10q10k10q10k.net

What changed in Sensata Technologies Holding plc's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Sensata Technologies Holding plc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+462 added−447 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-13)

Top changes in Sensata Technologies Holding plc's 2023 10-K

462 paragraphs added · 447 removed · 290 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

77 edited+50 added−51 removed54 unchanged
Biggest changeThe table below sets forth the amount of net revenue generated by our end markets, reconciled to total net revenue, for the years ended December 31, 2022, 2021, and 2020: For the year ended December 31, (In thousands) 2022 2021 2020 Net revenue: Automotive $ 2,107,651 $ 2,062,407 $ 1,751,370 HVOR 904,877 829,852 508,061 Industrial, HVAC, and other 863,854 793,812 649,980 Aerospace 152,880 134,735 136,167 Total net revenue (1) $ 4,029,262 $ 3,820,806 $ 3,045,578 __________________________ (1) Total revenue for the years ended December 31, 2022, 2021, and 2020 includes approximately $460 million, $261 million, and $165 million, respectively, of revenue related to the Electrification megatrend, portions of which are derived in each of the industries presented above.
Biggest changeOur largest customer accounted for approximately 6% of our net revenue for the year ended December 31, 2023. 4 Table of Contents End Markets The table below sets forth the amount of net revenue generated by our end markets, reconciled to total net revenue, for the years ended December 31, 2023, 2022, and 2021: For the year ended December 31, (In thousands) 2023 2022 2021 Net revenue: Automotive $ 2,177,189 $ 2,107,651 $ 2,062,407 HVOR (1) 863,422 848,514 783,170 Industrial, HVAC (2) , and other 825,293 920,217 840,494 Aerospace 188,179 152,880 134,735 Total net revenue (3) $ 4,054,083 $ 4,029,262 $ 3,820,806 __________________________ (1) Heavy vehicle and off-road (2) Heating, ventilation, and air conditioning (3) Total revenue for the years ended December 31, 2023, 2022, and 2021 includes approximately $673 million, $460 million, and $261 million, respectively, of revenue related to the Electrification growth trend (refer to discussion under the heading Growth Drivers below), portions of which are derived in each of the end markets presented above.
Our sustainability efforts focus on four key areas of prioritization against which we measure progress: • Empowering our workforce : We nurture a culture that promotes diversity and inclusion and prioritizes employee health, safety, and well-being while supporting our communities and suppliers; • Innovating for Sustainability : We develop products and technology solutions that help create a safer, cleaner, more efficient, electrified, and connected world; • Protecting Our Environment : We focus on building products that reduce environmental impact and improve technological efficiencies while optimizing and reducing our operational footprint through energy, water, and waste reduction; • Operating Responsibly : We consider transparency and accountability fundamental in everything we do, guiding our approach to governance, risk management, and ESG management.
Our ESG efforts focus on four key areas of prioritization against which we measure progress: • Empowering our workforce : We nurture a culture that promotes diversity and inclusion and prioritizes employee health, safety, and well-being while supporting our communities and suppliers; • Innovating for Sustainability : We develop products and technology solutions that help create a safer, cleaner, more efficient, electrified, and connected world; • Protecting Our Environment : We focus on building products that reduce environmental impact and improve technological efficiencies while optimizing and reducing our operational footprint through energy, water, and waste reduction; • Operating Responsibly : We consider transparency and accountability fundamental in everything we do, guiding our approach to governance, risk management, and ESG management.
We believe that continued focused investment in research and development ("R&D") is critical to our future growth and maintaining our leadership positions in the markets we serve. Our R&D efforts are directly related to the timely development of new and enhanced products that are central to our business strategy.
We believe that continued focused investment in R&D is critical to our future growth and maintaining our leadership positions in the markets we serve. Our R&D efforts are directly related to the timely development of new and enhanced products that are central to our business strategy.
Thanks to products and services we have added via acquisition, we have expanded our capabilities and reach to provide our customers with not only components but also either the subsystem of assembled components to manage battery charging in the form of a power distribution unit for renewable energy systems and applications or, in certain specialty transportation markets like marine, the full energy storage system, including battery management and a customized battery pack.
Thanks to products and services we have added via acquisition, we have expanded our capabilities and reach to provide our customers with not only components but also either the subsystem of assembled components to manage battery charging in the form of a power distribution unit for renewable energy systems and applications or, in certain specialty transportation markets, the full energy storage system, including battery management and a customized battery pack.
Compliance with environmental and governmental regulations and meeting customer requirements have increased our cost of doing business in various ways and may continue to do so in the future. We do not currently anticipate material capital expenditures during fiscal year 2023 for environmental control facilities.
Compliance with environmental and governmental regulations and meeting customer requirements have increased our cost of doing business in various ways and may continue to do so in the future. We do not currently anticipate material capital expenditures during fiscal year 2024 for environmental control facilities.
Specific to electric vehicles, we also provide and are developing several components that enable the safe and efficient operation of electrified platforms, such as high-voltage electrical protection, advanced temperature and thermal management sensing, highly-sensitive electric motor position, and next-generation current sensing.
Specific to EVs, we also provide and are developing several components that enable the safe and efficient operation of electrified platforms, such as high-voltage electrical protection, advanced temperature and thermal management sensing, highly sensitive electric motor position, and next-generation current sensing.
Many of our patents protect specific functionality in our products, and others consist of processes or techniques that result in reduced manufacturing costs. The following table presents information on our patents and patent applications as of December 31, 2022: U.S. Non-U.S.
Many of our patents protect specific functionality in our products, and others consist of processes or techniques that result in reduced manufacturing costs. The following table presents information on our patents and patent applications as of December 31, 2023: U.S. Non-U.S.
Our corporate values are the essence of our identity, provide a level-set foundation, and are an important way for us to improve our culture. Our values include passion, excellence, integrity, flexibility, and teamwork—working together towards common goals, the latter of which we refer to as "OneSensata." In various countries, local law requires our participation in works councils.
Our corporate values are the essence of our identity, provide a level-set foundation, and are an important way for us to improve our culture. Our values include passion, excellence, integrity, flexibility, and teamwork—working together towards common goals, the latter of which we refer to as "One Sensata." In various countries, local law requires our participation in works councils.
Accordingly, we regularly review our benefit offerings with external advisers with deep industry expertise in risk insurance, health insurance, and other employee benefits for advice and market expertise. We are committed to providing comprehensive and competitive benefits packages that attract, retain, and enhance the well-being of our employees by supporting their physical, financial, and emotional wellness.
Accordingly, we regularly review our benefit offerings with external advisers with deep industry expertise in risk insurance, health insurance, and other employee benefits for 14 Table of Contents advice and market expertise. We are committed to providing comprehensive and competitive benefits packages that attract, retain, and enhance the well-being of our employees by supporting their physical, financial, and emotional wellness.
A large portion of our R&D activities is directed towards technologies and megatrends that we believe have the potential for significant future growth but relate to products that are not currently within our core business or include new features and capabilities for existing products.
A large portion of our R&D activities is directed towards technologies and market trends that we believe have the potential for significant future growth but relate to products that are not currently within our core business or include new features and capabilities for existing products.
We believe that our relations with our employees are good. The following table presents a summary of our employee population as of December 31, 2022: (in thousands) Total U.S.
We believe that our relations with our employees are good. The following table presents a summary of our employee population as of December 31, 2023: (in thousands) Total U.S.
The contents on, or accessible through, this website or our website are not incorporated into this filing. Further, our references to the URLs for the SEC's website and our website are intended to be inactive textual references only. ITEM 1A.
The contents on, or accessible through, this website or our website are not incorporated into this filing. Further, our references to the URLs for the SEC's website and our website are intended to be inactive textual references only.
This policy applies to all terms and conditions of employment, including recruitment and selection; compensation and benefits; professional development and training; promotions; transfers; social and recreational programs; reductions in force; terminations; and the ongoing development of a work environment built on the premise of diversity, equity, and inclusion.
This policy applies to all terms and conditions of employment, including recruitment and selection; 13 Table of Contents compensation and benefits; professional development and training; promotions; transfers; social and recreational programs; reductions in force; terminations; and the ongoing development of a work environment built on the premise of diversity, equity, and inclusion.
These components and solutions will support a future that is more environmentally sustainable and efficient and include (1) clean energy transportation components for electric vehicles, charging stations, and chargers and (2) mission-critical high-voltage components and subsystems combined into high-value energy management or energy storage solutions.
These components and solutions will support a future that is more environmentally sustainable and efficient and include (1) components for electric vehicles ("EVs"), charging stations, and chargers and (2) mission-critical high-voltage components and subsystems combined into high-value energy management or energy storage solutions.
In addition, where possible, we are working to adjust our long-term supply agreements, strengthen our relationships with our suppliers, increase inventories on hand, increase visibility into long-term supply and demand, and accelerate the use of alternate materials to improve supply chain visibility.
In addition, where possible, we have been working to adjust our long-term supply agreements, strengthen our relationships with our suppliers, increase inventories on hand, increase visibility into long-term supply and demand, and accelerate the use of alternate materials to improve supply chain visibility.
Our average U.S. dollar content in an electric vehicle is expected to expand over the next several years to approximately two times the content that we currently realize on average for internal combustion vehicles, resulting from the broad array of sensors and other components designed into electric vehicles.
Our average U.S. dollar content in an electric vehicle is expected to expand over the next several years to approximately two times the content that we currently realize on average for ICE vehicles, resulting from the broad array of sensors and other components designed into EVs.
Our chassis (e.g., tire management solutions), thermal management (e.g., pressure plus temperature sensing), and safety (e.g., braking and electronic stability control) sensor/product solutions all play critical roles in enabling the safety, improved performance, and increased efficiency and range of both electrified vehicles and internal combustion engine powertrains.
Our chassis (e.g., tire management solutions), thermal management (e.g., pressure plus temperature sensing), and safety (e.g., braking and electronic stability control) sensor/product solutions all play critical roles in enabling the safety, improved performance, and increased efficiency and range of both electrified vehicles and ICE powertrains.
We offer our employees an online global learning management system ("Sensata Learning") that enables them to access live virtual and on-demand training. In fiscal year 2022, we delivered approximately 85,650 hours of training spanning various required learning and professional development topics, including a range of courses on diversity, inclusion, and ethics.
We offer our employees an online global learning management system ("Sensata Learning") that enables them to access live virtual and on-demand training. In fiscal year 2023, we delivered approximately 97,000 hours of training spanning various required learning and professional development topics, including a range of courses on diversity, inclusion, and ethics.
We believe this trend will drive growth in our business for the foreseeable future, particularly in the areas of Electrification and Insights/IoT. Moreover, we believe our broad customer base, global diversification, and evolving portfolio provide the foundation that will allow us to grow with these megatrends across a diverse set of markets.
We believe this trend will drive growth in our business for the foreseeable future, particularly in the area of Electrification. Moreover, we believe our broad customer base, global diversification, and evolving portfolio provide the foundation that will allow us to grow with these trends across a diverse set of markets.
In addition, tightening HVOR emissions regulations in the United States, Europe, and China have resulted in increased sensor content in engines and after-treatment. Our differentiated operator controls and systems improve operator productivity and enable simplified, improved, and safer operation, even in harsh conditions.
In addition, tightening HVOR emissions regulations in the U.S., Europe, and China have resulted in increased sensor content in engines and exhaust after-treatment. Our differentiated operator controls and systems improve operator productivity and enable simplified, improved, and safer operation, even in harsh conditions.
Customers Overall, our customers include a wide range of industrial and commercial manufacturers and suppliers across multiple end markets, primarily OEMs in the climate control, appliance, medical, energy and charging infrastructure, data/telecom, aerospace and defense industries, as well as systems integrators and aerospace and motor and compressor distributors.
Within the Sensing Solutions reportable segment, our customers include a wide range of industrial and commercial manufacturers and suppliers across multiple end markets, primarily OEMs in the climate control, appliance, medical, energy and charging infrastructure, data/telecom, aerospace and defense industries, as well as systems integrators and aerospace and motor and compressor distributors.
Raw Materials 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 labor laws and the impact of tariffs; trade barriers and disputes; global economic or political events, including government actions and labor strikes; suppliers' allocations to other purchasers; interruptions in production by suppliers; increased logistics costs; changes in foreign currency exchange rates; and prevailing price levels.
No license may be terminated under the agreement, even in the event of a material breach. 12 Table of Contents Raw Materials 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 labor laws and the impact of tariffs; trade barriers and disputes; global economic or political events, including government actions and labor strikes; suppliers' allocations to other purchasers; interruptions in production by suppliers; increased logistics costs; changes in foreign currency exchange rates; and prevailing price levels.
The most recent Integrity Week, in fiscal year 2022, focused on “Doing What’s Right – Every Day, Every Site.” By sharing best practices and stories from their professional journeys, various executives and site leaders at Sensata illustrated how integrity is not just about doing the right thing but how it is intrinsic to delivering value and sustainability for our company, environment, and communities.
The most recent Integrity Week, in fiscal year 2023, focused on “Integrity in Action.” By sharing best practices and stories from their professional journeys, various executives and site leaders at Sensata illustrated how integrity is not just about doing the right thing but how it is intrinsic to delivering value and sustainability for our company, environment, and communities.
Patents 341 587 Pending patent applications filed within the last five years 105 340 Our patents have expiration dates ranging from 2023 to 2045. We also own a portfolio of trademarks and license various patents and trademarks. "Sensata" and our logo are trademarks. We use licensing arrangements with respect to certain technology provided in our sensor and electrical protection products.
Patents 333 603 Pending patent applications filed within the last five years 106 297 Our patents have expiration dates ranging from 2024 to 2045. We also own a portfolio of trademarks and license various patents and trademarks. "Sensata" and our logo are trademarks. We use licensing arrangements with respect to certain technology provided in our sensor and electrical protection products.
Our TPMS is used in automotive and HVOR OEMs and fleets to eliminate downtime, reduce operating costs, improve fuel efficiency, and create safer driving conditions. Also, HVAC variable systems are the preferred method to meet stringent energy efficiency and environmental regulations.
Our tire pressure sensors are used by automotive and HVOR OEMs and fleets to reduce downtime and operating costs, improve fuel efficiency, and create safer driving conditions. Also, HVAC variable systems are the preferred method to meet stringent energy efficiency and environmental regulations.
Customers Our customers include leading global automotive, on-road truck, construction, and agriculture OEMs, the companies that supply parts directly to these OEMs, known as Tier 1 suppliers, various aftermarket distributors, fleet transportation, and logistics customers.
Customers Our customers in the Performance Sensing reportable segment include leading global automotive, on-road truck, construction, and agriculture original equipment manufacturers ("OEMs"), the companies that supply parts directly to these OEMs, known as Tier 1 suppliers, various aftermarket distributors, fleet transportation, and logistics customers.
We are experts in the applications we serve, enabling us to provide industry-leading solutions to our customers. 10 Table of Contents Sensing Solutions Sensing Solutions, which accounted for approximately 26% of our net revenue in fiscal year 2022, primarily serves the industrial and aerospace industries through the development and manufacture of a broad portfolio of application-specific sensor and electrical protection products used in a diverse range of industrial markets, including the appliance, HVAC, water management, operator controls, charging infrastructure, renewable energy generation, green hydrogen production, and microgrid applications and markets, as well as the aerospace market, including commercial aircraft, defense, and aftermarket markets.
Sensing Solutions Sensing Solutions, which accounted for approximately 26% of our net revenue in fiscal year 2023, primarily serves the industrial and aerospace industries through the development and manufacture of a broad portfolio of application-specific sensor and electrical protection products used in a diverse range of industrial markets, including the appliance, HVAC, water management, operator controls, charging infrastructure, renewable energy generation, green hydrogen production, and microgrid applications and markets, as well as the aerospace market, including commercial aircraft, defense, and aftermarket markets.
We have published our diversity goals in our Sustainability Report as discussed under the heading Sustainability Report included elsewhere in this Item 1: Business . 14 Table of Contents Social and Human Rights Matters We have policies related to our position on various social and human rights matters, including child labor, forced labor, human trafficking, health and safety, non-discrimination, and environmental matters.
Our diversity goals are discussed under the heading Environmental, Social, and Governance included elsewhere in this Item 1: Business . Social and Human Rights Matters We have policies related to our position on various social and human rights matters, including child labor, forced labor, human trafficking, health and safety, non-discrimination, and environmental matters.
Based Female Covered by Collective Bargaining Employees 20.8 1.7 11.6 0.2 Contractors (1) 2.2 0.2 1.1 — __________________________ (1) We engage contract workers in multiple locations, primarily to cost-effectively manage variations in manufacturing volume, but also to perform engineering and other general services. Includes approximately 1,800 direct labor contract workers worldwide.
Based Female Covered by Collective Bargaining Employees 19.4 1.5 10.8 0.2 Contractors (1) 2.5 0.1 1.3 — __________________________ (1) We engage contract workers in multiple locations, primarily to cost-effectively manage variations in manufacturing volume, but also to perform engineering and other general services. Includes approximately 2,200 direct labor contract workers worldwide.
We believe that our ability to design and produce customized solutions globally, breadth and scale of product offerings, technical expertise and development capability, product service and responsiveness, and a commercially competitive offering position us well to succeed in these markets.
We believe that our ability to design and produce customized solutions globally, breadth and scale of product offerings, technical expertise and development capability, product service and responsiveness, and a commercially competitive offering position us well to succeed in these markets. We are experts in the applications we serve, enabling us to provide industry-leading solutions to our customers.
However, the impact of the global supply chain shortages, including production delays on a vast and varied number of products across industries and geographies and increased procurement and logistics costs, is unprecedented. Accordingly, we are actively working with our customers to share the inflationary burden of these factors.
The impact of these global supply chain shortages of the past few years, including production delays on a vast and varied number of products across industries and geographies and increased procurement and logistics costs, has been unprecedented. Accordingly, we continue to actively work with our customers to share the inflationary burden of these factors.
In 2006, we entered into a perpetual, royalty-free cross-license agreement with our former owner, Texas Instruments Incorporated, which permits each party to use specified technology owned by the other party in its business. No license may be terminated under the agreement, even in the event of a material breach.
In 2006, we entered into a perpetual, royalty-free cross-license agreement with our former owner, Texas Instruments Incorporated, which permits each party to use specified technology owned by the other party in its business.
We identified the following key issues and set corresponding goals as follows: ◦ DEI : Our goals in this area are by 2026 to reach (1) 30% female representation in manager and above roles worldwide and (2) 25% racial/ethnic diversity representation in manager and above roles in the U.S.; ◦ Energy and Emissions : Our goals in this area are (1) to achieve carbon neutrality in our operations by 2050 and (2) to reduce greenhouse gas emissions intensity by 10% by 2026, from a 2021 baseline; ◦ Responsible Sourcing : Our goals in this area are by 2026 to (1) achieve a 75% response rate on our responsible sourcing campaigns and (2) achieve 100% sourcing of conflict minerals and cobalt from smelters that are conformant with the Responsible Minerals Assurance Process or equivalent standard.
We identified the following key issues and set corresponding goals as follows: ◦ DEI : Our goals in this area are by 2026 to reach (1) 30% female representation in manager and above roles worldwide and (2) 25% racial/ethnic diversity representation in manager and above roles in the U.S.; ◦ Energy and Emissions : Our goals in this area are (1) to achieve carbon neutrality in our operations by 2050, (2) to reduce GHG emissions intensity by 10% by 2026, from a 2021 baseline, which was achieved in 2022, (3) a new goal added of a 5% reduction in our market-based emissions intensity in 2023 from 2022, which was achieved in 2023, and (4) a new goal added to reduce absolute market-based emissions by 45% by 2030, from a 2021 baseline; ◦ Responsible Sourcing : Our goals in this area are by 2026 to (1) achieve a 75% response rate on our responsible sourcing campaigns and (2) achieve 100% sourcing of conflict minerals from smelters that are conformant with the Responsible Minerals Assurance Process ("RMAP") or equivalent standard.
We are not aware of any threatened or pending material environmental investigations, lawsuits, or claims involving us or our operations. 16 Table of Contents Many of our products are governed by material content restrictions and reporting requirements, examples of which include: European Union ("EU") regulations, such as Registration, Evaluation, Authorization, and Restriction of Chemicals ("REACH"), Restriction of Hazardous Substances ("RoHS"), and End of Life Vehicle ("ELV"); U.S. regulations, such as the conflict minerals requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and similar regulations in other countries, such as the German Explosives Act.
Many of our products are governed by material content restrictions and reporting requirements, examples of which include: European Union ("EU") regulations, such as Registration, Evaluation, Authorization, and Restriction of Chemicals ("REACH"), Restriction of Hazardous Substances ("RoHS"), and End of Life Vehicle ("ELV"); U.S. regulations, such as the conflict minerals requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and similar regulations in other countries, such as the German Explosives Act.
OEMs and Tier 1 suppliers seek to partner with suppliers with a proven record of quality, on-time delivery, and performance, as well as the engineering and manufacturing scale/resources to meet their needs over the multi-year lifecycle of these highly engineered vehicles and systems.
OEMs and Tier 1 suppliers seek to partner with suppliers with a proven record of quality, on-time delivery, and performance, as well as the engineering and manufacturing scale/resources to meet their needs over the multi-year lifecycle of these highly engineered vehicles and systems. Markets The markets we serve are seeking to provide cleaner, safer, more electrified, and connected solutions.
Our Clean Energy Solutions business includes products such as high-voltage contactors, inverters, rectifiers, and battery management systems and focuses on the industrial, stationary, and commercial energy storage end markets. Applications include those in battery-energy storage and renewable energy.
Our Clean Energy Solutions business includes products and solutions such as high-voltage contactors, inverters, rectifiers, energy storage systems, electrical sensing products, and battery management systems that serve the industrial, transportation, stationary, and commercial energy conversion and storage end markets. Applications include those in battery-energy storage, microgrids, and renewable energy generation and storage.
Expenses related to these activities are less likely than our more mainstream development activities to result in increased near-term revenue. 12 Table of Contents We benefit from many development opportunities at an early stage for several reasons: (1) we are the incumbent in many systems for our key customers; (2) we have robust design and service capability; and (3) our global engineering teams are located close to key customers in regional business centers.
We benefit from many development opportunities at an early stage for several reasons: (1) we are the incumbent in many systems for our key customers; (2) we have robust design and service capability; and (3) our global engineering teams are located close to key customers in regional business centers.
As of December 31, 2022, we had eleven ERGs globally focused on the following areas — gender equity, generational diversity, cross-cultural appreciation, Black/African American, Hispanic/Latinx, Asian/ Asian-American & Pacific Islander heritage, and LGBTQIA+ Pride.
As of December 31, 2023, we had ERGs globally focused on the following areas — gender equity, generational diversity, cross-cultural appreciation, Black/African American, Hispanic/Latinx, Asian/ Asian-American & Pacific Islander heritage, and LGBTQIA+ Pride, disability awareness, and armed forces. Our ERGs are set up globally with local chapters worldwide.
Any failure to maintain compliance with such regulations could limit our ability to import or export raw materials and finished goods. These laws and regulations are subject to change, and any such change may limit or exclude existing or future business opportunities, require us to change technology, or incur expenditures to comply with such laws and regulations.
These laws and regulations are subject to change, and any such change may limit or exclude existing or future business opportunities, require us to change technology, or incur expenditures to comply with such laws and regulations.
Our Sensata INSIGHTS business within Performance Sensing tends to peak in the last quarter of the calendar year as customers exhaust their annual capital budgets. 13 Table of Contents Human Capital Resources Our employees, whom we refer to as Team Sensata, are responsible for upholding our purpose – to help our customers and partners safely deliver a safer, cleaner, more efficient, more electrified, and increasingly more connected world – and they embody our values in all aspects of daily work.
Human Capital Resources Our employees, whom we refer to as Team Sensata, are responsible for upholding our purpose – to help our customers and partners deliver a safer, cleaner, more efficient, more electrified, and increasingly more connected world – and they embody our values in all aspects of daily work.
For a discussion of the risks relating to the attraction and retention of management and executive management employees, see Item 1A: Risk Factors included elsewhere in this Report.
For a discussion of the risks relating to the attraction and retention of management and executive management employees, see Item 1A: Risk Factors included elsewhere in this Report. Environmental, Social, and Governance Environmental, social, and governance (“ESG”) objectives are central to Sensata’s business strategy, values, and culture.
On an annual basis, we conduct a leadership review process with our chief executive officer, chief human resources officer, and business and functional leaders to identify key talent for additional development opportunities.
On an annual basis, we conduct a leadership review process with our chief executive officer, chief administrative officer, and business and functional leaders to identify key talent for additional development opportunities. This helps ensure optimal use of the talent for the benefit of both the employee and Sensata.
Licensing decisions are made based on the 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. We have a trade compliance team and other systems in place to apply for licenses and otherwise comply with import and export regulations.
Licensing decisions are made based on the 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.
Product Categories The following table presents the significant product categories offered by Performance Sensing and the corresponding key products, solutions, applications, systems, and end markets: Key Products/Solutions Key Applications/Systems Key End Markets Product category: Sensors Pressure sensors Speed and position sensors High-temperature sensors Thermal management and air conditioning systems Powertrain Exhaust after-treatment Suspension Braking Tire management solutions Operator controls Radar solutions Battery packs Automotive HVOR Product category: Electrical protection High-voltage contactors/fuses Battery management system Charging inlet modules High-voltage distribution units Electrical protection Electrical powertrain Battery management Charging systems Automotive HVOR Product category: Other Vehicle area networks Data collection devices and software Data insights (asset tracking and vehicle telematics) Usage-based insurance HVOR The table below sets forth the amount of net revenue generated by our product categories in Performance Sensing, reconciled to total segment net revenue, for the years ended December 31, 2022, 2021, and 2020: For the year ended December 31, (In thousands) 2022 2021 2020 Net revenue: Sensors (1) $ 2,627,788 $ 2,722,121 $ 2,171,364 Electrical protection 85,167 41,882 35,366 Other (1) 263,801 83,905 17,080 Performance Sensing net revenue $ 2,976,756 $ 2,847,908 $ 2,223,810 __________________________ (1) Beginning in the year ended December 31, 2022, we adjusted our product categories to better reflect how we currently view our products.
Product Categories The following table presents the significant product categories offered by Performance Sensing and the corresponding key products, solutions, applications, systems, and end markets: Key Products/Solutions Key Applications/Systems Key End Markets Product category: Sensors Pressure sensors Speed and position sensors High-temperature sensors Thermal management and air conditioning systems Powertrain Exhaust after-treatment Suspension Braking Tire management solutions Radar solutions Battery packs Automotive HVOR Product category: Electrical protection High-voltage contactors/fuses Battery management system Charging inlet modules High-voltage distribution units Electrical protection Electrical powertrain Battery management Charging systems Automotive HVOR Product category: Other Vehicle area networks Data collection devices and software Data insights (asset tracking and vehicle telematics) Usage-based insurance HVOR 9 Table of Contents The table below sets forth the amount of net revenue generated by our product categories in Performance Sensing, reconciled to total segment net revenue, for the years ended December 31, 2023, 2022, and 2021: For the year ended December 31, (In thousands) 2023 2022 2021 Net revenue: Sensors (1) $ 2,683,192 $ 2,571,425 $ 2,675,439 Electrical protection 120,636 85,167 41,882 Other 198,900 263,801 83,905 Performance Sensing net revenue (1) $ 3,002,728 $ 2,920,393 $ 2,801,226 _________________________ (1) In the year ended December 31, 2023, we moved our material handling products from the HVOR operating segment (in the Performance Sensing reportable segment) to the Sensing Solutions operating segment to align with new management reporting.
Our electrical protection solutions safeguard the expensive electronics used to power the vehicle and allow for an increase in power levels to improve charging times. The joint venture created with Churod Electronics in early fiscal year 2021 expanded our contactor offering by making available new technology applicable to lower voltage ranges than GIGAVAC's solutions.
The joint venture created with Churod Electronics in early fiscal year 2021 expanded our contactor offering by making available new technology applicable to lower voltage ranges than GIGAVAC's solutions.
This helps ensure optimal use of the talent for the benefit of both the employee and Sensata. 15 Table of Contents Ethics We have adopted a Code of Business Conduct and Ethics governing the conduct of our personnel, including our principal executive officer, principal financial officer, principal accounting officer, and controller, and persons performing similar functions.
Ethics We have adopted a Code of Business Conduct and Ethics governing the conduct of our personnel, including our principal executive officer, principal financial officer, principal accounting officer, and controller, and persons performing similar functions.
Our go-to-market approach leverages existing channels and also includes new channels. 11 Table of Contents Product Categories The following table presents the significant product categories offered by Sensing Solutions and the corresponding key products, solutions, applications, systems, and end markets: Key Products/Solutions Key Applications/Systems Key End Markets Product category: Electrical protection Bimetal electromechanical controls Circuit breakers High-voltage contactors/fuses Battery management systems Energy storage systems Switches and relays Motors, compressors, pumps Home appliances Lighting Commercial and military aircraft Marine/industrial Data and telecom equipment Medical equipment Recreational vehicles Aerospace and defense Industrial Appliance and HVAC Marine Medical Energy/solar Product category: Sensors Position sensors Pressure sensors Temperature sensors Gas leak detection sensors Motors, compressors, pumps Hydraulic machinery Motion control systems Commercial and military aircraft Motor/platform controllers Aerospace and defense Industrial automation Appliance and HVAC Marine Energy Product category: Other Inverters Brushless DC motors Current sensors Rectifiers and frequency converters Power conversion systems Recreational vehicles Grid harmonics and power delivery Mobile power Renewable power generation Energy storage Aerospace and defense The table below sets forth the amount of net revenue generated by our sensors and electrical protection product categories in Sensing Solutions, reconciled to total segment net revenue, for the years ended December 31, 2022, 2021, and 2020: For the year ended December 31, (In thousands) 2022 2021 2020 Net revenue: Electrical protection $ 625,316 $ 593,259 $ 468,635 Sensors 259,275 230,364 209,244 Other 167,915 149,275 143,889 Sensing Solutions net revenue $ 1,052,506 $ 972,898 $ 821,768 Competitors Within each of the principal product categories in Sensing Solutions, we compete with divisions of large multinational industrial corporations and companies with smaller market share that compete primarily in specific markets, applications, systems, or products.
Product Categories The following table presents the significant product categories offered by Sensing Solutions and the corresponding key products, solutions, applications, systems, and end markets: Key Products/Solutions Key Applications/Systems Key End Markets Product category: Electrical protection Bimetal electromechanical controls Circuit breakers High-voltage contactors/fuses Battery management systems Energy storage systems Switches and relays Motors, compressors, pumps Home appliances Lighting Commercial and military aircraft Industrial Data and telecom equipment Medical equipment Recreational vehicles Aerospace and defense Industrial Appliance and HVAC Medical Energy/solar Product category: Sensors Position sensors Pressure sensors Temperature sensors Gas leak detection sensors Motors, compressors, pumps Hydraulic machinery Motion control systems Commercial and military aircraft Motor/platform controllers Operator controls Aerospace and defense Industrial automation Appliance and HVAC Energy Product category: Other Inverters Brushless DC motors Current sensors Rectifiers and frequency converters Power conversion systems Recreational vehicles Grid harmonics and power delivery Mobile power Renewable power generation Energy storage Aerospace and defense The table below sets forth the amount of net revenue generated by our sensors and electrical protection product categories in Sensing Solutions, reconciled to total segment net revenue, for the years ended December 31, 2023, 2022, and 2021: For the year ended December 31, (In thousands) 2023 2022 2021 Net revenue: Electrical protection $ 557,313 $ 625,316 $ 593,259 Sensors (1) 308,333 315,638 277,046 Other 185,709 167,915 149,275 Sensing Solutions net revenue (1) $ 1,051,355 $ 1,108,869 $ 1,019,580 _________________________ (1) In the year ended December 31, 2023, we moved our material handling products from the HVOR operating segment (in the Performance Sensing reportable segment) to the Sensing Solutions operating segment to align with new management reporting.
We have achieved our current cost position through a continual process of migration and transformation to best-cost manufacturing locations, global best-cost sourcing, product design improvements, and ongoing productivity-enhancing initiatives.
Accordingly, NBOs are an indicator of future revenue potential. 5 Table of Contents Manufacturing From a manufacturing perspective, we have achieved our current cost position through development of manufacturing scale and efficiencies, a continual process of migration and transformation to best-cost manufacturing locations, global best-cost sourcing, product design improvements, and ongoing productivity-enhancing initiatives.
Our GIGAVAC-branded high-voltage electrical protection products augment our electrical protection portfolio to address many of the needs in electric vehicles as voltage systems continue to increase. As system voltages increase, the burden on the systems and subsystems to properly control and protect the vehicle from electrical failure becomes mission-critical, and is where our solutions play a critical role.
As system voltages increase, the burden 7 Table of Contents on the systems and subsystems to properly control and protect the vehicle from electrical failure becomes mission-critical and is where our solutions play a critical role.
Our products perform many functions, including prevention of damage from excess heat or electrical current, optimization of system performance, low-power circuit control, renewable energy generation, and power conversion from direct current ("DC") power to alternating current ("AC") power.
Our products perform many functions, including prevention of damage from excess heat or electrical current, optimization of system performance, low-power circuit control, renewable energy generation, and power conversion from DC power to alternating current power. Our electrical protection devices are critical for the safe operation of, for example, small appliances that are used in every day life.
Transportation industries provide some of the largest markets for sensors, giving participants with a presence in these markets significant scale advantages over those participating only in smaller, more niche industrial and medical markets. 8 Table of Contents Market Trends We believe that net revenue growth from the automotive and HVOR sensor markets served by Performance Sensing has historically been driven by three principal trends, including (1) growth in the number of vehicles produced globally, (2) expansion in the number and type of sensors per vehicle, and (3) efforts toward commercializing higher value sensors.
We believe that net revenue growth from the automotive and HVOR sensor markets served by Performance Sensing has historically been driven by three principal trends, including (1) growth in the number of vehicles produced globally, (2) expansion in the number and type of sensors per vehicle, and (3) efforts toward commercializing higher value sensors.
As described in the Sustainability Report, we conducted a materiality assessment to identify the ESG issues that were most important to our business and stakeholders.
Following the materiality assessment we conducted in fiscal year 2021, we identified the ESG issues that were most important to our business and stakeholders.
We believe that the key competitive factors in these markets are product performance, quality, and reliability. Technology and Intellectual Property We develop products that address increasingly complex engineering and operating performance requirements to help our customers solve their most difficult engineering challenges in the automotive, HVOR, fleet management, industrial, clean energy, and aerospace industries.
Technology and Intellectual Property We pride ourselves as a world leader and early innovator in mission-critical, hard-to-do sensor solutions. We develop products that address increasingly complex engineering and operating performance requirements to help our customers solve their most difficult engineering challenges in the automotive, HVOR, fleet management, industrial, clean energy, and aerospace industries.
On-Road Truck Production: Global production of heavy-duty trucks had also demonstrated consistent growth until fiscal year 2020, which declined as a result of the economic impacts of COVID-19. Global production of heavy- and medium-duty trucks in the markets we serve rebounded to increase approximately 20% in fiscal year 2021, but decreased approximately 12% in fiscal year 2022.
In fiscal year 2022, growth in global production of light vehicles returned, and in fiscal year 2023, according to third party data, global production increased approximately 9% from the prior year. On-Road Truck Production: Global production of heavy-duty trucks had also demonstrated consistent growth until fiscal year 2020, which declined as a result of the economic impacts of COVID-19.
Dynapower On July 12, 2022, we completed the acquisition of all of the outstanding equity interests of DP Acquisition Corp ("Dynapower"), a leader in power conversion systems, including inverters, converters, and rectifiers for renewable energy generation, green hydrogen production, electric vehicle charging stations, and microgrid applications, as well as industrial and defense applications.
Our fiscal year 2022 acquisition of Dynapower was a foundational addition to our Clean Energy Solutions strategy. Dynapower is a leader in power conversion systems, including inverters, converters, and rectifiers for renewable energy generation, green hydrogen production, electric vehicle charging stations, and microgrid applications, as well as industrial and defense applications.
Throughout this Report, we use the term “electric vehicles” holistically to reference plug-in hybrid and battery-electric vehicles of all kinds, unless otherwise specified.
Throughout this Report, we use the term “electric vehicles” or "EVs" holistically to reference plug-in hybrid and battery-electric vehicles of all kinds, unless otherwise specified. Because of the prevalence of ICE vehicles today, applications in these vehicles make up most of our current transportation addressable markets (automotive and HVOR).
To better pursue clean energy components and system opportunities, in fiscal year 2021, we organized a new business unit in our Sensing Solutions reportable segment, Clean Energy Solutions, which includes products and solutions such as high-voltage contactors, inverters, rectifiers, and battery management systems, that serve the industrial, stationary, and commercial energy conversion and storage end markets.
Clean Energy Solutions includes products and solutions such as high-voltage contactors, inverters, rectifiers, energy storage systems, electrical sensing products, and battery management systems, that serve the industrial, stationary, and commercial energy conversion and storage end markets. Our fiscal year 2022 acquisition of Dynapower was a foundational addition to our Clean Energy Solutions strategy.
We also see the growing importance of new ‘startup’ OEMs as market disruptors, and Sensata’s flexibility, speed, expertise, and global footprint provide these new entrants with a supplier/partner capable of meeting their demanding requirements. Fleet transportation and logistics customers demand data-driven insight, connectivity, and prognostics to increase productivity and operational efficiency.
We also see the growing importance of new ‘startup’ OEMs as market disruptors, and Sensata’s flexibility, speed, expertise, and global footprint provide these new entrants with a supplier/partner capable of meeting their demanding requirements. We have had relationships with our top ten customers for an average of 32 years.
Examples include those used in subsystems of 7 Table of Contents automobiles, on-road trucks, and off-road equipment, such as tire pressure monitoring, thermal management, electrical protection, regenerative braking, powertrain (engine/transmission), exhaust management, and operator controls.
Examples include those used in subsystems of automobiles, on-road trucks, and off-road equipment, such as tire pressure monitoring, thermal management, electrical protection, regenerative braking, powertrain (engine/transmission), and exhaust management. Our products are used in subsystems that, among other things, improve operating performance and efficiency and contribute to environmentally sustainable and safe solutions.
We focus our employee communications on continual engagement, providing updates on our business, technology, and workforce, including learning opportunities.
We survey our employees bi-annually to understand where we can initiate improvements in these areas. We focus our employee communications on continual engagement, providing updates on our business, technology, and workforce, including learning opportunities.
In addition to transportation applications, manufacturers of material handling equipment, marine vessels, aircraft, and industrial systems are also addressing ever-tightening greenhouse gas emissions regulations and taking advantage of falling battery costs and increasing energy capacities of lithium-ion battery cells to provide electrified solutions to their customers. 5 Table of Contents Because of the prevalence of internal combustion engine vehicles today, applications in these vehicles make up most of our current transportation addressable markets.
In addition, the need for electrification is evident in all aspects of daily life, not just in transportation applications. Manufacturers of material handling equipment, aircraft, and industrial systems are also addressing ever-tightening greenhouse gas ("GHG") emissions regulations and taking advantage of falling battery costs and increasing energy capacities of lithium-ion battery cells to provide electrified solutions to their customers.
Electrification megatrend Our objective with the Electrification megatrend initiative is to become a leading and foundational player in electrification components and sub-systems across broad industrial, transportation, aerospace, and stationary infrastructure recharging and energy storage end markets and to be a comprehensive solutions provider in select end market segments.
It is only loosely correlated to normal unit demand fluctuations in the markets we serve. 6 Table of Contents Electrification Our objective with the Electrification initiative is to become a leading and foundational player in electrification components and sub-systems across broad industrial, transportation, aerospace, recharging infrastructure, and renewable energy generation and storage end markets.
In June 2022, we published our second Sustainability Report, which shares our environmental, social, and governance ("ESG") strategies, performance, and goals. One of our key areas of prioritization as identified in the Sustainability Report is to empower our workforce through promotion of a culture that values inclusion and diversity and prioritizes employee well-being and safety.
One of our key areas of prioritization is to empower our workforce through promotion of a culture that values inclusion and diversity and prioritizes employee well-being and safety. A summary of additional content in the Sustainability Report can be found under the heading Environmental, Social, and Governance included elsewhere in this Item 1: Business .
Our pressure and temperature sensors are critical to optimize these systems and enable them to achieve higher levels of efficiency.
Our pressure and temperature sensors are critical to optimize these systems and enable them to achieve higher levels of efficiency. We consider these capabilities to be core to our historical success and will continue to be significant drivers of market outgrowth in the future.
In addition, we believe that the automotive and HVOR sensor markets are, and will continue to be, substantially impacted in the near term by current megatrends, including Electrification and Insights/IoT. Light vehicle production : Global production of light vehicles had consistently demonstrated steady annual growth for most of the decade up to 2019 when it started to decline.
In addition, we believe that the automotive and HVOR sensor markets are, and will continue to be, substantially impacted in the near term by Electrification. 8 Table of Contents Light vehicle production : Global production of light vehicles has consistently demonstrated steady annual growth for most of the past decade, with the exception of fiscal years 2020 and 2021, which were depressed production years due to the impact of the COVID-19 pandemic on global markets.
Markets Demand for our sensor products is driven by many of the same factors as in the transportation sensor markets: regulation of emissions, greater energy efficiency and safety, and consumer demand for new features. Gross Domestic Product growth is a broad indicator of demand for our consolidated industrial markets over the long term.
Dynapower also provides aftermarket sales and service to maintain its equipment in the field. 10 Table of Contents Markets Demand for our sensor products is driven by many of the same factors as in the transportation sensor markets: regulation of emissions, greater energy efficiency and safety, and consumer demand for new features.
We use Purchasing Managers' Index to gauge short-term trends in the industrial, appliance, and HVAC markets we serve. For instance, the growing consumer demand for cleaner heat sources, like heat pumps, which utilize our content, is being driven by government initiatives to reduce carbon emissions to net zero by 2050.
For instance, the growing consumer demand for cleaner heat sources, like heat pumps, which utilize our content, is being driven by government initiatives to reduce carbon emissions to net zero by 2050. We continue to focus our efforts on expanding our presence in all global geographies and serving our global customers in a highly efficient and cost-effective manner.
Sensata is a leading provider of high-voltage electrical protection on electric vehicles and charging infrastructure and we seek to be the partner of choice for HVOR, industrial, marine, and aerospace OEMs transitioning to electrified solutions. We also intend to participate in other areas of the evolving market that enable electrification to become more widespread.
We are a leading provider of high-voltage electrical protection on EVs and charging infrastructure and we also seek to be the partner of choice for HVOR, industrial, and aerospace OEMs transitioning to electrified solutions. We are directly enabling direct current ("DC") fast charging through high-voltage components.
We continue to drive investments in innovative technologies, competencies, and solutions to enable our customers' success as they pivot toward an electrified world.
We continue to drive investments in innovative technologies, competencies, and solutions to enable our customers' success as they pivot toward an electrified world. Performance Sensing The Performance Sensing reportable segment, which accounted for approximately 74% of our net revenue in fiscal year 2023, represents an aggregation of two operating segments, Automotive and HVOR.
It has historically been difficult to pass increased prices for manufactured components and raw materials to our customers through price increases. Therefore, a significant increase in the price or decrease in the availability of these items could materially increase our operating costs and materially and adversely affect our business and results of operations.
It has historically been difficult to pass increased prices for manufactured components and raw materials to our customers through price increases.
Our transportation addressable markets (automotive and HVOR) are large today and growing, with expectations that they will continue to grow over the next ten years.
These addressable markets are large today and growing, with expectations that they will continue to grow over the next ten years. However, the automotive market is rapidly changing with the transformation into electrification. Most of our customers have made significant commitments regarding the transition from ICEs to electrified platforms.
There was no revenue related to these products in the year ended December 31, 2020. The other product category in the year ended December 31, 2022 includes $173.3 million of revenue related to the Sensata INSIGHTS business. Competitors Within each of the principal product categories in Performance Sensing, we compete with a variety of independent suppliers.
These products were previously categorized in the "sensors" product category. Accordingly, Performance Sensing net revenue for the years ended December 31, 2022 and 2021, both overall and in the sensors product category, have been recast to reflect this realignment. Competitors Within each of the principal product categories in Performance Sensing, we compete with a variety of independent suppliers.
China remains a priority for us because of its export focus and the increasing domestic consumption of products that use our devices. Clean Energy Solutions serves a broad range of industrial, transportation, and stationary energy storage end markets with applications such as battery-energy storage, microgrids, and renewable energy generation and storage applications.
Our customers include established multinationals as well as local producers in markets such as China, India, Eastern Europe, and Turkey. China remains a priority for us because of its export focus and the increasing domestic consumption of products that use our devices.
We provide many of our innovative and differentiated components, such as those used in braking, tires, and environmental control, from traditional internal combustion engine vehicles for use in electric vehicle applications.
Many of the components and subsystems we have historically developed and produced, such as those used in braking, tires, and environmental control in traditional ICE vehicles, will play a significant role in this expansion, as we can convert much of this technology for use in electric vehicle applications.
We believe large OEMs and other multinational companies are increasingly demanding a global presence to supply sensors and electrical protection components for their key platforms worldwide. As our customers develop common global electrified platforms to drive scale and efficiency across their global markets, we are well-positioned to serve them with our global manufacturing and technical centers.
This has allowed us to build trust through various market cycles and through periods of significant change and disruption. We believe large OEMs and other multinational companies are increasingly demanding a global presence to supply sensors and electrical protection components for their key platforms worldwide.
We will continue to design and manufacture products and solutions for mission-critical, hard-to-do applications that enable our customers to protect the environment and improve quality of life. Examples of applications that fall within this trend include next-generation powertrains, tire pressure monitoring systems ("TPMS”), safety and environmental systems, operator sensing systems, and HVAC variable speed, flow, and air systems.
This is despite the expected transition within the automotive end market from internal combustion engines ("ICEs") to electrified platforms during that period of time. We design and manufacture products and solutions for mission-critical, hard-to-do applications that enable our customers to protect the environment and improve quality of life.
Growth drivers Significant drivers of growth in our business, which are expected to significantly impact our customers and business strategy, include the Electrification and Insights/IoT megatrends, as well as the Safe & Efficient growth trend, each described in more detail below.
In order to take advantage of the unprecedented opportunity for growth that these changes represent, we are leveraging certain material growth drivers. These material drivers include Electrification and Safe & Efficient, each of which are described in more detail under the heading Growth Drivers .
Removed
Item 1: Business, are significantly transforming the industries in which we operate and are creating greater secular demand for our current and new innovative products, resulting in growth that exceeds end market production growth in many of the markets we serve, a defining characteristic of our company.
Added
BUSINESS The Company The reporting company is Sensata Technologies Holding plc, a public limited company incorporated under the laws of England and Wales, and its consolidated subsidiaries, collectively referred to as the "Company," "Sensata," "we," "our," and "us." We are a global industrial technology company that strives to help our customers and partners safely deliver a cleaner, more efficient, electrified, and connected world.
Removed
We believe the medium- to long-term outlook for internal combustion engine powertrains and industrial equipment will evolve with, and be impacted by, Electrification and other adjacent technologies. Accordingly, we are focusing on expanding our market share on electrified platforms, including sensors, electrical protection components and systems, and battery-energy management systems as full solutions.

… 98 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

45 edited+41 added−10 removed67 unchanged
Biggest changeOur operations and transactions with customers in China could continue to be adversely affected by increased tariffs and export restrictions and could be otherwise adversely affected by other changes to market conditions, changes to the regulatory environment, or interpretation of Chinese law. 18 Table of Contents Adverse conditions in the industries upon which we are dependent, including the automotive industry, have had, and may in the future have, adverse effects on our business.
Biggest changeAdverse conditions in the industries upon which we are dependent, including the automotive industry, have had, and may in the future have, adverse effects on our business. We are dependent on market dynamics to sell our products, and our operating results could be adversely affected by cyclical and reduced demand in these markets.
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.
We have experienced attacks to our systems and networks and have from time-to-time experienced cybersecurity incidents, 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 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 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.
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 19 Table of Contents 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.
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 world, these systems also could be susceptible to similar interruptions, including the possibility of unauthorized access.
We also face the challenge of supporting our older systems and implementing necessary upgrades. Moreover, as we continue to develop products containing complex software systems designed to support today’s increasingly connected world, these systems also could be susceptible to similar interruptions, including the possibility of unauthorized access.
If, when required, we are unable to repay, refinance, or restructure our indebtedness under, or amend the covenants contained in, the Credit Agreement, or if a default otherwise occurs, the lenders under the Senior Secured Credit Facilities could: elect to terminate their commitments thereunder; cease making further loans; declare all borrowings outstanding, together with accrued interest and other fees, to be immediately due and payable; institute foreclosure proceedings against those assets that secure the borrowings under the Senior Secured Credit Facilities; and prevent us from making payments on the Senior Notes.
If, when required, we are unable to repay, refinance, or restructure our indebtedness under, or amend the covenants contained in, the Credit Agreement, or if a default otherwise occurs, the lenders under the Senior Secured Credit Facilities could: elect to terminate their commitments thereunder; cease making further loans; declare all borrowings outstanding, together with accrued interest and other fees, to be immediately due and payable; institute foreclosure proceedings against those assets that secure the borrowings under the Senior Secured Credit Facilities; and prevent 24 Table of Contents us from making payments on the Senior Notes.
Divestitures could involve additional risks, including difficulties in the separation of operations, services, products, and personnel; the diversion of management's attention from other business concerns; the disruption of our business; and the potential loss of key employees. There can be no assurance that we will be successful in addressing these or any other significant risks encountered.
Divestitures could involve additional risks, including difficulties in the 20 Table of Contents separation of operations, services, products, and personnel; the diversion of management's attention from other business concerns; the disruption of our business; and the potential loss of key employees. There can be no assurance that we will be successful in addressing these or any other significant risks encountered.
As a result, we may find it difficult to enter into agreements with such customers on terms that are commercially reasonable to us. Security breaches and other disruptions to our IT infrastructure could interfere with our operations, compromise confidential information, and expose us to liability, which could have a material adverse impact our business and reputation.
As a result, we may find it difficult to enter into agreements with such customers on terms that are commercially reasonable to us. Security incidents and other disruptions to our information technology ("IT") infrastructure could interfere with our operations, compromise confidential information, and expose us to liability, which could have a material adverse impact our business and reputation.
In the ordinary course of business, we rely on IT networks and systems, some of which are managed by third parties, to process, transmit, and store electronic information, and to manage or support a variety of business processes and activities. We are at risk of attack by a growing list of adversaries through increasingly sophisticated methods.
In the ordinary course of business, we rely on IT networks and systems, some of which are managed by third parties, to process, transmit, and store electronic information, and to manage or support a variety of business processes and activities. 21 Table of Contents We are at risk of attack by a growing list of adversaries through increasingly sophisticated methods.
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.
Additionally, we have been 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.
In addition, we could encounter difficulties in managing our combined company due to its increased size and scope. 20 Table of Contents Subject to the terms of our indebtedness, we may finance future acquisitions with cash from operations, additional indebtedness, and/or by issuing additional equity securities.
In addition, we could encounter difficulties in managing our combined company due to its increased size and scope. Subject to the terms of our indebtedness, we may finance future acquisitions with cash from operations, additional indebtedness, and/or by issuing additional equity securities.
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.
In addition, where possible, we have been 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.
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.
At each balance sheet date, recorded monetary balances denominated in currency other than the functional currency are adjusted to the functional currency using the exchange rate at the balance sheet date, with gains or losses recognized in other, net in the consolidated statements of operations.
Because the techniques used to obtain unauthorized access or sabotage systems change frequently, we may be unable to anticipate these techniques or implement adequate preventative measures. 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.
Because the techniques used to obtain unauthorized access or sabotage systems change frequently, we may be unable to anticipate these techniques or implement adequate preventative measures. In addition, we may not be able to detect incidents in our IT systems or assess the severity or impact of an incident in a timely manner.
Refer to Note 11: 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
Refer to Note 11: 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 and the Insights impairment charge. Refer to Critical Accounting Policies and Estimates , in
In pursuing our corporate strategy, we often acquire other businesses. The success of this strategy is dependent upon our ability to identify appropriate acquisition targets, negotiate transactions on favorable terms, complete transactions, and successfully integrate them into our existing businesses.
In pursuing our corporate strategy, we have in the past, and may in the future, acquire other businesses. The success of this strategy is dependent upon our ability to identify appropriate acquisition targets, negotiate transactions on favorable terms, complete transactions, and successfully integrate them into our existing businesses.
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.
The credit agreement governing our secured credit facility (as amended, supplemented, waived, or otherwise modified, 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.
Our subsidiaries located outside of the 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.
Our subsidiaries located outside of the U.S. generated approximately 59% of our net revenue in fiscal year 2023 (including approximately 18% in China) and we expect sales from non-U.S. markets to continue to represent a significant portion of our total net revenue.
Goodwill and other intangible assets, net totaled approximately $4.9 billion as of December 31, 2022, or 56% of our total assets. Goodwill, which represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized, was approximately $3.9 billion as of December 31, 2022, or 45% of our total assets.
Goodwill and other intangible assets, net totaled approximately $4.4 billion as of December 31, 2023, or 58% of our total assets. Goodwill, which represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized, was approximately $3.5 billion as of December 31, 2023, or 46% of our total assets.
However, the impact of the current global supply chain shortages, including production delays on a vast and varied number of products across industries and geographies and increased procurement and logistics costs, are unprecedented. Accordingly, we are actively working with our customers to share the inflationary burden of these factors.
The impact of these global supply chain shortages of the past few years, including production delays on a vast and varied number of products across industries and geographies and increased procurement and logistics costs, has been unprecedented. Accordingly, we continue to actively work with our customers to share the inflationary burden of these factors.
Further, to the extent that any disruption or security breach results in a loss of, or damage to, our data, or an inappropriate disclosure of confidential information, it could cause significant damage to our reputation, affect our relationships with our customers, lead to claims against us, and ultimately harm our business, financial condition, and/or results of operations. 22 Table of Contents Improper disclosure of confidential, personal, or proprietary data could result in regulatory scrutiny, legal liability, or harm to our reputation.
Further, to the extent that any disruption or security incident results in a loss of, or damage to, our data, or an inappropriate disclosure of confidential information, it could cause significant damage to our reputation, affect our relationships with our customers, lead to claims against us, and ultimately harm our business, financial condition, and/or results of operations.
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 a transaction denominated in a currency other than our functional currency is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction is measured and recorded in the functional currency using the exchange rate in effect at that date.
Changes to data protection laws, new customer requirements, and changes to international data transfer rules could impose new burdens. One of our significant responsibilities is to maintain the security and privacy of our employees’ and customers’ confidential and proprietary information.
Improper disclosure of confidential, personal, or proprietary data could result in regulatory scrutiny, legal liability, or harm to our reputation. Changes to data protection laws, new customer requirements, and changes to international data transfer rules could impose new burdens. One of our significant responsibilities is to maintain the security and privacy of our employees’ and customers’ confidential and proprietary information.
There are numerous risks inherent in these processes, including the risk that we will be unable to anticipate the direction of technological change; that we will be unable to develop and market profitable new products and applications before our competitors or in time to satisfy customer demands; the possibility that investment of significant time and resources will not be successful; the possibility that the marketplace does not accept our products or services; that we are unable to retain customers that adopt our new products or services; and the risk of additional liabilities associated with these efforts. 19 Table of Contents Our ability to generate revenue from products pending customer awards is subject to a number of important risks and uncertainties, many of which are beyond our control, including the number of products our customers will actually produce, as well as the timing of such production.
There are numerous risks inherent in these processes, including the risk that we will be unable to anticipate the direction of technological change; that we will be unable to develop and market profitable new products and applications before our competitors or in time to satisfy customer demands; the possibility that investment of significant time and resources will not be successful; the possibility that the marketplace does not accept our products or services; that we are unable to retain customers that adopt our new products or services; and the risk of additional liabilities associated with these efforts.
Certain of our customers currently have, or may develop in the future, the capability to internally produce 21 Table of Contents 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.
Goodwill and other identifiable intangible assets were recognized at fair value as of the corresponding acquisition date. Impairment of goodwill and other identifiable intangible assets may result from, among other things, deterioration in our performance, adverse market conditions, adverse changes in laws or regulations, significant unexpected or planned changes in the use of assets, and a variety of other factors.
Additional impairment of goodwill or other identifiable intangible assets may result from, among other things, deterioration in our performance, adverse market conditions, adverse changes in laws or regulations, significant unexpected or planned changes in the use of assets or future changes to go-to-market or product offerings strategy, and a variety of other factors.
While we would defend ourselves from warranty claims in these circumstances, there is no guarantee that we would prevail. 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.
As we continue to develop products containing complex software 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, our customers occasionally require engineering, design, or production changes. In some circumstances, we may be unable to cover the costs of these changes with price increases.
In some circumstances, we may be unable to cover the costs of these changes with price increases.
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: Debt of our Financial Statements included elsewhere in this Report for additional information related to our outstanding indebtedness. Our substantial indebtedness could have important consequences.
In fiscal year 2023, we repaid the remaining balance on the Term Loan. As of December 31, 2023, we had $3,425.2 million of gross outstanding indebtedness, including various tranches of senior unsecured notes (the “Senior Notes”). Refer to Note 14: Debt of our Financial Statements included elsewhere in this Report for additional information related to our outstanding indebtedness.
Item 1A: Risk Factors . 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, is located throughout the world. We employ approximately 92% of our workforce outside of the U.S. We have many manufacturing, administrative, and sales facilities outside of the U.S.
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. We have many manufacturing, administrative, and sales facilities outside of the U.S.
Many of our customers, including transportation manufacturers and other industrial and commercial OEMs, demand annual price reductions. If we are not able to offset continued price reductions through improved operating efficiencies and reduced expenditures, these price reductions may have a material adverse effect on our results of operations and cash flows.
If we are not able to offset continued price reductions through improved operating efficiencies and reduced expenditures, these price reductions may have a material adverse effect on our results of operations and cash flows. In addition, our customers occasionally require engineering, design, or production changes.
This program provides for reduced tariffs and eased import regulations; we could be adversely affected by changes in such program, or by our failure to comply with its requirements. 24 Table of Contents 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).
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 are dependent on market dynamics to sell our products, and our operating results could be adversely affected by cyclical and reduced demand in these markets. Periodic downturns in our customers’ industries could significantly reduce demand for certain of our products, which could have a material adverse effect on our results of operations, financial condition, and cash flows.
Periodic downturns in our customers’ industries could significantly reduce demand for certain of our products, which could have a material adverse effect on our results of operations, financial condition, and cash flows. Much of our business depends on, and is directly affected by, the global automobile industry.
We may not be able to successfully integrate and streamline overlapping functions from future acquisitions, and integration may be more costly to accomplish than we expect.
We may not be able to successfully integrate and streamline overlapping functions from future acquisitions, and integration may be more costly to accomplish than we expect. There is also no guarantee that the acquired businesses will perform according to the business case used in justifying the acquisition.
The amount of any quantified impairment must be expensed immediately as a charge that is included in operating income, which may impact our ability to raise capital. Should certain assumptions used in the development of the fair value of our reporting units change, we may be required to recognize goodwill or other intangible asset impairments.
Should certain assumptions used in the development of the fair value of our other reporting units change, we may be required to recognize additional impairments of goodwill or other intangible assets.
There can be no assurance that any restructuring of our business will not adversely affect our financial condition, leverage, or results of operations. In addition, any significant restructuring of our business will require significant managerial attention, which may be diverted from our other operations.
We also may seek to restructure our business in the future by relocating operations, disposing of certain assets, or consolidating operations. There can be no assurance that any restructuring of our business will not adversely affect our financial condition, leverage, or results of operations.
In the year ended December 31, 2022, we sold various assets and liabilities comprising our semiconductor test and thermal business (collectively, the "Qinex Business").
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 audited consolidated financial statements and accompanying notes thereto (the "Financial Statements") included elsewhere in this Report for additional information.
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.
It has historically been difficult to pass increased prices for manufactured components and raw materials to our customers through price increases.
Our failure to adhere to processes in response to changing regulatory requirements could result in legal liability, significant regulator penalties and fines, or impair our reputation in the marketplace. The technological capabilities we are developing in the Sensata INSIGHTS business bring new risks to our company.
Our failure to adhere to processes in response to changing regulatory requirements could result in legal liability, significant regulator penalties and fines, or impair our reputation in the marketplace. In addition, laws and regulations for smart vehicles are expected to continue to evolve in numerous jurisdictions globally, which could affect our product portfolio and operations.
Much of our business depends on, and is directly affected by, the global automobile industry. Sales in our automotive end markets accounted for approximately 52% of our total net revenue in fiscal year 2022.
Sales in our automotive end markets accounted for approximately 54% of our total net revenue in fiscal year 2023.
A portion of our net revenue, expenses, receivables, and payables are denominated in currencies other than the U.S. dollar (the "USD"). We, therefore, face exposure to adverse movements in exchange rates of currencies other than the USD, which may change over time and could affect our financial results and cash flows.
We, therefore, face exposure to adverse movements in exchange rates of these currencies, which may change over time and could affect our financial results and cash flows. Our level of indebtedness could adversely affect our financial condition and our ability to operate our business, including our ability to service our debt and/or comply with the related covenants.
In addition, these same conditions could adversely impact certain of our vendors’ financial solvency, resulting in potential liabilities or additional costs to us to ensure uninterrupted supply to our customers. We may incur material losses and costs as a result of product liability, warranty, and recall claims that may be brought against us.
In addition, these same conditions could adversely impact certain of our vendors’ financial solvency, resulting in potential liabilities or additional costs to us to ensure uninterrupted supply to our customers. Because of the prevalence of ICE vehicles today, applications in these vehicles make up most of our current transportation addressable markets (automotive and HVOR).
If we are unable to attract and retain key personnel, our business, financial condition, and results of operations could be adversely affected. Financial Risks We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.
If we are unable to attract and retain key personnel, our business, financial condition, and results of operations could be adversely affected. We are subject to various risks related to public health crises, including the COVID-19 pandemic, which have had, and may in the future have, material and adverse impacts on our business, financial condition, liquidity, and results of operations.
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. In addition, the impact of the current global supply chain shortages on one or more of our key suppliers could adversely impact our profitability.
If the future impacts of these shortages are more severe than we currently expect, or if our efforts to share the inflationary burden of these factors do not sufficiently offset our costs, it could result in deterioration of our results.
We must also prepare and adjust for rapid design philosophies associated with building these new solutions. Our future success depends in part on our ability to attract and retain key senior management and qualified technical, sales, and other personnel.
Further, managing and securing personal and customer data that our products, as well as our partners’ products, gather is a new and evolving risk for us. 22 Table of Contents Our future success depends in part on our ability to attract and retain key senior management and qualified technical, sales, and other personnel.
For financial reporting purposes, we, and most of our subsidiaries, operate under a USD functional currency because of the significant influence of the USD on our operations. In certain instances, we enter into transactions that are denominated in a currency other than the USD.
Our reporting currency is the U.S. dollar ("USD"). We derive a significant portion of our net revenue from markets outside the U.S. For financial reporting purposes, the functional currency of all of our subsidiaries has historically been the USD because of the significant influence of the USD on our operations.
Removed
We have sizable operations in China, including two principal manufacturing sites.
Added
ITEM 1A. RISK FACTORS The following are important factors that could cause actual results or events to differ materially from those contained in any forward-looking statements made by us or on our behalf. Investors should carefully consider these risks and all other information in this Report before investing in our securities.
Removed
Economic and political conditions in China have been and may continue to be volatile and uncertain, especially as the U.S. and China continue to discuss and have differences in trade policies and the U.S. continues to add restrictions on both exports to China and use of materials from certain regions within China.
Added
The risks and uncertainties described below are not the only ones we face. Our business is also subject to general risks that affect many other companies. If actions taken by management to limit, monitor, or control enterprise risk exposures are not successful, our business and consolidated financial statements could be materially adversely affected.
Removed
In addition, the legal and regulatory system in China is still developing and is subject to change.
Added
In such case, the trading price of our common stock and debt securities could decline and investors may lose all or part of their investment.
Removed
The impact of the current global supply chain shortages includes various factors that could impact our actual or perceived liability due to quality issues, whether at a supplier or customer.
Added
Business and Operational Risks We are subject to risks associated with climate change, including increased regulation of GHG emissions, changing consumer preferences and other risks related to our transition to Electrification, and the potential increased impacts of severe weather events on our operations and infrastructure.
Removed
Shortages of materials at our suppliers or customers could cause them to work longer production hours to meet demand, resulting in fatigue on manufacturing workers, delays in planned maintenance, and other factors that could impact the actual or perceived quality of our products.
Added
Climate change is receiving increasing attention worldwide, which has led to increased stakeholder and societal expectations on companies to address change and significant legislative and regulatory efforts to limit GHG emissions.
Removed
In addition, customers may be forced to assemble parts into the end product in an order not anticipated by design, or to assemble parts in a location without proper environmental controls (e.g. a parking lot), increasing the potential that our part fails through no fault of our own.
Added
For example, adoption of GHG or climate change rules in jurisdictions in which we operate facilities could require installation of emission controls, acquisition of emission credits, emission reductions, or other measures that could be costly, and could also impact utility rates and increase the amount we spend annually for energy.
Removed
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.
Added
Additionally, jurisdictions throughout the world are enacting more stringent disclosure requirements related to climate change impacts of an entity’s business. Such increased disclosure requirements could increase our costs and could result in risks to our reputation or consumer demand for our products if we do not meet increasingly demanding stakeholder expectations and standards.
Removed
Laws and regulations for smart vehicles are expected to continue to evolve in numerous jurisdictions globally, which could affect our product portfolio and operations. Further, managing and securing personal and customer data that our products, as well as our partners’ products, gather is a new and evolving risk for us.
Added
Changes in consumer preferences due to transitioning to a greener economy may result in increased costs, reduced demand for our ICE products, and reduced profits.
Removed
During times of a weakening USD, our revenue recognized in currencies other than the USD may increase because the non-U.S. currency will translate into more USD.
Added
Part of our strategy to address these risks includes our transition to EVs, which presents additional risks, including reduced demand for, and therefore profits from, our ICE vehicles, which we are using to fund our growth strategy; higher costs or reduced availability of materials related to EV technologies impacting profitability; and risks related to the success of our EV strategy.
Removed
Conversely, during times of a strengthening USD, our revenue recognized in currencies other than the USD may decrease because the local currency will translate into fewer USD. 23 Table of Contents Our level of indebtedness could adversely affect our financial condition and our ability to operate our business, including our ability to service our debt and/or comply with the related covenants.
Added
Finally, given the worldwide scope of our supply chain and operations, we and our suppliers face a risk of disruption or operating inefficiencies that may increase costs due to the adverse physical effects of climate change, which are predicted to increase the frequency and severity of weather and other natural events, e.g., tropical cyclones, extended droughts, and extreme temperatures.
Added
Climate change could also disrupt our operations by impacting the availability and cost of materials within our supply chain, and could also increase insurance and other operating costs. These factors may impact our decisions to construct 17 Table of Contents new facilities.
Added
If a business interruption occurs and we are unsuccessful in our continuing efforts to minimize the impact of these events, our business, results of operations, financial position, and cash flows could be materially adversely affected. Our business is subject to numerous global risks, including regulatory, political, economic, governmental, and military concerns and instability.
Added
These addressable markets are large today and growing, with expectations that they will continue to grow over the next ten years. However, the automotive market is rapidly changing with the transformation into electrification.
Added
Many of the components and subsystems we have historically developed and produced, such as those used in braking, tires, and environmental control from traditional ICE vehicles, will play a significant role in this expansion, as we can convert much of this technology for use in electric vehicle applications.
Added
If the pace of customer adoption of EVs slows, and this demand is not replaced by demand of more traditional vehicles served by our core ICE business, our results of operations, financial condition, and cash flows could be materially adversely affected. 18 Table of Contents We may incur material losses and costs as a result of product liability, warranty, and recall claims that may be brought against us.
Added
Our ability to generate revenue from products pending customer awards is subject to a number of important risks and uncertainties, many of which are beyond our control, including the number of products our customers will actually produce, as well as the timing of such production.
Added
Therefore, a significant increase in the price or a decrease in the availability of these items, such as those experienced in the global supply chain shortages of the past few years, could materially increase our operating costs and materially and adversely affect our business and results of operations.
Added
In addition, any significant restructuring of our business will require significant managerial attention, which may be diverted from our other operations. In the year ended December 31, 2023, we exited the marine energy storage business (the "Marine Business") of Spear Power Systems (“Spear”).
Added
In addition, we committed to a plan to reorganize our business (the “Q3 2023 Plan”), which consisted of voluntary and involuntary reductions-in-force, site closures, and other cost-savings initiatives. Refer to Note 5: Restructuring and Other Charges, Net of our Financial Statements included elsewhere in this Report for additional information on these activities.
Added
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.
Added
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.
Added
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.
Added
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.
Added
The COVID-19 pandemic has had, and could continue to have, these effects on the economy and our business. Additionally, the impacts described above and other impacts of a global pandemic, including responses to it, could substantially increase the risk to us from the other risks described in this Item 1A: Risk Factors .
Added
Financial Risks We have identified material weaknesses in our internal control over financial reporting. These material weaknesses could in the future adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

… 16 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

5 edited+1 added−1 removed2 unchanged
Biggest change(2) Our U.K. headquarters is located in this facility. (3) Our U.S. headquarters is located in this facility. (4) This facility was added with the acquisition of Dynapower. These facilities are primarily devoted to research, development, engineering, manufacturing, and assembly.
Biggest change(2) Our U.K. headquarters is located in this facility. (3) Our U.S. headquarters is located in this facility. These facilities are primarily devoted to research, development, engineering, manufacturing, and assembly. In addition to these principal facilities, we occupy other manufacturing, engineering, warehousing, administrative, and sales facilities worldwide, which are primarily leased.
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 condition, or cash flows. 30 Table of Contents ITEM 4.
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 condition, or cash flows. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.
PROPERTIES As of December 31, 2022, we occupied principal manufacturing facilities and business centers in the following locations: Reportable Segment Approximate Square Footage (in thousands) Performance Sensing Sensing Solutions Country Location Owned Leased Bulgaria Botevgrad X 169 — Bulgaria Plovdiv X 125 — Bulgaria Sofia X — 121 China Baoying (1) X X 301 385 China Changzhou X X 362 256 India Pune X X — 32 Malaysia Subang Jaya X 138 — Mexico Aguascalientes X X 489 — Mexico Mexicali X X 41 116 Mexico Tijuana X X — 235 The Netherlands Hengelo X X — 94 United Kingdom Antrim X — 137 United Kingdom Swindon (2) X — 34 United States Attleboro, MA (3) X X — 443 United States Carpinteria, CA X X — 51 United States Grandview, MO X — 47 United States Thousand Oaks, CA X X — 115 United States Burlington, VT (4) X — 133 1,625 2,199 __________________________ (1) The owned portion of the properties in this location serves the Sensing Solutions segment only.
PROPERTIES As of December 31, 2023, we occupied principal manufacturing facilities and business centers in the following locations: Reportable Segment Approximate Square Footage (in thousands) Performance Sensing Sensing Solutions Country Location Owned Leased Bulgaria Botevgrad X 184 — Bulgaria Plovdiv X 125 — Bulgaria Sofia X — 121 China Baoying (1) X X 301 385 China Changzhou X X 618 — India Pune X X — 32 Malaysia Subang Jaya X 138 — Mexico Aguascalientes X X 566 — Mexico Mexicali X X 41 116 Mexico Tijuana X X — 258 The Netherlands Hengelo X X — 94 United Kingdom Antrim X — 112 United Kingdom Swindon (2) X — 34 United States Attleboro, MA (3) X X — 435 United States Carpinteria, CA X X — 51 United States Grandview, MO X — 47 United States Thousand Oaks, CA X X — 115 United States Burlington, VT X — 133 1,973 1,933 __________________________ (1) The owned portion of the properties in this location serves the Sensing Solutions segment only.
An increase in demand for our products may require us to expand our production capacity, which could require us to identify and acquire or lease additional manufacturing facilities.
We consider our manufacturing facilities sufficient to meet our current operational requirements. An increase in demand for our products may require us to expand our production capacity, which could require us to identify and acquire or lease additional manufacturing facilities.
Leases covering our currently occupied principal leased facilities expire at varying dates within the next 14 years. We do not anticipate difficulty in retaining occupancy through lease renewals, month-to-month occupancy, or by replacing the leased facilities with equivalent facilities. A significant portion of our owned properties and equipment is subject to a lien under the Senior Secured Credit Facilities.
We do not anticipate difficulty in retaining occupancy through lease renewals, month-to-month occupancy, or by replacing the leased facilities with equivalent facilities. 32 Table of Contents A significant portion of our owned properties and equipment is subject to a lien under the Senior Secured Credit Facilities.
Removed
In addition to these principal facilities, we occupy other manufacturing, engineering, warehousing, administrative, and sales facilities worldwide, which are primarily leased. We consider our manufacturing facilities sufficient to meet our current operational requirements.
Added
Leases covering our currently occupied principal leased facilities expire at varying dates within the next 13 years.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

18 edited+11 added−26 removed6 unchanged
Biggest changeInterest expense, net increased in fiscal year 2021 primarily as a result of (1) interest expense in fiscal year 2021 related to the issuance of $1.0 billion aggregate principal amount of 4.0% senior notes due 2029 (the “4.0% Senior Notes”), (2) additional interest expense in fiscal year 2021 related to the $750.0 million aggregate principal amount of 3.75% senior notes due 2031 (the "3.75% Senior Notes") as a result of their issuance in fiscal year 2020, partially offset by reduced interest as a result of the redemption of the $750.0 million aggregate principal amount outstanding on the 6.25% senior notes due 2026 (the "6.25% Senior Notes") early in fiscal year 2021. 43 Table of Contents Other, net Other, net for the years ended December 31, 2022, 2021, and 2020 consisted of the following (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): For the year ended December 31, (In millions) 2022 2021 2020 Currency remeasurement (loss)/gain on net monetary assets (1) $ (18.2) $ 3.4 $ 10.8 Gain/(loss) on foreign currency forward contracts (2) 4.3 (7.6) (6.8) (Loss)/gain on commodity forward contracts (2) (3.4) (3.0) 10.0 Loss on debt financing (3) (5.5) (30.1) — Mark-to-market loss on investments, net (4) (75.6) — — Net periodic benefit cost, excluding service cost (5.1) (7.5) (10.0) Other 8.7 4.6 (4.5) Other, net $ (94.6) $ (40.0) $ (0.3) __________________________ (1) Relates to the remeasurement of non-USD denominated monetary assets and liabilities into USD.
Biggest changeOther, net Other, net for the years ended December 31, 2023, 2022, and 2021 consisted of the following (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): For the year ended December 31, (In millions) 2023 2022 2021 Currency remeasurement (loss)/gain on net monetary assets (1) $ (20.2) $ (18.2) $ 3.4 Gain/(loss) on foreign currency forward contracts (2) 4.2 4.3 (7.6) Loss on commodity forward contracts (2) (2.8) (3.4) (3.0) Loss on debt financing (3) (5.4) (5.5) (30.1) Loss on equity investments, net (4) (0.7) (75.6) — Net periodic benefit cost, excluding service cost (3.9) (5.1) (7.5) Other 15.8 8.7 4.6 Other, net $ (13.0) $ (94.6) $ (40.0) __________________________ (1) Relates to the remeasurement of non-USD denominated monetary assets and liabilities into USD.
Excluding a decrease of 2.7% attributed to changes in foreign currency exchange rates and an increase of 3.3% due to the effect of acquisitions, Performance Sensing net revenue increased 3.9% on an organic basis. Both the Automotive and HVOR operating segments contributed to these results as discussed below.
Excluding a decrease of 1.6% attributed to changes in foreign currency exchange rates and an increase of 0.1% due to the effect of acquisitions, Performance Sensing net revenue increased 4.3% on an organic basis. Both the Automotive and HVOR operating segments contributed to these results as discussed below.
HVOR net revenue for the year ended December 31, 2022 increased 9.0% compared to the year ended December 31, 2021. Excluding a decrease of 1.7% attributed to changes in foreign currency exchange rates and an increase of 11.4% due to the effect of acquisitions, HVOR net revenue decreased 0.7% on an organic basis.
HVOR net revenue for the year ended December 31, 2023 increased 1.8% compared to the prior year. Excluding a decrease of 0.9% attributed to changes in foreign currency exchange rates and an increase of 0.3% due to the effect of acquisitions, HVOR net revenue increased 2.4% on an organic basis.
Refer to Note 11: Goodwill and Other Intangible Assets, Net of our Financial Statements included elsewhere in this Report for additional information regarding definite-lived intangible assets and the related amortization.
Refer to Note 5: Restructuring and Other Charges, Net and Note 11: Goodwill and Other Intangible Assets, Net of our Financial Statements included elsewhere in this Report for additional information regarding the charges related to the exit of the Spear Marine Business and amortization on our intangible assets, respectively.
Refer to Note 21: Acquisitions and Divestitures and Note 4: Share-Based Payment Plans of our Financial Statements, included elsewhere in this Report, for additional information related to acquired businesses and share-based compensation, respectively.
Refer to Note 21: Acquisitions and Divestitures of our Financial Statements included elsewhere in this Report for additional information related to our acquisitions and divestitures.
Automotive net revenue for the year ended December 31, 2022 increased 2.7% compared to the year ended December 31, 2021. Excluding a decrease of 3.0% attributed to changes in foreign currency exchange rates, automotive net revenue increased 5.7% on an organic basis. This organic revenue growth was primarily due to continued content growth and pricing.
Automotive net revenue for the year ended December 31, 2023 increased 3.3% compared to the prior year. Excluding a decrease of 1.8% attributed to changes in foreign currency exchange rates, automotive net revenue increased 5.1% on an organic basis. This organic revenue growth was primarily due to market growth, partially offset by unfavorable revenue mix.
Restructuring and other charges, net We recorded a net credit of $66.7 million in restructuring and other charges, net in the year ended December 31, 2022, compared to a net charge of $14.9 million in the prior year, representing a favorable change in earnings of $81.6 million.
Restructuring and other charges, net We recorded a net charge of $54.5 million in restructuring and other charges, net in the year ended December 31, 2023, an unfavorable change in earnings compared to a net gain of $66.7 million in the prior year.
Excluding a decrease of 1.7% attributed to changes in foreign currency exchange rates and an increase of 2.4% due to the net effect of acquisitions and divestitures, Sensing Solutions net revenue increased 7.5% on an organic basis, which primarily reflects the launch of new industrial Electrification applications within the Clean Energy Solutions business as well as growth in content in other industrial businesses and aerospace, partially offset by weakness in our industrial markets, particularly appliance and HVAC.
Excluding a decrease of 0.9% attributed to changes in foreign currency exchange rates and an increase of 1.7% due to the net effect of acquisitions and divestitures, Sensing Solutions net revenue decreased 6.0% on an organic basis, which primarily reflects weakness in our industrial markets and inventory destocking, partially offset by market and content growth in the aerospace business and pricing.
Excluding an increase of 2.3% attributed to changes in foreign currency exchange rates and an increase of 2.5% due to the effect of acquisitions, net revenue increased 20.7% on an organic basis, which represented market outgrowth of 960 basis points. 40 Table of Contents Net Revenue - Performance Sensing Fiscal year 2022 vs. fiscal year 2021 Performance Sensing net revenue for the year ended December 31, 2022 increased 4.5% compared to the year ended December 31, 2021.
Net revenue increased 1.5% on an organic basis, which excludes a decrease of 1.4% attributed to changes in foreign currency exchange rates and an increase of 0.5% due to the net effect of acquisitions and divestitures. 43 Table of Contents Performance Sensing Performance Sensing net revenue for the year ended December 31, 2023 increased 2.8% compared to the prior year.
For the year ended December 31, 2022 2021 2020 Amount Percent of Net Revenue Amount Percent of Net Revenue Amount Percent of Net Revenue Net revenue: Performance Sensing $ 2,976.8 73.9 % $ 2,847.9 74.5 % $ 2,223.8 73.0 % Sensing Solutions 1,052.5 26.1 972.9 25.5 821.8 27.0 Total net revenue 4,029.3 100.0 % 3,820.8 100.0 % 3,045.6 100.0 % Operating costs and expenses 3,359.1 83.4 3,187.6 83.4 2,707.8 88.9 Operating income 670.1 16.6 633.2 16.6 337.7 11.1 Interest expense, net (178.8) (4.4) (179.3) (4.7) (171.8) (5.6) Other, net (94.6) (2.3) (40.0) (1.0) (0.3) 0.0 Income before taxes 396.7 9.8 413.9 10.8 165.6 5.4 Provision for income taxes 86.0 2.1 50.3 1.3 1.4 0.0 Net income $ 310.7 7.7 % $ 363.6 9.5 % $ 164.3 5.4 % Net revenue - Overall Net revenue for the year ended December 31, 2022 increased 5.5% compared to the year ended December 31, 2021.
For the year ended December 31, 2023 2022 2021 Amount Percent of Net Revenue Amount Percent of Net Revenue Amount Percent of Net Revenue Net revenue: Performance Sensing $ 3,002.7 74.1 % $ 2,920.4 72.5 % $ 2,801.2 73.3 % Sensing Solutions 1,051.4 25.9 1,108.9 27.5 1,019.6 26.7 Total net revenue 4,054.1 100.0 % 4,029.3 100.0 % 3,820.8 100.0 % Operating costs and expenses 3,872.4 95.5 3,359.1 83.4 3,187.6 83.4 Operating income 181.7 4.5 670.1 16.6 633.2 16.6 Interest expense (182.2) (4.5) (195.6) (4.9) (182.6) (4.8) Interest income 31.3 0.8 16.7 0.4 3.3 0.1 Other, net (13.0) (0.3) (94.6) (2.3) (40.0) (1.0) Income before taxes 17.8 0.4 396.7 9.8 413.9 10.8 Provision for income taxes 21.8 0.5 86.0 2.1 50.3 1.3 Net (loss)/income $ (3.9) (0.1) % $ 310.7 7.7 % $ 363.6 9.5 % The discussion that follows compares operating results for fiscal year 2023 to fiscal year 2022.
For the year ended December 31, 2022 2021 2020 Amount Percent of Net Revenue Amount Percent of Net Revenue Amount Percent of Net Revenue Operating costs and expenses: Cost of revenue $ 2,712.0 67.3 % $ 2,542.4 66.5 % $ 2,119.0 69.6 % Research and development 189.3 4.7 159.1 4.2 131.4 4.3 Selling, general and administrative 370.6 9.2 337.0 8.8 294.7 9.7 Amortization of intangible assets 153.8 3.8 134.1 3.5 129.5 4.3 Restructuring and other charges, net (66.7) (1.7) 14.9 0.4 33.1 1.1 Total operating costs and expenses $ 3,359.1 83.4 % $ 3,187.6 83.4 % $ 2,707.8 88.9 % Cost of revenue Cost of revenue as a percentage of net revenue increased in fiscal year 2022, primarily due to the impacts of inflation on material and logistics costs and the unfavorable impact of product mix, partially offset by improved pricing.
For the year ended December 31, 2023 2022 2021 Amount Percent of Net Revenue Amount Percent of Net Revenue Amount Percent of Net Revenue Operating costs and expenses: Cost of revenue $ 2,792.8 68.9 % $ 2,712.0 67.3 % $ 2,542.4 66.5 % Research and development 178.9 4.4 189.3 4.7 159.1 4.2 Selling, general and administrative 350.7 8.6 370.6 9.2 337.0 8.8 Amortization of intangible assets 173.9 4.3 153.8 3.8 134.1 3.5 Goodwill impairment charge 321.7 7.9 — — — — Restructuring and other charges, net 54.5 1.3 (66.7) (1.7) 14.9 0.4 Total operating costs and expenses $ 3,872.4 95.5 % $ 3,359.1 83.4 % $ 3,187.6 83.4 % Cost of revenue Cost of revenue as a percentage of net revenue increased in the year ended December 31, 2023, primarily due to (1) unfavorable product mix, (2) the unfavorable effect of changes in foreign currency exchange rates, (3) the impact of certain actions taken in relation to the Q3 2023 Plan, (4) the net unfavorable impacts of acquisitions and divestitures on gross margin, and (5) the $10.5 million write-down of inventory as a result of our decision to exit the Spear Marine Business, partially offset by (1) the net impacts of pricing recoveries from customers, inflation on material and logistics costs, and volume leverage, and (2) cost savings as a result of repositioning actions taken in fiscal year 2022.
The increase in net revenue was driven by the continued recovery of global industrial end markets, as well as new Electrification launches and HVAC market recovery. 41 Table of Contents Operating costs and expenses Operating costs and expenses for the years ended December 31, 2022, 2021, and 2020 are presented, in millions of dollars and as a percentage of revenue, in the following table.
Operating costs and expenses Operating costs and expenses for the years ended December 31, 2023, 2022, and 2021 are presented, in millions of dollars and as a percentage of revenue, in the following table.
Refer to Note 5: Restructuring and Other Charges, Net of our Financial Statements included elsewhere in this Report for additional information related to the Q2 2020 Global Restructure Program.
Refer to Note 5: Restructuring and Other Charges, Net , of our Financial Statements included elsewhere in this Report for additional details regarding our exit of the Spear Marine Business and actions taken as part of the Q3 2023 Plan.
We have derived these results of operations from our Financial Statements. Amounts and percentages in the table below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
The amounts previously reported in the tables below for the years ended December 31, 2022 and 2021 have been retrospectively recast to reflect this change. Amounts and percentages in the table below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
This organic revenue decline was primarily due to declining market conditions, largely offset by continued content growth and pricing. Fiscal year 2021 vs. fiscal year 2020 Performance Sensing net revenue for the year ended December 31, 2021 increased 28.1% compared to the year ended December 31, 2020.
This organic revenue growth was primarily due to market and content growth, partially offset by channel inventory de-stocking. Sensing Solutions Sensing Solutions net revenue for the year ended December 31, 2023 decreased 5.2% compared to the prior year.
Operating income In fiscal year 2022, operating income increased $36.9 million or 5.8%, to $670.1 million (16.6% of net revenue) compared to $633.2 million (16.6% of net revenue) in fiscal year 2021, primarily due to (1) the gain on the sale of the Qinex Business and (2) improvements in pricing to offset increased costs, partially offset by (1) the impact of inflation on our component and logistics costs, (2) higher acquisition-related incentive compensation, (3) the negative impact of product mix, (4) higher amortization, primarily due to acquired intangible assets, (5) higher spend to support our megatrends initiatives, and (6) the unfavorable effect of changes in foreign currency exchange rates.
Operating income In the year ended December 31, 2023, operating income decreased $488.4 million or 72.9%, to $181.7 million (4.5% of net revenue) compared to $670.1 million (16.6% of net revenue) in the prior year, primarily due to (1) the $321.7 million goodwill impairment charge related to the Insights reporting unit, (2) the non-recurrence of the $119.5 million gain on the sale of the Qinex Business in fiscal year 2022, net of the related transaction costs, (3) $38.5 million of charges incurred as a result of our exit from the Spear Marine Business, (4) the unfavorable effect of changes in foreign currency exchange rates, (5) charges incurred related to the Q3 2023 Plan, (6) unfavorable product mix, and (7) increased amortization of intangible assets as a result of new acquisitions, partially offset by (1) cost savings as a result of repositioning actions taken in fiscal year 2022, (2) the net impacts of pricing recoveries from customers, inflation on material and logistics costs, and volume leverage, and (3) lower expense for acquisition-related compensation arrangements.
This change was primarily due to (1) a gain of $135.1 million on the sale of the Qinex Business and (2) a gain of $8.6 million resulting from the reduction of the liability for contingent consideration for Spear Power Systems ("Spear"), partially offset by (1) expense of $48.9 million for acquisition-related compensation arrangements and (2) higher severance that does not represent the initiation of a larger plan.
This change was primarily driven by (1) the non-recurrence of the $135.1 million gain on the sale of the Qinex Business in fiscal year 2022, (2) charges incurred as a result of the entry into the Q3 2023 Plan, and (3) charges incurred as a result of our exit from the Spear Marine Business, partially offset by (1) a reduction in expense for acquisition-related compensation arrangements, and (2) the non-recurrence of $15.6 million of transaction-related charges to sell the Qinex Business in fiscal year 2022.
Net Revenue - Sensing Solutions Fiscal year 2022 vs. fiscal year 2021 Sensing Solutions net revenue for the year ended December 31, 2022 increased 8.2% compared to the year ended December 31, 2021.
The below discussion provides information on the material factors impacting fiscal year 2023 compared to fiscal year 2022. Net revenue Net revenue for the year ended December 31, 2023 increased 0.6% compared to the prior year.
Removed
Excluding a decrease of 2.4% attributed to changes in foreign currency exchange rates and an increase of 3.1% due to the net effect of acquisitions and divestitures, net revenue increased 4.8% on an organic basis, which represented market outgrowth of 820 basis points.
Added
We have derived these results of operations from our Financial Statements. Effective April 1, 2023, we moved our material handling products from the HVOR operating segment (in the Performance Sensing reportable segment) to the Sensing Solutions operating segment to align with new management reporting.
Removed
Net revenue for the year ended December 31, 2021 increased 25.5% compared to the year ended December 31, 2020 largely due to improved market results and our continued outperformance relative to those markets.
Added
For a discussion of our fiscal year 2022 operating results compared to fiscal year 2021, refer to Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 13, 2023.
Removed
Excluding an increase of 2.4% attributed to changes in foreign currency exchange rates and an increase of 3.4% due to the effect of acquisitions, Performance Sensing net revenue increased 22.3% on an organic basis compared to the year ended December 31, 2020. Both the Automotive and HVOR operating segments contributed to these results as discussed below.
Added
Refer to Item 1: Business included elsewhere in this Report for more detailed discussion of our reportable segments, including discussion of major products and market drivers. Refer to discussion under the heading Factors Affecting Our Operating Results included elsewhere in this MD&A for a detailed discussion of the various factors that may drive changes in our operating results.
Removed
Automotive net revenue for the year ended December 31, 2021 increased 17.6% compared to the year ended December 31, 2020. Excluding an increase of 2.5% attributed to changes in foreign currency exchange rates, automotive net revenue increased 15.1% on an organic basis.
Added
Research and development expense R&D expense decreased in the year ended December 31, 2023, primarily as a result of lower costs as a result of certain repositioning actions taken in fiscal year 2022 that were not part of a larger restructuring plan. 44 Table of Contents Selling, general and administrative expense SG&A expense decreased in the year ended December 31, 2023, primarily as a result of (1) cost savings as a result of repositioning actions taken in fiscal year 2022, (2) lower selling expenses, (3) lower compensation expense, and (4) lower transaction costs as a result of reduced mergers and acquisitions activity, partially offset by increased SG&A expense from our acquisitions (net of divestitures).
Removed
Although automotive production was constrained due to global supply chain shortages, resulting in muted end market growth of 1.2% for the year, we delivered organic revenue growth due to our continued outperformance relative to the automotive market, led by new product launches in powertrain and emissions, safety, and electrification-related applications and systems.
Added
Amortization of intangible assets Amortization expense increased in the year ended December 31, 2023, primarily due to (1) increased amortization due to newly acquired intangible assets and (2) a charge of $13.5 million in the second quarter of 2023 for accelerated amortization of intangible assets due to our exit from the Spear Marine Business, partially offset by the effect of amortization of intangible assets in accordance with their expected economic benefit.
Removed
HVOR net revenue for the year ended December 31, 2021 increased 63.3% compared to the year ended December 31, 2020. Excluding an increase of 2.1% attributed to changes in foreign currency exchange rates and an increase of 14.8% due to the effect of acquisitions, HVOR net revenue increased 46.4% on an organic basis.
Added
We expect amortization expense to be approximately $147.4 million in fiscal year 2024.
Removed
This organic revenue increase is primarily due to recovery of customer production combined with our continued outperformance relative to the HVOR markets. Our China on-road truck business saw significant market outgrowth from the adoption of NS6 emissions regulations, and we are also benefiting from a wave of electromechanical operator controls being installed in new off-road equipment.
Added
Goodwill impairment charge In the year ended December 31, 2023, we recorded a $321.7 million non-cash goodwill impairment charge in the fourth quarter of 2023, representing the entire goodwill balance allocated to Insights. This impairment was primarily driven by reprioritization of our investments into electrification in accordance with our business strategy.
Removed
Fiscal year 2021 vs. fiscal year 2020 Sensing Solutions net revenue for the year ended December 31, 2021 increased 18.4% compared to the year ended December 31, 2020.
Added
With electrification as the clear future of our company and the best area of focus for management, we narrowed our investment in Insights. These decisions resulted in significant cost restructuring and a lower long-range financial forecast for the reporting unit, impacting the valuation of the business with respect to the goodwill impairment analysis.
Removed
Excluding an increase of 1.7% attributed to changes in foreign currency exchange rates and an increase of 0.3% due to the effect of acquisitions, Sensing Solutions net revenue increased 16.4% on an organic basis.
Added
Other valuation assumptions for the Insights reporting unit valuation that are impacted by macroeconomic factors also contributed to the impairment.
Removed
Cost of revenue as a percentage of net revenue decreased in fiscal year 2021 primarily as a result of (1) higher volume and the nonrecurrence of productivity headwinds from our manufacturing facilities running at lower-than-normal capacity in fiscal year 2020 and (2) the nonrecurrence of a $29.2 million loss from fiscal year 2020 in intellectual property litigation originally brought against August Cayman Company, Inc.
Added
Interest expense In the year ended December 31, 2023, interest expense decreased $13.4 million from the prior period, primarily due to the early payment on the Term Loan in the first half of 2023. 45 Table of Contents Refer to Note 14: Debt of our Financial Statements included elsewhere in this Report for additional information regarding the early payment on the Term Loan.
Removed
("Schrader") by Wasica Finance GmbH ("Wasica"). These favorable impacts on cost of revenue as a percentage of revenue were partially offset by increased costs related to global supply chain shortages. Research and development expense We invest in R&D in megatrend-related areas to design and develop differentiated solutions for the fast-growing trends impacting our customers’ businesses, Electrification and Insights/IoT.
Added
Interest income In the year ended December 31, 2023, interest income increased $14.6 million compared to the prior period, primarily due to higher interest rates, partially offset by lower cash balances.
Removed
Megatrend-related R&D expense in fiscal year 2022 was $68.5 million, an increase of $20.5 million from fiscal year 2021. We currently expect approximately $65 million to $70 million in total megatrend spend in fiscal year 2023, the vast majority of which will be recorded as R&D expense.
Removed
Total R&D expense increased in fiscal year 2022, primarily as a result of (1) higher spend to support megatrend growth initiatives and (2) incremental R&D expense related to acquired businesses, partially offset by the favorable effect of foreign currency exchange rates.
Removed
R&D expense increased in fiscal year 2021, primarily as a result of (1) higher spend to support megatrend growth initiatives, (2) incremental R&D expense related to acquired businesses, and (3) the unfavorable effect of changes in foreign currency exchange rates, partially offset by the impact on fiscal year 2021 of ongoing savings resulting from cost reduction activities taken in fiscal year 2020.
Removed
R&D expense in fiscal year 2021 related to megatrends was $48.0 million, an increase of $22.0 million from fiscal year 2020.
Removed
Selling, general and administrative expense SG&A expense increased in fiscal year 2022, primarily as a result of (1) incremental SG&A expense related to acquired businesses, including related transaction costs, (2) increased selling expenses attributed to organic revenue growth, and (3) higher share-based compensation, partially offset by the favorable effect of changes in foreign currency exchange rates.
Removed
SG&A expense increased in fiscal year 2021, primarily as a result of (1) incremental SG&A expense related to acquired businesses, including related transaction costs, (2) higher incentive compensation aligned to improved financial performance, (3) increased selling expenses attributed to organic revenue growth, and (4) the unfavorable effect of changes in foreign currency exchange rates.
Removed
These increases were partially offset by the fiscal year 2020 completion of a project related to enhancements and improvements of our global operating processes to increase productivity and the resulting reduction in professional fees. 42 Table of Contents Amortization of intangible assets Amortization expense increased in fiscal year 2022, primarily due to increased intangibles from recent acquisitions.
Removed
Refer to Note 21: Acquisitions and Divestitures of our Financial Statements, included elsewhere in this Report, for additional information related to acquired businesses. We expect amortization expense to be approximately $153.7 million in fiscal year 2023.
Removed
Amortization expense increased in fiscal year 2021 primarily as a result of increased intangibles from recent acquisitions partially offset by the effect of the economic-benefit method of amortization as described in Note 2: Significant Accounting Policies of our Financial Statements included elsewhere in this Report.
Removed
Restructuring and other charges, net decreased in fiscal year 2021 primarily due to lower restructuring charges incurred as part of a plan commenced in fiscal year 2020 to reorganize our business in response to the potential long-term impact of the global financial and health crisis caused by the COVID-19 pandemic (the “Q2 2020 Global Restructure Program”).
Removed
In fiscal year 2021, operating income increased $295.5 million or 87.5%, to $633.2 million (16.6% of net revenue) compared to $337.7 million (11.1% of net revenue) in fiscal year 2020.
Removed
This increase was primarily driven by improved gross margins, due mainly to (1) higher organic sales volumes and (2) the turnaround effect of the Wasica litigation settlement in fiscal year 2020, partially offset by (1) increased costs related to global supply chain shortages, and (2) lower restructuring costs.
Removed
This effect of improved gross margins was partially offset by (1) higher spend to support megatrend growth initiatives, (2) higher incentive compensation aligned to improved financial performance, and (3) the turnaround effect of temporary salary reductions and furloughs taken in the second quarter 2020.
Removed
Interest expense, net Interest expense, net did not change materially in fiscal year 2022, as the impact of various transactions and higher interest rates largely offset. Refer to the table detailing interest expense by debt instrument under the heading Indebtedness and Liquidity , included elsewhere in this MD&A.
Removed
On January 31, 2023, we announced that we intended to pay down $250.0 million of outstanding principal on the Term Loan. That payment was completed on February 6, 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

43 edited+30 added−14 removed41 unchanged
Biggest changeSelling, general and administrative expense Selling, general and administrative ("SG&A") expense consists of all expenditures incurred in connection with the sale and marketing of our products, as well as administrative overhead costs, including: salary and benefit costs for sales and marketing personnel and administrative staff; share-based incentive compensation expense; charges related to the use and maintenance of administrative offices, including depreciation expense; other administrative costs, including expenses relating to information systems, human resources, and legal, finance, and accounting services; other selling and marketing related costs, such as expenses incurred in connection with travel and communications; and transaction costs associated with acquisitions. 37 Table of Contents Changes in SG&A expense as a percentage of net revenue have historically been impacted by a number of factors, including: • changes in sales volume, as higher volumes enable us to spread the fixed portion of our selling, marketing, and administrative expense over higher revenue (e.g. expenses relating to our sales and marketing personnel can fluctuate due to prolonged trends in sales volume, while expenses relating to administrative personnel generally do not increase or decrease directly with changes in sales volume); • changes in customer prices and surcharges; • changes in the mix of products we sell, as some products may require more customer support and sales effort than others; • new product launches in existing and new markets, as these launches typically involve a more intense sales and marketing activity before they are integrated into customer applications and systems; • changes in our customer base, as new customers may require different levels of sales and marketing attention; • fluctuations in foreign currency exchange rates; and • acquisitions and divestitures - acquired and divested businesses may require different levels of SG&A expense as a percentage of net revenue than our core business.
Biggest changeChanges in SG&A expense as a percentage of net revenue have historically been impacted by a number of factors, including: • changes in sales volume, as higher volumes enable us to spread the fixed portion of our selling, marketing, and administrative expense over higher revenue (e.g., expenses relating to our sales and marketing personnel can fluctuate due to prolonged trends in sales volume, while expenses relating to administrative personnel generally do not increase or decrease directly with changes in sales volume); • changes in customer prices and surcharges; • changes in the mix of products we sell, as some products may require more customer support and sales effort than others; • new product launches in existing and new markets, as these launches typically involve a more intense sales and marketing activity before they are integrated into customer applications and systems; • changes in our customer base, as new customers may require different levels of sales and marketing attention; 40 Table of Contents • fluctuations in foreign currency exchange rates; and • acquisitions and divestitures - acquired and divested businesses may require different levels of SG&A expense as a percentage of net revenue than our core business.
("STBV"), may be limited in its ability to pay dividends or otherwise make distributions to its immediate parent company and, ultimately, to us. Refer to Note 14: Debt of our audited consolidated financial statements and accompanying notes thereto included elsewhere in this Report for additional information related to our dividend restrictions.
("STBV"), may be limited in its ability to pay dividends or otherwise make distributions to its immediate parent company and, ultimately, to us. Refer to Note 14: Debt of our audited consolidated financial statements and accompanying notes thereto (the "Financial Statements") included elsewhere in this Report for additional information related to our dividend restrictions.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our ordinary shares trade on the New York Stock Exchange under the symbol "ST." Performance Graph The following graph compares the total shareholder return of our ordinary shares since December 31, 2017 to the total shareholder return since that date of the Standard & Poor’s ("S&P") 500 Stock Index and the S&P 500 Industrial Index.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our ordinary shares trade on the New York Stock Exchange under the symbol "ST." Performance Graph The following graph compares the total shareholder return of our ordinary shares since December 31, 2018 to the total shareholder return since that date of the Standard & Poor’s ("S&P") 500 Stock Index and the S&P 500 Industrial Index.
The provision for (or benefit from) 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 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, including goodwill, 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.
The provision for (or benefit from) income taxes consists of: current tax expense, which relates primarily to our profitable operations in jurisdictions outside the U.S. and U.K. and withholding taxes related to interest, royalties, and 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, including goodwill, 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.
Our current tax expense is favorably impacted by the amortization of definite-lived intangible assets and other tax benefits derived from our operating and capital structure, including tax incentives in both the United Kingdom (the "U.K.") and China as well as favorable tax status in Mexico.
Our current tax expense is favorably impacted by the amortization of definite-lived intangible assets and other tax benefits derived from our operating and capital structure, including tax incentives in both the U.K. and China as well as favorable tax status in Mexico.
Other, net Other, net primarily includes gains and losses associated with the remeasurement of non-USD denominated monetary assets and liabilities into USD, changes in the fair value of derivative financial instruments not designated as cash flow hedges, mark-to-market gains and losses on investments, losses on debt financing transactions, and net periodic benefit cost, excluding service cost.
Other, net Other, net primarily includes gains and losses associated with the remeasurement of non-USD denominated monetary assets and liabilities into USD, changes in the fair value of derivative financial instruments not designated as cash flow hedges, mark-to-market gains and losses on investments, losses on debt financing transactions, and net periodic benefit cost, excluding 41 Table of Contents service cost.
Refer to Results of Operations included elsewhere in this MD&A for discussion of the actual impact on our financial statements of these factors. 35 Table of Contents Net revenue We derive a significant portion of our revenue from sales into the automotive end market, and conditions in the automotive industry can have a significant impact on the amount of revenue that we recognize.
Refer to Results of Operations included elsewhere in this MD&A for discussion of the actual impact on our financial statements of these factors. Net revenue We derive a significant portion of our revenue from sales into the automotive end market, and conditions in the automotive industry can have a significant impact on the amount of revenue that we recognize.
Our overall net revenue is impacted by various factors, which we characterize as "organic" or "inorganic." Inorganic factors include fluctuations in foreign currency exchange rates and the net effect of acquisitions and divestitures. Organic factors include fluctuations in overall economic activity within the industries, end markets, and geographic regions in which we operate, which we term market growth.
Our overall net revenue is impacted by various factors, which we characterize as "organic" or "inorganic." Inorganic factors include fluctuations in foreign currency exchange rates and the net effect of acquisitions and divestitures. 38 Table of Contents Organic factors include fluctuations in overall economic activity within the industries, end markets, and geographic regions in which we operate, which we term market growth.
A large portion of our R&D activities is directed towards technologies and megatrends that we believe have the potential for significant future growth, but that relate to products that are not currently within our core business or include new features and capabilities for existing products.
A large portion of our R&D activities is directed towards technologies and market trends that we believe have the potential for significant future growth, but that relate to products that are not currently within our core business or include new features and capabilities for existing products.
The graph assumes that the value of the investment in our ordinary shares and each index was $100.00 on December 31, 2017.
The graph assumes that the value of the investment in our ordinary shares and each index was $100.00 on December 31, 2018.
Our effective tax rate will generally not equal the U.S. statutory tax rate due to various factors, the most significant of which are described below. As these factors fluctuate from year to year, our effective tax rate will change.
Our effective tax rate will generally not equal either the U.K. or U.S. statutory tax rate due to various factors, the most significant of which are described below. As these factors fluctuate from year to year, our effective tax rate will change.
Amounts recognized in restructuring and other charges, net will vary according to the extent of our restructuring programs and other income or expense items not presented elsewhere in operating income. Interest expense, net As of December 31, 2022 and 2021, we had gross outstanding indebtedness of $4,273.4 million and $4,280.2 million, respectively.
Amounts recognized in restructuring and other charges, net will vary according to the extent of our restructuring programs and other income or expense items not presented elsewhere in operating income. Interest expense As of December 31, 2023 and 2022, we had gross outstanding indebtedness of $3,425.2 million and $4,273.4 million, respectively.
The following table presents (as a percentage of total) property, plant and equipment ("PP&E") and net revenue by geographic region for the identified periods: PP&E, net as of December 31, Net revenue for the year ended December 31, 2022 2021 2022 2021 2020 Americas 33.7 % 32.3 % 42.3 % 38.0 % 39.3 % Europe 20.0 % 22.0 % 25.9 % 26.2 % 26.8 % Asia and rest of world 46.3 % 45.7 % 31.8 % 35.8 % 33.9 % Refer to Note 20: Segment Reporting of our Financial Statements included elsewhere in this Report for additional information related to our PP&E, net balances by selected geographic area as of December 31, 2022 and 2021 and net revenue by selected geographic area for the years ended December 31, 2022, 2021, and 2020.
The following table presents (as a percentage of total) PP&E and net revenue by geographic region for the identified periods: PP&E, net as of December 31, Net revenue for the year ended December 31, 2023 2022 2023 2022 2021 Americas 35.9 % 33.7 % 45.0 % 42.3 % 38.0 % Europe 17.9 % 20.0 % 26.3 % 25.9 % 26.2 % Asia and rest of world 46.2 % 46.3 % 28.7 % 31.8 % 35.8 % Refer to Note 20: Segment Reporting of our Financial Statements included elsewhere in this Report for additional information related to our PP&E, net balances by selected geographic area as of December 31, 2023 and 2022 and net revenue by selected geographic area for the years ended December 31, 2023, 2022, and 2021.
The credit agreement governing our secured credit facility (as amended, the "Credit Agreement") provides for the Senior Secured Credit Facilities, consisting of the Term Loan, the $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.
The credit agreement governing our secured credit facility (as amended, supplemented, waived, or otherwise modified, the "Credit Agreement") provides for senior secured credit facilities (the "Senior Secured Credit Facilities"), consisting of the Term Loan, the $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.
Restructuring and other charges, net Restructuring and other charges, net consists of severance, outplacement, other separation benefits, and facility and other exit costs.
Restructuring and other charges, net Restructuring charges consist of severance, outplacement, other separation benefits, and facility and other exit costs.
This foreign tax rate differential can change from year to year based upon the jurisdictional mix of earnings and changes in current and future enacted tax rates, tax holidays, and favorable tax regimes available to certain of our foreign subsidiaries; • changes in tax laws and rates, also Organization for Economic Co-operation and Development ("OECD") developments and European Commission ("EC") challenges to sovereign European Union member states; • losses incurred in certain jurisdictions, which cannot be currently benefited, if it is not more likely than not that the associated deferred tax asset will be realized in the foreseeable future; • foreign currency exchange gains and losses; • as a result of income tax audit settlements, final assessments, or lapse of applicable statutes of limitation, we may recognize an income tax expense or benefit including adjustment of previously accrued interest and penalties; and 39 Table of Contents • in certain jurisdictions, we recognize withholding and other taxes on intercompany payments, including dividends, and such taxes are deducted if they cannot be credited against the recipient's tax liability in its country of residence.
This foreign tax rate differential can change from year to year based upon the jurisdictional mix of earnings and changes in current and future enacted tax rates, tax holidays, and favorable tax regimes available to certain of our foreign subsidiaries; • changes in tax laws and rates, including the potential or actual impact of activities by the Organization for Economic Co-operation and Development ("OECD") related to the European Union's ("EU's") Pillar Two directive and the European Commission ("EC") challenges to sovereign EU member states; • losses incurred in certain jurisdictions, which cannot be currently benefited, if it is not more likely than not that the associated deferred tax asset will be realized in the foreseeable future; • foreign currency exchange gains and losses; • as a result of income tax audit settlements, final assessments, or lapse of applicable statutes of limitation, we may recognize an income tax expense or benefit including adjustment of previously accrued interest and penalties; and • in certain jurisdictions, we recognize withholding and other taxes on intercompany payments, including dividends, and such taxes are deducted if they cannot be credited against the recipient's tax liability in its country of residence.
Seasonality Refer to Item 1: Business included elsewhere in this Report for discussion of our assessment of seasonality related to our business. Legal Proceedings Refer to
Seasonality Refer to Item 1: Business included elsewhere in this Report for discussion of our assessment of seasonality related to our business. 42 Table of Contents Legal Proceedings Refer to
This indebtedness consists of a secured credit facility and senior unsecured notes. Refer to Note 14: Debt of our Financial Statements included elsewhere in this Report for additional information.
This indebtedness consists of a secured credit facility and various tranches of senior unsecured notes (together, the "Senior Notes"). Refer to Note 14: Debt of our Financial Statements included elsewhere in this Report for additional information on our indebtedness.
We rely on contract workers for direct labor in certain geographies. As of December 31, 2022, we had approximately 1,800 direct labor contract workers worldwide. • Sustaining Engineering Activity Costs.
We rely on contract workers for direct labor in certain geographies. As of December 31, 2023, we had approximately 2,200 direct labor contract workers worldwide. • Sustaining Engineering Activity Costs.
Net Revenue by End Market Our net revenue for the years ended December 31, 2022, 2021, and 2020 was derived from the following end markets: For the year ended December 31, (Percentage of total) 2022 2021 2020 Automotive 52.3 % 54.0 % 57.5 % HVOR 22.5 % 21.7 % 16.7 % Industrial 13.0 % 10.8 % 11.0 % Appliance and HVAC (1) 5.4 % 6.4 % 6.2 % Aerospace 3.8 % 3.5 % 4.5 % Other 3.0 % 3.6 % 4.1 % __________________________ (1) Heating, ventilation and air conditioning We are a significant supplier to multiple original equipment manufacturers within many of these end markets, thereby reducing customer concentration risk.
Net Revenue by End Market Our net revenue for the years ended December 31, 2023, 2022, and 2021 was derived from the following end markets: For the year ended December 31, (Percentage of total) 2023 2022 2021 Automotive 53.7 % 52.3 % 54.0 % HVOR 21.3 % 21.1 % 20.5 % Industrial 14.7 % 14.4 % 12.0 % Appliance and HVAC (1) 4.6 % 5.4 % 6.4 % Aerospace 4.7 % 3.8 % 3.5 % Other 1.0 % 3.0 % 3.6 % __________________________ (1) Heating, ventilation, and air conditioning We are a significant supplier to multiple OEMs within many of these end markets, thereby reducing customer concentration risk.
These withholdings took place outside of a publicly announced repurchase plan. There were 4,862, 1,323, and 10,893 ordinary shares withheld in October 2022, November 2022, and December 2022, respectively, representing a total aggregate fair value of $0.7 million based on the closing price of our ordinary shares on the date of withholdings.
These withholdings took place outside of a publicly announced repurchase plan. There were 4,035, 216, and 1,596 ordinary shares withheld in October 2023, November 2023, and December 2023, respectively, representing a total aggregate fair value of $0.2 million based on the closing price of our ordinary shares on the date of withholdings.
Refer to Item 7A: Quantitative and Qualitative Disclosures About Market Risk included elsewhere in this Report for more information regarding our exposure to potential changes in variable interest rates. 38 Table of Contents Interest income, which is netted against interest expense on the consolidated statements of operations, relates to interest earned on our cash and cash equivalent balances, and varies according to the balances in, and the interest rates provided by, these investments.
Refer to Item 7A: Quantitative and Qualitative Disclosures About Market Risk included elsewhere in this Report for more information regarding our exposure to potential changes in variable interest rates. Interest income Interest income relates to interest earned on our cash and cash equivalent balances, and varies according to the balances in, and the interest rates provided by, these investments.
Our remaining cost of revenue primarily consists of: gains and losses on certain foreign currency forward contracts that are designated as cash flow hedges; material yields; costs to import raw materials, such as tariffs; depreciation of fixed assets used in the manufacturing process; freight costs; warehousing expenses; maintenance and repair expenses; costs of quality assurance; operating supplies; and other general manufacturing expenses, such as expenses for energy consumption and operating lease expense. 36 Table of Contents Changes in cost of revenue as a percentage of net revenue have historically been impacted by several factors, including: • changes in the price of raw materials, including the impact of changes in costs to import such raw materials, such as tariffs; • changes in customer prices and surcharges; • implementation of cost improvement measures aimed at increasing productivity, including reduction of fixed production costs, refinements in inventory management, design and process driven changes, and the coordination of procurement within each subsidiary and at the business level; • product lifecycles, as we typically incur higher costs associated with new product development (related to excess manufacturing capacity and higher production costs during the initial stages of product launches) and during the phase-out of discontinued products; • changes in production volumes, as a portion of production costs are fixed; • transfer of production to our lower-cost manufacturing facilities; • changes in depreciation expense, including those arising from the adjustment of PP&E to fair value associated with acquisitions; • fluctuations in foreign currency exchange rates; • changes in product mix; • changes in logistics costs; • acquisitions and divestitures – acquired and divested businesses may generate higher or lower cost of revenue as a percentage of net revenue than our core business; and • the increase in the carrying value of inventory adjusted to fair value upon the application of purchase accounting associated with acquisitions.
Changes in cost of revenue as a percentage of net revenue have historically been impacted by several factors, including: • changes in the price of raw materials, including the impact of changes in costs to import such raw materials, such as tariffs; • changes in customer prices and surcharges; • implementation of cost improvement measures aimed at increasing productivity, including reduction of fixed production costs, refinements in inventory management, design and process driven changes, and the coordination of procurement within each subsidiary and at the business level; • product lifecycles, as we typically incur higher costs associated with new product development (related to excess manufacturing capacity and higher production costs during the initial stages of product launches) and during the phase-out of discontinued products; • changes in production volumes, as a portion of production costs are fixed; 39 Table of Contents • transfer of production to our lower-cost manufacturing facilities; • changes in depreciation expense, including those arising from the adjustment of PP&E to fair value associated with acquisitions; • fluctuations in foreign currency exchange rates; • changes in product mix; • changes in logistics costs; • acquisitions and divestitures – acquired and divested businesses may generate higher or lower cost of revenue as a percentage of net revenue than our core business; and • the increase in the carrying value of inventory adjusted to fair value upon the application of purchase accounting associated with acquisitions.
The factors include, but are not limited to, the following: • establishing or releasing a portion of the valuation allowance related to our gross deferred tax assets; • foreign tax rate differential - we operate in locations outside the U.S., including Belgium, Bulgaria, China, Malaysia, Malta, the Netherlands, South Korea, and the U.K., that historically have had statutory tax rates different than the U.S. statutory tax rate.
The factors include, but are not limited to, the following: • establishing or releasing a portion of the valuation allowance related to our gross deferred tax assets; • foreign tax rate differential - we operate in multiple jurisdictions including but not limited to Bulgaria, China, Malaysia, Malta, the Netherlands, South Korea, the U.S., and the U.K.
The total shareholder return shown on the graph represents past performance and should not be considered an indication of future price performance. Stockholders As of January 27, 2023, there were three holders of record of our ordinary shares, primarily Cede & Co.
The total shareholder return shown on the graph represents past performance and should not be considered an indication of future price performance. Stockholders As of February 7, 2024, there were three holders of record of our ordinary shares, primarily Cede & Co. (which acts as nominee shareholder for the Depository Trust Company).
Set forth below is selected information for each of these segments for the periods presented. Amounts and percentages in the tables below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
Amounts and percentages in the tables below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
In addition, new business wins ("NBOs") exceeded $1.0 billion in fiscal year 2022, an increase from NBOs of $640 million in fiscal year 2021. We define NBOs as incremental revenue to our current base of business that is expected to be recognized on average in the fifth year after entry into the agreement, when programs typically reach their normal volume.
We define NBOs as incremental revenue to our current base of business that is expected to be recognized on average in the fifth year after entry into the agreement, when programs typically reach their normal volume. Accordingly, NBOs are an indicator of future revenue potential.
These advancements lead to sensor growth rates that we expect to exceed underlying production growth in many of our key end markets, which we expect will continue to offer us significant growth opportunities. In fiscal year 2022, according to third party data, global production of light vehicles increased approximately 6% from fiscal year 2021.
These advancements lead to sensor growth rates that we expect to exceed underlying production growth in many of our key end markets, which we expect will continue to offer us significant growth opportunities.
Total Shareholder Return of $100.00 Investment from December 31, 2017 As of December 31, 2017 2018 2019 2020 2021 2022 Sensata $ 100.00 $ 87.73 $ 105.40 $ 103.19 $ 120.70 $ 79.61 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.88 S&P 500 Industrial $ 100.00 $ 85.00 $ 107.81 $ 117.52 $ 140.32 $ 130.35 The information in the graph and table above is not "soliciting material," is not deemed "filed" with the United States (the "U.S.") Securities and Exchange Commission, and is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K (this "Report"), except to the extent that we specifically incorporate such information by reference.
Total Shareholder Return of $100.00 Investment from December 31, 2018 As of December 31, 2018 2019 2020 2021 2022 2023 Sensata $ 100.00 $ 120.14 $ 117.62 $ 137.58 $ 90.75 $ 85.43 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 S&P 500 Industrial $ 100.00 $ 126.83 $ 138.25 $ 165.07 $ 153.35 $ 177.94 The information in the graph and table above is not "soliciting material," is not deemed "filed" with the United States (the "U.S.") Securities and Exchange Commission, and is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date 33 Table of Contents of this Annual Report on Form 10-K (this "Report"), except to the extent that we specifically incorporate such information by reference.
Organic revenue growth (or decline), discussed throughout this Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations (this "MD&A"), is a financial measure not presented in accordance with U.S. generally accepted accounting principles ("GAAP").
Net leverage ratio, discussed throughout this Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations (this "MD&A"), is a financial measure not presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Refer to Non-GAAP Financial Measures included elsewhere in this MD&A for additional information related to our use of net leverage ratio.
Refer to Results of Operations included elsewhere in this MD&A for additional discussion of our earnings results for the year ended December 31, 2022. We have sufficient cash to take advantage of strategic opportunities as they arise. We generated $460.6 million of operating cash flow in fiscal year 2022, ending the year with $1.2 billion in cash.
Refer to Results of Operations included elsewhere in this MD&A for additional discussion of our earnings results for the year ended December 31, 2023. We generated $456.7 million of operating cash flows in fiscal year 2023, ending the year with $508.1 million in cash.
Excluding a decrease of 2.4% attributed to changes in foreign currency exchange rates and an increase of 3.1% due to the net effect of acquisitions and divestitures, consolidated net revenue increased 4.8% on an organic basis. This reflects organic revenue growth of 3.9% in Performance Sensing and 7.5% in Sensing Solutions.
Fiscal year 2023 financial summary Our consolidated revenue increased 0.6% in fiscal year 2023 from the prior year. Excluding a decrease of 1.4% attributed to changes in foreign currency exchange rates and an increase of 0.5% due to the net effect of acquisitions and divestitures, net revenue increased 1.5% on an organic basis.
The following table presents net revenue by segment for the identified periods: For the year ended December 31, 2022 2021 2020 ($ in millions) Amount Percent of Total Amount Percent of Total Amount Percent of Total Net revenue: Performance Sensing $ 2,976.8 73.9 % $ 2,847.9 74.5 % $ 2,223.8 73.0 % Sensing Solutions 1,052.5 26.1 972.9 25.5 821.8 27.0 Total net revenue $ 4,029.3 100.0 % $ 3,820.8 100.0 % $ 3,045.6 100.0 % 34 Table of Contents The following table presents segment operating income in U.S. dollars ("USD") and as a percentage of segment net revenue for the identified periods: For the year ended December 31, 2022 2021 2020 ($ in millions) Amount Percent of Segment Net Revenue Amount Percent of Segment Net Revenue Amount Percent of Segment Net Revenue Segment operating income: Performance Sensing $ 751.6 25.2 % $ 777.2 27.3 % $ 532.5 23.9 % Sensing Solutions 300.0 28.5 % 293.2 30.1 % 241.2 29.4 % Total segment operating income $ 1,051.7 $ 1,070.4 $ 773.7 For a reconciliation of total segment operating income to consolidated operating income, refer to Note 20: Segment Reporting of our Financial Statements included elsewhere in this Report.
The following table presents net revenue by segment for the identified periods: For the year ended December 31, 2023 2022 2021 ($ in millions) Amount Percent of Total Amount Percent of Total Amount Percent of Total Net revenue: Performance Sensing $ 3,002.7 74.1 % $ 2,920.4 72.5 % $ 2,801.2 73.3 % Sensing Solutions 1,051.4 25.9 1,108.9 27.5 1,019.6 26.7 Total net revenue $ 4,054.1 100.0 % $ 4,029.3 100.0 % $ 3,820.8 100.0 % The following table presents segment operating income in U.S. dollars ("USD") and as a percentage of segment net revenue for the identified periods: For the year ended December 31, 2023 2022 2021 ($ in millions) Amount Percent of Segment Net Revenue Amount Percent of Segment Net Revenue Amount Percent of Segment Net Revenue Segment operating income: Performance Sensing $ 744.2 24.8 % $ 728.3 24.9 % $ 758.1 27.1 % Sensing Solutions 299.0 28.4 % 323.3 29.2 % 312.3 30.6 % Total segment operating income $ 1,043.3 $ 1,051.7 $ 1,070.4 For a reconciliation of total segment operating income to consolidated operating income, refer to Note 20: Segment Reporting of our Financial Statements included elsewhere in this Report. 37 Table of Contents Effective February 1, 2024, we combined our Automotive and HVOR businesses to better leverage core capabilities and prioritize product focus into one business, Vehicles, under the Performance Sensing reportable segment.
You should read the following discussion in conjunction with Item 1: Business and our audited consolidated financial statements and accompanying notes thereto (the "Financial Statements"), each included elsewhere in this Annual Report on Form 10-K (this "Report").
You should read the following discussion in conjunction with Item 1: Business and our Financial Statements, each included elsewhere in this Annual Report on Form 10-K (this "Report"). The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements.
Our various tranches of senior unsecured notes (the "Senior Notes") accrue interest at fixed rates. However, the Term Loan and the Revolving Credit Facility accrue interest at variable interest rates, which drives some of the variability in interest expense, net.
The Senior Notes accrue interest at fixed rates. However, the Term Loan and the Revolving Credit Facility accrue interest at variable interest rates, which could drive some of the variability in interest expense. As of December 31, 2023, we had no amounts outstanding on the Term Loan or Revolving Credit Facility.
The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties including, but not limited to, the risks and uncertainties described in Item 1A: Risk Factors included elsewhere in this Report.
These forward-looking statements are subject to numerous risks and uncertainties including, but not limited to, the risks and uncertainties described in Item 1A: Risk Factors included elsewhere in this Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Shareholders should consult their tax advisors regarding their particular tax situation and the income tax consequences on any potential dividend income received from us.
Shareholders should consult their tax advisors regarding their particular tax situation and the income tax consequences on any potential dividend income received from us. Share Repurchase Programs 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.
(2) All purchases during the three months ended December 31, 2022 were conducted pursuant to a $500.0 million share repurchase program authorized by our Board of Directors and publicly announced on January 20, 2022 (the “January 2022 Program”). The January 2022 Program does not have an established expiration date. ITEM 6. RESERVED 32 Table of Contents ITEM 7.
(2) All purchases during the three months ended December 31, 2023 were conducted pursuant to the September 2023 Program. The September 2023 Program does not have an established expiration date. ITEM 6. RESERVED ITEM 7.
We anticipate significant change in the markets that we serve over the next 10 years, as our customers transform their businesses and product portfolios to adjust to decarbonization trends. Many equipment categories are electrifying, and significant investment is being made in global infrastructure to support this trend. During fiscal year 2022, we recognized approximately $460 million of revenue in Electrification.
Many equipment categories are electrifying, and significant investment is being made in global infrastructure to support this trend. During fiscal year 2023, we recognized Electrification revenue of approximately $673 million. New business wins ("NBOs") were approximately $657 million in fiscal year 2023, of which more than half were in Electrification.
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (in shares) (1) Weighted-Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs (in shares)(2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Programs (in millions) (2) October 1 through October 31, 2022 713,766 $ 39.67 708,904 $ 244.1 November 1 through November 30, 2022 458,510 $ 42.75 457,187 $ 224.5 December 1 through December 31, 2022 10,893 $ 41.16 — $ 224.5 Quarter total 1,183,169 $ 40.88 1,166,091 $ 224.5 __________________________ (1) The number of ordinary shares presented includes ordinary shares that were withheld to cover payment of employee withholding tax upon the vesting of restricted securities.
The process or criteria used to determine the amount of repurchases is an ongoing and frequent review of our capacity of available cash and our overall capital allocation priorities. 34 Table of Contents Issuer purchase of Equity Securities Period Total Number of Shares Purchased (in shares) (1) Weighted-Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs (in shares)(2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Programs (in millions) (2) October 1 through October 31, 2023 215,560 $ 37.78 211,525 $ 492.0 November 1 through November 30, 2023 318,268 $ 31.61 318,052 $ 482.0 December 1 through December 31, 2023 302,639 $ 33.40 301,043 $ 471.9 Quarter total 836,467 $ 33.85 830,620 $ 471.9 __________________________ (1) The number of ordinary shares presented includes ordinary shares that were withheld to cover payment of employee withholding tax upon the vesting of restricted securities.
Operating income for the year ended December 31, 2022 increased $36.9 million, or 5.8%, to $670.1 million (16.6% of net revenue) compared to $633.2 million (16.6% of net revenue) in the prior year.
Operating income for fiscal year 2023 decreased $488.5 million, or 72.9%, to $181.7 million (4.5% of net revenue) compared to $670.1 million (16.6% of net revenue) in the prior year. This decrease was primarily due to the $321.7 million impairment of the Insights reporting unit in the fourth quarter.
Solving these mission-critical challenges enables us to deliver differentiated value for both our customers and shareholders while also investing in our growth opportunities and our people. Refer to Item 1: Business , included elsewhere in this Report, for additional discussion on our growth drivers, including megatrends.
Overview We innovate on behalf of our broad array of customers, solving some of their most difficult engineering challenges by providing sensors and sensor-rich solutions, electrical protection components and systems, and other products. Solving these mission-critical challenges enables us to deliver differentiated value for both our customers and shareholders, while also investing in our growth opportunities and our people.
Global production in the heavy vehicle and off-road ("HVOR") markets we serve decreased approximately 12% from fiscal year 2021. Our consolidated revenue increased 5.5% in fiscal year 2022 from the prior year.
In fiscal year 2023, according to third party data, global production of light vehicles increased approximately 9% and global production in the heavy vehicle and off-road ("HVOR") markets we serve increased approximately 1% to 2%, each from the prior year. 35 Table of Contents Fiscal year 2023 highlights In the fourth quarter of 2023, we determined that, as of October 1, 2023, our Insights reporting unit was impaired.
Removed
(which acts as nominee shareholder for the Depository Trust Company). 31 Table of Contents Dividends In April 2022, our Board of Directors approved our first quarterly dividend of $0.11 per share, paid in May 2022. Subsequent to this payment, we made additional quarterly payments in August 2022 and November 2022, each at $0.11 per share.
Added
Dividends In fiscal year 2023, we made payments of quarterly dividends of $0.11 per share in February 2023 and $0.12 per share in May, August, and November 2023. We expect that comparable cash dividends will continue to be paid in the foreseeable future.
Removed
Our actual results may differ materially from those contained in or implied by any forward-looking statements. Overview We innovate on behalf of our broad array of customers, solving some of their most difficult engineering challenges by providing our products and solutions in the areas that we consider our most significant growth drivers, Electrification, Insights/IoT, and Safe & Efficient.
Added
Under these programs, 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 were completed pursuant to an agreement and with a third party approved by our shareholders at the annual general meeting.
Removed
In fiscal year 2022, we completed two notable acquisitions in Electrification and Insights/IoT, Dynapower and Elastic M2M, Inc. ("Elastic M2M"), respectively. Refer to Item 1: Business – Business Combinations and Note 21: Acquisitions and Divestitures of our Financial Statements, each included elsewhere in this Report, for additional information related to these acquisitions.
Added
On January 20, 2022, our Board of Directors authorized a $500.0 million ordinary share repurchase program (the “January 2022 Program”), which replaced the previous $500.0 million program approved in July 2019.
Removed
Accordingly, NBOs are an indicator of future revenue potential. Approximately 70% of those NBOs in fiscal year 2022 were in Electrification, which will help drive future revenue outgrowth in this megatrend. Within our Insights/IoT megatrend initiative, we see a large and fast-growing market opportunity to deliver data insights across heavy, medium, and light vehicle fleets.
Added
On September 26, 2023, our Board of Directors authorized a new $500.0 million ordinary share repurchase program (the "September 2023 Program"), which replaced the January 2022 Program and became effective on October 1, 2023. The form of the September 2023 Program was approved by shareholders on May 25, 2023. The September 2023 Program does not have an established expiration date.
Removed
The Sensata INSIGHTS business addresses this opportunity by providing data and video telematics, asset tracking devices, and other cloud-based solutions. In February 2022, we acquired Elastic M2M, which augments our cloud capabilities critical to delivering actionable sensor-based insights, continuing the expansion of Sensata INSIGHTS begun with the fiscal year 2021 acquisitions of Xirgo Technologies, LLC ("Xirgo") and SmartWitness Holdings, Inc.
Added
Refer to Item 1: Business included elsewhere in this Report for additional discussion on our growth drivers. We anticipate significant change in the markets that we serve over the next 10 years, as our customers transform their businesses and product portfolios to adjust to decarbonization trends.
Removed
("SmartWitness"). Refer to Item 1: Business , included elsewhere in this Report, for additional discussion of the acquisition of Elastic M2M. Sensata INSIGHTS revenue in fiscal year 2022 was approximately $173.3 million.
Added
As a result, we recorded a $321.7 million non-cash impairment charge, representing the entire goodwill balance allocated to Insights. This impairment was primarily driven by reprioritization of our investments into electrification. This reprioritization evolved from an assessment of our business strategy, beginning in the second half of 2023.
Removed
Refer to Non-GAAP Financial Measures included elsewhere in this MD&A for additional information related to our use of organic revenue growth (or decline). 33 Table of Contents While our underlying markets were pressured by continuing supply chain disruptions, we produced 820 basis points of market outgrowth in fiscal year 2022, which includes higher pricing, content growth in the automotive and aerospace businesses, and new Electrification launches in our Industrial business.
Added
With electrification as the clear future of our company and the best area of focus for management, in the fourth quarter of 2023, we decided to narrow our investment in Insights. Our assessment of the potential of the business has not changed, but our focus has moved from growth of the business to profitability.
Removed
We use the term "market outgrowth" to describe the impact of an increasing quantity and value of our products used in customer systems and applications, above normal market growth. It is only loosely correlated to normal unit demand fluctuations in the markets we serve.
Added
These decisions resulted in significant cost restructuring and a lower long-range financial forecast for the reporting unit, impacting the valuation of the business with respect to the goodwill impairment analysis. Other valuation assumptions for the Insights reporting unit valuation that are impacted by macroeconomic factors also contributed to the impairment.
Removed
We believe we can continue to deliver end market outgrowth based on our high levels of new business awards and our large and expanding pipeline of new opportunities.
Added
We are considering strategic alternatives for this business as we continue to focus our investment priorities in line with our strategy. In the year ended December 31, 2023, we committed to a plan to reorganize our business (the “Q3 2023 Plan”).
Removed
This increase was primarily due to higher volumes, improved pricing to offset inflationary material and logistics costs, partially offset by unfavorable movements in foreign currency, the impact from investments in the growth vectors of Electrification and Insights/IoT, and the divestiture of various assets and liabilities comprising our semiconductor test and thermal business (collectively, the "Qinex Business").
Added
The Q3 2023 Plan, consisting of voluntary and involuntary reductions-in-force, site closures, and other cost-savings initiatives, was commenced to adjust our cost structure and business activities to better align with weaker market demand we have been experiencing due to continued economic uncertainty in many of our end markets and to take active measures to accelerate margin recovery.
Removed
In fiscal year 2022, we used approximately $631.5 million in cash for acquisitions and approximately $292.3 million for share repurchases. We also paid approximately $51.1 million in cash dividends. In fiscal year 2023, we will continue to return capital to shareholders through our dividend and opportunistic share repurchases.
Added
Our business strategy remains the same with increasing focus and effort in penetrating the fast-growing electrification trend where we are having great success with significant NBOs. The reductions-in-force, which are subject to the laws and regulations of the countries in which the actions are planned, are expected to impact 466 positions.
Removed
We expect improving free cash flow will naturally allow leverage to decline and returns on invested capital to improve over time. On January 31, 2023, we announced that we intended to pay down $250.0 million of principal on the balance outstanding of the term loan facility (the “Term Loan”) under the senior secured credit facilities (the "Senior Secured Credit Facilities").
Added
Over the life of the Q3 2023 Plan, we expect to incur restructuring charges of between $20.5 million and $25.5 million, primarily related to reductions-in-force. The majority of the actions under the Q3 2023 Plan are expected to be completed on or before June 30, 2024.
Removed
That payment was completed on February 6, 2023. Our long-standing mission is to help create a cleaner, safer, and more connected world, not just for our customer's products but also through our own operations. We reduced our greenhouse gas emission intensity by more than 10% in fiscal year 2022, reaching our fiscal year 2026 target four years earlier than anticipated.
Added
In the year ended December 31, 2023, we recognized approximately $23.5 million of charges related to the Q3 2023 Plan. As of December 31, 2023, our severance liability related to the Q3 2023 Plan was $6.0 million. Refer to Note 5: Restructuring and Other Charges, Net , of our Financial Statements included elsewhere in this Report for additional information.
Removed
In addition, we're on our way to achieving the other targets laid out in our Sustainability Report, bolstering the long-term sustainability and success of the company for all of its stakeholders. Selected Segment Information We present financial information for two reportable segments, Performance Sensing and Sensing Solutions.
Added
We expect that the actions taken in the Q3 2023 Plan will result in annualized savings of approximately $40 million to $50 million. On June 6, 2023, we announced that we had made the decision to exit the marine energy storage business (the "Marine Business") of Spear Power Systems (“Spear”).
Added
The exit of the Spear Marine Business was the result of a change in strategy with respect to the business and involved ceasing sales, marketing, and business operations. It resulted in the elimination of certain positions, primarily in the U.S. and the closure of operations in Belgium. The Spear Marine Business had been included in the Sensing Solutions reportable segment.
Added
Exiting the Spear Marine Business resulted in charges in the year ended December 31, 2023 of approximately $38.5 million, consisting of accelerated amortization, inventory and property, plant and equipment ("PP&E") write-downs, severance charges, and other charges, including contract termination costs.
Added
Refer to Note 5: Restructuring and Other Charges, Net , of our Financial Statements included elsewhere in this Report for additional information on the Q3 2023 Plan and our exit from the Spear Marine Business.
Added
In fiscal year 2023, we used $848.9 million of cash to pay debt, including prepaying the entire remaining outstanding principal on our variable-rate term loan facility ("Term Loan") balance in the first half of 2023 and the early redemption of the full $400.0 million aggregate principal amount outstanding on our 5.625% senior notes due 2024 (the "5.625% Senior Notes") in accordance with the terms of the indenture under which the 5.625% Senior Notes were issued.
Added
These repayments brought our gross outstanding indebtedness at December 31, 2023 to $3.4 billion, representing a net leverage ratio of 3.2x, compared to gross indebtedness of $4.3 billion as of December 31, 2022 (representing a net leverage ratio of 3.4x).
Added
Organic revenue growth (or decline), discussed throughout this MD&A, is a financial measure not presented in accordance with U.S. GAAP. Refer to Non-GAAP Financial Measures included elsewhere in this MD&A for additional information related to our use of organic revenue growth (or decline).
Added
Organic revenue growth was primarily driven by an increase in demand in markets we serve in the Automotive, HVOR, and Aerospace businesses, content 36 Table of Contents growth, and the impact of pricing recoveries, partially offset by revenue mix, market declines, and inventory destocking in our Industrial business.
Added
In addition, operating income in the prior year included $135.1 million of gain on sale of various assets and liabilities comprising our semiconductor test and thermal business (collectively, the "Qinex Business"), for which there was no comparable amount in fiscal year 2023.
Added
Other charges during the year, such as those related to our exit from the Spear Marine Business and the entry into the Q3 2023 Plan, and the unfavorable effect of changes in foreign currency exchange rates, were partially offset by the net impacts of pricing recoveries from customers with inflation on material and logistics costs, volume leverage, and cost savings during the year resulting from repositioning actions taken in fiscal year 2022.

… 7 more changes not shown on this page.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

14 edited+3 added−5 removed49 unchanged
Biggest changeSuch approval lasts for a maximum period of up to five years. Our shares are traded on the New York Stock Exchange, which is not a recognized investment exchange in the U.K. Consequently, any repurchase of our shares is currently considered an "off-market purchase." Our current authorization expires on May 28, 2025, and we intend to renew this authorization periodically.
Biggest changeEnglish law also generally prohibits a company from repurchasing its own shares by way of "off-market purchases" without the prior approval of our shareholders. Such approval lasts for a maximum period of up to five years. Our shares are traded on the New York Stock Exchange, which is not a recognized investment exchange in the U.K.
The following criteria must be satisfied for the English court to enforce the debt created by the U.S. judgment: (1) the U.S. court having had jurisdiction over the original proceedings according to English conflicts of laws principles and rules of English private international law at the time when proceedings were initiated; (2) the U.S. proceedings not having been brought in breach of a jurisdiction or arbitration clause except with the agreement of the defendant or the defendant’s subsequent submission to the jurisdiction of the court; (3) the U.S. judgment being final and conclusive on the merits in the sense of being final and unalterable in the court which pronounced it and being for a definite sum of money; (4) the recognition or enforcement, as the case may be, of the U.S. judgment not contravening English public policy in a sufficiently significant way or contravening the Human Rights Act 1998 (or any subordinate legislation made thereunder, to the extent applicable); (5) the U.S. judgment not being for a sum payable in respect of taxes, or other charges of a like nature, or in respect of a penalty or fine, or otherwise based on a U.S. law that an English court considers to be a penal or revenue law; (6) the U.S. judgment not having been arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damages sustained, and not otherwise being a judgment contrary to section 5 of the Protection of Trading Interests Act 1980 or is a judgment based on measures designated by the Secretary of State under Section 1 of that Act; (7) the U.S. judgment not having been obtained by fraud or in breach of English principles of natural justice; (8) the U.S. judgment not being a judgment on a matter previously determined by an English court, or another court whose judgment is entitled to recognition (or enforcement as the case may be) in England, in proceedings involving the same parties that conflicts with an earlier judgment of such court; (9) the party seeking enforcement (being a party who is not ordinarily resident in some part of the U.K. or resident in an EU Member State) providing security for costs, if ordered to do so by the English courts; and (10) the English enforcement proceedings being commenced within the relevant limitation period.
The following criteria must be satisfied for the English court to enforce the debt created by the U.S. judgment: (1) the U.S. court having had jurisdiction over the original proceedings according to English conflicts of laws principles and rules of English private international law at the time when proceedings were initiated; (2) the U.S. proceedings not having been brought in breach of a jurisdiction or arbitration clause except with the agreement of the defendant or the defendant’s subsequent submission to the jurisdiction of the court; (3) the U.S. judgment being final and conclusive on the merits in the sense of being final and unalterable in the court which pronounced it and being for a definite sum of money; (4) the recognition or enforcement, as the case may be, of the U.S. judgment not contravening English public policy in a sufficiently significant way or contravening the Human Rights Act 1998 (or any subordinate legislation made thereunder, to the extent applicable); (5) the U.S. judgment not being for a sum payable in respect of taxes, or other charges of a like nature, or in respect of a penalty or fine, or otherwise based on a U.S. law that an English court considers to be a penal or revenue law; (6) the U.S. judgment not having been arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damages sustained, and not otherwise being a judgment contrary to section 5 of the Protection of Trading Interests Act 1980 or is a judgment based on measures designated by the Secretary of State under Section 1 of that Act; (7) the U.S. judgment not having been obtained by fraud or in breach of English principles of natural justice; (8) the U.S. judgment not being a judgment on a matter previously determined by an English court, or another court whose judgment is entitled to recognition (or enforcement as the case may be) in England, in proceedings involving the same parties that conflicts with an earlier judgment of such court; (9) the party seeking enforcement (being a party who is not ordinarily resident in some part of the U.K. or resident in an EU Member State) providing security for costs, if ordered to do so by the English courts; and (10) the English enforcement proceedings being commenced within the relevant limitation period. 29 Table of Contents If an English court gives judgment for the sum payable under a U.S. judgment, the English judgment will be enforceable by methods generally available for this purpose.
These laws could make the manufacture or sale of our products more expensive or impossible, could limit our ability to sell our products in certain jurisdictions, and could result in liability for product recalls, penalties, or other claims. 27 Table of Contents Our ability to compete effectively depends, in part, on our ability to maintain the proprietary nature of our products and technology.
These laws could make the manufacture or sale of our products more expensive or impossible, could limit our ability to sell our products in certain jurisdictions, and could result in liability for product recalls, penalties, or other claims. Our ability to compete effectively depends, in part, on our ability to maintain the proprietary nature of our products and technology.
These laws and regulations govern, among other things, the generation, storage, use, and transportation of hazardous materials; emissions or discharges of substances into the environment; investigation and remediation of hazardous substances or materials at various sites; greenhouse gas emissions; product hazardous material content; and the health and safety of our employees.
These laws and regulations govern, among other things, the generation, storage, use, and transportation of hazardous materials; emissions or discharges of substances into the environment; investigation and remediation of hazardous substances or materials at various sites; GHG emissions; product hazardous material content; and the health and safety of our employees.
No assurance can be given that there will not be further changes in law, regulatory actions, or other circumstances that could restrict the ability of our subsidiaries to pay dividends or otherwise make payments to us.
No assurance can be given that there will not be further changes in law, regulatory actions, or other circumstances that could restrict the ability of our subsidiaries to pay dividends or otherwise make payments to 26 Table of Contents us.
These laws and regulations are subject to change, and any such change may limit or exclude existing or future business opportunities, require us to change technology, or incur expenditures to comply with such laws and regulations. 26 Table of Contents We have discovered in the past, and may discover in the future, deficiencies in our trade compliance program.
These laws and regulations are subject to change, and any such change may limit or exclude existing or future business opportunities, require us to change technology, or incur expenditures to comply with such laws and regulations. We have discovered in the past, and may discover in the future, deficiencies in our trade compliance program.
We cannot provide any assurances as to what our tax rate will be in any period because of, among other things, uncertainty regarding the nature and extent of our business activities in any particular jurisdiction in the future and the tax laws of such jurisdictions, as well as changes in U.S. and other tax laws, treaties, and regulations, in particular related to proposed tax laws by the U.S. government as a result of a new administration, which could increase our tax liabilities.
We cannot provide any assurances as to what our tax rate will be in any period because of, among other things, uncertainty regarding the nature and extent of our business activities in any particular jurisdiction in the future and the tax laws of such jurisdictions, as well as changes in U.S. and other tax laws, treaties, and regulations, in particular related to proposed tax laws by the U.S. or other governments, which could increase our tax liabilities.
We may not have been, or we may not always be, in compliance with all environmental and health and safety laws and regulations. If we violate these laws, we could be fined, criminally charged, or otherwise sanctioned by regulators. In addition, environmental and health and safety laws are becoming more stringent, resulting in increased costs and compliance burdens.
We may not have been, or we may not always be, in compliance with all environmental and health and safety laws and regulations. If we violate these laws, we could be fined, criminally charged, or otherwise sanctioned by regulators.
The defense of these lawsuits may divert our management's attention, and we may incur significant expenses in defending these lawsuits. In addition, we may be required to pay damage awards or settlements, or become subject to injunctions or other equitable remedies, that could cause a material adverse effect on our results of operations, financial condition, and/or cash flows. U.K.
In addition, we may be required to pay damage awards or settlements, or become subject to injunctions or other equitable remedies, that could cause a material adverse effect on our results of operations, financial condition, and/or cash flows. 28 Table of Contents U.K.
Certain environmental laws assess liability on current or previous owners or operators of real property for the costs of investigation, removal, and remediation of hazardous substances or materials at their properties or properties at which they have disposed of hazardous substances.
In addition, environmental and health and safety laws are becoming more stringent, resulting in increased costs and compliance burdens. 27 Table of Contents Certain environmental laws assess liability on current or previous owners or operators of real property for the costs of investigation, removal, and remediation of hazardous substances or materials at their properties or properties at which they have disposed of hazardous substances.
For example, the European Commission (the "EC") has been conducting investigations of state aid and have focused on whether EU sovereign country laws or rulings provide favorable treatment to taxpayers conflicting with its interpretation of EU law.
For example, the European Commission (the "EC") has been conducting investigations of state aid and have focused on whether EU sovereign country laws or rulings provide favorable treatment to taxpayers conflicting with its interpretation of EU law. EC findings may have retroactive effect and can cause increases in tax liabilities where we considered ourselves in full compliance with local legislation.
In addition, in any enforcement proceedings, the judgment debtor may raise any counterclaim that could have been brought if the action had been originally brought in England unless the subject of the counterclaim was in issue and denied in the U.S. proceedings. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 29 Table of Contents
These methods generally permit the English court discretion to prescribe the manner of enforcement. In addition, in any enforcement proceedings, the judgment debtor may raise any counterclaim that could have been brought if the action had been originally brought in England unless the subject of the counterclaim was in issue and denied in the U.S. proceedings. ITEM 1B.
While we intend to maintain a sufficient level of distributable reserves, there is no assurance that we will continue to generate sufficient earnings in order to maintain the necessary level of distributable reserves to make share repurchases or pay dividends. 28 Table of Contents English law also generally prohibits a company from repurchasing its own shares by way of "off-market purchases" without the prior approval of our shareholders.
Distributable reserves may be created through the earnings of the U.K. parent company or other actions. While we intend to maintain a sufficient level of distributable reserves, there is no assurance that we will continue to generate sufficient earnings in order to maintain the necessary level of distributable reserves to make share repurchases or pay dividends.
As a public limited company incorporated under the laws of England and Wales, the enforcement of civil liabilities against us may be more difficult.
Consequently, any repurchase of our shares is currently considered an "off-market purchase." Our current authorization expires on May 28, 2025, and we intend to renew this authorization periodically. As a public limited company incorporated under the laws of England and Wales, the enforcement of civil liabilities against us may be more difficult.
Removed
EC findings may have retroactive effect and can cause increases in tax liabilities where we considered ourselves in full compliance with local legislation. 25 Table of Contents 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.
Added
Furthermore, on December 15, 2022, the EU Member States formally adopted the EU's Pillar Two Directive, which generally provides for a minimum jurisdictional effective tax rate of 15%. The legislation is effective for our fiscal year beginning January 1, 2024.
Removed
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.
Added
We continue to evaluate the potential impact on future periods due to the Pillar Two framework, as such changes could result in complexity and uncertainty in countries where we do business and could increase our effective tax rate.
Removed
We continue to monitor developments and will react accordingly.
Added
The defense of these lawsuits may divert our management's attention, and we may incur significant expenses in defending these lawsuits.
Removed
Distributable reserves may be created through the earnings of the U.K. parent company or other actions.
Removed
If an English court gives judgment for the sum payable under a U.S. judgment, the English judgment will be enforceable by methods generally available for this purpose. These methods generally permit the English court discretion to prescribe the manner of enforcement.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

88 edited+36 added−50 removed59 unchanged
Biggest changeFor the year ended December 31, 2022 ($ in millions, except per share amounts) Operating Income Operating Margin Net Income Diluted EPS Reported (GAAP) $ 670.1 16.6 % $ 310.7 $ 1.99 Non-GAAP adjustments: Restructuring related and other (e) 36.5 0.9 34.5 0.22 Financing and other transaction costs (a) (75.6) (1.9) 10.7 0.07 Step-up depreciation and amortization 148.3 3.7 148.3 0.95 Deferred (gain)/loss on derivative instruments (1.5) 0.0 1.5 0.01 Amortization of debt issuance costs — — 7.0 0.04 Deferred taxes and other tax related (c) — — 17.8 0.11 Total adjustments 107.7 2.7 219.8 1.41 Adjusted (non-GAAP) $ 777.9 19.3 % $ 530.5 $ 3.40 For the year ended December 31, 2021 ($ in millions, except per share amounts) Operating Income Operating Margin Net Income Diluted EPS Reported (GAAP) $ 663.2 16.6 % $ 363.6 $ 2.28 Non-GAAP adjustments: Restructuring related and other (e) 23.6 0.6 21.4 0.13 Financing and other transaction costs (b) 13.2 0.3 41.0 0.26 Step-up depreciation and amortization 127.6 3.3 127.6 0.80 Deferred loss on derivative instruments 8.3 0.2 11.3 0.07 Amortization of debt issuance costs — — 6.9 0.04 Deferred taxes and other tax related (c) — — (4.9) (0.03) Total adjustments 172.8 4.5 203.3 1.28 Adjusted (non-GAAP) $ 806.0 21.1 % $ 566.8 $ 3.56 47 Table of Contents For the year ended December 31, 2020 ($ in millions, except per share amounts) Operating Income Operating Margin Net Income Diluted EPS Reported (GAAP) $ 337.7 11.1 % $ 164.3 $ 1.04 Non-GAAP adjustments: Restructuring related and other (e) 87.4 2.9 93.8 0.59 Financing and other transaction costs 8.2 0.3 6.4 0.04 Step-up depreciation and amortization 125.7 4.1 125.7 0.79 Deferred loss/(gain) on derivative instruments 3.1 0.1 (7.0) (0.04) Amortization of debt issuance costs — — 6.9 0.04 Deferred taxes and other tax related (d) — — (40.9) (0.26) Total adjustments 224.4 7.4 184.9 1.17 Adjusted (non-GAAP) $ 562.1 18.5 % $ 349.2 $ 2.21 __________________________ (a) Includes gains of $135.1 million and $9.4 million on the sale of the Qinex Business and changes in the fair value of acquisition-related contingent consideration, respectively, partially offset by $48.9 million of expense related to compensation arrangements entered into concurrent with the closing of acquisitions, each of which were recorded in restructuring and other charges, net.
Biggest changeFor the year ended December 31, 2023 ($ in millions, except per share amounts) Operating Income Operating Margin Income Taxes Net (Loss)/ Income Diluted EPS Reported (GAAP) $ 181.7 4.5 % $ 21.8 $ (3.9) $ (0.03) Non-GAAP adjustments: Restructuring related and other (a) 411.5 10.2 (3.7) 407.8 2.67 Financing and other transaction costs 16.3 0.4 2.7 24.2 0.16 Step-up depreciation and amortization (b) 168.6 4.2 — 168.6 1.11 Deferred gain on derivative instruments (4.1) (0.1) 0.3 (1.7) (0.01) Amortization of debt issuance costs — — — 6.8 0.04 Deferred taxes and other tax related — — (50.4) (50.4) (0.33) Total adjustments 592.3 14.6 (51.1) 555.3 3.64 Adjusted (non-GAAP) $ 774.0 19.1 % $ 72.8 $ 551.4 $ 3.61 For the year ended December 31, 2022 ($ in millions, except per share amounts) Operating Income Operating Margin Income Taxes Net Income Diluted EPS Reported (GAAP) $ 670.1 16.6 % $ 86.0 $ 310.7 $ 1.99 Non-GAAP adjustments: Restructuring related and other (a) 36.5 0.9 (3.5) 34.5 0.22 Financing and other transaction costs (c) (75.6) (1.9) 2.8 10.7 0.07 Step-up depreciation and amortization 148.3 3.7 — 148.3 0.95 Deferred (gain)/loss on derivative instruments (1.5) 0.0 (0.4) 1.5 0.01 Amortization of debt issuance costs — — — 7.0 0.04 Deferred taxes and other tax related (d) — — 17.8 17.8 0.11 Total adjustments 107.7 2.7 16.7 219.8 1.41 Adjusted (non-GAAP) $ 777.9 19.3 % $ 69.3 $ 530.5 $ 3.40 50 Table of Contents For the year ended December 31, 2021 ($ in millions, except per share amounts) Operating Income Operating Margin Income Taxes Net Income Diluted EPS Reported (GAAP) $ 663.2 16.6 % $ 50.3 $ 363.6 $ 2.28 Non-GAAP adjustments: Restructuring related and other (a) 23.6 0.6 (3.5) 21.4 0.13 Financing and other transaction costs (e) 13.2 0.3 (0.1) 41.0 0.26 Step-up depreciation and amortization 127.6 3.3 — 127.6 0.80 Deferred loss on derivative instruments 8.3 0.2 — 11.3 0.07 Amortization of debt issuance costs — — — 6.9 0.04 Deferred taxes and other tax related (d) — — (4.9) (4.9) (0.03) Total adjustments 172.8 4.5 (8.4) 203.3 1.28 Adjusted (non-GAAP) $ 806.0 21.1 % $ 58.8 $ 566.8 $ 3.56 __________________________ (a) The following table presents the components of our restructuring related and other non-GAAP adjustment to net income for fiscal years 2023, 2022, and 2021 (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): For the year ended December 31, (In millions) 2023 2022 2021 Business and corporate repositioning (i) $ 77.6 $ 27.2 $ 10.7 Supply chain repositioning and transition (ii) 13.4 4.5 8.2 Pre-acquisition legal matters (iii) (1.5) 6.4 6.0 Other (iv) 322.0 — — Income tax effect (v) (3.7) (3.5) (3.5) Total non-GAAP restructuring related and other (vi) $ 407.8 $ 34.5 $ 21.4 __________________________ i.
We describe these adjustments in more detail below, each of which is net of current tax impacts, as applicable. • Restructuring related and other : includes charges, net related to certain restructuring and other exit activities as well as other costs (or income) that we believe are either unique or unusual to the identified reporting period, and that we believe impact comparisons to prior period operating results.
We describe these adjustments in more detail below, each of which is net of current tax impacts, as applicable. • Restructuring related and other : includes net charges related to certain restructuring and other exit activities as well as other costs (or income) that we believe are either unique or unusual to the identified reporting period, and that we believe impact comparisons to prior period operating results.
Dollar 10% Weakening of the Value of the Foreign Currency Relative to the U.S.
Dollar 10% Weakening of the Value of the Foreign Currency Relative to the U.S.
Interest Rate Risk As discussed further in Note 14: Debt of our Financial Statements included elsewhere in this Report, the Credit Agreement provides for the Senior Secured Credit Facilities consisting of the Term Loan, the Revolving Credit Facility, and incremental availability under which additional secured credit facilities could be issued under certain circumstances.
Interest Rate Risk As discussed further in Note 14: Debt of our Financial Statements included elsewhere in this Report, the Credit Agreement provides for the Senior Secured Credit Facilities consisting of the Term Loan, the Revolving Credit Facility, and incremental availability (the "Accordion") under which additional secured credit facilities could be issued under certain circumstances.
GAAP. In addition, our measures of organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted EPS, free cash flow, adjusted corporate and other expenses, net leverage ratio, and adjusted EBITDA may not be the same as, or comparable to, similar non-GAAP financial measures presented by other companies.
In addition, our measures of organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted EPS, free cash flow, adjusted corporate and other expenses, gross and net leverage ratio, and adjusted EBITDA may not be the same as, or comparable to, similar non-GAAP financial measures presented by other companies.
Represents charges incurred related to legal matters associated with acquired businesses, for which new information is brought to light after the measurement period for the business combination is closed, but for which the liability relates to events or activities that occurred prior to our acquisition of the business.
Represents charges incurred related to legal matters associated with acquired businesses, for which new information is brought to light after the measurement period for the business combination is closed, but for which the liability relates to events or activities that occurred prior to our acquisition of the business. iv.
Goodwill, Intangible Assets, and Long-Lived Assets Businesses acquired are recognized at their fair value on the date of acquisition, with the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed recognized as goodwill. Intangible assets acquired may include either definite-lived or indefinite-lived intangible assets, or both.
Goodwill Businesses acquired are recognized at their fair value on the date of acquisition, with the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed recognized as goodwill. Intangible assets acquired may include either definite-lived or indefinite-lived intangible assets, or both.
The Credit Agreement also requires mandatory prepayments of the outstanding borrowings under the Senior Secured Credit Facilities upon certain asset dispositions and casualty events, in each case subject to certain reinvestment rights, and upon the incurrence of certain indebtedness (excluding any permitted indebtedness). These provisions were not triggered during the year ended December 31, 2022.
The Credit Agreement also requires mandatory prepayments of the outstanding borrowings under the Senior Secured Credit Facilities upon certain asset dispositions and casualty events, in each case subject to certain reinvestment rights, and upon the incurrence of certain indebtedness (excluding any permitted indebtedness). These provisions were not triggered during the year ended December 31, 2023.
Organic revenue growth (or decline) Organic revenue growth (or decline) is defined as the reported percentage change in net revenue, calculated in accordance with U.S. GAAP, excluding the period-over-period impact of foreign currency exchange rate differences as well as the net impact of material acquisitions and divestitures for the 12-month period following the respective transaction date(s).
Organic revenue growth (or decline) and market outgrowth Organic revenue growth (or decline) is defined as the reported percentage change in net revenue, calculated in accordance with U.S. GAAP, excluding the period-over-period impact of foreign currency exchange rate differences as well as the net impact of material acquisitions and divestitures for the 12-month period following the respective transaction date(s).
We do not believe that these restrictions and covenants will prevent us from funding share repurchases under our share repurchase programs with available cash and cash flows from operations. As of December 31, 2022, we believe that we were in compliance with all the covenants and default provisions under the Credit Agreement and the Senior Notes Indentures.
We do not believe that these restrictions and covenants will prevent us from funding share repurchases under our share repurchase programs with available cash and cash flows from operations. As of December 31, 2023, we believe that we were in compliance with all the covenants and default provisions under the Credit Agreement and the Senior Notes Indentures.
Our sources of liquidity include cash on hand, cash flows from operations, and available capacity under the Revolving Credit Facility. As of December 31, 2022, there was $746.1 million available under the Revolving Credit Facility, net of $3.9 million of obligations in respect of outstanding letters of credit issued thereunder.
Sources of liquidity Our sources of liquidity include cash on hand, cash flows from operations, and available capacity under the Revolving Credit Facility. As of December 31, 2023, there was $746.1 million available under the Revolving Credit Facility, net of $3.9 million of obligations in respect of outstanding letters of credit issued thereunder.
If the carrying value of a reporting unit exceeds its estimated fair value, we recognize an impairment of goodwill for the amount of this excess, in accordance with the guidance in FASB ASC Topic 350. We evaluated the goodwill of each reporting unit for impairment as of October 1, 2022 using a quantitative method.
If the carrying value of a reporting unit exceeds its estimated fair value, we recognize an impairment of goodwill for the amount of this excess, in accordance with the guidance in FASB ASC Topic 350. We evaluated the goodwill of each reporting unit for impairment as of October 1, 2023, using a quantitative method.
We have the option to first assess qualitative factors to determine whether a quantitative analysis must be performed. The objective of a qualitative analysis is to assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.
We have the option to first assess qualitative factors to determine whether a quantitative goodwill impairment analysis must be performed. The objective of a qualitative analysis is to assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.
Refer to Note 19: Derivative Instruments and Hedging Activities of our Financial Statements included elsewhere in this Report for additional information related to the commodity forward contracts outstanding as of December 31, 2022.
Refer to Note 19: Derivative Instruments and Hedging Activities of our Financial Statements included elsewhere in this Report for additional information related to the commodity forward contracts outstanding as of December 31, 2023.
We believe investors and securities analysts also use these non-GAAP financial measures in their evaluation of our performance and the performance of other similar companies. These non-GAAP financial measures are not measures of liquidity. Free cash flow Free cash flow is defined as net cash provided by operating activities less additions to PP&E and capitalized software.
We believe investors and securities analysts also use these non-GAAP financial measures in their evaluation of our performance and the performance of other similar companies. These non-GAAP financial measures are not measures of liquidity. 48 Table of Contents Free cash flow Free cash flow is defined as net cash provided by operating activities less additions to PP&E and capitalized software.
Changes to these assumptions could affect the estimated fair value of one or more of our reporting units and could result in a goodwill impairment charge in a future period. Types of events that could result in a goodwill impairment.
Changes to these assumptions could affect the estimated fair value of one or more of our reporting units and could result in a goodwill impairment charge in a future period. Types of events that could result in an additional goodwill impairment.
It also requires that we make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. The accounting policies and estimates that we believe are most critical to the portrayal of our financial 54 Table of Contents condition and results of operations are listed below.
It also requires that we make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. The accounting policies and estimates that we believe are most critical to the portrayal of our financial condition and results of operations are listed below.
Amounts and percentages in the table below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
Amounts and percentages in the tables below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
We also consider the impact of recent acquisitions in our expectations of the reporting units, and how these acquisitions perform against their original expected performance, as these might put pressure on the reporting units' fair value over carrying value in the short term.
We also consider the impact of recent acquisitions in our expectations of the reporting units, such as the Insights and Dynapower reporting units, and how these acquisitions perform against their original expected performance, as these might put pressure on the reporting units' fair value over carrying value in the short term.
GAAP, excluding interest expense, net, provision for (or benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable: (1) restructuring related and other, (2) financing and other transaction costs, (3) deferred loss or gain on derivative instruments, and (4) step-up inventory amortization. Refer to Non-GAAP adjustments below for additional discussion of these adjustments.
GAAP, excluding interest expense, net, provision for (or benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable: (1) restructuring related and other, (2) financing and other transaction costs, and (3) deferred loss or gain on derivative instruments. Refer to Non-GAAP adjustments below for additional discussion of these adjustments.
Net leverage ratio Net leverage ratio represents net debt (total debt, finance lease, and other financing obligations less cash and cash equivalents) divided by last twelve months ("LTM") adjusted EBITDA. We believe that the net leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.
Net leverage ratio Net leverage ratio represents net debt (total debt and finance lease obligations less cash and cash equivalents) divided by LTM adjusted EBITDA. We believe that the net leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.
Non-GAAP reconciliations The following tables present reconciliations of certain financial measures calculated in accordance with U.S. GAAP to the related non-GAAP financial measures for the periods presented. Refer to Non-GAAP adjustments section above for additional information related to these adjustments.
Non-GAAP reconciliations The following tables present reconciliations of certain financial measures calculated in accordance with U.S. GAAP to the related non-GAAP financial measures for the periods presented. Refer to the discussion under the heading Non-GAAP adjustments above for additional information related to these adjustments.
These restrictions and covenants, which are subject to important exceptions and qualifications set forth in the Credit Agreement and Senior Notes Indentures, were taken into consideration when we established our share repurchase programs and will be evaluated periodically with respect to future potential funding of those program.
These restrictions and covenants, which are subject to important exceptions and qualifications set forth in the Credit Agreement and Senior Notes Indentures, were taken into consideration when we established our share repurchase programs and will be evaluated periodically with respect to future potential funding of those programs. These restrictions and covenants were not materially modified in the Thirteenth Amendment.
Such amounts are excluded from internal financial statements and analyses that management uses in connection with financial planning, and in its review and assessment of our operating and financial performance, including the performance of our segments. • Financing and other transaction costs : includes losses or gains related to debt financing transactions, losses or gains related to the divestiture of a business, and costs incurred, including for legal, accounting, and other professional services, that are directly related to an acquisition, divestiture, or equity financing transaction. • Deferred loss or gain on derivative instruments : includes unrealized losses or gains on derivative instruments that do not qualify for hedge accounting as well as the impact of commodity prices on our raw material costs relative to the strike price on our commodity forward contracts. 46 Table of Contents • Step-up depreciation and amortization : includes depreciation and amortization expense associated with the step-up in fair value of assets acquired in connection with a business combination (e.g., PP&E, definite-lived intangible assets, and inventories). • Deferred taxes and other tax related : includes adjustments for book-to-tax basis differences due primarily to the step-up in fair value of fixed and intangible assets and goodwill, the utilization of net operating losses, and adjustments to our valuation allowance in connection with certain acquisitions and tax law changes.
Such amounts are excluded from internal financial statements and analyses that management uses in connection with financial planning and in its review and assessment of our operating and financial performance, including the performance of our segments. • Financing and other transaction costs : includes losses or gains related to debt financing transactions, losses or gains related to the divestiture of a business, costs incurred, including for legal, accounting, and other professional services, that are directly related to an acquisition, divestiture, or equity financing transaction, mark-to-market losses or gains on our equity investments, expenses related to compensation arrangements entered into concurrent with the closing of an acquisition, and gains related to changes in the fair value of acquisition-related contingent consideration amounts. • Deferred loss or gain on derivative instruments : includes unrealized losses or gains on derivative instruments that do not qualify for hedge accounting as well as the impact of commodity prices on our raw material costs relative to the strike price on our commodity forward contracts. 49 Table of Contents • Step-up depreciation and amortization : includes depreciation expense associated with the step-up in fair value of assets acquired in connection with a business combination (e.g., PP&E and inventories) and amortization of intangible assets. • Deferred taxes and other tax related : includes adjustments for book-to-tax basis differences due primarily to the step-up in fair value of fixed and intangible assets and goodwill, the utilization of net operating losses, and adjustments to our valuation allowance in connection with certain acquisitions and tax law changes.
For the year ended December 31, (In millions) 2022 2021 2020 Corporate and other expenses (GAAP) $ (294.4) $ (288.1) $ (273.4) Non-GAAP adjustments Restructuring related and other 11.9 9.9 54.9 Financing and other transaction costs 15.7 11.9 7.6 Step-up depreciation and amortization 1.2 1.7 2.8 Deferred (gain)/loss on derivative instruments (1.5) 8.3 3.1 Total Adjustments 27.3 31.8 68.4 Adjusted corporate and other expenses (non-GAAP) $ (267.1) $ (256.3) $ (205.0) The following table presents a reconciliation of net income calculated in accordance with U.S.
For the year ended December 31, (In millions) 2023 2022 2021 Corporate and other expenses (GAAP) $ (633.2) $ (294.4) $ (288.1) Non-GAAP adjustments Restructuring related and other 366.5 11.9 9.9 Financing and other transaction costs 6.8 15.7 11.9 Step-up depreciation and amortization 0.9 1.2 1.7 Deferred (gain)/loss on derivative instruments (4.1) (1.5) 8.3 Total adjustments 370.1 27.3 31.8 Adjusted corporate and other expenses (non-GAAP) $ (263.1) $ (267.1) $ (256.3) The following table presents a reconciliation of net (loss)/income calculated in accordance with U.S.
For the year ended December 31, (In millions) 2022 2021 2020 Net cash provided by operating activities $ 460.6 $ 554.2 $ 559.8 Additions to property, plant and equipment and capitalized software (150.1) (144.4) (106.7) Free cash flow $ 310.5 $ 409.7 $ 453.1 The following table presents a reconciliation of corporate and other expenses calculated in accordance with U.S.
For the year ended December 31, (In millions) 2023 2022 2021 Net cash provided by operating activities $ 456.7 $ 460.6 $ 554.2 Additions to property, plant and equipment and capitalized software (184.6) (150.1) (144.4) Free cash flow $ 272.1 $ 310.5 $ 409.7 The following table presents a reconciliation of corporate and other expenses calculated in accordance with U.S.
In accordance with FASB ASC Topic 350, Intangibles—Goodwill and Other , goodwill and intangible assets determined to have an indefinite useful life are not amortized. Instead these assets are evaluated for impairment on an annual basis, and whenever events or business conditions change that could indicate that the asset is impaired.
In accordance with FASB ASC Topic 350, Intangibles—Goodwill and Other , goodwill is not amortized. Instead these assets are evaluated for impairment on an annual basis, and whenever events or business conditions change that could indicate that the asset is impaired.
They should be considered as supplemental in nature and are not intended to be considered in isolation from, or as an alternative to, reported net revenue growth (or decline), operating income, operating margin, net income, diluted EPS, operating cash flows, corporate and other expenses, total debt, finance lease, and other financing obligations, or EBITDA, respectively, calculated in accordance with U.S.
They should be considered as supplemental in nature and are not intended to be considered in isolation from, or as an alternative to, reported net revenue growth (or decline), operating income, operating margin, net income, diluted EPS, net cash provided by operating activities, corporate and other expenses, or total debt and finance lease obligations, calculated in accordance with U.S. GAAP.
We believe that organic revenue growth (or decline) provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior-year period.
We believe that organic revenue growth (or decline) provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior-year period. Market outgrowth is calculated as organic revenue growth less our weighted market growth.
For the year ended December 31, (In millions) 2022 2021 2020 Net income $ 310.7 $ 363.6 $ 164.3 Interest expense, net 178.8 179.3 171.8 Provision for income taxes 86.0 50.3 1.4 Depreciation expense 127.2 125.0 125.7 Amortization of intangible assets 153.8 134.1 129.5 EBITDA 856.5 852.3 592.6 Non-GAAP adjustments Restructuring related and other 38.0 23.6 93.1 Financing and other transaction costs 7.5 41.0 6.4 Deferred loss/(gain) on derivative instruments 1.9 11.3 (7.0) Adjusted EBITDA $ 903.9 $ 928.3 $ 685.1 The following table presents a reconciliation of total debt, finance lease, and other financing obligations calculated in accordance with U.S.
For the year ended December 31, (In millions) 2023 2022 2021 Net (loss)/income $ (3.9) $ 310.7 $ 363.6 Interest expense, net 150.9 178.8 179.3 Provision for income taxes 21.8 86.0 50.3 Depreciation expense 133.1 127.2 125.0 Amortization of intangible assets 173.9 153.8 134.1 EBITDA 475.7 856.5 852.3 Non-GAAP adjustments Restructuring related and other 411.5 38.0 23.6 Financing and other transaction costs 21.5 7.5 41.0 Deferred (gain)/loss on derivative instruments (2.0) 1.9 11.3 Adjusted EBITDA $ 906.6 $ 903.9 $ 928.3 52 Table of Contents The following table presents a reconciliation of total debt and finance lease obligations calculated in accordance with U.S.
Dollar Euro $ 17.8 $ (45.3) $ 45.3 Chinese Renminbi $ (0.6) $ (19.9) $ 19.9 Japanese Yen $ 0.0 $ 0.5 $ (0.5) Korean Won $ 0.6 $ (1.9) $ 1.9 Malaysian Ringgit $ 0.0 $ 0.6 $ (0.6) Mexican Peso $ 4.5 $ 17.3 $ (17.3) British Pound Sterling $ (0.3) $ 7.8 $ (7.8) 59 Table of Contents Commodity Risk We are exposed to the potential change in prices associated with certain commodities used in the manufacturing of our products.
Dollar Euro $ 10.7 $ (43.3) $ 43.3 Chinese Renminbi $ 0.0 $ (5.8) $ 5.8 Japanese Yen $ 0.0 $ 0.5 $ (0.5) Korean Won $ 0.4 $ (1.5) $ 1.5 Malaysian Ringgit $ 0.0 $ 0.5 $ (0.5) Mexican Peso $ 13.2 $ 17.2 $ (17.2) British Pound Sterling $ (3.1) $ 6.4 $ (6.4) Commodity Risk We are exposed to the potential change in prices associated with certain commodities used in the manufacturing of our products.
As of January 27, 2023, Moody’s Investors Service’s corporate credit rating for STBV was Ba2 with a stable outlook, and Standard & Poor's corporate credit rating for STBV was BB+ with a stable outlook. Any future downgrades to STBV's credit ratings may increase our future borrowing costs but will not reduce availability under the Credit Agreement.
As of January 26, 2024, Moody’s Investors Service’s corporate credit rating for STBV was Ba2 with a positive outlook, and S&P's corporate credit rating for STBV was BB+ with a stable outlook. Any future downgrades to STBV's credit ratings may increase our future borrowing costs but will not reduce availability under the Credit Agreement.
Dollar Euro $ 10.7 $ (43.3) $ 43.3 Chinese Renminbi $ 0.0 $ (5.8) $ 5.8 Japanese Yen $ 0.0 $ 0.5 $ (0.5) Korean Won $ 0.4 $ (1.5) $ 1.5 Malaysian Ringgit $ 0.0 $ 0.5 $ (0.5) Mexican Peso $ 13.2 $ 17.2 $ (17.2) British Pound Sterling $ (3.1) $ 6.4 $ (6.4) (Decrease)/Increase to Future Pre-tax Earnings Due to: (In millions) Net Asset/(Liability) Balance as of December 31, 2021 10% Strengthening of the Value of the Foreign Currency Relative to the U.S.
Dollar Euro $ (7.4) $ (48.4) $ 48.4 Chinese Renminbi $ (0.2) $ 11.4 $ (11.4) Japanese Yen $ 0.0 $ 0.1 $ (0.1) Korean Won $ (0.0) $ (2.3) $ 2.3 Malaysian Ringgit $ 0.0 $ 0.5 $ (0.5) Mexican Peso $ 25.0 $ 26.3 $ (26.3) British Pound Sterling $ 2.4 $ 7.9 $ (7.9) (Decrease)/Increase to Future Pre-tax Earnings Due to: (In millions) Net Asset/(Liability) Balance as of December 31, 2022 10% Strengthening of the Value of the Foreign Currency Relative to the U.S.
For the year ended December 31, ($ in millions) 2022 2021 2020 Current portion of long-term debt, finance lease and other financing obligations $ 256.5 $ 6.8 $ 757.2 Finance lease and other financing obligations, less current portion 24.7 26.6 27.9 Long-term debt, net 3,958.9 4,214.9 3,213.7 Total debt, finance lease, and other financing obligations 4,240.1 4,248.3 3,998.9 Less: debt discount, net of premium (3.4) (5.2) (9.6) Less: deferred financing costs (29.9) (26.7) (28.1) Total gross indebtedness 4,273.4 4,280.2 4,036.6 Less: cash and cash equivalents 1,225.5 1,709.0 1,862.0 Net debt $ 3,047.9 $ 2,571.3 $ 2,174.6 Adjusted EBITDA (LTM) $ 903.9 $ 928.3 $ 685.1 Net leverage ratio 3.4 2.8 3.2 49 Table of Contents Liquidity and Capital Resources As of December 31, 2022 and 2021, we held cash and cash equivalents in the following regions (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): As of December 31, (In millions) 2022 2021 United Kingdom $ 15.7 $ 20.4 United States 16.1 25.0 The Netherlands 861.3 1,304.3 China 210.0 293.8 Other 122.4 65.5 Total cash and cash equivalents $ 1,225.5 $ 1,709.0 The amount of cash and cash equivalents held in these geographic regions fluctuates throughout the year due to a variety of factors, such as our use of intercompany loans and dividends and the timing of cash receipts and disbursements in the normal course of business.
For the year ended December 31, ($ in millions) 2023 2022 2021 Current portion of long-term debt and finance lease obligations $ 2.3 $ 256.5 $ 6.8 Finance lease obligations, less current portion 22.9 24.7 26.6 Long-term debt, net 3,374.0 3,958.9 4,214.9 Total debt and finance lease obligations 3,399.2 4,240.1 4,248.3 Less: debt discount, net of premium (1.6) (3.4) (5.2) Less: deferred financing costs (24.4) (29.9) (26.7) Total gross indebtedness $ 3,425.2 $ 4,273.4 $ 4,280.2 Adjusted EBITDA (LTM) $ 906.6 $ 903.9 $ 928.3 Gross leverage ratio 3.8 4.7 4.6 Total gross indebtedness $ 3,425.2 $ 4,273.4 $ 4,280.2 Less: cash and cash equivalents 508.1 1,225.5 1,709.0 Net debt $ 2,917.1 $ 3,047.9 $ 2,571.3 Adjusted EBITDA (LTM) $ 906.6 $ 903.9 $ 928.3 Net leverage ratio 3.2 3.4 2.8 Liquidity and Capital Resources As of December 31, 2023 and 2022, we held cash and cash equivalents in the following regions (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): As of December 31, (In millions) 2023 2022 United Kingdom $ 12.6 $ 15.7 United States 12.9 16.1 The Netherlands 158.2 861.3 China 250.8 210.0 Other 73.6 122.4 Total cash and cash equivalents $ 508.1 $ 1,225.5 The amount of cash and cash equivalents held in these geographic regions fluctuates throughout the year due to a variety of factors, such as our use of intercompany loans and dividends and the timing of cash receipts and disbursements in the normal course of business.
Sensitivity Analysis The tables below present our commodity forward contracts as of December 31, 2022 and 2021 and the estimated impact to pre-tax earnings associated with a 10% increase/(decrease) in the related forward price for each commodity: Net Asset/(Liability) Balance as of December 31, 2022 Average Forward Price Per Unit as of December 31, 2022 Increase/(Decrease) to Pre-tax Earnings Due to (In millions, except per unit amounts) 10% Increase in the Forward Price 10% Decrease in the Forward Price Silver $ 1.1 $ 24.33 $ 2.3 $ (2.3) Gold $ 0.1 $ 1,877.27 $ 1.5 $ (1.5) Nickel $ 0.7 $ 13.76 $ 0.3 $ (0.3) Aluminum $ (0.5) $ 1.11 $ 0.5 $ (0.5) Copper $ (2.2) $ 3.80 $ 3.1 $ (3.1) Platinum $ 0.9 $ 1,070.21 $ 1.2 $ (1.2) Palladium $ (0.5) $ 1,803.34 $ 0.2 $ (0.2) Net (Liability)/Asset Balance as of December 31, 2021 Average Forward Price Per Unit as of December 31, 2021 Increase/(Decrease) to Pre-tax Earnings Due to (In millions, except per unit amounts) 10% Increase in the Forward Price 10% Decrease in the Forward Price Silver $ (1.7) $ 23.24 $ 2.8 $ (2.8) Gold $ 0.0 $ 1,827.45 $ 1.7 $ (1.7) Nickel $ 0.3 $ 9.32 $ 0.2 $ (0.2) Aluminum $ 0.6 $ 1.25 $ 0.5 $ (0.5) Copper $ 1.1 $ 4.37 $ 2.9 $ (2.9) Platinum $ (1.0) $ 952.76 $ 1.2 $ (1.2) Palladium $ (0.8) $ 1,872.73 $ 0.3 $ (0.3) 60 Table of Contents
Sensitivity Analysis The tables below present our commodity forward contracts as of December 31, 2023 and 2022 and the estimated impact to pre-tax earnings associated with a 10% increase/(decrease) in the related forward price for each commodity: Net Asset Balance as of December 31, 2023 Average Forward Price Per Unit as of December 31, 2023 Increase/(Decrease) to Pre-tax Earnings Due to (In millions, except per unit amounts) 10% Increase in the Forward Price 10% Decrease in the Forward Price Silver $ 0.5 $ 24.61 $ 1.7 $ (1.7) Copper $ 0.2 $ 3.90 $ 2.5 $ (2.5) Net Asset/(Liability) Balance as of December 31, 2022 Average Forward Price Per Unit as of December 31, 2022 Increase/(Decrease) to Pre-tax Earnings Due to (In millions, except per unit amounts) 10% Increase in the Forward Price 10% Decrease in the Forward Price Silver $ 1.1 $ 24.33 $ 2.3 $ (2.3) Gold $ 0.1 $ 1,877.27 $ 1.5 $ (1.5) Nickel $ 0.7 $ 13.76 $ 0.3 $ (0.3) Aluminum $ (0.5) $ 1.11 $ 0.5 $ (0.5) Copper $ (2.2) $ 3.80 $ 3.1 $ (3.1) Platinum $ 0.9 $ 1,070.21 $ 1.2 $ (1.2) Palladium $ (0.5) $ 1,803.34 $ 0.2 $ (0.2) 62 Table of Contents
We believe that certain factors, such as a future recession, any material adverse conditions in the automotive industry and other industries in which we operate, and other factors identified in Item 1A: Risk Factors included elsewhere in this Report could cause us to revise our long-term projections and could reduce the multiples used to determine Terminal Year value.
We believe that certain factors, such as a future recession, any material adverse conditions in the automotive industry and other industries in which we operate, and other factors identified 59 Table of Contents in Item 1A: Risk Factors included elsewhere in this Report could cause us to revise our long-term projections.
An increase of 100 basis points in this rate would have resulted in additional interest expense of $3.9 million in fiscal year 2022. An additional 100 basis point increase in this rate would have resulted in incremental interest expense of $8.2 million in fiscal year 2022.
An increase of 100 basis points in this rate would have resulted in additional interest expense of $1.5 million in fiscal year 2023. An additional 100 basis point increase in this rate would have resulted in incremental interest expense of $3.1 million in fiscal year 2023.
Provision for income taxes The components of provision for income taxes for the years ended December 31, 2022, 2021, and 2020 are described in more detail in the table below (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): For the year ended December 31, (In millions) 2022 2021 2020 Tax computed at statutory rate of 21% (1) $ 83.3 $ 86.9 $ 34.8 Foreign tax rate differential (2) (44.3) (30.5) (22.0) Valuation allowances (3) 15.7 20.5 8.9 Withholding taxes not creditable 12.3 13.3 12.2 Research and development incentives (4) (10.8) (11.1) (7.4) Unrealized foreign currency exchange losses, net 9.3 (6.1) 2.7 Dispositions and capital restructurings (5) 4.5 — (54.2) Change in tax laws or rates 2.6 (7.1) 11.2 Reserve for tax exposure 1.3 (16.3) (0.2) Other (6) 12.1 0.7 15.4 Provision for income taxes $ 86.0 $ 50.3 $ 1.4 __________________________ (1) Represents the product of the applicable statutory tax rate and income before taxes, as reported in the consolidated statements of operations.
("Quanergy"), as disclosed in Note 18: Fair Value Measures of our Financial Statements included elsewhere in this Report. 46 Table of Contents Provision for income taxes The components of provision for income taxes for the years ended December 31, 2023, 2022, and 2021 are described in more detail in the table below, reconciled to the U.S. statutory rate for each year (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): For the year ended December 31, (In millions) 2023 2022 2021 Tax computed at U.S. statutory rate of 21% (1) $ 3.7 $ 83.3 $ 86.9 Dispositions and capital restructurings (6) (286.4) 4.5 — Valuation allowances (4) 278.5 15.7 20.5 Goodwill impairment (3) 41.2 — — Foreign tax rate differential (2) (17.3) (44.3) (30.5) Withholding taxes not creditable 14.1 12.3 13.3 Research and development incentives (5) (9.0) (10.8) (11.1) Unrealized foreign currency exchange losses/(gains), net 1.5 9.3 (6.1) Reserve for tax exposure 1.1 1.3 (16.3) Changes in tax laws or rates (0.3) 2.6 (7.1) Other (7) (5.2) 12.1 0.7 Provision for income taxes $ 21.8 $ 86.0 $ 50.3 __________________________ (1) Represents the product of the applicable statutory tax rate and income before taxes, as reported in the consolidated statements of operations.
However, we cannot make assurances that our business will generate sufficient cash flows from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.
However, we cannot make assurances that our business will generate sufficient cash flows from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Further, our highly-leveraged nature may limit our ability to procure additional financing in the future.
Indebtedness and Liquidity The following table details our gross outstanding indebtedness as of December 31, 2022, and the associated interest expense for the year then ended (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): (In millions) Balance as of December 31, 2022 Interest Expense, net for the year ended December 31, 2022 Term Loan (1) $ 446.8 $ 17.0 4.875% Senior Notes (2) — 18.1 5.625% Senior Notes 400.0 22.5 5.0% Senior Notes 700.0 35.0 4.375% Senior Notes 450.0 19.7 3.75% Senior Notes 750.0 28.1 4.0% Senior Notes 1,000.0 40.0 5.875% Senior Notes (3) 500.0 10.0 Finance lease and other financing obligations 26.6 2.3 Total gross outstanding indebtedness $ 4,273.4 Other interest expense, net (4) (13.9) Interest expense, net $ 178.8 __________________________ (1) On February 6, 2023, we prepaid $250.0 million on our outstanding variable rate Term Loan.
Indebtedness and Liquidity The following table details our gross outstanding indebtedness as of December 31, 2023 and the associated interest expense for the year then ended (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding): (In millions) Balance as of December 31, 2023 Interest Expense for the year ended December 31, 2023 Term Loan (1) $ — $ 5.4 5.625% Senior Notes (2) — 21.7 5.0% Senior Notes 700.0 35.0 4.375% Senior Notes 450.0 19.7 3.75% Senior Notes 750.0 28.1 4.0% Senior Notes 1,000.0 40.0 5.875% Senior Notes 500.0 29.4 Finance lease obligations 25.2 2.2 Total gross outstanding indebtedness $ 3,425.2 Amortization of debt issuance costs 6.8 Capitalized interest costs (3) (8.0) Other interest expense (4) 2.0 Interest expense $ 182.2 __________________________ (1) On May 3, 2023, we prepaid the remaining balance on our outstanding variable rate Term Loan.
Further, our highly-leveraged nature may limit our ability to procure additional financing in the future. 53 Table of Contents The Credit Agreement provides that if our senior secured net leverage ratio exceeds a specified level, we are required to use a portion of our excess cash flow, as defined in the Credit Agreement, generated by operating, investing, or financing activities to prepay some or all of the outstanding borrowings under the Senior Secured Credit Facilities.
Restrictions and Covenants The Credit Agreement provides that if our senior secured net leverage ratio exceeds a specified level, we are required to use a portion of our excess cash flow, as defined in the Credit Agreement, generated by operating, investing, or financing activities to prepay some or all of the outstanding borrowings under the Senior Secured Credit Facilities.
In the U.S., we benefit from the federal research and development credit. (5) The increase in our effective tax rate for the year ended December 31, 2022 is due to the tax accounting impacts of the divestiture of the Qinex Business, partially offset by separate intangible property transfers.
The increase in our effective tax rate for the year ended December 31, 2022 is due to the tax accounting impacts of the divestiture of the Qinex Business, partially offset by separate intangible property transfers.
Refer to Note 14: Debt of our Financial Statements included elsewhere in this Report for additional information related to our debt transactions. On February 6, 2023, we prepaid $250.0 million of principal on the Term Loan. The aggregate principal amount of each tranche of our Senior Notes is due in full at its maturity date.
Refer to Note 14: Debt of our Financial Statements included elsewhere in this Report for additional information related to our debt instruments. The aggregate principal amount of each tranche of our Senior Notes is due in full at its maturity date.
As of December 31, 2021, we had an outstanding balance on the Term Loan (excluding debt discount and deferred financing costs) of $451.5 million. The applicable interest rate associated with the Term Loan at December 31, 2021 was 1.87%.
Sensitivity Analysis As of December 31, 2023, we had no outstanding variable interest rate loans. As of December 31, 2022, we had an outstanding balance on the Term Loan (excluding debt discount and deferred financing costs) of $446.8 million. The applicable interest rate associated with the Term Loan at December 31, 2022 was 5.87%.
Adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS We define adjusted operating income as operating income, determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described below. Adjusted operating margin is calculated by dividing adjusted operating income by net revenue determined in accordance with U.S. GAAP.
GAAP, adjusted to exclude certain non-GAAP adjustments which are described under the heading Non-GAAP adjustments below. Adjusted operating margin is calculated by dividing adjusted operating income (or loss) by net revenue determined in accordance with U.S. GAAP. We define adjusted net income as follows: net income (or loss) determined in accordance with U.S.
The loss primarily reflects the payment of $23.4 million for the early redemption premium, with the remaining loss representing write-off of debt discounts and deferred financing costs. The loss is presented in other, net in our consolidated statements of operations.
The loss primarily reflects the payment of $23.4 million for the early redemption premium, with the remaining loss representing write-off of debt discounts and deferred financing costs. The loss is presented in other, net in our consolidated statements of operations. The following table presents a reconciliation of net cash provided by operating activities calculated in accordance with U.S.
On September 28, 2022, we redeemed in full the $500.0 million aggregate principal amount outstanding on the 4.875% Senior Notes due 2023 in accordance with the terms of the indenture under which the 4.875% Senior Notes were issued, at a price of 101.0% of the aggregate principal amount of the outstanding 4.875% Senior Notes (which includes the applicable premium), plus accrued and unpaid interest to (but not including) the redemption date.
On December 18, 2023, we redeemed in full the $400.0 million aggregate principal amount outstanding on the 5.625% Senior Notes in accordance with the terms of the indenture under which the 5.625% Senior Notes were issued, at a redemption price of 100.0% of the aggregate principal amount of the outstanding 5.625% Senior Notes, plus a $4.0 million "make-whole" premium, plus accrued and unpaid interest to (but not including) the redemption date.
We evaluate goodwill and indefinite-lived intangible assets for impairment in the fourth quarter of each fiscal year, unless events occur which trigger the need for an earlier impairment review. Identification of reporting units. We have six identified reporting units, Automotive, HVOR, Sensata INSIGHTS, Industrial Solutions, Aerospace, and Clean Energy Solutions.
We evaluate goodwill for impairment in the fourth quarter of each fiscal year, unless events occur which trigger the need for an earlier impairment review. Identification of reporting units. As of October 1, 2023, we had seven reporting units, Automotive, HVOR, Insights, Industrial Solutions, Aerospace, Clean Energy Solutions, and Dynapower.
Adjusted EPS is calculated by dividing adjusted net income by the number of diluted weighted-average ordinary shares outstanding in the period. 45 Table of Contents Management uses adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS as measures of operating performance, for planning purposes (including the preparation of our annual operating budget), to allocate resources to enhance the financial performance of our business, to evaluate the effectiveness of our business strategies, in communications with our Board of Directors and investors concerning our financial performance, and as factors in determining compensation for certain employees.
Management uses adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS (and the constant currency equivalent of each) as measures of operating performance, for planning purposes (including the preparation of our annual operating budget), to allocate resources to enhance the financial performance of our business, to evaluate the effectiveness of our business strategies, in communications with our Board of Directors and investors concerning our financial performance, and as factors in determining compensation for certain employees.
During the year ended December 31, 2022, we repurchased approximately 6.3 million ordinary shares under the January 2022 Program, at a weighted-average price per share of $46.08. As of December 31, 2022, approximately $224.5 million remained available under the January 2022 Program.
During the year ended December 31, 2021, we repurchased approximately 0.8 million ordinary shares under the July 2019 Program, at a weighted-average price per share of $59.28. During the year ended December 31, 2022, we purchased approximately 6.3 million ordinary shares under the January 2022 Program, at a weighted average price per share of $46.08.
The decision to repatriate these earnings was the result of our goal to reduce our balance sheet exposure and corresponding earnings volatility related to changes in foreign currency exchange rates as well as to fund our deployment of capital. (d) Includes a net $54.2 million deferred tax benefit recorded as a result of the transfer of intangible property.
The decision to repatriate these earnings was the result of our goal to reduce our balance sheet exposure and corresponding earnings volatility related to changes in foreign currency exchange rates as well as to fund our deployment of capital.
On June 23, 2022, we entered into an amendment (the “Eleventh Amendment”) to (i) the credit agreement, dated as of May 12, 2011 (as amended, supplemented, waived, or otherwise modified, the “Credit Agreement”), and (ii) the Foreign Guaranty, dated as of May 12, 2011.
In August 2023, we entered into an amendment (the “Thirteenth Amendment”) to (i) the Credit Agreement, and (ii) the Foreign Guaranty, dated as of May 12, 2011 (as amended, supplemented, waived, or otherwise modified prior to the Thirteenth Amendment).
(2) We operate in locations outside the U.S., including Belgium, Bulgaria, China, Malaysia, Malta, Mexico, the Netherlands, South Korea, and the U.K., that historically have had statutory tax rates different than the U.S. statutory tax rate. This can result in a foreign tax rate differential that may reflect a tax benefit or detriment.
(2) We operate in multiple jurisdictions, including but not limited to Bulgaria, China, Malaysia, Malta, Mexico, the Netherlands, South Korea, the U.S., and the U.K. This can result in a foreign tax rate differential that may reflect a tax benefit or detriment.
Debt Instruments As of December 31, 2022, our debt instruments included the Term Loan, $400.0 million in aggregate principal amount of 5.625% senior notes due 2024 (the "5.625% Senior Notes"), $700.0 million in aggregate principal amount of 5.0% senior notes due 2025 (the "5.0% Senior Notes"), $450.0 million aggregate principal amount of 4.375% senior notes due 2030 (the "4.375% Senior Notes"), the 3.75% Senior Notes, the 4.0% Senior Notes, and the 5.875% Senior Notes.
Debt Instruments As of December 31, 2023, our debt instruments included $700.0 million aggregate principal amount of 5.0% senior notes due 2025 (the "5.0% Senior Notes"), $450.0 million aggregate principal amount of 4.375% senior notes due 2030 (the "4.375% Senior Notes"), $750 million aggregate principal amount of 3.75% senior notes due 2031 (the "3.75% Senior Notes"), $1.0 billion aggregate principal amount of 4.0% senior notes due 2029 (the "4.0% Senior Notes"), and $500.0 million aggregate principal amount of 5.875% senior notes due 2030 (the "5.875% Senior Notes").
We believe, based on our current level of operations for the year ended December 31, 2022, and taking into consideration the restrictions and covenants included in the Credit Agreement and Senior Notes Indentures discussed below and in Note 14: Debt of our Financial Statements included elsewhere in this Report, that these sources of liquidity will be sufficient to fund our operations, capital expenditures, ordinary share repurchases, and debt service for at least the next twelve months.
As of December 31, 2023, availability under the Accordion was approximately $2.0 billion. 56 Table of Contents We believe, based on our current level of operations for the year ended December 31, 2023, and taking into consideration the restrictions and covenants included in the Credit Agreement and Senior Notes Indentures discussed below and in Note 14: Debt of our Financial Statements included elsewhere in this Report, that the sources of liquidity described above will be sufficient to fund our operations, capital expenditures, dividend payments, ordinary share repurchases, and debt service for the short and long term.
Sensitivity Analysis The tables below present our foreign currency forward contracts as of December 31, 2022 and 2021 and the estimated impact to future pre-tax earnings as a result of a 10% strengthening/weakening in the foreign currency exchange rate: (Decrease)/Increase to Future Pre-tax Earnings Due to: (In millions) Net Asset/(Liability) Balance as of December 31, 2022 10% Strengthening of the Value of the Foreign Currency Relative to the U.S.
Refer to Note 19: Derivative Instruments and Hedging Activities of our Financial Statements included elsewhere in this Report for additional information related to the foreign currency forward contracts outstanding as of December 31, 2023. 61 Table of Contents Sensitivity Analysis The tables below present our foreign currency forward contracts as of December 31, 2023 and 2022 and the estimated impact to future pre-tax earnings as a result of a 10% strengthening/weakening in the foreign currency exchange rate: (Decrease)/Increase to Future Pre-tax Earnings Due to: (In millions) Net (Liability)/Asset Balance as of December 31, 2023 10% Strengthening of the Value of the Foreign Currency Relative to the U.S.
Non-GAAP Financial Measures This section provides additional information regarding certain non-GAAP financial measures, including organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted earnings per share ("EPS"), free cash flow, adjusted corporate and other expenses, net debt, net leverage ratio, and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"), which are used by our management, Board of Directors, and investors.
We do not believe that there are any known trends related to the reconciling items noted above that are reasonably likely to result in our liquidity increasing or decreasing in any material way. 47 Table of Contents Non-GAAP Financial Measures This section provides additional information regarding certain non-GAAP financial measures, including organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted earnings per share ("EPS"), free cash flow, adjusted corporate and other expenses, net debt, gross and net leverage ratio, and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"), which are used by our management, Board of Directors, and investors.
In the event we reorganize our business, we reassign the assets (including goodwill) and liabilities among the affected reporting units using a reasonable and supportable methodology. As businesses are acquired, we assign assets acquired (including goodwill) and liabilities assumed to a new or existing reporting unit as of the date of the acquisition.
As businesses are acquired, we assign assets acquired (including goodwill) and liabilities assumed to a new or existing reporting unit as of the date of the acquisition.
The following table presents the remaining mandatory principal repayments of long-term debt, in millions, excluding finance lease payments, other financing obligations, and discretionary repurchases of debt, in each of the years ended December 31, 2023 through 2027 and thereafter. The table reflects the payment of $250.0 million principal amount of the Term Loan on February 6, 2023.
The following table presents the remaining mandatory principal repayments of long-term debt, in millions, excluding finance lease payments and discretionary repurchases of debt, in each of the years ended December 31, 2024 through 2028 and thereafter.
Based on the results of this analysis, we do not consider any of our reporting units to be at risk of failing the goodwill impairment test. Evaluation of other intangible assets for impairment Indefinite-lived intangible assets.
Based on the results of this analysis, we do not consider any of our reporting units outside of Insights, which was already fully impaired, to be at risk of failing the goodwill impairment test.
This foreign tax rate differential can change from year to year based upon the jurisdictional mix of earnings and changes in current and future enacted tax rates.
This foreign tax rate differential can change from year to year based upon the jurisdictional mix of earnings and changes in current and future enacted tax rates. Certain of our subsidiaries are currently eligible, or have been eligible, for tax exemptions or reduced tax rates in their respective jurisdictions.
Our cash and cash equivalent balances as of December 31, 2022 and 2021 were held in the following significant currencies: As of December 31, 2022 (In millions) USD EUR GBP CNY Other United Kingdom $ 2.7 € 0.0 £ 10.7 ¥ — United States 16.1 — — — The Netherlands 848.6 10.9 0.2 — China 95.0 — — 794.4 Other 99.9 2.3 — — Total $ 1,062.3 € 13.2 £ 10.9 ¥ 794.4 USD Equivalent $ 14.0 $ 13.2 $ 115.2 $ 20.8 As of December 31, 2021 (In millions) USD EUR GBP CNY Other United Kingdom $ 1.8 € 0.0 £ 13.2 ¥ — United States 25.0 — — — The Netherlands 1,294.2 8.9 — — China 50.8 — — 1,549.4 Other 51.0 1.7 — — Total $ 1,422.8 € 10.6 £ 13.2 ¥ 1,549.4 USD Equivalent $ 12.0 $ 17.8 $ 243.1 $ 13.3 50 Table of Contents Cash Flows The table below summarizes our primary sources and uses of cash for the years ended December 31, 2022, 2021, and 2020.
The transfer of cash from these jurisdictions could result in loss of incentives or higher cash tax expense, but those impacts are not expected to be material. 53 Table of Contents Our cash and cash equivalent balances as of December 31, 2023 and 2022 were held in the following significant currencies: As of December 31, 2023 (In millions) USD EUR GBP CNY Other United Kingdom $ 0.4 € 0.0 £ 11.9 ¥ — United States 12.9 0.0 — — The Netherlands 143.9 12.2 0.3 — China 155.2 — — 679.4 Other 58.3 2.5 — — Total $ 370.7 € 14.7 £ 12.2 ¥ 679.4 USD Equivalent $ 16.2 $ 15.6 $ 95.6 $ 10.0 As of December 31, 2022 (In millions) USD EUR GBP CNY Other United Kingdom $ 2.7 € 0.0 £ 10.7 ¥ — United States 16.1 — — — The Netherlands 848.6 10.9 0.2 — China 95.0 — — 794.4 Other 99.9 2.3 — — Total $ 1,062.3 € 13.2 £ 10.9 ¥ 794.4 USD Equivalent $ 14.0 $ 13.2 $ 115.2 $ 20.8 Cash Flows The table below summarizes our primary sources and uses of cash for the years ended December 31, 2023, 2022, and 2021.
All letters of credit issued thereunder will terminate at the final maturity of the Revolving Credit Facility unless cash collateralized prior to such time.
Loans made pursuant to the Revolving Credit Facility must be repaid in full at its maturity date and can be repaid prior to then at par. All letters of credit issued thereunder will terminate at the final maturity of the Revolving Credit Facility unless cash collateralized prior to such time.
Components of an operating segment are aggregated to form one reporting unit if the components have similar economic characteristics. We periodically review these reporting units to ensure that they continue to reflect the manner in which the business is operated. Assignment of assets, liabilities, and goodwill to reporting units.
We periodically review these reporting units to ensure that they continue to reflect the manner in which the business is operated. Assignment of assets, liabilities, and goodwill to reporting units. Some assets and liabilities relate to the operations of multiple reporting units.
For this method, we prepared detailed annual projections of future net cash flows for the reporting unit for the subsequent five fiscal years (the "Discrete Projection Period"). We estimated the value of the net cash flows beyond the fifth fiscal year (the "Terminal Year") by applying a multiple to the projected Terminal Year EBITDA.
For the discounted cash flow method, we prepared detailed annual projections of future net cash flows for the reporting unit for the subsequent ten fiscal years (the "Discrete Projection Period"). We estimated the value of the net cash flows beyond the tenth fiscal year (the "Terminal Year") by using either the Gordon Growth Model or the H-Model.
These reporting units have been identified based on the definitions and guidance provided in FASB ASC Topic 350. Identification of reporting units includes an analysis of the components that comprise each of our operating segments, which considers, among other things, the manner in which we operate our business and the availability of discrete financial information.
Identification of reporting units includes an analysis of the components that comprise each of our operating segments, which considers, among other things, the manner in which we operate our business and the availability of discrete financial information. Components of an operating segment are aggregated to form one reporting unit if the components have similar economic characteristics.
However, any future release of all or a portion of this valuation allowance resulting from a change in this assessment will impact our future provision for (or benefit from) income taxes. (4) In China, we benefit from the R&D super deduction regime. In the U.K., certain of our subsidiaries are eligible for lower tax rates under the "patent box" regime.
It is more likely than not that these attributes will not be utilized in the foreseeable future. However, any future release of all or a portion of this valuation allowance resulting from a change in this assessment will impact our future provision for (or benefit from) income taxes. (5) In China, we benefit from the R&D super deduction regime.
Fiscal year 2020 includes charges incurred under the Q2 2020 Global Restructure Program and charges for other business and corporate workforce rationalization. ii. Primarily includes costs related to optimization of our manufacturing processes to increase productivity and rationalize our manufacturing footprint and supply chain workforce rationalization. iii.
Primarily includes costs related to optimization of our manufacturing processes to increase productivity and rationalize our manufacturing footprint and supply chain workforce rationalization. iii.
Availability under the Accordion varies each period based on our attainment of certain financial metrics as set forth in the terms of the Credit Agreement and the indentures under which our Senior Notes were issued (the "Senior Notes Indentures"). As of December 31, 2022, availability under the Accordion was approximately $0.7 billion.
Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of December 31, 2023, no amounts had been drawn against these outstanding letters of credit. Availability under the Accordion varies each period based on our attainment of certain financial metrics as set forth in the terms of the Credit Agreement and the Senior Notes Indentures.
Some assets and liabilities relate to the operations of multiple reporting units. We allocate these assets and liabilities to the reporting units based on methods that we believe are reasonable and supportable. We apply that allocation method on a consistent basis from year to year.
We allocate these assets and liabilities to the reporting units based on methods that we believe are reasonable and supportable. We apply that allocation method on a consistent basis from year to year. Other assets and liabilities, such as debt, cash and cash equivalents, and PP&E associated with our corporate offices, are viewed as being corporate in nature.
As a result of this evaluation we determined that none of our reporting units were impaired. In performing our evaluation under the quantitative method, we estimated the fair values of our reporting units using the discounted cash flow method.
In performing our evaluation under the quantitative method, we estimated the fair values of our reporting units using the discounted cash flow method, and, when applicable, a market multiples approach (the "Market Approach") using comparable companies appropriate to the reporting unit.
(c) The years ended December 31, 2022 and 2021 include current tax expense of $14.7 million and $10.9 million, respectively, related to the repatriation of earnings from certain Asian subsidiaries to their parent companies in the Netherlands.
Also includes $75.6 million of mark-to-market losses on our equity investments, primarily our investment in Quanergy, which are presented in other, net in our consolidated statements of operations. 51 Table of Contents (d) Deferred taxes and other tax related adjustments for the years ended December 31, 2022 and 2021 include current tax expense of $14.7 million and $10.9 million, respectively, related to the repatriation of earnings from certain Asian subsidiaries to their parent companies in the Netherlands.
The remaining valuation allowance primarily relates to foreign tax credits, capital loss carryforwards, goodwill tax basis, and net operating losses in jurisdictions outside the U.S. It is more likely than not that these attributes will not be utilized in the foreseeable future.
A large portion of our valuation allowance is against interest carryforwards due to our assessment of our inability to utilize these carryforwards based on our forecasts of future taxable income. The remaining valuation allowance primarily relates to foreign tax credits, capital loss carryforwards, goodwill tax basis, and net operating losses in jurisdictions outside the U.S.
The preparation of forecasts of revenue growth and profitability for use in the long-range forecasts, the selection of the discount rates, and the estimation of the multiples used in valuing the Terminal Year involve significant judgments.
Refer to Note 11: Goodwill and Other Intangible Assets, Net of our Financial Statements included elsewhere in this Report for additional information. The preparation of forecasts of revenue growth and profitability for use in the long-range forecasts, the selection of the discount rates, and the estimation of the multiples used in the Market Approach involve significant judgments.
Net cash used in investing activities for the year ended December 31, 2022 decreased compared to the corresponding period of the prior year primarily due to lower cash paid for acquisitions (Elastic M2M and Dynapower) and the receipt of $198.8 million of cash proceeds of from the divestiture of the Qinex Business.
Net cash used in investing activities for the year ended December 31, 2023 decreased compared to the corresponding period of the prior year, primarily due to lower cash paid for acquisitions (there were no acquisitions in the year ended December 31, 54 Table of Contents 2023, while in the prior period we acquired Elastic M2M and Dynapower), partially offset by (1) lower cash received from sale of businesses and (2) an increase in cash paid for capital expenditures.
(6) Refer to Note 7: Income Taxes of our Financial Statements included elsewhere in this Report for additional information related to other components of our rate reconciliation. We do not believe that there are any known trends related to the reconciling items noted above that are reasonably likely to result in our liquidity increasing or decreasing in any material way.
(7) Refer to Note 7: Income Taxes of our Financial Statements included elsewhere in this Report for additional information related to other components of our rate reconciliation.
Additionally, we utilize the "more likely than not" criteria established in FASB ASC Topic 740 to determine whether the future tax benefit from the deferred tax assets should be recognized. 57 Table of Contents Ultimately, the ability to realize our deferred tax assets is based on our assessment of future taxable income, which is based on estimated future results.
The more negative evidence that exists, the more positive evidence is necessary, and the more difficult it is to support a conclusion that a valuation allowance is not needed. Additionally, we utilize the "more likely than not" criteria established in FASB ASC Topic 740 to determine whether the future tax benefit from the deferred tax assets should be recognized.
In fiscal year 2023, we anticipate additions to PP&E and capitalized software of approximately $170.0 million to $180.0 million, which we expect to be funded with cash flows from operations. Net cash used in investing activities increased in fiscal year 2021 primarily due to cash paid for acquisitions.
In the year ended December 31, 2023, we received cash proceeds of $19.0 million from the sale of a business, compared to $198.8 million in the year ended December 31, 2022. In fiscal year 2024, we anticipate additions to PP&E and capitalized software of approximately $175.0 million, which we expect to be funded with cash flows from operations.
In July 2019 our Board of Directors authorized a $500.0 million share repurchase program (the "July 2019 Program"). During the year ended December 31, 2021, we repurchased approximately 0.8 million ordinary shares, at a weighted-average price per share of $59.28, under the July 2019 Program. As of December 31, 2021, approximately $254.5 million remained available under the July 2019 Program.
During the year ended December 31, 2023, we repurchased approximately 2.3 million ordinary shares at a weighted average price per share of $38.31. These purchases were made under the January 2022 Program and the September 2023 Program. As of December 31, 2023, approximately $471.9 million remained available under the September 2023 Program.
Other tax related items include certain adjustments to unrecognized tax benefits and withholding tax on repatriation of foreign earnings. • Amortization of debt issuance costs . We adjust our results recorded in accordance with U.S.
Other tax related items include certain adjustments to unrecognized tax benefits and withholding tax on repatriation of foreign earnings. • Amortization of debt issuance costs: represents interest expense related to the amortization of deferred financing costs and debt discounts, net of premiums. • Where applicable, the current income tax effect of non-GAAP adjustments.

… 94 more changes not shown on this page.

Other ST 10-K year-over-year comparisons