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Item 2. Management’s Discussion and Analysis

2021-10-26 compared with 2021-07-27 · 241 added, 208 removed, 243 unchanged (65% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2020 Annual Report, filed with the SEC on February 12, 2021, and the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

The COVID-19 pandemic caused widespread disruptions to our company, employees, customers, suppliers, and communities in fiscal year 2020.

In the first quarter of 2020, these disruptions were primarily limited to our manufacturing operations in China.

In the second quarter of 2020, we experienced the full scope and impact of disruptions related to the COVID-19 pandemic globally.

These disruptions included, depending on the specific location, full or partial shutdowns of our facilities as mandated by government decrees, limited ability to adjust certain costs due to government actions, significant travel restrictions and “work-from-home” orders limiting the availability of our workforce, supplier constraints and material supply-chain interruptions, logistics challenges and limitations, and reduced demand from certain customers.

Reduced demand, in addition to elevated logistics costs, government mandates, and actions to safeguard our employees, contributed to lower margins in the second quarter of 2020.

We acted early in the pandemic to reduce our cost structure while continuing to invest in megatrends that are shaping our end markets that we believe will enable us to deliver long-term sustainable growth.

As a result, we have continued to capitalize on rapidly improving markets and supported our customers as they have returned to higher levels of production late in 2020 and during the first half of 2021.

Amounts and percentages in the following discussions have been calculated based on unrounded numbers.

Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.

During the third quarter of 2021, we experienced continued positive momentum from the business and economic growth that began in the second half of 2020 and continued through the first half of 2021.

Sensata responded well to the rapid changes in many of our end markets, demonstrating the strength, resiliency, and reliability of our business and organizational model, enabling us to capitalize on the recovery in end-market demand and deliver on customers’ orders.

However, as we continue to see elevated costs related to the worldwide supply chain shortages and logistics costs, we are working to diminish those effects, including commercial actions with our customers.

Sensata has benefited from its resilient, flexible, and focused organization, which continues to successfully navigate the ever-changing supply chain landscape and deliver on our customers’ needs.

We will continue to focus on delivering industry-leading margins for our shareholders, while also increasing investments in our growth opportunities and our people.

Additionally, we believe that the overall business environment provides opportunities to further strengthen our portfolio through strategically important, value-creating acquisitions and/or joint ventures.

We are also pursuing new technology collaborations and partnerships with third parties to expand our capabilities and accelerate our megatrend-driven growth potential.

2021 interim results

The economic recovery we experienced during the second half of 2020 continued through the first half of 2021.

Improved market results, combined with our response to increased demand, drove net revenue growth of 72.2% and 43.3% in the three and six months ended June 30, 2021, respectively, compared to the three and six months ended June 30, 2020.

This represented 1,140 basis points and 940 basis points, respectively, of market outgrowth.

Improved market results, combined with our response to increased demand, drove net revenue growth of 20.6% and 34.9% in the three and nine months ended September 30, 2021, respectively, compared to the three and nine months ended September 30, 2020.

In the three months ended September 30, 2021, Performance Sensing net revenue increased 21.6% and Sensing Solutions net revenue increased 17.9% from the three months ended September 30, 2020.

In the nine months ended September 30, 2021, Performance Sensing net revenue increased 40.9% and Sensing Solutions net revenue increased 19.7% from the nine months ended September 30, 2020.

We continue to produce strong market outgrowth, above our target ranges.

For the three and nine months ended September 30, 2021, we delivered 1,190 basis points and 1,040 basis points, respectively, of market outgrowth.

We use the term "market outgrowth" to describe the impact of an increasing quantity and value of our products used in customer systems and applications.

It is only loosely correlated to normal unit demand fluctuations in the markets we serve.

In the three months ended June 30, 2021, Performance Sensing net revenue increased 92.6% and Sensing Solutions net revenue increased 31.1% from the three months ended June 30, 2020.

In the six months ended June 30, 2021, Performance Sensing net revenue increased 52.7% and Sensing Solutions net revenue increased 20.6% from the six months ended June 30, 2020.

Our automotive and HVOR businesses delivered market outgrowth of 990 basis points and 2,850 basis points, respectively, in the three months ended June 30, 2021 and market outgrowth of 940 basis points and 1,840 basis points, respectively, in the six months ended June 30, 2021.

Our automotive and HVOR businesses delivered market outgrowth of 1,150 basis points and 2,400 basis points, respectively, in the three months ended September 30, 2021 and market outgrowth of 1,020 basis points and 2,030 basis points, respectively, in the nine months ended September 30, 2021.

Refer to Results of Operations—Net Revenue included elsewhere in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for additional discussion.

In the three months ended June 30, 2021, operating income/(loss) increased $166.6 million to $164.8 million, compared to $(1.9) million in the three months ended June 30, 2020.

In the six months ended June 30, 2021, operating income increased $265.5 million to $322.2 million, compared to $56.7 million in the six months ended June 30, 2020.

These improved results were due in large part to increased revenues, improved gross margins, and lower restructuring charges, partially offset by elevated costs related to the global semiconductor chip shortage, higher spend to support megatrend growth initiatives, and

increased incentive compensation aligned to improved financial performance.

We continue to see elevated costs related to the worldwide supply chain shortages and logistics costs, and we are working to diminish those effects, including commercial actions with our customers.

Despite these elevated costs, in the three months ended September 30, 2021, operating income increased $34.5 million to $161.3 million, compared to $126.8 million in the three months ended September 30, 2020.

In the nine months ended September 30, 2021, operating income increased $300.0 million to $483.5 million, compared to $183.6 million in the nine months ended September 30, 2020.

These improved results were due in large part to higher revenues, partially offset by increased costs related to industry-wide supply chain shortages, higher spend to support megatrend growth initiatives and higher incentive compensation aligned to improved financial performance.

Refer to Results of Operations—Operating costs and expenses included elsewhere in this MD&A for additional discussion of our improved operating costs and expenses.

In the three months ended June 30, 2021, net income/(loss) increased $155.5 million to $112.9 million, compared to $(42.5) million in the three months ended June 30, 2020.

In the six months ended June 30, 2021, net income/(loss) increased $200.8 million to $166.6 million, compared to $(34.1) million in the six months ended June 30, 2020.

This increase was primarily a result of improved operating results, partially offset by higher taxes as discussed at Results of Operations—Provision for/(benefit from) income taxes and, for the six month period, by the loss on redemption of the 6.25% Senior Notes as discussed at Results of Operations—Other, net.

In the three months ended September 30, 2021, net income increased $8.2 million to $85.0 million, compared to $76.7 million in the three months ended September 30, 2020.

In the nine months ended September 30, 2021, net income increased $209.0 million to $251.6 million, compared to $42.6 million in the nine months ended September 30, 2020.

These increases were primarily a result of improved operating results, partially offset by (1) higher taxes, (2) losses from our commodity forward contracts, and (3) foreign currency remeasurement on net monetary assets, each as discussed elsewhere in our Results of Operations.

For the nine months ended September 30, 2021 net income also reflected the loss on redemption of the 6.25% Senior Notes as discussed at Results of Operations—Other, net.

Forward-looking information

For the full year 2021, while a degree of market uncertainty remains, in particular with respect to the impact of the industry-wide semiconductor shortage, we are anticipating a continuation of improved and stable economic and business conditions.

We are also anticipating a return to normal seasonality, which includes sequentially lower revenue in the third quarter as compared to the second quarter and sequentially flat revenue in the fourth quarter as compared to the third quarter.

We continue to expect to deliver industry-leading margins for our shareholders, while also increasing investments in our growth opportunities and our people.

Our targeted market outgrowth for the automotive business is 400-600 basis points.

Our targeted market outgrowth for the HVOR business is 600-800 basis points.

For the past three and a half years, on average, we have delivered market outgrowth in our automotive and HVOR businesses of 615 basis points and 950 basis points, respectively, at or above the top of those ranges.

Automotive production is expected to rebound sharply this year from last year, but at a pace slightly lower than expected in April given production slowdowns caused by the global semiconductor shortage.

Global automotive production for the full year 2021 is now expected to grow 9% from the prior year, according to third party forecasts.

While low inventory levels at our automotive customers, especially in North America, will lead to growth in 2021, we expect production slowdowns attributed to the global semiconductor chip shortage to continue for the remainder of the year.

One headwind affecting our outlook for the second half of 2021 is the expected impact from the global semiconductor shortage facing the automotive supply chain, as well as other sectors, due in part to large-scale shutdowns early in 2020 caused by the COVID-19 pandemic.

Semiconductors are the technology used to make microchips, and this shortage has resulted in paused production on certain vehicles and increased costs to procure microchips.

This shortage has impacted our margins in the first half of 2021, and we believe it will continue to have an adverse impact on our operating costs in the remainder of fiscal year 2021.

We continue to demonstrate progress in our megatrend initiatives as we increase our investments to pursue these large, fast-growing markets driven by secular trends.

We intend to expand our solutions for these areas organically as well as through acquisitions and third party collaborations.

We see numerous opportunities to utilize our strong financial position, engineering capabilities, supply chain, and customer relationships to meaningfully enlarge our addressable markets.

Our automotive addressable market is large today and growing rapidly.

Applications in internal combustion vehicles make up most of our current automotive addressable market, which is expected to continue to grow over the next 10 years, even with the shift in type of vehicles produced.

In addition, while the Electrification applications that we serve represent a smaller market today, these applications are expected to grow very rapidly until they become an even larger opportunity for us than internal combustion engines by 2030.

As a result, we’re expecting a doubling of our automotive addressable market by 2030.

The rapid introduction of new electric vehicles provides a healthy tailwind for our revenue growth.

Our content in electric vehicles represents a 20% uplift in content value as compared to internal combustion vehicles of a similar class.

This content uplift is derived from the broad array of our sensors and other components that we design into battery electric vehicles, in many cases using the same underlying technology product families that we use in internal combustion vehicles.

Additionally, certain sensors carry over directly from internal combustion vehicles, such as brake pressure and tire pressure sensors.

We also build additional sensors or devices unique to electric vehicles, such as contactors and electric motor position sensors.

We are broadening and deepening our product portfolio to support this expanding segment.

In the first quarter, we completed the acquisition of Lithium Balance to add battery management systems to our product capabilities.

In addition, we achieved a meaningful milestone in our Electrification megatrend initiative when we agreed to a joint venture with Churod Electronics ("Churod") on April 8, 2021.

This joint venture extends our electrical protection capabilities to mass-market electric vehicles and other electrified equipment worldwide and expands our contactor capabilities in the automotive market to vehicles that have shorter ranges and longer charging times, which are more common in Asia.

This enables us to offer

a broader electrification solution set for electric vehicle manufacturers globally.

The joint venture will provide medium-voltage contactors to transportation original equipment manufacturers ("OEMs") in China, and we will sell the product line to customers elsewhere in the world.

Churod will contribute access to its ceramic, high-levitation contactor intellectual property.

These contactors are optimized for medium-voltage applications in the 150 amp to 400 amp range common in mass-market vehicles.

They will also dedicate engineering resources and contribute manufacturing equipment to the joint venture.

Sensata will contribute $9.5 million and will dedicate application engineers and salespeople.

We expect this joint venture to close in the third quarter of 2021.

Our Electrification megatrend initiative not only represents a market opportunity in electric vehicles, but also electrified heavy vehicles and the charging infrastructure necessary to support this ecosystem.

For the fourth quarter of 2021, we expect automotive production to be down approximately 28% compared to the prior year, given ongoing production slowdowns caused by global supply chain shortages.

We do not see production constraints from the global supply chain shortages lifting in the near term.

Our revenue outgrowth to market will be increasingly driven by enhanced positioning in our megatrend areas of Electrification (across our markets) and Insights.

We continue to invest in these growth initiatives both organically and inorganically, with Xirgo, and now the pending acquisitions of Spear and SmartWitness, expanding not only our capabilities, but also our access to end markets and product portfolios in these pivotal areas.

We expect continued significant growth in these megatrend areas over the coming years, driven by electrification trends, the infrastructure requirements to support electrification, and the proliferation of Internet of Things on stationary and mobile equipment.

Since 2018, we have delivered average market outgrowth of 570 basis points as a company, including 1,050 basis points in our HVOR business and 650 basis points in our automotive business.

Our revenue by end market should grow consistent with each market’s production growth plus our targeted outgrowth of approximately 400 to 500 basis points across the entire company.

In addition, we intend to continue to make acquisitions to further expand our market position in our megatrend areas and we aim to have this activity add a material amount to revenue growth each year.

One headwind affecting our outlook is the expected impact from the global supply chain shortages and logistics costs, due in part to large-scale shutdowns early in 2020 caused by the COVID-19 pandemic.

These shortages have resulted in paused production on certain vehicles and increased procurement costs.

These shortages have impacted our margins in the first nine months of 2021, and we believe that impacts from the supply chain shortages will continue throughout next year.

Electrification

Our automotive addressable market is large today and growing, with expectations that it will continue to grow over the next 10 years.

Applications in internal combustion vehicles make up most of our current automotive addressable market.

While the Electrification applications that we serve represent a smaller market today, these applications are expected to grow very rapidly until they become an even larger opportunity for us than internal combustion engines by 2030.

Our content in electric vehicles represents, on average, a 20% uplift in content value as compared to internal combustion vehicles of a similar class.

This content uplift is derived from the broad array of our sensors and other components that we design into battery electric vehicles.

Our design win activity within Electrification has been growing rapidly;

including an 80% increase in Electrification wins last year.

In addition, approximately 50% of our automotive design wins for the nine months ended September 30, 2021 are with electric vehicles.

Looking forward, based on the business wins we’re gaining and the products we are developing, we estimate that our battery-electric content per vehicle is on a path to double that of an internal combustion engine vehicle within five years.

We provide many of our innovative and differentiated components such as braking, tire, and environmental control from traditional vehicles for use in electrical vehicle applications.

Specific to electric vehicles, we also provide and are developing several components that enable safe and efficient operation of electrified platforms such as high voltage electrical protection, advanced temperature sensing, highly sensitive electric motor position, and next-generation current sensing.

In addition, we achieved a meaningful milestone in our Electrification megatrend initiative when we agreed to a joint venture with Churod Electronics ("Churod") on April 8, 2021, which will contribute access to its ceramic, high-levitation contactor intellectual property.

This joint venture extends our electrical protection capabilities to mass-market electric vehicles and other electrified equipment worldwide and expands our contactor capabilities in the automotive market to vehicles that operate with lower voltage while maintaining differentiated technology, which are more common in Asia.

This enables us to offer a broader Electrification solution set for electric vehicle manufacturers globally.

In the third quarter of 2021, we reorganized our Sensing Solutions operating segment, moving the portion of our electrical protection product category that includes high voltage contactors, inverters, and battery management systems from the industrial business unit to a new business unit, Clean Energy Solutions.

This business unit will focus on electric vehicle infrastructure, energy storage, smart grid, and renewable energy applications.

Electrification technology is expanding in many markets, not just in passenger vehicles.

Manufacturers of bikes, heavy trucks, material handling equipment, marine vessels, aircraft, and spacecraft are addressing ever-tightening greenhouse gas emissions regulations and taking advantage of falling battery costs to provide electrified solutions to their customers.

However, not all customers can design all aspects of an electrified solution in house.

Thanks to capabilities we have added, or are pending addition via acquisition, we will be able to provide either the subsystem of assembled components to manage battery charging in the form of a power distribution unit or, using technology from Lithium Balance and the pending acquisition of Spear, we will be able to provide the full energy storage system including battery management and a customized battery pack.

In addition, our Electrification megatrend initiative represents a market opportunity in the charging infrastructure necessary to support this ecosystem.

We see additional opportunities in industrial and grid applications, some of which are more nascent today.

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We also intend to participate in other areas of the evolving market that enable Electrification to become more widespread.

In support of our Insights megatrend initiative, on April 1, 2021, we acquired Xirgo, a leading telematics and data insights provider for fleet management across the transportation and logistics segments.

Refer to the section Sensata Insights below for additional information.

We believe that the overall market environment may continue to provide opportunities to further strengthen our portfolio through strategically important, value-creating acquisitions and/or joint ventures.

In addition, we are pursuing new technology collaborations and partnerships with third parties to expand our capabilities and accelerate our megatrend growth.

In support of the Clean Energy Solutions business unit, on August 23, 2021, we entered into an SPA to acquire all of the outstanding equity interests of Spear for $100 million plus $30 million of contingent consideration.

Spear is headquartered in Grandview, Missouri, and is a leader in electrification solutions, developing next generation scalable lithium-ion battery storage systems for demanding land, sea and air applications.

The transaction contemplated by this SPA is subject to clearance under the Hart-Scott-Rodino Act and other customary closing conditions, and is expected to be completed in the fourth quarter of 2021.

The acquisition of Spear advances Sensata’s Electrification portfolio and strategy into new clean energy markets.

Spear expands on Sensata’s acquisition of Lithium Balance in battery management systems and GIGAVAC in high voltage contactors, and provides energy storage solutions for OEMs and system integrators in fast-growing end markets that offer significant growth opportunities.

With this pending acquisition, we will be able to provide full battery energy storage systems for a variety of specialty transportation markets.

These are highly demanding solutions that include very robust safety features.

Sensata Insights

On April 1, 2021, we completed the acquisition of Xirgo, headquartered in Camarillo, California, for $409 million.

This acquisition represents a meaningful milestone in our Insights megatrend initiative, greatly expanding our ability to provide data insights to transportation and logistics customers, as well as adding a new customer base for these solutions.

The Insights megatrend initiative addresses a large and fast-growing market, and we are gaining traction with both current and new customers across various sectors.

On April 1, 2021, we completed the acquisition of Xirgo, a leading telematics and data insights provider for fleet management across the transportation and logistics segments, for $408.7 million, which includes $7.0 million related to employee retention, reflected in operating cash flows.

This acquisition represented a meaningful milestone in our Insights megatrend initiative, greatly expanding our ability to provide data insights to transportation and logistics customers, as well as adding a new customer base for these solutions.

Xirgo brings a comprehensive suite of telematics and asset tracking devices, cloud-based data insight solutions, as well as emerging sensing applications and data services.

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Xirgo is complementary to, and meaningfully extends, our organic Insights solutions for commercial fleet managers, adding cargo, container, and light-vehicle fleet management to our heavy vehicle OEM and fleet focus.

We are branding these offerings, which serve our Insights megatrend initiative, as Sensata Insights.

We have branded these offerings, which serve our Insights megatrend initiative, as Sensata Insights.

In addition, on October 4, 2021, we entered into an SPA to acquire all of the outstanding equity interests of SmartWitness, a privately held innovator of video telematics technology for heavy and light duty fleets, for $191.4 million.

SmartWitness is headquartered in Schaumburg, Illinois and expands the capabilities of Sensata Insights into high growth video telematics applications, providing access to applications that will drive adoption of traditional and video telematics solutions.

SmartWitness’ solutions comprise proprietary software and hardware purpose-built for telematics service providers, providing a complementary fit with our Insights business.

Since its founding in 2007, SmartWitness has been a pioneer in video telematics that expands on traditional offerings to include contextually aware data capture that enhances the monitoring of vehicles and their surroundings to increase safety and lower insurance costs for fleets.

SmartWitness will be integrated into the Performance Sensing reportable segment and will be included in Sensata Insights.

Refer to Note 16:

Acquisitions of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information in the acquisition of Xirgo.

The Insights initiative is expected to generate more than $100 million in annualized revenue in 2021 and grow in excess of 20% per year over the next several years.

We already have committed orders for 100% of the revenue we expect the Insights initiative to generate for the remainder of 2021.

Acquisitions of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information in the acquisitions of Xirgo, Spear, and SmartWitness.

We have sufficient cash to take advantage of strategic opportunities as they arise.

At December 31, 2020, we had cash and cash equivalents of $1,862.0 million.

In the six months ended June 30, 2021, we generated operating cash flows of $267.9 million, ending the quarter on June 30, 2021 with cash and cash equivalents of $1,861.8 million.

In the nine months ended September 30, 2021, we generated operating cash flows of $393.2 million, ending the quarter on September 30, 2021 with cash and cash equivalents of $1,958.1 million.

This enables us to continue to acquire targeted, innovative businesses that will expand our presence in our targeted growth vectors.

In the first quarter of 2021, we used the flexibility provided by our large cash balance to lower our cost of capital and extend our debt maturity by redeeming the 6.25% Senior Notes and issuing the 4.0% Senior Notes.

Refer to Overview—Debt Transactions below for additional discussion of these transactions.

On April 1, 2021, we used $401.5 million, net of $7.1 million of cash received, to acquire Xirgo, which will help advance our Insights initiative.

On April 1, 2021, we used $408.7 million, net of $7.1 million of cash received, to acquire Xirgo, which will help advance our Insights megatrend initiative.

Cash paid to acquire Xirgo includes $7.0 million related to employee retention and which is reflected in operating cash flows.

Refer to Overview—Sensata Insights above for additional discussion of this acquisition.

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The redemption was at a price of 103.125% of principal, resulting in additional payment of $23.4 million upon redemption.

We recorded a loss of $30.1 million as a result of this transaction, consisting primarily of the premium payment and write-off of deferred financing costs.

We recognized a loss of $30.1 million as a result of this transaction, consisting primarily of the premium payment and write-off of deferred financing costs.

Subsequently, on March 29, 2021, we issued $750.0 million aggregate principal amount of 4.0% Senior Notes, at par, and on April 8, 2021, we issued an additional $250.0 million of 4.0% Senior Notes at a price of 100.75%.

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Refer to Note 11:

Debt of our condensed consolidated financial statements, included elsewhere in this Quarterly

Report on Form 10-Q, for additional information on these transactions and our overall debt.

Debt of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information on these transactions and our overall debt.

Proceeds from the 4.0% Senior Notes will be used for general corporate purposes, to fund future acquisitions and our capital deployment strategy, and for future debt repayments.

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On June 30, 2020, in response to the potential long-term impact of the COVID-19 pandemic on our business, we commenced the Q2 2020 Global Restructure Program, consisting of voluntary and involuntary reductions-in-force and certain site closures, in order to align our cost structure to the then anticipated future demand outlook.

We have completed a majority of the actions contemplated under the Q2 2020 Global Restructure Program as of June 30, 2021.

Including charges of $5.7 million in the first half of 2021, we have recognized charges of $30.1 million since inception of the Q2 2020 Global Restructure Program, of which $27.4 million have been severance charges and $2.7 million have been facility exit costs.

As of June 30, 2021, our severance liability related to the Q2 2020 Global Restructure Program was $9.4 million, which is presented in accrued expenses and other current liabilities of our condensed consolidated balance sheets.

We expect to settle these charges with cash on hand.

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.

As of September 30, 2021, we have completed all actions contemplated under the Q2 2020 Global Restructure Program, with approximately 840 positions impacted.

Since inception of the Q2 2020 Global Restructure Program, we have recognized cumulative costs of $33.2 million, of which $28.4 million related to severance charges and $4.8 million related to facility and exit costs.

As of September 30, 2021, we have a liability of approximately $7.5 million related to actions taken under this plan.

We expect to settle these remaining liabilities with cash on hand.

Refer to Note 5:

Restructuring and Other Charges, Net of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information on this plan.

Sustainability Report

In September 2021, we published our first Sustainability Report, which shares our environmental, social, and governance ("ESG") strategies, performance, and goals that support our vision of creating a cleaner, more efficient, electrified, and connected world.

Our sustainability efforts focus on four key areas of prioritization against which we will measure progress:

• Empowering our workforce:

We promote a culture that values inclusion and diversity and prioritizes employee well-being and safety, while supporting our communities and suppliers.

• Innovating for Sustainability:

We develop products and technology solutions that help create a safer, cleaner, more efficient and connected world.

• Protecting the Environment:

We focus on building products that reduce environmental impact and improve technological efficiencies while optimizing and reducing our operational footprint through energy, water, and waste reduction.

• Operating Responsibly:

We consider transparency and accountability as fundamental in everything that we do, guiding our approach to governance, risk management, and ESG.

As described in the Sustainability Report, we conducted a materiality assessment to identify the ESG issues that were most important to our business and stakeholders.

We identified the following key issues and set corresponding goals as follows:

◦ Diversity, Equity, and Inclusion :

Our goal is to reach (1) 30% female representation in manager and above roles worldwide and (2) 25% racial/ethically diverse representation in manager and above roles in the U.S.

◦ Energy and Emissions :

Our goal is to achieve carbon neutrality by 2050 and reduce greenhouse gas emissions intensity by 10% by 2026.

◦ Responsible Sourcing :

Our goals in this area are by 2026 to (1) achieve 75% response rate on our responsible sourcing campaigns and (2) achieve 100% sourcing of conflict minerals and Cobalt from smelters that are conformant with the Responsible Minerals Assurance Process ("RMAP") or equivalent standard.

Results of Operations

The table below presents our historical results of operations, in millions of dollars and as a percentage of net revenue, for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020.

The table below presents our historical results of operations, in millions of dollars and as a percentage of net revenue, for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020.

We have derived the results of operations from the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.

For the three months ended For the six months ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

For the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Amount Margin* Amount Margin* Amount Margin* Amount Margin*

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Operating costs and expenses 789.7 83.0 661.5 83.9 2,402.7 83.2 1,955.5 91.4

Operating income/(loss) 164.8 16.6 (1.9) (0.3) 322.2 16.7 56.7 4.2

Operating income 161.3 17.0 126.8 16.1 483.5 16.8 183.6 8.6

Interest expense, net (45.1) (4.7) (44.1) (5.6) (134.4) (4.7) (124.3) (5.8)

Other, net (9.4) (1.0) 9.2 1.2 (47.8) (1.7) (1.5) (0.1)

Income/(loss) before taxes 120.6 12.1 (41.1) (7.1) 194.6 10.1 (34.2) (2.5)

Provision for/(benefit from) income taxes 7.6 0.8 1.4 0.2 27.9 1.4 (0.1) (0.0)

Net income/(loss) $ 112.9 11.4 % $ (42.5) (7.4) % $ 166.6 8.6 % $ (34.1) (2.5) %

Income before taxes 106.8 11.2 91.9 11.7 301.4 10.4 57.7 2.7

Provision for income taxes 21.8 2.3 15.2 1.9 49.8 1.7 15.1 0.7

Net income $ 85.0 8.9 % $ 76.7 9.7 % $ 251.6 8.7 % $ 42.6 2.0 %

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* Represents the amount presented divided by total net revenue.

Net revenue for the three months ended June 30, 2021 increased 72.2% compared to the three months ended June 30, 2020 largely due to improved market results and our continued outperformance relative to those markets.

Excluding an increase of 4.9% attributed to changes in foreign currency exchange rates and an increase of 4.4% due to the acquisition of Xirgo, net revenue for the three months ended June 30, 2021 increased 62.9% on an organic basis.

This organic revenue increase represents market outgrowth of 1,140 basis points.

We are continuing to monitor all of our end markets and customers to ensure that our resources are balanced against forecasts and prioritized against critical growth opportunities.

Net revenue for the three months ended September 30, 2021 increased 20.6% compared to the three months ended September 30, 2020 largely due to improved market results and our continued outperformance relative to those markets.

Excluding an increase of 1.7% attributed to changes in foreign currency exchange rates and an increase of 2.3% due to the effect of the acquisition of Xirgo, net revenue for the three months ended September 30, 2021 increased 16.6% on an organic basis.

This organic revenue growth reflects increased customer demand and represents market outgrowth of 1,190 basis points.

Organic revenue growth (or decline), discussed throughout this MD&A, is a financial measure not presented in accordance with U.S.

the section entitled Non-GAAP Financial Measures below for additional information related to our use of organic revenue growth (or decline).

Net revenue for the six months ended June 30, 2021 increased 43.3% compared to the six months ended June 30, 2020 largely due to improved market results and our continued outperformance relative to those markets.

Excluding an increase of 3.8% attributed to changes in foreign currency exchange rates and an increase of 1.9% due to the effect of the acquisition of Xirgo, net revenue for the six months ended June 30, 2021 increased 37.6% on an organic basis.

This organic revenue increase represents a market outgrowth of 940 basis points.

Refer to the section entitled Non-GAAP Financial Measures below for additional information related to our use of organic revenue growth (or decline).

Our continued investment in megatrend initiatives is playing a part in revenue growth by expanding our capabilities, as well as our access to end markets and product portfolios.

We are continuing to monitor all of our end markets and customers to ensure that our resources are balanced against forecasts and prioritized against critical growth opportunities.

Net revenue for the nine months ended September 30, 2021 increased 34.9% compared to the nine months ended September 30, 2020 largely due to improved market results and our continued outperformance relative to those markets.

Excluding an increase of 3.0% attributed to changes in foreign currency exchange rates and an increase of 2.0% due to the effect of the acquisition of Xirgo, net revenue for the nine months ended September 30, 2021 increased 29.9% on an organic basis.

This organic revenue growth reflects increased customer demand and represents market outgrowth of 1,040 basis points.

Performance Sensing

Performance Sensing net revenue for the three months ended June 30, 2021 increased 92.6% compared to the three months ended June 30, 2020.

Excluding an increase of 5.8% attributed to changes in foreign currency exchange rates and an increase of 6.6% due to the effect of the acquisition of Xirgo, Performance Sensing net revenue for the three months ended June 30, 2021 increased 80.2% on an organic basis.

Performance Sensing net revenue for the three months ended September 30, 2021 increased 21.6% compared to the three months ended September 30, 2020.

Excluding an increase of 1.8% attributed to changes in foreign currency exchange rates and an increase of 3.1% due to the effect of the acquisition of Xirgo, Performance Sensing net revenue for the three months ended September 30, 2021 increased 16.7% on an organic basis.

Both automotive and HVOR contributed to these results as discussed below.

Automotive net revenue for the three months ended June 30, 2021 grew 80.9% compared to the three months ended June 30, 2020.

Excluding growth of 6.0% attributed to changes in foreign currency exchange rates, automotive net revenue for the three months ended June 30, 2021 grew 74.9% on an organic basis.

Although automotive production was lower than expected, due to the semiconductor chip shortage, it increased significantly from the abnormally low levels experienced in the second quarter of 2020, which contributed to the organic growth.

Further, amid the significant production increases, we continued to outperform the automotive end market, delivering 990 basis points of market outgrowth.

Lastly, OEM efforts to replenish inventory channels also partly contributed to our organic revenue growth in the quarter.

HVOR net revenue for the three months ended June 30, 2021 grew 126.4% compared to the three months ended June 30, 2020.

Excluding growth of 5.0% attributed to changes in foreign currency exchange rates and growth of 25.7% related to the acquisition of Xirgo, HVOR net revenue for the three months ended June 30, 2021 grew 95.7% on an organic basis.

Similar to automotive, HVOR market production improved significantly from the prior year period despite being adversely impacted by the semiconductor chip shortage.

In addition, HVOR delivered 2,850 basis points of market outgrowth in the quarter, demonstrating the continued ability to outperform end markets, due in part to growth in China related to adoption of the NS6 emissions as well as a wave of electromechanical operator controls being installed in new off-road equipment.

Performance Sensing net revenue for the six months ended June 30, 2021 increased 52.7% compared to the six months ended June 30, 2020.

Excluding an increase of 4.3% attributed to changes in foreign currency exchange rates and an increase of 2.7% due to the effect of the acquisition of Xirgo, Performance Sensing net revenue for the six months ended June 30, 2021 increased 45.7% on an organic basis.

Automotive net revenue for the three months ended September 30, 2021 grew 7.0% compared to the three months ended September 30, 2020.

Excluding growth of 1.8% attributed to changes in foreign currency exchange rates, automotive net revenue for the three months ended September 30, 2021 grew 5.2% on an organic basis.

Although automotive production was constrained due to supply chain shortages, resulting in end-market contraction of 21.6%, it increased significantly from the abnormally low levels experienced in the third quarter of 2020, which contributed to the organic revenue growth.

In addition, our automotive business benefited from new product launches in powertrain and emissions, safety, and electrification-related applications and systems.

We continued to outperform the automotive end market, delivering 1,150 basis points of market outgrowth, excluding the effects of OEM efforts to replenish inventory channels.

HVOR net revenue for the three months ended September 30, 2021 grew 75.1% compared to the three months ended September 30, 2020.

Excluding growth of 1.8% attributed to changes in foreign currency exchange rates and growth of 14.4% due to the effect of the acquisition of Xirgo, HVOR net revenue for the three months ended September 30, 2021 grew 58.9% on an organic basis.

Similar to automotive, HVOR market production improved significantly from the prior year period despite being adversely impacted by the global supply chain shortages and logistics costs.

Our China on-road truck business continued to post better than expected growth from the adoption of NS6 emissions regulations, and we are also benefiting from a wave of electromechanical operator controls being installed in new off-road equipment.

In addition, HVOR delivered 2,400 basis points of market outgrowth in the quarter, excluding the effects of OEM efforts to replenish inventory channels.

Performance Sensing net revenue for the nine months ended September 30, 2021 increased 40.9% compared to the nine months ended September 30, 2020.

Excluding an increase of 3.3% attributed to changes in foreign currency exchange rates and an increase of 2.9% due to the effect of the acquisition of Xirgo, Performance Sensing net revenue for the nine months ended September 30, 2021 increased 34.7% on an organic basis.

Both automotive and HVOR contributed to these results as discussed below.

Automotive net revenue for the six months ended June 30, 2021 grew 45.7% compared to the the six months ended June 30, 2020.

Excluding growth of 4.4% attributed to changes in foreign currency exchange rates, automotive net revenue for the six months ended June 30, 2021 grew 41.3% on an organic basis.

This organic revenue increase is primarily due to recovery of customer production combined with our continued outperformance relative to the automotive market, which was led by continued new product launches in powertrain and emissions, safety, and electrification-related applications and systems.

Excluding the effects of OEM efforts to replenish inventory channels, Automotive outgrew its end markets by 940 basis points in the six months ended June 30, 2021.

HVOR net revenue for the six months ended June 30, 2021 grew 74.7% compared to the six months ended June 30, 2020.

Excluding growth of 3.8% attributed to changes in foreign currency exchange rates and growth of 11.1% due to the effect of the acquisition of Xirgo, HVOR net revenue for the six months ended June 30, 2021 grew 59.8% on an organic basis.

Automotive net revenue for the nine months ended September 30, 2021 grew 30.7% compared to the the nine months ended September 30, 2020.

Excluding growth of 3.4% attributed to changes in foreign currency exchange rates, automotive net revenue for the nine months ended September 30, 2021 grew 27.3% on an organic basis.

Although automotive production was constrained due to supply chain shortages, we delivered organic revenue growth due to recovery of customer production combined with our continued outperformance relative to the automotive market, which was led by new product launches in powertrain and emissions, safety, and electrification-related applications and systems.

Excluding the effects of OEM efforts to replenish inventory channels, automotive outgrew its end markets by 1,020 basis points in the nine months ended September 30, 2021.

HVOR net revenue for the nine months ended September 30, 2021 grew 74.8% compared to the nine months ended September 30, 2020.

Excluding growth of 3.1% attributed to changes in foreign currency exchange rates and growth of 12.2% due to the effect of the acquisition of Xirgo, HVOR net revenue for the nine months ended September 30, 2021 grew 59.5% on an organic basis.

This organic revenue increase is primarily due to recovery of customer production combined with our continued outperformance relative to the HVOR markets.

Our China on-road truck business continued to achieve better than expected growth, primarily from the adoption of NS6 emissions regulations as well as the benefit from a wave of electromechanical operator controls being installed in new off-road equipment.

Excluding the effects of OEM efforts to replenish inventory channels, HVOR outgrew its end markets by 1,840 basis points in the six months ended June 30, 2021.

Excluding the effects of OEM efforts to replenish inventory channels, HVOR outgrew its end markets by 2,030 basis points in the nine months ended September 30, 2021.

Sensing Solutions

Sensing Solutions net revenue for the three months ended June 30, 2021 increased 31.1% compared to the three months ended June 30, 2020.

Excluding growth of 3.1% attributed to changes in foreign currency exchange rates, Sensing Solutions net revenue for the three months ended June 30, 2021 grew 28.0% on an organic basis.

The increase in net revenue was driven by continued growth in industrial markets (particularly HVAC), new electrification launches, and supply chain restocking.

Sensing Solutions net revenue for the six months ended June 30, 2021 increased 20.6% compared to the six months ended June 30, 2020.

Excluding growth of 2.6% attributed to changes in foreign currency exchange rates, Sensing Solutions net revenue for the six months ended June 30, 2021 grew 18.0% on an organic basis.

The increase in net revenue was mainly driven by continued growth in industrial markets (particularly HVAC), new electrification launches, and supply chain restocking, partially offset by aerospace market weakness in the first quarter of 2021.

Sensing Solutions net revenue for the three months ended September 30, 2021 increased 17.9% compared to the three months ended September 30, 2020.

Excluding growth of 1.5% attributed to changes in foreign currency exchange rates, Sensing Solutions net revenue for the three months ended September 30, 2021 grew 16.4% on an organic basis.

The increase in net revenue was driven by the continued recovery of global and industrial end markets in the third quarter, as well as new electrification launches and strong growth in our HVAC business.

Aerospace saw growth in the quarter reflecting somewhat improved OEM production and air traffic, which drives our aerospace aftermarket business.

In addition, new product launches, primarily in defense and improvements in aftermarket, enabled our aerospace business to grow faster than market this quarter.

Sensing Solutions net revenue for the nine months ended September 30, 2021 increased 19.7% compared to the nine months ended September 30, 2020.

Excluding growth of 2.2% attributed to changes in foreign currency exchange rates, Sensing Solutions net revenue for the nine months ended September 30, 2021 grew 17.5% on an organic basis.

The increase in net revenue was mainly driven by the continued recovery of global and industrial end markets, as well as new electrification launches and strong growth in our HVAC business.

Operating costs and expenses

Operating costs and expenses for the three and six months ended June 30, 2021 and 2020 are presented, in millions of dollars and as a percentage of net revenue, in the following table.

Operating costs and expenses for the three and nine months ended September 30, 2021 and 2020 are presented, in millions of dollars and as a percentage of net 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 three months ended For the six months ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

For the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Amount Margin* Amount Margin* Amount Margin* Amount Margin*

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Cost of revenue

For the three months ended June 30, 2021, cost of revenue as a percentage of net revenue decreased from the three months ended June 30, 2020, primarily as a result of improvement of various factors that drove cost of revenue as a percentage of revenue up in the second quarter of 2021 (primarily related to the COVID-19 pandemic) such as volume declines and productivity headwinds from our manufacturing facilities running at lower than normal capacity.

These favorable impacts on cost of revenue as a percentage of revenue were partially offset by (1) the impacts of the microchip shortage, (2) the turnaround of the positive impact in the second quarter of 2020 of temporary salary and furlough cost savings implemented in the second quarter of 2020 in response to the COVID-19 pandemic, and (3) the unfavorable effect of changes in foreign currency exchange rates.

For the six months ended June 30, 2021, cost of revenue as a percentage of net revenue decreased from the six months ended June 30, 2020, primarily as a result of (1) improvement of various factors that drove cost of revenue as a percentage of revenue up in the first half of 2020 (primarily related to the COVID-19 pandemic) such as volume declines and productivity headwinds from our manufacturing facilities running at lower than normal capacity and (2) the impact in the first half of 2021 of ongoing savings resulting from cost reduction activities taken in fiscal year 2020.

In addition, the first half of 2020 included a $29.2 million loss related to a judgment against us in intellectual property litigation with Wasica, which we settled in the third quarter of 2020.

These favorable impacts on cost of revenue as a percentage of revenue were partially offset by (1) the impacts of the microchip shortage, (2) the turnaround of the positive impact in the first half of 2020 of temporary salary and furlough cost savings implemented in the second quarter of 2020 in response to the COVID-19 pandemic, and (3) the unfavorable effect of changes in foreign currency exchange rates.

For the three months ended September 30, 2021, cost of revenue as a percentage of net revenue decreased from the three months ended September 30, 2020, primarily as a result of (1) improvement of various factors that drove cost of revenue as a percentage of revenue up in the third quarter of 2020 (primarily related to the COVID-19 pandemic) such as volume declines and productivity headwinds from our manufacturing facilities running at lower than normal capacity, (2) the impact in the third quarter of 2021 of ongoing savings resulting from cost reduction activities taken in fiscal year 2020, and (3) the favorable effect of changes in foreign currency exchange rates.

These favorable impacts on cost of revenue as a percentage of revenue were partially offset by increased costs related to industry-wide supply chain shortages.

For the nine months ended September 30, 2021, cost of revenue as a percentage of net revenue decreased from the nine months ended September 30, 2020, primarily as a result of (1) improvement of various factors that drove cost of revenue as a percentage of revenue up in the nine months ended September 30, 2020 (primarily related to the COVID-19 pandemic) such as volume declines and productivity headwinds from our manufacturing facilities running at lower than normal capacity and (2) the impact in the nine months ended September 30, 2021 of ongoing savings resulting from cost reduction activities taken in fiscal year 2020.

In addition, the nine months ended September 30, 2020 included a $29.2 million loss related to a judgment against us in intellectual property litigation with Wasica, which we settled in the third quarter of 2020.

These favorable impacts on cost of revenue as a percentage of revenue were partially offset by (1) increased costs related to industry-wide supply chain shortages, (2) the turnaround of the positive impact in the first nine months of 2020 of temporary salary and furlough cost savings implemented in the second quarter of 2020 in response to the COVID-19 pandemic, and (3) the unfavorable effect of changes in foreign currency exchange rates.

Research and development expense

For the three months ended June 30, 2021, research and development ("R&D") expense increased $12.7 million (41.9%) from the three months ended June 30, 2020, primarily as a result of (1) increased investments in our megatrend initiatives and (2) the unfavorable effect of changes in foreign currency exchange rates.

For the six months ended June 30, 2021, R&D expense increased $14.2 million (21.9%) from the six months ended June 30, 2020, primarily as a result of (1) increased investments in our megatrend initiatives and (2) the unfavorable effect of changes in foreign currency exchange rates.

Megatrend investments during the three and six months ended June 30, 2021 were $13.8 million and $26.2 million, respectively, an increase of $7.1 million and $13.0 million, respectively, from the three and six months ended June 30, 2020.

We currently expect approximately $50 million to $55 million in megatrend-related spend in 2021 to design and develop differentiated sensor-rich and data insight solutions to enter new markets, develop new business models, and design new product categories in the fast-growing and transformational megatrend vectors of Electrification and Sensata Insights solutions.

For the three months ended September 30, 2021, research and development ("R&D") expense increased $6.6 million (19.9%) from the three months ended September 30, 2020, primarily as a result of (1) higher spend to support megatrend growth initiatives, (2) incremental R&D expense related to acquired businesses, and (3) the unfavorable effect of changes in foreign currency exchange rates, partially offset by the impact on the third quarter of 2021 of ongoing savings resulting from cost reduction activities taken in fiscal year 2020.

For the nine months ended September 30, 2021, R&D expense increased $20.8 million (21.2%) from the nine months ended September 30, 2020, primarily as a result of (1) higher spend to support megatrend growth initiatives, (2) incremental R&D expense related to acquired businesses, (3) the unfavorable effect of changes in foreign currency exchange rates, and (4) the turnaround impact of cost savings actions taken in the second quarter of 2020, including temporary salary reductions and furloughs, partially offset by the impact on the nine months ended September 30, 2021 of ongoing savings resulting from cost reduction activities taken in fiscal year 2020.

R&D expense related to megatrends during the three and nine months ended September 30, 2021 was $12.9 million and $36.7 million, respectively, an increase of $5.3 million and $18.2 million, respectively, from the three and nine months ended September 30, 2020.

Selling, general and administrative expense

For the three months ended June 30, 2021, selling, general and administrative ("SG&A") expense increased $22.1 million to $86.8 million (8.7% of revenue) from $64.7 million (11.2% of revenue) in the three months ended June 30, 2020.

The increase in SG&A expense is primarily a result of (1) higher incentive compensation aligned to improved financial performance, (2) incremental SG&A expense related to acquired businesses, including related transaction costs, (3) increased selling expenses attributed to organic revenue growth, (4) the unfavorable impact of changes in foreign currency exchange rates, and (5) the turnaround impact of cost savings actions taken in the second quarter of 2020, including temporary salary reductions and furloughs, partially offset by (1) the impact on the second quarter of 2021 of ongoing savings resulting from cost reduction activities taken in fiscal year 2020 and (2) the 2020 completion of a project related to enhancements and improvements of our global operating processes to increase productivity and the resulting reduction in professional fees.

For the six months ended June 30, 2021, SG&A expense increased $22.0 million to $163.9 million (8.5% of revenue) from $142.0 million (10.5% of revenue) in the six months ended June 30, 2020.

The increase in SG&A expense is primarily a result of (1) higher incentive compensation aligned to improved financial performance, (2) incremental SG&A expense related to acquired businesses, including related transaction costs, (3) the unfavorable impact of changes in foreign currency exchange rates, (4) increased selling expenses attributed to organic revenue growth, and (5) the turnaround impact of cost savings actions taken in the second quarter of 2020, including temporary salary reductions and furloughs, and savings from repositioning actions, partially offset by (1) the impact on the second quarter of 2021 of ongoing savings resulting from cost reduction activities taken in fiscal year 2020 and (2) the 2020 completion of a project related to enhancements and improvements of our global operating processes to increase productivity and the resulting reduction in professional fees.

For the three months ended September 30, 2021, selling, general and administrative ("SG&A") expense increased $10.0 million to $85.8 million (9.0% of revenue) from $75.7 million (9.6% of revenue) in the three months ended September 30, 2020.

These increases were partially offset by (1) the impact on the third quarter of 2021 of ongoing savings resulting from cost reduction activities taken in fiscal year 2020 and (2) the 2020 completion of a project related to enhancements and improvements of our global operating processes to increase productivity and the resulting reduction in professional fees.

For the nine months ended September 30, 2021, SG&A expense increased $32.0 million to $249.7 million (8.7% of revenue) from $217.7 million (10.2% of revenue) in the nine months ended September 30, 2020.

The increase in SG&A expense is primarily a result of (1) incremental SG&A expense related to acquired businesses, including related transaction costs, (2) higher incentive compensation aligned to improved financial performance, (3) increased selling expenses attributed to organic revenue growth, (4) the unfavorable impact of changes in foreign currency exchange rates, and (5) the turnaround impact of cost savings actions taken in the second quarter of 2020, including temporary salary reductions, furloughs, and savings from repositioning actions.

These increases were partially offset by (1) the impact on the nine months ended September 30, 2021 of ongoing savings resulting from cost reduction activities taken in fiscal year 2020 and (2) the 2020 completion of a project related to enhancements and improvements of our global operating processes to increase productivity and the resulting reduction in professional fees.

Amortization of intangible assets

For the three and six months ended June 30, 2021, amortization expense increased 6.5% and 1.6%, respectively, from the three and six months ended June 30, 2020 primarily due to increased intangibles from recent acquisitions partially offset by the effect of the economic benefit amortization method.

For the three and nine months ended September 30, 2021, amortization expense increased 6.2% and 3.1%, respectively, from the three and nine months ended September 30, 2020 primarily due to increased intangibles from recent acquisitions partially offset by the effect of the economic benefit amortization method.

Restructuring and other charges, net

For the three and six months ended June 30, 2021, restructuring and other charges, net decreased $33.2 million (86.8%) and $33.1 million (77.5%) from the three and six months ended June 30, 2020.

In the three and six months ended June 30, 2021, we incurred $3.8 million and $5.7 million in charges, respectively, related to the Q2 2020 Global Restructure Program, declines of $20.3 million and $18.5 million, respectively, from the prior periods.

Refer to Overview—Q2 2020 Global Restructure Program elsewhere in this MD&A for additional discussion on this program.

The remaining decrease in restructuring and other charges, net, relates to a $12.1 million charge recorded in the second quarter of 2020 resulting from a prejudgment interest-related award granted by the court on behalf of Wasica in intellectual property litigation.

For the three months ended September 30, 2021, we incurred restructuring and other charges, net of $0.3 million, an increase of $10.9 million (103.3%) from a net credit of $(10.5) million for the three months ended September 30, 2020.

In the three months ended September 30, 2020, we settled a patent infringement case brought by Wasica against Schrader and released $11.7 million of the related liability, which is presented in restructuring and other charges, net.

Refer to Overview—Q2 2020 Global Restructure Program elsewhere in this MD&A for additional discussion on the Q2 2020 Global Restructure Program.

For the nine months ended September 30, 2021, we incurred restructuring and other charges, net of $10.0 million, a decrease of $22.2 million (69.1%) from $32.2 million for the nine months ended September 30, 2020.

This includes a decrease of $15.4 million in charges incurred in connection with the Q2 2020 Global Restructure Program from the prior year period.

In addition, for the nine months ended September 30, 2020, the release of the liability related to the Wasica settlement in the third quarter of 2020 largely offset a charge of $12.1 million resulting from a prejudgment interest-related award granted by the court on behalf of Wasica in intellectual property litigation in the second quarter of 2020.

Refer to Note 5:

Restructuring and Other Charges, Net of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information on our restructuring and other charges, net.

Operating income/(loss)

In the three months ended June 30, 2021, operating income/(loss) increased $166.6 million to $164.8 million (16.6% of net revenue) compared to $(1.9) million ((0.3%) of net revenue) in the three months ended June 30, 2020.

The increase was primarily due to higher volume, improved gross margins, and lower restructuring costs.

These improvements were partially offset by increases in other operating costs and expenses, driven primarily by elevated costs related to the semiconductor chip shortage, higher incentive compensation aligned to improved financial performance, increased megatrend spending, and the turnaround effect of temporary salary reductions and furloughs taken in the second quarter 2020.

In the six months ended June 30, 2021, operating income increased $265.5 million to $322.2 million (16.7% of net revenue) compared to $56.7 million (4.2% of net revenue) in the six months ended June 30, 2020.

The increase was primarily due to higher volume, improved gross margins, and lower restructuring costs.

These improvements were partially offset by elevated costs related to the semiconductor chip shortage, higher incentive compensation aligned to improved financial performance, increased megatrend spending, and the turnaround effect of temporary salary reductions and furloughs taken in the second quarter 2020.

We expect that the microchip shortage will increase our operating costs in the third quarter of 2021, compared to the third quarter of 2020.

Operating income

In the three months ended September 30, 2021, operating income increased $34.5 million to $161.3 million (17.0% of net revenue) compared to $126.8 million (16.1% of net revenue) in the three months ended September 30, 2020.

The increase was primarily due to (1) increase in volume from depressed levels experienced last year due to the COVID-19 pandemic and (2) improved gross margins, which were somewhat tempered by increased costs related to industry-wide supply chain shortages.

These improvements were partially offset by increases in other operating costs and expenses, driven primarily by (1) higher incentive compensation aligned to improved financial performance, (2) higher spend to support megatrend growth initiatives, and (3) the release of the liability related to the Wasica settlement in the third quarter of 2021.

In the nine months ended September 30, 2021, operating income increased $300.0 million to $483.5 million (16.8% of net revenue) compared to $183.6 million (8.6% of net revenue) in the nine months ended September 30, 2020.

The increase was primarily due to (1) increase in volume from depressed levels experienced last year due to the COVID-19 pandemic, (2) improved gross margins, which were somewhat tempered by increased costs related to industry-wide supply chain shortages, and (3) lower restructuring costs.

These improvements were partially offset by (1) higher incentive compensation aligned to improved financial performance, (2) higher spend to support megatrend growth initiatives, and (3) the turnaround effect of temporary salary reductions and furloughs taken in the second quarter 2020.

We expect that the supply chain shortages will increase our operating costs in the fourth quarter of 2021, compared to the fourth quarter of 2020, and that it will continue to impact our operating results into 2022.

If the impacts of this shortage are more severe than we expect, it could result in deterioration of our results, potentially for a longer period than currently anticipated.

Interest expense, net

For the three months ended June 30, 2021, interest expense, net increased $4.4 million (10.8%) from the three months ended June 30, 2020, primarily as a result of (1) interest expense on the 4.0% Senior Notes, which were issued on March 29, 2021 and April 8, 2021 and (2) interest expense on the 3.75% Senior Notes, which were issued on August 17, 2020, partially offset by the reduced interest expense related to our March 5, 2021 redemption of the 6.25% Senior Notes.

For the six months ended June 30, 2021, interest expense, net increased $9.0 million (11.3%) from the six months ended June 30, 2020, primarily as a result of (1) interest expense on the 3.75% Senior Notes and (2) interest expense on the 4.0% Senior Notes, partially offset by the reduced interest impact of our redemption of the 6.25% Senior Notes.

For the three months ended September 30, 2021, interest expense, net increased $1.0 million (2.3%) from the three months ended September 30, 2020, primarily as a result of (1) interest expense on the 4.0% Senior Notes, which were issued on March 29, 2021 and April 8, 2021 and (2) interest expense on the 3.75% Senior Notes, which were issued on August 17, 2020, partially offset by the reduced interest expense resulting from our March 5, 2021 redemption of the 6.25% Senior Notes.

For the nine months ended September 30, 2021, interest expense, net increased $10.1 million (8.1%) from the nine months ended September 30, 2020, primarily as a result of (1) interest expense on the 3.75% Senior Notes and (2) interest expense on the 4.0% Senior Notes, partially offset by the reduced interest impact of our redemption of the 6.25% Senior Notes.

Refer to Overview—Debt Transactions elsewhere in this MD&A for additional information related to these transactions.

Other, net primarily includes currency remeasurement gains and losses on net monetary assets, gains and losses on foreign currency and commodity forward contracts not designated as hedging instruments, losses related to debt refinancing, and the portion of our net periodic benefit cost excluding service cost.

In the three months ended June 30, 2021, other, net represented a net gain of $1.0 million, a decrease of $0.6 million compared to $1.6 million in the three months ended June 30, 2020.

In the six months ended June 30, 2021, other, net represented a net loss of $38.4 million, an increase of $27.7 million compared to a net loss of $10.7 million in the six months ended June 30, 2020.

The increase in net loss for the six months ended June 30, 2021 was driven primarily by the loss of $30.1 million recorded in the first quarter of 2021 related to the redemption of the 6.25% Senior Notes.

In the three months ended September 30, 2021, other, net represented a net loss of $9.4 million, an unfavorable change of $18.6 million compared to a net gain of $9.2 million in the three months ended September 30, 2020.

This was primarily due to increased losses from our commodity forward contracts and increased foreign currency remeasurement losses on net monetary assets.

In the nine months ended September 30, 2021, other, net represented a net loss of $47.8 million, an increase of $46.3 million compared to a net loss of $1.5 million in the nine months ended September 30, 2020.

This was primarily due to the loss of $30.1 million recognized in the first quarter of 2021 related to the redemption of the 6.25% Senior Notes, increased losses from our commodity forward contracts, and increased foreign currency remeasurement losses on net monetary assets.

Refer to Overview—Debt Transactions included elsewhere in this MD&A for additional information related to the redemption of the 6.25% Senior Notes.

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Other, Net of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for more detailed information on amounts included in other, net.

Provision for/(benefit from) income taxes

For the three months ended June 30, 2021, provision for income taxes increased $6.2 million from the three months ended June 30, 2020, predominantly related to the overall increase in income before tax as impacted by the mix of profits in the various jurisdictions in which we operate.

For the six months ended June 30, 2021, the provision for/(benefit from) income taxes increased $28.0 million from the six months ended June 30, 2020, predominantly related to the overall increase in income before tax 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 enactment of the CARES Act, which was enacted by the U.S.

Provision for income taxes

For the three months ended September 30, 2021, provision for income taxes increased $6.7 million from the three months ended September 30, 2020, predominantly related to the overall increase in income before tax as impacted by the mix of profits in the various jurisdictions in which we operate.

For the nine months ended September 30, 2021, the provision for income taxes increased $34.7 million from the nine months ended September 30, 2020, predominantly related to the overall increase in income before tax as impacted by the mix of profits in the various jurisdictions in which we operate, as well as the nonrecurrence of the benefit recognized in the first quarter of 2020 as a result of the enactment of the CARES Act, which was enacted by the U.S.

federal government on March 27, 2020 in response to the global financial and health crisis caused by the COVID-19 pandemic.

In connection with this legislation, federal limitations on interest deductions were reduced and we recorded a deferred tax benefit of $7.5 million in the six months ended June 30, 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;

In connection with this legislation, federal limitations on interest deductions were reduced and we recognized a deferred tax benefit of $7.5 million in the nine months ended September 30, 2020, as we were able to utilize additional interest expense that was previously subject to a valuation allowance.

The provision for income taxes consists of (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.

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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.

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.

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Adjusted EBITDA

Adjusted EBITDA represents net income (or loss), determined in accordance with U.S.

Adjusted EBITDA is defined as net income (or loss), determined in accordance with U.S.

GAAP, excluding interest expense, net, provision for (or benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable:

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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.

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, each of which is net of current tax impacts, as applicable.

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• 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 to an acquisition, divestiture, or equity financing transaction.

includes losses or gains related to debt financing transactions, losses or gains related to the divestiture of a business, and costs incurred, including for legal, accounting, and other professional services, that are directly related to an acquisition, divestiture, or equity financing transaction.

• Deferred loss or gain on derivative instruments :

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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 three months ended June 30, 2021 For the three months ended June 30, 2020

(Dollars in millions, except per share amounts) Operating Income Operating Margin Net Income Diluted EPS Operating (Loss)/Income Operating Margin Net (Loss)/Income Diluted EPS

For the three months ended September 30, 2021 For the three months ended September 30, 2020

(Dollars in millions, except per share amounts) Operating Income Operating Margin Net Income Diluted EPS Operating Income Operating Margin Net Income Diluted EPS

Reported (GAAP) $ 161.3 17.0 % $ 85.0 $ 0.53 $ 126.8 16.1 % $ 76.7 $ 0.49

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Adjusted (non-GAAP) $ 201.0 21.1 % $ 138.6 $ 0.87 $ 154.8 19.6 % $ 103.6 $ 0.66

For the six months ended June 30, 2021 For the six months ended June 30, 2020

(Dollars in millions, except per share amounts) Operating Income Operating Margin Net Income Diluted EPS Operating Income Operating Margin Net (Loss)/Income Diluted EPS

For the nine months ended September 30, 2021 For the nine months ended September 30, 2020

(Dollars in millions, except per share amounts) Operating Income Operating Margin Net Income Diluted EPS Operating Income Operating Margin Net Income Diluted EPS

Reported (GAAP) $ 483.5 16.8 % $ 251.6 $ 1.58 $ 183.6 8.6 % $ 42.6 $ 0.27

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Step-up depreciation and amortization 96.0 3.3 96.0 0.60 95.6 4.5 95.6 0.61

Deferred gain on derivative instruments 4.4 0.2 3.3 0.02 0.8 0.1 1.0 0.01

Deferred loss/(gain) on derivative instruments 7.0 0.2 13.5 0.08 1.0 0.0 (5.0) (0.03)

Amortization of debt issuance costs — — 5.1 0.03 — — 5.0 0.03

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GAAP to free cash flow.

For the six months ended June 30,

For the nine months ended September 30,

(in millions) 2021 2020

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Free cash flow $ 292.8 $ 213.4

The following table provides a reconciliation of net income/(loss) in accordance with U.S.

The following table provides a reconciliation of net income in accordance with U.S.

GAAP to Adjusted EBITDA.

For the three months ended June 30 For the six months ended June 30

For the three months ended September 30, For the nine months ended September 30,

(in millions) LTM 2021 2020 2021 2020

Net income/(loss) $ 365.0 $ 112.9 $ (42.5) $ 166.6 $ (34.1)

Net income $ 373.3 $ 85.0 $ 76.7 $ 251.6 $ 42.6

Interest expense, net 181.8 45.1 44.1 134.4 124.3

Provision for/(benefit from) income taxes 29.3 7.6 1.4 27.9 (0.1)

Provision for income taxes 36.0 21.8 15.2 49.8 15.1

Depreciation expense 125.8 31.5 28.9 94.4 94.2

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Financing and other transaction costs 35.0 (1.8) 1.8 35.8 7.2

Deferred (gain)/loss on derivative instruments (3.5) 1.4 (4.9) 4.4 1.0

Deferred loss/(gain) on derivative instruments 11.5 9.1 (5.9) 13.5 (5.0)

Adjusted EBITDA $ 927.6 $ 229.6 $ 188.4 $ 699.6 $ 457.1

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GAAP to net leverage ratio.

(in millions) June 30, 2021 December 31, 2020

(Dollars in millions) September 30, 2021 December 31, 2020

Current portion of long-term debt, finance lease and other financing obligations $ 6.6 $ 757.2

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Liquidity and Capital Resources

As of June 30, 2021 and December 31, 2020, we held cash and cash equivalents in the following regions (amounts have been calculated based on unrounded numbers;

As of September 30, 2021 and December 31, 2020, we held cash and cash equivalents in the following regions (amounts have been calculated based on unrounded numbers;

accordingly, certain amounts may not appear to recalculate due to the effect of rounding):

(In millions) June 30, 2021 December 31, 2020

(In millions) September 30, 2021 December 31, 2020

United Kingdom $ 30.2 $ 25.3

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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.

The table below summarizes our primary sources and uses of cash for the six months ended June 30, 2021 and 2020.

The table below summarizes our primary sources and uses of cash for the nine months ended September 30, 2021 and 2020.

We have derived this summarized statements of cash flows from the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.

For the six months ended

(In millions) June 30, 2021 June 30, 2020

For the nine months ended

(In millions) September 30, 2021 September 30, 2020

Net cash provided by/(used in):

Operating activities:

Net income/(loss) adjusted for non-cash items

Net income adjusted for non-cash items

$ 516.8 $ 248.7

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Operating activities.

Net cash provided by operating activities increased in the six months ended June 30, 2021 primarily due to higher net income adjusted for non-cash items, partially offset by the impact of changes in working capital.

Changes in working capital in the six months ended June 30, 2021 were primarily driven by higher accounts receivable balances reflecting higher revenue in the second quarter of 2021 compared to the second quarter of 2020.

In addition, during the six months ended June 30, 2021, we built raw material and work-in process inventory to address higher demand compared to the prior year.

These changes were partially offset by increased accounts payable and accrued expenses, in part related to our increased cost of revenue and inventory.

Net cash provided by operating activities increased in the nine months ended September 30, 2021 primarily due to higher net income adjusted for non-cash items, partially offset by the impact of changes in working capital.

Changes in working capital in the nine months ended September 30, 2021 were primarily driven by higher accounts receivable balances reflecting higher revenue in the third quarter of 2021 compared to the third quarter of 2020.

In addition, during the three months ended September 30, 2021, we increased raw material purchases in order to maximize production flexibility given widespread parts shortages in our supply chain.

These changes were partially offset by increased accounts payable in the nine months ended September 30, 2021 compared to the prior year period.

Investing activities.

Net cash used in investing activities increased in the six months ended June 30, 2021 primarily due to $422.0 million cash paid for the acquisitions of Lithium Balance and Xirgo.

Net cash used in investing activities increased in the nine months ended September 30, 2021 primarily due to $415.0 million cash paid for the acquisitions of Lithium Balance and Xirgo.

In fiscal year 2021, we anticipate capital expenditures of approximately $145.0 million to $155.0 million, which we expect to be funded from cash on hand.

Financing activities .

In the six months ended June 30, 2021, net cash provided by financing activities decreased primarily due to the impact of debt financing transactions.

In the six months ended June 30, 2021 we issued $1.0 billion of 4.0% Senior Notes compared to a drawdown of $400.0 million on the Revolving Credit Facility in the six months ended June 30, 2020.

In addition, in the six months ended June 30, 2021, we redeemed the $750.0 million aggregate principal amount outstanding on the 6.25% Senior Notes.

Further, we did not repurchase any ordinary shares in the six months ended June 30, 2021, compared to ordinary share repurchases of $35.2 million in the first half of 2020.

In the nine months ended September 30, 2021, net cash provided by financing activities decreased primarily due to the impact of debt financing transactions.

In the nine months ended September 30, 2021, we issued $1.0 billion of 4.0% Senior Notes and redeemed the $750.0 million aggregate principal amount outstanding on the 6.25% Senior Notes, for net cash provided of $208.0 million (including associated fees).

This compares to the issuance of $750 million aggregate principal amount of 3.75% Senior Notes in the nine months ended September 30, 2020 and the borrowing and subsequent repayment of $400.0 million on the Revolving Credit facility, which, including associated fees, provided net cash inflow of $736.5 million.

This decline in net proceeds from the issuance of debt was partially offset by less cash paid to repurchase shares and increased proceeds from option exercises.

We did not repurchase any ordinary shares in the nine months ended September 30, 2021, compared to ordinary share repurchases of $35.2 million in the nine months ended September 30, 2020.

This decline is the result of our temporary suspension of share repurchases on April 2, 2020.

Refer to Capital Resources — Share repurchase programs for additional discussion.

We will resume the share repurchase program when market conditions are favorable to do so.

This decline related to share repurchases was partially offset by a $23.4 million premium paid on the redemption of the 6.25% Senior Notes, and $9.6 million of costs paid in connection with the issuance of the 4.0% Senior Notes.

We intend to resume our share repurchase program in the fourth quarter.

Indebtedness and Liquidity

As of June 30, 2021, we had $4.3 billion in gross indebtedness, which includes finance lease and other financing obligations and excluded debt discounts and deferred financing costs.

As of September 30, 2021, we had $4.3 billion in gross indebtedness, which includes finance lease and other financing obligations and excluded debt discounts and deferred financing costs.

In the first quarter of 2021, we redeemed our 6.25% Senior Notes and issued the 4.0% Senior Notes, reducing our cost of capital and extending the maturity profile of our debt.

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Our sources of liquidity include cash on hand, cash flows from operations, and available capacity under the Revolving Credit Facility.

As of June 30, 2021, 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.

As of September 30, 2021, 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 June 30, 2021, no amounts had been drawn against these outstanding letters of credit.

As of September 30, 2021, no amounts had been drawn against these outstanding letters of credit.

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 June 30, 2021, availability under the Accordion was approximately $1.0 billion.

We believe, based on our current level of operations and taking into consideration the restrictions and covenants included in the Credit Agreement and Senior Notes Indentures, that the sources of liquidity described above will be sufficient to fund our operations, capital expenditures, ordinary share repurchases (if and when resumed), and debt service for at least the next twelve months.

As of September 30, 2021, availability under the Accordion was approximately $1.0 billion.

Our primary use of cash on hand is to acquire businesses that will extend our market position within our key growth vectors of Electrification and Insights.

In addition, we intend to resume our share repurchase program, under which we have approximately $302 million available for repurchase, in the fourth quarter.

We believe, based on our current level of operations and taking into consideration the restrictions and covenants included in the Credit Agreement and Senior Notes Indentures, that the sources of liquidity described above will be sufficient to fund our operations, capital expenditures, ordinary share repurchases (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.

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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 July 23, 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 stable outlook.

As of October 20, 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 stable outlook.

Any future downgrades to STBV's credit ratings may increase our future borrowing costs but will not reduce availability under the Credit Agreement.

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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 six months ended June 30, 2021.

indebtedness (excluding any permitted indebtedness).

These provisions were not triggered during the nine months ended September 30, 2021.

The Credit Agreement and the Senior Notes Indentures contain restrictions and covenants that limit the ability of our wholly-owned subsidiary, STBV, and certain of its subsidiaries to, among other things, incur subsequent indebtedness, sell assets, pay dividends, and make other restricted payments.

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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 when we established our share repurchase programs and will be evaluated periodically with respect to future potential funding of those programs.

As of June 30, 2021, we believe we were in compliance with all covenants and default provisions under our credit arrangements.

As of September 30, 2021, we believe we were in compliance with all covenants and default provisions under our credit arrangements.

Share repurchase programs

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

We currently have an authorized $500.0 million share repurchase program under which approximately $302.3 million remained available as of September 30, 2021.

On April 2, 2020, we announced a temporary suspension of this share repurchase program.

We intend to resume our share repurchase program in the fourth quarter.

Recently Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis