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 wholly-owned 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. The results of operations for the
three
months ended
March 31, 2019
are not necessarily indicative of the results to be expected for the full year, nor were the results of operations of the comparable period in
2018
necessarily representative of those actually experienced for the full year
2018
. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended
December 31, 2018
.
All intercompany balances and transactions have been eliminated.
All U.S. dollar and share amounts presented, except per share amounts, are stated in thousands, unless otherwise indicated.
Certain reclassifications have been made to prior periods to conform to current period presentation.
2. New Accounting Standards
Adopted in the current period
In February 2016 the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02,
Leases (Topic 842)
, which establishes new accounting and disclosure requirements for leases. FASB Accounting Standards Codification ("ASC") Topic 842 requires lessees to classify most leases as either finance or operating leases and to recognize a lease liability and right-of-use asset. For finance leases, the statements of operations include separate recognition of interest on the lease liability and amortization of the right-of-use asset. For operating leases, the statements of operations include a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis. We adopted the provisions of FASB ASU No. 2016-02 on January 1, 2019 using the modified retrospective transition method. Refer to Note 18, “Leases” for additional discussion of this adoption.
3. Revenue Recognition
We recognize revenue in accordance with FASB ASC Topic 606,
Revenue from Contracts with Customers
. We are electing to apply certain practical expedients that allow for more limited disclosures than those that would otherwise be required by FASB ASC Topic 606, including (1) the disclosure of transaction price allocated to the remaining unsatisfied performance obligations at the end of the period and (2) an explanation of when we expect to recognize the related revenue.
Disaggregation of Revenue
We believe that our end markets are the categories that best depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The following table presents net revenue disaggregated by segment and end market for the three months ended March 31, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2019
|
|
For the three months ended March 31, 2018
|
|
|
Performance Sensing
|
|
Sensing Solutions
|
|
Total
|
|
Performance Sensing
|
|
Sensing Solutions
|
|
Total
|
Automotive
|
|
$
|
492,015
|
|
|
$
|
11,428
|
|
|
$
|
503,443
|
|
|
$
|
529,793
|
|
|
$
|
13,856
|
|
|
$
|
543,649
|
|
HVOR
(1)
|
|
148,013
|
|
|
—
|
|
|
148,013
|
|
|
133,036
|
|
|
—
|
|
|
133,036
|
|
Appliance and HVAC
(2)
|
|
—
|
|
|
51,704
|
|
|
51,704
|
|
|
—
|
|
|
54,317
|
|
|
54,317
|
|
Industrial
|
|
—
|
|
|
92,641
|
|
|
92,641
|
|
|
—
|
|
|
82,385
|
|
|
82,385
|
|
Aerospace
|
|
—
|
|
|
42,979
|
|
|
42,979
|
|
|
—
|
|
|
41,706
|
|
|
41,706
|
|
Other
|
|
—
|
|
|
31,719
|
|
|
31,719
|
|
|
—
|
|
|
31,200
|
|
|
31,200
|
|
Total
|
|
$
|
640,028
|
|
|
$
|
230,471
|
|
|
$
|
870,499
|
|
|
$
|
662,829
|
|
|
$
|
223,464
|
|
|
$
|
886,293
|
|
(1)
Heavy vehicle and off-road
(2)
Heating, ventilation and air conditioning
4. Share-Based Payment Plans
Share-Based Compensation Expense
The table below presents non-cash compensation expense related to our equity awards, which is recognized within selling, general and administrative expense in the condensed consolidated statements of operations, during the identified periods:
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
March 31, 2019
|
|
March 31, 2018
|
Stock options
|
$
|
1,524
|
|
|
$
|
1,289
|
|
Restricted securities
|
4,416
|
|
|
3,801
|
|
Share-based compensation expense
|
$
|
5,940
|
|
|
$
|
5,090
|
|
Option Exercises
During the
three
months ended
March 31, 2019
,
248
thousand stock options were exercised.
5. Restructuring and Other Charges, Net
Restructuring and other charges, net for the three months ended
March 31, 2019
and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
March 31, 2019
|
|
March 31, 2018
|
Severance costs
|
|
$
|
2,855
|
|
|
$
|
3,604
|
|
Facility and other exit costs
|
|
—
|
|
|
162
|
|
Other
|
|
2,454
|
|
|
—
|
|
Restructuring and other charges, net
|
|
$
|
5,309
|
|
|
$
|
3,766
|
|
Severance costs for the three months ended
March 31, 2019
and 2018 were primarily related to limited workforce reductions of manufacturing, engineering, and administrative positions. Other charges for the three months ended March 31, 2019 were primarily related to deferred compensation incurred in connection with the acquisition of GIGAVAC, LLC ("GIGAVAC"). Refer to Note 16, "Acquisitions and Divestitures" for further discussion.
Changes to the severance portion of our restructuring liability during the
three
months ended
March 31, 2019
were as follows:
|
|
|
|
|
|
|
|
Severance
|
Balance at December 31, 2018
|
|
$
|
6,591
|
|
Charges
|
|
2,855
|
|
Payments
|
|
(2,210
|
)
|
Impact of changes in foreign currency exchange rates
|
|
24
|
|
Balance at March 31, 2019
|
|
$
|
7,260
|
|
6. Other, Net
Other, net
consisted of the following for the
three
months ended
March 31, 2019
and 2018:
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
March 31, 2019
|
|
March 31, 2018
|
Currency remeasurement gain on net monetary assets
|
$
|
1,865
|
|
|
$
|
6,748
|
|
Gain/(loss) on foreign currency forward contracts
|
478
|
|
|
(6,326
|
)
|
Gain/(loss) on commodity forward contracts
|
1,123
|
|
|
(3,195
|
)
|
Loss on debt financing
|
—
|
|
|
(2,350
|
)
|
Net periodic benefit cost, excluding service cost
|
(287
|
)
|
|
(298
|
)
|
Other
|
10
|
|
|
788
|
|
Other, net
|
$
|
3,189
|
|
|
$
|
(4,633
|
)
|
7. Income Taxes
Provision for income taxes for the three months ended
March 31, 2019
and 2018 totaled
$21.5 million
and
$14.1 million
, respectively. The increase in our total tax provision relates predominantly to the utilization of previously unbenefitted net operating losses in our U.S. jurisdiction. The provision for income taxes consists of:
|
|
•
|
current tax expense, which relates primarily to our profitable operations in non-U.S. tax jurisdictions and withholding taxes related to interest, royalties, and the repatriation of foreign earnings; and
|
|
|
•
|
deferred tax expense (or benefit), which represents adjustments in book-to-tax basis differences primarily related to the step-up in fair value of fixed and intangible assets acquired in connection with business combination transactions, the utilization of net operating losses, changes in tax rates, and changes in our assessment of the realizability of our deferred tax assets.
|
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
months ended
March 31, 2019
and 2018 the weighted-average ordinary shares outstanding for basic and diluted net income per share were as follows:
|
|
|
|
|
|
|
|
For the three months ended
|
|
March 31,
2019
|
|
March 31,
2018
|
Basic weighted-average ordinary shares outstanding
|
163,247
|
|
|
171,404
|
|
Dilutive effect of stock options
|
635
|
|
|
926
|
|
Dilutive effect of unvested restricted securities
|
639
|
|
|
526
|
|
Diluted weighted-average ordinary shares outstanding
|
164,521
|
|
|
172,856
|
|
Net income and net income per share are presented in the condensed consolidated statements of operations.
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 are as follows:
|
|
|
|
|
|
|
|
For the three months ended
|
|
March 31,
2019
|
|
March 31,
2018
|
Anti-dilutive shares excluded
|
1,013
|
|
|
709
|
|
Contingently issuable shares excluded
|
477
|
|
|
787
|
|
9. Inventories
The components of inventories as of
March 31, 2019
and
December 31, 2018
were as follows:
|
|
|
|
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
Finished goods
|
$
|
173,246
|
|
|
$
|
187,095
|
|
Work-in-process
|
106,597
|
|
|
104,405
|
|
Raw materials
|
204,293
|
|
|
200,819
|
|
Inventories
|
$
|
484,136
|
|
|
$
|
492,319
|
|
10. Pension and Other Post-Retirement Benefits
We provide various pension and other post-retirement benefit plans for current and former employees, including defined benefit, defined contribution, and retiree healthcare benefit plans.
The components of net periodic benefit cost/(credit) associated with our defined benefit and retiree healthcare plans for the
three
months ended
March 31, 2019
and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
|
Defined Benefit
|
|
Retiree Healthcare
|
|
Defined Benefit
|
|
Total
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Service cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
19
|
|
|
$
|
731
|
|
|
$
|
831
|
|
|
$
|
733
|
|
|
$
|
850
|
|
Interest cost
|
399
|
|
|
327
|
|
|
53
|
|
|
70
|
|
|
338
|
|
|
342
|
|
|
790
|
|
|
739
|
|
Expected return on plan assets
|
(451
|
)
|
|
(428
|
)
|
|
—
|
|
|
—
|
|
|
(175
|
)
|
|
(237
|
)
|
|
(626
|
)
|
|
(665
|
)
|
Amortization of net loss
|
245
|
|
|
300
|
|
|
11
|
|
|
—
|
|
|
191
|
|
|
25
|
|
|
447
|
|
|
325
|
|
Amortization of prior service (credit)/cost
|
—
|
|
|
—
|
|
|
(327
|
)
|
|
(334
|
)
|
|
3
|
|
|
(1
|
)
|
|
(324
|
)
|
|
(335
|
)
|
Loss on settlement
|
—
|
|
|
530
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
530
|
|
Gain on curtailment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(296
|
)
|
|
—
|
|
|
(296
|
)
|
Net periodic benefit cost/(credit)
|
$
|
193
|
|
|
$
|
729
|
|
|
$
|
(261
|
)
|
|
$
|
(245
|
)
|
|
$
|
1,088
|
|
|
$
|
664
|
|
|
$
|
1,020
|
|
|
$
|
1,148
|
|
Components of net periodic benefit cost other than service cost are presented in other, net. Refer to Note 6, "Other, Net."
11. Debt
Our long-term debt and finance lease and other financing obligations as of
March 31, 2019
and
December 31, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity Date
|
|
March 31,
2019
|
|
December 31,
2018
|
Term Loan
|
|
October 14, 2021
|
|
$
|
915,516
|
|
|
$
|
917,794
|
|
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
|
|
|
750,000
|
|
Less: discount
|
|
|
|
(14,481
|
)
|
|
(15,169
|
)
|
Less: deferred financing costs
|
|
|
|
(24,405
|
)
|
|
(23,159
|
)
|
Less: current portion
|
|
|
|
(9,901
|
)
|
|
(9,704
|
)
|
Long-term debt, net
|
|
|
|
$
|
3,216,729
|
|
|
$
|
3,219,762
|
|
|
|
|
|
|
|
|
Finance lease and other financing obligations
|
|
|
|
$
|
34,623
|
|
|
$
|
35,475
|
|
Less: current portion
|
|
|
|
(3,759
|
)
|
|
(4,857
|
)
|
Finance lease and other financing obligations, less current portion
|
|
|
|
$
|
30,864
|
|
|
$
|
30,618
|
|
On March 27, 2019 certain indirect, wholly-owned subsidiaries of Sensata plc, including Sensata Technologies B.V., entered into the ninth amendment (the "Ninth Amendment") of the credit agreement governing our senior secured credit facilities (the "Credit Agreement"). Among other changes to the Credit Agreement, the Ninth Amendment (i) extended the maturity date of the
$420.0 million
revolving credit facility (the "Revolving Credit Facility") to March 27, 2024; (ii) added pounds sterling as an available currency for revolving credit loans and letters of credit under the Revolving Credit Facility; (iii) lowered certain index rate spreads related to the Revolving Credit Facility; (iv) lowered our letter of credit fees; (v) reduced our revolving credit commitment fees; and (vi) modified the senior secured net leverage ratio financial covenant to increase the Revolving Credit Facility utilization threshold above which such financial covenant is tested from
10%
to
20%
, and deleted the requirement that such financial covenant be tested (regardless of utilization) in determining whether a default exists for purposes of satisfying the conditions to borrowing or other utilization of the Revolving Credit Facility.
In connection with the entry into the Ninth Amendment, we incurred
$2.4 million
of creditor fees and related third-party costs. We applied the provisions of FASB ASC Subtopic 470-50,
Modifications and Extinguishments
in accounting for the amounts paid. As a result, we recorded
$2.4 million
as an adjustment to the carrying amount of long-term debt.
As of
March 31, 2019
there was
$416.1 million
available under the Revolving Credit Facility, net of
$3.9 million
in letters of credit. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of
March 31, 2019
no
amounts had been drawn against these outstanding letters of credit.
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
March 31, 2019
and
December 31, 2018
accrued interest totaled
$46.1 million
and
$40.6 million
, respectively.
12. Commitments and Contingencies
We are a defendant in a lawsuit,
Wasica Finance Gmbh et al v. Schrader International Inc. et al, Case No. 13-1353-CPS, U.S.D.C., Delaware,
in which the claimant alleges infringement of their patent (US 5,602,524) in connection with our tire pressure monitoring system products. The patent in question has expired, and as a result, the claimant is seeking damages for past alleged infringement with interest and costs. Should the claimant prevail, these amounts could be material. We have denied liability and have been defending the litigation, which is in discovery. Trial is currently expected in February 2020. We do not believe a loss related to this matter is probable. As of
March 31, 2019
we have not recorded an accrual for this matter.
We are a defendant in a lawsuit,
Metal Seal Precision, Ltd. v. Sensata Technologies Inc., Case No. 2017-0518-BCSI, MA Superior Court (Suffolk County)
, in which the claimant ("Metal Seal"), a supplier of certain metal parts used in the manufacture of our products, alleges breach of contract and misrepresentation. The dispute arises out of a long-term supply agreement under which Metal Seal alleges certain purchase requirements were not met, resulting in damages and lost profits. On April 12, 2019
the court granted, in part, our motion for summary judgment and dismissed Metal Seal's unfair trade practices claims. Plaintiff’s damage expert claims that Metal Seal has losses ranging up to
$51.0 million
. We are defending the lawsuit and do not believe a loss related to this matter is probable. As of March 31, 2019 we have not recorded an accrual related to this matter.
13. Shareholders' Equity
Treasury Shares
In May 2018 we announced that our Board of Directors had authorized a
$400.0 million
share repurchase program. The program was completed during the three months ended March 31, 2019. Since inception we repurchased
7,584
thousand ordinary shares under the program.
In October 2018 our Board of Directors authorized a new
$250.0 million
share repurchase program. Under this program we may repurchase ordinary shares at such times and in amounts to be determined by our management, based on market conditions, legal requirements, and other corporate considerations, on the open market or in privately negotiated transactions, provided that such transactions are completed pursuant to an agreement and with a third party approved by our shareholders at the annual general meeting of shareholders held in May 2018. We repurchased
3,023
thousand ordinary shares under this program during the three months ended March 31, 2019, for a total purchase price of approximately
$150.2 million
, which are now held as treasury shares.
Accumulated Other Comprehensive Loss
The following is a roll forward of the components of accumulated other comprehensive loss for the
three
months ended
March 31, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges
|
|
Defined Benefit and Retiree Healthcare Plans
|
|
Accumulated Other Comprehensive Loss
|
Balance as of December 31, 2018
|
|
$
|
9,184
|
|
|
$
|
(35,362
|
)
|
|
$
|
(26,178
|
)
|
Other comprehensive income before reclassifications, net of tax
|
|
12,721
|
|
|
—
|
|
|
12,721
|
|
Reclassifications from accumulated other comprehensive loss, net of tax
|
|
(2,661
|
)
|
|
83
|
|
|
(2,578
|
)
|
Other comprehensive income
|
|
10,060
|
|
|
83
|
|
|
10,143
|
|
Balance as of March 31, 2019
|
|
$
|
19,244
|
|
|
$
|
(35,279
|
)
|
|
$
|
(16,035
|
)
|
The details of the amounts reclassified from accumulated other comprehensive loss for the
three
months ended
March 31, 2019
and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss/(Gain) Reclassified from Accumulated Other Comprehensive Loss
|
|
Affected Line in Condensed Consolidated Statements of Operations
|
|
|
For the three months ended
|
|
Component
|
|
March 31, 2019
|
|
March 31, 2018
|
|
Derivative instruments designated and qualifying as cash flow hedges:
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
$
|
(3,219
|
)
|
|
$
|
10,884
|
|
|
Net revenue
(1)
|
Foreign currency forward contracts
|
|
(128
|
)
|
|
826
|
|
|
Cost of revenue
(1)
|
Foreign currency forward contracts
|
|
—
|
|
|
1,376
|
|
|
Other, net
(1)
|
Total, before taxes
|
|
(3,347
|
)
|
|
13,086
|
|
|
Income before taxes
|
Income tax effect
|
|
686
|
|
|
(3,272
|
)
|
|
Provision for income taxes
|
Total, net of taxes
|
|
$
|
(2,661
|
)
|
|
$
|
9,814
|
|
|
Net income
|
|
|
|
|
|
|
|
Defined benefit and retiree healthcare plans
|
|
$
|
123
|
|
|
$
|
224
|
|
|
Other, net
(2)
|
Income tax effect
|
|
(40
|
)
|
|
175
|
|
|
Provision for income taxes
|
Total, net of taxes
|
|
$
|
83
|
|
|
$
|
399
|
|
|
Net income
|
__________________________
|
|
(1)
|
Refer to Note 15, "Derivative Instruments and Hedging Activities" for additional details 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 details of net periodic benefit cost.
|
14. Fair Value Measures
Our assets and liabilities recorded at fair value have been categorized based upon the fair value hierarchy in accordance with FASB ASC Topic 820,
Fair Value Measurement
.
Measured on a Recurring Basis
The fair values of our assets and liabilities measured at fair value on a recurring basis as of
March 31, 2019
and
December 31, 2018
are as shown in the below table. All fair value measures presented are categorized in Level 2 of the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
Assets
|
|
|
|
Foreign currency forward contracts
|
$
|
27,152
|
|
|
$
|
17,871
|
|
Commodity forward contracts
|
981
|
|
|
831
|
|
Total
|
$
|
28,133
|
|
|
$
|
18,702
|
|
Liabilities
|
|
|
|
Foreign currency forward contracts
|
$
|
2,882
|
|
|
$
|
5,165
|
|
Commodity forward contracts
|
2,293
|
|
|
4,137
|
|
Total
|
$
|
5,175
|
|
|
$
|
9,302
|
|
Measured on a Nonrecurring Basis
We evaluated our goodwill and other indefinite-lived intangible assets for impairment as of October 1, 2018 and determined that they were not impaired. As of March 31, 2019 no events or changes in circumstances occurred that would have triggered the need for an additional impairment review of these assets.
We periodically reevaluate the carrying values and estimated useful lives of long-lived assets whenever events or changes in circumstances indicate that the carrying values of such assets may not be recoverable.
We account for our investment in Series B Preferred Stock of Quanergy Systems, Inc. ("Quanergy") under the measurement alternative in FASB ASC Topic 321,
Investments - Equity Securities
for equity investments without a readily determinable fair value. Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. No adjustments to the carrying value of this investment were required in the first quarter of 2019 or since the adoption of this guidance. Accordingly, our investment in Quanergy continues to be held at cost of
$50.0 million
.
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
March 31, 2019
and
December 31, 2018
. All fair value measures presented are categorized in Level 2 of the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Carrying
Value
(1)
|
|
Fair Value
|
|
Carrying
Value
(1)
|
|
Fair Value
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Term Loan
|
$
|
915,516
|
|
|
$
|
916,661
|
|
|
$
|
917,794
|
|
|
$
|
904,027
|
|
4.875% Senior Notes
|
$
|
500,000
|
|
|
$
|
514,375
|
|
|
$
|
500,000
|
|
|
$
|
491,875
|
|
5.625% Senior Notes
|
$
|
400,000
|
|
|
$
|
425,000
|
|
|
$
|
400,000
|
|
|
$
|
400,500
|
|
5.0% Senior Notes
|
$
|
700,000
|
|
|
$
|
714,000
|
|
|
$
|
700,000
|
|
|
$
|
660,625
|
|
6.25% Senior Notes
|
$
|
750,000
|
|
|
$
|
793,125
|
|
|
$
|
750,000
|
|
|
$
|
751,875
|
|
___________________________________
(1)
Excluding any related debt discounts and deferred financing costs.
The fair values of the Term Loan and the senior notes are determined primarily using observable prices in markets where these instruments are generally not traded on a daily basis. Cash and cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates fair value because of their short-term nature.
15. Derivative Instruments and Hedging Activities
Hedges of Foreign Currency Risk
We are exposed to fluctuations in various foreign currencies against our functional currency, the U.S. dollar (the "USD"). We enter into forward contracts for certain of these foreign currencies to manage this exposure. We currently have outstanding foreign currency forward contracts that qualify as cash flow hedges intended to offset the effect of exchange rate fluctuations on forecasted sales and certain manufacturing costs. We also have outstanding foreign currency forward contracts that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities, which are not designated for hedge accounting treatment in accordance with FASB ASC Topic 815,
Derivatives and Hedging
.
For the
three
months ended
March 31, 2019
and 2018 amounts excluded from the assessment of effectiveness of our foreign currency forward agreements that are designated as cash flow hedges were not material. As of
March 31, 2019
we estimate that
$20.8 million
of net gains will be reclassified from accumulated other comprehensive loss to earnings during the twelve-month period ending
March 31, 2020
.
As of
March 31, 2019
we had the following outstanding foreign currency forward contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Notional
(in millions)
|
|
Effective Date(s)
|
|
Maturity Date(s)
|
|
Index
|
|
Weighted- Average Strike Rate
|
|
Hedge
Designation
(1)
|
46.0 EUR
|
|
March 27, 2019
|
|
April 30, 2019
|
|
Euro to USD Exchange Rate
|
|
1.13 USD
|
|
Not designated
|
340.9 EUR
|
|
Various from May 2017 to March 2019
|
|
Various from April 2019 to February 2021
|
|
Euro to USD Exchange Rate
|
|
1.21 USD
|
|
Cash flow hedge
|
387.0 CNY
|
|
March 22, 2019
|
|
April 30, 2019
|
|
USD to Chinese Renminbi Exchange Rate
|
|
6.74 CNY
|
|
Not designated
|
813.4 CNY
|
|
January 10, 2019
|
|
Various from April to December 2019
|
|
USD to Chinese Renminbi Exchange Rate
|
|
6.81 CNY
|
|
Cash flow hedge
|
578.0 JPY
|
|
March 27, 2019
|
|
April 26, 2019
|
|
USD to Japanese Yen Exchange Rate
|
|
110.22 JPY
|
|
Not designated
|
25,897.0 KRW
|
|
Various from May 2017 to March 2019
|
|
Various from April 2019 to February 2021
|
|
USD to Korean Won Exchange Rate
|
|
1,091.92 KRW
|
|
Cash flow hedge
|
24.0 MYR
|
|
March 26, 2019
|
|
April 30, 2019
|
|
USD to Malaysian Ringgit Exchange Rate
|
|
4.08 MYR
|
|
Not designated
|
175.0 MXN
|
|
March 27, 2019
|
|
April 30, 2019
|
|
USD to Mexican Peso Exchange Rate
|
|
19.32 MXN
|
|
Not designated
|
2,656.6 MXN
|
|
Various from May 2017 to March 2019
|
|
Various from April 2019 to February 2021
|
|
USD to Mexican Peso Exchange Rate
|
|
20.81 MXN
|
|
Cash flow hedge
|
43.0 GBP
|
|
Various from May 2017 to March 2019
|
|
Various from April 2019 to February 2021
|
|
British Pound Sterling to USD Exchange Rate
|
|
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 not for trading or speculative purposes.
|
Hedges of Commodity Risk
We enter into commodity forward contracts in order to limit our exposure to variability in raw material costs that is caused by movements in the price of underlying metals. The terms of these forward contracts fix the price at a future date for various notional amounts associated with these commodities. These instruments are not designated for hedge accounting treatment in accordance with FASB ASC Topic 815.
As of
March 31, 2019
we had the following outstanding commodity forward contracts:
|
|
|
|
|
|
|
|
Commodity
|
|
Notional
|
|
Remaining Contracted Periods
|
|
Weighted-Average Strike Price Per Unit
|
Silver
|
|
985,928 troy oz.
|
|
April 2019-February 2021
|
|
$16.21
|
Gold
|
|
8,862 troy oz.
|
|
April 2019-February 2021
|
|
$1,314.95
|
Nickel
|
|
261,138 pounds
|
|
April 2019-February 2021
|
|
$5.84
|
Aluminum
|
|
4,401,529 pounds
|
|
April 2019-February 2021
|
|
$0.93
|
Copper
|
|
2,742,639 pounds
|
|
April 2019-February 2021
|
|
$3.11
|
Platinum
|
|
7,694 troy oz.
|
|
April 2019-February 2021
|
|
$900.11
|
Palladium
|
|
808 troy oz.
|
|
April 2019-February 2021
|
|
$1,042.41
|
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
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
|
Balance Sheet Location
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Balance Sheet Location
|
|
March 31, 2019
|
|
December 31, 2018
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
Prepaid expenses and other current assets
|
|
$
|
22,835
|
|
|
$
|
14,608
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
2,421
|
|
|
$
|
3,615
|
|
Foreign currency forward contracts
|
Other assets
|
|
4,185
|
|
|
3,168
|
|
|
Other long-term liabilities
|
|
214
|
|
|
1,134
|
|
Total
|
|
|
$
|
27,020
|
|
|
$
|
17,776
|
|
|
|
|
$
|
2,635
|
|
|
$
|
4,749
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
Commodity forward contracts
|
Prepaid expenses and other current assets
|
|
$
|
675
|
|
|
$
|
524
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
2,132
|
|
|
$
|
3,679
|
|
Commodity forward contracts
|
Other assets
|
|
306
|
|
|
307
|
|
|
Other long-term liabilities
|
|
161
|
|
|
458
|
|
Foreign currency forward contracts
|
Prepaid expenses and other current assets
|
|
132
|
|
|
95
|
|
|
Accrued expenses and other current liabilities
|
|
247
|
|
|
416
|
|
Total
|
|
|
$
|
1,113
|
|
|
$
|
926
|
|
|
|
|
$
|
2,540
|
|
|
$
|
4,553
|
|
These fair value measurements are 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
March 31, 2019
and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as
hedging instruments
|
|
Amount of Deferred Gain/(Loss) Recognized in Other Comprehensive Income
|
|
Location of Net Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Net Income
|
|
Amount of Net Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Net Income
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
Foreign currency forward contracts
|
|
$
|
9,118
|
|
|
$
|
(17,838
|
)
|
|
Net revenue
|
|
$
|
3,219
|
|
|
$
|
(10,884
|
)
|
Foreign currency forward contracts
|
|
$
|
6,078
|
|
|
$
|
13,471
|
|
|
Cost of revenue
|
|
$
|
128
|
|
|
$
|
(826
|
)
|
Foreign currency forward contracts
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other, net
|
|
$
|
—
|
|
|
$
|
(1,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as
hedging instruments
|
|
Amount of Gain/(Loss) Recognized in Net Income
|
|
Location of Gain/(Loss) Recognized in Net Income
|
|
2019
|
|
2018
|
|
Commodity forward contracts
|
|
$
|
1,123
|
|
|
$
|
(3,195
|
)
|
|
Other, net
|
Foreign currency forward contracts
|
|
$
|
478
|
|
|
$
|
(4,950
|
)
|
|
Other, net
|
Credit Risk Related Contingent Features
We have agreements with certain of our derivative counterparties that contain a provision whereby if we default on our indebtedness, and where repayment of the indebtedness has been accelerated by the lender, then we could also be declared in default on our derivative obligations.
As of
March 31, 2019
the termination value of outstanding derivatives in a liability position, excluding any adjustment for non-performance risk, was
$5.2 million
. As of
March 31, 2019
we have
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 and Divestitures
GIGAVAC merger
On September 24, 2018 we entered into an agreement and plan of merger with GIGAVAC, whereby GIGAVAC would merge with one of our wholly-owned subsidiaries, thereby becoming a wholly-owned subsidiary of Sensata. On October 31, 2018 we completed the acquisition of GIGAVAC for
$233 million
of cash consideration, subject to working capital and other adjustments, approximately
$12.0 million
of which related to certain compensation arrangements with certain GIGAVAC employees and shareholders.
Based in Carpinteria, California, GIGAVAC has more than
270
employees and is a leading provider of solutions that enable electrification in demanding environments within the automotive, battery storage, industrial, and HVOR end markets. We acquired GIGAVAC to increase our content and capabilities for electrification, including products such as cars, delivery trucks, buses, material handling equipment, and charging stations. Portions of GIGAVAC will be integrated into each of our operating segments.
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
|
|
$
|
16,980
|
|
Property, plant and equipment
|
|
4,384
|
|
Goodwill
|
|
113,731
|
|
Other intangible assets
|
|
122,742
|
|
Other assets
|
|
63
|
|
Deferred income tax liabilities
|
|
(27,000
|
)
|
Other long-term liabilities
|
|
(1,000
|
)
|
Fair value of net assets acquired, excluding cash and cash equivalents
|
|
229,900
|
|
Cash and cash equivalents
|
|
359
|
|
Fair value of net assets acquired
|
|
$
|
230,259
|
|
The allocation of purchase price related to the GIGAVAC merger 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
$113.7 million
, which represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships. The amount of goodwill recorded that is expected to be deductible for tax purposes is not material.
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
|
$
|
74,500
|
|
|
10
|
Completed technologies
|
31,040
|
|
|
13
|
Tradenames
|
15,400
|
|
|
15
|
Other
|
1,802
|
|
|
6
|
Total definite-lived intangible assets acquired
|
$
|
122,742
|
|
|
12
|
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.
Valves Business Divestiture
On August 31, 2018 we completed the sale of the capital stock of Schrader Bridgeport International, Inc. and August France Holding Company SAS (collectively, the "Valves Business") to Pacific Industrial Co. Ltd. (together with its affiliates, "Pacific"). Contemporaneous with the closing of the sale, Sensata and Pacific entered into a long-term supply agreement, which imposes an obligation on us to purchase minimum quantities of product from Pacific over a period of nearly
five
years.
In exchange for selling the Valves Business and entering into the long-term supply agreement, we received cash consideration from Pacific of approximately
$165.5 million
, net of
$11.8 million
of cash and cash equivalents sold.
We determined that the terms of the long-term supply agreement entered into concurrent with the sale of the Valves Business were not at market. Accordingly, we recognized a liability of
$16.4 million
, measured at fair value, which represented the fair value of the off-market component of the supply agreement.
17. Segment Reporting
We organize our business into
two
reportable segments, Performance Sensing and Sensing Solutions, each of which 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, and certain corporate costs/credits not associated with the operations of the segment, including share-based compensation expense and a portion of depreciation expense associated with assets recorded in connection with acquisitions. In addition, an operating segment’s performance excludes results from discontinued operations, if any. 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" included in our Annual Report on Form 10-K for the year ended
December 31, 2018
.
The following table presents net revenue and segment operating income for the reported segments and other operating results not allocated to the reported segments for the
three
months ended
March 31, 2019
and 2018:
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
March 31, 2019
|
|
March 31, 2018
|
Net revenue:
|
|
|
|
Performance Sensing
|
$
|
640,028
|
|
|
$
|
662,829
|
|
Sensing Solutions
|
230,471
|
|
|
223,464
|
|
Total net revenue
|
$
|
870,499
|
|
|
$
|
886,293
|
|
Segment operating income (as defined above):
|
|
|
|
Performance Sensing
|
$
|
150,509
|
|
|
$
|
169,410
|
|
Sensing Solutions
|
74,969
|
|
|
71,884
|
|
Total segment operating income
|
225,478
|
|
|
241,294
|
|
Corporate and other
|
(41,430
|
)
|
|
(54,781
|
)
|
Amortization of intangible assets
|
(36,143
|
)
|
|
(35,069
|
)
|
Restructuring and other charges, net
|
(5,309
|
)
|
|
(3,766
|
)
|
Operating income
|
142,596
|
|
|
147,678
|
|
Interest expense, net
|
(39,253
|
)
|
|
(38,429
|
)
|
Other, net
|
3,189
|
|
|
(4,633
|
)
|
Income before taxes
|
$
|
106,532
|
|
|
$
|
104,616
|
|
18. Leases
As discussed in Note 2, "New Accounting Standards," we adopted FASB ASC Topic 842 on January 1, 2019, using the modified retrospective transition method. We have elected to apply the package of practical expedients and the land easement practical expedient. We have not elected to apply the hindsight practical expedient.
As a result of this adoption, we classify most leases as either finance or operating leases and recognize a related lease liability and right-of-use asset on our consolidated balance sheets. Our accounting for finance leases remains unchanged after the adoption of FASB ASC Topic 842. We have elected to account for leases with a term of one year or less (short-term leases) using a method similar to the operating lease model under FASB ASC Topic 840,
Leases
(i.e. they are not recorded on the consolidated balance sheets).
We elected to apply the transition provisions of this guidance, including its disclosure requirements, at its date of adoption instead of at the beginning of the earliest comparative period presented. Accordingly, we have not restated our consolidated balance sheet as of December 31, 2018. There was no cumulative effect of adoption on our retained earnings or any other components of equity. The below adjustments were made to our condensed consolidated balance sheet on January 1, 2019 to reflect the new guidance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Adjustment
|
|
January 1, 2019
|
Prepaid expenses and other current assets
|
$
|
113,234
|
|
|
$
|
(253
|
)
|
|
$
|
112,981
|
|
Other intangible assets, net
|
$
|
897,191
|
|
|
$
|
(1,510
|
)
|
|
$
|
895,681
|
|
Other assets
|
$
|
86,890
|
|
|
$
|
58,496
|
|
|
$
|
145,386
|
|
Accrued expenses and other current liabilities
|
$
|
218,130
|
|
|
$
|
12,119
|
|
|
$
|
230,249
|
|
Other long-term liabilities
|
$
|
39,277
|
|
|
$
|
44,614
|
|
|
$
|
83,891
|
|
The table below presents the amounts recognized and location of recognition in our condensed consolidated balance sheet as of March 31, 2019 related to our operating and finance leases:
|
|
|
|
|
|
March 31, 2019
|
Operating lease right-of-use assets:
|
|
Other assets
|
$
|
54,672
|
|
Total operating lease right-of-use assets
|
$
|
54,672
|
|
Operating lease liabilities:
|
|
Accrued expenses and other current liabilities
|
$
|
12,209
|
|
Other long-term liabilities
|
42,908
|
|
Total operating lease liabilities
|
$
|
55,117
|
|
Finance lease right-of-use assets:
|
|
Property, plant and equipment, at cost
|
$
|
49,714
|
|
Accumulated depreciation
|
(22,960
|
)
|
Property, plant and equipment, net
|
$
|
26,754
|
|
Finance lease liabilities:
|
|
Current portion of long-term debt, finance lease and other financing obligations
|
$
|
1,956
|
|
Finance lease and other financing obligations, less current portion
|
30,468
|
|
Total finance lease liabilities
|
$
|
32,424
|
|
The table below presents the lease liabilities arising from obtaining right-of-use assets in the three months ended March 31, 2019:
|
|
|
|
|
|
For the three months ended
|
|
March 31, 2019
|
Operating leases
|
$
|
158
|
|
Finance leases
|
$
|
—
|
|
For finance leases, the consolidated statements of operations include separate recognition of interest on the lease liability and amortization of the right-of-use asset. For operating leases, the consolidated statements of operations include a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis. The table below presents our total lease cost for the three months ended March 31, 2019:
|
|
|
|
|
|
For the three months ended
|
|
March 31, 2019
|
Operating lease cost
|
$
|
3,979
|
|
|
|
Finance lease cost:
|
|
Amortization of right-of-use assets
|
$
|
452
|
|
Interest on lease liabilities
|
689
|
|
Total finance lease cost
|
$
|
1,141
|
|
Short term lease cost was not material for the three months ended March 31, 2019.
Cash flows from operating activities include (1) interest on finance lease liabilities and (2) payments arising from operating leases. Cash flows from financing activities include repayments of the principal portion of finance lease liabilities. The table below presents the cash paid related to our operating and financing leases for the three months ended March 31, 2019:
|
|
|
|
|
|
For the three months ended
|
|
March 31, 2019
|
Operating cash flows from operating leases
|
$
|
3,788
|
|
Operating cash flows from finance leases
|
$
|
619
|
|
Financing cash flows from finance leases
|
$
|
459
|
|
We occupy leased facilities with initial terms ranging up to
20
years. These lease agreements frequently include options to renew for additional periods and generally require that we pay taxes, insurance, and maintenance costs. We also lease certain vehicles and equipment. The table below presents the weighted average remaining lease term of our operating and finance leases (in years):
|
|
|
|
March 31, 2019
|
Operating leases
|
8.3
|
Finance leases
|
13.0
|
Our lease liabilities are initially measured at the present value of the lease payments not yet paid, discounted using our incremental borrowing rate for a period that is comparable to the remaining lease term. Upon adoption of FASB ASC Topic 842, we initially measured our operating lease liabilities using this methodology, while our accounting for finance leases remained unchanged. We use our incremental borrowing rate because the discount rate implicit in our leases are generally not readily determinable. The table below presents our weighted average discount rate as of March 31, 2019:
|
|
|
|
|
March 31, 2019
|
Operating leases
|
5.8
|
%
|
Finance leases
|
8.5
|
%
|
The table below presents a maturity analysis of the obligations related to our operating lease liabilities and finance lease liabilities in effect as of March 31, 2019:
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
Year ending December 31,
|
|
|
|
2019 (excluding the three months ended March 31, 2019)
|
$
|
11,521
|
|
|
$
|
3,613
|
|
2020
|
12,359
|
|
|
4,559
|
|
2021
|
8,506
|
|
|
4,081
|
|
2022
|
6,894
|
|
|
3,731
|
|
2023
|
5,790
|
|
|
3,790
|
|
Thereafter
|
27,339
|
|
|
36,398
|
|
Total undiscounted cash flows related to lease liabilities
|
72,409
|
|
|
56,172
|
|
Less imputed interest
|
(17,292
|
)
|
|
(23,748
|
)
|
Total lease liabilities
|
$
|
55,117
|
|
|
$
|
32,424
|
|
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 and 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," in our Annual Report on Form 10-K for the year ended December 31, 2018), 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:
|
|
•
|
instability and changes in the global markets, including regulatory, political, economic, and military matters, such as the impending 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;
|
|
|
•
|
pressure from customers to reduce prices;
|
|
|
•
|
supplier interruption or non-performance, limiting our access to manufactured components or raw materials;
|
|
|
•
|
we may not 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;
|
|
|
•
|
risks related to the acquisition or disposition of businesses, or the restructuring of our business;
|
|
|
•
|
market acceptance of new product introductions and product innovations;
|
|
|
•
|
losses and costs as a result of intellectual property, product liability, warranty, and recall claims;
|
|
|
•
|
business disruptions due to natural disasters or other disasters outside our control;
|
|
|
•
|
labor disruptions or increased labor costs;
|
|
|
•
|
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;
|
|
|
•
|
foreign currency risks, changes in socio-economic 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 indentures;
|
|
|
•
|
risks related to the potential for goodwill impairment;
|
|
|
•
|
the impact of United States ("U.S.") federal income tax reform, or taxing authorities challenging our historical and future tax positions or our allocation of taxable income among our subsidiaries, and challenges to the sovereign taxation regimes of EU member states by the European Commission;
|
|
|
•
|
changes to current policies, such as trade tariffs, by the U.S. government;
|
|
|
•
|
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
|
|
|
•
|
risks related to our domicile in the U.K.
|
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 Annual Report on Form 10-K for the year ended December 31, 2018 and in the other documents that we file with the U.S. Securities and Exchange Commission. You can read these documents at
www.sec.gov
or on our website at
www.sensata.com
.