.

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The "make-whole" premium will not be payable with respect to any such redemption of the 3.75% Senior Notes on or after February 15, 2026;

on or after such date, we may optionally redeem the 6.25 % Senior Notes, in whole or in part, at the following prices (plus accrued and unpaid interest to the date of redemption, if any) during the applicable period:

Period beginning February 15,

on or after such date, we may optionally 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 %

Upon the occurrence of certain specific kinds of changes in control, the issuers of the Senior Notes will be required to offer to repurchase the notes at 101 % of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

Upon the occurrence of certain specific change in control events, we will be required to offer to repurchase the notes at 101 % of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

If changes in certain tax laws or treaties, or any change in the official application, administration, or interpretation thereof, of any relevant taxing jurisdiction become effective that would impose withholding taxes or other deductions on the payments of any of the Senior Notes or the guarantees thereof, we may, at our option, redeem the relevant 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, to, but excluding, the redemption date, premium, if any, and all additional amounts (as described in the relevant Senior Notes Indenture), if any, then due and which will become due on the date of redemption.

The obligations of the issuers of the Senior Notes are guaranteed by STBV and all of its subsidiaries (excluding the company that is the issuer of the relevant Senior Notes) that guarantee the obligations of STI under Credit Agreement (after giving effect to the Guarantees Release pursuant to the Tenth Amendment).

The Released Guarantors are not guarantors of the 4.375 % Senior Notes, and upon consummation of the Tenth Amendment, the guarantees of the Released Guarantors with respect to the other Senior Notes were released.

The obligations of the issuers of the Senior Notes are guaranteed by STBV and all of its subsidiaries (excluding the company that is the issuer of the relevant Senior Notes) that guarantee the obligations of STI under the Credit Agreement (after giving effect to the Guarantees Release pursuant to the Tenth Amendment).

The Released Guarantors are not guarantors of the 3.75% Senior Notes or the 4.375% Senior Notes, and upon consummation of the Tenth Amendment, the guarantees of the Released Guarantors with respect to the other Senior Notes were released.

Events of Default

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• enter into certain burdensome contractual obligations.

In addition, under the Credit Agreement, STBV and its subsidiaries are required to maintain a senior secured net leverage ratio not to exceed 5.0 :

1.0 at the conclusion of certain periods when outstanding loans and letters of credit that are not cash collateralized for the full face amount thereof exceed 20 % of the commitments under the Revolving Credit Facility.

In addition, under the Credit Agreement, STBV and its subsidiaries are required to maintain a senior secured net leverage ratio not to exceed 5.0 :1.0 at the conclusion of certain periods when outstanding loans and letters of credit that are not cash collateralized for the full face amount thereof exceed 20 % of the commitments under the Revolving Credit Facility.

Senior Notes Indentures

The Senior Notes Indentures contain restrictive covenants (subject to important exceptions and qualifications set forth in the Senior Notes Indentures) that limit the ability of STBV and its subsidiaries to, among other things:

• incur liens;

• incur or guarantee indebtedness without guaranteeing the Senior Notes;

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• customary and reasonable operating expenses, legal and accounting fees and expenses, and overhead of such parent companies incurred in the ordinary course of business, provided that such amounts, in the aggregate, do not exceed $ 20.0 million in any fiscal year;

dividends and other distributions in an aggregate amount not to exceed $ 200.0 million plus certain amounts, including the retained portion of excess cash flow, but only insofar as no default or event of default exists and the senior secured net leverage ratio is less than 2.0 :

1.0 calculated on a pro forma basis;

• dividends and other distributions in an aggregate amount not to exceed $ 200.0 million plus certain amounts, including the retained portion of excess cash flow, but only insofar as no default or event of default exists and the senior secured net leverage ratio is less than 2.0 :1.0 calculated on a pro forma basis;

• so long as no default or an event of default exists, dividends and other distributions in an aggregate amount not to exceed $ 50.0 million in any calendar year (with the unused portion in any year being carried over to succeeding years) plus unlimited additional amounts but only insofar as the senior secured net leverage ratio is less than 2.5 :1.0 calculated on a pro forma basis;

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Accounting for Debt Financing Transactions

During the year ended December 31, 2019 , in connection with the entry into the Ninth Amendment, we incurred $ 2.4 million of creditor fees and related third-party costs, which were recorded as an adjustment to the carrying amount of long-term debt.

During the year ended December 31, 2020, in connection with the entry into the 3.75% Senior Notes, we incurred $ 8.4 million of related third-party costs, which are presented as a reduction of long-term debt on our consolidated balance sheets.

During the year ended December 31, 2019, in connection with the entry into the Ninth Amendment, we incurred $ 2.4 million of creditor fees and related third-party costs, which are presented as a reduction of long-term debt on our consolidated balance sheets.

During the year ended December 31, 2019, in connection with of the issuance of the 4.375% Senior Notes, the entry into the Tenth Amendment, and the subsequent partial repayment of the Term Loan, we recognized a loss of $ 4.4 million, presented in the other, net line of our consolidated statement of operations, as well as $ 5.0 million of deferred financing costs, which are presented as a reduction of long-term debt on our consolidated balance sheets.

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As a result, and based on application of the provisions in FASB ASC Subtopic 470-50, we recognized a $ 3.5 million adjustment to the carrying value of long-term debt, net and a $ 2.4 million loss in other, net.

During the year ended December 31, 2017, we recognized a $ 0.2 million adjustment to the carrying value of long-term debt, net and a $ 2.7 million loss in other, net, based on application of the provisions in FASB ASC Subtopic 470-50.

Refer to Note 2, "Significant Accounting Policies," for additional information related to our accounting policies regarding debt financing transactions.

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All letters of credit issued thereunder will terminate at the final maturity of the Revolving Credit Facility unless cash collateralized prior to such time.

T he following table presents the remaining mandatory principal repayments of long-term debt, excluding finance lease payments, other financing obligations, and discretionary repurchases of debt, in each of the years ended December 31, 2020 through 2024 and thereafter.

For the year ended December 31,

Aggregate Maturities

The following table presents the remaining mandatory principal repayments of long-term debt, excluding finance lease payments, other financing obligations, and discretionary repurchases of debt, in each of the years ended December 31, 2021 through 2025 and thereafter.

On February 3, 2021, we announced that we intended to redeem in full the $ 750.0 million aggregate principal amount outstanding on our 6.25 % Senior Notes due 2026 in March 2021.

This redemption is reflected in fiscal year 2021 in the following table.

In accordance with the terms of the 6.25% Senior Notes, redemption will be at 103.125 % of aggregate principal amount outstanding, and will represent an additional cash outflow of approximately $ 23.4 million in fiscal year 2021, which is not presented below.

For the year ended December 31, Aggregate Maturities

2021 $ 754,630

Thereafter 1,632,946

Total long-term debt principal payments $ 4,006,096

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For the year ending December 31,

2025 and thereafter

2021 $ 41,355

Thereafter 196

Total purchase commitments $ 63,238

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Officers and Directors:

Our articles of association provide for indemnification of directors and officers by us to the fullest extent permitted by applicable law, as it now exists or may hereinafter be amended (but, in the case of an amendment, only to the extent such amendment permits broader indemnification rights than permitted prior thereto), against any and all liabilities, including all expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit, or proceeding, provided he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or

proceeding, had no reasonable cause to believe his or her conduct was unlawful or outside of his or her mandate.

liabilities, including all expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit, or proceeding, provided he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful or outside of his or her mandate.

The articles do not provide a limit to the maximum future payments, if any, under the indemnification.

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Our operations and facilities are subject to U.S.

laws and regulations governing the protection of the environment and our employees, including those governing air emissions, water discharges, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites.

laws and regulations governing the protection of the environment and our employees, including those governing air emissions, chemical usage, water discharges, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites.

We could incur substantial costs, including cleanup costs, fines, civil or criminal sanctions, or third-party property damage or personal injury claims, in the event of violations or liabilities under these laws and regulations, or non-compliance with the environmental permits required at our facilities.

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Legal Proceedings and Claims

We are regularly involved in a number of claims and litigation matters in the ordinary course of business.

Most of our litigation matters are third-party claims related to patent infringement allegations or for property damage allegedly caused by our products, but some involve allegations of personal injury or wrongful death.

We are regularly involved in a number of claims and litigation matters that arise in the ordinary course of business.

Although it is not feasible to predict the outcome of these matters, based upon our experience and current information known to us, we do not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on our results of operations, financial position, and/or cash flows.

1 unchanged sentence

Under FASB ASC Topic 450, loss contingency provisions are recognized for probable and estimable losses at our best estimate of a loss or, when a best estimate cannot be made, at our estimate of the minimum loss.

These estimates are often developed prior to knowing the amount of the ultimate loss, require the application of considerable judgment, and are refined each accounting period as

additional information becomes known.

These estimates are often developed prior to knowing the

amount of the ultimate loss, require the application of considerable judgment, and are refined each accounting period as additional information becomes known.

Accordingly, we are often initially unable to develop a best estimate of loss and therefore the minimum amount, which could be an immaterial amount, is recognized.

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Pending Litigation and Claims:

We are a defendant in a lawsuit, Wasica Finance Gmbh et al v.

There are no material pending litigation and claims outstanding as of December 31, 2020.

Litigation and Claims resolved in the current year:

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 alleges infringement of their patent (US 5,602,524) in connection with our tire pressure monitoring system ("TPMS") products.

The patent in question has expired, and as a result, the claimant is seeking damages for past alleged infringement with interest and costs.

Should the claimant prevail, these amounts could be material.

We have denied liability and have been defending the litigation.

Trial is currently expected in February 2020 .

We believe that a loss related to this matter is probable, but do not believe such loss will be material.

We were a defendant in a lawsuit, Metal Seal Precision, Ltd.

Sensata Technologies Inc., Case No.

2017-0518-BCSI, MA Superior Court (Suffolk County) , in which the claimant, a supplier of certain metal parts used in the manufacture of our products, alleged breach of contract, breach of covenant of good faith and fair dealing, and anticipatory repudiation.

The dispute arose out of an agreement under which Metal Seal alleged that we did not meet certain purchase requirements, resulting in damages and lost profits.

On November 26, 2019, the parties agreed to settle this lawsuit and terminate the underlying supply agreement through an asset purchase agreement (the “MS Purchase Agreement”), whereby Sensata would purchase certain equipment and assets from Metal Seal for $ 28.0 million (the “Purchase Price”).

The parties executed and closed the MS Purchase Agreement on December 13, 2019, and the lawsuit was formally dismissed by the Superior Court on December 24, 2019.

We intend to use the assets and equipment purchased in this transaction to expand our internal production of certain parts previously supplied by Metal Seal.

As a result of the termination of the underlying supply agreement and execution of the MS Purchase Agreement, we recorded $ 10.2 million of the Purchase Price as a capital expense for the acquired assets, with the remaining $ 17.8 million , representing the amount by which the Purchase Price exceeded the fair value of the purchased equipment and assets, recorded in restructuring and other charges, net.

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.

Shareholders’ Equity

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Accordingly, we (1) derecognized the total purchase price of these treasury shares, (2) recognized a reduction to ordinary shares at an amount equal to the total par value of such shares, and (3) recognized a reduction to retained earnings at an amount equal to the excess of the total repurchase price over the total par value of the then outstanding treasury shares, or $ 286.1 million.

From time to time, our Board of Directors has authorized various share repurchase programs.

From time to time, our Board of Directors has authorized various share repurchase programs, which may be modified or terminated by our Board of Directors at any time.

Under these programs, we may repurchase ordinary shares at such times and in amounts to be determined by our management, based on market conditions, legal requirements, and other corporate considerations, on the open market or in privately negotiated transactions, provided that such transactions were completed pursuant to an agreement and with a third party approved by our shareholders at the annual general meeting.

The authorized amount of our various share repurchase programs may be modified or terminated by our Board of Directors at any time.

During the year ended December 31, 2018 , we repurchased ordinary shares under a $ 400.0 million share repurchase program authorized by our Board of Directors in May 2018 .

During the year ended December 31, 2019 , we repurchased ordinary shares under a $ 250.0 million share repurchase program authorized by our Board of Directors in October 2018 (the "October 2018 Program") and a $ 500.0 million share repurchase program authorized by our Board of Directors in July 2019 (the "July 2019 Program").

The October 2018 Program was terminated upon commencement of the July 2019 Program.

We currently have a $ 500.0 million share repurchase program authorized by our Board of Directors in July 2019 (the "July 2019 Program").

On April 2, 2020, we announced a temporary suspension of July 2019 Program, which will continue to remain on hold until market conditions show greater improvement and stability.

As of December 31, 2020, approximately $ 302.3 million remained available under the July 2019 Program.

As a result of certain aspects of U.K.

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The components of accumulated other comprehensive loss were as follows:

Cash Flow Hedges

Defined Benefit and Retiree Healthcare Plans

Accumulated Other Comprehensive Loss

Cash Flow Hedges Defined Benefit and Retiree Healthcare Plans Accumulated Other Comprehensive Loss

Balance as of December 31, 2017 $ ( 28,179 ) $ ( 34,985 ) $ ( 63,164 )

Pre-tax current period change 49,817 ( 1,183 ) 48,634

Tax effect ( 12,454 ) 806 ( 11,648 )

Balance as of December 31, 2018 9,184 ( 35,362 ) ( 26,178 )

Pre-tax current period change 9,816 ( 2,198 ) 7,618

Tax effect ( 2,454 ) 530 ( 1,924 )

Balance as of December 31, 2019 16,546 ( 37,030 ) ( 20,484 )

Pre-tax current period change ( 31,114 ) ( 7,848 ) ( 38,962 )

Tax effect 7,835 2,076 9,911

Balance as of December 31, 2020 $ ( 6,733 ) $ ( 42,802 ) $ ( 49,535 )

The details of the components of other comprehensive income/(loss), net of tax, for the years ended December 31, 2019 , 2018 , and 2017 are as follows:

The details of the components of other comprehensive (loss)/income, net of tax, for the years ended December 31, 2020, 2019, and 2018 are as follows:

For the year ended December 31,

Cash Flow Hedges

Defined Benefit and Retiree Healthcare Plans

Cash Flow Hedges

Defined Benefit and Retiree Healthcare Plans

Cash Flow Hedges

Defined Benefit and Retiree Healthcare Plans

Other comprehensive income/(loss) before reclassifications

2020 2019 2018

Cash Flow Hedges Defined Benefit and Retiree Healthcare Plans Total Cash Flow Hedges Defined Benefit and Retiree Healthcare Plans Total Cash Flow Hedges Defined Benefit and Retiree Healthcare Plans Total

Other comprehensive (loss)/income before reclassifications $ ( 17,738 ) $ ( 12,494 ) $ ( 30,232 ) $ 28,795 $ ( 3,470 ) $ 25,325 $ 26,859 $ ( 2,120 ) $ 24,739

Amounts reclassified from accumulated other comprehensive loss ( 5,541 ) 6,722 1,181 ( 21,433 ) 1,802 ( 19,631 ) 10,504 1,743 12,247

Other comprehensive income/(loss)

Other comprehensive (loss)/income $ ( 23,279 ) $ ( 5,772 ) $ ( 29,051 ) $ 7,362 $ ( 1,668 ) $ 5,694 $ 37,363 $ ( 377 ) $ 36,986

The details of the (gain)/loss reclassified from accumulated other comprehensive loss for the years ended December 31, 2020, 2019, and 2018 are as follows:

Amount of (Gain)/Loss Reclassified from Accumulated Other Comprehensive Loss

For the year ended December 31,

Affected Line in Consolidated Statements of Operations

For the year ended December 31, Affected Line in Consolidated Statements of Operations

2020 2019 2018

Derivative instruments designated and qualifying as cash flow hedges:

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— — 1,376 Other, net (1)

Total, before taxes

Income before taxes

Income tax effect

Provision for/(benefit from) income taxes

Total, net of taxes

Defined benefit and retiree healthcare plans

Other, net (2)

Defined benefit and retiree healthcare plans

Restructuring and other charges, net (3)

Total, before taxes

Income before taxes

Income tax effect

Provision for/(benefit from) income taxes

Total, net of taxes

Total, before taxes ( 7,388 ) ( 28,577 ) 14,006 Income before taxes

Income tax effect 1,847 7,144 ( 3,502 ) Provision for/(benefit from) income taxes

Total, net of taxes $ ( 5,541 ) $ ( 21,433 ) $ 10,504 Net income

Defined benefit and retiree healthcare plans $ 9,118 $ 2,552 $ 1,993 Other, net (2)

Defined benefit and retiree healthcare plans — — 228 Restructuring and other charges, net (3)

Total, before taxes 9,118 2,552 2,221 Income before taxes

Income tax effect ( 2,396 ) ( 750 ) ( 478 ) Provision for/(benefit from) income taxes

Total, net of taxes $ 6,722 $ 1,802 $ 1,743 Net income

__________________________________________

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(3) Amount represents an equity component of the Valves Business, which was sold in fiscal year 2018.

Refer to Note 5, "Restructuring and Other Charges, Net," and Note 17, "Acquisitions and Divestitures," for additional information related to the divestiture of the Valves Business.

Acquisitions and Divestitures

Other acquisition

On September 13, 2019 we completed one acquisition for approximately $ 30.8 million , net of cash acquired and subject to customary post-closing adjustments.

This business is being integrated into our Sensing Solutions segment.

The majority of the purchase price allocation, which is preliminary as of December 31, 2019 , was to completed technologies, customer relationships, and goodwill.

We are in the process of completing our assessment of the fair values of assets acquired and liabilities assumed.

GIGAVAC merger

On September 24, 2018 , we entered into an agreement and plan of merger with GIGAVAC, whereby GIGAVAC would merge with one of our wholly-owned subsidiaries, thereby becoming a wholly-owned subsidiary of Sensata.

On October 31, 2018 , we completed the acquisition of GIGAVAC for cash consideration of approximately $ 231.1 million , net of cash received.

In connection with the acquisition, an additional $ 12.0 million related to compensation arrangements entered into with certain GIGAVAC employees and shareholders will be paid on or before the second anniversary of the transaction.

Based in Carpinteria, California, GIGAVAC has more than 270 employees and is a leading producer of high voltage contactors and fuses that are mission-critical components for electric vehicles and equipment.

It provides solutions that enable electrification in demanding environments within the automotive, battery storage, industrial, and HVOR end markets.

We acquired GIGAVAC to increase our content and capabilities for electrification, including products such as cars, delivery trucks, buses, material handling equipment, and charging stations.

Portions of GIGAVAC are being integrated into each of our operating segments.

The following table summarizes the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed:

Net working capital, excluding cash

Property, plant and equipment

Other intangible assets

Deferred income tax liabilities

Refer to Note 5, "Restructuring and Other Charges, Net."

The table below shows right-of-use asset and lease liability amounts and the financial statement line item in which those amounts are presented:

December 31, 2020 December 31, 2019

Operating lease right-of-use assets:

$ 49,980 $ 55,333

Total operating lease right-of-use assets

$ 49,980 $ 55,333

Operating lease liabilities:

Accrued expenses and other current liabilities $ 11,389 $ 11,543

Other long-term liabilities 43,307 45,457

Fair value of net assets acquired, excluding cash and cash equivalents

Cash and cash equivalents

Fair value of net assets acquired

The allocation of purchase price related to this merger was finalized in the fourth quarter of 2019 and was based on management’s judgments after evaluating several factors, including valuation assessments of tangible and intangible assets.

The goodwill of $ 114.5 million represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships.

The amount of goodwill recognized that is expected to be deductible for tax purposes is not material.

In connection with the allocation of purchase price to the assets acquired and liabilities assumed, we identified certain definite-lived intangible assets.

The following table presents the acquired definite-lived intangible assets, their estimated fair values, and weighted average lives:

Acquisition Date Fair Value

Weighted-Average Lives (years)

Acquired definite-lived intangible assets:

Customer relationships

Completed technologies

Total definite-lived intangible assets acquired

The definite-lived intangible assets were valued using the income approach.

We used the relief-from-royalty method to value completed technologies and tradenames, and we used the multi-period excess earnings method to value customer relationships.

These valuation methods incorporate assumptions including expected discounted future cash flows resulting from either the future estimated after-tax royalty payments avoided as a result of owning the completed technologies or the future earnings related to existing customer relationships.

Valves Business Divestiture

In August 2018 we completed the divestiture of the Valves Business to Pacific Industrial Co.

(together with its affiliates, "Pacific").

Contemporaneous with the closing of the sale, Sensata and Pacific entered into a long-term supply agreement, which imposes an obligation on us to purchase minimum quantities of product from Pacific over a period of nearly five years .

In exchange for selling the Valves Business and entering into the long-term supply agreement, we received cash consideration from Pacific of approximately $ 165.5 million , net of $ 11.8 million of cash and cash equivalents sold.

We recognized a (pre-tax) gain on sale of $ 64.4 million , which is presented in restructuring and other charges, net.

In addition, we recognized $ 5.9 million of costs to sell the Valves Business, which are also presented in restructuring and other charges, net.

Refer to Note 5, "Restructuring and Other Charges, Net," for additional information.

We determined that the terms of the long-term supply agreement entered into concurrent with the divestiture of the Valves Business were not at market.

Accordingly, we recognized a liability of $ 16.4 million , measured at fair value, which represented the fair value of the off-market component of the supply agreement.

The Valves Business, which we acquired in fiscal year 2014 as part of our acquisition of Schrader, manufactured mechanical valves for pressure applications in tires and fluid controls and assembled tire hardware aftermarket products with

manufacturing locations in the U.S.

The sale did not include our TPMS business and the Global TPMS Aftermarket business.

The Valves Business was included in our Performance Sensing segment (and reporting unit).

We allocated goodwill to the Valves Business based on its fair value relative to the fair value of the retained Performance Sensing reporting unit.

Total operating lease liabilities

$ 54,696 $ 57,000

Finance lease right-of-use assets:

Property, plant and equipment, at cost

$ 49,714 $ 49,714

Accumulated depreciation

( 26,107 ) ( 24,316 )

Property, plant and equipment, net

$ 23,607 $ 25,398

Finance lease liabilities:

Current portion of long-term debt, finance lease and other financing obligations $ 2,403 $ 1,974

Finance lease and other financing obligations, less current portion 27,931 28,669

Total finance lease liabilities $ 30,334 $ 30,643

The vast majority of our finance lease obligations are for facilities in Baoying, China and Attleboro, Massachusetts.

As of December 31, 2020 and 2019, the combined finance lease obligation outstanding for these facilities was $ 29.4 million and $ 29.4 million, respectively.

The table below presents the lease liabilities arising from obtaining right-of-use assets in the years ended December 31, 2020 and 2019:

For the year ended December 31,

Operating leases $ 3,232 $ 5,423

Finance leases $ — $ —

The table below presents our total lease cost for the years ended December 31, 2020 and 2019 (short-term lease cost was not material for the years ended December 31, 2020 and 2019):

For the year ended December 31,

Operating lease cost $ 16,658 $ 16,124

Finance lease cost:

Amortization of right-of-use assets $ 1,794 $ 1,808

Interest on lease liabilities 2,565 2,695

Total finance lease cost $ 4,359 $ 4,503

Rent expense for the year ended December 31, 2018 (prior to the adoption of FASB ASC Topic 842) was $ 21.0 million.

The table below presents the cash paid related to our operating and finance leases for the years ended December 31, 2020 and 2019:

For the year ended December 31,

Operating cash flows from operating leases

$ 16,489 $ 15,911

Operating cash flows from finance leases

$ 2,262 $ 2,731

Financing cash flows from finance leases

$ 944 $ 1,933

The table below presents the weighted-average remaining lease term of our operating and finance leases (in years):

Operating leases 7.6

Finance leases 11.8

The table below presents our weighted-average discount rate as of December 31, 2020:

Operating leases

Finance leases

The table below presents a maturity analysis of the obligations related to our operating lease liabilities and finance lease liabilities in effect as of December 31, 2020:

Operating Leases Finance Leases

Year ending December 31,

2021 $ 14,608 $ 4,572

2022 12,176 3,848

2023 8,829 3,813

2024 7,561 3,873

2025 5,048 3,934

Thereafter 21,808 29,486

Total undiscounted cash flows related to lease liabilities

70,030 49,526

Less imputed interest

( 15,334 ) ( 19,192 )

Total lease liabilities

$ 54,696 $ 30,334

Fair Value Measures

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Although we have determined that the majority of the inputs used to value our derivative instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to appropriately reflect both our own non-performance risk and the respective counterparties' non-performance risk in the fair value measurement.

As of December 31, 2019 and 2018 , we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

As of December 31, 2020 and 2019, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have

determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

As a result, we have determined that our derivatives in their entirety are classified in Level 2 in the fair value hierarchy.

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Carrying Value (1)

Fair Value Carrying Value (1)

Term Loan $ 456,096 $ 454,955 $ 460,725 $ 464,181

4.875 % Senior Notes

$ 500,000 $ 538,750 $ 500,000 $ 532,500

5.625 % Senior Notes

$ 400,000 $ 448,000 $ 400,000 $ 444,000

5.0 % Senior Notes

$ 700,000 $ 777,000 $ 700,000 $ 759,500

6.25 % Senior Notes

$ 750,000 $ 778,125 $ 750,000 $ 808,125

4.375 % Senior Notes

$ 450,000 $ 487,125 $ 450,000 $ 457,875

3.75 % Senior Notes

$ 750,000 $ 776,250 $ — $ —

__________________________________________

(1) Excluding any related debt discounts and deferred financing costs.

2 unchanged sentences

There were no impairments or changes resulting from observable transactions for any of these investments, and no adjustments have been made to their carrying values.

Refer to the table below for a detail of the carrying values of these investments, each of which are included in other assets.

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 consolidated balance sheets.

As of December 31,

Quanergy Systems, Inc $ 50,000 $ 50,000

Lithium Balance (1)

___________________________________

Our investment in Lithium Balance A/S ("Lithium Balance") was purchased in July 2019.

Other 15,000 3,700

Total $ 65,000 $ 53,700

Derivative Instruments and Hedging Activities

We utilize derivative instruments that are designated and qualify as hedges of the exposure to variability in expected future cash flows.

We utilize derivative instruments that are designated and qualify as hedges of our exposure to variability in expected future cash flows.

Hedge accounting generally provides for the matching of the timing of gain or loss recognition on these hedging instruments with the earnings effect of the hedged forecasted transactions.

2 unchanged sentences

Refer to Note 2, "Significant Accounting Policies," for additional information related to the valuation techniques and accounting policies regarding derivative instruments and hedging activities.

Hedges of Foreign Currency Risk

We are exposed to fluctuations in various foreign currencies against our functional currency, the USD.

We enter into forward contracts for certain of these foreign currencies to manage this exposure.

We currently have outstanding foreign currency forward contracts that qualify as cash flow hedges intended to offset the effect of exchange rate fluctuations on forecasted sales and certain manufacturing costs.

Foreign Currency Risk

We are exposed to fluctuations in the values of certain foreign currencies relative to our functional currency, the USD.

We enter into forward contracts to manage this exposure.

We currently have outstanding foreign currency forward contracts that qualify as cash flow hedges intended to offset the effect of exchange rate fluctuations on forecasted sales and certain

manufacturing costs.

We also have outstanding foreign currency forward contracts that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities, which are not designated for hedge accounting treatment in accordance with FASB ASC Topic 815.

For each of the years ended December 31, 2019 , 2018 , and 2017 , amounts excluded from the assessment of effectiveness of our foreign currency forward agreements that are designated as cash flow hedges were not material.

As of December 31, 2019 , we estimate that $ 20.1 million of net gains will be reclassified from accumulated other comprehensive loss to earnings during the twelve month period ending December 31, 2020 .

For each of the years ended December 31, 2020, 2019, and 2018, amounts excluded from the assessment of effectiveness of our foreign currency forward contracts were not material.

As of December 31, 2020, we estimate that $ 9.7 million of net losses will be reclassified from accumulated other comprehensive loss to earnings during the twelve month period ending December 31, 2021.

As of December 31, 2020, we had the following outstanding foreign currency forward contracts:

(in millions)

Effective Date(s)

Maturity Date(s)

Index (Exchange Rates)

Weighted- Average Strike Rate

Hedge Designation (1)

December 27, 2019

January 31, 2020

Euro ("EUR") to USD

Not designated

Various from March 2018 to December 2019

Various from January 2020 to November 2021

Cash flow hedge

December 23, 2019

January 31, 2020

USD to Chinese Renminbi ("CNY")

Not designated

December 13, 2019

Various from January to December 2020

Cash flow hedge

December 23, 2019

January 31, 2020

USD to Japanese Yen ("JPY")

Not designated

Various from February 2018 to December 2019

Various from January 2020 to November 2021

USD to Korean Won ("KRW")

Cash flow hedge

December 23, 2019

January 31, 2020

USD to Malaysian Ringgit ("MYR")

Not designated

December 27, 2019

January 31, 2020

USD to Mexican Peso ("MXN")

Not designated

Various from February 2018 to December 2019

Various from January 2020 to November 2021

Cash flow hedge

Various from March 2018 to December 2019

Various from January 2020 to November 2021

British Pound Sterling ("GBP") to USD

Cash flow hedge

(in millions) Effective Date(s) Maturity Date(s) Index (Exchange Rates) Weighted- Average Strike Rate Hedge Designation (1)

22.0 EUR December 29, 2020 January 29, 2021 Euro ("EUR") to USD 1.23 USD Not designated

317.3 EUR Various from February 2019 to December 2020 Various from January 2021 to December 2022 EUR to USD 1.17 USD Cash flow hedge

584.0 CNY December 28, 2020 January 29, 2021 USD to Chinese Renminbi ("CNY") 6.57 CNY Not designated

500.0 CNY November 5, 2020 Various from January to December 2021 USD to CNY 6.74 CNY Cash flow hedge

897.0 JPY December 28, 2020 January 29, 2021 USD to Japanese Yen ("JPY") 103.53 JPY Not designated

17,321.7 KRW Various from March 2019 to December 2020 Various from January 2021 to December 2022 USD to Korean Won ("KRW") 1,167.03 KRW Cash flow hedge

22.0 MYR December 30, 2020 January 29, 2021 USD to Malaysian Ringgit ("MYR") 4.06 MYR Not designated

284.0 MXN December 29, 2020 January 29, 2021 USD to Mexican Peso ("MXN") 19.95 MXN Not designated

2,963.5 MXN Various from February 2019 to December 2020 Various from January 2021 to December 2022 USD to MXN 22.56 MXN Cash flow hedge

6.0 GBP December 29, 2020 January 29, 2021 British Pound Sterling ("GBP") to USD 1.35 USD Not designated

48.9 GBP Various from February 2019 to December 2020 Various from January 2021 to December 2022 GBP to USD 1.29 USD Cash flow hedge

______________________________________

1 unchanged sentence

They are intended to preserve the economic value, and they are not used for trading or speculative purposes.

Hedges of Commodity Risk

Commodity Risk

We enter into commodity forward contracts in order to limit our exposure to variability in raw material costs that is caused by movements in the price of underlying metals.

2 unchanged sentences

As of December 31, 2020, we had the following outstanding commodity forward contracts:

Remaining Contracted Periods

Weighted-Average

Commodity Notional Remaining Contracted Periods Weighted-Average

Strike Price Per Unit

855,297 troy oz.

January 2020-November 2021

7,851 troy oz.

January 2020-November 2021

225,599 pounds

January 2020-November 2021

3,054,791 pounds

January 2020-November 2021

2,336,790 pounds

January 2020-November 2021

7,340 troy oz.

January 2020-November 2021

Silver 742,939 troy oz.

January 2021- December 2022 $ 20.54

Gold 7,326 troy oz.

January 2021-December 2022 $ 1,733.35

Nickel 165,037 pounds January 2021-December 2022 $ 6.62

Aluminum 2,224,837 pounds January 2021-December 2022 $ 0.86

Copper 1,803,323 pounds January 2021-December 2022 $ 2.83

Platinum 7,440 troy oz.

January 2021-December 2022 $ 911.09

Palladium 831 troy oz.

January 2021-December 2022 $ 1,988.33

Financial Instrument Presentation

The following table presents the fair values of our derivative financial instruments and their classification in the consolidated balance sheets as of December 31, 2020 and 2019:

Asset Derivatives

Liability Derivatives

Balance Sheet

As of December 31,

Asset Derivatives Liability Derivatives

Balance Sheet

As of December 31,

Location As of December 31, Balance Sheet

Location As of December 31,

2020 2019 2020 2019

Derivatives designated as hedging instruments:

Foreign currency forward contracts

Prepaid expenses and other current assets

Accrued expenses and other current liabilities

Foreign currency forward contracts

Other long-term liabilities

Foreign currency forward contracts Prepaid expenses and other current assets $ 11,281 $ 20,957 Accrued expenses and other current liabilities $ 18,834 $ 1,055

Foreign currency forward contracts Other assets 4,728 2,530 Other long-term liabilities 5,182 428

Total $ 16,009 $ 23,487 $ 24,016 $ 1,483

Derivatives not designated as hedging instruments:

Commodity forward contracts

Prepaid expenses and other current assets

Accrued expenses and other current liabilities

Commodity forward contracts

Other long-term liabilities

Foreign currency forward contracts

Prepaid expenses and other current assets

Accrued expenses and other current liabilities

Commodity forward contracts Prepaid expenses and other current assets $ 7,598 $ 3,069 Accrued expenses and other current liabilities $ 149 $ 394

Commodity forward contracts Other assets 1,304 554 Other long-term liabilities 161 68

Foreign currency forward contracts Prepaid expenses and other current assets 154 74 Accrued expenses and other current liabilities 644 476

Total $ 9,056 $ 3,697 $ 954 $ 938

These fair value measurements are all categorized within Level 2 of the fair value hierarchy.

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The following tables present the effect of our derivative financial instruments on the consolidated statements of operations and the consolidated statements of comprehensive income for the years ended December 31, 2020 and 2019:

Derivatives designated as hedging instruments

Amount of Deferred Gain Recognized in Other Comprehensive 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

For the year ended December 31,

Foreign currency forward contracts

Cost of revenue

Foreign currency forward contracts

Derivatives not designated as hedging instruments

Amount of Gain/(Loss) Recognized in Net Income

Location of Gain/(Loss)

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

For the year ended December 31, For the year ended December 31,

2020 2019 2020 2019

Foreign currency forward contracts $ ( 25,866 ) $ 23,881 Net revenue $ 10,785 $ 26,180

Foreign currency forward contracts $ 2,140 $ 14,512 Cost of revenue $ ( 3,397 ) $ 2,397

Derivatives not designated as hedging instruments Amount of Gain/(Loss) Recognized in Net Income Location of Gain/(Loss) Recognized in Net Income

For the year ended December 31,

Commodity forward contracts

Foreign currency forward contracts

Commodity forward contracts $ 10,027 $ 4,888 Other, net

Foreign currency forward contracts $ ( 6,762 ) $ 2,225 Other, net

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.

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 December 31, 2020, the termination value of outstanding derivatives in a liability position, excluding any adjustment for non-performance risk, was $ 25.1 million.

2 unchanged sentences

Segment Reporting

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.

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 R&D and SG&A expenses related to our megatrend initiatives were historically allocated to our operating segments, beginning in fiscal year 2020 these amounts are presented within corporate and other.

Prior period information has been recast to reflect this revised presentation.

We have historically operated in, and reported financial information for, the following two reportable segments:

Performance Sensing and Sensing Solutions, each of which was also an operating segment.

In the fourth quarter of 2020, a change in focus of the evaluation of our business by our chief operating decision maker in order to make decisions about resource allocation, among other factors such as solidification of a reporting structure to accommodate this focus, necessitated a reevaluation of our conclusion that Performance Sensing was an operating segment.

Based on our assessment of these factors, we determined that the Performance Sensing operating segment should be divided into two operating segments, Automotive and HVOR.

We also determined that each of these operating segments meet the criteria for aggregation in FASB ASC Topic 280, Reportable Segments .

No change was made to Sensing Solutions, and it remains an operating segment.

None of the preceding changes resulted in any impact on the overall composition of our reportable segments and prior periods were not required to be recast for this change.

An operating segment’s performance is primarily evaluated based on segment operating income, which excludes amortization of intangible assets, restructuring and other charges, net, 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.

Corporate and other costs excluded from an operating (and reportable) 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.

The accounting policies of each of our reportable segments are materially consistent with those described in Note 2, "Significant Accounting Policies."

Performance Sensing primarily serves the automotive and HVOR industries through development and manufacture of sensors, high-voltage contactors, and other products used in mission-critical systems and applications such as those in subsystems of automobiles, on-road trucks, and off-road equipment (e.g., tire pressure monitoring, thermal management, air conditioning, and regenerative braking).

Our products are used in subsystems that, among other things, improve operating performance and efficiency as well as address environmental or safety concerns.

Sensing Solutions primarily serves the industrial and aerospace industries through development and manufacture of a broad portfolio of application-specific sensor and control products used in the aerospace market and a diverse range of industrial markets, including the small appliance, HVAC, semiconductor, material handling, factory automation, and water management markets.

Some of the products the segment sells include pressure, temperature, and position sensors, motor and compressor protectors, solid state relays, bimetal electromechanical controls, thermal and magnetic-hydraulic circuit breakers, power inverters, and charge controllers.

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 years ended December 31, 2019 , 2018 , and 2017 :

The accounting policies of each of our operating and reportable segments are materially consistent with those described in Note 2, "Significant Accounting Policies."

As discussed above, the Performance Sensing reportable segment represents the aggregation of the Automotive and HVOR operating segments, which primarily serve the automotive and HVOR industries, respectively, through development and manufacture of sensors, high-voltage contactors, and other solutions used in mission-critical systems and applications such as those in subsystems of automobiles, on-road trucks, and off-road equipment (e.g., tire pressure monitoring, thermal management, electrical protection, regenerative braking, powertrain (engine/transmission), and exhaust management).

Our products are used in subsystems that, among other things, improve operating performance and efficiency, as well as contribute to environmentally sustainable and safe solutions as the world continues to pivot in those directions

Sensing Solutions primarily serves the industrial and aerospace industries through development and manufacture of a broad portfolio of application-specific sensor and electrical protection products used in a diverse range of industrial markets, including the appliance, HVAC, semiconductor, material handling, factory automation, and water management markets, as well as the aerospace market.

For the year ended December 31,

2020 2019 2018

Performance Sensing $ 2,223,810 $ 2,546,016 $ 2,627,651

10 unchanged sentences

Interest expense, net ( 171,757 ) ( 158,554 ) ( 153,679 )

Other, net ( 339 ) ( 7,908 ) ( 30,365 )

Income before taxes $ 165,641 $ 390,423 $ 526,375

1 unchanged sentence

The following table presents net revenue by product category for the years ended December 31, 2020, 2019, and 2018:

Performance Sensing

Sensing Solutions

For the year ended December 31,

Performance Sensing Sensing Solutions For the year ended December 31,

2020 2019 2018

Sensors X X $ 2,380,608 $ 2,712,926 $ 2,755,280

Electrical Protection (1)

X X 504,001 573,631 522,172

X X 160,969 164,074 244,175

Net revenue $ 3,045,578 $ 3,450,631 $ 3,521,627

(1) Beginning in the year ended December 31, 2020, we adjusted our product categories to better reflect how we view our products.

The product category we previously referred to as "controls" was renamed to "electrical protection," and our GIGAVAC products, which were previously grouped in "other," have been recast into "electrical protection." The amount of revenue recast from "other" to "electrical protection" in the years ended December 31, 2019 and 2018 was $ 91.9 million and $ 13.4 million, respectively.

The "sensors" product category was unchanged.

The following table presents depreciation and amortization expense for our reportable segments for the years ended December 31, 2020, 2019, and 2018:

For the year ended December 31,

2020 2019 2018

Depreciation and amortization:

2 unchanged sentences

Corporate and other (1)

147,143 156,559 156,475

Total depreciation and amortization $ 255,229 $ 258,748 $ 245,340

1 unchanged sentence

(1) Included within corporate and other is depreciation and amortization expense associated with the fair value step-up recognized in prior acquisitions and accelerated depreciation recognized in connection with restructuring actions.

We do not allocate the additional depreciation and amortization expense associated with the step-up in the fair value of the PP&E and intangible assets associated with these acquisitions or accelerated depreciation related to restructuring actions to our segments.

to our segments.

This treatment is consistent with the financial information reviewed by our chief operating decision maker.

5 unchanged sentences

5,936,773 4,839,668

Total assets $ 7,844,202 $ 6,834,519

__________________________________________

(1) The following is included within corporate and other as of December 31, 2020 and 2019:

6 unchanged sentences

For the year ended December 31,

2020 2019 2018

Additions to property, plant and equipment and capitalized software:

7 unchanged sentences

For the year ended December 31,

2020 2019 2018

Americas $ 1,197,846 $ 1,460,101 $ 1,480,567

Europe 816,287 969,470 1,028,534

Asia and rest of world 1,031,445 1,021,060 1,012,526

Net revenue $ 3,045,578 $ 3,450,631 $ 3,521,627

For the year ended December 31,

2020 2019 2018

United States $ 1,082,671 $ 1,333,532 $ 1,360,590

Netherlands 482,020 576,804 585,036

China 641,516 575,211 560,938

Korea 172,229 188,226 188,114

United Kingdom 122,403 151,674 163,963

All other 544,739 625,184 662,986

Net revenue $ 3,045,578 $ 3,450,631 $ 3,521,627

The following tables present PP&E, net, by geographic area and by significant country as of December 31, 2020 and 2019.

2 unchanged sentences

Property, plant and equipment, net:

Americas $ 266,378 $ 289,300

Europe 196,132 192,772

Asia and rest of world 341,315 348,926

3 unchanged sentences

United States $ 108,615 $ 97,226

China 257,935 266,161

Mexico 157,576 191,861

Bulgaria 147,103 138,644

United Kingdom 34,453 40,003

Property, plant and equipment, net

We occupy leased facilities with initial terms ranging up to 20 years .

The lease agreements frequently include options to renew for additional periods or to purchase the leased assets and generally require that we pay taxes, insurance, and maintenance costs.

We also lease certain vehicles and equipment.

Depending on the specific terms of the leases, our obligations are in two forms:

finance leases and operating leases.

As discussed in Note 2, "Significant Accounting Policies," we adopted FASB ASC Topic 842 on January 1, 2019, using the modified retrospective transition method.

We have elected to apply the package of practical expedients and the land easement practical expedient.

We have not elected to apply the hindsight practical expedient.

As a result of this adoption, we classify most leases as either finance or operating leases and recognize a related lease liability and right-of-use asset on our consolidated balance sheets.

Our accounting for finance leases remains unchanged after the adoption of FASB ASC Topic 842.

We have elected to account for leases with a term of one year or less (short-term leases) using a method similar to the operating lease model under FASB ASC Topic 840, Leases (i.e.

they are not recorded on the consolidated balance sheets).

We elected to apply the transition provisions of this guidance, including its disclosure requirements, at its date of adoption instead of at the beginning of the earliest comparative period presented.

Accordingly, we have not restated our consolidated balance sheet as of December 31, 2018.

There was no cumulative effect of adoption on our retained earnings or any other components of equity.

The below adjustments were made to our consolidated balance sheet on January 1, 2019 to reflect the new guidance:

December 31, 2018

January 1, 2019

Prepaid expenses and other current assets

Other intangible assets, net

Accrued expenses and other current liabilities

Other long-term liabilities

The table below presents the amounts recognized and location of recognition in our consolidated balance sheet as of December 31, 2019 related to our operating and finance leases:

December 31, 2019

Operating lease right-of-use assets:

Total operating lease right-of-use assets

Operating lease liabilities:

Accrued expenses and other current liabilities

Other long-term liabilities

Total operating lease liabilities

Finance lease right-of-use assets:

Property, plant and equipment, at cost

Accumulated depreciation

Malaysia 78,752 78,310

All other 19,391 18,793

Property, plant and equipment, net $ 803,825 $ 830,998

Finance lease liabilities:

Current portion of long-term debt, finance lease and other financing obligations

Finance lease and other financing obligations, less current portion

Total finance lease liabilities

We have material finance leases for facilities in Baoying, China and Attleboro, Massachusetts.

As of December 31, 2019 and 2018 , the combined finance lease obligation outstanding for these facilities was $ 29.4 million and $ 30.4 million , respectively.

The table below presents the lease liabilities arising from obtaining right-of-use assets in the year ended December 31, 2019 :

For the year ended

December 31, 2019

Operating leases

Finance leases

For finance leases, the consolidated statements of operations include separate recognition of interest on the lease liability and amortization of the right-of-use asset.

For operating leases, the consolidated statements of operations include a single lease

cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis.

The table below presents our total lease cost for the year ended December 31, 2019 (short-term lease cost was not material for the year ended December 31, 2019 ):

For the year ended

December 31, 2019

Operating lease cost

Finance lease cost:

Amortization of right-of-use assets

Interest on lease liabilities

Total finance lease cost

Rent expense for the years ended December 31, 2018 and 2017 (prior to the adoption of FASB ASC Topic 842) was $ 21.0 million and $ 19.7 million , respectively.

Cash flows from operating activities include (1) interest on finance lease liabilities and (2) payments arising from operating leases.

Cash flows from financing activities include repayments of the principal portion of finance lease liabilities.

The table below presents the cash paid related to our operating and finance leases for the year ended December 31, 2019 :

For the year ended

December 31, 2019

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

The table below presents the weighted-average remaining lease term of our operating and finance leases (in years):

December 31, 2019

Operating leases

Finance leases

Upon adoption of FASB ASC Topic 842, we initially measured our operating lease liabilities using this methodology, while our accounting for finance leases remained unchanged.

We use our incremental borrowing rate, adjusted for collateralization, because the discount rate implicit in our leases are generally not readily determinable.

The table below presents our weighted-average discount rate as of December 31, 2019 :

December 31, 2019

Operating leases

Finance leases

The table below presents a maturity analysis of the obligations related to our operating lease liabilities and finance lease liabilities in effect as of December 31, 2019 :

Operating Leases

Finance Leases

Year ending December 31,

Total undiscounted cash flows related to lease liabilities

Less imputed interest

Total lease liabilities

Unaudited Quarterly Data

1 unchanged sentence

For the three months ended

December 31, 2019

September 30, 2019

June 30, 2019

March 31, 2019

December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020

Net revenue $ 906,491 $ 788,313 $ 576,505 $ 774,269

Gross profit $ 296,551 $ 258,058 $ 164,062 $ 207,863

Net income $ 121,667 $ 76,729 $ ( 42,541 ) $ 8,431

Basic net income per share $ 0.77 $ 0.49 $ ( 0.27 ) $ 0.05

1 unchanged sentence

For the three months ended

December 31, 2018

September 30, 2018

June 30, 2018

March 31, 2018

December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019

Net revenue $ 846,691 $ 849,715 $ 883,726 $ 870,499

Gross profit $ 290,209 $ 294,805 $ 308,491 $ 289,693

Net income $ 53,538 $ 70,675 $ 73,436 $ 85,065

Basic net income per share (1)

$ 0.34 $ 0.44 $ 0.45 $ 0.52

Diluted net income per share $ 0.34 $ 0.44 $ 0.45 $ 0.52

1 unchanged sentence

(1) The sum of net income per share for the four quarters does not equal the full year net income per share due to rounding.

Acquisitions and Divestitures

In August 2018 we completed the divestiture of the Valves Business.

As a result, in the third quarter of 2018, we recognized a (pre-tax) gain of $ 64.4 million and costs of $ 5.9 million in restructuring and other charges, net in our consolidated statement of operations.

Refer to Note 17, "Acquisitions and Divestitures," for additional information related to the divestiture of the Valves Business.

Our consolidated results presented above only include the results of this business before August 31, 2018.

In October 2018 we completed the acquisition of GIGAVAC.

Refer to Note 17, "Acquisitions and Divestitures," for additional information related to this merger.

Net revenue of GIGAVAC included in our consolidated statement of operations in the fourth quarter of 2018 was $ 12.6 million .

In the fourth quarter of 2018, we recorded related transaction costs of $ 2.5 million , which are included in SG&A expense in the consolidated statements of operations.

In the fourth quarter of 2018, we recorded an income tax benefit of $ 122.1 million related to the realization of U.S.

deferred tax assets previously offset by a valuation allowance.

Refer to Note 7, "Income Taxes," for additional information related to our accounting for income taxes.

Commodity forward contracts

Gains and losses related to our commodity forward contracts, which are not designated for hedge accounting treatment in accordance with FASB ASC Topic 815, are recorded in other, net in the consolidated statements of operations.

Refer to Note 19, "Derivative Instruments and Hedging Activities," for additional information related to our commodity forward contracts, and Note 6, "Other, Net," for a detail of other, net for the years ended December 31, 2019 and 2018 .

The below table presents gains/(losses) recognized related to these contracts in the periods presented:

For the three months ended

September 30,

Restructuring and other charges

The below table presents charges/(gains) recorded to restructuring and other charges, net in the periods presented:

The decline in revenue in the first, second, and third quarters of 2020 compared to the corresponding quarters of 2019 relates in large part to the impact of the COVID-19 pandemic on our business.

The second quarter of 2020 was most significantly impacted, and we experienced partial recovery in the third quarter of 2020.

Restructuring and other charges, net

The below table presents amounts recognized in restructuring and other charges, net in the periods presented:

For the three months ended

September 30,

In fiscal year 2019, restructuring and other charges net includes a loss related to the termination of a supply agreement in connection with the Metal Seal litigation in the fourth quarter, termination benefits provided under a one-time benefit arrangement related to the shutdown and relocation of an operating site in Germany in the third quarter, and a charge provided under a voluntary retirement incentive program in the second quarter.

In fiscal year 2018, restructuring and other charges, net includes the gain on sale of the Valves Business, net of transaction costs, in the third quarter.

Refer to Note 5, "Restructuring and Other Charges, Net," for additional information related to our restructuring charges.

December 31, September 30, June 30, March 31,

2020 $ 897 $ ( 10,519 ) $ 38,218 $ 4,498

2019 $ 25,520 $ 6,421 $ 16,310 $ 5,309

On June 30, 2020, we initiated the Q2 2020 Global Restructure Program and recognized approximately $ 24.1 million of severance charges related to that program in the second quarter of 2020.

In the third quarter of 2020, we settled intellectual property litigation brought against Schrader by Wasica, which resulted in the derecognition of nearly the entire $ 12.1 million liability that we recorded in the second quarter of 2020 resulting from a prejudgment interest-related award granted by the court on behalf of Wasica.

In fiscal year 2019, restructuring and other charges net includes a $ 17.8 million loss related to the termination of a supply agreement in connection with the Metal Seal litigation in the fourth quarter, $ 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 in the third quarter, and $ 12.7 million of benefits provided under a voluntary retirement incentive program offered to a limited number of eligible employees in the U.S., in the second quarter.

Refer to Note 5, "Restructuring and Other Charges, Net," for additional information related to restructuring and other charges.

In response to the global financial and health crisis caused by the COVID-19 pandemic, the U.S.

federal government enacted the Coronavirus Aid, Relief, and Economic Security 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.

In the fourth quarter of 2020 we recognized a net income tax benefit of $ 54.2 million related to intangible property transfers.

In the first quarter of 2020, we recognized a $ 29.2 million loss in cost of revenue as a result of a judgment issued against us for damages in intellectual property litigation brought against Schrader by Wasica.

We settled this litigation in the third quarter of 2020.

Additional amounts recognized related to this litigation are presented in restructuring and other charges, net as discussed above.

See Note 15, "Commitments and Contingencies," for additional information regarding the intellectual property litigation with Wasica.

Subsequent Events

On February 3, 2021, we announced that we intended to redeem in full the $ 750.0 million aggregate principal amount outstanding on our 6.25 % Senior Notes due 2026 in March 2021.

This resulted in classification of the Senior Notes as current on our December 31, 2020 consolidated balance sheet.

Refer to Note 14, “Debt,” for additional information on the terms of this redemption.

On February 11, 2021, we entered into a securities purchase agreement (the "SPA") to acquire all of the outstanding equity interests of Xirgo Technologies, LLC ("Xirgo") for an aggregate purchase price of $ 400 million, subject to adjustment for certain closing and post-closing items.

Xirgo is a leading provider of telematics and data insight, headquartered in Camarillo, California.

The product offerings and technology of Xirgo will augment our existing portfolio in advancing our Smart & Connected megatrend initiative.

We expect to integrate Xirgo into our Performance Sensing reportable segment.

transaction contemplated by the SPA is expected to close in the first quarter of 2021, subject to clearance under the Hart-Scott-Rodino Act and the satisfaction of certain customary closing conditions.

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

6 unchanged sentences

Cash and cash equivalents $ 664 $ 238

Intercompany receivables 837 —

Intercompany notes receivable from subsidiaries 65,972 43,673

2 unchanged sentences

Deferred income tax assets 506 570

Other non-current assets 51 —

Investment in subsidiaries 2,726,216 2,554,954

Total assets $ 2,796,067 $ 2,600,681

Liabilities and shareholders’ equity

14 unchanged sentences

For the year ended December 31,

2020 2019 2018

Net revenue $ — $ — $ —

Operating costs and expenses:

3 unchanged sentences

Intercompany dividend income — 700,000 —

Intercompany interest (expense)/income, net

Income/(loss) before income taxes and equity in net income of subsidiaries

Equity in net (loss)/income of subsidiaries

Benefit from income taxes

Intercompany interest expense, net ( 479 ) ( 23,294 ) ( 4,709 )

Other, net 115 ( 21 ) 474

(Loss)/income before income taxes and equity in net income of subsidiaries ( 12,841 ) 667,825 ( 14,388 )

Equity in net income/(loss) of subsidiaries 182,733 ( 401,715 ) 613,383

(Provision for)/benefit from income taxes ( 5,606 ) 16,604 —

Net income $ 164,286 $ 282,714 $ 598,995

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

4 unchanged sentences

For the year ended December 31,

Other comprehensive income/(loss), net of tax:

2020 2019 2018

Net income $ 164,286 $ 282,714 $ 598,995

Other comprehensive (loss)/income, net of tax:

Defined benefit plan — — 535

Subsidiaries' other comprehensive income/(loss)

Other comprehensive income/(loss)

Subsidiaries' other comprehensive (loss)/income ( 29,051 ) 5,694 36,451

Other comprehensive (loss)/income ( 29,051 ) 5,694 36,986

Comprehensive income $ 135,235 $ 288,408 $ 635,981

5 unchanged sentences

For the year ended December 31,

2020 2019 2018

Net cash used in operating activities $ ( 7,911 ) $ ( 14,989 ) $ ( 14,253 )

Cash flows from investing activities:

Return of capital from subsidiaries

Dividends received from subsidiary — 700,000 —

2 unchanged sentences

Proceeds from exercise of stock options and issuance of ordinary shares 15,457 15,150 6,093

(Payments on)/proceeds from intercompany borrowings

Proceeds from/(payments on) intercompany borrowings 30,966 ( 344,018 ) 410,190

Payments to repurchase ordinary shares ( 35,175 ) ( 350,004 ) ( 399,417 )

Payments of employee restricted stock tax withholdings ( 2,911 ) ( 6,990 ) ( 3,674 )

Net cash (used in)/provided by financing activities

Net cash provided by/(used in) financing activities 8,337 ( 685,862 ) 13,192

Net change in cash and cash equivalents 426 ( 851 ) ( 1,061 )

25 unchanged sentences

Balance at the

Balance at the End of

the Period Additions Deductions Balance at the End of

Charged, Net of Reversals,

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data