Sensata Technologies Holding plc 10-Q

Item 1. Financial Statements. SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Balance Sheets (In thousands, except per share amounts) (unaudited) September 30, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 1,958,144 $ 1,861,980 Accounts receivable, net of allowances of $ 20,709 and $ 19,033 as of September 30, 2021 and December 31, 2020, respectively 662,751 576,647 Inventories 551,628 451,005 Prepaid expenses and other current assets 130,141 90,340 Total current assets 3,302,664 2,979,972 Property, plant and equipment, net 805,202 803,825 Goodwill 3,301,947 3,111,349 Other intangible assets, net of accumulated amortization of $ 2,245,877 and $ 2,145,634 as of September 30, 2021 and December 31, 2020, respectively 859,367 691,549 Deferred income tax assets 78,597 84,785 Other assets 156,981 172,722 Total assets $ 8,504,758 $ 7,844,202 Liabilities and shareholders' equity Current liabilities: Current portion of long-term debt, finance lease and other financing obligations $ 6,632 $ 757,205 Accounts payable 427,271 393,907 Income taxes payable 32,830 19,215 Accrued expenses and other current liabilities 363,087 324,830 Total current liabilities 829,820 1,495,157 Deferred income tax liabilities 306,703 259,857 Pension and other post-retirement benefit obligations 43,621 48,002 Finance lease and other financing obligations, less current portion 27,000 27,931 Long-term debt, net 4,214,388 3,213,747 Other long-term liabilities 73,603 94,022 Total liabilities 5,495,135 5,138,716 Commitments and contingencies (Note 12) Shareholders’ equity: Ordinary shares, € 0.01 nominal value per share, 177,069 shares authorized, and 174,079 and 173,266 shares issued as of September 30, 2021 and December 31, 2020, respectively 2,230 2,220 Treasury shares, at cost, 15,631 shares as of September 30, 2021 and December 31, 2020 ( 784,596 ) ( 784,596 ) Additional paid-in capital 1,798,549 1,759,668 Retained earnings 2,020,346 1,777,729 Accumulated other comprehensive loss ( 26,906 ) ( 49,535 ) Total shareholders' equity 3,009,623 2,705,486 Total liabilities and shareholders' equity $ 8,504,758 $ 7,844,202 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (unaudited) For the three months ended For the nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Net revenue $ 951,021 $ 788,313 $ 2,886,209 $ 2,139,087 Operating costs and expenses: Cost of revenue 628,922 530,255 1,922,556 1,509,104 Research and development 40,060 33,423 118,929 98,115 Selling, general and administrative 85,784 75,747 249,728 217,698 Amortization of intangible assets 34,571 32,562 101,492 98,397 Restructuring and other charges, net 345 ( 10,519 ) 9,956 32,197 Total operating costs and expenses 789,682 661,468 2,402,661 1,955,511 Operating income 161,339 126,845 483,548 183,576 Interest expense, net ( 45,137 ) ( 44,129 ) ( 134,393 ) ( 124,340 ) Other, net ( 9,403 ) 9,194 ( 47,788 ) ( 1,511 ) Income before taxes 106,799 91,910 301,367 57,725 Provision for income taxes 21,840 15,181 49,759 15,106 Net income $ 84,959 $ 76,729 $ 251,608 $ 42,619 Basic net income per share $ 0.54 $ 0.49 $ 1.59 $ 0.27 Diluted net income per share $ 0.53 $ 0.49 $ 1.58 $ 0.27 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Comprehensive Income (In thousands) (unaudited) For the three months ended For the nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Net income $ 84,959 $ 76,729 $ 251,608 $ 42,619 Other comprehensive income/(loss): Cash flow hedges 2,975 ( 2,197 ) 18,651 ( 26,698 ) Defined benefit and retiree healthcare plans 594 1,015 3,978 6,029 Other comprehensive income/(loss) 3,569 ( 1,182 ) 22,629 ( 20,669 ) Comprehensive income $ 88,528 $ 75,547 $ 274,237 $ 21,950 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) For the nine months ended September 30, 2021 September 30, 2020 Cash flows from operating activities: Net income $ 251,608 $ 42,619 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 94,361 94,216 Amortization of debt issuance costs 5,142 5,026 Share-based compensation 18,871 14,212 Loss on debt financing 30,066 — Amortization of intangible assets 101,492 98,397 Deferred income taxes ( 2,070 ) ( 11,600 ) Unrealized loss on derivative instruments and other 17,359 5,876 Changes in operating assets and liabilities, net of the effects of acquisitions: Accounts receivable, net ( 66,340 ) ( 5,205 ) Inventories ( 93,651 ) 71,207 Prepaid expenses and other current assets ( 18,390 ) 15,689 Accounts payable and accrued expenses 44,879 ( 10,939 ) Income taxes payable 13,615 ( 23,806 ) Other ( 3,716 ) ( 2,354 ) Net cash provided by operating activities 393,226 293,338 Cash flows from investing activities: Acquisitions, net of cash received ( 414,959 ) ( 64,452 ) Additions to property, plant and equipment and capitalized software ( 100,410 ) ( 79,939 ) Investment in debt and equity securities ( 4,655 ) ( 24,794 ) Other 3,919 10,717 Net cash used in investing activities ( 516,105 ) ( 158,468 ) Cash flows from financing activities: Proceeds from exercise of stock options and issuance of ordinary shares 20,016 2,237 Payment of employee restricted stock tax withholdings ( 8,987 ) ( 2,335 ) Proceeds from borrowings on debt 1,001,875 1,150,000 Payments on debt ( 760,768 ) ( 406,568 ) Payments to repurchase ordinary shares — ( 35,175 ) Payments of debt financing costs ( 33,093 ) ( 6,957 ) Net cash provided by financing activities 219,043 701,202 Net change in cash and cash equivalents 96,164 836,072 Cash and cash equivalents, beginning of period 1,861,980 774,119 Cash and cash equivalents, end of period $ 1,958,144 $ 1,610,191 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC Condensed Consolidated Statements of Changes in Shareholders' Equity (In thousands) (unaudited) Ordinary Shares Treasury Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Number Amount Number Amount Balance as of June 30, 2021 174,005 $ 2,229 ( 15,631 ) $ ( 784,596 ) $ 1,789,863 $ 1,936,427 $ ( 30,475 ) $ 2,913,448 Surrender of shares for tax withholding — — ( 18 ) ( 1,039 ) — — — ( 1,039 ) Stock options exercised 34 — — — 1,290 — — 1,290 Vesting of restricted securities 58 1 — — — ( 1 ) — — Retirement of ordinary shares ( 18 ) — 18 1,039 — ( 1,039 ) — — Share-based compensation — — — — 7,396 — — 7,396 Net income — — — — — 84,959 — 84,959 Other comprehensive income — — — — — — 3,569 3,569 Balance as of September 30, 2021 174,079 $ 2,230 ( 15,631 ) $ ( 784,596 ) $ 1,798,549 $ 2,020,346 $ ( 26,906 ) $ 3,009,623 Ordinary Shares Treasury Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Number Amount Number Amount Balance as of December 31, 2020 173,266 $ 2,220 ( 15,631 ) $ ( 784,596 ) $ 1,759,668 $ 1,777,729 $ ( 49,535 ) $ 2,705,486 Surrender of shares for tax withholding — — ( 154 ) ( 8,987 ) — — — ( 8,987 ) Stock options exercised 501 6 — — 20,010 — — 20,016 Vesting of restricted securities 466 6 — — — ( 6 ) — — Retirement of ordinary shares ( 154 ) ( 2 ) 154 8,987 — ( 8,985 ) — — Share-based compensation — — — — 18,871 — — 18,871 Net income — — — — — 251,608 — 251,608 Other comprehensive income — — — — — — 22,629 22,629 Balance as of September 30, 2021 174,079 $ 2,230 ( 15,631 ) $ ( 784,596 ) $ 1,798,549 $ 2,020,346 $ ( 26,906 ) $ 3,009,623 Ordinary Shares Treasury Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Number Amount Number Amount Balance as of June 30, 2020 172,844 $ 2,215 ( 15,631 ) $ ( 784,596 ) $ 1,735,826 $ 1,579,931 $ ( 39,971 ) $ 2,493,405 Surrender of shares for tax withholding — — — ( 21 ) — — — ( 21 ) Stock options exercised 29 1 — — 1,090 — — 1,091 Vesting of restricted securities 2 — — — — — — — Retirement of ordinary shares — — — 21 — ( 21 ) — — Share-based compensation — — — — 4,622 — — 4,622 Net income — — — — — 76,729 — 76,729 Other comprehensive loss — — — — — — ( 1,182 ) ( 1,182 ) Balance as of September 30, 2020 172,875 $ 2,216 ( 15,631 ) $ ( 784,596 ) $ 1,741,538 $ 1,656,639 $ ( 41,153 ) $ 2,574,644 Ordinary Shares Treasury Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Number Amount Number Amount Balance as of December 31, 2019 172,561 $ 2,212 ( 14,733 ) $ ( 749,421 ) $ 1,725,091 $ 1,616,357 $ ( 20,484 ) $ 2,573,755 Surrender of shares for tax withholding — — ( 83 ) ( 2,335 ) — — — ( 2,335 ) Stock options exercised 84 2 — — 2,235 — — 2,237 Vesting of restricted securities 313 3 — — — ( 3 ) — — Repurchase of ordinary shares — — ( 898 ) ( 35,175 ) — — — ( 35,175 ) Retirement of ordinary shares ( 83 ) ( 1 ) 83 2,335 — ( 2,334 ) — — Share-based compensation — — — — 14,212 — — 14,212 Net income — — — — — 42,619 — 42,619 Other comprehensive loss — — — — — — ( 20,669 ) ( 20,669 ) Balance as of September 30, 2020 172,875 $ 2,216 ( 15,631 ) $ ( 784,596 ) $ 1,741,538 $ 1,656,639 $ ( 41,153 ) $ 2,574,644 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents SENSATA TECHNOLOGIES HOLDING PLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements reflect the financial position, results of operations, comprehensive income, cash flows, and changes in shareholders' equity of Sensata Technologies Holding plc ("Sensata plc"), a public limited company incorporated under the laws of England and Wales, and its subsidiaries, collectively referred to as the "Company," "Sensata," "we," "our," or "us." The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q. Accordingly, these interim financial statements do not include all of the information and note disclosures required by U.S. GAAP for complete financial statements. The accompanying financial information reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the interim period results. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Annual Report"). All U.S. dollar ("USD") and share amounts presented, except per share amounts, are stated in thousands, unless otherwise indicated. 2. New Accounting Standards There are no recently issued accounting standards that have been adopted in the current period or will be adopted in future periods that have had or are expected to have a material impact on our consolidated financial position or results of operations. 3. Revenue Recognition The following tables presents net revenue disaggregated by segment and end market for the three and nine months ended September 30, 2021 and 2020: For the three months ended September 30, 2021 For the three months ended September 30, 2020 Performance Sensing Sensing Solutions Total Performance Sensing Sensing Solutions Total Automotive $ 488,041 $ 9,451 $ 497,492 $ 456,200 $ 7,801 $ 464,001 HVOR (1) 218,425 — 218,425 124,736 — 124,736 Industrial — 106,809 106,809 — 87,174 87,174 Appliance and HVAC (2) — 62,793 62,793 — 47,618 47,618 Aerospace — 34,377 34,377 — 31,740 31,740 Other — 31,125 31,125 — 33,044 33,044 Total $ 706,466 $ 244,555 $ 951,021 $ 580,936 $ 207,377 $ 788,313 ________________________ (1) Heavy vehicle and off-road (2) Heating, ventilation and air conditioning For the nine months ended September 30, 2021 For the nine months ended September 30, 2020 Performance Sensing Sensing Solutions Total Performance Sensing Sensing Solutions Total Automotive $ 1,543,121 $ 33,003 $ 1,576,124 $ 1,180,402 $ 23,316 $ 1,203,718 HVOR 619,709 — 619,709 354,430 — 354,430 Industrial — 302,758 302,758 — 247,037 247,037 Appliance and HVAC — 185,896 185,896 — 136,703 136,703 Aerospace — 99,847 99,847 — 101,057 101,057 Other — 101,875 101,875 — 96,142 96,142 Total $ 2,162,830 $ 723,379 $ 2,886,209 $ 1,534,832 $ 604,255 $ 2,139,087 8 Table of Contents 4. Share-Based Payment Plans The following table presents the components of non-cash compensation expense related to our equity awards for the three and nine months ended September 30, 2021 and 2020: For the three months ended For the nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Stock options $ 307 $ 179 $ 1,072 $ 2,721 Restricted securities 7,089 4,443 17,799 11,491 Share-based compensation expense $ 7,396 $ 4,622 $ 18,871 $ 14,212 Equity Awards At our Annual General Meeting held on May 27, 2021, our shareholders approved the Sensata Technologies Holding plc 2021 Equity Incentive Plan (the "2021 Equity Plan"), which replaced the Sensata Technologies Holding plc First Amended and Restated 2010 Equity Incentive Plan (the "2010 Equity Plan"). The 2021 Equity Plan is substantially similar to the 2010 Equity Plan with some updates based on changes in law and current practices. The purpose of the 2021 Equity Plan is to promote the long-term growth, profitability, and interests of the Company and its shareholders by aiding us in attracting and retaining employees, officers, consultants, advisors, and non-employee directors capable of assuring our future success. All awards granted subsequent to this approval were made under the 2021 Equity Plan. We granted the following restricted stock units ("RSUs" and each, an "RSU") and performance-based restricted stock units ("PRSUs" and each, a "PRSU") under the 2021 Equity Plan and 2010 Equity Plan during the nine months ended September 30, 2021: Awards Granted To: Type of Award Number of Units Granted (in thousands) Percentage of PRSUs Awarded that May Vest Weighted Average Grant Date Fair Value Directors RSU (1)(5) 27 N/A $ 58.63 Various executives and employees RSU (2)(4) 373 N/A $ 58.37 Various executives and employees PRSU (3)(4) 236 0.0 % - 200.0 % $ 58.20 ________________________ (1) These RSUs cliff vest one year from the grant date (May 2022). (2) These RSUs vest ratably over three years , one-third per year beginning on the first anniversary of the grant date. These RSUs will fully vest on various dates between February 2024 and August 2024. (3) These PRSUs vest on various dates between April 2024 and May 2024. The number of units that ultimately vest is dependent on the achievement of certain performance criteria. (4) Primarily granted under the 2010 Equity Plan. (5) Primarily granted under the 2021 Equity Plan. 5. Restructuring and Other Charges, Net On June 30, 2020, in response to the potential long-term impact of the global financial and health crisis caused by the coronavirus ("COVID-19") pandemic on our business, we committed to a plan to reorganize our business (the “Q2 2020 Global Restructure Program”), consisting of voluntary and involuntary reductions-in-force and certain site closures. The Q2 2020 Global Restructure Program was commenced in order to align our cost structure to the then anticipated future demand outlook, and as of September 30, 2021, we have completed all actions contemplated thereunder, 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. 9 Table of Contents Restructuring actions taken under the Q2 2020 Global Restructure Program impacted our business segments and corporate functions as follows: Reductions-in-Force Site Closures (Dollars in millions) Positions Minimum Maximum Minimum Maximum Performance Sensing 170 $ 9.3 $ 10.0 $ 3.0 $ 4.0 Sensing Solutions 280 8.0 8.0 3.0 4.0 Corporate and other (1) 390 9.7 11.0 — — Total 840 $ 27.0 $ 29.0 $ 6.0 $ 8.0 ___________________________________ (1) The majority of these positions relate to engineering and manufacturing operations, which are allocated to corporate and other. However, these restructuring actions will benefit the results of Performance Sensing and Sensing Solutions as well. Charges recognized in the three and nine months ended September 30, 2021 and 2020 resulting from the Q2 2020 Global Restructure Program are presented by impacted segment below. However, as discussed in Note 17: Segment Reporting , restructuring and other charges, net are excluded from segment operating income. For the three months ended For the nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Performance Sensing $ 1,106 $ — $ 1,909 $ 7,609 Sensing Solutions 1,992 — 5,132 7,181 Corporate and other — — 1,711 9,330 Restructuring and other charges $ 3,098 $ — $ 8,752 $ 24,120 Approximately $ 1.3 million and $ 3.0 million of these charges in the three and nine months ended September 30, 2021, respectively, relate to site closures in Sensing Solutions. Approximately $ 0.9 million and $ 1.2 million of these charges in the three and nine months ended September 30, 2021, respectively, relate to site closures in Performance Sensing. None of the charges recognized in 2020 relate to site closures. The following table presents the components of restructuring and other charges, net for the three and nine months ended September 30, 2021 and 2020: For the three months ended For the nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Q2 2020 Global Restructure Program charges $ 3,098 $ — $ 8,752 $ 24,120 Other restructuring charges Severance costs, net (1) 133 206 726 4,103 Facility and other exit costs 541 423 1,832 423 Other (2) ( 3,427 ) ( 11,148 ) ( 1,354 ) 3,551 Restructuring and other charges, net $ 345 $ ( 10,519 ) $ 9,956 $ 32,197 ___________________________________ (1) Severance costs, net (excluding those related to the Q2 2020 Global Restructure Program) for the nine months ended September 30, 2020 were related to termination benefits arising from the shutdown and relocation of an operating site in Northern Ireland. (2) In the three months ended September 30, 2020, we settled a patent infringement case brought by Wasica Finance GmbH ("Wasica") against Schrader, and released $ 11.7 million of the related liability, which is presented in restructuring and other charges, net. For the nine months ended September 30, 2020, this release largely offset a charge of $ 12.1 million resulting from a prejudgment interest-related award granted by the court on behalf of Wasica in intellectual property litigation in the second quarter of 2020. 10 Table of Contents The following table presents a rollforward of the severance portion of our restructuring obligations for the nine months ended September 30, 2021. Q2 2020 Global Restructure Program Other Total Balance at December 31, 2020 $ 10,842 $ 4,037 $ 14,879 Charges, net of reversals 4,579 726 5,305 Payments ( 7,736 ) ( 3,239 ) ( 10,975 ) Foreign currency remeasurement ( 171 ) ( 10 ) ( 181 ) Balance at September 30, 2021 $ 7,514 $ 1,514 $ 9,028 The severance liability as of September 30, 2021 was entirely recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheet. 6. Other, Net The following table presents the components of other, net for the three and nine months ended September 30, 2021 and 2020: For the three months ended For the nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Currency remeasurement (loss)/gain on net monetary assets $ ( 324 ) $ 5,422 $ 187 $ 5,878 Loss on foreign currency forward contracts ( 2,414 ) ( 1,060 ) ( 4,791 ) ( 4,424 ) (Loss)/gain on commodity forward contracts ( 6,495 ) 6,138 ( 6,462 ) 5,990 Loss on debt refinancing — — ( 30,066 ) — Net periodic benefit cost, excluding service cost ( 1,053 ) ( 1,506 ) ( 5,731 ) ( 8,403 ) Other 883 200 ( 925 ) ( 552 ) Other, net $ ( 9,403 ) $ 9,194 $ ( 47,788 ) $ ( 1,511 ) 7. Income Taxes The following table presents the provision for income taxes for the three and nine months ended September 30, 2021 and 2020: For the three months ended For the nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Provision for income taxes $ 21,840 $ 15,181 $ 49,759 $ 15,106 The increase in total tax for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was primarily due to the increase in income before taxes. The increase in total tax for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was predominantly due to the increase in income before taxes as impacted by the mix of profits in the various jurisdictions in which we operate as well as the nonrecurrence of the benefit recognized in the first quarter of 2020 as a result of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). In response to the global financial and health crisis caused by COVID-19, the U.S. federal government enacted the CARES Act on March 27, 2020. Federal limitations on interest deductions were reduced in connection with this legislation, and we recognized a deferred tax benefit of $ 7.5 million in the three months ended March 31, 2020, as we were able to utilize additional interest expense that was previously subject to a valuation allowance. The provision for income taxes consists of (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. 11 Table of Contents 8. Net Income per Share Basic and diluted net income per share are calculated by dividing net income by the number of basic and diluted weighted-average ordinary shares outstanding during the period. For the three and nine months ended September 30, 2021 and 2020 the weighted-average ordinary shares outstanding used to calculate basic and diluted net income per share were as follows: For the three months ended For the nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Basic weighted-average ordinary shares outstanding 158,394 157,220 158,122 157,335 Dilutive effect of stock options 603 233 660 211 Dilutive effect of unvested restricted securities 482 526 569 444 Diluted weighted-average ordinary shares outstanding 159,479 157,979 159,351 157,990 Certain potential ordinary shares were excluded from our calculation of diluted weighted-average ordinary shares outstanding because either they would have had an anti–dilutive effect on net income per share or they related to equity awards that were contingently issuable for which the contingency had not been satisfied. These potential ordinary shares were as follows: For the three months ended For the nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Anti-dilutive shares excluded 9 1,680 8 1,868 Contingently issuable shares excluded 1,072 1,183 1,037 1,010 9. Inventories The following table presents the components of inventories as of September 30, 2021 and December 31, 2020: September 30, 2021 December 31, 2020 Finished goods $ 185,044 $ 170,488 Work-in-process 102,671 87,006 Raw materials 263,913 193,511 Inventories $ 551,628 $ 451,005 10. Pension and Other Post-Retirement Benefits The components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the three months ended September 30, 2021 and 2020 were as follows: U.S. Plans Non-U.S. Plans Defined Benefit Retiree Healthcare Defined Benefit Total 2021 2020 2021 2020 2021 2020 2021 2020 Service cost $ — $ — $ 2 $ 2 $ 725 $ 777 $ 727 $ 779 Interest cost 167 206 21 37 405 294 593 537 Expected return on plan assets ( 226 ) ( 292 ) — — ( 177 ) ( 177 ) ( 403 ) ( 469 ) Amortization of net loss 243 311 — ( 1 ) 461 257 704 567 Amortization of prior service (credit)/cost — — ( 159 ) ( 196 ) 3 2 ( 156 ) ( 194 ) Loss on settlement 315 31 — — — 785 315 816 Loss on curtailment — — — 249 — — — 249 Net periodic benefit cost/(credit) $ 499 $ 256 $ ( 136 ) $ 91 $ 1,417 $ 1,938 $ 1,780 $ 2,285 12 Table of Contents The components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the nine months ended September 30, 2021 and 2020 were as follows: U.S. Plans Non-U.S. Plans Defined Benefit Retiree Healthcare Defined Benefit Total 2021 2020 2021 2020 2021 2020 2021 2020 Service cost $ — $ — $ 6 $ 7 $ 3,028 $ 2,485 $ 3,034 $ 2,492 Interest cost 407 679 63 110 1,210 1,005 1,680 1,794 Expected return on plan assets ( 678 ) ( 1,018 ) — — ( 534 ) ( 523 ) ( 1,212 ) ( 1,541 ) Amortization of net loss 1,045 906 — 18 1,382 852 2,427 1,776 Amortization of prior service (credit)/cost — — ( 477 ) ( 589 ) 19 7 ( 458 ) ( 582 ) Loss on settlement 3,294 4,363 — — — 2,344 3,294 6,707 Loss on curtailment — — — 249 — — — 249 Net periodic benefit cost/(credit) $ 4,068 $ 4,930 $ ( 408 ) $ ( 205 ) $ 5,105 $ 6,170 $ 8,765 $ 10,895 Components of net periodic benefit cost/(credit) other than service cost are presented in other, net in the condensed consolidated statements of operations. Refer to Note 6: Other, Net . 11. Debt Our long-term debt, finance lease, and other financing obligations as of September 30, 2021 and December 31, 2020 consisted of the following: Maturity Date September 30, 2021 December 31, 2020 Term Loan September 20, 2026 $ 452,623 $ 456,096 4.875 % Senior Notes October 15, 2023 500,000 500,000 5.625 % Senior Notes November 1, 2024 400,000 400,000 5.0 % Senior Notes October 1, 2025 700,000 700,000 6.25 % Senior Notes February 15, 2026 — 750,000 4.375 % Senior Notes February 15, 2030 450,000 450,000 3.75 % Senior Notes February 15, 2031 750,000 750,000 4.0 % Senior Notes April 15, 2029 1,000,000 — Less: discount, net of premium ( 5,652 ) ( 9,605 ) Less: deferred financing costs ( 27,953 ) ( 28,114 ) Less: current portion ( 4,630 ) ( 754,630 ) Long-term debt, net $ 4,214,388 $ 3,213,747 Finance lease and other financing obligations $ 29,002 $ 30,506 Less: current portion ( 2,002 ) ( 2,575 ) Finance lease and other financing obligations, less current portion $ 27,000 $ 27,931 Revolving Credit Facility As of September 30, 2021, we had $ 416.1 million available under our $ 420.0 million revolving credit facility (the "Revolving Credit Facility"), net of $ 3.9 million of obligations in respect of outstanding letters of credit issued thereunder. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of September 30, 2021, no amounts had been drawn against these outstanding letters of credit. 6.25% Senior Notes redemption On February 3, 2021, we announced that we intended to redeem in full the $ 750.0 million aggregate principal amount outstanding on our 6.25 % senior notes due 2026 (the "6.25% Senior Notes"). On February 15, 2021, the “make-whole” premium with respect to the 6.25% Senior Notes expired. Accordingly, we reflected the 6.25% Senior Notes as a current liability on our consolidated balance sheet as of December 31, 2020. We redeemed the 6.25% Senior Notes on March 5, 2021 in accordance with the terms of the indenture under which the 6.25% Senior Notes were issued and the terms of the notice of redemption at a redemption price equal to 103.125 % of the aggregate 13 Table of Contents principal amount of the outstanding 6.25% Senior Notes, plus accrued and unpaid interest to (but not including) the redemption date. In addition to the $ 750.0 million aggregate principal amount outstanding, at redemption we paid the $ 23.4 million premium and $ 2.6 million accrued interest. 4.0% Senior Notes On March 29, 2021, our indirect, wholly-owned subsidiary, Sensata Technologies B.V. ("STBV"), completed the issuance and sale of $ 750.0 million aggregate principal amount of 4.0 % senior notes due 2029 (the "4.0% Senior Notes"). The 4.0% Senior Notes were issued under an indenture dated as of March 29, 2021 among STBV, as issuer, The Bank of New York Mellon, as trustee (the "Trustee"), and our guarantor subsidiaries (the "Guarantors") named therein (the "4.0% Senior Notes Indenture"). The 4.0% Senior Notes Indenture contains covenants that limit the ability of STBV and its subsidiaries to, among other things: incur liens; engage in sale and leaseback transactions; with respect to any subsidiary of STBV, incur indebtedness without such subsidiary’s guaranteeing the 4.0% Senior Notes; or consolidate, merge with, or sell, assign, convey, transfer, lease, or otherwise dispose of all or substantially all of their properties or assets to, another person. These covenants are subject to important exceptions and qualifications set forth in the 4.0% Senior Notes Indenture. The 4.0% Senior Notes bear interest at 4.0 % per year and mature on April 15, 2029. Interest is payable semi-annually on April 15 and October 15 of each year, commencing on October 15, 2021. The 4.0% Senior Notes are guaranteed by each of STBV's wholly-owned subsidiaries that is a borrower or guarantor under the senior secured credit facilities (the "Senior Secured Credit Facilities") of STBV's wholly-owned subsidiary Sensata Technologies, Inc. ("STI") and the issuer or a guarantor under our existing senior notes as follows: STBV's 4.875% Senior Notes due 2023, 5.625% Senior Notes due 2024, and 5.0% Senior Notes due 2025; and STI's 4.375% Senior Notes due 2030 and 3.75% Senior Notes due 2031. At any time, and from time to time, prior to April 15, 2024, STBV may redeem the 4.0% Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 4.0% Senior Notes being redeemed, plus a “make whole” premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time on or after April 15, 2024, STBV may redeem the 4.0% Senior Notes, in whole or in part, at the following prices (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, up to but excluding the redemption date. Period beginning April 15, Price 2024 102.000 % 2025 101.000 % 2026 and thereafter 100.000 % In addition, at any time prior to April 15, 2024, STBV may redeem up to 40 % of the principal amount of the outstanding 4.0% Senior Notes (including additional 4.0% Senior Notes, if any, that may be issued after March 29, 2021) with the net cash proceeds of certain equity offerings at a redemption price (expressed as a percentage of principal amount) of 104.00 %, plus accrued and unpaid interest, if any, up to but excluding the redemption date, provided that at least 60 % of the aggregate principal amount of the 4.0% Senior Notes (including additional 4.0% Senior Notes, if any) remains outstanding immediately after each such redemption. Upon the occurrence of certain changes in control, each holder of the 4.0% Senior Notes will have the right to require STBV to repurchase the 4.0% Senior Notes at 101 % of their principal amount plus accrued and unpaid interest, if any, up to but excluding the date of repurchase. Upon changes in certain tax laws or treaties, or any change in the official application, administration, or interpretation thereof, STBV may, at its option, redeem the 4.0% Senior Notes, in whole but not in part, at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest, if any, up to but excluding the redemption date, premium, if any, and all Additional Amounts (as defined in the 4.0% Senior Notes Indenture), if any, then due and which will become due on the date of redemption. On April 8, 2021, STBV completed the issuance and sale of an additional $ 250.0 million in aggregate principal amount of 4.0% Senior Notes (the “Additional Notes”). The Additional Notes were priced at 100.75 % and were issued pursuant to the 4.0% Senior Notes Indenture, as supplemented by the First Supplemental Indenture, dated as of April 8, 2021, among STBV, the Guarantors, and the Trustee. The Additional Notes are consolidated and form a single class with the $ 750.0 million aggregate principal amount of 4.0% Senior Notes issued by STBV on March 29, 2021 (the “Initial Notes”). The Additional Notes have the same terms as the Initial Notes, other than with respect to the date of issuance and the issue price. 14 Table of Contents We intend to use the net proceeds from the issuance and sale of the 4.0% Senior Notes and the Additional Notes for general corporate purposes, which may include working capital, capital expenditures, the acquisition of other companies, businesses, or assets, strategic investments, the refinancing or repayment of debt, and share repurchases. Accounting for Debt Financing Transactions We account for our debt financing transactions as disclosed in Note 2: Significant Accounting Policies of the audited consolidated financial statements and notes thereto included in our 2020 Annual Report. In the nine months ended September 30, 2021, in connection with the redemption of the 6.25% Senior Notes, we recognized a loss of $ 30.1 million, which included $ 23.4 million in premiums paid, with the remaining loss representing write-off of debt discounts and deferred financing costs. In addition, in connection with the issuance of the 4.0% Senior Notes, we recognized $ 9.6 million of deferred financing costs, which are presented as a reduction of long-term debt on our condensed consolidated balance sheets and $ 1.7 million of issuance premiums, which are presented as an addition to long-term debt on our condensed consolidated balance sheets. Accrued Interest Accrued interest associated with our outstanding debt is included as a component of accrued expenses and other current liabilities in the condensed consolidated balance sheets. As of September 30, 2021 and December 31, 2020, accrued interest totaled $ 64.7 million and $ 53.6 million, respectively. 12. Commitments and Contingencies We are regularly involved in a number of claims and litigation matters that arise in the ordinary course of business. Although it is not feasible to predict the outcome of these matters, based upon our experience and current information known to us, we do not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on our results of operations, financial position, and/or cash flows. 13. Shareholders' Equity Ordinary and Treasury Shares Our authorized share capital consists of 177,069 ordinary shares with a nominal value of € 0.01 per share. From time to time, our Board of Directors has authorized various share repurchase programs, which may be modified or terminated by the Board at any time. We currently have an authorized $ 500.0 million share repurchase program under which approximately $ 302.3 million remained available as of 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. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss for the nine months ended September 30, 2021 were as follows: Cash Flow Hedges Defined Benefit and Retiree Healthcare Plans Accumulated Other Comprehensive Loss Balance at December 31, 2020 $ ( 6,733 ) $ ( 42,802 ) $ ( 49,535 ) Other comprehensive income before reclassifications, net of tax 16,032 — 16,032 Reclassifications from accumulated other comprehensive loss, net of tax 2,619 3,978 6,597 Other comprehensive income 18,651 3,978 22,629 Balance at September 30, 2021 $ 11,918 $ ( 38,824 ) $ ( 26,906 ) 15 Table of Contents The amounts reclassified from accumulated other comprehensive loss for the three and nine months ended September 30, 2021 and 2020 were as follows: For the three months ended September 30, For the nine months ended September 30, Affected Line in Condensed Consolidated Statements of Operations Component 2021 2020 2021 2020 Derivative instruments designated and qualifying as cash flow hedges: Foreign currency forward contracts $ 1,976 $ ( 625 ) $ 9,816 $ ( 13,640 ) Net revenue (1) Foreign currency forward contracts ( 3,557 ) 3,371 ( 6,324 ) 1,796 Cost of revenue (1) Total, before taxes ( 1,581 ) 2,746 3,492 ( 11,844 ) Income before taxes Income tax effect 395 ( 687 ) ( 873 ) 2,961 Provision for income taxes Total, net of taxes $ ( 1,186 ) $ 2,059 $ 2,619 $ ( 8,883 ) Net income Defined benefit and retiree healthcare plans $ 863 $ 1,438 $ 5,263 $ 8,150 Other, net (2) Income tax effect ( 269 ) ( 423 ) ( 1,285 ) ( 2,121 ) Provision for income taxes Total, net of taxes $ 594 $ 1,015 $ 3,978 $ 6,029 Net income __________________________ (1) Refer to Note 15: Derivative Instruments and Hedging Activities for additional information on amounts to be reclassified from accumulated other comprehensive loss in future periods. (2) Refer to Note 10: Pension and Other Post-Retirement Benefits for additional information on net periodic benefit cost/(credit). 14. Fair Value Measures Measured on a Recurring Basis The fair values of our assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 are shown in the below table. All fair value measures presented are categorized in Level 2 of the fair value hierarchy. September 30, 2021 December 31, 2020 Assets Foreign currency forward contracts $ 19,070 $ 16,163 Commodity forward contracts 2,625 8,902 Total $ 21,695 $ 25,065 Liabilities Foreign currency forward contracts $ 5,014 $ 24,660 Commodity forward contracts 6,983 310 Total $ 11,997 $ 24,970 Refer to Note 15: Derivative Instruments and Hedging Activities for additional information related to our forward contracts. Measured on a Nonrecurring Basis We evaluated our goodwill and other indefinite-lived intangible assets for impairment as of October 1, 2020 and determined that they were not impaired. During the nine months ended September 30, 2021, no events or changes in circumstances occurred that would have triggered the need for an additional impairment review of these assets. 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. We have concluded that this reorganization has not impacted our reportable or operating segment evaluations. Clean Energy Solutions will focus on electric vehicle infrastructure, energy storage, smart grid, and renewable energy applications. The reorganization was effective beginning July 1, 2021. We evaluated our goodwill and other indefinite-lived intangible assets for impairment before and after the reorganization and determined that they were not impaired. 16 Table of Contents Financial Instruments Not Recorded at Fair Value The following table presents the carrying values and fair values of financial instruments not recorded at fair value in the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020. All fair value measures presented are categorized in Level 2 of the fair value hierarchy. September 30, 2021 December 31, 2020 Carrying Value (1) Fair Value Carrying Value (1) Fair Value Liabilities Term Loan $ 452,623 $ 452,057 $ 456,096 $ 454,955 4.875 % Senior Notes $ 500,000 $ 532,500 $ 500,000 $ 538,750 5.625 % Senior Notes $ 400,000 $ 444,000 $ 400,000 $ 448,000 5.0 % Senior Notes $ 700,000 $ 771,750 $ 700,000 $ 777,000 6.25 % Senior Notes $ — $ — $ 750,000 $ 778,125 4.375 % Senior Notes $ 450,000 $ 483,750 $ 450,000 $ 487,125 3.75 % Senior Notes $ 750,000 $ 750,000 $ 750,000 $ 776,250 4.0 % Senior Notes $ 1,000,000 $ 1,012,500 $ — $ — ___________________________________ (1) Excluding any related debt discounts, or premiums, and deferred financing costs. Cash and cash equivalents are carried at cost, which approximates fair value because of their short-term nature. In addition to the above, we hold certain equity investments that do not have readily determinable fair values for which we use the measurement alternative prescribed in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 321, Investments - Equity Securities . Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. There were no impairments or changes resulting from observable transactions for any of these investments and no adjustments were made to their carrying values. Refer to the table below for the carrying values of equity investments using the measurement alternative, which are presented as a component of other assets in the condensed consolidated balance sheets. September 30, 2021 December 31, 2020 Quanergy $ 50,000 $ 50,000 Other 15,000 15,000 Total $ 65,000 $ 65,000 On June 22, 2021, Quanergy Systems, Inc. ("Quanergy") announced that it had entered into a definitive business combination agreement with CITIC Capital Acquisition Corp (NYSE: CCAC). Upon closing of the business combination, which is expected to be in the fourth quarter of 2021, subject to customary closing conditions and the effectiveness of a Registration Statement on Form S-4, the combined company is expected to be listed on the New York Stock Exchange ("NYSE") under the ticker symbol QNGY. We have assessed our investment in Quanergy based on the proposed terms of the business combination agreement and concluded that there were no indicators of impairment as of September 30, 2021. Subsequent to closing, we will mark our investment to market each reporting period. 15. Derivative Instruments and Hedging Activities Hedges of Foreign Currency Risk For the three and nine months ended September 30, 2021 and 2020, amounts excluded from the assessment of effectiveness of our foreign currency forward contracts that are designated as cash flow hedges were not material. As of September 30, 2021, we estimated that $ 14.0 million of net gains will be reclassified from accumulated other comprehensive loss to earnings during the twelve-month period ending September 30, 2022. 17 Table of Contents As of September 30, 2021, we had the following outstanding foreign currency forward contracts: Notional (in millions) Effective Date(s) Maturity Date(s) Index (Exchange Rates) Weighted-Average Strike Rate Hedge Designation (1) 13.0 EUR September 28, 2021 October 29, 2021 Euro ("EUR") to USD 1.17 USD Not designated 383.8 EUR Various from November 19, 2019 to September 23, 2021 Various from October 29, 2021 to September 29, 2023 EUR to USD 1.19 USD Cash flow hedge 881.0 CNY September 27, 2021 October 29, 2021 USD to Chinese Renminbi ("CNY") 6.49 CNY Not designated 260.4 CNY Various from November 5, 2020 to January 5, 2021 Various from 10/19/21 to December 31, 2021 USD to CNY 6.68 CNY Cash flow hedge 518.0 JPY September 28, 2021 October 29, 2021 USD to Japanese Yen ("JPY") 111.59 JPY Not designated 21,416.7 KRW Various from November 19, 2019 to September 23, 2021 Various from October 29, 2021 to August 31, 2023 USD to Korean Won ("KRW") 1,149.75 KRW Cash flow hedge 26.0 MYR September 27, 2021 October 29, 2021 USD to Malaysian Ringgit ("MYR") 4.19 MYR Not designated 408.0 MXN September 28, 2021 October 29, 2021 USD to Mexican Peso ("MXN") 20.39 MXN Not designated 3,290.0 MXN Various from November 19, 2019 to September 23, 2019 Various from October 29, 2021 to September 29, 2023 USD to MXN 22.28 MXN Cash flow hedge 3.2 GBP September 28, 2021 October 29, 2021 British Pound Sterling ("GBP") to USD 1.35 USD Not Designated 52.4 GBP Various from November 19, 2019 to September 23, 2021 Various from October 29, 2021 to September 29, 2023 GBP to USD 1.34 USD Cash flow hedge _________________________ (1) Derivative financial instruments not designated as hedges are used to manage our exposure to currency exchange rate risk. They are intended to preserve economic value, and they are not used for trading or speculative purposes. Hedges of Commodity Risk As of September 30, 2021, we had the following outstanding commodity forward contracts, none of which were designated for hedge accounting treatment in accordance with FASB ASC Topic 815, Derivatives and Hedging : Commodity Notional Remaining Contracted Periods Weighted-Average Strike Price Per Unit Silver 1,144,155 troy oz. October 2021 - September 2023 $ 24.68 Gold 10,247 troy oz. October 2021 - September 2023 $ 1,822.43 Nickel 247,207 pounds October 2021 - September 2023 $ 7.91 Aluminum 3,482,343 pounds October 2021 - September 2023 $ 1.06 Copper 4,355,707 pounds October 2021 - September 2023 $ 4.01 Platinum 12,880 troy oz. October 2021 - September 2023 $ 1,032.88 Palladium 1,678 troy oz. October 2021 - September 2023 $ 2,434.27 18 Table of Contents Financial Instrument Presentation The following table presents the fair values of our derivative financial instruments and their classification in the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020: Asset Derivatives Liability Derivatives Balance Sheet Location September 30, 2021 December 31, 2020 Balance Sheet Location September 30, 2021 December 31, 2020 Derivatives designated as hedging instruments Foreign currency forward contracts Prepaid expenses and other current assets $ 15,613 $ 11,281 Accrued expenses and other current liabilities $ 3,756 $ 18,834 Foreign currency forward contracts Other assets 3,424 4,728 Other long-term liabilities 880 5,182 Total $ 19,037 $ 16,009 $ 4,636 $ 24,016 Derivatives not designated as hedging instruments Commodity forward contracts Prepaid expenses and other current assets $ 2,441 $ 7,598 Accrued expenses and other current liabilities $ 4,712 $ 149 Commodity forward contracts Other assets 184 1,304 Other long-term liabilities 2,271 161 Foreign currency forward contracts Prepaid expenses and other current assets 33 154 Accrued expenses and other current liabilities 378 644 Total $ 2,658 $ 9,056 $ 7,361 $ 954 These fair value measurements were all categorized within Level 2 of the fair value hierarchy. The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive income for the three months ended September 30, 2021 and 2020: Derivatives designated as hedging instruments Amount of Deferred Gain/(Loss) Recognized in Other Comprehensive Income/(Loss) Location of Net (Loss)/Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income Amount of Net (Loss)/Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income 2021 2020 2021 2020 Foreign currency forward contracts $ 9,379 $ ( 12,666 ) Net revenue $ ( 1,976 ) $ 625 Foreign currency forward contracts $ ( 3,832 ) $ 7,021 Cost of revenue $ 3,557 $ ( 3,371 ) Derivatives not designated as hedging instruments Amount of (Loss)/Gain Recognized in Net Income Location of (Loss)/Gain Recognized in Net Income 2021 2020 Commodity forward contracts $ ( 6,495 ) $ 6,138 Other, net Foreign currency forward contracts $ ( 2,414 ) $ ( 1,060 ) Other, net The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive income for the nine months ended September 30, 2021 and 2020: Derivatives designated as hedging instruments Amount of Deferred Gain/(Loss) Recognized in Other Comprehensive Income/(Loss) Location of Net (Loss)/Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income Amount of Net (Loss)/Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income 2021 2020 2021 2020 Foreign currency forward contracts $ 21,825 $ ( 6,076 ) Net revenue $ ( 9,816 ) $ 13,640 Foreign currency forward contracts $ ( 449 ) $ ( 17,342 ) Cost of revenue $ 6,324 $ ( 1,796 ) 19 Table of Contents Derivatives not designated as hedging instruments Amount of (Loss)/Gain Recognized in Net Income Location of (Loss)/Gain Recognized in Net Income 2021 2020 Commodity forward contracts $ ( 6,462 ) $ 5,990 Other, net Foreign currency forward contracts $ ( 4,791 ) $ ( 4,424 ) Other, net Credit Risk Related Contingent Features We have agreements with our derivative counterparties that contain a provision whereby if we default on our indebtedness and repayment of the indebtedness has been accelerated by the lender, then we could also be declared in default on our derivative obligations. As of September 30, 2021, the termination value of outstanding derivatives in a liability position, excluding any adjustment for non-performance risk, was $ 12.1 million. As of September 30, 2021, we had no t posted any cash collateral related to these agreements. If we breach any of the default provisions on any of our indebtedness as described above, we could be required to settle our obligations under the derivative agreements at their termination values. 16. Acquisitions Xirgo Technologies, LLC On February 11, 2021, we entered into a securities purchase agreement (the "Xirgo SPA") to acquire all of the outstanding equity interests of Xirgo Technologies, LLC ("Xirgo"), a leading provider of telematics and data insight, headquartered in Camarillo, California. The transaction contemplated by the Xirgo SPA closed on April 1, 2021 for an aggregate cash purchase price of $ 401.7 million, subject to certain post-closing items. The purchase price is net of $ 7.0 million related to employee retention, reflected in operating cash flows. The product offerings and technology of Xirgo will augment our existing portfolio in advancing our Insights megatrend initiative. We are integrating Xirgo into our Performance Sensing reportable segment. The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed: Net working capital, excluding cash $ 11,536 Property, plant and equipment 1,427 Goodwill 177,268 Other intangible assets 249,612 Other assets 508 Deferred income tax liabilities ( 45,506 ) Other long-term liabilities ( 292 ) Fair value of net assets acquired, excluding cash and cash equivalents 394,553 Cash and cash equivalents 7,117 Fair value of net assets acquired $ 401,670 The allocation of purchase price of Xirgo is preliminary, and is based on management’s judgments after evaluating several factors, including preliminary valuation assessments of tangible and intangible assets. The final allocation of the purchase price to the assets acquired will be completed when the final valuations are completed. The preliminary goodwill recognized as a result of this acquisition was approximately $ 177.3 million, which represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships. The amount of goodwill recognized that is expected to be deductible for tax purposes is not material. 20 Table of Contents In connection with the allocation of purchase price to the assets acquired and liabilities assumed, we identified certain definite-lived intangible assets. The following table presents the acquired intangible assets, their estimated fair values, and weighted-average lives: Acquisition Date Fair Value Weighted-Average Lives (years) Acquired definite-lived intangible assets Customer relationships $ 198,540 15 Completed technologies 44,130 10 Tradenames 6,930 11 Other 12 1 Total definite-lived intangible assets acquired $ 249,612 14 The definite-lived intangible assets were valued using the income approach. We used the relief-from-royalty method to value completed technologies and tradenames, and we used the multi-period excess earnings method to value customer relationships. These valuation methods incorporate assumptions including expected discounted future cash flows resulting from either the future estimated after-tax royalty payments avoided as a result of owning the completed technologies or the future earnings related to existing customer relationships. Spear Power Systems On August 23, 2021, we entered into a securities purchase agreement ("SPA") to acquire all of the outstanding equity interests of Spear Power Systems ("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 provides energy storage solutions for original equipment manufacturers ("OEMs") and system integrators in fast-growing end markets that offer significant growth opportunities. Spear will be integrated into our Sensing Solutions Segment. SmartWitness Holdings, Inc. On October 4, 2021, we entered into an SPA to acquire all of the outstanding equity interests of SmartWitness Holdings, Inc. ("SmartWitness") 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 will be integrated into the Performance Sensing reportable segment. 17. Segment Reporting We operate in, and report financial information for, the following two reportable segments: Performance Sensing and Sensing Solutions. The Performance Sensing reportable segment consists of two operating segments, Automotive and HVOR, each of which meet the criteria for aggregation in FASB ASC Topic 280, Reportable Segments . The Sensing Solutions reportable segment is also an operating segment. Our operating segments are businesses that we manage as components of an enterprise, for which separate financial information is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and assess performance. An operating segment’s performance is primarily evaluated based on segment operating income, which excludes amortization of intangible assets, restructuring and other charges, net, certain costs associated with our strategic megatrend initiatives, and certain corporate costs or credits not associated with the operations of the segment, including share-based compensation expense and a portion of depreciation expense associated with assets recognized in connection with acquisitions. Corporate and other costs excluded from an operating segment’s performance are separately stated below and also include costs that are related to functional areas, such as finance, information technology, legal, and human resources. We believe that segment operating income, as defined above, is an appropriate measure for evaluating the operating performance of our segments. However, this measure should be considered in addition to, and not as a substitute for, or superior to, operating income or other measures of financial performance prepared in accordance with U.S. GAAP. The accounting policies of each of our reporting segments are materially consistent with those in the summary of significant accounting policies as described in Note 2: Significant Accounting Policies of the audited consolidated financial statements and notes thereto included in our 2020 Annual Report. 21 Table of Contents The following table presents net revenue and segment operating income for the reportable segments and other operating results not allocated to the reportable segments for the three and nine months ended September 30, 2021 and 2020: For the three months ended For the nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Net revenue: Performance Sensing $ 706,466 $ 580,936 $ 2,162,830 $ 1,534,832 Sensing Solutions 244,555 207,377 723,379 604,255 Total net revenue $ 951,021 $ 788,313 $ 2,886,209 $ 2,139,087 Segment operating income (as defined above): Performance Sensing $ 193,742 $ 151,626 $ 591,650 $ 347,428 Sensing Solutions 75,262 58,229 218,705 170,545 Total segment operating income 269,004 209,855 810,355 517,973 Corporate and other ( 72,749 ) ( 60,967 ) ( 215,359 ) ( 203,803 ) Amortization of intangible assets ( 34,571 ) ( 32,562 ) ( 101,492 ) ( 98,397 ) Restructuring and other charges, net ( 345 ) 10,519 ( 9,956 ) ( 32,197 ) Operating income 161,339 126,845 483,548 183,576 Interest expense, net ( 45,137 ) ( 44,129 ) ( 134,393 ) ( 124,340 ) Other, net ( 9,403 ) 9,194 ( 47,788 ) ( 1,511 ) Income before taxes $ 106,799 $ 91,910 $ 301,367 $ 57,725 18. Subsequent Events On October 4, 2021, we entered into the SmartWitness SPA to acquire all of the outstanding equity interests of SmartWitness for $ 191.4 million. Refer to Note 16: Acquisitions for additional information. 22 Table of Contents Cautionary Statements Concerning Forward-Looking Statements This Quarterly Report on Form 10-Q, including any documents incorporated by reference herein, includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These forward-looking statements also relate to our future prospects, developments, and business strategies. These forward-looking statements may be identified by terminology such as "may," "will," "could," "should," "expect," "anticipate," "believe," "estimate," "predict," "project," "forecast," "continue," "intend," "plan," and similar terms or phrases, or the negative of such terminology, including references to assumptions. However, these terms are not the exclusive means of identifying such statements. Forward-looking statements contained herein, or in other statements made by us, are made based on management’s expectations and beliefs concerning future events impacting us. These statements are subject to uncertainties and other important factors relating to our operations and business environment, all of which are difficult to predict, and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurances that any of the events anticipated by these forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. We believe that the following important factors, among others (including those described in Item 1A: Risk Factors , included in our 2020 Annual Report), could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf: • Future risks and existing uncertainties associated with the COVID-19 pandemic, which continues to have a significant adverse impact on our business and operations including: (i) full or partial shutdowns of our facilities as mandated by government decrees, (ii) limited ability to adjust certain costs due to government actions, (iii) significant travel restrictions and “work-from-home” orders limiting the availability of our workforce, (iv) supplier constraints and supply-chain interruptions, (v) logistics challenges and limitations, (vi) reduced demand from certain customers, (vii) uncertainties associated with a protracted economic slowdown that could negatively affect the financial condition of our customers and suppliers, and (viii) uncertainties and volatility in the global capital markets; • instability and changes in the global markets, including regulatory, political, economic, governmental, and military matters, such as the exit of the United Kingdom (the "U.K.") from the European Union (the "EU"); • adverse conditions or competition in the industries upon which we are dependent, including the automotive industry; • losses and costs as a result of intellectual property, product liability, warranty, and recall claims; • market acceptance of new product introductions and product innovations; • inability to realize all of the revenue or achieve anticipated gross margins from products subject to existing purchase orders for which we are currently engaged in development; • supplier interruption or non-performance, limiting our access to manufactured components or raw materials; • risks related to the acquisition or disposition of businesses, or the restructuring of our business; • labor disruptions or increased labor costs; • competitive pressure from customers that could require us to reduce prices or result in reduced demand; • security breaches, cyber theft of our intellectual property, and other disruptions to our information technology infrastructure, or improper disclosure of confidential, personal, or proprietary data; • our ability to attract and retain key senior management and qualified technical, sales, and other personnel; • foreign currency risks, changes in socioeconomic conditions, or changes to monetary and fiscal policies; • our level of indebtedness, or our inability to meet debt service obligations or comply with the covenants contained in the credit agreement and senior notes indentures; • changes to current policies, such as trade tariffs, by various governments worldwide; • risks related to the potential for goodwill impairment; • the impact of challenges by taxing authorities of our historical and future tax positions or our allocation of taxable income among our subsidiaries, unfavorable developments in taxation sentiments in countries where we do business, and challenges to the sovereign taxation regimes of EU member states by the European Commission and the Organization for Economic Co-operation and Development; • changes to, or inability to comply with, various regulations, including tax laws, import/export regulations, anti-bribery laws, environmental, health, and safety laws, and other governmental regulations; and 23 Table of Contents • risks related to our domicile in the U.K. In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments, such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements contained in this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. We urge readers to review carefully the risk factors described in our 2020 Annual Report and in the other documents that we file with the U.S. Securities and Exchange Commission (the "SEC"). You can read these documents at www.sec.gov or on our website at www.sensata.com .