Sensata Technologies Holding plc 10-Q

Item 1. Financial Statements. SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Balance Sheets (In thousands, except per share amounts) (unaudited) June 30, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 1,861,769 $ 1,861,980 Accounts receivable, net of allowances of $ 20,223 and $ 19,033 as of June 30, 2021 and December 31, 2020, respectively 694,317 576,647 Inventories 503,641 451,005 Prepaid expenses and other current assets 117,401 90,340 Total current assets 3,177,128 2,979,972 Property, plant and equipment, net 801,342 803,825 Goodwill 3,308,939 3,111,349 Other intangible assets, net of accumulated amortization of $ 2,211,355 and $ 2,145,634 as of June 30, 2021 and December 31, 2020, respectively 892,521 691,549 Deferred income tax assets 79,625 84,785 Other assets 158,803 172,722 Total assets $ 8,418,358 $ 7,844,202 Liabilities and shareholders’ equity Current liabilities: Current portion of long-term debt, finance lease and other financing obligations $ 7,281 $ 757,205 Accounts payable 473,932 393,907 Income taxes payable 25,663 19,215 Accrued expenses and other current liabilities 330,056 324,830 Total current liabilities 836,932 1,495,157 Deferred income tax liabilities 301,471 259,857 Pension and other post-retirement benefit obligations 44,146 48,002 Finance lease and other financing obligations, less current portion 27,220 27,931 Long-term debt, net 4,213,830 3,213,747 Other long-term liabilities 81,311 94,022 Total liabilities 5,504,910 5,138,716 Commitments and contingencies (Note 12) Shareholders’ equity: Ordinary shares, € 0.01 nominal value per share, 177,069 shares authorized, and 174,005 and 173,266 shares issued as of June 30, 2021 and December 31, 2020, respectively 2,229 2,220 Treasury shares, at cost, 15,631 shares as of June 30, 2021 and December 31, 2020 ( 784,596 ) ( 784,596 ) Additional paid-in capital 1,789,863 1,759,668 Retained earnings 1,936,427 1,777,729 Accumulated other comprehensive loss ( 30,475 ) ( 49,535 ) Total shareholders’ equity 2,913,448 2,705,486 Total liabilities and shareholders’ equity $ 8,418,358 $ 7,844,202 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (unaudited) For the three months ended For the six months ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Net revenue $ 992,660 $ 576,505 $ 1,935,188 $ 1,350,774 Operating costs and expenses: Cost of revenue 658,285 412,443 1,293,634 978,849 Research and development 42,913 30,239 78,869 64,692 Selling, general and administrative 86,821 64,730 163,944 141,951 Amortization of intangible assets 34,857 32,743 66,921 65,835 Restructuring and other charges, net 5,029 38,218 9,611 42,716 Total operating costs and expenses 827,905 578,373 1,612,979 1,294,043 Operating income/(loss) 164,755 ( 1,868 ) 322,209 56,731 Interest expense, net ( 45,213 ) ( 40,808 ) ( 89,256 ) ( 80,211 ) Other, net 1,012 1,576 ( 38,385 ) ( 10,705 ) Income/(loss) before taxes 120,554 ( 41,100 ) 194,568 ( 34,185 ) Provision for/(benefit from) income taxes 7,638 1,441 27,919 ( 75 ) Net income/(loss) $ 112,916 $ ( 42,541 ) $ 166,649 $ ( 34,110 ) Basic net income/(loss) per share $ 0.71 $ ( 0.27 ) $ 1.05 $ ( 0.22 ) Diluted net income/(loss) per share $ 0.71 $ ( 0.27 ) $ 1.05 $ ( 0.22 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Comprehensive Income/(Loss) (In thousands) (unaudited) For the three months ended For the six months ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Net income/(loss) $ 112,916 $ ( 42,541 ) $ 166,649 $ ( 34,110 ) Other comprehensive income/(loss): Cash flow hedges 1,398 ( 5,167 ) 15,676 ( 24,501 ) Defined benefit and retiree healthcare plans 1,672 1,672 3,384 5,014 Other comprehensive income/(loss) 3,070 ( 3,495 ) 19,060 ( 19,487 ) Comprehensive income/(loss) $ 115,986 $ ( 46,036 ) $ 185,709 $ ( 53,597 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) For the six months ended June 30, 2021 June 30, 2020 Cash flows from operating activities: Net income/(loss) $ 166,649 $ ( 34,110 ) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Depreciation 62,833 65,288 Amortization of debt issuance costs 3,426 3,263 Share-based compensation 11,475 9,590 Loss on debt financing 30,066 — Amortization of intangible assets 66,921 65,835 Deferred income taxes ( 7,070 ) 1,500 Loss on litigation judgment — 41,314 Unrealized loss on derivative instruments and other 12,700 8,035 Changes in operating assets and liabilities, net of the effects of acquisitions: Accounts receivable, net ( 97,906 ) 114,162 Inventories ( 45,664 ) 17,871 Prepaid expenses and other current assets ( 8,280 ) 14,790 Accounts payable and accrued expenses 68,764 ( 99,467 ) Income taxes payable 6,448 ( 34,368 ) Other ( 2,431 ) ( 3,431 ) Net cash provided by operating activities 267,931 170,272 Cash flows from investing activities: Acquisitions, net of cash received ( 421,951 ) — Additions to property, plant and equipment and capitalized software ( 63,572 ) ( 56,697 ) Investment in debt and equity securities ( 6,444 ) ( 5,817 ) Other 2,862 2,019 Net cash used in investing activities ( 489,105 ) ( 60,495 ) Cash flows from financing activities: Proceeds from exercise of stock options and issuance of ordinary shares 17,957 1,146 Payment of employee restricted stock tax withholdings ( 7,948 ) ( 2,314 ) Proceeds from borrowings on debt 1,001,875 400,000 Payments on debt ( 757,889 ) ( 4,604 ) Payments to repurchase ordinary shares — ( 35,175 ) Payments of debt financing costs ( 33,032 ) — Net cash provided by financing activities 220,963 359,053 Net change in cash and cash equivalents ( 211 ) 468,830 Cash and cash equivalents, beginning of period 1,861,980 774,119 Cash and cash equivalents, end of period $ 1,861,769 $ 1,242,949 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Changes in Shareholders' Equity (In thousands) (unaudited) Ordinary Shares Treasury Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Number Amount Number Amount Balance as of March 31, 2021 173,533 $ 2,223 ( 15,631 ) $ ( 784,596 ) $ 1,775,320 $ 1,831,241 $ ( 33,545 ) $ 2,790,643 Surrender of shares for tax withholding — — ( 132 ) ( 7,727 ) — — — ( 7,727 ) Stock options exercised 208 3 — — 8,167 — — 8,170 Vesting of restricted securities 396 5 — — — ( 5 ) — — Retirement of ordinary shares ( 132 ) ( 2 ) 132 7,727 — ( 7,725 ) — — Share-based compensation — — — — 6,376 — — 6,376 Net income — — — — — 112,916 — 112,916 Other comprehensive income — — — — — — 3,070 3,070 Balance as of June 30, 2021 174,005 $ 2,229 ( 15,631 ) $ ( 784,596 ) $ 1,789,863 $ 1,936,427 $ ( 30,475 ) $ 2,913,448 Ordinary Shares Treasury Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Number Amount Number Amount Balance as of December 31, 2020 173,266 $ 2,220 ( 15,631 ) $ ( 784,596 ) $ 1,759,668 $ 1,777,729 $ ( 49,535 ) $ 2,705,486 Surrender of shares for tax withholding — — ( 136 ) ( 7,948 ) — — — ( 7,948 ) Stock options exercised 467 6 — — 18,720 — — 18,726 Vesting of restricted securities 408 5 — — — ( 5 ) — — Retirement of ordinary shares ( 136 ) ( 2 ) 136 7,948 — ( 7,946 ) — — Share-based compensation — — — — 11,475 — — 11,475 Net income — — — — — 166,649 — 166,649 Other comprehensive income — — — — — — 19,060 19,060 Balance as of June 30, 2021 174,005 $ 2,229 ( 15,631 ) $ ( 784,596 ) $ 1,789,863 $ 1,936,427 $ ( 30,475 ) $ 2,913,448 Ordinary Shares Treasury Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Number Amount Number Amount Balance as of March 31, 2020 172,596 $ 2,212 ( 15,631 ) $ ( 784,596 ) $ 1,731,884 $ 1,624,773 $ ( 36,476 ) $ 2,537,797 Surrender of shares for tax withholding — — ( 83 ) ( 2,299 ) — — — ( 2,299 ) Stock options exercised 21 1 — — 436 — — 437 Vesting of restricted securities 310 3 — — — ( 3 ) — — Retirement of ordinary shares ( 83 ) ( 1 ) 83 2,299 — ( 2,298 ) — — Share-based compensation — — — — 3,506 — — 3,506 Net loss — — — — — ( 42,541 ) — ( 42,541 ) Other comprehensive loss — — — — — — ( 3,495 ) ( 3,495 ) Balance as of June 30, 2020 172,844 $ 2,215 ( 15,631 ) $ ( 784,596 ) $ 1,735,826 $ 1,579,931 $ ( 39,971 ) $ 2,493,405 Ordinary Shares Treasury Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Number Amount Number Amount Balance as of December 31, 2019 172,561 $ 2,212 ( 14,733 ) $ ( 749,421 ) $ 1,725,091 $ 1,616,357 $ ( 20,484 ) $ 2,573,755 Surrender of shares for tax withholding — — ( 83 ) ( 2,314 ) — — — ( 2,314 ) Stock options exercised 55 1 — — 1,145 — — 1,146 Vesting of restricted securities 311 3 — — — ( 3 ) — — Repurchase of ordinary shares — — ( 898 ) ( 35,175 ) — — — ( 35,175 ) Retirement of ordinary shares ( 83 ) ( 1 ) 83 2,314 — ( 2,313 ) — — Share-based compensation — — — — 9,590 — — 9,590 Net loss — — — — — ( 34,110 ) — ( 34,110 ) Other comprehensive loss — — — — — — ( 19,487 ) ( 19,487 ) Balance as of June 30, 2020 172,844 $ 2,215 ( 15,631 ) $ ( 784,596 ) $ 1,735,826 $ 1,579,931 $ ( 39,971 ) $ 2,493,405 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements reflect the financial position, results of operations, comprehensive income/(loss), cash flows, and changes in shareholders' equity of Sensata Technologies Holding plc, a public limited company incorporated under the laws of England and Wales, and its subsidiaries, collectively referred to as the "Company," "Sensata," "we," "our," or "us." The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q. Accordingly, these interim financial statements do not include all of the information and note disclosures required by U.S. GAAP for complete financial statements. The accompanying financial information reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the interim period results. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Annual Report"). All U.S. dollar ("USD") and share amounts presented, except per share amounts, are stated in thousands, unless otherwise indicated. Certain reclassifications have been made to prior periods to conform to current period presentation. 2. New Accounting Standards There are no recently issued accounting standards that have been adopted in the current period or will be adopted in future periods that have had or are expected to have a material impact on our consolidated financial position or results of operations. 3. Revenue Recognition The following tables presents net revenue disaggregated by segment and end market for the three and six months ended June 30, 2021 and 2020: For the three months ended June 30, 2021 For the three months ended June 30, 2020 Performance Sensing Sensing Solutions Total Performance Sensing Sensing Solutions Total Automotive $ 518,367 $ 12,052 $ 530,419 $ 286,499 $ 7,279 $ 293,778 HVOR (1) 223,485 — 223,485 98,708 — 98,708 Industrial — 105,474 105,474 — 79,264 79,264 Appliance and HVAC (2) — 63,187 63,187 — 43,689 43,689 Aerospace — 32,793 32,793 — 27,193 27,193 Other — 37,302 37,302 — 33,873 33,873 Total $ 741,852 $ 250,808 $ 992,660 $ 385,207 $ 191,298 $ 576,505 ________________________ (1) Heavy vehicle and off-road (2) Heating, ventilation and air conditioning For the six months ended June 30, 2021 For the six months ended June 30, 2020 Performance Sensing Sensing Solutions Total Performance Sensing Sensing Solutions Total Automotive $ 1,055,080 $ 23,552 $ 1,078,632 $ 724,202 $ 15,515 $ 739,717 HVOR 401,284 — 401,284 229,694 — 229,694 Industrial — 195,949 195,949 — 159,863 159,863 Appliance and HVAC — 123,103 123,103 — 89,085 89,085 Aerospace — 65,470 65,470 — 69,317 69,317 Other — 70,750 70,750 — 63,098 63,098 Total $ 1,456,364 $ 478,824 $ 1,935,188 $ 953,896 $ 396,878 $ 1,350,774 8 Table of Contents 4. Share-Based Payment Plans The following table presents the components of non-cash compensation expense related to our equity awards for the three and six months ended June 30, 2021 and 2020: For the three months ended For the six months ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Stock options $ 305 $ 53 $ 765 $ 2,542 Restricted securities 6,071 3,453 10,710 7,048 Share-based compensation expense $ 6,376 $ 3,506 $ 11,475 $ 9,590 Equity Awards At our Annual General Meeting held on May 27, 2021, our shareholders approved the Sensata Technologies Holding plc 2021 Equity Incentive Plan (the "2021 Equity Plan"), which replaced the Sensata Technologies Holding plc First Amended and Restated 2010 Equity Incentive Plan (the "2010 Equity Plan"). The 2021 Equity Plan is substantially similar to the 2010 Equity Plan with some updates based on changes in law and current practices. The purpose of the 2021 Equity Plan is to promote the long-term growth, profitability, and interests of the Company and its shareholders by aiding us in attracting and retaining employees, officers, consultants, advisors, and non-employee directors capable of assuring our future success. All awards granted subsequent to this approval were made under the 2021 Equity Plan. We granted the following restricted stock units ("RSUs" and each, an "RSU") and performance-based restricted stock units ("PRSUs" and each, a "PRSU") under the 2021 Equity Plan and 2010 Equity Plan during the six months ended June 30, 2021: Awards Granted To: Type of Award Number of Units Granted (in thousands) Percentage of PRSUs Awarded that May Vest Weighted Average Grant Date Fair Value Directors RSU (1)(5) 27 N/A $ 58.63 Various executives and employees RSU (2)(4) 370 N/A $ 58.37 Various executives and employees PRSU (3)(4) 236 0.0 % - 200.0 % $ 58.20 ________________________ (1) These RSUs cliff vest one year from the grant date (May 2022). (2) RSUs vest ratably over three years , one-third per year beginning on the first anniversary of the grant date. These RSUs will fully vest on various dates between February 2024 and June 2024. (3) These PRSUs vest on various dates between April 2024 and May 2024. The number of units that ultimately vest is dependent on the achievement of certain performance criteria. (4) Primarily granted under the 2010 Equity Plan. (5) Primarily granted under the 2021 Equity Plan. 5. Restructuring and Other Charges, Net On June 30, 2020, in response to the potential long-term impact of the global financial and health crisis caused by the coronavirus ("COVID-19") pandemic on our business, we committed to a plan to reorganize our business (the “Q2 2020 Global Restructure Program”), consisting of voluntary and involuntary reductions-in-force and certain site closures. The Q2 2020 Global Restructure Program was commenced in order to align our cost structure to the then anticipated future demand outlook. As of June 30, 2021, we have recorded cumulative costs of $ 30.1 million over the life of the plan, of which $ 27.4 million related to severance charges and $ 2.7 million related to facility and exit costs. We have completed a majority of the actions contemplated under the Q2 2020 Global Restructure Program. Reductions in force under the Q2 2020 Global Restructure Program have impacted approximately 560 positions as of June 30, 2021. When the remaining contemplated reduction-in-force actions are completed, which is expected in the third quarter of 2021, the total reductions in force are expected to be approximately 840 positions, reflecting total severance charges of between $ 27.0 million and $ 29.0 million. In addition, we expect total facility and exit costs incurred over the life of the Q2 2020 Global Restructure Program to be between $ 6.0 million and $ 8.0 million. We expect to settle these charges with cash on hand. 9 Table of Contents We expect that when fully completed, restructuring actions taken under the Q2 2020 Global Restructure Program will have impacted our business segments and corporate functions as follows: Reductions-in-Force Site Closures (Dollars in millions) Positions Minimum Maximum Minimum Maximum Performance Sensing 170 $ 9.3 $ 10.0 $ 3.0 $ 4.0 Sensing Solutions 280 8.0 8.0 3.0 4.0 Corporate and other (1) 390 9.7 11.0 — — Total 840 $ 27.0 $ 29.0 $ 6.0 $ 8.0 ___________________________________ (1) The majority of these positions relate to engineering and manufacturing operations, which are allocated to corporate and other. However, these restructuring actions will benefit the results of Performance Sensing and Sensing Solutions as well. Charges recognized in the three and six months ended June 30, 2021 and 2020 resulting from the Q2 2020 Global Restructure Program are presented by impacted segment below. However, as noted in Note 17: Segment Reporting , restructuring and other charges, net are excluded from segment operating income. Approximately $ 1.0 million and $ 2.0 million of these charges in the three and six months ended June 30, 2021, respectively, relate to site closures in Sensing Solutions. Approximately $ 0.3 million of these charges in the three and six months ended June 30, 2021 relate to site closures in Performance Sensing. For the three months ended For the six months ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Performance Sensing $ 507 $ 7,609 $ 803 $ 7,609 Sensing Solutions 1,612 7,181 3,140 7,181 Corporate and other 1,711 9,330 1,711 9,330 Restructuring and other charges $ 3,830 $ 24,120 $ 5,654 $ 24,120 The following table presents the components of restructuring and other charges, net for the three and six months ended June 30, 2021 and 2020: For the three months ended For the six months ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Q2 2020 Global Restructure Program charges $ 3,830 $ 24,120 $ 5,654 $ 24,120 Other restructuring charges Severance costs, net (1) 407 — 593 3,897 Facility and other exit costs 625 — 1,291 — Other (2) 167 14,098 2,073 14,699 Restructuring and other charges, net $ 5,029 $ 38,218 $ 9,611 $ 42,716 ___________________________________ (1) Severance costs, net (excluding those related to the Q2 2020 Global Restructure Program) for the six months ended June 30, 2020 were related to termination benefits arising from the shutdown and relocation of an operating site in Northern Ireland. (2) Other charges in the three and six months ended June 30, 2020 included a charge of $ 12.1 million resulting from a prejudgment interest-related award granted by the court on behalf of Wasica Finance GmbH ("Wasica") in intellectual property litigation in the second quarter of 2020. We settled this litigation with Wasica in the third quarter of 2020. The following table presents a rollforward of the severance portion of our restructuring obligations for the six months ended June 30, 2021. Q2 2020 Global Restructure Program Other Total Balance at December 31, 2020 $ 10,842 $ 4,037 $ 14,879 Charges, net of reversals 3,623 593 4,216 Payments ( 4,931 ) ( 2,888 ) ( 7,819 ) Foreign currency remeasurement ( 103 ) 32 ( 71 ) Balance at June 30, 2021 $ 9,431 $ 1,774 $ 11,205 10 Table of Contents The severance liability as of June 30, 2021 was entirely recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheet. 6. Other, Net The following table presents the components of other, net for the three and six months ended June 30, 2021 and 2020: For the three months ended For the six months ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Currency remeasurement gain/(loss) on net monetary assets $ 1,988 $ ( 1,097 ) $ 511 $ 456 (Loss)/gain on foreign currency forward contracts ( 1,419 ) 417 ( 2,377 ) ( 3,364 ) Gain/(loss) on commodity forward contracts 1,186 5,427 33 ( 148 ) Loss on debt refinancing — — ( 30,066 ) — Net periodic benefit cost, excluding service cost ( 2,268 ) ( 2,516 ) ( 4,678 ) ( 6,897 ) Other 1,525 ( 655 ) ( 1,808 ) ( 752 ) Other, net $ 1,012 $ 1,576 $ ( 38,385 ) $ ( 10,705 ) 7. Income Taxes The following table presents the provision for/(benefit from) income taxes for the three and six months ended June 30, 2021 and 2020: For the three months ended For the six months ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Provision for/(benefit from) income taxes $ 7,638 $ 1,441 $ 27,919 $ ( 75 ) The increase in total tax for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 was primarily due to the increase in pre-tax profits. The increase in total tax for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was predominantly due to the overall increase in income/(loss) before taxes as impacted by the mix of profits in the various jurisdictions in which we operate as well as the nonrecurrence of the benefit recorded in the first quarter of 2020 as a result of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). In response to the global financial and health crisis caused by COVID-19, the U.S. federal government enacted the CARES Act on March 27, 2020. Federal limitations on interest deductions were reduced in connection with this legislation, and we recorded a deferred tax benefit of $ 7.5 million in the three months ended March 31, 2020, as we were able to utilize additional interest expense that was previously subject to a valuation allowance. The provision for/(benefit from) income taxes consists of (1) current tax expense, which relates primarily to our profitable operations in tax jurisdictions with limited or no net operating loss carryforwards and withholding taxes related to management fees, royalties, and the repatriation of foreign earnings; and (2) deferred tax expense (or benefit), which represents adjustments in book-to-tax basis differences primarily related to (a) book versus tax basis in intangible assets, (b) changes in net operating loss carryforwards, (c) changes in tax rates, and (d) changes in our assessment of the realizability of our deferred tax assets. 8. Net Income/(Loss) per Share Basic and diluted net income/(loss) per share are calculated by dividing net income/(loss) by the number of basic and diluted weighted-average ordinary shares outstanding during the period. For the three and six months ended June 30, 2021 and 2020 the weighted-average ordinary shares outstanding used to calculate basic and diluted net income/(loss) per share were as follows: For the three months ended For the six months ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Basic weighted-average ordinary shares outstanding 158,208 157,186 157,986 157,392 Dilutive effect of stock options (1) 670 — 689 — Dilutive effect of unvested restricted securities (1) 466 — 612 — Diluted weighted-average ordinary shares outstanding 159,344 157,186 159,287 157,392 ___________________________________ 11 Table of Contents (1) In the three and six months ended June 30, 2020, potential ordinary shares of approximately 66 thousand and 200 thousand, respectively, related to stock options and approximately 353 thousand and 403 thousand, respectively, related to unvested restricted securities were excluded from the calculation of diluted weighted-average ordinary shares outstanding as a result of the net loss incurred in those periods. Certain potential ordinary shares were excluded from our calculation of diluted weighted-average ordinary shares outstanding because either they would have had an anti–dilutive effect on net income/(loss) per share or they related to equity awards that were contingently issuable for which the contingency had not been satisfied. These potential ordinary shares were as follows: For the three months ended For the six months ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Anti-dilutive shares excluded 8 2,959 7 2,172 Contingently issuable shares excluded 1,089 1,251 1,020 923 9. Inventories The following table presents the components of inventories as of June 30, 2021 and December 31, 2020: June 30, 2021 December 31, 2020 Finished goods $ 161,378 $ 170,488 Work-in-process 98,194 87,006 Raw materials 244,069 193,511 Inventories $ 503,641 $ 451,005 10. Pension and Other Post-Retirement Benefits The components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the three months ended June 30, 2021 and 2020 were as follows: U.S. Plans Non-U.S. Plans Defined Benefit Retiree Healthcare Defined Benefit Total 2021 2020 2021 2020 2021 2020 2021 2020 Service cost $ — $ — $ 2 $ 3 $ 1,325 $ 939 $ 1,327 $ 942 Interest cost 120 206 21 36 401 396 542 638 Expected return on plan assets ( 226 ) ( 293 ) — — ( 179 ) ( 172 ) ( 405 ) ( 465 ) Amortization of net loss 401 300 — 9 462 359 863 668 Amortization of prior service (credit)/cost — — ( 159 ) ( 197 ) 13 3 ( 146 ) ( 194 ) Loss on settlement 1,414 310 — — — 1,559 1,414 1,869 Net periodic benefit cost/(credit) $ 1,709 $ 523 $ ( 136 ) $ ( 149 ) $ 2,022 $ 3,084 $ 3,595 $ 3,458 The components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the six months ended June 30, 2021 and 2020 were as follows: U.S. Plans Non-U.S. Plans Defined Benefit Retiree Healthcare Defined Benefit Total 2021 2020 2021 2020 2021 2020 2021 2020 Service cost $ — $ — $ 4 $ 5 $ 2,303 $ 1,708 $ 2,307 $ 1,713 Interest cost 240 473 42 73 805 711 1,087 1,257 Expected return on plan assets ( 452 ) ( 726 ) — — ( 357 ) ( 346 ) ( 809 ) ( 1,072 ) Amortization of net loss 802 595 — 19 921 595 1,723 1,209 Amortization of prior service (credit)/cost — — ( 318 ) ( 393 ) 16 5 ( 302 ) ( 388 ) Loss on settlement 2,979 4,332 — — — 1,559 2,979 5,891 Net periodic benefit cost/(credit) $ 3,569 $ 4,674 $ ( 272 ) $ ( 296 ) $ 3,688 $ 4,232 $ 6,985 $ 8,610 12 Table of Contents Components of net periodic benefit cost/(credit) other than service cost are presented in other, net in the condensed consolidated statements of operations. Refer to Note 6: Other, Net . 11. Debt Our long-term debt, finance lease, and other financing obligations as of June 30, 2021 and December 31, 2020 consisted of the following: Maturity Date June 30, 2021 December 31, 2020 Term Loan September 20, 2026 $ 453,780 $ 456,096 4.875 % Senior Notes October 15, 2023 500,000 500,000 5.625 % Senior Notes November 1, 2024 400,000 400,000 5.0 % Senior Notes October 1, 2025 700,000 700,000 6.25 % Senior Notes February 15, 2026 — 750,000 4.375 % Senior Notes February 15, 2030 450,000 450,000 3.75 % Senior Notes February 15, 2031 750,000 750,000 4.0 % Senior Notes April 15, 2029 1,000,000 — Less: discount, net of premium ( 6,097 ) ( 9,605 ) Less: deferred financing costs ( 29,224 ) ( 28,114 ) Less: current portion ( 4,629 ) ( 754,630 ) Long-term debt, net $ 4,213,830 $ 3,213,747 Finance lease and other financing obligations $ 29,872 $ 30,506 Less: current portion ( 2,652 ) ( 2,575 ) Finance lease and other financing obligations, less current portion $ 27,220 $ 27,931 Revolving Credit Facility As of June 30, 2021, we had $ 416.1 million available under our $ 420.0 million revolving credit facility (the "Revolving Credit Facility"), net of $ 3.9 million of obligations in respect of outstanding letters of credit issued thereunder. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of June 30, 2021, no amounts had been drawn against these outstanding letters of credit. 6.25% Senior Notes redemption 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 (the "6.25% Senior Notes"). On February 15, 2021, the “make-whole” premium with respect to the 6.25% Senior Notes expired. Accordingly, we reflected the 6.25% Senior Notes as a current liability on our consolidated balance sheet as of December 31, 2020. We redeemed the 6.25% Senior Notes on March 5, 2021 in accordance with the terms of the indenture under which the 6.25% Senior Notes were issued and the terms of the notice of redemption at a redemption price equal to 103.125 % of the aggregate principal amount of the outstanding 6.25% Senior Notes, plus accrued and unpaid interest to (but not including) the redemption date. In addition to the $ 750.0 million aggregate principal amount outstanding, at redemption we paid the $ 23.4 million premium and $ 2.6 million accrued interest. 4.0% Senior Notes On March 29, 2021, our indirect, wholly-owned subsidiary, Sensata Technologies B.V. ("STBV"), completed the issuance and sale of $ 750.0 million aggregate principal amount of 4.0 % senior notes due 2029 (the "4.0% Senior Notes"). The 4.0% Senior Notes were issued under an indenture dated as of March 29, 2021 among STBV, as issuer, The Bank of New York Mellon, as trustee (the "Trustee"), and our guarantor subsidiaries (the "Guarantors") named therein (the "4.0% Senior Notes Indenture"). The 4.0% Senior Notes Indenture contains covenants that limit the ability of STBV and its subsidiaries to, among other things: incur liens; engage in sale and leaseback transactions; with respect to any subsidiary of STBV, incur indebtedness without such subsidiary’s guaranteeing the 4.0% Senior Notes; or consolidate, merge with, or sell, assign, convey, transfer, lease, or otherwise dispose of all or substantially all of their properties or assets to, another person. These covenants are subject to important exceptions and qualifications set forth in the 4.0% Senior Notes Indenture. 13 Table of Contents The 4.0% Senior Notes bear interest at 4.0 % per year and mature on April 15, 2029. Interest is payable semi-annually on April 15 and October 15 of each year, commencing on October 15, 2021. The 4.0% Senior Notes are guaranteed by each of STBV's wholly-owned subsidiaries that is a borrower or guarantor under the senior secured credit facilities (the "Senior Secured Credit Facilities") of STBV's wholly-owned subsidiary Sensata Technologies, Inc. ("STI") and the issuer or a guarantor under our existing senior notes as follows: STBV's 4.875% Senior Notes due 2023, 5.625% Senior Notes due 2024, and 5.0% Senior Notes due 2025; and STI's 4.375% Senior Notes due 2030 and 3.75% Senior Notes due 2031. At any time, and from time to time, prior to April 15, 2024, STBV may redeem the 4.0% Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 4.0% Senior Notes being redeemed, plus a “make whole” premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time on or after April 15, 2024, STBV may redeem the 4.0% Senior Notes, in whole or in part, at the following prices (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, up to but excluding the redemption date. Period beginning April 15, Price 2024 102.000 % 2025 101.000 % 2026 and thereafter 100.000 % In addition, at any time prior to April 15, 2024, STBV may redeem up to 40 % of the principal amount of the outstanding 4.0% Senior Notes (including additional 4.0% Senior Notes, if any, that may be issued after March 29, 2021) with the net cash proceeds of certain equity offerings at a redemption price (expressed as a percentage of principal amount) of 104.00 %, plus accrued and unpaid interest, if any, up to but excluding the redemption date, provided that at least 60 % of the aggregate principal amount of the 4.0% Senior Notes (including additional 4.0% Senior Notes, if any) remains outstanding immediately after each such redemption. Upon the occurrence of certain changes in control, each holder of the 4.0% Senior Notes will have the right to require STBV to repurchase the 4.0% Senior Notes at 101 % of their principal amount plus accrued and unpaid interest, if any, up to but excluding the date of repurchase. Upon changes in certain tax laws or treaties, or any change in the official application, administration, or interpretation thereof, STBV may, at its option, redeem the 4.0% Senior Notes, in whole but not in part, at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest, if any, up to but excluding the redemption date, premium, if any, and all Additional Amounts (as defined in the 4.0% Senior Notes Indenture), if any, then due and which will become due on the date of redemption. On April 8, 2021, STBV completed the issuance and sale of an additional $ 250.0 million in aggregate principal amount of 4.0% Senior Notes (the “Additional Notes”). The Additional Notes were priced at 100.75 % and were issued pursuant to the 4.0% Senior Notes Indenture, as supplemented by the First Supplemental Indenture, dated as of April 8, 2021, among STBV, the Guarantors, and the Trustee. The Additional Notes are consolidated and form a single class with the $ 750.0 million aggregate principal amount of 4.0% Senior Notes issued by STBV on March 29, 2021 (the “Initial Notes”). The Additional Notes have the same terms as the Initial Notes, other than with respect to the date of issuance and the issue price. We intend to use the net proceeds from the issuance and sale of the 4.0% Senior Notes and the Additional Notes for general corporate purposes, which may include working capital, capital expenditures, the acquisition of other companies, businesses, or assets, strategic investments, the refinancing or repayment of debt, and share repurchases. Accounting for Debt Financing Transactions We account for our debt financing transactions as disclosed in Note 2: Significant Accounting Policies of the audited consolidated financial statements and notes thereto included in our 2020 Annual Report. In connection with the redemption of the 6.25% Senior Notes, we recorded a loss of $ 30.1 million, which included $ 23.4 million in premiums paid, with the remaining loss representing write-off of debt discounts and deferred financing costs. In connection with the issuance of the 4.0% Senior Notes, we recognized $ 9.6 million of deferred financing costs, which are presented as a reduction of long-term debt on our condensed consolidated balance sheets and $ 1.7 million of issuance premiums, which are presented as an addition to long-term debt on our condensed consolidated balance sheets. 14 Table of Contents Accrued Interest Accrued interest associated with our outstanding debt is included as a component of accrued expenses and other current liabilities in the condensed consolidated balance sheets. As of June 30, 2021 and December 31, 2020, accrued interest totaled $ 46.1 million and $ 53.6 million, respectively. 12. Commitments and Contingencies We are regularly involved in a number of claims and litigation matters that arise in the ordinary course of business. Although it is not feasible to predict the outcome of these matters, based upon our experience and current information known to us, we do not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on our results of operations, financial position, and/or cash flows. 13. Shareholders' Equity Treasury Shares From time to time, our Board of Directors has authorized various share repurchase programs, which may be modified or terminated by the Board at any time. We currently have an authorized $ 500.0 million share repurchase program under which approximately $ 302.3 million remained available as of June 30, 2021. On April 2, 2020, we announced a temporary suspension of this share repurchase program, which will remain on hold until we determine that market conditions warrant continuation of the program. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss for the six months ended June 30, 2021 were as follows: Cash Flow Hedges Defined Benefit and Retiree Healthcare Plans Accumulated Other Comprehensive Loss Balance at December 31, 2020 $ ( 6,733 ) $ ( 42,802 ) $ ( 49,535 ) Other comprehensive income before reclassifications, net of tax 11,871 — 11,871 Reclassifications from accumulated other comprehensive loss, net of tax 3,805 3,384 7,189 Other comprehensive income 15,676 3,384 19,060 Balance at June 30, 2021 $ 8,943 $ ( 39,418 ) $ ( 30,475 ) The amounts reclassified from accumulated other comprehensive loss for the three and six months ended June 30, 2021 and 2020 were as follows: For the three months ended June 30, For the six months ended June 30, Affected Line in Condensed Consolidated Statements of Operations Component 2021 2020 2021 2020 Derivative instruments designated and qualifying as cash flow hedges: Foreign currency forward contracts $ 3,433 $ ( 6,392 ) $ 7,840 $ ( 13,015 ) Net revenue (1) Foreign currency forward contracts ( 2,024 ) 193 ( 2,767 ) ( 1,575 ) Cost of revenue (1) Total, before taxes 1,409 ( 6,199 ) 5,073 ( 14,590 ) Income/(loss) before taxes Income tax effect ( 352 ) 1,550 ( 1,268 ) 3,648 Provision for/(benefit from) income taxes Total, net of taxes $ 1,057 $ ( 4,649 ) $ 3,805 $ ( 10,942 ) Net income/(loss) Defined benefit and retiree healthcare plans $ 2,131 $ 2,343 $ 4,400 $ 6,712 Other, net (2) Income tax effect ( 459 ) ( 671 ) ( 1,016 ) ( 1,698 ) Provision for/(benefit from) income taxes Total, net of taxes $ 1,672 $ 1,672 $ 3,384 $ 5,014 Net income/(loss) __________________________ (1) Refer to Note 15: Derivative Instruments and Hedging Activities for additional information on amounts to be reclassified from accumulated other comprehensive loss in future periods. (2) Refer to Note 10: Pension and Other Post-Retirement Benefits for additional information on net periodic benefit cost/(credit). 15 Table of Contents 14. Fair Value Measures Measured on a Recurring Basis The fair values of our assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 are shown in the below table. All fair value measures presented are categorized in Level 2 of the fair value hierarchy. June 30, 2021 December 31, 2020 Assets Foreign currency forward contracts $ 17,789 $ 16,163 Commodity forward contracts 5,479 8,902 Total $ 23,268 $ 25,065 Liabilities Foreign currency forward contracts $ 7,667 $ 24,660 Commodity forward contracts 2,016 310 Total $ 9,683 $ 24,970 Refer to Note 15: Derivative Instruments and Hedging Activities for additional information related to our forward contracts. Measured on a Nonrecurring Basis We evaluated our goodwill and other indefinite-lived intangible assets for impairment as of October 1, 2020 and determined that they were not impaired. During the six months ended June 30, 2021, no events or changes in circumstances occurred that would have triggered the need for an additional impairment review of these assets. Financial Instruments Not Recorded at Fair Value The following table presents the carrying values and fair values of financial instruments not recorded at fair value in the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020. All fair value measures presented are categorized in Level 2 of the fair value hierarchy. June 30, 2021 December 31, 2020 Carrying Value (1) Fair Value Carrying Value (1) Fair Value Liabilities Term Loan $ 453,780 $ 453,780 $ 456,096 $ 454,955 4.875 % Senior Notes $ 500,000 $ 533,750 $ 500,000 $ 538,750 5.625 % Senior Notes $ 400,000 $ 444,000 $ 400,000 $ 448,000 5.0 % Senior Notes $ 700,000 $ 777,000 $ 700,000 $ 777,000 6.25 % Senior Notes $ — $ — $ 750,000 $ 778,125 4.375 % Senior Notes $ 450,000 $ 473,625 $ 450,000 $ 487,125 3.75 % Senior Notes $ 750,000 $ 740,625 $ 750,000 $ 776,250 4.0 % Senior Notes $ 1,000,000 $ 1,010,000 $ — $ — ___________________________________ (1) Excluding any related debt discounts, or premiums, and deferred financing costs. Cash and cash equivalents are carried at cost, which approximates fair value because of their short-term nature. In addition to the above, we hold certain equity investments that do not have readily determinable fair values for which we use the measurement alternative prescribed in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 321, Investments - Equity Securities . Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. There were no impairments or changes resulting from observable transactions for any of these investments and no adjustments were made to their carrying values. 16 Table of Contents Refer to the table below for the carrying values of equity investments using the measurement alternative, which are presented as a component of other assets in the condensed consolidated balance sheets. June 30, 2021 December 31, 2020 Quanergy $ 50,000 $ 50,000 Other 15,000 15,000 Total $ 65,000 $ 65,000 On June 22, 2021, Quanergy Systems, Inc. ("Quanergy") announced that it had entered into a definitive business combination agreement with CITIC Capital Acquisition Corp (NYSE: CCAC). Upon closing of the business combination, which is expected to be in the second half of 2021, subject to customary closing conditions, the combined company is expected to be listed on the New York Stock Exchange ("NYSE") under the ticker symbol QNGY. We have assessed our investment in Quanergy based on the proposed terms of the business combination agreement and concluded that there were no indicators of impairment as of June 30, 2021. Subsequent to closing, we will mark our investment to market each reporting period. 15. Derivative Instruments and Hedging Activities Hedges of Foreign Currency Risk For the three and six months ended June 30, 2021 and 2020, amounts excluded from the assessment of effectiveness of our foreign currency forward contracts that are designated as cash flow hedges were not material. As of June 30, 2021, we estimated that $ 9.2 million of net gains will be reclassified from accumulated other comprehensive loss to earnings during the twelve-month period ending June 30, 2022. As of June 30, 2021, we had the following outstanding foreign currency forward contracts: Notional (in millions) Effective Date(s) Maturity Date(s) Index (Exchange Rates) Weighted-Average Strike Rate Hedge Designation (1) 14.0 EUR June 28, 2021 July 30, 2021 Euro ("EUR") to USD 1.19 USD Not designated 370.4 EUR Various from August 23, 2019 to June 22, 2021 Various from July 30, 2021 to June 30, 2023 EUR to USD 1.19 USD Cash flow hedge 696.0 CNY June 23, 2021 July 30, 2021 USD to Chinese Renminbi ("CNY") 6.51 CNY Not designated 520.8 CNY Various from November 5, 2020 to January 5, 2021 Various from July 30, 2021 to December 31, 2021 USD to CNY 6.66 CNY Cash flow hedge 450.0 JPY June 28, 2021 July 30, 2021 USD to Japanese Yen ("JPY") 110.82 JPY Not designated 20,066.7 KRW Various from August 23, 2019 to June 22, 2021 Various from July 30, 2021 to May 31, 2023 USD to Korean Won ("KRW") 1,143.12 KRW Cash flow hedge 26.0 MYR June 23, 2021 July 30, 2021 USD to Malaysian Ringgit ("MYR") 4.14 MYR Not designated 423.0 MXN June 28, 2021 July 30, 2021 USD to Mexican Peso ("MXN") 19.92 MXN Not designated 3,215.0 MXN Various from August 23, 2019 to June 22, 2021 Various from July 30, 2021 to June 30, 2023 USD to MXN 22.41 MXN Cash flow hedge 5.6 GBP June 28, 2021 July 30, 2021 British Pound Sterling ("GBP") to USD 1.39 USD Not Designated 51.3 GBP Various from August 23, 2019 to June 22, 2021 Various from July 30, 2021 to June 30, 2023 GBP to USD 1.33 USD Cash flow hedge _________________________ (1) Derivative financial instruments not designated as hedges are used to manage our exposure to currency exchange rate risk. They are intended to preserve economic value, and they are not used for trading or speculative purposes. 17 Table of Contents Hedges of Commodity Risk As of June 30, 2021, we had the following outstanding commodity forward contracts, none of which were designated for hedge accounting treatment in accordance with FASB ASC Topic 815, Derivatives and Hedging : Commodity Notional Remaining Contracted Periods Weighted-Average Strike Price Per Unit Silver 929,084 troy oz. July 2021 - June 2023 $ 24.51 Gold 8,943 troy oz. July 2021 - June 2023 $ 1,819.10 Nickel 202,117 pounds July 2021 - June 2023 $ 7.44 Aluminum 2,870,170 pounds July 2021 - June 2023 $ 0.97 Copper 2,842,272 pounds July 2021 - June 2023 $ 3.76 Platinum 9,540 troy oz. July 2021 - June 2023 $ 1,045.46 Palladium 1,256 troy oz. July 2021 - June 2023 $ 2,457.28 Financial Instrument Presentation The following table presents the fair values of our derivative financial instruments and their classification in the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020: Asset Derivatives Liability Derivatives Balance Sheet Location June 30, 2021 December 31, 2020 Balance Sheet Location June 30, 2021 December 31, 2020 Derivatives designated as hedging instruments Foreign currency forward contracts Prepaid expenses and other current assets $ 14,875 $ 11,281 Accrued expenses and other current liabilities $ 6,928 $ 18,834 Foreign currency forward contracts Other assets 2,860 4,728 Other long-term liabilities 284 5,182 Total $ 17,735 $ 16,009 $ 7,212 $ 24,016 Derivatives not designated as hedging instruments Commodity forward contracts Prepaid expenses and other current assets $ 5,041 $ 7,598 Accrued expenses and other current liabilities $ 1,216 $ 149 Commodity forward contracts Other assets 438 1,304 Other long-term liabilities 800 161 Foreign currency forward contracts Prepaid expenses and other current assets 54 154 Accrued expenses and other current liabilities 455 644 Total $ 5,533 $ 9,056 $ 2,471 $ 954 These fair value measurements were all categorized within Level 2 of the fair value hierarchy. The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive income/(loss) for the three months ended June 30, 2021 and 2020: Derivatives designated as hedging instruments Amount of Deferred (Loss)/Gain Recognized in Other Comprehensive Income/(Loss) Location of Net (Loss)/Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income/(Loss) Amount of Net (Loss)/Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income/(Loss) 2021 2020 2021 2020 Foreign currency forward contracts $ ( 6,353 ) $ ( 5,954 ) Net revenue $ ( 3,433 ) $ 6,392 Foreign currency forward contracts $ 6,808 $ 5,267 Cost of revenue $ 2,024 $ ( 193 ) Derivatives not designated as hedging instruments Amount of Gain/(Loss) Recognized in Net Income/(Loss) Location of Gain/(Loss) Recognized in Net Income/(Loss) 2021 2020 Commodity forward contracts $ 1,186 $ 5,427 Other, net Foreign currency forward contracts $ ( 1,419 ) $ 417 Other, net 18 Table of Contents The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive income/(loss) for the six months ended June 30, 2021 and 2020: Derivatives designated as hedging instruments Amount of Deferred Gain/(Loss) Recognized in Other Comprehensive Income/(Loss) Location of Net (Loss)/Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income/(Loss) Amount of Net (Loss)/Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income/(Loss) 2021 2020 2021 2020 Foreign currency forward contracts $ 12,446 $ 6,590 Net revenue $ ( 7,840 ) $ 13,015 Foreign currency forward contracts $ 3,383 $ ( 24,363 ) Cost of revenue $ 2,767 $ 1,575 Derivatives not designated as hedging instruments Amount of Gain/(Loss) Recognized in Net Income/(Loss) Location of Gain/(Loss) Recognized in Net Income/(Loss) 2021 2020 Commodity forward contracts $ 33 $ ( 148 ) Other, net Foreign currency forward contracts $ ( 2,377 ) $ ( 3,364 ) Other, net Credit Risk Related Contingent Features We have agreements with our derivative counterparties that contain a provision whereby if we default on our indebtedness and repayment of the indebtedness has been accelerated by the lender, then we could also be declared in default on our derivative obligations. As of June 30, 2021, the termination value of outstanding derivatives in a liability position, excluding any adjustment for non-performance risk, was $ 9.7 million. As of June 30, 2021, we had no t posted any cash collateral related to these agreements. If we breach any of the default provisions on any of our indebtedness as described above, we could be required to settle our obligations under the derivative agreements at their termination values. 16. Acquisitions On February 11, 2021, we entered into a securities purchase agreement (the "SPA") to acquire all of the outstanding equity interests of Xirgo Technologies, LLC ("Xirgo"), a leading provider of telematics and data insight, headquartered in Camarillo, California. The transaction contemplated by the SPA closed on April 1, 2021 for an aggregate cash purchase price of $ 408.7 million, subject to certain post-closing items. The product offerings and technology of Xirgo will augment our existing portfolio in advancing our Sensata Insights megatrend initiative. We expect to integrate Xirgo into our Performance Sensing reportable segment. The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed: Net working capital, excluding cash $ 11,536 Property, plant and equipment 1,427 Goodwill 184,260 Other intangible assets 249,612 Other assets 508 Deferred income tax liabilities ( 45,506 ) Other long-term liabilities ( 292 ) Fair value of net assets acquired, excluding cash and cash equivalents 401,545 Cash and cash equivalents 7,117 Fair value of net assets acquired $ 408,662 The allocation of purchase price of Xirgo is preliminary, and is based on management’s judgments after evaluating several factors, including preliminary valuation assessments of tangible and intangible assets. The final allocation of the purchase price to the assets acquired will be completed when the final valuations are completed. The preliminary goodwill recognized as a result of this acquisition was approximately $ 184.3 million, which represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships. The amount of goodwill recorded that is expected to be deductible for tax purposes is not material. 19 Table of Contents In connection with the allocation of purchase price to the assets acquired and liabilities assumed, we identified certain definite-lived intangible assets. The following table presents the acquired intangible assets, their estimated fair values, and weighted-average lives: Acquisition Date Fair Value Weighted-Average Lives (years) Acquired definite-lived intangible assets Customer relationships $ 198,540 15 Completed technologies 44,130 10 Tradenames 6,930 11 Other 12 1 Total definite-lived intangible assets acquired $ 249,612 14 The definite-lived intangible assets were valued using the income approach. We used the relief-from-royalty method to value completed technologies and tradenames, and we used the multi-period excess earnings method to value customer relationships. These valuation methods incorporate assumptions including expected discounted future cash flows resulting from either the future estimated after-tax royalty payments avoided as a result of owning the completed technologies or the future earnings related to existing customer relationships. 17. Segment Reporting We operate in, and report financial information for, the following two reportable segments: Performance Sensing and Sensing Solutions. The Performance Sensing reportable segment consists of two operating segments, Automotive and HVOR, each of which meet the criteria for aggregation in FASB ASC Topic 280, Reportable Segments . The Sensing Solutions reportable segment is also an operating segment. Our operating segments are businesses that we manage as components of an enterprise, for which separate financial information is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and assess performance. An operating segment’s performance is primarily evaluated based on segment operating income, which excludes amortization of intangible assets, restructuring and other charges, net, certain costs associated with our strategic megatrend initiatives, and certain corporate costs or credits not associated with the operations of the segment, including share-based compensation expense and a portion of depreciation expense associated with assets recorded in connection with acquisitions. Corporate and other costs excluded from an operating segment’s performance are separately stated below and also include costs that are related to functional areas, such as finance, information technology, legal, and human resources. We believe that segment operating income, as defined above, is an appropriate measure for evaluating the operating performance of our segments. However, this measure should be considered in addition to, and not as a substitute for, or superior to, operating income or other measures of financial performance prepared in accordance with U.S. GAAP. The accounting policies of each of our reporting segments are materially consistent with those in the summary of significant accounting policies as described in Note 2: Significant Accounting Policies of the audited consolidated financial statements and notes thereto included in our 2020 Annual Report. 20 Table of Contents The following table presents net revenue and segment operating income for the reportable segments and other operating results not allocated to the reportable segments for the three and six months ended June 30, 2021 and 2020: For the three months ended For the six months ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Net revenue: Performance Sensing $ 741,852 $ 385,207 $ 1,456,364 $ 953,896 Sensing Solutions 250,808 191,298 478,824 396,878 Total net revenue $ 992,660 $ 576,505 $ 1,935,188 $ 1,350,774 Segment operating income (as defined above): Performance Sensing $ 202,064 $ 60,756 $ 397,908 $ 195,802 Sensing Solutions 76,549 55,787 143,443 112,316 Total segment operating income 278,613 116,543 541,351 308,118 Corporate and other ( 73,972 ) ( 47,450 ) ( 142,610 ) ( 142,836 ) Amortization of intangible assets ( 34,857 ) ( 32,743 ) ( 66,921 ) ( 65,835 ) Restructuring and other charges, net ( 5,029 ) ( 38,218 ) ( 9,611 ) ( 42,716 ) Operating income/(loss) 164,755 ( 1,868 ) 322,209 56,731 Interest expense, net ( 45,213 ) ( 40,808 ) ( 89,256 ) ( 80,211 ) Other, net 1,012 1,576 ( 38,385 ) ( 10,705 ) Income/(loss) before taxes $ 120,554 $ ( 41,100 ) $ 194,568 $ ( 34,185 ) 21 Table of Contents Cautionary Statements Concerning Forward-Looking Statements This Quarterly Report on Form 10-Q, including any documents incorporated by reference herein, includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These forward-looking statements also relate to our future prospects, developments, and business strategies. These forward-looking statements may be identified by terminology such as "may," "will," "could," "should," "expect," "anticipate," "believe," "estimate," "predict," "project," "forecast," "continue," "intend," "plan," and similar terms or phrases, or the negative of such terminology, including references to assumptions. However, these terms are not the exclusive means of identifying such statements. Forward-looking statements contained herein, or in other statements made by us, are made based on management’s expectations and beliefs concerning future events impacting us. These statements are subject to uncertainties and other important factors relating to our operations and business environment, all of which are difficult to predict, and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurances that any of the events anticipated by these forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. We believe that the following important factors, among others (including those described in Item 1A: Risk Factors , included in our 2020 Annual Report), could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf: • Future risks and existing uncertainties associated with the COVID-19 pandemic, which continues to have a significant adverse impact on our business and operations including: (i) full or partial shutdowns of our facilities as mandated by government decrees, (ii) limited ability to adjust certain costs due to government actions, (iii) significant travel restrictions and “work-from-home” orders limiting the availability of our workforce, (iv) supplier constraints and supply-chain interruptions, (v) logistics challenges and limitations, (vi) reduced demand from certain customers, (vii) uncertainties associated with a protracted economic slowdown that could negatively affect the financial condition of our customers and suppliers, and (viii) uncertainties and volatility in the global capital markets; • instability and changes in the global markets, including regulatory, political, economic, governmental, and military matters, such as the exit of the United Kingdom (the "U.K.") from the European Union (the "EU"); • adverse conditions or competition in the industries upon which we are dependent, including the automotive industry; • losses and costs as a result of intellectual property, product liability, warranty, and recall claims; • market acceptance of new product introductions and product innovations; • inability to realize all of the revenue or achieve anticipated gross margins from products subject to existing purchase orders for which we are currently engaged in development; • supplier interruption or non-performance, limiting our access to manufactured components or raw materials; • risks related to the acquisition or disposition of businesses, or the restructuring of our business; • labor disruptions or increased labor costs; • competitive pressure from customers that could require us to reduce prices or result in reduced demand; • security breaches, cyber theft of our intellectual property, and other disruptions to our information technology infrastructure, or improper disclosure of confidential, personal, or proprietary data; • our ability to attract and retain key senior management and qualified technical, sales, and other personnel; • foreign currency risks, changes in socioeconomic conditions, or changes to monetary and fiscal policies; • our level of indebtedness, or our inability to meet debt service obligations or comply with the covenants contained in the credit agreement and senior notes indentures; • changes to current policies, such as trade tariffs, by various governments worldwide; • risks related to the potential for goodwill impairment; • the impact of challenges by taxing authorities of our historical and future tax positions or our allocation of taxable income among our subsidiaries, unfavorable developments in taxation sentiments in countries where we do business, and challenges to the sovereign taxation regimes of EU member states by the European Commission and the Organization for Economic Co-operation and Development; • changes to, or inability to comply with, various regulations, including tax laws, import/export regulations, anti-bribery laws, environmental, health, and safety laws, and other governmental regulations; and 22 Table of Contents • risks related to our domicile in the U.K. In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments, such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements contained in this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. We urge readers to review carefully the risk factors described in our 2020 Annual Report and in the other documents that we file with the U.S. Securities and Exchange Commission (the "SEC"). You can read these documents at www.sec.gov or on our website at www.sensata.com .