What changed in this filing

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Item 1A. Risk Factors

2023-02-13 compared with 2022-02-10 · 48 added, 32 removed, 371 unchanged (18% of the section changed)

9 unchanged sentences

Any outbreaks of contagious diseases and other adverse public health developments in countries where we operate could have a material and adverse impact on our business, financial condition, liquidity, and results of operations.

As has occurred with the COVID-19 pandemic, a global pandemic could cause significant disruption to the global economy, including in all of the regions in which we, our suppliers, distributors, business partners, and customers do business and in which our workforce is located.

A global pandemic and efforts to manage it, including those by governmental authorities, could have significant impacts on global markets, and could have a significant, negative impact on our sales and operating results.

Disruptions could include partial shutdowns of our facilities as mandated by government decree, government actions limiting our ability to adjust certain costs, significant travel restrictions, “work-from-home” orders, limited availability of our workforce, supplier constraints, supply chain interruptions, logistics challenges and limitations, and reduced demand from certain customers.

Disruptions could include:

partial shutdowns of our facilities as mandated by government decree;

government actions limiting our ability to adjust certain costs;

significant travel restrictions;

“work-from-home” orders;

limited availability of our workforce;

supplier constraints;

supply chain interruptions;

logistics challenges and limitations;

and reduced demand from certain customers.

The COVID-19 pandemic has had, and could continue to have, these effects on the economy and our business.

5 unchanged sentences

Our business is subject to numerous global risks, including regulatory, political, economic, governmental, and military concerns and instability.

Our business, including our employees, customers, and suppliers, are located throughout the world.

Our business, including our employees, customers, and suppliers, is located throughout the world.

We employ approximately 92% of our workforce outside of the U.S.

Our customers are located throughout the world, and we have many manufacturing, administrative, and sales facilities outside of the U.S.

We have many manufacturing, administrative, and sales facilities outside of the U.S.

Our subsidiaries located outside of the U.S.

generated approximately 66% of our net revenue in fiscal year 2021, with approximately 23% in China, and we expect sales from non-U.S.

generated approximately 61% of our net revenue in fiscal year 2022 (including approximately 20% in China) and we expect sales from non-U.S.

markets to continue to represent a significant portion of our total net revenue.

2 unchanged sentences

Such risks may result from instability in economic or political conditions, inflation, recession, and/or actual or anticipated military or political conflicts, and include, without limitation:

trade regulations, including customs, import, and export matters, tariffs, trade barriers, trade disputes, and economic sanctions;

trade regulations, including customs, import, export, and sourcing restrictions, tariffs, trade barriers, trade disputes, and economic sanctions;

changes in local employment costs, laws, regulations, and conditions;

3 unchanged sentences

natural disasters;

and instability in economic or political conditions;

actual or anticipated military or political conflicts;

and the impact of each of the foregoing on our business operations, manufacturing, and supply chain.

Other risks are inherent in our non-U.S.

operations, including the potential for changes in socio-economic conditions and/or monetary and fiscal policies, intellectual property protection difficulties and disputes, the settlement of legal disputes through certain foreign legal systems, the collection of receivables, exposure to possible expropriation or other government actions, unsettled political conditions, and possible terrorist attacks.

operations, including:

the potential for changes in socio-economic conditions and/or monetary and fiscal policies;

intellectual property protection difficulties and disputes;

the settlement of legal disputes through certain foreign legal systems;

the collection of receivables;

exposure to possible expropriation or other government actions;

unsettled political conditions;

and possible terrorist attacks.

These and other factors may have a material adverse effect on our non-U.S.

operations and, therefore, on our business and results of operations.

In addition, a scarcity of resources or other hardships caused by a global pandemic may result in increased nationalism, protectionism and political tensions which may cause governments and/or other entities to take actions that may have a significant negative impact on the ability of us, our suppliers, and our customers to conduct business.

In addition, a scarcity of resources or other hardships caused by a global pandemic may result in increased nationalism, protectionism, and political tensions which may cause governments and/or other entities to take actions that may have a significant negative impact on our ability – and the ability of our suppliers and customers – to conduct business.

We have sizable operations in China, including two principal manufacturing sites.

1 unchanged sentence

and China continue to discuss and have differences in trade policies and the U.S.

continues to add restrictions on exports of Controlled Items to China.

continues to add restrictions on both exports to China and use of materials from certain regions within China.

In addition, the legal and regulatory system in China is still developing and is subject to change.

18 unchanged sentences

As we continue to develop products containing complex information technology (“IT”) systems designed to support today’s increasingly connected vehicles, these systems result in potential increases to our risks in product safety, regulatory compliance, product liability, warranty, and recall claims.

In addition, the warranty period for certain electric vehicle components are generally eight to ten years, which increases our risk for warranty claims over the life of a product.

In addition, the warranty period for certain electric vehicle components is generally eight to ten years, which increases our risk for warranty claims over the life of a product.

In addition, a product recall could generate substantial negative publicity about our business and interfere with our manufacturing plans and product delivery obligations as we seek to repair affected products.

24 unchanged sentences

We use a broad range of manufactured components, subassemblies, and raw materials in the manufacture of our products in both our Performance Sensing and Sensing Solutions segments, including those containing certain commodities (e.g.

semiconductors, resins, and metals), which may experience significant volatility in their price and availability due to, among other things, new laws or regulations, including the impact of tariffs, trade barriers, trade disputes, export restrictions, economic sanctions, and global economic or political events including government actions, labor strikes, suppliers' allocations to other purchasers, interruptions in production by suppliers, changes in foreign currency exchange rates, and prevailing price levels.

It is generally difficult to pass increased prices for manufactured components and raw materials through to our customers in the form of price increases.

semiconductors, resins, and metals), which may experience significant volatility in their price and availability due to, among other things, new laws or regulations, including the impact of tariffs, trade barriers, trade disputes, export or sourcing restrictions, economic sanctions, and global economic or political events including government actions, labor strikes, suppliers' allocations to other purchasers, interruptions in production by suppliers, changes in foreign currency exchange rates, and prevailing price levels.

It has historically been difficult to pass increased prices for manufactured components and raw materials through to our customers in the form of price increases.

Therefore, a significant increase in the price or a decrease in the availability of these items could materially increase our operating costs and materially and adversely affect our business and results of operations.

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In addition, where possible, we are working to adjust our long-term supply agreements, strengthen our relationships with our suppliers, increase inventory on hand, increase visibility into long-term supply and demand, and accelerate the use of alternate materials to increase supply chain visibility.

Despite these efforts, as discussed in the MD&A, these shortages have impacted our margins in fiscal year 2021, and we believe that these impacts will continue throughout fiscal year 2022.

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

29 unchanged sentences

There can be no assurance that we will be successful in addressing these or any other significant risks encountered.

In the year ended December 31, 2022, we sold various assets and liabilities comprising our semiconductor test and thermal business (collectively, the "Qinex Business").

Refer to Note 21:

Acquisitions and Divestitures of our Financial Statements included elsewhere in this Report for additional information

We also may seek to restructure our business in the future by relocating operations, disposing of certain assets, or consolidating operations.

12 unchanged sentences

These customers may choose to develop relationships with additional suppliers or elect to produce some or all of these products internally, primarily to reduce risk of delivery interruptions or as a means of extracting more value from us.

Certain of our tier customers currently have, or may develop in the future, the capability to internally produce the products that we sell to them and may compete with us with respect to those and other products and with respect to other customers.

Certain of our customers currently have, or may develop in the future, the capability to internally produce

the products that we sell to them and may compete with us with respect to those and other products and with respect to other customers.

Many of our customers, including transportation manufacturers and other industrial and commercial OEMs, demand annual price reductions.

10 unchanged sentences

In addition, we may not be able to detect breaches in our IT systems or assess the severity or impact of a breach in a timely manner.

We regularly experience attacks to our systems and networks and have from time to time experienced cybersecurity breaches, such as computer viruses and malware, unauthorized parties gaining access to our IT systems, and similar incidents, which to date have not had a material impact on our business.

We have experienced attacks to our systems and networks and have from time to time experienced cybersecurity breaches, such as computer viruses and malware, unauthorized parties gaining access to our IT systems, and similar incidents, which to date have not had a material impact on our business.

If we are unable to efficiently and effectively maintain and upgrade our system safeguards, we may incur unexpected costs and certain of our systems may become more vulnerable to unauthorized access.

While we select our third-party vendors carefully, problems with the IT systems of our vendors, including breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks, and security breaches at a vendor could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business.

Additionally, we are an acquisitive organization and the process of integrating the information systems of the businesses we acquire is complex and exposes us to additional risk as we might not adequately identify weaknesses in the targets’ information systems, which could expose us to unexpected liabilities or make our own systems more vulnerable to attack.

1 unchanged sentence

We also face the challenge of supporting our older systems and implementing necessary upgrades.

Moreover, as we continue to develop products containing complex IT systems designed to support today’s increasingly connected vehicles, these systems also could be susceptible to similar interruptions, including the possibility of unauthorized access.

Moreover, as we continue to develop products containing complex IT systems designed to support today’s increasingly connected world, these systems also could be susceptible to similar interruptions, including the possibility of unauthorized access.

Further, as we transition to offering more cloud-based solutions that are dependent on the internet or other networks to operate with increased users, we may become a greater target for cyber threats, such as malware, denial of service, external adversaries, or insider threats.

28 unchanged sentences

In certain instances, we enter into transactions that are denominated in a currency other than the USD.

At the date that such transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction is measured and

recorded in USD using the exchange rate in effect at that date.

At the date that such transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction is measured and recorded in USD using the exchange rate in effect at that date.

At each balance sheet date, recorded monetary balances denominated in a currency other than the USD are adjusted to USD using the exchange rate at the balance sheet date, with gains or losses recognized in other, net in the consolidated statements of operations.

4 unchanged sentences

The credit agreement governing our secured credit facility (as amended, the "Credit Agreement") provides for senior secured credit facilities (the "Senior Secured Credit Facilities") consisting of a term loan facility (the "Term Loan"), a $750.0 million revolving credit facility (the "Revolving Credit Facility"), and incremental availability (the "Accordion") under which additional secured credit facilities could be issued under certain circumstances.

As of December 31, 2021, we had $4,280.2 million of gross outstanding indebtedness, including various tranches of senior notes (the “Senior Notes”).

As of December 31, 2022, we had $4,273.4 million of gross outstanding indebtedness, including various tranches of senior unsecured notes (the “Senior Notes”).

Refer to Note 14:

26 unchanged sentences

However, trade policies, including quotas, duties, tariffs, taxes, or other restrictions on the import or export of our products, are subject to change, and we cannot ensure that any mitigation strategies employed will remain available in the future or that we will be able to offset tariff-related costs or maintain competitive pricing of our products.

The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the

potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the global economy, which in turn could have a material adverse effect on our business, operating results and financial condition.

The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the global economy, which in turn could have a material adverse effect on our business, operating results and financial condition.

Existing duty reduction and deferral programs, such as free-trade agreements, duty drawback, and inward processing relief, provide beneficial impacts to our duties and tariffs for qualifying imports and exports, subject to compliance with each program’s unique requirements.

4 unchanged sentences

Further tariffs may be imposed on other imports of our products or our business may be further impacted by retaliatory trade measures taken by China or other countries in response to existing or future U.S.

tariffs or other measures (e.g., subsidies).

We may raise our prices on products subject to such tariffs to share the cost with our customers, which could harm our operating performance or cause our customers to seek alternative suppliers.

14 unchanged sentences

Goodwill and Other Intangible Assets, Net of our Financial Statements included elsewhere in this Report for additional information related to our goodwill and other identifiable intangible assets.

Refer to Critical Accounting Policies and Estimates , in the MD&A included elsewhere in this Report for additional information related to the assumptions used in the development of the fair value of our reporting units.

Refer to Critical Accounting Policies and Estimates , in Item 7:

Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Report for additional information related to the assumptions used in the development of the fair value of our reporting units.

Our global effective tax rate is subject to a variety of different factors that could create volatility in that tax rate, expose us to greater than anticipated tax liabilities, or cause us to adjust previously recognized tax assets and liabilities.

6 unchanged sentences

and other tax laws, treaties, and regulations, in particular related to proposed tax laws by the U.S.

government as a result of seating of a new administration, which could increase our tax liabilities.

Our actual global

tax rate may vary from our expectation and that variance may be material.

government as a result of a new administration, which could increase our tax liabilities.

Our actual global tax rate may vary from our expectation and that variance may be material.

We continually monitor all global regulatory developments and consider alternatives to limit their detrimental impacts.

3 unchanged sentences

Furthermore, on October 8, 2021, the Organization for Economic Co-operation and Development (the "OECD") announced most of its member jurisdictions agreed to the OECD’s Inclusive Framework of the Base Erosion and Profit Shifting project, which establishes global minimum tax rules.

These rules are expected to be reflected in local country laws where we do business effective in calendar 2023.

These rules have begun to be reflected in local country laws where we do business and are expected to apply beginning in calendar 2024.

The precise impact of these laws is not yet known, and we cannot provide assurances that Sensata can mitigate any increases in tax liabilities under these new rules.

12 unchanged sentences

We could be adversely affected by violations of the U.S.

Foreign Corrupt Practices Act (the "FCPA"), the U.K.'s Bribery Act, and similar worldwide anti-bribery laws.

Foreign Corrupt Practices Act (the "U.S.

FCPA"), the U.K.'s Bribery Act, and similar worldwide anti-bribery laws.

FCPA, the U.K.'s Bribery Act, and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business.

8 unchanged sentences

The export of many such Controlled Items requires a license from the applicable government agency.

Licensing decisions are made based on type of product, its destination, end use, end user, the parties involved in the transaction,

national security, and foreign policy.

Licensing decisions are made based on type of product, its destination, end use, end user, the parties involved in the transaction, national security, and foreign policy.

As a result, export license approvals are not guaranteed.

27 unchanged sentences

the EU REACH regulation;

the German Explosives Act;

and the China law on Management Methods for Controlling Pollution by Electronic Information Products.

71 unchanged sentences

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

What changed 10-K

Item 1A. Risk Factors