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Item 7. Management’s Discussion and Analysis

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, and liquidity and capital resources. You should read the following discussion in conjunction with Item 1, "Business," Item 6, "Selected Financial Data," and our Financial Statements included elsewhere in this Report. 
 The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties including, but not limited to, the risks and uncertainties described in Item 1A, "Risk Factors," included elsewhere in this Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements. 
 Overview 
 Sensata Technologies Holding plc, the successor issuer to Sensata N.V. and its wholly-owned subsidiaries, collectively referred to as the "Company," "Sensata," "we," "our," and "us," is 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. 
 Original equipment manufacturers ("OEMs") are producing products that are safer, cleaner, more efficient, more electrified, and increasingly more connected. 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. Our electrical protection product portfolio is comprised of various sensors, controllers, receivers, and software, and include high-voltage contactors and other products embedded within systems to maximize their efficiency and protect them from excessive heat or current. 
 Our business strategy involves leveraging certain new and emerging technology trends, which complement our existing product offerings, to deliver products used in mission-critical systems and applications that create valuable business insights for our customers and end users. Each of these trends, which we refer to as “megatrends,” is expected to significantly transform the industries in which we operate. These megatrends are also creating greater secular demand for our products, resulting in growth that exceeds end-market production growth in many of the markets we serve, a defining characteristic of our company. We refer to this as “market outgrowth,” which describes the impact of an increasing quantity and value of our products used in customer systems and applications, and is only loosely correlated to normal unit demand fluctuations in the markets we serve. Refer to Item 1, "Business," included elsewhere in this Report for additional information related to our business strategy and megatrends. 
 Our customers are facing ever increasing mandates, due to regulation and consumer demand, to make their products cleaner, more efficient, and safer, while providing more comfort-related features. Our sensors are being used in mission-critical systems and applications that are addressing these demands, including those that help: industrial customers to make more efficient pumps and boilers; automotive customers to meet the standards of emissions and pollution control legislation; and fleet managers to proactively monitor the health of their vehicles, conduct proactive maintenance, optimize fleet operations, and enhance driver safety. We believe regulatory requirements for safer vehicles, higher fuel efficiency, and lower emissions, such as the National Highway Traffic Safety Administration's Corporate Average Fuel Economy requirements in the U.S., "Euro 6d" requirements in Europe, "China National 6" requirements in China, and "Bharat Stage VI" requirements in India, as well as customer demand for operator productivity and convenience, drive the need for advancements in powertrain management, efficiency, safety, and operator controls. These advancements lead to sensor growth rates that we expect to exceed underlying demand in many of our key end markets, which we expect will continue to offer us significant growth opportunities. 
 However, in our automotive business, we believe the medium- to long-term outlook for internal combustion engine powertrain products will evolve with the advent of more environmentally friendly vehicles that rely more heavily on Electrification and other adjacent technologies. Refer to the Megatrends section of Item 1, "Business," for additional information on our Electrification megatrend initiative. Accordingly, we are focusing on expanding our market share on electrified platforms, including both sensor and electrical protection products. Many of the components and subsystems that we have historically developed and produced will play a significant role in this expansion, but we will also seek strategic partnerships and acquisitions to accelerate the growth and transformation of our product portfolio. By entering into such relationships, we obtain access to new technologies and solutions, which we can leverage with our existing expertise to optimize and expand our product portfolio. Beyond Electrification, we also recognize the potential market impact of autonomous vehicles and advanced driver-assistance systems, and are developing sensors to facilitate development of this market by manufacturers of vehicles (light passenger, heavy on and off-road) and material handling equipment. 
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 The technology-driven, highly-customized, and integrated nature of our products requires customers to invest heavily in certification and qualification to ensure proper functioning of the systems in which our products are embedded. We believe the capital commitment and time required for this process significantly increases the switching costs for our customers once a particular sensor has been designed and installed in a system. As a result, our sensors are rarely substituted during a product lifecycle, which in the case of the traditional automotive market historically lasts five to seven years. We focus on new applications that will help us secure new business, drive long-term growth, and provide an opportunity to define a leading application technology in collaboration with our customers. 
 Our strategies of leveraging core technology platforms and focusing on high-volume applications enable us to provide our customers with highly-customized products at a relatively low cost, as compared to the costs of the systems in which our products are embedded. We have achieved our current cost position through a continuous process of migration and transformation to best-cost manufacturing locations, global best-cost sourcing, product design improvements, and ongoing productivity-enhancing initiatives. 
 COVID-19 
 The coronavirus ("COVID-19") pandemic has caused widespread disruptions to our Company, employees, customers, suppliers, and communities since the first quarter of 2020. We recognized the global impact of the COVID-19 pandemic early, and took a wide range of actions across our organization, designed to benefit the health and safety of employees, while also enabling us to respond to customer needs and enhance our financial flexibility during the pandemic. We are continuing to work with local, state, and federal governmental health agencies in many countries, implementing measures to help protect employees and minimize the spread of COVID-19 in our communities. 
 In the third and fourth quarters of 2020, the global economy continued to rebound following a period of commercial lockdowns and quarantines instituted by governments around the world in response to the spread of COVID-19 earlier in the year. Our response to that rebound has enabled our revenue to grow sequentially in the second half of fiscal year 2020, as we continue to deliver strong market outgrowth. For fiscal year 2020, we delivered 880 basis points of market outgrowth in our heavy vehicle and off-road ("HVOR") business and 690 basis points of market outgrowth in our automotive business. We continue to monitor all of our end markets and customers to ensure that our resources are balanced against forecasts and prioritized against critical growth opportunities. 
 Due in part to large-scale shutdowns early in 2020 caused by the COVID-19 pandemic, the automotive industry supply chain is currently facing a global shortage of semiconductors, the technology used to make microchips, resulting in paused production on certain vehicles and increased costs to procure microchips. We believe this shortage will have an adverse impact on our operating costs in fiscal year 2021. If the impacts of this shortage are more severe than we expect, it could result in further deterioration of our results, potentially for a longer period than currently anticipated. 
 New Business Wins 
 During fiscal year 2020, we closed $465 million in new business wins ("NBOs"), including $180 million in Electrification wins, higher than our average over the past five years. We define NBOs as incremental revenue to our current base of business that is expected to be recognized on average in the fifth year after entry into the agreement, when the program typically reaches its normal volume. We have demonstrated progress against our megatrend initiatives, such as Electrification, and intend to continue these efforts to expand our markets and provide strong growth and differentiation for the future. We continue to believe investments in these megatrends, including technology collaborations and partnerships with third parties to expand our technological capabilities, will further our end market diversification, increase our long-term growth rate and provide important competitive advantages as these trends transform our world. In addition, we believe that the overall market environment may provide meaningful opportunities to further strengthen our portfolio through strategically important, value-creating acquisitions. 
 Financial Flexibility 
 We have taken multiple steps to enhance our financial flexibility. In the second quarter, we implemented various cost reduction activities, including temporary salary reductions and furloughs, resulting in savings in the second quarter of approximately $21.8 million, including the impact of government subsidies. These salary reductions and furloughs did not continue in the third or fourth quarters. However, we have continued working to align our long-term operating costs with future expected demand levels, maintaining lower levels of discretionary spending and keeping production in certain facilities at a level necessary to be in line with end market demand. In addition, we reduced our capital expenditures for the year and are carefully managing our working capital. Also in the second quarter, we initiated the Q2 2020 Global Restructure Program, discussed in more detail below. 
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 We believe that we are in a strong financial position today, having generated $559.8 million of operating cash flow in fiscal year 2020. Additionally, in the third quarter of 2020, we took advantage of historically low interest rates in issuing $750.0 million aggregate principal amount of 3.75% senior notes due 2031 (the "3.75% Senior Notes") under an indenture dated as of August 17, 2020. In addition, on February 3, 2021, we announced that we intended to redeem in full the outstanding balance on our $750.0 million aggregate principal amount of 6.25% senior notes due 2026 (the "6.25% Senior Notes") in March 2021. Refer to Note 14, “Debt,” of our Financial Statements for additional information on this planned redemption. In taking these actions, we are extending the maturity of our debt profile and lowering our cost of capital. 
 Q2 2020 Global Restructure Program 
 On June 30, 2020, in response to the potential long-term impact of the global financial and health crisis caused by the COVID-19 pandemic on our business, we committed to a plan to reorganize our business (the "Q2 2020 Global Restructure Program"), which consists of voluntary and involuntary reductions-in-force and certain site closures in order to align our cost structure to the demand levels that we anticipated in the coming quarters. This program is expected to impact approximately 880 positions. 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. 
 Over the life of the Q2 2020 Global Restructure Program, we expect to incur restructuring charges of between $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. 
 In fiscal year 2020, we recognized $24.5 million of severance charges related to the Q2 2020 Global Restructure Program. As of December 31, 2020, our severance liability related to the Q2 2020 Global Restructure Program was $10.8 million. Refer to Note 5, "Restructuring and Other Charges, Net," of our Financial Statements, for additional information on the Q2 2020 Global Restructure Program. 
 We continue to realize savings related to the Q2 2020 Global Restructure Program and from ongoing cost reduction activities and spend controls. Such savings represented approximately $13 million in fiscal year 2020. We expect that the actions taken as a result of the Q2 2020 Global Restructure Program will result in annualized savings of personnel- and facilities-related costs of approximately $43 million by 2021. 
 Selected Segment Information 
 We operate in, and report financial information for, two reportable segments: Performance Sensing and Sensing Solutions. 
 Set forth below is selected information for each of these segments for the periods presented. Amounts and percentages in the tables below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. 
 The following table presents net revenue by segment for the identified periods: 
 
 For the year ended December 31, 
 2020 2019 2018 
 (Dollars in millions) Amount Percent of Total Amount Percent of Total Amount Percent of Total 
 Net revenue: 
 Performance Sensing $ 2,223.8 73.0 % $ 2,546.0 73.8 % $ 2,627.7 74.6 % 
 Sensing Solutions 821.8 27.0 904.6 26.2 894.0 25.4 
 Total net revenue $ 3,045.6 100.0 % $ 3,450.6 100.0 % $ 3,521.6 100.0 % 

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 The following table presents segment operating income in U.S. dollars ("USD") and as a percentage of segment net revenue for the identified periods (prior period information has been recast to reflect revised presentation as discussed in Note 20, "Segment Reporting," of our Financial Statements): 
 
 For the year ended December 31, 
 2020 2019 2018 
 (Dollars in millions) Amount Percent of
Segment
Net Revenue Amount Percent of
Segment
Net Revenue Amount Percent of
Segment
Net Revenue 
 Segment operating income: 
 Performance Sensing $ 532.5 23.9 % $ 670.5 26.3 % $ 728.3 27.7 % 
 Sensing Solutions 241.2 29.4 % 294.0 32.5 % 295.0 33.0 % 
 Total segment operating income $ 773.7 $ 964.4 $ 1,023.2 

 For a reconciliation of total segment operating income to consolidated operating income, refer to Note 20, "Segment Reporting," of our Financial Statements. 
 Selected Geographic Information 
 We are a global business with significant operations around the world and a diverse revenue mix by geography, customer, and end market. The following table presents (as a percentage of total) property, plant and equipment, net ("PP&E"), and net revenue by geographic region for the identified periods: 
 
 PP&E, net as of December 31, 
 Net revenue for the year ended December 31, 
 2020 2019 2020 2019 2018 
 Americas 33.1 % 34.8 % 39.3 % 42.3 % 42.0 % 
 Europe 24.4 % 23.2 % 26.8 % 28.1 % 29.2 % 
 Asia and rest of world 42.5 % 42.0 % 33.9 % 29.6 % 28.8 % 

 Refer to Note 20, "Segment Reporting," of our Financial Statements for additional information related to our PP&E, net by selected geographic area as of December 31, 2020 and 2019 and net revenue by selected geographic area for the years ended December 31, 2020, 2019, and 2018. 
 Net Revenue by End Market 
 Our net revenue for the years ended December 31, 2020, 2019, and 2018 was derived from the following end markets (amounts are calculated based on unrounded numbers, and may not appear to recalculate): 
 
 For the year ended December 31, 
 (Percentage of total) 2020 2019 2018 
 Automotive 57.5 % 58.8 % 60.4 % 
 HVOR 
 16.7 % 16.2 % 15.6 % 
 Industrial 11.0 % 10.2 % 9.6 % 
 Heating, ventilation and air conditioning ("HVAC") 
 6.2 % 5.8 % 5.9 % 
 Aerospace 4.5 % 5.1 % 4.7 % 
 Other 4.1 % 3.9 % 3.8 % 

 We are a significant supplier to multiple OEMs within many of these end markets, thereby reducing customer concentration risk. 
 Factors Affecting Our Operating Results 
 The following discussion describes components of the consolidated statements of operations as well as factors that impact those components. Refer to Note 2, "Significant Accounting Policies," of our Financial Statements, and Critical Accounting Policies and Estimates included elsewhere in this MD&A for additional information on the accounting policies and estimates made related to these components. 
 Net revenue 
 We generate revenue primarily from the sale of tangible products. Because we derive a significant portion of our revenue 
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 from sales into the automotive end market, conditions in the automotive industry can have a significant impact on the amount of revenue that we recognize. However, outside of the automotive industry, we sell our products to end-users in a wide range of industries, end markets, and geographic regions. As a result, the drivers of demand for these products vary considerably and are influenced by the conditions in these industries, end markets, or geographic regions. 
 Our overall net revenue is impacted by various factors, which we characterize as either "organic" or "inorganic." Organic factors are reflective of our ongoing operations. Inorganic factors are either not reflective of our historical business or related to situations for which we have little to no control (e.g. changes in foreign currency exchange rates). 
 Our net revenue may be impacted by the following organic factors: 
 • fluctuations in overall economic activity within the geographic regions in which we operate; 
 • underlying growth in one or more of our core end markets, either worldwide or in particular geographies in which we operate; 
 • the number of our products used within existing applications, or the development of new applications requiring these products, due to regulations or other factors; 
 • the "mix" of products sold, including the proportion of new or upgraded products and their pricing relative to existing products; 
 • changes in product sales prices (including quantity discounts, rebates, and cash discounts for prompt payment); 
 • changes in the level of competition faced by our products, including the launch of new products by competitors; and 
 • our ability to successfully develop, launch, and sell new products and applications. 
 Our net revenue may be impacted by the following inorganic factors: 
 • fluctuations in foreign currency exchange rates; and 
 • acquisitions and divestitures. 
 While the factors described above may impact net revenue in each of our reportable segments, the impact of these factors on our reportable segments can differ. For more information about revenue risks relating to our business, refer to Item 1A, "Risk Factors," included elsewhere in this Report. 
 Cost of revenue 
 We manufacture the majority of our products and subcontract only a limited number of products to third parties. As such, our cost of revenue consists principally of the following: 
 • Production Materials Costs. We purchase much of the materials used in production on a global best-cost basis, but we are still impacted by global and local market conditions, including fluctuations in foreign currency exchange rates. A portion of our production materials contains certain commodities, resins, and rare earth metals, and the cost of these materials may vary with underlying pricing. However, we enter into forward contracts to economically hedge a portion of our exposure to the potential change in prices associated with certain of these commodities. The terms of these contracts fix the price at a future date for various notional amounts associated with these commodities. Gains and losses recognized on these derivatives are recorded in other, net and are not included in cost of revenue. Refer to Note 6, "Other, Net," of our Financial Statements for additional information. 
 • Employee Costs. Employee costs include wages and benefits for employees involved in our manufacturing operations and certain engineering activities, including variable incentive compensation. A significant portion of these costs can fluctuate on an aggregate basis in direct correlation with changes in production volumes. As a percentage of net revenue, these costs may decline as a result of economies of scale associated with higher production volumes, and conversely, may increase with lower production volumes. These costs also fluctuate based on local market conditions. We rely on contract workers for direct labor in certain geographies. As of December 31, 2020, we had approximately 2,500 direct labor contract workers on a worldwide basis. 
 • Sustaining Engineering Activity Costs. These costs relate to modifications of existing products for use by new and existing customers in familiar applications. 
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 • Other. Our remaining cost of revenue primarily consists of: 
 • gains and losses on certain foreign currency forward contracts that are designated as cash flow hedges; 
 • material yields; 
 • costs to import raw materials, such as tariffs; 
 • depreciation of fixed assets used in the manufacturing process; 
 • freight costs; 
 • warehousing expenses; 
 • maintenance and repair expenses; 
 • operating supplies; and 
 • other general manufacturing expenses, such as expenses for energy consumption and operating lease expense. 
 Changes in cost of revenue as a percentage of net revenue have historically been impacted by a number of factors, including: 
 • changes in the price of raw materials, including the impact of changes in costs to import such raw materials, such as tariffs; 
 • price reductions provided to our customers; 
 • implementation of cost improvement measures aimed at increasing productivity, including reduction of fixed production costs, refinements in inventory management, design and process driven changes, and the coordination of procurement within each subsidiary and at the business level; 
 • product lifecycles, as we typically incur higher cost of revenue associated with new product development (related to excess manufacturing capacity and higher production costs during the initial stages of product launches) and during the phase-out of discontinued products; 
 • changes in production volumes – production costs are capitalized in inventory based on normal production volumes, as revenue increases, the fixed portion of these costs does not; 
 • transfer of production to our lower-cost manufacturing facilities; 
 • changes in depreciation expense, including those arising from the adjustment of PP&E to fair value associated with acquisitions; 
 • fluctuations in foreign currency exchange rates; 
 • changes in product mix; 
 • changes in logistics costs; 
 • acquisitions and divestitures – acquired and divested businesses may generate higher or lower cost of revenue as a percentage of net revenue than our core business; and 
 • the increase in the carrying value of inventory that is adjusted to fair value as a result of the application of purchase accounting associated with acquisitions. 
 Research and development expense 
 We develop products that address increasingly complex engineering and operating performance requirements to help our customers solve their most difficult challenges in the automotive, HVOR, industrial, and aerospace industries. We believe that continued focused investment in research and development ("R&D") is critical to our future growth and maintaining our leadership positions in the markets we serve. Our R&D efforts are directly related to timely development of new and enhanced products that are central to our business strategy. We continuously develop our technologies to meet an evolving set of customer requirements and new product introductions. We conduct such activities in areas that we believe will increase our 
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 long-term revenue growth. Our development expense is typically associated with engineering core technology platforms to specific applications and engineering major upgrades that improve the functionality or reduce the cost of existing products. In addition, we continually consider new technologies where we may have expertise for potential investment or acquisition. 
 An increasing portion of our R&D activities are being directed towards technologies and megatrends that we believe have the potential for significant future growth, but relate to products that are not currently within our core business or include new features and capabilities for existing products. Expenses related to these activities are less likely to result in increased near-term revenue than our more mainstream development activities. 
 R&D expense consists of costs related to product design, development, and process engineering. Costs related to modifications of existing products for use by new and existing customers in familiar applications are presented in cost of revenue and are not included in R&D expense. The level of R&D expense in any period is related to the number of products in development, the stage of the development process, the complexity of the underlying technology, the potential scale of the product upon successful commercialization, and the level of our exploratory research. 
 Selling, general and administrative expense 
 Selling, general and administrative ("SG&A") expense consists of all expenditures incurred in connection with the sale and marketing of our products, as well as administrative overhead costs, including: 
 • salary and benefit costs for sales and marketing personnel and administrative staff; 
 • share-based incentive compensation expense; 
 • charges related to the use and maintenance of administrative offices, including depreciation expense; 
 • other administrative costs, including expenses relating to information systems, human resources, and legal and accounting services; 
 • other selling and marketing related costs, such as expenses incurred in connection with travel and communications; and 
 • transaction costs associated with acquisitions. 
 Changes in SG&A expense as a percentage of net revenue have historically been impacted by a number of factors, including: 
 • changes in sales volume, as higher volumes enable us to spread the fixed portion of our selling, marketing, and administrative expense over higher revenue (e.g. expenses relating to our sales and marketing personnel can fluctuate due to prolonged trends in sales volume, while expenses relating to administrative personnel generally do not increase or decrease directly with changes in sales volume); 
 • price reductions provided to our customers; 
 • changes in the mix of products we sell, as some products may require more customer support and sales effort than others; 
 • new product launches in existing and new markets, as these launches typically involve a more intense sales and marketing activity before they are integrated into customer applications and systems; 
 • changes in our customer base, as new customers may require different levels of sales and marketing attention; 
 • fluctuations in foreign currency exchange rates; and 
 • acquisitions and divestitures - acquired and divested businesses may require different levels of SG&A expense as a percentage of net revenue than our core business. 
 Depreciation expense 
 Depreciation expense includes depreciation of PP&E, which includes assets held under finance lease, and amortization of leasehold improvements. Depreciation expense is included in either cost of revenue or SG&A expense depending on the use of the asset as a manufacturing or administrative asset. Depreciation expense will vary according to the age of existing PP&E and the level of capital expenditures. 
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 Amortization expense 
 We have recognized a significant amount of definite-lived intangible assets. Acquisition-related definite-lived intangible assets are amortized on an economic-benefit basis according to the useful lives of the assets, or on a straight-line basis if a pattern of economic benefits cannot be reliably determined. The amount of amortization expense related to definite-lived intangible assets depends on the amount and timing of definite-lived intangible assets acquired and where previously acquired definite-lived intangible assets are in their estimated life-cycle. In general, the economic benefit of a definite-lived intangible asset is concentrated towards the beginning of its useful life. 
 Restructuring and other charges, net 
 Restructuring and other charges, net consists of severance, outplacement, other separation benefits, and facility and other exit costs. These charges may be incurred as part of an announced restructuring plan, or may be individual charges recognized related to acquired businesses or the termination of a limited number of employees that do not represent the initiation of a larger restructuring plan. Restructuring and other charges, net also includes the gain, net of transaction costs, from the sale of businesses, and other operating income or expense that is not presented elsewhere in operating income. 
 Amounts recognized in restructuring and other charges, net will vary according to the extent of our restructuring programs and other income or expense items not presented elsewhere in operating income. 
 Interest expense, net 
 As of December 31, 2020 and 2019, we had gross outstanding indebtedness of $4,036.6 million and $3,291.8 million, respectively. This indebtedness consists of a secured credit facility and senior unsecured notes. Refer to Note 14, "Debt," of our Financial Statements for additional information. 
 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 $420.0 million revolving credit facility (the "Revolving Credit Facility"), and incremental availability (the "Accordion") under which additional secured credit facilities could be issued under certain circumstances. 
 Our respective senior unsecured notes (the "Senior Notes") accrue interest at fixed rates. However, the Term Loan and the Revolving Credit Facility accrue interest at variable interest rates, which drives some of the variability in interest expense, net. Refer to Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," included elsewhere in this Report for more information regarding our exposure to potential changes in variable interest rates. 
 Interest income, which is netted against interest expense on the consolidated statements of operations, relates to interest earned on our cash and cash equivalent balances, and varies according to the balances in, and the interest rates provided by, these investments. 
 Other, net 
 Other, net primarily includes gains and losses associated with the remeasurement of non-USD denominated monetary assets and liabilities into USD, changes in the fair value of derivative financial instruments not designated as cash flow hedges, debt financing transactions, and net periodic benefit cost, excluding service cost. 
 Amounts recognized in other, net vary according to changes in foreign currency exchange rates, changes in the forward prices for the foreign currencies and commodities that we hedge, the number and magnitude of debt financing transactions we undertake, and the change in funded status of our pension and other post-retirement benefit plans. 
 Refer to Note 6, "Other, Net," of our Financial Statements for additional information related to the components of other, net. Refer to Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," included elsewhere in this Report for additional information related to our exposure to potential changes in foreign currency exchange rates and commodity prices. Refer to Note 14, "Debt," of our Financial Statements for additional information related to our debt financing transactions. 
 Provision for/(benefit from) income taxes 
 We are subject to income tax in the various jurisdictions in which we operate. The provision for/(benefit from) income taxes consists of: 
 • current tax expense, which relates primarily to our profitable operations in non-U.S. tax jurisdictions and withholding taxes related to interest, royalties, and repatriation of foreign earnings; and 
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 • deferred tax expense (or benefit), which represents adjustments in book-to-tax basis differences primarily related to the step-up in fair value of fixed and intangible assets, including goodwill, acquired in connection with business combination transactions, the utilization of net operating losses, changes in tax rates, and changes in our assessment of the realizability of our deferred tax assets. 
 Our current tax expense is favorably impacted by the amortization of definite-lived intangible assets and other tax benefits derived from our operating and capital structure, including tax incentives in both the U.K. and China as well as favorable tax status in Mexico. In addition, our tax structure takes advantage of participation exemption regimes that permit the receipt of intercompany dividends without incurring taxable income in those jurisdictions. 
 While the extent of our future tax liability is uncertain, the impact of purchase accounting for past and future acquisitions, changes to debt and equity capitalization of our subsidiaries, and the realignment of the functions performed and risks assumed by our various subsidiaries are among the factors that will determine the future book and taxable income of each of our subsidiaries and of Sensata as a whole. 
 Our effective tax rate will generally not equal the U.S. statutory tax rate due to various factors, the most significant of which are described below. As these factors fluctuate from year to year, our effective tax rate will change. The factors include, but are not limited to, the following: 
 • establishing or releasing a portion of the valuation allowance related to our gross deferred tax assets; 
 • 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. statutory tax rate. This can result in a foreign tax rate differential that may reflect a tax benefit or detriment. This foreign tax rate differential can change from year to year based upon the jurisdictional mix of earnings and changes in current and future enacted tax rates, tax holidays, and favorable tax regimes available to certain of our foreign subsidiaries; 
 • changes in tax laws, including emerging Organization for Economic Co-operation and Development guidelines and European Commission challenges to sovereign European Union member states; 
 • losses incurred in certain jurisdictions, which cannot be currently benefited, as it is not more likely than not that the associated deferred tax asset will be realized in the foreseeable future; 
 • foreign currency exchange gains and losses; 
 • as a result of income tax audit settlements, final assessments, or lapse of applicable statutes of limitation, we may recognize an income tax expense or benefit including the reversal of previously accrued interest and penalties; and 
 • in certain jurisdictions, we recognize withholding and other taxes on intercompany payments, including dividends. 
 Seasonality 
 Refer to Item 1, "Business," included elsewhere in this Report for discussion of our assessment of seasonality related to our business. 
 Inflation 
 With the exception of the effects of fluctuations in foreign currency exchange rates, which are discussed elsewhere in this MD&A if material, we do not believe that inflation has had a material effect on our financial condition or results of operations in recent years. 
 Legal Proceedings 
 Refer to Item 3, "Legal Proceedings," included elsewhere in this Report for discussion of legal proceedings related to our business. 
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 Results of Operations 
 Our discussion and analysis of results of operations are based upon our Financial Statements. The Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of the Financial Statements requires us to make estimates and judgments that affect the amounts reported therein. We base our estimates on historical experience and assumptions believed to be reasonable under the circumstances, and we re-evaluate such estimates on an ongoing basis. Actual results could differ from our estimates under different assumptions or conditions. Our significant accounting policies and estimates are more fully described in Note 2, "Significant Accounting Policies," of our Financial Statements, and Critical Accounting Policies and Estimates included elsewhere in this MD&A. 
 The table below presents our historical results of operations in millions of dollars and as a percentage of net revenue. We have derived these results of operations from our Financial Statements. Amounts and percentages in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. 
 
 For the year ended December 31, 
 2020 2019 2018 
 Amount Percent of
Net Revenue Amount Percent of
Net Revenue Amount Percent of
Net Revenue 
 Net revenue: 
 Performance Sensing $ 2,223.8 73.0 % $ 2,546.0 73.8 % $ 2,627.7 74.6 % 
 Sensing Solutions 821.8 27.0 904.6 26.2 894.0 25.4 
 Total net revenue 3,045.6 100.0 % 3,450.6 100.0 % 3,521.6 100.0 % 
 
 
 
 
 
 
 Operating costs and expenses 2,707.8 88.9 2,893.7 83.9 2,811.2 79.8 
 Operating income 337.7 11.1 556.9 16.1 710.4 20.2 
 Interest expense, net (171.8) (5.6) (158.6) (4.6) (153.7) (4.4) 
 Other, net (0.3) 0.0 (7.9) (0.2) (30.4) (0.9) 
 Income before taxes 165.6 5.4 390.4 11.3 526.4 14.9 
 Provision for/(benefit from) income taxes 1.4 0.0 107.7 3.1 (72.6) (2.1) 
 Net income $ 164.3 5.4 % $ 282.7 8.2 % $ 599.0 17.0 % 

 Net revenue - Overall 
 Net revenue declined 11.7% in fiscal year 2020 largely due to end-market contraction caused by the COVID-19 pandemic. Excluding an increase of 0.2% attributed to changes in foreign currency exchange rates, net revenue in fiscal year 2020 declined 11.9% on an organic basis. This represents a market outgrowth of 600 basis points. Organic revenue growth (or decline), presented throughout this MD&A, is a financial measure not presented in accordance with U.S. GAAP. Refer to the section entitled Non-GAAP Financial Measures below for additional information related to our use of organic revenue growth (or decline). 
 Net revenue declined 2.0% in fiscal year 2019 primarily due to a somewhat weaker automotive end market. Excluding a decline of 0.2% related to acquisitions and divestitures and a decline of 0.7% related to changes in foreign currency exchange rates, net revenue in fiscal year 2019 declined 1.1% on an organic basis. 
 Net Revenue - Performance Sensing 
 Fiscal year 2020 vs. fiscal year 2019 
 Performance Sensing net revenue declined 12.7% in fiscal year 2020, driven primarily by impacts from the COVID-19 pandemic. Excluding an increase of 0.1% attributed to changes in foreign currency exchange rates, Performance Sensing net revenue declined 12.8% on an organic basis. The overall net revenue decline in fiscal year 2020 was reduced in the second half of the year as OEM customers ramped production within their facilities through the half in an effort to replace production lost during shut-downs earlier in the year. The Performance Sensing results in fiscal year 2020 represent market outgrowth of 770 basis points. In addition, price reductions of 1.5%, primarily to automotive customers, contributed to the Performance Sensing organic revenue decline. 
 Net revenue in our automotive business declined 13.6% in fiscal year 2020, or 13.9% on an organic basis. These results represented market outgrowth of 690 basis points compared to the combination of an automotive market that was down 18.5% and the impact of OEM customers working down inventory. This market outgrowth continues to be led by new product 
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 launches in emissions, electrification, and safety-related applications and systems. A high level of automotive production in the fourth quarter resulted in customers using more inventory on hand to fill orders, negatively impacting fiscal year 2020 revenue. However, as our customers restock inventory in 2021, we expect to recover much of that decline. Global automotive production is expected to grow in fiscal year 2021, as the industry seeks to address low inventory levels at the end of 2020. In addition, we expect market outgrowth in our automotive business to be in the range of 400 to 600 basis points for fiscal year 2021. 
 Net revenue in our HVOR business declined 9.2% in fiscal year 2020, on a reported and an organic basis. These results represented market outgrowth of 880 basis points compared to an HVOR market that was down 18.0%. Our China on-road truck business continued to post better than expected growth as a result of the accelerated adoption of NS6 emissions regulations. We expect market outgrowth in our HVOR business to be in the range of 600 to 800 basis points for fiscal year 2021. 
 Fiscal year 2019 vs. fiscal year 2018 
 Performance Sensing net revenue declined 3.1% in fiscal year 2019. Excluding a decline of 1.9% related to acquisitions and divestitures and a decline of 0.7% related to changes in foreign currency exchange rates, Performance Sensing net revenue declined 0.5% on an organic basis. In addition, price reductions of 1.6%, primarily to automotive customers, contributed to the Performance Sensing organic revenue decline. 
 Net revenue in our automotive business declined 4.3% in fiscal year 2019, or 0.9% on an organic basis. These results represented market outgrowth compared to an automotive market that was down 5.6%. All of our major geographic markets contributed to this market outgrowth, but most notably China. 
 Net revenue in our HVOR business grew 1.6% in fiscal year 2019, or 0.9% on an organic basis. These results represented market outgrowth compared to an HVOR market that was down 5.5%. This market outgrowth was primarily related to our business in China as well as in the agriculture and on-road truck markets. 
 Net Revenue - Sensing Solutions 
 Fiscal year 2020 vs. fiscal year 2019 
 Sensing Solutions net revenue declined 9.2% in fiscal year 2020 on a reported and an organic basis. This decrease was the result of year over year declines in the industrial, appliance and HVAC, and aerospace end markets. The global industrial and appliance and HVAC end markets began recovering in the fourth quarter of 2020, which, in addition to supply chain restocking, reflected strong growth in HVAC and 5G applications. The decline in the aerospace industry has continued throughout the year, reflecting reduced OEM production and significantly lower air traffic. New product launches in the fourth quarter, primarily in the defense market, partially offset this decline. 
 Fiscal year 2019 vs. fiscal year 2018 
 Sensing Solutions net revenue increased 1.2% in fiscal year 2019. Excluding an increase of 4.6% related to acquisitions and divestitures and a decline of 0.7% related to changes in foreign currency exchange rates, Sensing Solutions net revenue declined 2.7% on an organic basis. The organic revenue decline was primarily attributable to weakness in the industrial markets we serve. This market weakness is consistent with trends in certain indicators of demand, such as global manufacturing Purchasing Managers' Index ("PMI") data, which is signaling continued demand contraction, consistent with slowing customer production and reductions in inventory. Our industrial growth in China is particularly weak as exports out of China have further slowed as a result of tariffs and global trade actions. 
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 Operating costs and expenses 
 Operating costs and expenses for the years ended December 31, 2020, 2019, and 2018 are presented, in millions of dollars and as a percentage of revenue, in the following table. Amounts and percentages in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. 
 
 For the year ended December 31, 
 2020 2019 2018 
 Amount Percent of
Net Revenue Amount Percent of
Net Revenue Amount Percent of
Net Revenue 
 Operating costs and expenses: 
 Cost of revenue $ 2,119.0 69.6 % $ 2,267.4 65.7 % $ 2,266.9 64.4 % 
 Research and development 131.4 4.3 148.4 4.3 147.3 4.2 
 Selling, general and administrative 294.7 9.7 281.4 8.2 305.6 8.7 
 Amortization of intangible assets 129.5 4.3 142.9 4.1 139.3 4.0 
 Restructuring and other charges, net 33.1 1.1 53.6 1.6 (47.8) (1.4) 
 Total operating costs and expenses $ 2,707.8 88.9 % $ 2,893.7 83.9 % $ 2,811.2 79.8 % 

 Cost of revenue 
 Cost of revenue as a percentage of net revenue increased in fiscal year 2020 primarily as a result of (1) productivity headwinds from lower volume, the resulting lower than normal capacity, and increased costs related to the COVID-19 pandemic, (2) a $29.2 million loss related to a judgment against us in intellectual property litigation brought against Schrader by Wasica Finance GmbH ("Wasica") in the first quarter of 2020 (settled in the third quarter 2020), and (3) higher compensation to retain and incentivize critical employee talent, partially offset by (1) the impact of ongoing savings resulting from cost reduction activities taken in fiscal years 2019 and 2020, (2) the favorable effect of changes in foreign currency exchange rates, and (3) savings from temporary cost reductions in the second quarter of 2020 (including salary reductions and furloughs). Refer to Note 15, "Commitments and Contingencies," of our Financial Statements for additional information regarding the intellectual property litigation with Wasica. 
 We expect that the actions taken as part of the Q2 2020 Global Restructure Program will result in improvements of our cost of revenue as a percentage of revenue in future quarters. Refer to the Q2 2020 Global Restructure Program section earlier in this MD&A for a more detailed discussion of expected savings under the Q2 2020 Global Restructure Program. However, we believe that the impact of a global microchip shortage that the entire industry is currently experiencing will adversely impact our operating costs in fiscal year 2021. 
 Cost of revenue as a percentage of net revenue increased in fiscal year 2019 primarily as a result of (1) organic revenue decline, (2) negative mix due to new product launches, (3) the impact of acquisitions and divestitures, and (4) increased tariff costs, partially offset by (1) the favorable effect of changes in foreign currency exchange rates and (2) lower variable compensation. 
 Research and development expense 
 R&D expense decreased in fiscal year 2020 primarily as a result of the impact of ongoing savings resulting from cost reduction activities taken in fiscal years 2019 and 2020, somewhat offset by increased R&D expense related to our megatrend initiatives. R&D expense related to our megatrend initiatives was $26.1 million in fiscal year 2020, an increase of $6.8 million from fiscal year 2019. We currently expect approximately $50 million to $55 million in total megatrend-related spend in 2021, the majority of which is expected to be in R&D. 
 R&D expense did not materially change in fiscal year 2019 compared to fiscal year 2018 as increased design and development effort to support new design wins and fund megatrends was offset by the favorable effect of changes in foreign currency exchange rates, primarily the Euro and British Pound Sterling. 
 Selling, general and administrative expense 
 SG&A expense increased in fiscal year 2020 primarily as a result of (1) higher compensation to retain and incentivize critical employee talent, (2) increased costs related to enhancements and improvements to our global operating processes to increase productivity, and (3) incremental SG&A related to acquired businesses, partially offset by (1) the impact of ongoing savings resulting from cost reduction activities taken in fiscal years 2019 and 2020 and (2) savings from temporary cost reductions in the second quarter of 2020 (including salary reductions and furloughs). 
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 SG&A expense decreased in fiscal year 2019 primarily due to (1) lower variable compensation, (2) lower selling costs, (3) the divestiture of the Valves Business, (4) the favorable effect of changes in foreign currency exchange rates (primarily the Euro, Chinese Renminbi, and British Pound Sterling), and (5) lower costs related to our redomicile in the prior year, partially offset by additional SG&A expense related to GIGAVAC. 
 Amortization of intangible assets 
 Amortization expense decreased in fiscal year 2020 primarily as a result of the effect of the economic-benefit method of amortization. We expect amortization expense to be approximately $117.5 million in fiscal year 2021. Refer to Note 11, "Goodwill and Other Intangible Assets, Net," of our Financial Statements for additional information regarding definite-lived intangible assets and the related amortization. 
 Amortization expense increased in fiscal year 2019 primarily due to the intangible assets acquired with GIGAVAC, partially offset by the effect of the economic-benefit method of amortization. 
 Restructuring and other charges, net 
 Restructuring and other charges, net for the years ended December 31, 2020, 2019, and 2018 consisted of the following (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): 
 
 For the year ended December 31, 
 (In millions) 2020 2019 2018 
 Q2 2020 Global Restructure Program (1) 
 $ 24.5 $ — $ — 
 Other restructuring charges 
 Severance costs, net (2) 
 3.0 29.2 7.6 
 Facility and other exit costs 1.3 0.8 0.9 
 Gain on sale of Valves Business (3) 
 — — (64.4) 
 Other (4) 
 4.3 23.5 8.2 
 Restructuring and other charges, net $ 33.1 $ 53.6 $ (47.8) 

 _______________________________________ 
 (1) Refer to Q2 2020 Global Restructure Program section elsewhere in this MD&A for additional discussion related to the Q2 2020 Global Restructure Program. 
 (2) 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. 
 (3) In the year ended December 31, 2018, we completed the sale of the Valves Business. The gain on this sale was recorded in restructuring and other charges, net. 
 (4) 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 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," of our Financial Statements 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 in the year ended December 31, 2018. 
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 Operating income 
 In fiscal year 2020, operating income decreased $219.1 million or 39.4%, to $337.7 million (11.1% of net revenue) compared to $556.9 million (16.1% of net revenue) in fiscal year 2019. This decrease was primarily driven by: 
 • the impacts of the COVID-19 pandemic, most significantly lower revenues, productivity headwinds from our manufacturing facilities running at lower than normal capacity, and increased COVID-19 related costs; 
 • charges related to the intellectual property litigation brought against Schrader by Wasica, which was settled in the third quarter, including $29.2 million recognized in the first quarter of 2020; 
 • $24.5 million in severance charges recognized in fiscal year 2020 related to the Q2 2020 Global Restructure Program; and 
 • higher compensation costs to retain and incentivize critical employee talent. 
 These drivers of reduced operating income were partially offset by: 
 • the non-recurrence of certain restructuring and other charges from fiscal year 2019 as discussed in Note 5, "Restructuring and Other Charges, Net," of our Financial Statements, including $17.8 million loss related to the termination of a supply agreement in connection with the Metal Seal litigation and charges related to benefits provided under a voluntary retirement incentive program; 
 • cost savings of approximately $21.8 million realized in the second quarter of 2020 resulting from temporary salary reductions, furloughs, and government subsidies; 
 • the impact of ongoing savings resulting from cost reduction activities taken in fiscal years 2019 and 2020; 
 • the favorable effect of changes in foreign currency exchange rates; and 
 • lower intangible amortization expense due to the impacts of the economic-benefit method of amortization. 
 We expect that the actions taken as part of the Q2 2020 Global Restructure Program will result in savings that will be favorable to operating income in future quarters. Refer to the Q2 2020 Global Restructure Program section earlier in this MD&A for a more detailed discussion of expected savings under the Q2 2020 Global Restructure Program. However, we believe that the impact of a global microchip shortage that the entire automotive industry is currently experiencing will adversely impact out operating costs in fiscal year 2021. 
 In fiscal year 2019, operating income decreased $153.5 million or 21.6%, to $556.9 million (16.1% of net revenue) compared to $710.4 million (20.2% of net revenue) in fiscal year 2018. This decrease was primarily due to (1) the divestiture of the Valves Business in the third quarter of 2018 (including the gain on sale), (2) net productivity headwinds partly due to the scaling up of new product launches, (3) $17.8 million loss related to the termination of a supply agreement in connection with the Metal Seal litigation, (4) higher severance charges, (5) the impact of increased tariffs, and (6) lower volume. 
 These drivers of reduced operating income were partially offset by (1) lower variable compensation, (2) lower selling expenses, (3) the favorable effect of changes in foreign currency exchange rates, and (4) the impact of the acquisition of GIGAVAC. 
 Interest expense, net 
 Interest expense, net increased in fiscal year 2020 primarily due to (1) a full year of interest expense related to the $450.0 million aggregate principal amount of 4.375% senior notes due 2030 (the "4.375% Senior Notes"), which were issued in fiscal year 2019, (2) a partial year of interest expense related to the 3.75% Senior Notes, which was issued in 2020, (3) interest incurred on outstanding balances of the Revolving Credit Facility in fiscal year 2020, and (4) lower cash interest income due to declining interest rates. These increases were partially offset by lower interest expense on the term loan, which was partially repaid in fiscal year 2019 after issuance of the 4.375% Senior Notes. 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 our Revolving Credit Facility. On August 17, 2020, we took advantage of historically low interest rates in issuing the 3.75% Senior Notes. Given improving market conditions and strengthening financial markets, we decided to use a portion of the proceeds to repay $400.0 million of outstanding borrowings under the Revolving Credit Facility. 
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 On February 3, 2021, we announced that we intended to redeem in full the outstanding balance on the 6.25% Senior Notes in March 2021. The 6.25% Senior Notes represent approximately $46.9 million of interest expense annually. We will redeem the notes at a premium of 103.125% of the aggregate principal amount of the notes outstanding, or approximately $23.4 million. Accordingly, while we expect to see a reduction of interest expense in fiscal year 2021 as a result of this redemption, the reduction will be significantly larger in fiscal year 2022. 
 Interest expense, net increased in fiscal year 2019 primarily due to an increase in interest expense related to higher variable interest rates as well as the impact of the refinancing of a portion of our Term Loan (variable rate debt) through the issuance of the 4.375% Senior Notes (fixed rate debt). The 4.375% Senior Notes accrued interest at a higher rate than the average rate of the Term Loan in fiscal year 2019. 
 Other, net 
 Other, net for the years ended December 31, 2020, 2019, and 2018 consisted of the following (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): 
 
 For the year ended December 31, 
 (In millions) 2020 2019 2018 
 Currency remeasurement gain/(loss) on net monetary assets (1) 
 $ 10.8 $ (6.8) $ (18.9) 
 (Loss)/gain on foreign currency forward contracts (2) 
 (6.8) 2.2 2.1 
 Gain/(loss) on commodity forward contracts (2) 
 10.0 4.9 (8.5) 
 Loss on debt financing (3) 
 — (4.4) (2.4) 
 
 Net periodic benefit cost, excluding service cost (10.0) (3.2) (3.6) 
 Other (4.5) (0.7) 0.9 
 Other, net $ (0.3) $ (7.9) $ (30.4) 

 _______________________________________________ 
 (1) Relates to the remeasurement of non-USD denominated monetary assets and liabilities into USD. 
 (2) Relates to changes in the fair value of derivative financial instruments that are not designated as hedges. Refer to Note 19, "Derivative Instruments and Hedging Activities," of our Financial Statements for additional information related to gains and losses related to our commodity and foreign currency exchange forward contracts. Refer to Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," included elsewhere in this Report for an analysis of the sensitivity of other, net to changes in foreign currency exchange rates and commodity prices. 
 (3) Refer to Note 14, "Debt," of our Financial Statements for additional information related to our debt financing transactions. 
 Provision for/(benefit from) income taxes 
 The components of provision for/(benefit from) income taxes for the years ended December 31, 2020, 2019, and 2018 are described in more detail in the table below (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): 
 
 For the year ended December 31, 
 (In millions) 2020 2019 2018 
 Tax computed at statutory rate of 21% (1) 
 $ 34.8 $ 82.0 $ 110.5 
 Intangible property transfers (2) 
 (54.2) — — 
 Foreign tax rate differential (3) 
 (22.0) (19.1) (41.2) 
 Valuation allowances (4) 
 8.9 19.6 (123.4) 
 Withholding taxes not creditable 12.2 9.5 8.7 
 Change in tax laws or rates 11.2 5.1 (22.3) 
 Research and development incentives (5) 
 (7.4) (8.4) (19.5) 
 Reserve for tax exposure (0.2) 20.1 10.8 
 
 Other (6) 
 18.0 (1.1) 3.7 
 Provision for/(benefit from) income taxes $ 1.4 $ 107.7 $ (72.6) 

 _______________________________________________ 
 (1) Represents the product of the applicable statutory tax rate and income before taxes, as reported in the consolidated statements of operations. 
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 (2) In the fourth quarter of 2020, we completed the transfer of intangible property which resulted in a net $54.2 million deferred tax benefit. 
 (3) 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. statutory tax rate. This can result in a foreign tax rate differential that may reflect a tax benefit or detriment. This foreign tax rate differential can change from year to year based upon the jurisdictional mix of earnings and changes in current and future enacted tax rates. Certain of our subsidiaries are currently eligible, or have been eligible, for tax exemptions or reduced tax rates in their respective jurisdictions. 
 (4) During the years ended December 31, 2020, 2019, and 2018, we established/(released) a portion of our valuation allowance and recognized a deferred tax expense/(benefit). The valuation allowance as of December 31, 2020 and 2019 was $202.1 million and $146.8 million, respectively. A significant portion of our valuation allowance is against interest carryforwards due to our assessment of our inability to utilize these carryforwards based on our forecasts of future taxable income. The remaining valuation allowance primarily relates to foreign tax credit capital loss carryforwards, goodwill tax basis, and net operating losses in jurisdictions outside the U.S. It is more likely than not that these attributes will not be utilized in the foreseeable future. However, any future release of all or a portion of this valuation allowance resulting from a change in this assessment will impact our future provision for/(benefit from) income taxes. 
 (5) Certain income of our U.K. subsidiaries is eligible for lower tax rates under the "patent box" regime, resulting in certain of our intellectual property income being taxed at a rate lower than the U.K. statutory tax rate. In China, we benefit from the R&D super deduction regime. In fiscal year 2018, we substantially completed an assessment of our ability to claim an R&D credit in the U.S. 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. 
 (6) Refer to Note 7, "Income Taxes," of our Financial Statements for additional information related to other components of our rate reconciliation. 
 We do not believe that there are any known trends related to the reconciling items noted above that are reasonably likely to result in our liquidity increasing or decreasing in any material way. 
 Non-GAAP Financial Measures 
 This section provides additional information regarding certain non-GAAP financial measures, including organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted earnings per share ("EPS"), free cash flow, net leverage ratio, and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"), which are used by our management, Board of Directors, and investors. We use these non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance, and as a factor in determining compensation for certain employees. 
 The use of our non-GAAP financial measures have limitations. They should be considered as supplemental in nature and are not intended to be considered in isolation from, or as an alternative to, reported net revenue growth (or decline), operating income, operating margin, net income, diluted EPS, operating cash flows, segment operating margin, total debt, finance lease, and other financing obligations, or EBITDA, respectively, calculated in accordance with U.S. GAAP. In addition, our measures of organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted EPS, free cash flow, net leverage ratio, and adjusted EBITDA may not be the same as, or comparable to, similar non-GAAP financial measures presented by other companies. 
 Organic revenue growth (or decline) 
 Organic revenue growth (or decline) is defined as the reported percentage change in net revenue, calculated in accordance with U.S. GAAP, excluding the period-over-period impact of foreign currency exchange rate differences as well as the net impact of material acquisitions and divestitures for the 12-month period following the respective transaction date(s). 
 We believe that organic revenue growth (or decline) provides investors with helpful information with respect to our operating performance, and we use organic revenue growth (or decline) to evaluate our ongoing operations as well as for internal planning and forecasting purposes. We believe that organic revenue growth (or decline) provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior-year period. 
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 Adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS 
 We define adjusted operating income as operating income determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described below. Adjusted operating margin is calculated by dividing adjusted operating income by net revenue calculated in accordance with U.S. GAAP. We define adjusted net income as follows: net income determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described in Non-GAAP Adjustments below. Adjusted EPS is calculated by dividing adjusted net income by the number of diluted weighted-average ordinary shares outstanding in the period. 
 Management uses adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS as measures of operating performance, for planning purposes (including the preparation of our annual operating budget), to allocate resources to enhance the financial performance of our business, to evaluate the effectiveness of our business strategies, in communications with our Board of Directors and investors concerning our financial performance, and as factors in determining compensation for certain employees. We believe investors and securities analysts also use these non-GAAP financial measures in their evaluation of our performance and the performance of other similar companies. These non-GAAP financial measures are not measures of liquidity. 
 Free cash flow 
 Free cash flow is defined as net cash provided by/(used in) operating activities less additions to PP&E and capitalized software. We believe free cash flow is useful to management and investors as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to, among other things, fund acquisitions, repurchase ordinary shares, and (or) accelerate the repayment of debt obligations. 
 Adjusted EBITDA 
 Adjusted EBITDA represents net income, determined in accordance with U.S. GAAP, excluding interest expense, net, provision for/(benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable: (1) restructuring related and other, (2) financing and transaction related, (3) deferred gain or loss on commodities and other derivative instruments, and (4) step-up inventory amortization. Refer to Non-GAAP Adjustments below for additional discussion of these adjustments. 
 Net leverage ratio 
 Net leverage ratio represents net debt (total debt, finance lease and other financing obligations less cash and cash equivalents) divided by last twelve months ("LTM") adjusted EBITDA. We believe that the net leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition. 
 Non-GAAP adjustments 
 Many of our non-GAAP adjustments relate to a series of strategic initiatives developed by our management aimed at better positioning us for future revenue growth and an improved cost structure. These initiatives have been modified from time to time to reflect changes in overall market conditions and the competitive environment facing our business. These initiatives include, among other items, acquisitions, divestitures, restructurings of certain business, supply chain, or corporate activities, and various financing transactions. We describe these adjustments in more detail below. 
 • Restructuring related and other : includes charges, net related to certain restructuring and other exit activities as well as other costs (or income) that we believe are either unique or unusual to the identified reporting period, and that we believe impact comparisons to prior period operating results. Such costs include charges related to optimization of our manufacturing processes to increase productivity. This type of activity occurs periodically, however each action is unique, discrete, and driven by various facts and circumstances. Such amounts are excluded from internal financial statements and analyses that management uses in connection with financial planning, and in its review and assessment of our operating and financial performance, including the performance of our segments. Restructuring related and other does not, however, include charges related to the integration of acquired businesses, including such charges that are recognized as restructuring and other charges, net in the consolidated statements of operations. This adjustment is net of current tax impacts. 
 • Financing and other transaction costs : includes losses or gains related to debt financing transactions, losses or gains related to the divestiture of a business, losses or gains related to the termination of a long-term unfavorable supply agreement, and costs incurred, including for legal, accounting, and other professional services, that are directly related 
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 to an acquisition, divestiture, or equity financing transaction. There was no current tax effect related to this adjustment in any period presented. 
 • Deferred loss or gain on derivative instruments : includes unrealized losses or gains on derivative instruments that do not qualify for hedge accounting as well as the impact of commodity prices on our raw material costs relative to the strike price on our commodity forward contracts. There was no current tax effect related to this adjustment in any period presented. 
 • Step-up depreciation and amortization : includes depreciation and amortization expense associated with the step-up in fair value of assets acquired in connection with a business combination (e.g., PP&E, definite-lived intangible assets, and inventory). The current tax effect of step-up depreciation and amortization was not material, individually or in the aggregate, in any period presented. 
 • Deferred taxes and other tax related : includes adjustments for book-to-tax basis differences due primarily to the step-up in fair value of fixed and intangible assets and goodwill, the utilization of net operating losses, and adjustments to our U.S. valuation allowance in connection with certain acquisitions and U.S. tax law changes. Other tax related items include certain adjustments to unrecognized tax positions and withholding tax on repatriation of foreign earnings. 
 • Amortization of debt issuance costs . There was no current tax effect related to this adjustment in any period presented. 
 • Where applicable, the current tax effect of non-GAAP adjustments. 
 Our definition of adjusted net income excludes the deferred provision for/(benefit from) income taxes and other tax related items described above. As we treat deferred income taxes as an adjustment to compute adjusted net income, the deferred income tax effect associated with the reconciling items presented below would not change adjusted net income for any period presented. 
 Non-GAAP reconciliations 
 The following tables provide reconciliations of certain financial measures calculated in accordance with U.S. GAAP to the related non-GAAP financial measures for the periods presented. Refer to Non-GAAP Adjustments section above for additional information on these adjustments. Amounts and percentages have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding. 
 
 For the year ended December 31, 2020 
 (Dollars in millions, except per share amounts) Operating Income Operating Margin Net Income Diluted EPS 
 Reported (GAAP) 
 $ 337.7 11.1 % $ 164.3 $ 1.04 
 Non-GAAP adjustments: 
 
 Restructuring related and other (c) 
 87.4 2.9 93.8 0.59 
 Financing and other transaction costs 8.2 0.3 6.4 0.04 
 Step-up depreciation and amortization 125.7 4.1 125.7 0.79 
 Deferred loss/(gain) on derivative instruments 3.1 0.1 (7.0) (0.04) 
 Amortization of debt issuance costs — — 6.9 0.04 
 Deferred taxes and other tax related — — (40.9) (0.26) 
 Total adjustments 224.4 7.4 184.9 1.17 
 Adjusted (non-GAAP) 
 $ 562.1 18.5 % $ 349.2 $ 2.21 

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 For the year ended December 31, 2019 
 (Dollars in millions, except per share amounts) Operating Income Operating Margin Net Income Diluted EPS 
 Reported (GAAP) 
 $ 556.9 16.1 % $ 282.7 $ 1.75 
 Non-GAAP adjustments: 
 
 Restructuring related and other (c) 
 61.9 1.8 62.2 0.38 
 Financing and other transaction costs 28.9 0.8 34.9 0.22 
 Step-up depreciation and amortization 
 139.6 4.0 139.6 0.86 
 Deferred gain on derivative instruments 
 (1.6) (0.0) (6.5) (0.04) 
 Amortization of debt issuance costs — — 7.8 0.05 
 Deferred taxes and other tax related — — 55.2 0.34 
 Total adjustments 228.8 6.6 293.2 1.81 
 Adjusted (non-GAAP) 
 $ 785.7 22.8 % $ 575.9 $ 3.56 

 
 For the year ended December 31, 2018 
 (Dollars in millions, except per share amounts) Operating Income Operating Margin Net Income Diluted EPS 
 Reported (GAAP) 
 $ 710.4 20.2 % $ 599.0 $ 3.53 
 Non-GAAP adjustments: 
 
 Restructuring related and other (c) 
 25.4 0.7 28.0 0.17 
 Financing and other transaction costs (a) 
 (47.0) (1.3) (40.3) (0.24) 
 Step-up depreciation and amortization 141.2 4.0 141.2 0.83 
 Deferred loss on derivative instruments 2.0 0.1 12.5 0.07 
 Amortization of debt issuance costs — — 7.3 0.04 
 Deferred taxes and other tax related (b) 
 — — (128.3) (0.76) 
 Total adjustments 121.5 3.5 20.4 0.12 
 Adjusted (non-GAAP) 
 $ 832.0 23.6 % $ 619.4 $ 3.65 

 __________________________________________ 
 (a) Financing and other transaction costs in fiscal year 2018 primarily included a $64.4 million gain on the sale of the Valves Business and $5.9 million of related transaction costs. 
 (b) In fiscal year 2020, we completed the transfer of intangible property which resulted in a $54.2 million deferred tax benefit. In fiscal year 2018, we recognized a deferred tax benefit of $144.1 million, which primarily included a $122.1 million deferred tax benefit related to the release of a portion of our U.S. valuation allowance as discussed in Note 7, "Income Taxes," of our Financial Statements. 
 (c) The following table presents the components of our restructuring related and other non-GAAP adjustment to net income for fiscal years 2020, 2019, and 2018 (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): 
 
 For the year ended December 31, 
 (in millions) 2020 2019 2018 
 Business and corporate repositioning (i) 
 $ 35.8 $ 40.1 $ 8.8 
 Supply chain repositioning and transition (ii) 
 30.8 16.0 15.3 
 Preacquisition legal matters (iii) 
 31.5 5.3 2.9 
 Other — 2.7 1.0 
 Income tax effect (iv) 
 (4.2) (1.8) — 
 Total non-GAAP restructuring related and other (v) 
 $ 93.8 $ 62.2 $ 28.0 

 __________________________________________ 
 i. Fiscal year 2020 includes charges incurred under the Q2 2020 Global Restructure Program and charges for other business and corporate workforce rationalization. Fiscal year 2019 includes benefits provided under a voluntary retirement incentive program, costs related to the shutdown and relocation of an operating site in Germany, and charges for other business and corporate workforce rationalization. 
 ii. Primarily includes costs related to optimization of our manufacturing processes to increase productivity and rationalize our manufacturing footprint and supply chain workforce rationalization. 
 iii. Represents charges incurred related to legal matters associated with acquired businesses, for which new information is brought to light after the measurement period for the business combination is closed, but for which the liability relates to events or activities that occurred prior to our acquisition of the business. Fiscal year 2020 primarily includes the settlement of intellectual property litigation brought against Schrader by Wasica. 
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 iv. We treat deferred taxes as a non-GAAP adjustment. Accordingly, the tax effect of the restructuring related and other non-GAAP adjustment refers only to the current tax effect. With respect to the year ended December 31, 2018, the current tax effect was not material, individually or in the aggregate. 
 v. Total presented is the non-GAAP adjustment to net income. Certain portions of these adjustments are non-operating and are excluded from the non-GAAP adjustments to operating income. 
 The following table provides a reconciliation of net cash provided by operating activities in accordance with U.S. GAAP to free cash flow. 
 
 For the year ended December 31, 
 (in millions) 2020 2019 2018 
 Net cash provided by operating activities $ 559.8 $ 619.6 $ 620.6 
 Additions to property, plant and equipment and capitalized software $ (106.7) $ (161.3) $ (159.8) 
 Free cash flow $ 453.1 $ 458.3 $ 460.8 

 The following table provides a reconciliation of net income in accordance with U.S. GAAP to Adjusted EBITDA. 
 
 For the year ended December 31, 
 (in millions) 2020 2019 2018 
 Net income $ 164.3 $ 282.7 $ 599.0 
 Interest expense, net 171.8 158.6 153.7 
 Provision for/(benefit from) income taxes 1.4 107.7 (72.6) 
 Depreciation expense 125.7 115.9 106.0 
 Amortization of intangible assets 129.5 142.9 139.3 
 EBITDA 592.6 807.7 925.4 
 Non-GAAP Adjustments 
 Restructuring related and other 93.1 64.1 28.0 
 Financing and other transaction costs 6.4 34.9 (40.3) 
 Deferred (gain)/loss on derivative instruments (7.0) (6.5) 12.5 
 Step up inventory amortization — — 0.9 
 Adjusted EBITDA $ 685.1 $ 900.1 $ 926.5 

 The following table provides a reconciliation of total debt, finance lease, and other financing obligations in accordance with U.S. GAAP to net leverage ratio. 
 
 For the year ended December 31, 
 (in millions) 2020 2019 2018 
 Current portion of long-term debt, finance lease and other financing obligations $ 757.2 $ 6.9 $ 14.6 
 Finance lease and other financing obligations, less current portion 27.9 28.8 30.6 
 Long-term debt, net 3,213.7 3,219.9 3,219.8 
 Total debt, finance lease, and other financing obligations 3,998.9 3,255.6 3,264.9 
 Less: Discount (9.6) (11.8) (15.2) 
 Less: Deferred financing costs (28.1) (24.5) (23.2) 
 Total gross indebtedness 4,036.6 3,291.8 3,303.3 
 Less: Cash and cash equivalents 1,862.0 774.1 729.8 
 Net Debt $ 2,174.6 $ 2,517.7 $ 2,573.4 
 
 Adjusted EBITDA (LTM) $ 685.1 $ 900.1 $ 926.5 
 Net leverage ratio 3.2 2.8 2.8 

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 Liquidity and Capital Resources 
 As of December 31, 2020 and 2019 we held cash and cash equivalents in the following regions: 
 
 As of December 31, 
 (in millions) 2020 2019 
 United Kingdom $ 25.3 $ 8.8 
 United States 17.2 7.0 
 The Netherlands 1,514.1 522.9 
 China 185.2 119.3 
 Other 120.2 116.1 
 Total $ 1,862.0 $ 774.1 

 The amount of cash and cash equivalents held in these geographic regions fluctuates throughout the year due to a variety of factors, such as our use of intercompany loans and dividends and the timing of cash receipts and disbursements in the normal course of business. Our earnings are not considered to be permanently reinvested in certain jurisdictions in which they were earned. We recognize a deferred tax liability on these unremitted earnings to the extent the remittance of such earnings cannot be recovered in a tax free manner. 
 On February 3, 2021, we announced that we intended to redeem in full the outstanding balance on the 6.25% Senior Notes in March 2021 at 103.125%. The cash to be used to execute this redemption, or approximately $773.4 million (excluding fees), will be paid from cash on hand in the Netherlands. 
 Cash Flows 
 The table below summarizes our primary sources and uses of cash for the years ended December 31, 2020, 2019, and 2018. We have derived the summarized statements of cash flows from our Financial Statements. Amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. 
 
 For the year ended December 31, 
 (in millions) 2020 2019 2018 
 Net cash provided by/(used in): 
 Operating activities: 
 Net income adjusted for non-cash items $ 405.3 $ 630.3 $ 687.5 
 Changes in operating assets and liabilities, net 154.5 (10.7) (66.9) 
 Operating activities 559.8 619.6 620.6 
 Investing activities (182.1) (208.8) (237.6) 
 Financing activities 710.2 (366.5) (406.2) 
 Net change $ 1,087.9 $ 44.3 $ (23.3) 

 Operating Activities 
 The decrease in cash provided by operating activities in fiscal year 2020 compared to fiscal year 2019 relates primarily to lower profitability, partially offset by reduced inventory and the timing of supplier payments and customer receipts. 
 The decrease in cash provided by operating activities in fiscal year 2019 compared to fiscal year 2018 relates primarily to lower operating profitability and the timing of supplier payments and customer receipts. 
 Investing Activities 
 Investing activities include cash flows related to additions to PP&E and capitalized software, the acquisition or divestiture of a business or assets, and the acquisition or sale of certain debt and equity securities. 
 The decrease in cash used in investing activities in fiscal year 2020 compared to fiscal year 2019 relates primarily to lower capital expenditures, partially offset by additional cash paid for acquisitions. 
 In fiscal year 2019, net cash used in investing activities decreased primarily due to lower cash used in acquisitions, as the GIGAVAC merger was completed in fiscal year 2018. This was partially offset by the impact of the divestiture of the Valves Business, for which proceeds were received in fiscal year 2018, cash paid for the acquisition of assets from Metal Seal, and cash used to acquire debt and equity securities. 
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 In fiscal year 2021, we anticipate additions to PP&E and capitalized software of approximately $160.0 million to $170.0 million, which we expect to be funded with cash flows from operations. 
 Financing Activities 
 In fiscal year 2020 cash provided by financing activities was $710.2 million compared to cash used in financing activities of $366.5 million in fiscal year 2019. This change was primarily driven by issuance of the 3.75% Senior Notes and lower volume of share repurchases. 
 On February 3, 2021, we announced we announced that we intended to redeem in full the outstanding balance on the 6.25% Senior Notes in March 2021 at 103.125%. The cash to be used to execute this redemption, or approximately $773.4 million (excluding fees), will be presented in cash used in financing activities in the first quarter of 2021. 
 In fiscal year 2019, net cash used in financing activities decreased primarily due to a lower volume of ordinary share repurchases. 
 Indebtedness and Liquidity 
 The following table details our gross outstanding indebtedness as of December 31, 2020, and the associated interest expense for the year then ended: 
 
 (in millions) Balance as of December 31, 2020 Interest Expense, net for the year ended December 31, 2020 
 Term Loan $ 456.1 $ 11.0 
 4.875% Senior Notes 500.0 24.4 
 5.625% Senior Notes 400.0 22.5 
 5.0% Senior Notes 700.0 35.0 
 6.25% Senior Notes (1) 
 750.0 46.9 
 4.375% Senior Notes 450.0 19.7 
 3.75% Senior Notes 750.0 10.5 
 Revolving Credit Facility — 2.1 
 Finance lease and other financing obligations 30.5 2.6 
 Total gross outstanding indebtedness $ 4,036.6 
 Other interest expense, net (2) 
 (2.9) 
 Interest expense, net $ 171.8 

 __________________________________________ 
 (1) On February 3, 2021, we announced that we intended to redeem in full the outstanding balance on the 6.25% Senior Notes in March 2021. As a result, these notes have been classified as current on our consolidated balance sheets as of December 31, 2020. 
 (2) Other interest expense, net includes interest income, amortization of debt issuance costs, and interest costs capitalized in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Subtopic 835-20, Capitalization of Interest . 
 Debt Instruments 
 Refer to Note 14, "Debt," of our Financial Statements for information related to the terms of our debt instruments. 
 Capital Resources 
 Our sources of liquidity include cash on hand, cash flows from operations, and available capacity under the Revolving Credit Facility. In addition, the Senior Secured Credit Facilities provide for the Accordion, under which additional secured debt may be issued or the capacity of the Revolving Credit Facility may be increased. Availability under the Accordion varies each period based on our attainment of certain financial metrics as set forth in the terms of the Credit Agreement and the indentures under which our Senior Notes were issued (the "Senior Notes Indentures"). As of December 31, 2020, availability under the Accordion was approximately $0.6 billion. 
 We believe, based on our current level of operations as reflected in our results of operations for the year ended December 31, 2020, and taking into consideration the restrictions and covenants included in the Credit Agreement and Senior Notes Indentures discussed below and in Note 14, "Debt," of our Financial Statements, and the redemption of the 6.25% Senior Notes as discussed below, that these sources of liquidity will be sufficient to fund our operations, capital expenditures, ordinary 
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 share repurchases (if and when resumed), and debt service for at least the next twelve months. However, we cannot make assurances that our business will generate sufficient cash flows from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Further, our highly-leveraged nature may limit our ability to procure additional financing in the future. 
 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 used a portion of the proceeds from the issuance and sale of the 3.75% Senior Notes to repay the balance outstanding on the Revolving Credit Facility. As of December 31, 2020, we had $416.1 million available under the Revolving Credit Facility, net of $3.9 million of obligations related to outstanding letters of credit issued thereunder. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of December 31, 2020, no amounts had been drawn against these outstanding letters of credit. 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 will be paid with cash on hand. 
 The Credit Agreement provides that, if our senior secured net leverage ratio exceeds a specified level, we are required to use a portion of our excess cash flow, as defined in the Credit Agreement, generated by operating, investing, or financing activities to prepay some or all of the outstanding borrowings under the Senior Secured Credit Facilities. The Credit Agreement also requires mandatory prepayments of the outstanding borrowings under the Senior Secured Credit Facilities upon certain asset dispositions and casualty events, in each case subject to certain reinvestment rights, and upon the incurrence of certain indebtedness (excluding any permitted indebtedness). These provisions were not triggered during the year ended December 31, 2020. 
 All obligations under the Senior Secured Credit Facilities are unconditionally guaranteed by certain of our subsidiaries (the "Guarantors"). The collateral for such borrowings under the Senior Secured Credit Facilities consists of substantially all present and future property and assets of our indirect, wholly-owned subsidiary, Sensata Technologies B.V. ("STBV") and the Guarantors. 
 Our ability to raise additional financing, and our borrowing costs, may be impacted by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by certain credit metrics such as interest coverage and leverage ratios. As of January 29, 2021, Moody’s Investors Service’s corporate credit rating for STBV was Ba2 with a stable outlook, and Standard & Poor’s corporate credit rating for STBV was BB+ with a negative outlook. The Standard & Poor's outlook represents a decline from their outlook of "stable" as of December 31, 2019. The change in outlook reflects the uncertainties in the markets caused by the COVID-19 pandemic. Any future downgrades to STBV's credit ratings may increase our future borrowing costs, but will not reduce availability under the Credit Agreement. 
 The Credit Agreement and the Senior Notes Indentures contain restrictions and covenants (described in more detail in Note 14, "Debt," of our Financial Statements) that limit the ability of STBV and its subsidiaries to, among other things, incur subsequent indebtedness, sell assets, pay dividends, and make other restricted payments. These restrictions and covenants, which are subject to important exceptions and qualifications set forth in the Credit Agreement and Senior Notes Indentures, were taken into consideration in establishing our share repurchase programs, and are evaluated periodically with respect to future potential funding. We do not believe that these restrictions and covenants will prevent us from funding share repurchases under our share repurchase programs with available cash and cash flows from operations, should we decide to do so. As of December 31, 2020, we believe that we were in compliance with all the covenants and default provisions under the Credit Agreement and the Senior Notes Indentures. 
 Share repurchase program 
 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. In July 2019, our Board of Directors authorized our current $500.0 million share repurchase program (the "July 2019 Program"). On April 2, 2020, we announced a temporary suspension of the 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. 
 During the year ended December 31, 2020, we repurchased approximately 0.9 million ordinary shares at a weighted-average price of $39.17 per share under the July 2019 Program. 
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 During the year ended December 31, 2019, we repurchased ordinary shares under the July 2019 Program and a $250.0 million share repurchase program authorized by our Board of Directors in October 2018 (the "October 2018 Program"). We repurchased approximately 7.2 million ordinary shares at a weighted-average price of $48.87 per share under these programs. The October 2018 Program was terminated upon commencement of the July 2019 Program. 
 During the year ended December 31, 2018, we repurchased approximately 7.6 million ordinary shares at a weighted-average price of $52.75 per share under a $400.0 million share repurchase program authorized by our Board of Directors in May 2018. 
 Contractual Obligations and Commercial Commitments 
 The table below reflects our contractual obligations as of December 31, 2020. On February 3, 2021, we announced that we intended to redeem in full the outstanding balance on the 6.25% Senior Notes in March 2021. As a result of this announcement, the 6.25% Senior Notes have been classified within current liabilities on our consolidated balance sheet as of December 31, 2020. The table below has been recast to reflect this classification. Amounts we pay in future periods may vary from those reflected in the table. Amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. 
 
 Payments Due by Period 
 (In millions) Total Less than One Year One to Three Years Three to Five Years More than
Five Years 
 Debt obligations principal (1) 
 $ 4,006.1 $ 754.6 $ 509.3 $ 1,109.3 $ 1,632.9 
 Debt obligations interest (2) 
 919.3 187.8 275.9 205.2 250.4 
 Finance lease obligations principal (3) 
 30.3 2.1 3.1 3.8 21.3 
 Finance lease obligations interest (3) 
 19.2 2.5 4.6 4.0 8.2 
 Other financing obligations principal (4) 
 0.2 0.2 — — — 
 
 Operating lease obligations (5) 
 70.0 14.6 21.0 12.6 21.8 
 Non-cancelable purchase obligations (6) 
 63.2 41.4 21.4 0.3 0.2 
 Total contractual obligations (7)(8) 
 $ 5,108.3 $ 1,003.2 $ 835.3 $ 1,335.2 $ 1,934.8 

 __________________________________________ 
 (1) With the exception of the 6.25% Senior Notes, as discussed above, represents the contractually required principal payments, in accordance with the required payment schedule, on our debt obligations in existence as of December 31, 2020. The redemption of the $750.0 million aggregate principal amount of 6.25% Senior Notes is reflected as an outflow in fiscal year 2021. 
 (2) Represents the contractually required interest payments, in accordance with the required payment schedule, on our debt obligations in existence as of December 31, 2020. Cash flows associated with the next interest payment to be made on our variable rate debt subsequent to December 31, 2020 were calculated using the interest rates in effect as of the latest interest rate reset date prior to December 31, 2020, plus the applicable spread. Fiscal year 2021 outflow reflects cash outflow of $26.0 million related to interest on the 6.25% Senior Notes through March 5, 2021 and cash outflow of $23.4 million related to the 3.125% premium owed to the lenders as a result of the early redemption. This schedule has also been adjusted to reflect the annualized full year cash interest savings of approximately $46.9 million per year through fiscal year 2025 and $23.6 million in fiscal year 2026 as a result of early redemption of the 6.25% Senior Notes. 
 (3) Represents the contractually required payments, in accordance with the required payment schedule, under our finance lease obligations in existence as of December 31, 2020. No assumptions were made with respect to renewing these leases beyond their current terms. 
 (4) Represents the contractually required payments, in accordance with the required payment schedule, under our financing obligations in existence as of December 31, 2020. No assumptions were made with respect to renewing these financing arrangements beyond their current terms. 
 (5) Represents the contractually required payments, in accordance with the required payment schedule, under our operating lease obligations in existence as of December 31, 2020. No assumptions were made with respect to renewing these leases beyond their current terms. 
 (6) Represents the contractually required payments under our various purchase obligations in existence as of December 31, 2020. No assumptions were made with respect to renewing the purchase obligations at the expiration date of their initial terms. 
 (7) Contractual obligations denominated in a foreign currency were calculated utilizing the USD to local currency exchange rates in effect as of December 31, 2020. 
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 (8) This table does not include the contractual obligations associated with our pension and other post-retirement benefit plans. As of December 31, 2020, we had recognized a net benefit liability of $51.5 million, representing the net unfunded benefit obligations of the defined benefit and retiree healthcare plans. Refer to Note 13, "Pension and Other Post-Retirement Benefits," of our Financial Statements for additional information related to our pension and other post-retirement benefits, including expected benefit payments for the next 10 years. This table also does not include $24.7 million of unrecognized tax benefits as of December 31, 2020, as we are unable to make reasonably reliable estimates of when cash settlement, if any, will occur with a tax authority, as the timing and the ultimate resolution of the examination is uncertain. Refer to Note 7, "Income Taxes," of our Financial Statements for additional information related to our unrecognized tax benefits. 
 Critical Accounting Policies and Estimates 
 As discussed in Note 2, "Significant Accounting Policies," of our Financial Statements, which more fully describes our significant accounting policies, the preparation of consolidated financial statements in accordance with U.S. GAAP requires us to exercise judgment in the process of applying our accounting policies. It also requires that we make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. The accounting policies and estimates that we believe are most critical to the portrayal of our financial condition and results of operations are listed below. We believe these policies require the most difficult, subjective, and complex judgments in estimating the effect of inherent uncertainties. 
 Revenue Recognition 
 The discussion below details the most significant judgments and estimates we make regarding recognition of revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers . In accordance with FASB ASC Topic 606, 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 using a five step model. The most critical judgments and estimates we make in the implementation of this model relate to identifying the contract with the customer and determination of the transaction price associated with the performance obligation(s) in the contract, specifically related to variable consideration. 
 While many of the agreements with our customers specify certain terms and conditions that apply to any transaction between the parties, many of which are in effect for a defined term, the vast majority of these agreements do not result in contracts (as defined in FASB ASC Topic 606) because they do not create enforceable rights and obligations on the parties. Specifically, (1) the parties are not committed to perform any obligations in accordance with the specified terms and conditions until a customer purchase order is received and accepted by us and (2) there is a unilateral right of each party to terminate the agreement at any time without compensating the other party. For this reason, the vast majority of our contracts (as defined in FASB ASC Topic 606) are customer purchase orders. If this assessment were to change, it could result in a material change to the amount of net revenue recognized in a period. 
 The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. In determining the transaction price related to a contract, we determine whether the amount promised in a contract includes a variable amount (variable consideration). Variable consideration may be specified in the customer purchase order, in another agreement that identifies terms and conditions of the transaction, or based on our customary practices. We have identified certain types of variable consideration that may be included in the transaction price related to our contracts, including sales returns (which generally include a right of return for defective or non-conforming product) and trade discounts (including retrospective volume discounts and early payment incentives). Such variable consideration has not historically been material. However, should our judgments and estimates regarding variable consideration change, it could result in a material change to the amount of net revenue recognized in a period. 
 Goodwill, Intangible Assets, and Long-Lived Assets 
 Businesses acquired are recognized at their fair value on the date of acquisition, with the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed recognized as goodwill. Intangible assets acquired may include either definite-lived or indefinite-lived intangible assets, or both. In accordance with 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. 
 Goodwill 
 Our judgments regarding the existence of indicators of goodwill impairment are based on several factors, including the performance of the end markets served by our customers, as well as the actual financial performance of our reporting units and 
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 their respective financial forecasts over the long-term. 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. 
 Identification of reporting units. 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. 
 Historically, we have identified six reporting units. In the fourth quarter of 2020, in connection with our review of these reporting units, and consistent with our determination that our Performance Sensing operating segment was now two separate operating segments, we determined that our Performance Sensing reporting unit was now two separate reporting units, Automotive and HVOR. Refer to Note 20, “Segment Reporting,” of our Financial Statements for additional information on this decision. We reassigned assets and liabilities, including goodwill, to these new reporting units as required by FASB ASC Topic 350. This did not result in an impairment of the goodwill of either reporting unit. Accordingly, we now have seven reporting units, Automotive, HVOR, Electrical Protection, Industrial Sensing, Aerospace, Power Management, and Interconnection. 
 Assignment of assets, liabilities, and goodwill to reporting units. Some assets and liabilities relate to the operations of multiple reporting units. We allocate these assets and liabilities to the 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 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 (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. 
 Evaluation of goodwill for impairment. 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 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 the 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. 
 We evaluated the goodwill of each reporting unit for impairment as of October 1, 2020 using a combination of the quantitative and qualitative methods. As a result of this evaluation we determined that none of our reporting units were impaired. For reporting units that were evaluated using the quantitative method, we estimated the fair values of our reporting units using the discounted cash flow method. For this method, we prepared detailed annual projections of future cash flows for the reporting unit for the subsequent five fiscal years (the "Discrete Projection Period"). We estimated the value of the cash flows beyond the fifth fiscal year (the "Terminal Year") by applying a multiple to the projected Terminal Year EBITDA. The cash flows from the Discrete Projection Period and the Terminal Year were discounted at an estimated weighted-average cost of capital ("WACC") appropriate for each reporting unit. The estimated WACC was derived, in part, from comparable companies appropriate to each reporting unit. We believe that our procedures for estimating discounted future cash flows, including the Terminal Year valuation, were reasonable and consistent with accepted valuation practices. 
 The preparation of forecasts of revenue growth and profitability for use in the long-range forecasts, the selection of the discount rates, and the estimation of the multiples used in valuing the Terminal Year involve significant judgments. Changes to these assumptions could affect the estimated fair value of one or more of our reporting units and could result in a goodwill impairment charge in a future period. 
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 Types of events that could result in a goodwill impairment. As noted above, the assumptions used in the quantitative calculation of fair value of our reporting units, including 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 involve significant judgments. Changes to these assumptions could affect the estimated fair values of our reporting units calculated in prior years and could result in a goodwill impairment charge in a future period. We believe that certain factors, such as a future recession, any material adverse conditions in the automotive industry and other industries in which we operate, and other factors identified in Item 1A, "Risk Factors," included elsewhere in this Report could cause us to revise our long-term projections and could reduce the multiples used to determine Terminal Year value. Such revisions could result in a goodwill impairment charge in the future. 
 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. 
 Evaluation of other intangible assets for impairment 
 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 analysis in which we estimate the fair value of the indefinite-lived intangible asset and compare that amount to its carrying value. In performing 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. 
 We evaluated our indefinite-lived intangible assets for impairment as of October 1, 2020 (using the quantitative method) and determined that the estimated fair values of these assets exceeded their carrying values at that date. Should certain assumptions used in the development of the fair values of our indefinite-lived intangible assets change, we may be required to recognize an impairment charge in the future. 
 Definite-lived intangible assets. Reviews are regularly performed to determine whether facts or circumstances exist that indicate that the carrying values of our definite-lived intangible assets to be held and used are impaired. If we determine that such facts or circumstances exist, we estimate the recoverability of these assets by comparing the projected undiscounted net cash flows associated with these assets to their respective carrying values. If the sum of the projected undiscounted net cash flows falls below the carrying value of an asset, the impairment charge is measured as the excess of the carrying value over the fair value of that asset. We determine fair value by using the appropriate income approach valuation methodology depending on the nature of the definite-lived intangible asset. 
 Evaluation of long-lived assets for impairment 
 We periodically re-evaluate the carrying values and estimated useful lives of long-lived assets whenever events or changes in circumstances indicate that the carrying values of these assets may not be recoverable. We use estimates of undiscounted cash flows from long-lived assets to determine whether the carrying values of such assets are recoverable over the assets’ remaining useful lives. These estimates include assumptions about our future performance and the performance of the end markets we serve. If an asset is determined to be impaired, the impairment is the amount by which its carrying value exceeds its fair value. These evaluations are performed at a level where discrete cash flows may be attributed to either an individual asset or a group of assets. 
 Income Taxes 
 As part of the process of preparing our financial statements, we are required to estimate our provision for (or benefit from) income taxes in each of the jurisdictions in which we operate. This involves estimating our actual current tax exposure, including assessing the risks associated with tax audits, together with assessing temporary differences resulting from the different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. 
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 Management judgment is required in determining various elements of our provision for (or benefit from) income taxes, including the amount of tax benefits on uncertain tax positions, and deferred tax assets that should be recognized. 
 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. The more-likely-than-not recognition threshold must be met in each reporting period to support continued recognition of any tax benefits claimed, both in the current year, as well as any year which remains open for review by the relevant tax authority at the balance sheet date. Penalties and interest related to uncertain tax positions may be classified as either income taxes or another expense line item in the consolidated statements of operations. We classify interest and penalties related to uncertain tax positions within the provision for/(benefit from) income taxes line of the consolidated statements of operations. 
 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, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations in various jurisdictions, 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. Significant judgment is required in considering the relative impact of these items along with the weight that should be given to each category, commensurate with the extent to which it can be objectively verified. 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. 
 Ultimately, the ability to realize our deferred tax assets is based on our assessment of future taxable income, which is based on estimated future results. In the event that actual results differ from these estimates, or we adjust our estimates in the future, we may need to adjust our valuation allowance assessment, which could materially impact our consolidated financial position and results of operations. 
 Pension and Other Post-Retirement Benefits 
 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 is measured as the difference between the fair value of plan assets and the benefit obligation at the measurement date. Changes in the funded status of a pension or other post-retirement benefit plan are recognized in the year in which they occur by adjusting the recognized (net) liability or asset with an offsetting adjustment to either net income or other comprehensive income. 
 Our most difficult and subjective judgments and estimates relate to the valuation of our benefit obligations. Benefit obligations represent the actuarial present value of all benefits attributed by the pension formula as of the measurement date to employee service rendered before that date, and can be categorized as projected benefit obligations or accumulated benefit obligations. The value of projected benefit obligations take into consideration various actuarial assumptions including future compensation levels and the probability of payment between the measurement date and the expected date of payment. Accumulated benefit obligations differ from projected benefit obligations only in that they include no assumptions about future compensation levels. 
 The most significant assumptions used to determine a plan's funded status and net periodic benefit cost relate to discount rate, expected return on plan assets, and rate of increase in healthcare costs. These assumptions are reviewed annually. Refer to Note 13, "Pension and Other Post-Retirement Benefits," of our Financial Statements for additional information related to the values determined for each of these assumptions in the last three fiscal years. 
 The discount rate reflects the current rate at which the pension and other post-retirement liabilities could be effectively settled, considering the timing of expected payments for plan participants. It is used to discount the estimated future obligations of the plans to the present value of the liability reflected in the financial statements. In estimating this rate in countries that have a market of high-quality fixed-income investments, we consider rates of return on these investments included in various bond indices, adjusted to eliminate the effects of call provisions and differences in the timing and amounts of cash outflows related to the bonds. In other countries where a market of high-quality fixed-income investments does not exist, we estimate the discount rate using government bond yields or long-term inflation rates. 
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 The expected return on plan assets reflects the average rate of earnings expected on the funds invested to provide for the benefits included in the projected benefit obligation. To determine the expected return on plan assets, we consider the historical returns earned by similarly invested assets, the rates of return expected on plan assets in the future, and our investment strategy and asset mix with respect to the plans’ funds. 
 The rate of increase of healthcare costs directly impacts the estimate of our future obligations in connection with our post-retirement medical benefits. Our estimate of healthcare cost trends is based on historical increases in healthcare costs under similarly designed plans, the level of increase in healthcare costs expected in the future, and the design features of the underlying plan. 
 Other assumptions used include employee demographic factors such as compensation rate increases, retirement patterns, employee turnover rates, and mortality rates. Our review of demographic assumptions includes analyzing historical patterns and/or referencing industry standard tables, combined with our expectations around future compensation and staffing strategies. The difference between these assumptions and our actual experience results in the recognition of an actuarial gain or loss. 
 Future changes to assumptions, or differences between actual and expected outcomes, can significantly affect our future net periodic benefit cost, projected benefit obligations, and accumulated other comprehensive loss. 
 Share-Based Compensation 
 FASB ASC Topic 718, Compensation—Stock Compensation , requires that a company 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. 
 We estimate the fair value of stock options on the date of grant using the Black-Scholes-Merton option-pricing model. Key assumptions used in this model are (1) the fair value of the underlying ordinary shares, (2) the time period for which we expect the stock options will be outstanding (the expected term), (3) the expected volatility of the price of our ordinary shares, (4) the risk-free interest rate, and (5) the expected dividend yield. Expected term and expected volatility are the judgments that we believe are the most critical and subjective in estimating fair value (and related share-based compensation expense) of our stock option awards. 
 The expected term is determined based upon our own historical average term of exercised and outstanding stock options. We consider our own historical volatility, as well as our implied volatility, in estimating expected volatility for stock options. Implied volatility provides a forward-looking indication and may offer insight into expected volatility. 
 Other assumptions used include risk-free interest rate and expected dividend yield. The risk-free interest rate is based on the yield for a U.S. Treasury security having a maturity similar to the expected term of the related stock option grant. This assumption is dependent on the assumed expected term. 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. Refer to Item 5, "Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities," included elsewhere in this Report for additional information related to limitations on our ability to pay dividends. 
 Certain of our restricted securities include performance conditions that require us to estimate the probable outcome of the performance condition. This assessment is based on management's judgment using internally developed forecasts and is assessed at each reporting period. Compensation expense is recognized if it is probable that the performance condition will be achieved. 
 We elect to recognize share-based compensation expense net of estimated forfeitures as permitted by FASB ASC Topic 718, and therefore only recognize compensation expense for those awards expected to vest over the requisite service period. The forfeiture rate is based on our estimate of forfeitures by plan participants after consideration of historical forfeiture rates. Compensation expense recognized for each award ultimately reflects the number of units that actually vest. 
 Material changes to any of these assumptions may have a significant effect on our valuation of stock options, and, ultimately, the share-based compensation expense recognized in the consolidated statements of operations. 
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 Off-Balance Sheet Arrangements 
 From time to time, we execute contracts that require us to indemnify the other parties to the contracts. These indemnification obligations generally arise in two contexts. First, in connection with certain transactions, such as the divestiture of a business or the issuance of debt or equity securities, the agreement typically contains standard provisions requiring us to indemnify the purchaser against breaches by us of representations and warranties contained in the agreement. These indemnities are generally subject to time and liability limitations. Second, we enter into agreements in the ordinary course of business, such as customer contracts, that might contain indemnification provisions relating to product quality, intellectual property infringement, governmental regulations and employment related matters, and other typical indemnities. In certain cases, indemnification obligations arise by law. 
 We believe that our indemnification obligations are consistent with other companies in the markets in which we compete. Performance under any of these indemnification obligations would generally be triggered by a breach of the terms of the contract or by a third-party claim. Historically, we have experienced only immaterial and irregular losses associated with these indemnifications. Consequently, any future liabilities brought about by these indemnifications cannot reasonably be estimated or accrued. 
 Refer to Note 15, "Commitments and Contingencies," of our Financial Statements for additional information related to our off-balance sheet arrangements. 
 Recent Accounting Pronouncements 
 Recently issued accounting standards adopted in the current period: 
 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. FASB ASU No. 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: 
 There are no recently issued accounting standards to be adopted in future periods that are expected to have a material impact on our consolidated financial position or results of operations.
Sensata Technologies Holding plc 10-K

Item 7. Management’s Discussion and Analysis
