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Business Combination, Step Acquisition, Equity Interest in Acquiree, Including Subsequent Acquisition, Percentage | 25 | SEC-NUM |
31 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2022 and 2021Agua Clara — On June 17, 2022, the Company, through its subsidiaries AES Dominicana Renewable Energy and AES Andres DR, S.A., acquired 100% of the equity interests in Agua Clara, S.A.S., a wind project, for consideration of $98 million. The transaction was accounted for as an asset acquisition that did not meet the definition of a business. As Agua Clara is not a VIE, any difference between the fair value of the assets and consideration transferred was allocated to PP&E on a relative fair value basis. Agua Clara is reported in the MCAC SBU reportable segment.Tunica Windpower, LLC — On June 17, 2022, the Company entered into an agreement for the purchase of 100% of the membership interests in Tunica Windpower, LLC. The transaction was accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business. The assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration paid of approximately $22 million, including contingent consideration of $7 million. The contingent consideration will be updated quarterly with any prospective changes in fair value recorded through earnings. Tunica Windpower is reported in the US and Utilities SBU reportable segment.Windsor PV1, LLC — On May 27, 2022, the Company entered into an agreement for the purchase of 100% of the membership interests in Windsor PV1, LLC, an early development-stage solar project. The transaction was accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business. The assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration paid of approximately $17 million, including contingent consideration of $5 million. The contingent consideration will be updated quarterly with any prospective changes in fair value recorded through earnings. Windsor is reported in the US and Utilities SBU reportable segment.Community Energy — In the first quarter of 2022, the Company finalized the purchase price allocation related to the acquisition of Community Energy, LLC. There were no significant adjustments made to the preliminary purchase price allocation recorded in the fourth quarter of 2021 when the acquisition was completed. Community Energy is reported in the US and Utilities SBU reportable segment.New York Wind — In the first quarter of 2022, the Company finalized the purchase price allocation related to the acquisition of Cogentrix Valcour Intermediate Holdings, LLC. There were no significant adjustments made to the preliminary purchase price allocation recorded in the fourth quarter of 2021 when the acquisition was completed. New York Wind is reported in the US and Utilities SBU reportable segment.Serra Verde Wind Complex — On July 19, 2021, AES Brasil completed the acquisition of the Serra Verde Wind Complex for $18 million, subject to customary working capital adjustments, of which $6 million was paid in cash and the remaining $12 million will be paid in two annual installments ending on July 19, 2023. The transaction was accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business; therefore, the assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration. Serra Verde is reported in the South America SBU.Cajuina Wind Complex — On May 21, 2021, AES Brasil completed the acquisition of the Cajuina Wind Complex phase I for $22 million, subject to customary working capital adjustments. On July 29, 2021, AES Brasil completed the acquisition of the Cajuína Wind Complex phase II for $24 million, subject to customary working capital adjustments, including $3 million of contingent consideration. The Company made initial cash payments of $6 million and the remaining balance will be paid in three annual installments ending on March 31, 2024 and on July 29, 2024, respectively. These transactions were accounted for as asset acquisitions of variable interest entities that did not meet the definition of a business; therefore the assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration. Cajuina is reported in the South America SBU.Cubico Wind Complex — On April 30, 2021, AES Brasil completed the acquisition of the Cubico Wind Complex for $109 million, subject to customary working capital adjustments. The transaction was accounted for as an asset acquisition; therefore the consideration transferred, plus transaction costs, were allocated to the individual assets acquired and liabilities assumed based on their relative fair values. Cubico is reported in the South America SBU.AES Clean Energy Development — On February 1, 2021, the Company substantially completed the merger of the sPower and AES Renewable Holdings development platforms to form AES Clean Energy Development, which will serve as the development vehicle for all future renewable projects in the U.S. As part of the transaction, AES acquired an additional 25% ownership interest in the sPower development platform from AIMCo, our existing partner in the sPower equity method investment, in exchange for a 25% ownership interest in specifically identified development entities of AES Renewable Holdings, certain future exit rights in the new partnership, and $7 million of cash.
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Total amortized cost of debt securities, Maturity of 5-10 Years | 2,675 | SEC-NUM |
The following table presents the amortized cost and fair value of debt securities by contractual maturity as of December 31, 2021. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without incurring penalties.
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| | Distribution of Maturities |
| (in millions) | 1 Year or Less | After 1 Year through 5 Years | After 5 Years through 10 Years | After 10 Years | Total |
| Amortized cost: | | | | | |
| U.S. Treasury and other | $11 | | $— | | $— | | $— | | $11 | |
| State and political subdivisions | — | | — | | — | | 2 | | 2 | |
| Mortgage-backed securities: | | | | | |
| Federal agencies and U.S. government sponsored entities | 7 | | 66 | | 1,914 | | 22,620 | | 24,607 | |
| Other/non-agency | — | | — | | — | | 397 | | 397 | |
| Collateralized loan obligations | — | | — | | 24 | | 1,184 | | 1,208 | |
| Total debt securities available for sale | 18 | | 66 | | 1,938 | | 24,203 | | 26,225 | |
| Mortgage-backed securities: | | | | | |
| Federal agencies and U.S. government sponsored entities | — | | — | | — | | 1,505 | | 1,505 | |
| | | | | | |
| Asset-backed securities | — | | — | | 737 | | — | | 737 | |
| Total debt securities held to maturity | — | | — | | 737 | | 1,505 | | 2,242 | |
| Total amortized cost of debt securities | $18 | | $66 | | $2,675 | | $25,708 | | $28,467 | |
| | | | | | |
| Fair value: | | | | | |
| U.S. Treasury and other | $11 | | $— | | $— | | $— | | $11 | |
| State and political subdivisions | — | | — | | — | | 2 | | 2 | |
| Mortgage-backed securities: | | | | | |
| Federal agencies and U.S. government sponsored entities | 7 | | 68 | | 1,957 | | 22,410 | | 24,442 | |
| Other/non-agency | — | | — | | — | | 405 | | 405 | |
| Collateralized loan obligations | — | | — | | 24 | | 1,183 | | 1,207 | |
| Total debt securities available for sale | 18 | | 68 | | 1,981 | | 24,000 | | 26,067 | |
| Mortgage-backed securities: | | | | | |
| Federal agencies and U.S. government sponsored entities | — | | — | | — | | 1,557 | | 1,557 | |
| | | | | | |
| Asset-backed securities | — | | — | | 732 | | — | | 732 | |
| Total debt securities held to maturity | — | | — | | 732 | | 1,557 | | 2,289 | |
| Total fair value of debt securities | $18 | | $68 | | $2,713 | | $25,557 | | $28,356 | |
Taxable interest income from investment securities as presented in the Consolidated Statements of Operations was $487 million, $519 million and $642 million for the years ended December 31, 2021, 2020 and 2019, respectively.The following table presents realized gains and losses on securities:
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| | Year Ended December 31, |
| (in millions) | 2021 | | 2020 | | 2019 |
| Gains on sale of debt securities(1) | $15 | | | $6 | | | $41 | |
| Losses on sale of debt securities | (5) | | | (2) | | | (16) | |
| Debt securities gains, net | $10 | | | $4 | | | $25 | |
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(1) For the year ended December 31, 2019, $6 million of gains on sale of debt securities were recognized in mortgage banking fees in the Consolidated Statements of Operations, as they related to AFS securities held as economic hedges of the value of the MSR portfolio recognized using the amortization method.
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| | | Citizens Financial Group, Inc. | 94 |
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Value added tax | 2 | SEC-NUM |
14 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2022 and 2021
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| | | September 30, 2022 |
| | | CarryingAmount | | Fair Value |
| | | Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | Accounts receivable — noncurrent (1) | $ | 92 | | | $ | 132 | | | $ | — | | | $ | — | | | $ | 132 | |
| Liabilities: | Non-recourse debt | 17,358 | | | 16,368 | | | — | | | 14,870 | | | 1,498 | |
| | Recourse debt | 4,668 | | | 4,175 | | | — | | | 4,175 | | | — | |
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| | | December 31, 2021 |
| | | CarryingAmount | | Fair Value |
| | | Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | Accounts receivable — noncurrent (1) | $ | 55 | | | $ | 117 | | | $ | — | | | $ | — | | | $ | 117 | |
| Liabilities: | Non-recourse debt | 14,811 | | | 16,091 | | | — | | | 16,065 | | | 26 | |
| | Recourse debt | 3,754 | | | 3,818 | | | — | | | 3,818 | | | — | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)These amounts primarily relate to amounts due from CAMMESA, the administrator of the wholesale electricity market in Argentina, and amounts impacted by the Stabilization Fund enacted by the Chilean government, and are included in Other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets. The fair value and carrying amount of these receivables exclude VAT of $2 million as of September 30, 2022 and December 31, 2021.4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIESFor further information on the Company’s derivative and hedge accounting policies, see Note 1—General and Summary of Significant Accounting Policies—Derivatives and Hedging Activities of Item 8.—Financial Statements and Supplementary Data in the 2021 Form 10-K.Volume of Activity — The following tables present the Company’s maximum notional (in millions) over the remaining contractual period by type of derivative as of September 30, 2022, regardless of whether they are in qualifying cash flow hedging relationships, and the dates through which the maturities for each type of derivative range:
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| Interest Rate and Foreign Currency Derivatives | | Maximum Notional Translated to USD | | Latest Maturity |
| Interest rate | | $ | 6,464 | | | 2059 |
| Cross-currency swaps (Brazilian real) | | 254 | | | 2026 |
| Foreign Currency: | | | | |
| Colombian peso | | 120 | | | 2024 |
| Euro | | 54 | | | 2024 |
| Mexican peso | | 53 | | | 2023 |
| Brazilian real | | 36 | | | 2024 |
| Chilean peso | | 27 | | | 2024 |
| Argentine peso | | 7 | | | 2026 |
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| Commodity Derivatives | | Maximum Notional | | Latest Maturity |
| Natural Gas (in MMBtu) | | 106 | | | 2029 |
| Power (in MWhs) | | 22 | | | 2040 |
| Coal (in Tons or Metric Tons) | | 6 | | | 2027 |
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Accounting and Reporting — Assets and Liabilities — The following tables present the fair value of assets and liabilities related to the Company’s derivative instruments as of the periods indicated (in millions):
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| Fair Value | September 30, 2022 | | December 31, 2021 |
| Assets | Designated | | Not Designated | | Total | | Designated | | Not Designated | | Total |
| Interest rate derivatives | $ | 475 | | | $ | 1 | | | $ | 476 | | | $ | 53 | | | $ | — | | | $ | 53 | |
| Cross-currency derivatives | — | | | — | | | — | | | 5 | | | — | | | 5 | |
| Foreign currency derivatives | 20 | | | 85 | | | 105 | | | 28 | | | 109 | | | 137 | |
| Commodity derivatives | 19 | | | 224 | | | 243 | | | 6 | | | 32 | | | 38 | |
| Total assets | $ | 514 | | | $ | 310 | | | $ | 824 | | | $ | 92 | | | $ | 141 | | | $ | 233 | |
| Liabilities | | | | | | | | | | | |
| Interest rate derivatives | $ | 2 | | | $ | — | | | $ | 2 | | | $ | 288 | | | $ | 6 | | | $ | 294 | |
| Cross-currency derivatives | 36 | | | — | | | 36 | | | 11 | | | — | | | 11 | |
| Foreign currency derivatives | 22 | | | 12 | | | 34 | | | 23 | | | 12 | | | 35 | |
| Commodity derivatives | 14 | | | 241 | | | 255 | | | 11 | | | 33 | | | 44 | |
| Total liabilities | $ | 74 | | | $ | 253 | | | $ | 327 | | | $ | 333 | | | $ | 51 | | | $ | 384 | |
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Former gain contingency, recognized in current period, net of tax | 223 | SEC-NUM |
offsetting items such as the ACA’s minimum MLR rebate requirements and premium taxes, the Company recorded pre-tax income of $307 million and after-tax income of $223 million during the year ended December 31, 2020.
Advertising Costs
Advertising costs, which are reduced by the portion funded by vendors, are expensed when the related advertising takes place. Net advertising costs, which are included in operating expenses, were $523 million, $461 million and $396 million in 2021, 2020 and 2019, respectively.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the stock award (generally three to five years) using the straight-line method.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year or years in which the differences are expected to reverse. The effect of a change in the tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date of such change.
The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and the Company’s recent operating results. The Company establishes a valuation allowance when it does not consider it more likely than not that a deferred tax asset will be recovered.
The Company records uncertain tax positions on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.
Interest and/or penalties related to uncertain tax positions are recognized in the income tax provision.
Measurement of Defined Benefit Pension and Other Postretirement Employee Benefit Plans
The Company sponsors defined benefit pension plans (“pension plans”) and other postretirement employee benefit plans (“OPEB plans”) for its employees and retirees. The Company recognizes the funded status of its pension and OPEB plans on the consolidated balance sheets based on the year-end measurements of plan assets and benefit obligations. When the fair value of plan assets are in excess of the plan benefit obligations, the amounts are reported in other current assets and other assets. When the fair value of plan benefit obligations are in excess of plan assets, the amounts are reported in accrued expenses and other long-term liabilities based on the amount by which the actuarial present value of benefits payable in the next twelve months included in the benefit obligation exceeds the fair value of plan assets. The net periodic benefit cost (income) for the Company’s pension and OPEB plans do not contain a service cost component as these plans have been frozen for an extended period of time. Non-service cost components of pension and postretirement net periodic benefit cost (income) are included in other income in the consolidated statements of operations.
Earnings per Share
Earnings per share is computed using the two-class method. The Company calculates basic earnings per share based on the weighted average number of common shares outstanding for the period. See Note 14 ‘‘Earnings Per Share’’ for additional information.
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Weight of metric (as a percent) | 50 | SEC-NUM |
[Table of Contents](#ie3b4dd133255408488aec6011c49b801_10)APPLIED MATERIALS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Stock OptionsStock options are rights to purchase, at future dates, shares of Applied common stock. The exercise price of each stock option equals the fair market value of Applied common stock on the date of grant. Options typically vest over three to four years, subject to the grantee’s continued service with Applied through the scheduled vesting date, and expire no later than seven years from the grant date. There were no stock options granted during fiscal 2021, 2020 and 2019. There were no outstanding stock options at the end of fiscal 2021.Restricted Stock Units, Restricted Stock, Performance Share Units and Performance UnitsRestricted stock units are converted into shares of Applied common stock upon vesting on a one-for-one basis. Restricted stock has the same rights as other issued and outstanding shares of Applied common stock except these shares generally have no right to dividends and are held in escrow until the award vests. Performance share units and performance units are awards that result in a payment to a grantee, generally in shares of Applied common stock on a one-for-one basis, if performance goals and/or other vesting criteria established by the Human Resources and Compensation Committee of Applied’s Board of Directors are achieved or the awards otherwise vest. Restricted stock units, restricted stock, performance share units and performance units typically vest over three to four years and vesting is usually subject to the grantee’s continued service with Applied and, in some cases, achievement of specified performance goals. The compensation expense related to the service-based awards is determined using the fair market value of Applied common stock on the date of the grant, and the compensation expense is recognized over the vesting period. During fiscal 2021, 2020 and 2019, certain executive officers were granted awards that are subject to the achievement of certain levels specified performance goals.Certain awards are subject to the achievement of targeted levels of adjusted operating margin and targeted levels of total shareholder return (TSR) relative to a peer group, comprised of companies in the Standard & Poor's 500 Index. Each metric will be weighted 50% and will be measured over a three-year period. The number of shares that may vest in full after three years ranges from 0% to 200% of the target amount. The awards become eligible to vest only if performance goals are achieved and will vest only if the grantee remains employed by Applied through each applicable vesting date, subject to a qualifying retirement based on age and years of service. The awards provide for a partial payout based on actual performance at the conclusion of the three-year performance period in the event of a qualifying retirement.During fiscal 2021, certain executive officers were also granted non-recurring long-term performance-based awards that are subject to the achievement of targeted levels of Applied’s absolute TSR. The awards become eligible to vest only if targeted levels of TSR are achieved during the five-year performance period and will vest only if the grantee remains employed by Applied through the vesting date in October 2025, except in the event of involuntary termination of employment without cause, death or following a change of control. The number of shares that may vest in full after five years ranges from 0% to 200% of the target amount.The fair value of the portion of the awards subject to targeted levels of adjusted operating margin is estimated on the date of grant. If the performance goals are not met as of the end of the performance period, no compensation expense is recognized and any previously recognized compensation expense is reversed. The expected cost is based on the portion of the awards that is probable to vest and is reflected over the service period and reduced for estimated forfeitures.The fair value of the portion of the awards subject to targeted levels of relative TSR or absolute TSR is estimated on the date of grant using a Monte Carlo simulation model. Compensation expense is recognized based upon the assumption of 100% achievement of the TSR goal and will not be reversed even if the threshold level of TSR is never achieved, and is reflected over the service period and reduced for estimated forfeitures.93
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Share based compensation arrangement by share based payment maximum award potential (in shares) | 1,408,973 | SEC-NUM |
[Table of Contents](#i31241139a24240ee889881d54ce4b5f1_7)Diamondback Energy, Inc. and Subsidiaries Condensed Notes to Consolidated Financial Statements - (Continued)(Unaudited)Restricted Stock Units
The following table presents the Company’s restricted stock unit activity during the six months ended June 30, 2022 under the Equity Plan:
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| | Restricted Stock Units | | Weighted Average Grant-DateFair Value |
| Unvested at December 31, 2021 | 1,079,589 | | | $ | 62.09 | |
| Granted | 319,035 | | | $ | 132.84 | |
| Vested | (178,185) | | | $ | 92.82 | |
| Forfeited | (39,231) | | | $ | 68.58 | |
| Unvested at June 30, 2022 | 1,181,208 | | | $ | 76.35 | |
The aggregate fair value of restricted stock units that vested during the six months ended June 30, 2022 was $17 million. As of June 30, 2022, the Company’s unrecognized compensation cost related to unvested restricted stock units was $70 million, which is expected to be recognized over a weighted-average period of 1.9 years.
Performance Based Restricted Stock Units
The following table presents the Company’s performance restricted stock units activity under the Equity Plan for the six months ended June 30, 2022:
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| | Performance Restricted Stock Units | | Weighted Average Grant-Date Fair Value |
| Unvested at December 31, 2021 | 456,459 | | | $ | 100.17 | |
| Granted | 126,905 | | | $ | 237.13 | |
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| | | | |
| Unvested at June 30, 2022(1) | 583,364 | | | $ | 129.96 | |
(1)A maximum of 1,408,973 units could be awarded based upon the Company’s final TSR ranking.
As of June 30, 2022, the Company’s unrecognized compensation cost related to unvested performance based restricted stock awards and units was $45 million, which is expected to be recognized over a weighted-average period of 1.6 years.
In March 2022, eligible employees received performance restricted stock unit awards totaling 126,905 units from which a minimum of 0% and a maximum of 200% of the units could be awarded based upon the measurement of total stockholder return of the Company’s common stock as compared to a designated peer group during the 3-year performance period of January 1, 2022 to December 31, 2024 and cliff vest at December 31, 2024 subject to continued employment. The initial payout of the March 2022 awards will be further adjusted by a TSR modifier that may reduce the payout or increase the payout up to a maximum of 250%.
The fair value of each performance restricted stock unit issuance is estimated at the date of grant using a Monte Carlo simulation, which results in an expected percentage of units to be earned during the performance period.
The following table presents a summary of the grant-date fair values of performance restricted stock units granted and the related assumptions for the awards granted during the period presented:
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| | 2022 | | | | |
| Grant-date fair value | $ | 237.13 | | | | | |
| | | | | | |
| Risk-free rate | 1.44 | % | | | | |
| Company volatility | 72.10 | % | | | | |
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Noncontrolling interests related to acquisition of Entertainment One Ltd. | 26.2 | SEC-NUM |
[Table of Contents](#i3d0ebbc4e2a2420f98ed7e6fe698936a_7)HASBRO, INC. AND SUBSIDIARIESConsolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interests(Millions of Dollars)
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| | CommonStock | | AdditionalPaid-inCapital | | RetainedEarnings | | AccumulatedOtherComprehensiveLoss | | TreasuryStock | | Non-controlling Interests | | TotalShareholders’Equity | | | RedeemableNon-controllingInterests |
| Balance, December 30, 2018 | $ | 104.8 | | | 1,275.1 | | | 4,184.4 | | | (294.5) | | | (3,515.2) | | | — | | | $ | 1,754.6 | | | | $ | — | |
| Net earnings | | | — | | | 520.5 | | | — | | | — | | | — | | | 520.5 | | | | — | |
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| Equity issuance, net of fees | 5.3 | | | 969.9 | | | — | | | — | | | — | | | — | | | 975.2 | | | | — | |
| Other comprehensive earnings | — | | | — | | | — | | | 110.3 | | | — | | | — | | | 110.3 | | | | — | |
| Stock-based compensation transactions | — | | | 3.0 | | | — | | | — | | | 15.7 | | | — | | | 18.7 | | | | — | |
| Purchases of common stock | — | | | — | | | — | | | — | | | (61.4) | | | — | | | (61.4) | | | | — | |
| Stock-based compensation expense | — | | | 27.8 | | | — | | | — | | | 0.2 | | | — | | | 28.0 | | | | — | |
| Dividends declared | — | | | — | | | (350.2) | | | — | | | — | | | — | | | (350.2) | | | | — | |
| Balance, December 29, 2019 | $ | 110.1 | | | 2,275.8 | | | 4,354.7 | | | (184.2) | | | (3,560.7) | | | — | | | $ | 2,995.7 | | | | $ | — | |
| Noncontrolling interests related to acquisition of eOne | — | | | — | | | — | | | — | | | — | | | 43.3 | | | 43.3 | | | | 26.2 | |
| Net earnings attributable to Hasbro, Inc. | — | | | — | | | 222.5 | | | — | | | — | | | — | | | 222.5 | | | | — | |
| Net earnings attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 2.5 | | | 2.5 | | | | 0.4 | |
| Buyout of noncontrolling interest | — | | | 0.6 | | | — | | | — | | | — | | | — | | | 0.6 | | | | — | |
| Other comprehensive loss | — | | | — | | | — | | | (10.8) | | | — | | | — | | | (10.8) | | | | — | |
| Stock-based compensation transactions | — | | | 1.9 | | | — | | | — | | | 8.7 | | | — | | | 10.6 | | | | — | |
| | | | | | | | | | | | | | | | | |
| Stock-based compensation expense | — | | | 49.4 | | | — | | | — | | | 0.3 | | | — | | | 49.7 | | | | — | |
| Dividends declared | — | | | — | | | (373.0) | | | — | | | — | | | — | | | (373.0) | | | | — | |
| Distributions paid to noncontrolling owners and other foreign exchange | — | | | 1.4 | | | — | | | — | | | — | | | (5.8) | | | (4.4) | | | | (2.2) | |
| Balance, December 27, 2020 | $ | 110.1 | | | 2,329.1 | | | 4,204.2 | | | (195.0) | | | (3,551.7) | | | 40.0 | | | $ | 2,936.7 | | | | $ | 24.4 | |
| | | | | | | | | | | | | | | | | |
| Net earnings attributable to Hasbro, Inc. | — | | | — | | | 428.7 | | | — | | | — | | | — | | | 428.7 | | | | — | |
| Net earnings attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 3.3 | | | 3.3 | | | | 3.3 | |
| Change in put option value | — | | | (1.3) | | | — | | | — | | | — | | | — | | | (1.3) | | | | — | |
| Other comprehensive loss | — | | | — | | | — | | | (40.3) | | | — | | | — | | | (40.3) | | | | — | |
| Stock-based compensation transactions | — | | | 1.2 | | | — | | | — | | | 15.6 | | | — | | | 16.8 | | | | — | |
| Stock-based compensation expense | — | | | 96.4 | | | — | | | — | | | 1.4 | | | — | | | 97.8 | | | | — | |
| Dividends declared | — | | | — | | | (375.1) | | | — | | | — | | | — | | | (375.1) | | | | — | |
| Distributions paid to noncontrolling owners and other foreign exchange | — | | | 2.6 | | | — | | | — | | | — | | | (6.1) | | | (3.5) | | | | (3.8) | |
| Balance, December 26, 2021 | $ | 110.1 | | | 2,428.0 | | | 4,257.8 | | | (235.3) | | | (3,534.7) | | | 37.2 | | | $ | 3,063.1 | | | | $ | 23.9 | |
See accompanying notes to consolidated financial statements. 77
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2025 | 39 | SEC-NUM |
[Table of Contents](#id353055757fb42afb305a023bc295188_7)Intangible Assets, NetFinite-lived intangible assets are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Licenses | | Customer-RelatedIntangibleAssets | | DevelopedTechnology | | CovenantsNot toCompeteand Other | | Total |
| | (In $ millions) |
| Gross Asset Value | | | | | | | | | |
| As of December 31, 2021 | 45 | | | 996 | | | 45 | | | 55 | | | 1,141 | |
| | | | | | | | | | |
| | | | | | | | | | |
| Exchange rate changes | (2) | | | (57) | | | (1) | | | — | | | (60) | |
| As of June 30, 2022 | 43 | | | 939 | | | 44 | | | 55 | | | 1,081 | |
| Accumulated Amortization | | | | | | | | | |
| As of December 31, 2021 | (41) | | | (543) | | | (42) | | | (39) | | | (665) | |
| Amortization | (2) | | | (19) | | | (1) | | | — | | | (22) | |
| Exchange rate changes | 3 | | | 32 | | | 1 | | | — | | | 36 | |
| As of June 30, 2022 | (40) | | | (530) | | | (42) | | | (39) | | | (651) | |
| Net book value | 3 | | | 409 | | | 2 | | | 16 | | | 430 | |
Indefinite-lived intangible assets are as follows:
| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | | | | |
| | Trademarksand Trade Names | |
| | (In $ millions) | |
| As of December 31, 2021 | 259 | | |
| | | |
| | | |
| Exchange rate changes | (14) | | |
| As of June 30, 2022 | 245 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
During the six months ended June 30, 2022, the Company did not renew or extend any intangible assets.Estimated amortization expense for the succeeding five fiscal years is as follows:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | (In $ millions) |
| 2023 | 40 | |
| 2024 | 39 | |
| 2025 | 39 | |
| 2026 | 39 | |
| 2027 | 39 | |
12
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Deferred income tax benefits | 32 | SEC-NUM |
[Table of Contents](#i6266d2788e5849989ad57be380853c2d_7)Entergy Corporation and SubsidiariesNotes to Financial Statements
Entergy Texas Securitization Bonds - Hurricane Rita
In April 2007 the PUCT issued a financing order authorizing the issuance of securitization bonds to recover $353 million of Entergy Texas’s Hurricane Rita reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC, a company that is now wholly-owned and consolidated by Entergy Texas, issued $329.5 million of senior secured transition bonds (securitization bonds). Although the principal amount was not due until June 2022, Entergy Gulf States Reconstruction Funding made principal payments on the bonds in the amount of $17.5 million in 2021, after which the bonds were fully repaid.
Entergy Texas Securitization Bonds - Hurricane Ike and Hurricane Gustav
In September 2009 the PUCT authorized the issuance of securitization bonds to recover $566.4 million of Entergy Texas’s Hurricane Ike and Hurricane Gustav restoration costs, plus carrying costs and transaction costs, offset by insurance proceeds. In November 2009, Entergy Texas Restoration Funding, LLC (Entergy Texas Restoration Funding), a company wholly-owned and consolidated by Entergy Texas, issued $545.9 million of senior secured transition bonds (securitization bonds). Although the principal amount is not due until November 2023, Entergy Texas Restoration Funding expects to make principal payments on the bonds in the amount of $54.3 million for 2022, after which the bonds will be fully repaid.
With the proceeds, Entergy Texas Restoration Funding purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Texas Restoration Funding, including the transition property, and the creditors of Entergy Texas Restoration Funding do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to Entergy Texas Restoration Funding except to remit transition charge collections.
Grand Gulf Sale-Leaseback Transactions
In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.
System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. As such, it has recognized debt for the lease obligation and retained the portion of the plant subject to the sale-leaseback on its balance sheet. For financial reporting purposes, System Energy has recognized interest expense on the debt balance and depreciation on the applicable plant balance. The lease payments are recognized as principal and interest payments on the debt balance. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million as of December 31, 2021 and 2020.
135
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Change in estimated program costs | 44 | SEC-NUM |
Notes to Condensed Consolidated Financial Statements
Reinsurance and indemnification recoverables
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| Reinsurance and indemnification recoverables, net | | | | |
| ($ in millions) | | September 30, 2022 | | December 31, 2021 |
| Property and casualty | | | | |
| Paid and due from reinsurers and indemnitors | | $ | 264 | | | $ | 391 | |
| Unpaid losses estimated (including IBNR) | | 9,556 | | | 9,479 | |
| Total property and casualty | | $ | 9,820 | | | $ | 9,870 | |
| | | | | |
| Accident and health insurance | | 141 | | | 154 | |
| Total | | $ | 9,961 | | | $ | 10,024 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Rollforward of credit loss allowance for reinsurance recoverables |
| ($ in millions) | | Three months ended September 30, | | Nine months ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Property and casualty (1) (2) | | | | | | | | |
| Beginning balance | | $ | (66) | | | $ | (60) | | | $ | (66) | | | $ | (59) | |
| Increase in the provision for credit losses | | (5) | | | (6) | | | (5) | | | (7) | |
| Write-offs | | 9 | | | — | | | 9 | | | — | |
| Ending balance | | $ | (62) | | | $ | (66) | | | $ | (62) | | | $ | (66) | |
| | | | | | | | | |
| Accident and health insurance | | | | | | | | |
| Beginning balance | | $ | (8) | | | $ | (1) | | | $ | (8) | | | $ | (1) | |
| | | | | | | | | |
| Increase in the provision for credit losses | | — | | | — | | | — | | | — | |
| Write-offs | | — | | | — | | | — | | | — | |
| Ending balance | | $ | (8) | | | $ | (1) | | | $ | (8) | | | $ | (1) | |
(1)Primarily related to Run-off Property-Liability reinsurance ceded. (2)Indemnification recoverables are considered collectible based on the industry pool and facility enabling legislation.
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Note 11 | Company Restructuring |
The Company undertakes various programs to reduce expenses. These programs generally involve a reduction in staffing levels, and in certain cases, office closures. Restructuring and related charges primarily include the following costs related to these programs:•Employee - severance and relocation benefits•Exit - contract termination penalties and real estate costs primarily related to accelerated amortization of right-of-use assets and related leasehold improvements at facilities to be vacatedThe expenses related to these activities are included in the Condensed Consolidated Statements of Operations as restructuring and related charges and totaled $14 million and $23 million during the three months ended September 30, 2022 and 2021, respectively, and $27 million and $145 million during the nine months ended September 30, 2022 and 2021, respectively.Restructuring expenses during the third quarter and first nine months of 2022 are primarily due to thefuture work environment and employee costs. The Company continues to identify ways to improve operating efficiency and reduce cost which may result in additional restructuring charges in the future.
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| Future work environment |
| ($ in millions) | | |
| Expected program charges | | $ | 110 | |
| 2021 expenses | | (131) | |
| 2022 expenses | | (13) | |
| Change in estimated program costs | | 44 | |
| Remaining program charges | | $ | 10 | |
These charges are primarily recorded in the Allstate Protection segment. Exit costs of this program reflect real estate costs primarily related to accelerated amortization of right-of-use assets and related leasehold improvements at facilities to be vacated. The Company expects that the majority of these actions will be completed in 2022.Third Quarter 2022 Form 10-Q 37
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Authorized shares available for future awards under the stock-based compensation plans (in shares) | 20 | SEC-NUM |
As of December 31, 2021, $82 million of unrecognized compensation cost related to RSUs is expected to be recognized as expense over a weighted-average period of approximately 2.1 years. The weighted-average grant-date fair value of RSUs granted in 2021, 2020 and 2019 was $79.30, $77.51 and $75.60, respectively. The fair value of RSUs vested in 2021, 2020 and 2019 was $47 million, $52 million and $57 million, respectively.PSUsOur annual equity awards stock compensation program for senior management includes the issuance of PSUs. In 2020 and 2021, the PSUs awarded were based on our compound annual sales growth rate (CAGR) performance, our adjusted return on invested capital (ROIC) performance and on our stock performance relative to our peer group. PSUs awarded between 2017 and 2019 were based on adjusted operating margin as well as stock performance relative to our peer group. The vesting condition for CAGR and ROIC PSUs is set at the beginning of the 3-year service period while the vesting condition for adjusted operating margin is set at the beginning of each year for each tranche of the award during the 3-year service period. Compensation cost for the CAGR, adjusted ROIC and adjusted operating margin PSUs is measured based on the fair value of the awards on the date that the specific vesting terms for each award are established and the fair value of the awards is determined based on the quoted price of our stock on the grant date of the award. The compensation cost for CAGR, adjusted ROIC and adjusted operating margin PSUs is adjusted at each reporting date to reflect the estimated vesting outcome.The fair value for PSUs based on our stock performance relative to our peer group is determined using a Monte Carlo model. The assumptions used in estimating the fair value of these PSUs granted during the period, along with the grant-date fair values, were as follows:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| years ended December 31 | 2021 | 2020 | 2019 |
| Baxter volatility | 28 | % | 26 | % | 19 | % |
| Peer group volatility | 26%-81% | 23%-95% | 18%-113% |
| Correlation of returns | 0.05-0.65 | 0.19-0.70 | 0.13-0.63 |
| Risk-free interest rate | 0.3 | % | 0.4 | % | 2.5 | % |
| Fair value per PSU | $ | 86 | | $ | 108 | | $ | 106 | |
The following table summarizes nonvested PSU activity for the year ended December 31, 2021.
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| (share units in thousands) | Share units | Weighted-averagegrant-datefair value |
| Nonvested PSUs as of January 1, 2021 | 760 | | $ | 86.69 | |
| Granted | 241 | | $ | 78.24 | |
| Vested | (178) | | $ | 78.41 | |
| Forfeited | (91) | | $ | 87.63 | |
| Nonvested PSUs as of December 31, 2021 | 732 | | $ | 85.87 | |
Unrecognized compensation cost related to all unvested PSUs of $23 million at December 31, 2021 is expected to be recognized as expense over a weighted-average period of 1.5 years.Employee Stock Purchase PlanNearly all employees are eligible to participate in our employee stock purchase plan. The employee purchase price is 85% of the closing market price on the purchase date.The Baxter International Inc. Employee Stock Purchase Plan provides for 20 million shares of common stock available for issuance to eligible participants, of which approximately 11 million shares were available for future purchases as of December 31, 2021.During 2021, 2020, and 2019, we issued approximately 0.7 million, 0.7 million and 0.7 million shares, respectively, under the employee stock purchase plan. 79
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General rate case authorizations, escalation increase, amount | 13 | SEC-NUM |
[Table of Contents](#ifb4765332bfb410ba6ce53d196f7d99d_7)Note 4: Regulatory MattersGeneral Rate CasesPresented in the table below are annualized incremental revenues, excluding reductions for the amortization of the excess accumulated deferred income taxes (“EADIT”) that are generally offset in income tax expense, assuming a constant water sales volume, resulting from general rate cases authorizations that became effective during 2019 through 2021:
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| | | | | | | | | | | | | | | | | | |
| (In millions) | 2021 | | 2020 | | 2019 |
| General rate cases by state (a): | | | | | |
| Iowa (effective October 11, 2021) | $ | 1 | | | $ | — | | | $ | — | |
| Missouri (effective May 28, 2021) | 22 | | | — | | | — | |
| Pennsylvania (effective January 28, 2021) | 70 | | | — | | | — | |
| California (effective January 1, 2021, January 1, 2020 and May 11, 2019) | 22 | | | 5 | | | 4 | |
| New Jersey (effective November 1, 2020) | — | | | 54 | | | — | |
| Indiana (effective May 1, 2020 and July 1, 2019) | — | | | 13 | | | 4 | |
| Kentucky (effective June 28, 2019) | — | | | — | | | 13 | |
| West Virginia (effective February 25, 2019) | — | | | — | | | 19 | |
| Maryland (effective February 5, 2019) | — | | | — | | | 1 | |
| Total general rate case authorizations | $ | 115 | | | $ | 72 | | | $ | 41 | |
(a)Excludes authorized increases of $7 million and $4 million in 2021 and 2019, respectively, for the Company’s New York subsidiary, which was sold on January 1, 2022. See Note 6—Acquisitions and Divestitures for additional information.On November 18, 2021, the California Public Utilities Commission (the “CPUC”) unanimously approved a final decision in the test year 2021 general rate case filed by the Company’s California subsidiary, which is retroactive to January 1, 2021. The Company’s California subsidiary received authorization for additional annualized water and wastewater revenues of $22 million, excluding agreed to reductions for EADIT as a result of the Tax Cuts and Jobs Act of 2017 (the “TCJA”). The EADIT reduction in revenues is $4 million and is offset by a like reduction in income tax expense. On January 18, 2022, the Company’s California subsidiary filed for approval of $13 million in 2022 escalation increases, excluding $4 million of reductions related to the TCJA. This filing, which is retroactive to January 1, 2022, is subject to CPUC approval with a 45-day review period.On June 28, 2021, an order was issued authorizing an increase of $1 million in the general rate case filed by the Company’s Iowa subsidiary in 2020. The Company’s Iowa subsidiary filed tariffs consistent with the order on September 23, 2021. Effective October 11, 2021, the Iowa Utilities Board approved the tariffs and implemented the new rates.On April 7, 2021, the Company’s Missouri subsidiary was authorized additional annualized revenues of $22 million, effective May 28, 2021, excluding agreed to reductions for EADIT as a result of the TCJA. The EADIT reduction in revenues is $25 million and is offset by a like reduction in income tax expense. The protected EADIT balance of $72 million is being returned to customers using the average rate assumption method (“ARAM”), and the unprotected EADIT balance of $74 million is being returned to customers over 10 years. The $25 million EADIT reduction includes both the protected and unprotected catch-up period EADIT of $13 million. The catch-up period of January 1, 2018 through May 31, 2021 covers the period from when the lower federal corporate income tax rate went into effect until new base rates went into effect and will be amortized over 2.5 years.On March 2, 2021, an administrative law judge (“ALJ”) in the Office of Administrative Law of New Jersey filed an initial decision with the New Jersey Board of Public Utilities (the “NJBPU”) that recommended denial of a petition filed by the Company’s New Jersey subsidiary, which sought approval of acquisition adjustments in rate base of $29 million associated with the acquisitions of Shorelands Water Company, Inc. in 2017 and the Borough of Haddonfield’s water and wastewater systems in 2015. On July 29, 2021, the NJBPU issued an order adopting the ALJ’s initial decision without modification. The Company’s New Jersey subsidiary filed a Notice of Appeal with the New Jersey Appellate Division on September 10, 2021. A scheduling order was issued on October 18, 2021 establishing a briefing schedule through March 2022. There is no financial impact to the Company as a result of the NJBPU’s order, since the acquisition adjustments are currently recorded as goodwill on the Consolidated Balance Sheets.96
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Lessee, Operating Lease, Liability, Undiscounted Excess Amount | 39 | SEC-NUM |
millions):
| | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | |
| | | | Fiscal Year Ended June 30, 2022 |
| Cash paid for amounts included in lease liabilities: | | | |
| Financing cash flows used for finance leases | | | $ | 15 | |
| Operating cash flows used for finance leases | | | 11 | |
| Operating cash flows used for operating leases | | | 19 | |
| | | | |
| Non-cash transactions: | | | |
| Right-of-use assets obtained in exchange for new finance lease liabilities | | | 59 | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | | | $ | 31 | |
As of June 30, 2022, the Company expects that its future minimum lease payments will become due and payable as follows:
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| | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | Financing Leases | | Operating Leases | | Total |
| 2023 | $ | 29 | | | $ | 17 | | | $ | 46 | |
| 2024 | 28 | | | 14 | | | 42 | |
| 2025 | 25 | | | 11 | | | 36 | |
| 2026 | 22 | | | 11 | | | 33 | |
| 2027 | 22 | | | 11 | | | 33 | |
| Thereafter | 238 | | | 74 | | | 312 | |
| Total minimum lease payments | 364 | | | 138 | | | 502 | |
| Less: interest | 130 | | | 39 | | | 169 | |
| Total lease liabilities | $ | 234 | | | $ | 99 | | | $ | 333 | |
17. COMMITMENTS AND CONTINGENCIESContingent LossesFrom time to time, the Company may be involved in legal proceedings arising in the ordinary course of business, including, without limitation, inquiries and claims concerning environmental contamination as well as litigation and allegations in connection with acquisitions, product liability, manufacturing or packaging defects, and claims for reimbursement for the cost of lost or damaged active pharmaceutical ingredients, the cost of any of which could be significant. The Company intends to vigorously defend itself against any such litigation and does not currently believe that the outcome of any such litigation will have a material adverse effect on the Company’s financial statements. In addition, the healthcare industry is highly regulated and government agencies continue to scrutinize certain practices affecting government programs and otherwise.From time to time, the Company receives subpoenas or requests for information relating to the business practices and activities of customers or suppliers from various governmental agencies or private parties, including from state attorneys general, the U.S. Department of Justice, and private parties engaged in patent infringement, antitrust, tort, and other litigation. The Company generally responds to such subpoenas and requests in a timely and thorough manner, which responses sometimes require considerable time and effort and can result in considerable costs being incurred. The Company expects to incur costs in future periods in connection with future requests.18. SEGMENT AND GEOGRAPHIC INFORMATIONAs discussed in Note 1, Basis of Presentation and Summary of Significant Accounting Policies, the Company conducted its business within the following segments in fiscal 2022: Biologics, Softgel and Oral Technologies, Oral and Specialty Delivery, and Clinical Supply Services. The Company evaluates the performance of its segments based on segment earnings before other (income) expense, impairments, restructuring costs, interest expense, income tax expense, and depreciation and amortization (“Segment EBITDA”). Segment EBITDA is subject to important limitations as it is not defined under U.S. GAAP and is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP. These consolidated financial 114
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Net book value for the exclusion of one ground lease related to one operating property | 6.4 | SEC-NUM |
5. LEASES (continued)
As of September 30, 2022, the present value of the remaining contractual payments aggregating $910.8 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $409.0 million. Our corresponding operating lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to the commencement of the lease, aggregated $561.9 million. As of September 30, 2022, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 42 years, and the weighted-average discount rate was 4.6%. The weighted-average discount rate is based on the incremental borrowing rate estimated for each lease, which is the interest rate that we estimate we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments.
Ground lease obligations as of September 30, 2022, included leases for 40 of our properties, which accounted for approximately 9% of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property with a net book value of $6.4 million as of September 30, 2022, our ground lease obligations have remaining lease terms ranging from approximately 31 years to 99 years, including extension options which we are reasonably certain to exercise.
The reconciliation of future lease payments, under noncancelable operating ground and office leases in which we are the lessee, to the operating lease liability reflected in our unaudited consolidated balance sheet as of September 30, 2022 is presented in the table below (in thousands):
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| Year | | Total |
| 2022 | | $ | 6,586 | |
| 2023 | | 24,073 | |
| 2024 | | 24,389 | |
| 2025 | | 24,475 | |
| 2026 | | 24,543 | |
| Thereafter | | 806,749 | |
| Total future payments under our operating leases in which we are the lessee | | 910,815 | |
| Effect of discounting | | (501,785) | |
| Operating lease liability | | $ | 409,030 | |
Lessee operating costs
Operating lease costs relate to our ground and office leases in which we are the lessee. Ground leases generally require fixed annual rent payments and may also include escalation clauses and renewal options. Our operating lease obligations related to our office leases have remaining terms of up to 13 years, exclusive of extension options. For the three and nine months ended September 30, 2022 and 2021, our costs for operating leases in which we are the lessee were as follows (in thousands):
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| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 |
| Gross operating lease costs | | $ | 9,349 | | | $ | 7,055 | | | $ | 26,843 | | | $ | 20,580 | |
| Capitalized lease costs | | (847) | | | (827) | | | (2,699) | | | (2,273) | |
| Expenses for operating leases in which we are the lessee | | $ | 8,502 | | | $ | 6,228 | | | $ | 24,144 | | | $ | 18,307 | |
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For the nine months ended September 30, 2022 and 2021, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we are the lessee were $46.8 million and $18.0 million, respectively. The increase primarily relates to a $26.3 million payment made during the three months ended March 31, 2022 in connection with the execution of lease extensions at two properties in our Greater Stanford submarket.
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Owned generating capacity and renewable purchased power | 15,400 | SEC-NUM |
[Table of Contents](#i9e3d7fad53bb42b083be8286e4319cd4_10) EVERGY, INC.EVERGY KANSAS CENTRAL, INC.EVERGY METRO, INC.Combined Notes to Consolidated Financial Statements The notes to consolidated financial statements that follow are a combined presentation for Evergy, Inc., Evergy Kansas Central, Inc. and Evergy Metro, Inc., all registrants under this filing. The terms "Evergy," "Evergy Kansas Central," "Evergy Metro" and "Evergy Companies" are used throughout this report. "Evergy" refers to Evergy, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Kansas Central" refers to Evergy Kansas Central, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Metro" refers to Evergy Metro, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Companies" refers to Evergy, Evergy Kansas Central and Evergy Metro, collectively, which are individual registrants within the Evergy consolidated group. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESOrganizationEvergy is a public utility holding company incorporated in 2017 and headquartered in Kansas City, Missouri. Evergy operates primarily through the following wholly-owned direct subsidiaries listed below.•Evergy Kansas Central, Inc. (Evergy Kansas Central) is an integrated, regulated electric utility that provides electricity to customers in the state of Kansas. Evergy Kansas Central has one active wholly-owned subsidiary with significant operations, Evergy Kansas South, Inc. (Evergy Kansas South). •Evergy Metro, Inc. (Evergy Metro) is an integrated, regulated electric utility that provides electricity to customers in the states of Missouri and Kansas.•Evergy Missouri West, Inc. (Evergy Missouri West) is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri.•Evergy Transmission Company, LLC (Evergy Transmission Company) owns 13.5% of Transource Energy, LLC (Transource) with the remaining 86.5% owned by AEP Transmission Holding Company, LLC, a subsidiary of American Electric Power Company, Inc. (AEP). Transource is focused on the development of competitive electric transmission projects. Evergy Transmission Company accounts for its investment in Transource under the equity method.Evergy Kansas Central also owns a 50% interest in Prairie Wind Transmission, LLC (Prairie Wind), which is a joint venture between Evergy Kansas Central and subsidiaries of AEP and Berkshire Hathaway Energy Company. Prairie Wind owns a 108-mile, 345 kV double-circuit transmission line that provides transmission service in the Southwest Power Pool, Inc. (SPP). Evergy Kansas Central accounts for its investment in Prairie Wind under the equity method.
Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West conduct business in their respective service territories using the name Evergy. Collectively, the Evergy Companies have approximately 15,400 MWs of owned generating capacity and renewable power purchase agreements and engage in the generation, transmission, distribution and sale of electricity to approximately 1.6 million customers in the states of Kansas and Missouri.Principles of ConsolidationEach of Evergy's, Evergy Kansas Central's and Evergy Metro's consolidated financial statements includes the accounts of their subsidiaries and variable interest entities (VIEs) of which they are the primary beneficiary. Undivided interests in jointly-owned generation facilities are included on a proportionate basis. Intercompany transactions have been eliminated. The Evergy Companies assess financial performance and allocate resources on a consolidated basis (i.e., operate in one segment).87
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Stock repurchase remaining authorized amount | 1.3 | SEC-NUM |
[Table of Contents](#i31241139a24240ee889881d54ce4b5f1_7)Diamondback Energy, Inc. and Subsidiaries Condensed Notes to Consolidated Financial Statements - (Continued)(Unaudited)Viper’s Credit Agreement
Viper LLC’s credit agreement, as amended, provides for a revolving credit facility in the maximum credit amount of $2.0 billion with a borrowing base of $580 million based on Viper LLC’s oil and natural gas reserves and other factors. As of June 30, 2022, the elected commitment amount was $500 million with $250 million of outstanding borrowings and $250 million available for future borrowings. During the three and six months ended June 30, 2022 and 2021, the weighted average interest rates on borrowings under the Viper credit agreement were 3.20%, 2.88%, 1.93% and 1.90%, respectively. The Viper credit agreement will mature on June 2, 2025. As of June 30, 2022, Viper LLC was in compliance with all financial maintenance covenants under the Viper credit agreement.
Rattler’s Credit Agreement
Rattler LLC’s credit agreement, as amended, provides for a revolving credit facility in the maximum credit amount of $600 million, which is expandable to $1.0 billion upon Rattler’s election, subject to obtaining additional lender commitments and satisfaction of customary conditions. As of June 30, 2022, Rattler LLC had $232 million of outstanding borrowings and $368 million available for future borrowings under the Rattler credit agreement. During the three and six months ended June 30, 2022 and 2021, the weighted average interest rates on borrowings under the Rattler credit agreement were, in each case, 2.03%, 1.73%, 1.36% and 1.39%, respectively. The revolving credit facility will mature on May 28, 2024. As of June 30, 2022, Rattler LLC was in compliance with all financial maintenance covenants under the Rattler credit agreement.
8. STOCKHOLDERS’ EQUITY AND EARNINGS (LOSS) PER SHARE
Stock Repurchase Program
In September 2021, the Company’s board of directors approved a stock repurchase program to acquire up to $2.0 billion of the Company’s outstanding common stock. Purchases under the repurchase program may be made from time to time in open market or privately negotiated transactions, and are subject to market conditions, applicable legal requirements, contractual obligations and other factors. The repurchase program does not require the Company to acquire any specific number of shares. This repurchase program may be suspended from time to time, modified, extended or discontinued by the board of directors at any time. During the three and six months ended June 30, 2022, the Company repurchased approximately $303 million and $310 million of common stock under this repurchase program, respectively. As of June 30, 2022, approximately $1.3 billion remained available for use to repurchase shares under the Company’s common stock repurchase program.
Change in Ownership of Consolidated Subsidiaries
Non-controlling interests in the accompanying condensed consolidated financial statements represent minority interest ownership in Viper and Rattler and are presented as a component of equity. When the Company’s relative ownership interests in Viper and Rattler change, adjustments to non-controlling interest and additional paid-in-capital, tax effected, will occur. The following table summarizes changes in the ownership interest in consolidated subsidiaries during the periods presented:
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| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | (In millions) |
| Net income (loss) attributable to the Company | $ | 1,416 | | | $ | 311 | | | $ | 2,195 | | | $ | 531 | |
| Change in ownership of consolidated subsidiaries | (9) | | | (3) | | | (21) | | | (7) | |
| Change from net income (loss) attributable to the Company's stockholders and transfers to non-controlling interest | $ | 1,407 | | | $ | 308 | | | $ | 2,174 | | | $ | 524 | |
Earnings (Loss) Per Share
The Company’s earnings (loss) per share amounts have been computed using the two-class method. The two-class method is an earnings allocation proportional to the respective ownership among holders of common stock and participating securities. Basic earnings (loss) per share amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share include the effect of potentially dilutive non-participating securities outstanding for the period. Additionally, the per share earnings of Viper and Rattler are included in the consolidated earnings per share computation based on the consolidated group’s holdings of the subsidiaries.17
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Insurance receivables, current | 7 | SEC-NUM |
Insurance. FCX purchases a variety of insurance products to mitigate potential losses, which typically have specified deductible amounts or self-insured retentions and policy limits. FCX generally is self-insured for U.S. workers’ compensation, but purchases excess insurance up to statutory limits. An actuarial analysis is performed twice a year on the various casualty insurance programs covering FCX’s U.S.-based mining operations, including workers’ compensation, to estimate expected losses. At December 31, 2021, FCX’s liability for expected losses under these insurance programs totaled $62 million, which consisted of a current portion of $11 million (included in accounts payable and accrued liabilities) and a long-term portion of $51 million (included in other liabilities). In addition, FCX has receivables of $26 million (a current portion of $7 million included in other accounts receivable and a long-term portion of $19 million included in other assets) for expected claims associated with these losses to be filed with insurance carriers.
FCX’s oil and gas operations are subject to all of the risks normally incidental to the production of oil and gas, including well blowouts, cratering, explosions, oil spills, releases of gas or well fluids, fires, pollution and releases of toxic gas, each of which could result in damage to or destruction of oil and gas wells, production facilities or other property, or injury to persons. While FCX is not fully insured against all risks related to its oil and gas operations, its insurance policies provide limited coverage for losses or liabilities relating to pollution, with broader coverage for sudden and accidental occurrences. FCX is self-insured for named windstorms in the GOM.
NOTE 13. COMMITMENTS AND GUARANTEESLeases. Effective January 1, 2019, FCX adopted the new Accounting Standards Update (ASU) for lease accounting, and nearly all of FCX’s leases were considered operating leases under the new ASU. FCX leases various types of properties, including land, offices and equipment under non-cancelable leases.
The components of FCX’s leases presented in the consolidated balance sheet for the years ended December 31 follow:
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| | December 31, | | |
| | 2021 | | 2020 | | |
| Lease right-of-use assets (included in property, plant, equipment and mine development costs, net) | $ | 277 | | | $ | 207 | | | |
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| Short-term lease liabilities (included in accounts payable and accrued liabilities) | $ | 38 | | | $ | 38 | | | |
| Long-term lease liabilities (included in other liabilities) | 281 | | a | 190 | | | |
| Total lease liabilities | $ | 319 | | | $ | 228 | | | |
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a.Includes a land lease by PT-FI for the greenfield smelter totaling $126 million. This is FCX’s only significant finance lease.
Operating lease costs, primarily included in production and delivery expense in the consolidated statement of operations, for the two years ended December 31 follow:
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| | | 2021 | | 2020 | | 2019 |
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| Operating leases | | $ | 42 | | | $ | 42 | | | $ | 55 | |
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| Variable and short-term leases | | 62 | | | 74 | | | 79 | |
| Total operating lease costs | | $ | 104 | | | $ | 116 | | | $ | 134 | |
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FCX payments included in operating cash flows for its lease liabilities totaled $54 million in 2021, $36 million in 2020 and $38 million in 2019. FCX payments included in financing cash flows for its lease liabilities totaled $25 million in 2021 and $4 million in both 2020 and 2019. As of December 31, 2021, the weighted-average discount rate used to determine the lease liabilities was 4.2 percent (5.4 percent as of December 31, 2020) and the weighted-average remaining lease term was 12.4 years (7.7 years as of December 31, 2020).
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Common stock, shares authorized (in shares) | 4,000,000,000 | SEC-NUM |
[Table of Contents](#i329aa562213e420593df15cade55885b_7) The changes in the carrying amount of warranty related provisions are as follows:
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| | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, |
| (In millions) | | 2022 | | 2021 |
| Balance as of January 1, | | $ | 524 | | | $ | 514 | |
| Warranties, performance guarantees issued and changes in estimated liability | | 120 | | | 136 | |
| Settlements made | | (116) | | | (127) | |
| Other | | 9 | | | 1 | |
| Balance as of September 30, | | $ | 537 | | | $ | 524 | |
NOTE 10: EQUITY The authorized number of shares of common stock of Carrier is 4,000,000,000 shares of $0.01 par value. As of September 30, 2022 and December 31, 2021, 875,413,836 and 873,064,219 shares of common stock were issued, respectively, which includes 39,237,430 and 10,375,654 shares of treasury stock, respectively.
Share Repurchase ProgramThe Company may repurchase its outstanding common stock from time to time subject to market conditions and at the Company's discretion in the open market or through one or more other public or private transactions and subject to compliance with the Company's obligations under certain tax agreements. Shares acquired are recognized at cost and presented separately on the balance sheet as a reduction to Equity. In July 2021, the Company's Board of Directors approved a $1.75 billion increase to the Company's existing $350 million share repurchase program authorizing the repurchase of up to $2.1 billion of the Company's outstanding common stock. During 2021, the Company repurchased 10.4 million shares of common stock for an aggregate purchase price of $529 million.
On December 14, 2021, the Company entered into an accelerated share repurchase agreement ("ASR Agreement") to repurchase $500 million of its common stock pursuant to the Company's existing share repurchase program. In accordance with the ASR Agreement, the Company received initial delivery of 7.6 million shares on January 4, 2022, representing approximately 80% of the expected share repurchases. The final number of shares under the ASR Agreement was based on the daily average of the volume-weighted average share price of the Company's common stock over the term of the ASR Agreement. Upon final settlement, the Company received an additional 2.7 million shares on February 8, 2022 and recognized $500 million in Treasury stock as a reduction in equity.
During the nine months ended September 30, 2022, the Company repurchased 28.9 million shares of common stock for an aggregate purchase price of $1.3 billion, which includes shares repurchased under the ASR Agreement. As of September 30, 2022, the Company has approximately $309 million remaining under the current authorization. In October 2022, the Company's Board of Directors approved a $2.0 billion increase to the Company's existing share repurchase program.
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Proceeds from sale of operating property | 70,536 | SEC-NUM |
[Table of Contents](#ie7fd49285ee64ca9b19be8c003cdb9a8_7)CAMDEN PROPERTY TRUSTCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)
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| | Nine Months EndedSeptember 30, |
| (in thousands) | 2022 | | 2021 |
| Cash flows from operating activities | | | |
| Net income | $ | 614,037 | | | $ | 94,517 | |
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| Adjustments to reconcile net income to net cash from operating activities: | | | |
| Depreciation and amortization | 429,749 | | | 304,189 | |
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| Gain on sale of operating property | (36,372) | | | — | |
| Gain on acquisition of unconsolidated joint venture interests | (474,146) | | | — | |
| Distributions of income from joint ventures | 3,015 | | | 6,553 | |
| Equity in income of joint ventures | (3,048) | | | (6,652) | |
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| Share-based compensation | 9,676 | | | 12,148 | |
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| Net change in operating accounts and other | 33,619 | | | 25,267 | |
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| Net cash from operating activities | $ | 576,530 | | | $ | 436,022 | |
| Cash flows from investing activities | | | |
| Development and capital improvements, including land | $ | (342,532) | | | $ | (279,698) | |
| Acquisition of operating properties, including joint venture interests, net of cash acquired | (1,066,051) | | | (464,000) | |
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| Proceeds from sale of operating property | 70,536 | | | — | |
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| Increase in non-real estate assets | (3,948) | | | (4,685) | |
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| Other | (6,083) | | | (7,371) | |
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| Net cash from investing activities | $ | (1,348,078) | | | $ | (755,754) | |
| Cash flows from financing activities | | | |
| Borrowings on unsecured credit facility | $ | 640,000 | | | $ | — | |
| Repayments on unsecured credit facility | (640,000) | | | — | |
| Proceeds from issuance of common shares | 516,758 | | | 579,518 | |
| Distributions to common shareholders and non-controlling interests | (293,231) | | | (255,120) | |
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| Payment of deferred financing costs | (10,165) | | | (1,037) | |
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| Other | 7,623 | | | 5,385 | |
| Net cash from financing activities | $ | 220,985 | | | $ | 328,746 | |
| Net increase/(decrease) in cash, cash equivalents, and restricted cash | (550,563) | | | 9,014 | |
| Cash, cash equivalents, and restricted cash, beginning of period | 618,980 | | | 424,533 | |
| Cash, cash equivalents, and restricted cash, end of period | $ | 68,417 | | | $ | 433,547 | |
| Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets | | | |
| Cash and cash equivalents | $ | 62,027 | | | $ | 428,226 | |
| Restricted cash | 6,390 | | | 5,321 | |
| Total cash, cash equivalents, and restricted cash, end of period | $ | 68,417 | | | $ | 433,547 | |
| Supplemental information | | | |
| Cash paid for interest, net of interest capitalized | $ | 73,158 | | | $ | 64,794 | |
| Cash paid for income taxes | 3,090 | | | 2,221 | |
| Supplemental schedule of noncash investing and financing activities | | | |
| Distributions declared but not paid | 103,620 | | | 87,919 | |
| Value of shares issued under benefit plans, net of cancellations | 21,650 | | | 18,858 | |
| Conversion of operating partnership units to common shares | — | | | 5,936 | |
| Accrual associated with construction and capital expenditures | 23,277 | | | 25,137 | |
| Acquisition of joint venture interests: | | | |
| Mortgage debt assumed | 514,554 | | | — | |
| Other liabilities | 39,168 | | | — | |
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See Notes to Condensed Consolidated Financial Statements (Unaudited).7
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Fixed and floating rate notes | 309 | SEC-NUM |
In the second quarter of 2021, we completed a debt tender to repurchase a total of $7,275 million of debt, comprising $4,084 million of GE-issued debt with maturities ranging from 2022 through 2050, and $3,191 million of GE assumed debt with maturities ranging from 2021 through 2039. In the fourth quarter of 2021, we completed a debt tender to repurchase a total of $25,350 million of debt, comprised of $7,744 million of GE-issued debt with maturities ranging from 2022 through 2050, $4,718 million of GE assumed debt with maturities ranging from 2022 through 2040 and $12,888 million of GE Capital issued debt with maturities ranging from 2022 through 2039.
See Note 20 for further information about borrowings and associated interest rate swaps.
Long-term debt maturities over the next five years follow.
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| | 2022 | | 2023 | 2024 | 2025 | 2026 |
| Debt issued by GE | $ | 1,249 | | | $ | 482 | | $ | 175 | | $ | 905 | | $ | 31 | |
| Debt assumed by GE | 1,645 | | | 1,627 | | 498 | | 236 | | 1,137 | |
| Debt issued by GE Capital | 1,370 | | (a) | 1,297 | | 111 | | 700 | | 159 | |
(a)Fixed and floating rate notes of $309 million contain put options with exercise dates in 2022, which have final maturity beyond 2036.
The total interest payments on consolidated borrowings are estimated to be $1,245 million, $1,130 million, $1,081 million, $1,047 million and $1,009 million for 2022, 2023, 2024, 2025 and 2026, respectively.
NOTE 11. INSURANCE LIABILITIES AND ANNUITY BENEFITS. Insurance liabilities and annuity benefits comprise substantially all obligations to annuitants and insureds in our run-off insurance operations. Our insurance operations (net of eliminations) generated revenues of $3,106 million, $2,865 million and $2,802 million, profit (loss) of $566 million, $197 million and $(821) million and net earnings (loss) of $444 million, $143 million and $(663) million for the years ended December 31, 2021, 2020 and 2019, respectively. These operations were supported by assets of $49,894 million and $50,067 million at December 31, 2021 and 2020, respectively. A summary of our insurance contracts is presented below:
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| December 31, 2021 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
| Future policy benefit reserves | $ | 17,097 | | $ | 8,902 | | $ | 188 | | $ | 3,394 | | $ | 29,581 | |
| Claim reserves | 4,546 | | 258 | | 585 | | — | | 5,389 | |
| Investment contracts | — | | 955 | | 954 | | — | | 1,909 | |
| Unearned premiums and other | 15 | | 184 | | 89 | | — | | 287 | |
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| Total | $ | 21,658 | | $ | 10,299 | | $ | 1,815 | | $ | 3,394 | | $ | 37,166 | |
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| December 31, 2020 | | | | | |
| Future policy benefit reserves | $ | 16,934 | | $ | 9,207 | | $ | 181 | | $ | 8,160 | | $ | 34,482 | |
| Claim reserves | 4,393 | | 275 | | 694 | | — | | 5,362 | |
| Investment contracts | — | | 1,034 | | 1,016 | | — | | 2,049 | |
| Unearned premiums and other | 19 | | 189 | | 89 | | — | | 298 | |
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| Total | $ | 21,346 | | $ | 10,705 | | $ | 1,980 | | $ | 8,160 | | $ | 42,191 | |
(a) The decrease in Other adjustments of $4,766 million is a result of the higher margin resulting from the 2021 premium deficiency test and the decline in unrealized gains on investment securities.
Claim reserve activity included incurred claims of $1,699 million, $1,801 million and $1,873 million, of which $(46) million, $(1) millionand $(36) million related to the recognition of adjustments to prior year claim reserves arising from our periodic reserve evaluation in the years ended December 31, 2021, 2020 and 2019, respectively. Paid claims were $1,709 million, $1,728 million and $1,626 million in the years ended December 31, 2021, 2020 and 2019, respectively.
Reinsurance recoveries are recorded as a reduction of insurance losses and annuity benefits in our Statement of Earnings (Loss) and amounted to $351 million, $350 million and $362 million for the years ended December 31, 2021, 2020 and 2019, respectively. Reinsurance recoverables, net of allowances of $1,654 million and $1,510 million, are included in non-current All other assets in our Statement of Financial Position, and amounted to $2,651 million and $2,552 million at December 31, 2021 and 2020, respectively. The vast majority of our remaining net reinsurance recoverables are secured by assets held in a trust for which we are the beneficiary.
2021 FORM 10-K 65
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Risk based capital ratio requirement, authorized control level (less than) | 100 | SEC-NUM |
The combined statutory net income, excluding intercompany dividends and surplus note interest, and capital and surplus of the Company’s U.S. domiciled statutory insurance subsidiaries is as follows:
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| | Years Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Property and casualty companies | $ | 468.0 | | | $ | 445.5 | | | $ | 313.3 | |
| Life and health companies | 18.6 | | | 98.3 | | | 104.7 | |
| Total statutory net income (1) | $ | 486.6 | | | $ | 543.8 | | | $ | 418.0 | |
(1)There was no statutory net income for the year ended December 31, 2021 from the insurance entities included in the disposed Global Preneed business due to the August 2021 sale.
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| | December 31, |
| | 2021 | | 2020 |
| Property and casualty companies | $ | 1,529.1 | | | $ | 1,567.3 | |
| Life and health companies | 120.3 | | | 445.8 | |
| Total statutory capital and surplus (1) | $ | 1,649.4 | | | $ | 2,013.1 | |
(1)There was no statutory capital and surplus as of December 31, 2021 from the insurance entities included in the disposed Global Preneed business.
The Company also has non-insurance subsidiaries and foreign insurance subsidiaries that are not subject to SAP. The statutory net income and statutory capital and surplus amounts presented above do not include non-insurance subsidiaries and foreign insurance subsidiaries in accordance with SAP.Insurance enterprises are required by state insurance departments to adhere to minimum RBC requirements developed by the NAIC. All of the Company’s insurance subsidiaries exceed minimum RBC requirements.The payment of dividends to the Company by any of the Company’s regulated U.S domiciled insurance subsidiaries in excess of a certain amount (i.e., extraordinary dividends) must be approved by the subsidiary’s domiciliary jurisdiction department of insurance. Ordinary dividends, for which no regulatory approval is generally required, are limited to amounts determined by a formula, which varies by jurisdiction. The formula for the majority of the jurisdictions in which the Company’s subsidiaries are domiciled is based on the prior year’s statutory net income or 10% of the statutory surplus as of the end of the prior year. Some jurisdictions limit ordinary dividends to the greater of these two amounts, others limit them to the lesser of these two amounts and some jurisdictions exclude prior year realized capital gains from prior year net income in determining ordinary dividend capacity. Some jurisdictions have an additional stipulation that dividends may only be paid out of earned surplus. If insurance regulators determine that payment of an ordinary dividend or any other payments by the Company’s insurance subsidiaries to the Company (such as payments under a tax sharing agreement or payments for employee or other services) would be adverse to policyholders or creditors, the regulators may block such payments that would otherwise be permitted without prior approval. Based on the dividend restrictions under applicable laws and regulations, the maximum amount of dividends that the Company’s U.S domiciled insurance subsidiaries could pay to the Company in 2022 without regulatory approval is approximately $475.3 million. No assurance can be given that there will not be further regulatory actions restricting the ability of the Company’s insurance subsidiaries to pay dividends.State regulators require insurance companies to meet minimum capitalization standards designed to ensure that they can fulfill obligations to policyholders. Minimum capital requirements are based on the RBC Ratio, which is a ratio of a company’s total adjusted capital (“TAC”) to its RBC. TAC is equal to statutory surplus adjusted to exclude certain statutory liabilities. RBC is calculated by applying specified factors to various asset, premium, expense, liability, and reserve items.Generally, if a company’s RBC Ratio is below 100% (the “Authorized Control Level”), the insurance commissioner of the company’s jurisdiction of domicile is authorized to take control of the company, to protect the interests of policyholders. If the RBC Ratio is greater than 100% but less than 200% (the “Company Action Level”), the company must submit a RBC plan to the commissioner of the jurisdiction of domicile. Corrective actions may also be required if the RBC Ratio is greater than the Company Action Level but the company fails certain trend tests.As of December 31, 2021, the TAC of each of the Company’s insurance subsidiaries exceeded the Company Action Level and no trend tests that would require regulatory action were violated. As of December 31, 2021, the TAC of the Company’s property and casualty companies subject to RBC requirements was $1.53 billion. The corresponding Authorized Control Level was $326.1 million. As of December 31, 2021, the TAC of the Company’s life and health companies subject to RBC requirements was $126.7 million. The corresponding Authorized Control Level was $14.3 million.
F-69
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Lessee, Operating Lease, Liability, Payments, Due | 431 | SEC-NUM |
[Table of Contents](#i5ec3aabfaa534f9c8fa2d2a5b7677d19_7)
Supplemental balance sheet information related to leases was as follows:
| | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | |
| | | | December 31, |
| | | | 2021 | | 2020 |
| | | | | | |
| | | | (dollars in millions) |
| Operating leases: | | | | | |
| Operating lease right-of-use assets | | | $ | 383 | | | $ | 380 | |
| Accrued liabilities (Note 8) | | | $ | 92 | | | $ | 100 | |
| Long-term operating lease liabilities | | | 304 | | | 300 | |
| Total operating lease liabilities | | | $ | 396 | | | $ | 400 | |
| | | | | | |
| Finance leases: | | | | | |
| Property and equipment | | | $ | 26 | | | $ | 31 | |
| Less: accumulated depreciation | | | (15) | | | (13) | |
| Total property, net | | | $ | 11 | | | $ | 18 | |
| Short-term debt (Note 11) | | | $ | 3 | | | $ | 4 | |
| Long-term debt (Note 11) | | | 10 | | | 14 | |
| Total finance lease liabilities | | | $ | 13 | | | $ | 18 | |
| | | | | | |
| Weighted average remaining lease term: | | | | | |
| Operating leases | | | 6 years | | 6 years |
| Finance leases | | | 5 years | | 6 years |
| | | | | | |
| Weighted average discount rate: | | | | | |
| Operating leases | | | 3.00 | % | | 3.25 | % |
| Finance leases | | | 3.50 | % | | 3.50 | % |
Maturities of lease liabilities were as follows:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | OperatingLeases | | Finance Leases |
| | | | |
| | (in millions) |
| As of December 31, 2021 | | | |
| 2022 | $ | 103 | | | $ | 3 | |
| 2023 | 86 | | | 3 | |
| 2024 | 62 | | | 3 | |
| 2025 | 50 | | | 2 | |
| 2026 | 38 | | | 2 | |
| Thereafter | 92 | | | 2 | |
| Total lease payments | 431 | | | 15 | |
| Less: imputed interest | (35) | | | (2) | |
| Total | $ | 396 | | | $ | 13 | |
| | | | |
As of December 31, 2021, the Company has entered into additional operating leases, primarily for real estate, that have not yet commenced of approximately $15 million. These operating leases are anticipated to commence primarily in 2022 with lease terms of approximately 10 years.
125
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Due after one year through five years, cost or amortized cost, net of allowance | 443.2 | SEC-NUM |
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | December 31, 2021 |
| | Cost orAmortizedCost, Net of Allowance | | Fair Value |
| Due in one year or less | $ | 15.3 | | | $ | 15.1 | |
| Due after one year through five years | 443.2 | | | 436.6 | |
| Due after five years through ten years | 602.9 | | | 591.3 | |
| Due after ten years | 369.8 | | | 360.3 | |
| Total | 1,431.2 | | | 1,403.3 | |
| Asset-backed | 269.8 | | | 267.5 | |
| Commercial mortgage-backed | 280.1 | | | 276.8 | |
| Residential mortgage-backed | 105.7 | | | 104.0 | |
| Total | $ | 2,086.8 | | | $ | 2,051.6 | |
The Company has entered into commercial mortgage loans, collateralized by the underlying real estate, on properties located throughout the U.S. As of December 31, 2021, approximately 38% of the outstanding principal balance of commercial mortgage loans was concentrated in the states of California, Texas and Illinois. Although the Company has a diversified loan portfolio, an economic downturn could have an adverse impact on the ability of its debtors to repay their loans. The outstanding balance of commercial mortgage loans range in size from $0.1 million to $9.6 million as of December 31, 2021 and from $0.1 million to $9.9 million as of December 31, 2020. Credit quality indicators for commercial mortgage loans are loan-to-value and debt-service coverage ratios. The loan-to-value ratio compares the principal amount of the loan to the fair value of the underlying property collateralizing the loan, and is commonly expressed as a percentage. The debt-service coverage ratio compares a property’s net operating income to its debt-service payments and is commonly expressed as a ratio. The loan-to-value and debt-service coverage ratios are generally updated annually in the fourth quarter.The following table presents the amortized cost basis of commercial mortgage loans, excluding allowance for credit losses, by origination year for certain key credit quality indicators at December 31, 2021 and 2020, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| | Origination Year |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | | % of Total |
| Loan to value ratios (1): | | | | | | | | | | | | | | | |
| 70% and less | $ | 71.7 | | | $ | 5.6 | | | $ | — | | | $ | — | | | $ | 4.0 | | | $ | 99.8 | | | $ | 181.1 | | | 70.3 | % |
| 71% to 80% | 61.8 | | | — | | | — | | | 4.7 | | | — | | | 1.0 | | | 67.5 | | | 26.2 | % |
| 81% to 95% | — | | | — | | | — | | | — | | | — | | | 1.1 | | | 1.1 | | | 0.4 | % |
| Greater than 95% | — | | | — | | | — | | | — | | | 5.8 | | | 2.1 | | | 7.9 | | | 3.1 | % |
| Total | $ | 133.5 | | | $ | 5.6 | | | $ | — | | | $ | 4.7 | | | $ | 9.8 | | | $ | 104.0 | | | $ | 257.6 | | | 100.0 | % |
| | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| | Origination Year |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | | % of Total |
| Debt service coverage ratios (2): | | | | | | | | | | | | | | | |
| Greater than 2.0 | $ | 59.3 | | | $ | 5.6 | | | $ | — | | | $ | — | | | $ | — | | | $ | 70.5 | | | $ | 135.4 | | | 52.6 | % |
| 1.5 to 2.0 | 34.1 | | | — | | | — | | | 4.7 | | | 4.0 | | | 17.5 | | | 60.3 | | | 23.4 | % |
| 1.0 to 1.5 | 40.1 | | | — | | | — | | | — | | | — | | | 9.9 | | | 50.0 | | | 19.4 | % |
| Less than 1.0 | — | | | — | | | — | | | — | | | 5.8 | | | 6.1 | | | 11.9 | | | 4.6 | % |
| Total | $ | 133.5 | | | $ | 5.6 | | | $ | — | | | $ | 4.7 | | | $ | 9.8 | | | $ | 104.0 | | | $ | 257.6 | | | 100.0 | % |
F-35
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Obligation for future contribution to an equity affiliate | 94.4 | SEC-NUM |
[Table of Contents](#ic4907372b5a74ad699ec049e915a6266_10)Jazan Gas Project Company Jazan Gas Project Company (“JGPC”), a joint venture between Air Products and ACWA Holding, entered into a 20-year oxygen and nitrogen supply agreement in 2015 to supply Aramco’s oil refinery and power plant in Jazan, Saudi Arabia. We own 26% of the joint venture.In October 2021, the supply agreement between JGPC and Aramco was terminated, and JGPC sold its air separation units to Aramco. We initially sold these assets to JGPC and deferred revenue and profit equal to our ownership percentage in the joint venture. With the termination of the supply agreement and sale of the air separation units complete, we recognized the remaining deferred profit, net of other project finalization costs, in equity affiliates’ income in the first quarter of fiscal year 2022.As of 30 September 2021, our consolidated balance sheets included $94.4 reflected within "Payables and accrued liabilities" for our obligation to make equity contributions based on our proportionate share of advances received by the joint venture under an equity bridge loan. The joint venture utilized a portion of the proceeds from the sale of the air separation units to repay its outstanding debt, including the equity bridge loan. Accordingly, we recorded a noncash adjustment of $94.4 in the first quarter of fiscal year 2022 to reduce our obligation to zero with a corresponding reduction to the carrying value of our investment in the joint venture.
7. GOODWILLChanges to the carrying amount of consolidated goodwill by segment for the three months ended 31 December 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Americas | | Asia | | Europe | | Middle East and India | | Corporateand other | | Total |
| Goodwill, net at 30 September 2021 | $151.0 | | | $184.3 | | | $533.5 | | | $8.0 | | | $34.7 | | | $911.5 | |
| | | | | | | | | | | | |
| Acquisitions(A) | — | | | — | | | 17.0 | | | — | | | — | | | 17.0 | |
| Currency translation and other | (2.3) | | | 0.8 | | | (3.7) | | | — | | | — | | | (5.2) | |
| Goodwill, net at 31 December 2021 | $148.7 | | | $185.1 | | | $546.8 | | | $8.0 | | | $34.7 | | | $923.3 | |
(A)We recognized goodwill in the first quarter of fiscal year 2022 for expected cost synergies associated with a small business combination in Europe. The goodwill, which we do not expect to be deductible for tax purposes, is based on a preliminary purchase price allocation as of 31 December 2021.
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| | | 31 December | | 30 September |
| | | 2021 | | 2021 |
| Goodwill, gross | | $1,234.6 | | | $1,239.2 | |
| Accumulated impairment losses(A) | | (311.3) | | | (327.7) | |
| Goodwill, net | | $923.3 | | | $911.5 | |
(A)Accumulated impairment losses include the impacts of currency translation. These losses are attributable to our Latin America reporting unit ("LASA") within the Americas segment.We review goodwill for impairment annually in the fourth quarter of the fiscal year and whenever events or changes in circumstances indicate that the carrying value of goodwill might not be recoverable.
14
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Additional foreign tax withholding amount | 3.4 | SEC-NUM |
[Table of Contents](#i3d0ebbc4e2a2420f98ed7e6fe698936a_7) HASBRO, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
others that expire beginning in 2022, and other net deferred tax assets. The decrease in the valuation allowance is primarily due to the realization of certain net operating losses resulting from tax planning during the year. At December 26, 2021 and December 27, 2020, the Company’s net deferred income taxes are recorded in the consolidated balance sheets as follows:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| (In millions) | 2021 | | 2020 |
| Other assets | 132.1 | | | 137.6 | |
| Other liabilities | (147.9) | | | (154.8) | |
| Net deferred income taxes | $ | (15.8) | | | (17.2) | |
We previously considered the earnings in our non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. However, the Tax Cuts and Jobs Act (the "Tax Act") enacted on December 22, 2017 gave the Company more flexibility to manage cash globally. The Company still has significant cash needs outside the United States and continues to consistently monitor and analyze its global working capital and cash requirements. However, we intend to repatriate substantially all of our accumulated foreign earnings when appropriate. As of 2021, we have recorded $3.4 million of a foreign withholding and U.S. state income tax liability. The Company has not finalized the timing of any actual cash distributions or the specific amounts and therefore we could still be subject to some additional foreign withholding taxes and U.S. state taxes. We will record these additional tax effects, if any, in the period that we complete our analysis and are able to make a reasonable estimate.A reconciliation of unrecognized tax benefits, excluding potential interest and penalties, for the fiscal years ended December 26, 2021, December 27, 2020, and December 29, 2019 is as follows:
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| (In millions) | 2021 | | 2020 | | 2019 |
| Balance at beginning of year | $ | 67.8 | | | 36.7 | | | 46.1 | |
| Gross increases in prior period tax positions | 0.6 | | | 12.7 | | | 2.0 | |
| Gross increase from acquisition | — | | | 13.7 | | | — | |
| Gross decreases in prior period tax positions | (12.0) | | | — | | | — | |
| Gross increases in current period tax positions | 4.6 | | | 11.7 | | | 4.2 | |
| Decreases related to settlements with tax authorities | (2.7) | | | — | | | (12.0) | |
| Decreases from the expiration of statute of limitations | (7.7) | | | (7.0) | | | (3.6) | |
| Balance at end of year | $ | 50.6 | | | 67.8 | | | 36.7 | |
Unrecognized tax benefits as of December 26, 2021, December 27, 2020 and December 29, 2019, were $50.6 million, $67.8 million, and $36.7 million, respectively, and are recorded within other liabilities, prepaid expenses and other current assets, and other assets in the Company's consolidated balance sheets. If recognized, these tax benefits would have affected our income tax provision for fiscal years 2021, 2020, and 2019, by approximately $46.0 million, $57.0 million, and $36.0 million, respectively.During 2021, 2020, and 2019, the Company recognized $2.6 million, $3.7 million, and $1.8 million, respectively, of potential interest and penalties, which are included as a component of income taxes in the accompanying consolidated statements of operations. At December 26, 2021, December 27, 2020, and December 29, 2019, the Company had accrued potential interest and penalties of $7.3 million, $11.6 million, and $5.5 million, respectively.The Company and its subsidiaries file income tax returns in the United States and various state and international jurisdictions. In the normal course of business, the Company is regularly audited by U.S. federal, state and local and international tax authorities in various tax jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years before 2012. With few exceptions, the Company is no longer subject to U.S. state or local and non-U.S. income tax examinations by tax authorities in its major jurisdictions for years before 2014. The Company is currently under income tax examination by the Internal Revenue Service and in several U.S. state and local and non-U.S. jurisdictions.107
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Deferred Compensation Arrangement with Individual, Requisite Service Period | 2.7 | SEC-NUM |
19 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2022 and 2021performance commitments which the Company or its businesses expect to fulfill within the normal course of business. The expiration dates of these guarantees vary from less than one year to no more than 16 years.The following table summarizes the Parent Company’s contingent contractual obligations as of September 30, 2022. Amounts presented in the following table represent the Parent Company’s current undiscounted exposure to guarantees and the range of maximum undiscounted potential exposure. The maximum exposure is not reduced by the amounts, if any, that could be recovered under the recourse or collateralization provisions in the guarantees.
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| Contingent Contractual Obligations | | Amount (in millions) | | Number of Agreements | | Maximum Exposure Range for Each Agreement (in millions) |
| Guarantees and commitments | | $ | 2,282 | | | 81 | | | $0 — 400 |
| Letters of credit under the unsecured credit facilities | | 156 | | | 44 | | | $0 — 36 |
| Letters of credit under the revolving credit facility | | 26 | | | 12 | | | $0 — 15 |
| Surety bonds | | 2 | | | 2 | | | $1 |
| | | | | | | |
| | | | | | | |
| Total | | $ | 2,466 | | | 139 | | | |
During the nine months ended September 30, 2022, the Company paid letter of credit fees ranging from 1% to 3% per annum on the outstanding amounts of letters of credit.ContingenciesEnvironmental — The Company periodically reviews its obligations as they relate to compliance with environmental laws, including site restoration and remediation. For the periods ended September 30, 2022 and December 31, 2021, the Company recognized liabilities of $10 million and $4 million, respectively, for projected environmental remediation costs. Due to the uncertainties associated with environmental assessment and remediation activities, future costs of compliance or remediation could be higher or lower than the amount currently accrued. Moreover, where no liability has been recognized, it is reasonably possible that the Company may be required to incur remediation costs or make expenditures in amounts that could be material but could not be estimated as of September 30, 2022. In aggregate, the Company estimates the range of potential losses related to environmental matters, where estimable, to be up to $12 million. The amounts considered reasonably possible do not include amounts accrued as discussed above. Litigation — The Company is involved in certain claims, suits and legal proceedings in the normal course of business. The Company accrues for litigation and claims when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company has recognized aggregate liabilities for all claims of approximately $23 million as of September 30, 2022 and December 31, 2021. These amounts are reported on the Condensed Consolidated Balance Sheets within Accrued and other liabilities and Other noncurrent liabilities. A significant portion of these accrued liabilities relate to regulatory matters and commercial disputes in international jurisdictions. There can be no assurance that these accrued liabilities will be adequate to cover all existing and future claims or that we will have the liquidity to pay such claims as they arise.Where no accrued liability has been recognized, it is reasonably possible that some matters could be decided unfavorably to the Company and could require the Company to pay damages or make expenditures in amounts that could be material but could not be estimated as of September 30, 2022. The material contingencies where a loss is reasonably possible primarily include disputes with offtakers, suppliers and EPC contractors; alleged breaches of contract; alleged violation of laws and regulations; income tax and non-income tax matters with tax authorities; and regulatory matters. In aggregate, the Company estimates the range of potential losses, where estimable, related to these reasonably possible material contingencies to be between $239 million and $704 million. The amounts considered reasonably possible do not include the amounts accrued, as discussed above. These material contingencies do not include income tax-related contingencies which are considered part of our uncertain tax positions.Tietê GSF Settlement — In accordance with the regulation published by ANEEL in December 2020 regarding the incorrect application of the GSF mechanism between 2013 and 2018, Tietê will be compensated in the form of a concession extension period, initially determined to be 2.7 years, which will be amortized from the date of the agreement until the end of the new concession period. As of December 31, 2020, the compensation to be received from the concession extension was estimated to have a fair value of $184 million, based on a preliminary time-value equivalent calculation made by the CCEE. In March 2021, the CCEE’s final calculation of fair value was $190 million and the Company recognized an additional reversal of Non-Regulated Cost of Sales of $6 million. In August 2021, ANEEL published Resolution 2.919/2021, establishing an extension for the end of the concession originally granted to AES Brasil’s hydroelectric plants, from 2029 to 2032. On April 14, 2022, the amended term was finalized and agreed upon by ANEEL and AES.
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Preferred stock, authorized (in shares) | 10,000,000 | SEC-NUM |
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| AT&T INC. |
| CONSOLIDATED BALANCE SHEETS |
| Dollars in millions except per share amounts |
| (Unaudited) | | | |
| | September 30, | | December 31, |
| | 2022 | | 2021 |
| Assets | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 2,423 | | | $ | 19,223 | |
| Accounts receivable – net of related allowances for credit loss of $646 and $658 | 11,384 | | | 12,313 | |
| Inventories | 3,935 | | | 3,325 | |
| Prepaid and other current assets | 14,553 | | | 16,131 | |
| Assets from discontinued operations | — | | | 119,776 | |
| Total current assets | 32,295 | | | 170,768 | |
| | | | |
| Property, plant and equipment | 327,903 | | | 324,613 | |
| Less: accumulated depreciation and amortization | (200,858) | | | (202,964) | |
| Property, Plant and Equipment – Net | 127,045 | | | 121,649 | |
| Goodwill | 92,725 | | | 92,740 | |
| Licenses – Net | 123,856 | | | 113,830 | |
| | | | |
| | | | |
| Other Intangible Assets – Net | 5,362 | | | 5,391 | |
| Investments in and Advances to Equity Affiliates | 3,964 | | | 6,168 | |
| Operating Lease Right-Of-Use Assets | 21,782 | | | 21,824 | |
| | | | |
| Other Assets | 19,434 | | | 19,252 | |
| Total Assets | $ | 426,463 | | | $ | 551,622 | |
| Liabilities and Stockholders’ Equity | | | |
| Current Liabilities | | | |
| Debt maturing within one year | $ | 9,626 | | | $ | 24,620 | |
| Note payable to DIRECTV | 271 | | | 1,245 | |
| Accounts payable and accrued liabilities | 36,642 | | | 39,095 | |
| Advanced billings and customer deposits | 3,705 | | | 3,966 | |
| Dividends payable | 2,013 | | | 3,749 | |
| Liabilities from discontinued operations | — | | | 33,555 | |
| Total current liabilities | 52,257 | | | 106,230 | |
| Long-Term Debt | 123,854 | | | 151,011 | |
| Deferred Credits and Other Noncurrent Liabilities | | | |
| Deferred income taxes | 56,055 | | | 53,767 | |
| Postemployment benefit obligation | 6,152 | | | 12,560 | |
| Operating lease liabilities | 18,741 | | | 18,956 | |
| Other noncurrent liabilities | 29,426 | | | 25,243 | |
| | | | |
| Total deferred credits and other noncurrent liabilities | 110,374 | | | 110,526 | |
| Stockholders’ Equity | | | |
| Preferred stock ($1 par value, 10,000,000 authorized at September 30, 2022 and December 31, 2021): | | | |
| Series A (48,000 issued and outstanding at September 30, 2022 and December 31, 2021) | — | | | — | |
| Series B (20,000 issued and outstanding at September 30, 2022 and December 31, 2021) | — | | | — | |
| Series C (70,000 issued and outstanding at September 30, 2022 and December 31, 2021) | — | | | — | |
| Common stock ($1 par value, 14,000,000,000 authorized at September 30, 2022 andDecember 31, 2021: issued 7,620,748,598 at September 30, 2022 and December 31, 2021) | 7,621 | | | 7,621 | |
| Additional paid-in capital | 122,933 | | | 130,112 | |
| Retained earnings | 6,127 | | | 42,350 | |
| Treasury stock (494,560,271 at September 30, 2022 and 479,684,705 at December 31, 2021, at cost) | (17,148) | | | (17,280) | |
| Accumulated other comprehensive income | 2,873 | | | 3,529 | |
| Noncontrolling interest | 17,572 | | | 17,523 | |
| Total stockholders’ equity | 139,978 | | | 183,855 | |
| Total Liabilities and Stockholders’ Equity | $ | 426,463 | | | $ | 551,622 | |
See Notes to Consolidated Financial Statements.5
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Title of 12(b) Security | Common Stock, Par Value $0.01 | SEC-NUM |
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-Q☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2022OR☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from \_\_\_\_\_ to \_\_\_\_\_Commission File Number 001-38769 Cigna Corporation (Exact name of registrant as specified in its charter)
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| Delaware | 82-4991898 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
900 Cottage Grove Road Bloomfield, Connecticut 06002 (Address of principal executive offices) (Zip Code)(860) 226-6000(Registrant's telephone number, including area code)
Not Applicable(Former name, former address and former fiscal year, if changed since last report)Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, Par Value $0.01 | CI | New York Stock Exchange, Inc. |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ NoIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | ☒ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ NoAs of October 31, 2022, 305,739,004 shares of the issuer's common stock were outstanding.
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Shares granted in period under equity incentive plan | 189,499 | SEC-NUM |
[Table of Contents](#i36695dc5143241f795c32e47bf5f4b3d_7)CBRE GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)In addition, as of December 31, 2021, we had issued numerous non-recourse carveout, completion and budget guarantees relating to development projects for the benefit of third parties. These guarantees are commonplace in our industry and are made by us in the ordinary course of our Real Estate Investments business. Non-recourse carveout guarantees generally require that our project-entity borrower not commit specified improper acts, with us potentially liable for all or a portion of such entity’s indebtedness or other damages suffered by the lender if those acts occur. Completion and budget guarantees generally require us to complete construction of the relevant project within a specified timeframe and/or within a specified budget, with us potentially being liable for costs to complete in excess of such timeframe or budget. While there can be no assurance, we do not expect to incur any material losses under these guarantees.An important part of the strategy for our Real Estate Investments business involves investing our capital in certain real estate investments with our clients. These co-investments generally total up to 2.0% of the equity in a particular fund. As of December 31, 2021, we had aggregate commitments of $127.1 million to fund these future co-investments. Additionally, an important part of our Real Estate Investments business strategy is to invest in unconsolidated real estate subsidiaries as a principal (in most cases co-investing with our clients). As of December 31, 2021, we had committed to fund $40.7 million of additional capital to these unconsolidated subsidiaries and $141.6 million to consolidated projects.14.Employee Benefit PlansStock Incentive Plans2012 Equity Incentive Plan and 2017 Equity Incentive PlanOur 2012 Equity Incentive Plan (the 2012 Plan) and 2017 Equity Incentive Plan (the 2017 Plan) were adopted by our board of directors and approved by our stockholders on May 8, 2012 and May 19, 2017, respectively. Both the 2012 Plan and 2017 Plan authorized the grant of stock-based awards to our employees, directors and independent contractors. Our 2012 Plan was terminated in May 2017 in connection with the adoption of our 2017 Plan. Our 2017 Plan was terminated in May 2019 in connection with the adoption of our 2019 Equity Incentive Plan (the 2019 Plan), which is described below. At termination of the 2012 Plan, no unissued shares from the 2012 Plan were allocated to the 2017 Plan for potential future issuance. At termination of the 2017 Plan, no unissued shares from the 2017 Plan were allocated to the 2019 Plan for potential future issuance. Since our 2012 Plan and 2017 Plan have been terminated, no new awards may be granted under them. As of December 31, 2021, assuming the maximum number of shares under our performance-based awards will later be issued, 30,148 outstanding restricted stock unit (RSU) awards to acquire shares of our Class A common stock granted under the 2012 Plan remain outstanding according to their terms, and we will continue to issue shares to the extent required under the terms of such outstanding awards. Shares underlying awards that expire, terminate or lapse under the 2012 Plan will not become available for grant under the 2017 Plan or the 2019 Plan. As of December 31, 2021, 3,591,138 outstanding RSU awards to acquire shares of our Class A common stock granted under the 2017 Plan remain outstanding according to their terms, and we will continue to issue shares to the extent required under the terms of such outstanding awards (noting that any shares granted above target will get deducted from the 2019 Plan reserve as noted below). Shares underlying awards outstanding under the 2017 Plan at termination that are subsequently canceled, forfeited or terminated without issuance to the holder thereof will be available for grant under the 2019 Plan.2019 Equity Incentive PlanOur 2019 Plan was adopted by our board of directors on March 1, 2019 and approved by our stockholders on May 17, 2019. The 2019 Plan authorizes the grant of stock-based awards to employees, directors and independent contractors. Unless terminated earlier, the 2019 Plan will terminate on March 1, 2029. A total of 9,900,000 shares of our Class A common stock are reserved for issuance under the 2019 Plan, less 189,499 shares granted under the 2017 Plan between March 1, 2019, the date our board of directors approved the plan, and May 17, 2019, the date our stockholders approved the 2019 Plan. Additionally, as mentioned above, shares underlying awards outstanding under the 2017 Plan at termination that are subsequently canceled, forfeited or terminated without issuance to the holder thereof will be available for reissuance under the 2019 Plan. As of December 31, 2021, 748,003 shares were cancelled and 564,503 shares were withheld for payment of taxes under the 2017 Plan and added to the authorized pool for the 2019 Plan, bringing the total authorized amount under the 2019 Plan to 11,023,007 shares of our Class A common stock.100
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Decrease due to effect from foreign currency translation | 1 | SEC-NUM |
Tax Contingencies
The total amount of gross unrecognized tax benefits at December 31, 2021 is approximately $42 million, of this total, approximately $41 million represents the amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate. It is reasonably possible that certain amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date of the Company’s consolidated financial statements. Expiration of statutes of limitation in various jurisdictions during the next twelve months could include unrecognized tax benefits of approximately $1 million. Of this approximately $1 million represents the amount of unrecognized tax benefits that, if recognized would affect the effective income tax rate.
The total amount of accrued interest and penalties were $8 million and $4 million at December 31, 2021 and 2020, respectively. The Company has consistently classified interest and penalties recognized in its consolidated financial statements as income taxes based on the accounting policy election of the Company. During the years ended December 31, 2021 and 2020, the Company recognized income tax expense of $2 million each year, related to interest and penalties. During the year ended December 31, 2019, the Company recognized income tax benefit of $2 million, related to interest and penalties.
The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The significant jurisdictions include the U.S., Germany, Sweden and Switzerland. The Company has substantially concluded all U.S. federal income tax matters for years through 2011. The Company is currently under audit for the tax years 2012, 2013, 2015 and 2016. For further information on the Internal Revenue Service (“IRS”) Audit, see Note 22, Commitments and Contingencies. The tax years 2014 through 2020 are subject to future potential tax audit adjustments. The Company has concluded audits in Germany through the tax year 2013 and is currently under audit for the years 2014 through 2017. The tax years 2018 through 2020 are subject to future potential audit adjustments in Germany. The taxable years that remain open for Sweden are 2013 through 2020. For information related to Sweden, see Note 22, Commitments and Contingencies. The taxable years that remain open for Switzerland are 2011 through 2020.
The activity recorded for unrecognized tax benefits were as follows:
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| (in millions) | | 2021 | | 2020 | | 2019 |
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| Unrecognized tax benefits at beginning of period | | $ | 27 | | | $ | 24 | | | $ | 28 | |
| Gross change for prior-period positions | | 6 | | | 1 | | | — | |
| Gross change for current year positions | | 2 | | | 1 | | | — | |
| Decrease due to settlements and payments | | — | | | — | | | (4) | |
| Decrease due to statute expirations | | — | | | — | | | — | |
| Increase due to effect of foreign currency translation | | — | | | 1 | | | — | |
| Decrease due to effect from foreign currency translation | | (1) | | | — | | | — | |
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| Unrecognized tax benefits at end of period | | $ | 34 | | | $ | 27 | | | $ | 24 | |
U.S. Federal Legislative Changes
Undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested amounted to $1,771 million at December 31, 2021 and $1,807 million at December 31, 2020. The Tax Cuts and Jobs Act (the "act" or "U.S. tax reform") imposed U.S. tax on all post-1986 foreign unrepatriated earnings accumulated through December 31, 2017. Unrepatriated earnings generated after December 31, 2017, are now subject to tax in the current year. All undistributed earnings are still subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply. It is not practicable to calculate the unrecognized deferred tax liability on undistributed earnings.
For the Global Intangible Low Taxed Income (GILTI) provision of the Act, the Company has made the policy election to record any liability associated with GILTI in the period in which it is incurred.
In March 2020, in response to the impact of the COVID-19 pandemic in the U.S. and across the globe, the U.S. Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act. In December 2020, the U.S. Congress passed a second relief package, Consolidated Appropriations Act, 2021. The enactment period impacts to the Company were immaterial to income tax expense.
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Equity investment, ownership percentage | 18 | SEC-NUM |
[Table of](#i7d20a63dbc7f4057897188cf4f4b9871_7) [Contents](#i7d20a63dbc7f4057897188cf4f4b9871_7)Supplemental Cash Flow InformationThe following table shows supplemental cash flow information (in millions):
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| | Three Months EndedJune 30, | | Six Months EndedJune 30, | | Twelve Months EndedJune 30, |
| | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 |
| SUPPLEMENTAL CASH FLOW INFORMATION: | | | | | | | | | | | |
| Cash paid for interest on debt | $ | 179 | | | $ | 349 | | | $ | 455 | | | $ | 628 | | | $ | 942 | | | $ | 1,271 | |
| Cash paid for operating leases | 1,577 | | | 2,088 | | | 3,217 | | | 4,455 | | | 5,577 | | | 7,960 | |
| Cash paid for interest on finance leases | 129 | | | 95 | | | 286 | | | 202 | | | 569 | | | 437 | |
| Cash paid for interest on financing obligations | 35 | | | 55 | | | 68 | | | 113 | | | 127 | | | 198 | |
| Cash paid for income taxes, net of refunds | 1,803 | | | 3,145 | | | 2,604 | | | 3,598 | | | 3,526 | | | 4,682 | |
| Assets acquired under operating leases | 5,578 | | | 5,101 | | | 9,114 | | | 7,276 | | | 19,576 | | | 23,531 | |
| Property and equipment acquired under finance leases, net of remeasurements and modifications | 1,642 | | | 61 | | | 3,709 | | | 227 | | | 9,976 | | | 3,579 | |
| Property and equipment recognized during the construction period of build-to-suit lease arrangements | 1,193 | | | 986 | | | 2,080 | | | 2,351 | | | 3,486 | | | 6,117 | |
| Property and equipment derecognized after the construction period of build-to-suit lease arrangements, with the associated leases recognized as operating | 99 | | | 1,079 | | | 99 | | | 1,112 | | | 99 | | | 1,243 | |
Earnings Per ShareBasic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we have a net loss, stock awards are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect.The following table shows the calculation of diluted shares (in millions):
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| | Three Months EndedJune 30, | | Six Months EndedJune 30, |
| | 2021 | | 2022 | | 2021 | | 2022 |
| Shares used in computation of basic earnings per share | 10,103 | | | 10,175 | | | 10,089 | | | 10,173 | |
| Total dilutive effect of outstanding stock awards | 183 | | | — | | | 187 | | | — | |
| Shares used in computation of diluted earnings per share | 10,286 | | | 10,175 | | | 10,276 | | | 10,173 | |
Other Income (Expense), NetOther income (expense), net, is as follows (in millions):
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| | Three Months EndedJune 30, | | Six Months EndedJune 30, |
| | 2021 | | 2022 | | 2021 | | 2022 |
| Marketable equity securities valuation gains (losses) | $ | 157 | | | $ | (4,322) | | | $ | 81 | | | $ | (12,567) | |
| Equity warrant valuation gains (losses) | 939 | | | (1,124) | | | 1,244 | | | (1,436) | |
| Upward adjustments relating to equity investments in private companies | 31 | | | 58 | | | 1,506 | | | 65 | |
| Foreign currency gains (losses) | 110 | | | (117) | | | 79 | | | (103) | |
| Other, net | 24 | | | (40) | | | 48 | | | (74) | |
| Total other income (expense), net | 1,261 | | | (5,545) | | | 2,958 | | | (14,115) | |
Included in other income (expense), net is a marketable equity securities valuation loss of $3.9 billion in Q2 2022, and $11.5 billion for the six months ended June 30, 2022, from our equity investment in Rivian Automotive, Inc. (“Rivian”). Our investment in Rivian’s preferred stock was accounted for at cost, with adjustments for observable changes in prices or impairments, prior to Rivian’s initial public offering in November 2021, which resulted in the conversion of our preferred stock to Class A common stock. As of June 30, 2022, we held 158 million shares of Rivian’s Class A common stock, representing an approximate 18% ownership interest, and an approximate 16% voting interest. We determined that we have the ability to exercise significant influence over Rivian through our equity investment, our commercial arrangement for the purchase of 8
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Vested and distributed during the period (usd per share) | 20.20 | SEC-NUM |
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| | For the nine months ended September 30, |
| $ in millions | 2022 | | 2021 |
| Americas | 3,553.2 | | 3,842.8 |
| Asia Pacific | 218.7 | | 260.8 |
| EMEA(1) | 833.6 | | 1027.5 |
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| Total operating revenues | 4,605.5 | | 5,131.1 |
\_\_\_\_\_\_\_\_\_\_(1) Includes UK revenue of $124.3 million and $157.7 million for the three month periods ended September 30, 2022 and 2021 and $404.7 million and $486.0 million for the nine month periods ended September 30, 2022 and 2021.
Money Market Fee Waivers
The company is currently providing voluntary yield support waivers of its revenues on certain money market funds to ensure that they maintain a minimum level of daily net investment income. During the three and nine months ended September 30, 2022, yield support waivers resulted in a reduction of total gross operating revenues of $1.4 million and $33.7 million (three and nine months ended September 30, 2021: $40.8 million and $111.2 million). A significant portion of our money market AUM arises from the institutional distribution channel, where relationships with our distribution partners allow us to share the waiver impact. Gross waivers are partially offset by a reduction of payments to these intermediaries, which are included in third-party distribution, service and advisory expenses.
8. COMMON SHARE-BASED COMPENSATION
The company recognized total expenses of $83.1 million and $106.0 million related to equity-settled common share-based payment transactions in the nine months ended September 30, 2022 and 2021, respectively.
Movements on common share awards during the periods ended September 30, are detailed below:
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| | For the nine months ended September 30, 2022 | | For the nine months ended September 30, 2021 |
| millions of common shares, except fair values | Time- Vested | | Performance- Vested | | Weighted Average Grant Date Fair Value ($) | | Time- Vested | | Performance- Vested | | |
| Unvested at the beginning of period | 13.5 | | | 1.9 | | | 18.88 | | | 18.1 | | | 1.6 | | | |
| Granted during the period | 3.6 | | | 1.0 | | | 21.23 | | | 3.4 | | | 0.6 | | | |
| Forfeited during the period | (0.3) | | | (0.1) | | | 19.33 | | | (0.4) | | | — | | | |
| Vested and distributed during the period | (6.2) | | | (0.4) | | | 20.20 | | | (7.3) | | | (0.3) | | | |
| Unvested at the end of the period | 10.6 | | | 2.4 | | | 19.02 | | | 13.8 | | | 1.9 | | | |
The total fair value of common shares that vested during the nine months ended September 30, 2022 was $131.7 million (nine months ended September 30, 2021: $182.9 million). The weighted average grant date fair value of the common share awards that were granted during the nine months ended September 30, 2022 was $21.23 (nine months ended September 30, 2021: $22.61).
At September 30, 2022, there was $168.6 million of total unrecognized compensation cost related to non-vested common share awards; that cost is expected to be recognized over a weighted average period of 2.4 years.
9. RETIREMENT BENEFIT PLANS
On June 28, 2022, the company entered into a pension buy-in agreement for the UK defined benefit pension plan with a third party insurer. The agreement does not relieve the company of the primary responsibility to fund the pension obligations. The company transferred plan assets of £88.8 million ($107.4 million) in exchange for an insurance asset, which was recorded at fair value. The transaction did not have a material impact on the company’s results of operations or financial condition for the nine months ended September 30, 2022.
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Estimated ownership pending restructuring process (percent) | 10 | SEC-NUM |
Notes to the Consolidated Financial StatementsOther Investments
This category includes various investments that are accounted for at fair value or under the equity method, depending on our ownership interest and the level of influence conveyed by our investment.
Virgin Atlantic. Virgin Atlantic has completed an out-of-court restructuring, during which we provided strategic and operational assistance and which we continue to provide. The carrying value of our investment in Virgin Atlantic remains zero as of September 30, 2022. We maintained our 49% equity interest and continue to track our share of Virgin Atlantic's losses under the equity method of accounting, which are only recorded to the extent we make additional investments in Virgin Atlantic.
LATAM. LATAM Airlines Group S.A. ("LATAM") is undergoing voluntary proceedings to reorganize under Chapter 11 of the United States bankruptcy code, and the carrying value of our investment in LATAM remains zero as of September 30, 2022. In order to support our relationship with LATAM, we are providing strategic and operational assistance through the bankruptcy process. After LATAM's refinancing in the June 2022 quarter, we have a $71 million noncurrent receivable outstanding associated with LATAM's debtor-in-possession financing. LATAM's plan of reorganization has been confirmed by the Bankruptcy Court and is expected to take effect before the end of 2022. As our pre-bankruptcy equity ownership of approximately 20% will be substantially diluted to a de minimis level, we expect to participate in certain of the offerings contemplated under the reorganization plan at an additional investment level commensurate with an equity stake of approximately 10% in the reorganized LATAM.
In the September 2022 quarter, final regulatory approval was granted for our trans-American joint venture agreement with LATAM. This agreement will combine our highly complementary route networks between North and South America, with the goal of providing customers with a seamless travel experience and industry-leading connectivity. Approval was granted for a 10-year period with a subsequent reassessment and extension process. This agreement supports our strategic partnership with LATAM and the value of our $1.2 billion alliance-related indefinite-lived intangible asset. We believe the LATAM joint venture agreement will generate growth opportunities, building upon Delta's and LATAM's global footprint and joint ventures.
We have classified our intangible asset as indefinite-lived as we expect to indefinitely receive the economic benefits from the relationship, similar to other joint venture arrangements between U.S. and foreign carriers that have been cleared by competition authorities in relevant foreign jurisdictions and granted antitrust immunity from the U.S. Department of Transportation ("DOT"). Antitrust immunity grants are generally subject to reporting requirements and periodic reassessment processes administered by the DOT. We have determined that there are currently no material legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of our LATAM alliance-related intangible asset.
Delta Air Lines, Inc. September 2022 Form 10-Q 12
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Goodwill, expected to be tax deductible | 261 | SEC-NUM |
[Table of Contents](#ic0c31f79a13347b4b84027caf6ad2450_7)KDG Acquisition On January 3, 2022, we, through our wholly-owned subsidiary, Motion Industries, Inc., acquired all of the equity interests in KDG for a purchase price of approximately $1.3 billion in cash. KDG, which is headquartered in Bloomfield, Connecticut, is a power transmission, automation and fluid power industrial distributor and solutions provider with operations throughout the United States, providing electro-mechanical products, bearings, power transmission, motion control and electrical and fluid power components to MRO and OEM customers. KDG has approximately 1,700 employees with approximately 220 locations across the United States and Puerto Rico. As of January 3, 2022, KDG had estimated annual revenues of approximately $1 billion.The net cash consideration transferred of approximately $1.3 billion is net of the estimated cash acquired of approximately $30 million. The KDG acquisition was financed using a combination of borrowings under the existing unsecured revolving credit facility, proceeds of $200 million from the selling of additional receivables under our amended A/R Sales Agreement and $109 million of cash. The following table summarizes the preliminary, estimated fair values of the assets acquired and liabilities assumed at the acquisition date as well as adjustments made to the acquisition accounting during the nine months ended September 30, 2022 (referred to as the "measurement period adjustments"). The measurement period adjustments primarily resulted from revisions to the valuation of certain tangible and intangible assets. The fair value of the acquired identifiable intangible assets is provisional pending completion of the final valuations for these assets. We are in the process of analyzing the estimated values of all assets acquired and liabilities assumed as of the acquisition date, including, among other things, obtaining valuations of certain tangible and intangible assets, as well as the fair value of certain contracts and the determination of certain tax balances. Additional adjustments may be made to the acquisition accounting during the measurement period primarily related to intangible asset revaluations, tax accounting and leases.
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| | | As of January 3, 2022 |
| (in thousands) | | Initial Balance | Measurement Period Adjustments | As Adjusted |
| Trade accounts receivable | | $ | 156,000 | | $ | — | | $ | 156,000 | |
| Merchandise inventories | | 166,000 | | (1,000) | | 165,000 | |
| Prepaid expenses and other current assets | | 39,000 | | (2,000) | | 37,000 | |
| Property, plant and equipment | | 26,000 | | (2,000) | | 24,000 | |
| Operating lease assets | | 49,000 | | (5,000) | | 44,000 | |
| Other assets | | 1,000 | | — | | 1,000 | |
| Other intangible assets | | 574,000 | | (6,000) | | 568,000 | |
| Goodwill | | 592,000 | | 4,000 | | 596,000 | |
| Total assets acquired | | 1,603,000 | | (12,000) | | 1,591,000 | |
| Trade accounts payable | | 85,000 | | — | | 85,000 | |
| Other current liabilities | | 32,000 | | — | | 32,000 | |
| Operating lease liabilities | | 17,000 | | (1,000) | | 16,000 | |
| Deferred tax liabilities | | 121,000 | | (10,000) | | 111,000 | |
| Other long-term liabilities | | 39,000 | | (4,000) | | 35,000 | |
| Total liabilities assumed | | 294,000 | | (15,000) | | 279,000 | |
| Net assets acquired | | $ | 1,309,000 | | $ | 3,000 | | $ | 1,312,000 | |
The other intangible assets acquired included $527 million of customer relationship intangibles and a $41 million favorable trade name licensing agreement, with amortization lives of 17 and 1.5 years, respectively. The other intangible assets have a total weighted amortization life of 16 years.The goodwill was assigned to the Industrial segment and is attributable primarily to expected synergies and the assembled workforce. Approximately $261 million of the estimated goodwill recognized as part of the KDG acquisition is expected to be tax deductible. For the nine months ended September 30, 2022, approximately $5 million of inventory amortization step-up cost related to this acquisition was included in cost of goods sold. Further, $49 million of transaction and other one-time 13
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Performance adjustment, weighted-average grant-date fair value (in dollars per share) | 125.57 | SEC-NUM |
that is measured against a three-year cumulative target established by the Compensation Committee at the award date and is not tied to the performance of peer companies. Restricted Stock UnitsA summary of the Company’s outstanding RSUs is presented below:
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| | Restricted Stock Units | | Weighted-AverageGrant-DateFair Value |
| Restricted stock units outstanding at December 31, 2020 | 723,726 | | | $ | 95.67 | |
| Grants (1) | 252,613 | | | 143.20 | |
| Vests (2) | (330,053) | | | 96.70 | |
| Forfeitures and adjustments | (18,852) | | | 110.38 | |
| Restricted stock units outstanding at December 31, 2021 | 627,434 | | | $ | 113.84 | |
| Restricted stock units vested, but deferred at December 31, 2021 | 75,270 | | | $ | 80.02 | |
(1)The weighted average grant date fair value for RSUs granted in 2020 and 2019 was $96.33 and $102.86, respectively. (2)The total fair value of RSUs vested was $47.4 million, $32.3 million and $38.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. The following table shows a summary of RSU activity during the years ended December 31, 2021, 2020 and 2019:
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| RSU compensation expense | $ | 32.8 | | | $ | 29.4 | | | $ | 29.5 | |
| Income tax benefit | (5.9) | | | (5.2) | | | (5.3) | |
| RSU compensation expense, net of tax | $ | 26.9 | | | $ | 24.2 | | | $ | 24.2 | |
As of December 31, 2021, there was $22.4 million of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of 0.97 years. Performance Share UnitsA summary of the Company’s outstanding PSUs is presented below:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | PerformanceShare Units | | Weighted-AverageGrant-DateFair Value |
| Performance share units outstanding at December 31, 2020 | 674,099 | | | $ | 101.45 | |
| Grants (1) | 208,040 | | | 148.04 | |
| Vests (2) | (177,157) | | | 123.84 | |
| Performance adjustment (3) | 28,290 | | | 125.57 | |
| Forfeitures and adjustments | (22,156) | | | 107.30 | |
| Performance share units outstanding at December 31, 2021 | 711,116 | | | $ | 110.31 | |
(1)The weighted average grant date fair value for PSUs granted in 2020 and 2019 was $87.53 and $105.23, respectively.(2)The total fair value of PSUs vested was $24.6 million, $24.9 million and $19.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. (3)Represents the change in PSUs issued based upon the attainment of performance goals established by the Company. PSU grants above represent initial target awards and do not reflect potential increases or decreases resulting from the financial performance objectives to be determined at the end of the prospective performance period. The actual number of PSUs to be issued at the end of each performance period will range from 0% to 200% of the initial target awards.F-64
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Unrecognized tax benefits that, if recognized, would affect the effective tax rate | 16.5 | SEC-NUM |
[Table of Contents](#i16ebb68f4bd84ff99a771b20ec27c3fc_7)Deferred Income TaxesDeferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of our net deferred tax assets (liabilities) follow:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| (in millions) | | January 29,2022 | | January 30,2021 |
| Deferred tax assets: | | | | |
| Operating lease liabilities | | $ | 1,647.3 | | | $ | 1,658.4 | |
| Net operating losses, interest expense and credit carryforwards | | 91.5 | | | 95.5 | |
| Accrued expenses | | 50.7 | | | 72.9 | |
| Accrued compensation expense | | 34.9 | | | 47.2 | |
| Inventory | | 24.4 | | | — | |
| State tax election | | 15.8 | | | 17.4 | |
| Other | | 2.4 | | | 3.2 | |
| Total deferred tax assets | | 1,867.0 | | | 1,894.6 | |
| Valuation allowance | | (13.0) | | | (16.8) | |
| Deferred tax assets, net | | 1,854.0 | | | 1,877.8 | |
| Deferred tax liabilities: | | | | |
| Operating lease right-of-use assets | | (1,578.4) | | | (1,587.2) | |
| Other intangibles | | (780.9) | | | (840.4) | |
| Property and equipment | | (435.6) | | | (410.5) | |
| Prepaids | | (26.0) | | | (25.2) | |
| Inventory | | — | | | (4.8) | |
| | | | | |
| Total deferred tax liabilities | | (2,820.9) | | | (2,868.1) | |
| Deferred income taxes, net | | $ | (966.9) | | | $ | (990.3) | |
At January 29, 2022, we had certain state tax credit carryforwards, net operating loss carryforwards and capital loss carryforwards totaling $91.5 million. Some of these carryforwards will expire, if not utilized, beginning in 2022 through 2041.A valuation allowance of $13.0 million, net of federal tax benefits, has been provided principally for certain state credit carryforwards and net operating loss carryforwards. Since January 30, 2021, the valuation allowance has been decreased to reflect state credits and net operating losses expected to be utilized over the carryforward period. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred taxes will not be realized. Based upon the availability of carrybacks of future deductible amounts and our projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not the remaining existing deductible temporary differences will reverse during periods in which carrybacks are available or in which we generate net taxable income. Uncertain Tax PositionsWe are participating in the IRS Compliance Assurance Program (“CAP”) for fiscal 2021 and we have been accepted into the program for fiscal 2022. This program accelerates the examination of key transactions with the goal of resolving any issues before the tax return is filed. Our federal tax returns have been examined and all issues have been settled through the fiscal 2019 tax year. Several states completed their examinations during fiscal 2021. In general, fiscal 2018 and forward are within the statute of limitations for state tax purposes. The statute of limitations is still open prior to fiscal 2018 for some states. In fiscal 2020, we participated in the CAP under the IRS’s bridge year program and as a result, the IRS will not be completing an audit on the 2020 tax return. The balance for unrecognized tax benefits at January 29, 2022 was $20.9 million. The total amount of unrecognized tax benefits at January 29, 2022 that, if recognized, would affect the effective tax rate was $16.5 million (net of the federal tax benefit).
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Aggregate intrinsic value vested and expected to vest in the future as of period end | 5 | SEC-NUM |
Stock Options
The Company’s stock options vest one-third annually on each of the first three anniversaries of the grant date. Stock options are generally granted for a term of ten years. Information concerning stock options granted under stock incentive plans was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Numberof Option Shares | | WeightedAverageExercisePrice | | WeightedAverageRemainingContractualTerm | | AggregateIntrinsicValue(in millions) |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Outstanding as of March 31, 2019 | | 2,318,768 | | | $ | 30.40 | | | 4.80 | | $ | 79 | |
| Granted | | — | | | $ | — | | | | | |
| Exercised | | (331,172) | | | $ | 31.36 | | | | | $ | 8 | |
| Canceled/Forfeited | | (2,213) | | | $ | 55.95 | | | | | |
| Expired | | (115,568) | | | $ | 34.97 | | | | | |
| Outstanding as of March 31, 2020 | | 1,869,815 | | | $ | 29.92 | | | 4.27 | | $ | — | |
| Granted | | — | | | $ | — | | | | | |
| Exercised | | (89,335) | | | $ | 16.01 | | | | | $ | 1 | |
| Canceled/Forfeited | | — | | | $ | — | | | | | |
| Expired | | (104,900) | | | $ | 33.53 | | | | | |
| Outstanding as of March 31, 2021 | | 1,675,580 | | | $ | 30.43 | | | 3.61 | | $ | 8 | |
| Granted | | — | | | $ | — | | | | | |
| Exercised | | (510,294) | | | $ | 23.27 | | | | | $ | 8 | |
| Canceled/Forfeited | | — | | | $ | — | | | | | |
| Expired | | (53,899) | | | $ | 35.57 | | | | | |
| Outstanding as of March 31, 2022 | | 1,111,387 | | | $ | 33.47 | | | 3.01 | | $ | 5 | |
| Vested and expected to vest in the future as of March 31, 2022 | | 1,111,387 | | | $ | 33.47 | | | 3.01 | | $ | 5 | |
| Exercisable as of March 31, 2022 | | 1,111,347 | | | $ | 33.47 | | | 3.01 | | $ | 5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of March 31, 2022 |
| | | Options Outstanding | | Options Exercisable |
| Range of Option Exercise Price | | NumberOutstanding | | WeightedAverageExercisePrice | | WeightedAverageRemainingContractualTerm | | NumberExercisable | | WeightedAverageExercisePrice |
| $8.96 - $24.47 | | 137,920 | | | $ | 19.89 | | | 1.89 | | 137,920 | | | $ | 19.89 | |
| $25.14 - $41.92 | | 518,356 | | | $ | 27.34 | | | 2.89 | | 518,356 | | | $ | 27.34 | |
| $42.05 - $58.80 | | 455,111 | | | $ | 44.59 | | | 3.49 | | 455,111 | | | $ | 44.59 | |
| | | 1,111,387 | | | | | | | 1,111,387 | | | |
The cash received from stock options exercised during fiscal 2022, 2021 and 2020 was $12 million, $1 million and $9 million, respectively.
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Other short-term borrowings | 6 | SEC-NUM |
[Table of Contents](#id0d7a71b05ce452ea9fdb54f3cb359c7_7)eBay Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Note 10 — Debt
The following table summarizes the carrying value of our outstanding debt (in millions, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Coupon | | As of | | Effective | | As of | | Effective |
| | | Rate | | December 31, 2021 | | Interest Rate | | December 31, 2020 | | Interest Rate |
| Long-Term Debt | | | | | | | | | | |
| Floating Rate Notes: | | | | | | | | | | |
| | | | | | | | | | | |
| Senior notes due 2023 | | LIBOR plus 0.87% | | $ | 400 | | | 1.100 | % | | $ | 400 | | | 1.187 | % |
| | | | | | | | | | | |
| Fixed Rate Notes: | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Senior notes due 2022 | | 3.800 | % | | 750 | | | 3.989 | % | | 750 | | | 3.989 | % |
| Senior notes due 2022 | | 2.600 | % | | 605 | | | 2.678 | % | | 1,000 | | | 2.678 | % |
| Senior notes due 2023 | | 2.750 | % | | 750 | | | 2.866 | % | | 750 | | | 2.866 | % |
| Senior notes due 2024 | | 3.450 | % | | 750 | | | 3.531 | % | | 750 | | | 3.531 | % |
| Senior notes due 2025 | | 1.900 | % | | 800 | | | 1.803 | % | | 800 | | | 1.803 | % |
| Senior notes due 2026 | | 1.400 | % | | 750 | | | 1.252 | % | | — | | | — | % |
| Senior notes due 2027 | | 3.600 | % | | 850 | | | 3.689 | % | | 850 | | | 3.689 | % |
| Senior notes due 2030 | | 2.700 | % | | 950 | | | 2.623 | % | | 950 | | | 2.623 | % |
| Senior notes due 2031 | | 2.600 | % | | 750 | | | 2.186 | % | | — | | | — | % |
| Senior notes due 2042 | | 4.000 | % | | 750 | | | 4.114 | % | | 750 | | | 4.114 | % |
| Senior notes due 2051 | | 3.650 | % | | 1,000 | | | 2.517 | % | | — | | | — | % |
| Senior notes due 2056 | | 6.000 | % | | — | | | — | % | | 750 | | | 6.547 | % |
| Total senior notes | | | | 9,105 | | | | | 7,750 | | | |
| Hedge accounting fair value adjustments (1) | | | | 7 | | | | | 10 | | | |
| Unamortized premium/(discount) and debt issuance costs | | | | (30) | | | | | (20) | | | |
| | | | | | | | | | | |
| Less: Current portion of long-term debt | | | | (1,355) | | | | | — | | | |
| Total long-term debt | | | | 7,727 | | | | | 7,740 | | | |
| | | | | | | | | | | |
| Short-Term Debt | | | | | | | | | | |
| Current portion of long-term debt | | | | 1,355 | | | | | — | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Other short-term borrowings | | | | — | | | | | 6 | | | |
| Total short-term debt | | | | 1,355 | | | | | 6 | | | |
| Total Debt | | | | $ | 9,082 | | | | | $ | 7,746 | | | |
(1) Includes the fair value adjustments to debt associated with terminated interest rate swaps which are being recorded as a reduction to interest expense over the remaining term of the related notes.
Senior Notes
Effective March 1, 2021, the company redeemed the $750 million aggregate principal amount of the 6.000% senior notes due 2056. Total cash consideration paid was $750 million, as the redemption price was equal to 100% of the principal amount. In addition, we paid accrued and unpaid interest on the principal amount.
In March 2021, we settled cash tender offers with holders of approximately 39% of the total outstanding $1 billion aggregate principal amount of the 2.600% senior fixed rate notes due 2022. Total cash consideration paid for these purchases was $405 million and the carrying amount of the notes was $395 million, resulting in a loss on extinguishment of $10 million (including immaterial fees and other costs associated with the tender), which was recorded in interest and other, net in our consolidated statement of income. In addition, we paid any accrued interest on the tendered notes up to, but not including the date of settlement.
In May 2021, we issued senior notes, in an aggregate principal amount of $2.5 billion, which consisted of $750 million of 1.400% fixed rate notes due 2026, $750 million of 2.600% fixed rate notes due to 2031 and $1.0 billion of 3.650% fixed rate notes due 2051.
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Intangible assets | 577 | SEC-NUM |
New Accounting Pronouncements
Recently issued ASUs effective after March 31, 2022 are not expected to have a material effect on DXC's consolidated financial statements.
Note 2 - Acquisitions
Fiscal 2021 Acquisitions
AXA Bank Germany Acquisition
On January 1, 2021, DXC completed its acquisition of AXA Bank Germany ("AXA Bank"), a German retail bank, from AXA Group for the total consideration of $101 million. In connection with its acquisition of AXA Bank, DXC received cash of $294 million which includes customer deposit liabilities totaling $197 million. DXC recorded goodwill associated with the acquisition of AXA Bank totaling $2 million. The AXA bank has been consolidated within FDB and will be part of the FDB sale previously disclosed.
Fiscal 2020 Acquisitions
Luxoft Acquisition
On June 14, 2019, DXC completed the acquisition of Luxoft, a digital service provider whose offerings encompass strategic consulting, custom software development services, and digital solution engineering for total consideration of $2.0 billion. The acquisition combined Luxoft’s digital engineering capabilities with DXC’s expertise in IT modernization and integration. The purchase agreement was entered into by DXC and Luxoft on January 6, 2019 and the transaction was closed on June 14, 2019.
The transaction between DXC and Luxoft is an acquisition, with DXC as the acquirer and Luxoft as the acquiree, based on the fact that DXC acquired 100% of the equity interests and voting rights in Luxoft, and that DXC is the entity that transferred the cash consideration.
The Company's allocation of the purchase price to the assets acquired and liabilities assumed as of the Luxoft acquisition date is as follows:
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| (in millions) | | Fair Value |
| Cash and cash equivalents | | $ | 113 | |
| Accounts receivable | | 233 | |
| Other current assets | | 15 | |
| Total current assets | | 361 | |
| Property and equipment | | 31 | |
| Intangible assets | | 577 | |
| Other assets | | 99 | |
| Total assets acquired | | 1,068 | |
| Accounts payable, accrued payroll, accrued expenses, and other current liabilities | | (121) | |
| Deferred revenue | | (8) | |
| Long-term deferred tax liabilities and income tax payable | | (106) | |
| Other liabilities | | (72) | |
| Total liabilities assumed | | (307) | |
| Net identifiable assets acquired | | 761 | |
| | | |
| Goodwill | | 1,262 | |
| Total consideration transferred | | $ | 2,023 | |
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Repayments of short-term borrowings, maturities greater than 90 days | 516 | SEC-NUM |
Brown-Forman Corporation and SubsidiariesConsolidated Statements of Cash Flows(Dollars in millions)
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| Year Ended April 30, | 2020 | | 2021 | | 2022 |
| Cash flows from operating activities: | | | | | |
| Net income | $ | 827 | | | $ | 903 | | | $ | 838 | |
| Adjustments to reconcile net income to net cash provided by operations: | | | | | |
| Gain on sale of business | — | | | (127) | | | — | |
| Asset impairment charges | 13 | | | — | | | 61 | |
| Depreciation and amortization | 74 | | | 77 | | | 79 | |
| Stock-based compensation expense | 11 | | | 12 | | | 15 | |
| Deferred income tax provision (benefit) | 39 | | | (53) | | | (11) | |
| | | | | | |
| Other, net | 15 | | | (23) | | | 31 | |
| Changes in assets and liabilities, net of business acquisitions and dispositions: | | | | | |
| Accounts receivable | 12 | | | (150) | | | (77) | |
| Inventories | (203) | | | (37) | | | (93) | |
| Other current assets | (27) | | | 31 | | | 15 | |
| Accounts payable and accrued expenses | (30) | | | 137 | | | 37 | |
| Accrued income taxes | 18 | | | 8 | | | 47 | |
| Other operating assets and liabilities | (25) | | | 39 | | | (6) | |
| Cash provided by operating activities | 724 | | | 817 | | | 936 | |
| Cash flows from investing activities: | | | | | |
| Proceeds from sale of business | — | | | 177 | | | — | |
| Acquisition of business, net of cash acquired | (22) | | | (14) | | | — | |
| Additions to property, plant, and equipment | (113) | | | (62) | | | (138) | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Other, net | (6) | | | (3) | | | 11 | |
| Cash provided by (used for) investing activities | (141) | | | 98 | | | (127) | |
| Cash flows from financing activities: | | | | | |
| Proceeds from short-term borrowings, maturities greater than 90 days | — | | | 344 | | | — | |
| Repayments of short-term borrowings, maturities greater than 90 days | — | | | (516) | | | — | |
| | | | | | |
| Net change in short-term borrowings | 178 | | | 46 | | | (196) | |
| | | | | | |
| | | | | | |
| | | | | | |
| Payments of withholding taxes related to stock-based awards | (43) | | | (21) | | | (11) | |
| | | | | | |
| Acquisition of treasury stock | (1) | | | — | | | — | |
| Dividends paid | (325) | | | (338) | | | (831) | |
| | | | | | |
| Cash used for financing activities | (191) | | | (485) | | | (1,038) | |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (24) | | | 45 | | | (47) | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 368 | | | 475 | | | (276) | |
| Cash, cash equivalents, and restricted cash at beginning of period | 307 | | | 675 | | | 1,150 | |
| Cash, cash equivalents,and restricted cash at end of period | 675 | | | 1,150 | | | 874 | |
| Less: Restricted cash (included in other current assets) at end of period | — | | | — | | | (6) | |
| Cash and cash equivalents at end of period | $ | 675 | | | $ | 1,150 | | | $ | 868 | |
| Supplemental disclosure of cash paid for: | | | | | |
| Interest | $ | 83 | | | $ | 79 | | | $ | 80 | |
| Income taxes | $ | 143 | | | $ | 204 | | | $ | 226 | |
The accompanying notes are an integral part of the consolidated financial statements.58
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Increase in Retained Earnings Resulting from Implementation of ASU 2017-12 | 8 | SEC-NUM |
[Table of Contents](#i6266d2788e5849989ad57be380853c2d_7)Entergy Corporation and SubsidiariesNotes to Financial Statements
of $74.45 per share as adjusted in accordance with the forward sale agreements. Entergy incurred approximately $728 thousand of common stock issuance costs with the settlement.
In May 2019, Entergy physically settled its remaining obligations under the forward sale agreements by delivering 8,448,171 shares of common stock in exchange for cash proceeds of $608 million. The forward sale price used to determine the cash proceeds received by Entergy was calculated based on the initial forward sale price of $74.45 per share as adjusted in accordance with the forward sale agreements. Entergy incurred approximately $7 thousand of common stock issuance costs with the settlement.
Entergy used the net proceeds for general corporate purposes, which included repayment of commercial paper, outstanding loans under Entergy’s revolving credit facility, and other debt.
Retained Earnings and Dividends
Entergy implemented ASU No. 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” effective January 1, 2019. The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges. Entergy implemented this standard using a modified retrospective method and recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately $8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.
Entergy implemented ASU 2017-08 “Receivables (Topic 310): Nonrefundable Fees and Other Costs” effective January 1, 2019. The ASU amends the amortization period for certain purchased callable debt securities held at a premium to the earliest call date. Entergy implemented this standard using the modified retrospective approach and recorded an adjustment decreasing retained earnings and decreasing accumulated other comprehensive loss by approximately $1 million as of January 1, 2019 for the cumulative effect of the amended amortization period.
Entergy Corporation received dividend payments and distributions from subsidiaries totaling $136 million in 2021, $113 million in 2020, and $124 million in 2019.
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the year ended December 31, 2021 by component:
| | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash flowhedgesnetunrealizedgain (loss) | | Pensionandotherpostretirementliabilities | | Netunrealizedinvestmentgain (loss) | | Total AccumulatedOtherComprehensiveIncome (Loss) |
| | (In Thousands) |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Beginning balance, January 1, 2021 | $28,719 | | | ($534,576) | | | $56,650 | | | ($449,207) | |
| Other comprehensive income (loss) before reclassifications | 1,439 | | | 130,371 | | | (48,050) | | | 83,760 | |
| Amounts reclassified from accumulated other comprehensive income (loss) | (31,193) | | | 65,558 | | | (1,446) | | | 32,919 | |
| Net other comprehensive income (loss) for the period | (29,754) | | | 195,929 | | | (49,496) | | | 116,679 | |
| Ending balance, December 31, 2021 | ($1,035) | | | ($338,647) | | | $7,154 | | | ($332,528) | |
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Conversion of stock, amount | 39 | SEC-NUM |
[Table of Contents](#i1852a2ea91e948d98ea7c44fc3e188ea_7)10. Capital StockDividendsCommon StockIn February 2022, the Company’s Board of Directors approved an increase in the quarterly base dividend on the Company’s common stock from $0.125 to $0.15 per share. The following table summarizes the dividends the Company has paid on its common stock during the six months ended June 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Rate per share | | |
| | | Fixed | | Variable | | Total | | Total Dividends Paid (In millions) |
| 2022: | | | | | | | | |
| First quarter | | $ | 0.15 | | | $ | 0.41 | | | $ | 0.56 | | | $ | 455 | |
| Second quarter | | 0.15 | | 0.45 | | 0.60 | | 484 | |
| | | | | | | | | |
| | | | | | | | | |
| Total year-to-date | | $ | 0.30 | | | $ | 0.86 | | | $ | 1.16 | | | $ | 939 | |
| 2021: | | | | | | | | |
| First quarter | | $ | 0.10 | | | $ | — | | | $ | 0.10 | | | $ | 40 | |
| Second quarter | | 0.11 | | — | | | 0.11 | | 44 | |
| | | | | | | | | |
| | | | | | | | | |
| Total year-to-date | | $ | 0.21 | | | $ | — | | | $ | 0.21 | | | $ | 84 | |
Subsequent Event. In August 2022, the Company’s Board of Directors approved the quarterly base dividend of $0.15 per share and a variable dividend of $0.50 per share, resulting in a base-plus-variable dividend of $0.65 per share on the Company’s common stock. Treasury StockIn February 2022, the Company’s Board of Directors terminated the previously authorized share repurchase program and authorized a new share repurchase program. This new share repurchase program authorizes the Company to purchase up to $1.25 billion of the Company’s common stock in the open market or in negotiated transactions. During the six months ended June 30, 2022, the Company repurchased 20 million shares for $513 million under the new share repurchase program, including repurchases of $27 million that were purchased prior to June 30, 2022 and settled in July 2022. As of June 30, 2022, 99 million shares were held as treasury stock, with $737 million remaining under the Company’s current share repurchase program.Cimarex Redeemable Preferred StockIn May 2022, the holders of 21,900 shares of Cimarex redeemable preferred stock elected to convert their Cimarex redeemable preferred stock into Coterra common stock and cash. As a result of the conversion, the holders received 809,846 shares of Coterra common stock and $10 million in cash according to the terms of the Certificate of Designations for the Cimarex redeemable preferred stock. The book value of the converted shares was $39 million, and upon conversion the excess of carrying value over cash paid was credited to additional paid-in capital. There was no gain or loss recognized on the transaction because it was completed in accordance with the original terms of the Certificate of Designations for the Cimarex redeemable preferred stock. At June 30, 2022, there were 6,125 shares of Cimarex redeemable preferred stock outstanding with a carrying value of $11 million.
11. Stock-Based CompensationGeneralThe Company grants certain stock-based compensation awards, including restricted stock awards, restricted stock units, performance share awards and stock options. Stock-based compensation expense associated with these awards was $21 million and $4 million in the second quarter of 2022 and 2021, respectively, and $44 million and $16 million for the six months ended 16
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Total long-term debt | 21,237 | SEC-NUM |
[Table of Contents](#i82eec5aa49a24290a07e4a9f99c1e608_7) 12. DebtThe Company’s debt consisted of the following at December 31:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| | | | | |
| (In millions) | | 2021 | | 2020 |
| Short-term and current maturities of long-term debt: | | | | |
| Foreign lines of credit | | $ | 240 | | | $ | 144 | |
| Finance lease and other financing obligations | | 268 | | | 240 | |
| Total short-term and current maturities of long-term debt | | $ | 508 | | | $ | 384 | |
| | | | | |
| Long-term debt: | | | | |
| | | | | |
| 4.750% senior notes due June 2021 | | $ | — | | | $ | 400 | |
| 3.500% senior notes due October 2022 | | 700 | | | 700 | |
| 0.375% senior notes due July 2023 (Euro-denominated) | | 566 | | | 612 | |
| 3.800% senior notes due October 2023 | | 1,000 | | | 1,000 | |
| 2.750% senior notes due July 2024 | | 2,000 | | | 2,000 | |
| 3.850% senior notes due June 2025 | | 900 | | | 900 | |
| 2.250% senior notes due July 2025 (British Pound-denominated) | | 705 | | | 709 | |
| 3.200% senior notes due July 2026 | | 2,000 | | | 2,000 | |
| 2.250% senior notes due June 2027 | | 1,000 | | | 1,000 | |
| 1.125% senior notes due July 2027 (Euro-denominated) | | 566 | | | 612 | |
| 4.200% senior notes due October 2028 | | 1,000 | | | 1,000 | |
| 3.500% senior notes due July 2029 | | 3,000 | | | 3,000 | |
| 2.650% senior notes due June 2030 | | 1,000 | | | 1,000 | |
| 1.625% senior notes due July 2030 (Euro-denominated) | | 566 | | | 612 | |
| 3.000% senior notes due July 2031 (British Pound-denominated) | | 705 | | | 709 | |
| 4.400% senior notes due July 2049 | | 2,000 | | | 2,000 | |
| U.S. commercial paper notes | | 916 | | | — | |
| Euro commercial paper notes | | 905 | | | — | |
| Revolving credit facility | | 97 | | | 22 | |
| Receivable securitized loan | | 500 | | | 425 | |
| Term loan facility | | 200 | | | 1,250 | |
| Unamortized discount and deferred financing costs | | (125) | | | (155) | |
| Finance lease and other financing obligations | | 528 | | | 504 | |
| Total long-term debt | | $ | 20,729 | | | $ | 20,300 | |
Annual maturities of the Company’s total debt were as follows at December 31, 2021:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | |
| (In millions) | |
| Year Ending December 31, | |
| 2022 | $ | 508 | |
| 2023 | 4,923 | |
| 2024 | 2,391 | |
| 2025 | 1,677 | |
| 2026 | 2,027 | |
| Thereafter | 9,836 | |
| Total principal payments | 21,362 | |
| Unamortized discount and deferred financing costs | (125) | |
| Total debt | $ | 21,237 | |
| | |
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Exercisable (in years) | 1.05 | SEC-NUM |
CAESARS ENTERTAINMENT, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)A summary of the MSUs activity for the year ended December 31, 2021 is presented in the following table:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Units | | Weighted- Average Fair Value (a) |
| Unvested outstanding as of December 31, 2020 | 446,087 | | | $ | 49.37 | |
| Granted | 147,471 | | | 102.98 | |
| | | | |
| Vested | (208,866) | | | 28.56 | |
| Forfeited | (2,769) | | | 84.12 | |
| Unvested outstanding as of December 31, 2021 | 381,923 | | | 77.09 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(a)Represents the grant date fair value determined using a Monte Carlo simulation model.
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Option Activity | | | | | | | | | |
| | Shares | | Weighted Average Exercise Price | | | | Weighted Average Remaining Contractual Term (years) | | Aggregate Intrinsic Value(in millions) |
| Outstanding as of December 31, 2020 | 176,724 | | | $ | 22.57 | | | | | 1.71 | | $ | 9 | |
| | | | | | | | | | |
| Exercised | (114,884) | | | 22.64 | | | | | | | |
| Forfeited | (1,233) | | | 26.65 | | | | | | | |
| Expired | (16,702) | | | 26.67 | | | | | | | |
| Outstanding as of December 31, 2021 | 43,905 | | | 20.69 | | | | | 1.05 | | 3 | |
| Vested and expected to vest as of December 31, 2021 | 43,905 | | | 20.69 | | | | | 1.05 | | 3 | |
| Exercisable as of December 31, 2021 | 42,610 | | | 20.84 | | | | | 1.05 | | 3 | |
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| Stock Option Exercises | | | | | |
| | Years Ended December 31, |
| (Dollars in millions) | 2021 | | 2020 | | 2019 |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Option Exercises: | | | | | |
| Number of options exercised | 114,884 | | | 70,608 | | | — | |
| Cash received for options exercised | $ | 3 | | | $ | 1 | | | $ | — | |
| Aggregate intrinsic value of options exercised | $ | 9 | | | $ | 5 | | | $ | — | |
| | | | | | |
| | | | | | |
| | | | | | |
Unrecognized Compensation CostAs of December 31, 2021, the Company had $120 million of unrecognized compensation expense, which is expected to be recognized over a weighted-average period of 1.4 years.Common Stock OfferingsOn June 19, 2020, the Company completed the public offering of 20,700,000 shares (including the shares sold pursuant to the underwriters’ overallotment option) of Company Common Stock, at an offering price of $39.00 per share, which provided $772 million of proceeds, net of fees and estimated expenses of $35 million.On October 1, 2020, the Company completed the public offering of 35,650,000 shares (including the shares sold pursuant to the underwriters’ overallotment option) of Company Common Stock, at an offering price of $56.00 per share, which provided $1.9 billion of proceeds, net of fees and estimated expenses of $50 million.Changes to the Authorized SharesOn June 17, 2021, following receipt of required shareholder approvals, the Company amended its Certificate of Incorporation to increase the number of authorized shares of common stock from 300 million to 500 million, and authorize the issuance of up to 150 million shares of preferred stock. As of December 31, 2021, no shares of preferred stock have been issued.Share Repurchase ProgramIn November 2018, the Board authorized a $150 million common stock repurchase program (the “Share Repurchase Program”) pursuant to which the Company may, from time to time, repurchase shares of common stock on the open market (either with or [Table of Contents](#i37dfc5eabc12461dbfc5ef573d80947e_7)106
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Options forfeited or expired, Weighted Average Exercise Price | 90.25 | SEC-NUM |
Stock Option Activity
| | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Weighted | | |
| | | | Weighted | | Average | | |
| | | | Average | | Remaining | | Aggregate |
| | Number of | | Exercise | | Contractual | | Intrinsic |
| (Shares and intrinsic value in thousands) | Shares | | Price | | Life (Years) | | Value |
| Outstanding as of February 28, 2021 | 6,266 | | | $ | 67.57 | | | | | |
| Options granted | 922 | | | 136.88 | | | | | |
| Options exercised | (1,302) | | | 61.30 | | | | | |
| Options forfeited or expired | (90) | | | 90.25 | | | | | |
| Outstanding as of February 28, 2022 | 5,796 | | | $ | 79.66 | | | 4.2 | | $ | 196,694 | |
| | | | | | | | |
| Exercisable as of February 28, 2022 | 3,031 | | | $ | 68.72 | | | 3.5 | | $ | 125,141 | |
Stock Option Information
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | Years Ended February 28 or 29 |
| | 2022 | | 2021 | | 2020 |
| Options granted | 922,475 | | | 1,607,401 | | | 1,601,489 | |
| Weighted average grant date fair value per share | $ | 42.31 | | | $ | 22.80 | | | $ | 22.10 | |
| Cash received from options exercised (in millions) | $ | 79.8 | | | $ | 143.1 | | | $ | 124.4 | |
| Intrinsic value of options exercised (in millions) | $ | 95.2 | | | $ | 94.0 | | | $ | 78.6 | |
| Realized tax benefits (in millions) | $ | 20.6 | | | $ | 25.5 | | | $ | 21.8 | |
For stock options, the fair value of each award is estimated as of the date of grant using a binomial valuation model. In computing the value of the option, the binomial model considers characteristics of fair-value option pricing that are not available for consideration under a closed-form valuation model (for example, the Black-Scholes model), such as the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life and the probability of termination or retirement of the option holder. For this reason, we believe that the binomial model provides a fair value that is more representative of actual experience and future expected experience than the value calculated using a closed-form model. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the recipients of share-based awards.
Assumptions Used to Estimate Option Values
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended February 28 or 29 |
| | 2022 | | 2021 | | 2020 |
| Dividend yield | | | 0.0 | % | | | | 0.0 | % | | | | 0.0 | % |
| Expected volatility factor (1) | 31.8 | % | - | 37.6 | % | | 36.1 | % | - | 56.1 | % | | 26.8 | % | - | 32.6 | % |
| Weighted average expected volatility | | | 36.2 | % | | | | 38.2 | % | | | | 29.2 | % |
| Risk-free interest rate (2) | 0.0 | % | - | 1.4 | % | | 0.1 | % | - | 0.7 | % | | 1.5 | % | - | 2.4 | % |
| Expected term (in years) (3) | | | 4.6 | | | | 4.6 | | | | 4.6 |
(1)Measured using historical daily price changes of our stock for a period corresponding to the term of the options and the implied volatility derived from the market prices of traded options on our stock.(2)Based on the U.S. Treasury yield curve at the time of grant.(3)Represents the estimated number of years that options will be outstanding prior to exercise.
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Estimated hedging losses to be reclassified from accumulated other comprehensive loss into earnings within the next twelve months | 4,051,000 | SEC-NUM |
[Table of](#ia143979d54ef4089bc700f871e6b0e92_7) [Contents](#ia143979d54ef4089bc700f871e6b0e92_7)The following table summarizes the consolidated derivative positions at June 30, 2022 (dollars in thousands):
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| | Non-designated Hedges | Cash Flow Hedges |
| | Interest Rate Caps | Interest Rate Swaps |
| Notional balance | $ | 402,670 | $ | 150,000 |
| Weighted average interest rate (1) | 2.5 | % | N/A |
| Weighted average swapped/capped interest rate | 6.1 | % | 1.4 | % |
| Earliest maturity date | January 2024 | November 2022 |
| Latest maturity date | November 2026 | November 2022 |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)For debt hedged by interest rate caps, represents the weighted average interest rate on the hedged debt prior to any impact of the associated interest rate caps.
As of June 30, 2022, the Company had $150,000,000 in aggregate outstanding pay fixed interest rate swap agreements that were entered into as hedges of changes in interest rates for our anticipated future debt issuance activity. At the time of the future debt issuance activity, the Company expects to cash settle the swaps and either pay or receive cash for the then current fair value. Assuming that the Company issues the debt as expected, the hedging impact from these positions will then be recognized over the life of the issued debt as a yield adjustment.
The Company had five derivatives not designated as hedges at June 30, 2022 for which the fair value changes for the three and six months ended June 30, 2022 and 2021 were not material. The Company did not have any derivatives designated as fair value hedges as of June 30, 2022 and 2021.
The following table summarizes the deferred losses reclassified from accumulated other comprehensive loss into earnings (dollars in thousands):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended | | For the six months ended |
| | 6/30/2022 | | 6/30/2021 | | 6/30/2022 | | 6/30/2021 |
| | | | | | | | |
| Cash flow hedge losses reclassified to earnings | $ | 1,013 | | | $ | 2,366 | | | $ | 2,026 | | | $ | 4,733 | |
The Company anticipates reclassifying approximately $4,051,000 of net hedging losses from accumulated other comprehensive loss into earnings within the next 12 months as an offset to the hedged item during this period.
Redeemable Noncontrolling Interests
The Company issued and has outstanding 7,500 units of limited partnership interest in a DownREIT which can be presented for cash redemption as determined by the partnership agreement. Under the DownREIT agreement, for each limited partnership unit, the limited partner is entitled to receive cash in the amount equal to the fair value of the Company's common stock on or about the date of redemption. In lieu of cash redemption, the Company may elect to exchange such units for an equal number of shares of the Company's common stock. The limited partnership units in the DownREIT are valued using the market price of the Company's common stock, a Level 1 price under the fair value hierarchy.
Financial Instruments Not Carried at Fair Value
Cash and Cash Equivalents
Cash and cash equivalent balances are held with various financial institutions within accounts designed to preserve principal. The Company monitors credit ratings of these financial institutions and the concentration of cash and cash equivalent balances with any one financial institution and believes the likelihood of realizing material losses related to cash and cash equivalent balances is remote. Cash and cash equivalents are carried at their face amounts, which reasonably approximate their fair values and are Level 1 within the fair value hierarchy.
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Period for recognition, unrecognized compensation cost | 2.36 | SEC-NUM |
[Table of Contents](#i11f673a761214399ab28a3a12dfa4686_7)
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)Our performance share awards which are contingent upon achievement of revenue-based financial metrics are valued based on the fair market value of the award on the grant date. The related compensation costs are recognized over the longer of the remaining performance or service period based upon the expected levels of achievement, which are assessed periodically until certification by the ECC.As of September 2, 2022, the shares awarded under our 2022, 2021 and 2020 Performance Share Programs remained outstanding and were yet to be earned. For information regarding our outstanding 2021 and 2020 Performance Share Programs, including the terms, see “Note 12. Stock-Based Compensation” of our Annual Report on Form 10-K for the fiscal year ended December 3, 2021.Performance share activity for the nine months ended September 2, 2022 was as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | Number ofShares(in millions) | | Weighted AverageGrant Date Fair Value | | AggregateFair Value(1)(in millions) |
| Beginning outstanding balance | 0.6 | | | $ | 408.84 | | | |
| Awarded | 0.3 | | | $ | 402.24 | | | |
| Released | (0.4) | | | $ | 291.15 | | | |
| Forfeited | (0.1) | | | $ | 490.39 | | | |
| Ending outstanding balance | 0.4 | | | $ | 495.23 | | | $ | 158 | |
| | | | | | |
| Expected to vest | 0.4 | | | $ | 494.35 | | | $ | 144 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1) The aggregate fair value is calculated using the closing stock price as of September 2, 2022 of $368.14. Under our Performance Share Programs, participants generally have the ability to receive up to 200% of the target number of shares originally granted. Shares released during the nine months ended September 2, 2022 resulted from 168% achievement of target for the 2019 Performance Share Program, as certified by the ECC in the first quarter of fiscal 2021. Shares awarded during the nine months ended September 2, 2022 include 0.2 million additional shares awarded for the final achievement of the 2019 Performance Share Program. The remaining awarded shares were for the 2022 Performance Share Program.The total fair value of performance shares vested during the nine months ended September 2, 2022 was $192 million.Employee Stock Purchase Plan SharesEmployees purchased 0.8 million shares at an average price of $333.92 and 1.0 million shares at an average price of $294.15 for the nine months ended September 2, 2022 and September 3, 2021, respectively. The intrinsic value of shares purchased during the nine months ended September 2, 2022 and September 3, 2021 was $73 million and $256 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.Compensation CostsAs of September 2, 2022, there was $3.04 billion of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based awards and purchase rights which will be recognized over a weighted average period of 2.36 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.21
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Adjustment, income taxes payable | 19.0 | SEC-NUM |
Balance Sheet, Condensed Consolidated Statement of Cash Flows and Condensed Consolidated Statement of Shareholders’ Equity for the three-month period ended January 29, 2022.During the first quarter of 2022, the Company recorded acquisition accounting adjustments of $24.9 million to goodwill comprised of $19.0 million to income tax payable, $7.8 million to other non-current liabilities and $1.6 million to accrued liabilities offset by $3.5 million to deferred income taxes. The Acquisition accounting is not complete and additional information relating to conditions that existed at the Acquisition Date may become known to the Company during the remainder of the measurement period. As of the filing date of this Quarterly Report on Form 10-Q, the Company is still in the process of valuing Maxim's assets, including fixed assets, intangible assets, and liabilities, including related income tax accounting.The following unaudited pro forma consolidated financial information for the three-month period ended January 30, 2021 combines the results of the Company for the three-month period ended January 30, 2021 and the unaudited results of Maxim for the corresponding period. The unaudited pro forma consolidated financial information assumes that the Acquisition, which closed on August 26, 2021, was completed on November 3, 2019 (the first day of fiscal 2020). The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for amortization expense of acquired intangible assets, fair value adjustments for acquired inventory, property, plant and equipment and long-term debt and compensation expense for ongoing share-based compensation arrangements that were replaced in conjunction with the Acquisition, together with the consequential tax effects. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the Acquisition actually taken place on November 3, 2019. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur after the Acquisition, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the Acquisition.
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | |
| | | Pro Forma Three Months Ended (unaudited) |
| | | January 30, 2021 | | |
| | | | | |
| Revenue | | $ | 2,059,679 | | | |
| Net income | | $ | 298,895 | | | |
| Basic net income per common share | | $ | 0.56 | | | |
| Diluted net income per common share | | $ | 0.55 | | | |
Note 15 – Subsequent EventsOn February 15, 2022, the Board of Directors of the Company declared a cash dividend of $0.76 per outstanding share of common stock. The dividend will be paid on March 8, 2022 to all shareholders of record at the close of business on February 25, 2022 and is expected to total approximately $397.7 million. 13
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Fair value of notes issued | 2,594.9 | SEC-NUM |
Note 10. Debt
The Company issued three series of fixed-rate notes with staggered maturities of 7 and 10-years totaling $3.0 billion (collectively the “Notes”). The Notes are senior unsecured obligations, and interest is payable in arrears, semi-annually.
The principal amounts and associated effective interest rates of the Notes and other debt as of September 30, 2022 and June 30, 2022, are as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| Debt instrument | | Effective Interest Rate | | September 30, 2022 | | June 30, 2022 |
| | | | | | | |
| Fixed-rate 3.375% notes due September 15, 2025 | | 3.47% | | $ | 1,000.0 | | | $ | 1,000.0 | |
| Fixed-rate 1.250% notes due September 1, 2030 | | 1.83% | | 1,000.0 | | | 1,000.0 | |
| Fixed-rate 1.700% notes due May 15, 2028 | | 1.85% | | 1,000.0 | | | 1,000.0 | |
| Other | | | | 6.3 | | | 6.0 | |
| | | | | 3,006.3 | | | 3,006.0 | |
| Less: current portion (a) | | | | (1.7) | | | (1.2) | |
| Less: unamortized discount and debt issuance costs | | | | (17.0) | | | (17.7) | |
| Total long-term debt | | | | $ | 2,987.6 | | | $ | 2,987.1 | |
(a) - Current portion of long-term debt as of September 30, 2022 is included within Accrued expenses and other current liabilities on the Consolidated Balance Sheets.
The effective interest rates for the Notes include the interest on the Notes and amortization of the discount and debt issuance costs.
As of September 30, 2022, the fair value of the Notes, based on Level 2 inputs, was $2,594.9 million. For a description of the fair value hierarchy and the Company's fair value methodologies, including the use of an independent third-party pricing service, see Note 1 “Summary of Significant Accounting Policies” in the Company's Annual Report on Form 10-K for fiscal 2022.
Note 11. Employee Benefit Plans
A. Stock-based Compensation Plans. Stock-based compensation consists of the following:
The Company's share-based compensation consists of stock options, time-based restricted stock, time-based restricted stock units, performance-based restricted stock, and performance-based restricted stock units. The Company also offers an employee stock purchase plan for eligible employees. Beginning in September 2022, the Company discontinued granting stock options, time-based restricted stock and performance-based restricted stock. Any such future awards will be grants of time-based restricted stock units and/or performance-based restricted stock units, depending on employee eligibility. Time-based restricted stock unit awards and performance-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock, and for awards granted to employees with a home country outside the United States are generally settled in cash.
•Restricted Stock.•Time-Based Restricted Stock Units. Time-based restricted stock units generally vest ratably over 3 years. Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.
Time-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock and cannot be transferred during the vesting period. Time-based restricted stock unit awards granted to employees with a home country outside the United States are generally settled in cash and cannot be transferred during the vesting period. Compensation expense relating to the issuance of share-settled units is measured based on the fair value of the award on the grant date and recognized on a straight-line basis over the vesting period. Compensation expense relating to the issuance of cash-settled units is recorded over the vesting period and is initially based on the fair value of the award on the grant date and is subsequently 16
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Investment after first milestone | 10.8 | SEC-NUM |
[Table of Contents](#i8e6404ebd98d416daa7f88f48159b601_7)EDWARDS LIFESCIENCES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)7. INVESTMENTS (Continued)
The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of December 31, 2021, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in millions):
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| | December 31, 2021 |
| | Less than 12 Months | | 12 Months or Greater | | Total |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
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| United States government and agency securities | $ | 85.1 | | | $ | (0.7) | | | $ | — | | | $ | — | | | $ | 85.1 | | | $ | (0.7) | |
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| Asset-backed securities | 433.3 | | | (2.9) | | | — | | | — | | | 433.3 | | | (2.9) | |
| Corporate debt securities | 1,114.1 | | | (8.3) | | | — | | | — | | | 1,114.1 | | | (8.3) | |
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| | $ | 1,632.5 | | | $ | (11.9) | | | $ | — | | | $ | — | | | $ | 1,632.5 | | | $ | (11.9) | |
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The unrealized losses were largely due to changes in interest rates and were considered temporary. There were no investments that were in an unrealized loss position as of December 31, 2020.
Investments in Unconsolidated Entities
The Company has a number of equity investments in unconsolidated entities. These investments are recorded in "Long-term Investments" on the consolidated balance sheets, and are as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | December 31, |
| | 2021 | | 2020 |
| | (in millions) |
| Equity method investments | | | |
| Carrying value of equity method investments | $ | 8.4 | | | $ | 5.7 | |
| Equity securities | | | |
| Carrying value of non-marketable equity securities | 84.1 | | | 29.4 | |
| Total investments in unconsolidated entities | $ | 92.5 | | | $ | 35.1 | |
Non-marketable equity securities consist of investments in privately held companies without readily determinable fair values, and are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. The Company recorded an upward adjustment of $4.2 million based on observable price changes during 2021, and an upward adjustment of $1.8 million based on observable price changes and a downward adjustment of $0.7 million due to an impairment during 2020. As of December 31, 2021, the Company had recorded cumulative upward adjustments of $8.0 million based on observable price changes, and cumulative downward adjustments of $2.6 million due to impairment and observable price changes.
In April 2021, the Company recorded $35.9 million related to its investment in a privately-held medical device company (the "Investee"), including an initial cash investment in the Investee's preferred equity securities and other consideration. Also, in April 2021, the Company paid $5.7 million, included in "Other Assets," for an exclusive contingent option to acquire the Investee. Per the agreement, the Company may be required to invest up to an additional $9.9 million in the Investee's preferred equity securities and up to an additional $21.8 million for the option to acquire the Investee, depending on the achievement of certain milestones, of which the Company invested $10.8 million in the fourth quarter of 2021 upon achievement of the first milestone. The Company also agreed to loan the Investee up to $45 million under a secured promissory note. As of December 31, 2021, there had been no borrowings under this secured promissory note.
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Trading account payable to brokers and clearing organizations | 53,636 | SEC-NUM |
W. R. BERKLEY CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | December 31, |
| (In thousands, except share data) | 2021 | | 2020 |
| Assets | | | |
| Investments: | | | |
| Fixed maturity securities (amortized cost of $16,471,304 and $13,755,858; allowance for expected credit losses of $22,625 and $2,580 at December 31, 2021 and 2020) | $ | 16,602,673 | | | $ | 14,159,369 | |
| Investment funds | 1,480,612 | | | 1,309,430 | |
| Real estate | 1,852,508 | | | 1,960,914 | |
| Arbitrage trading account | 1,179,606 | | | 341,473 | |
| Equity securities | 941,243 | | | 625,667 | |
| Loans receivable (net of allowance for expected credit losses of $1,718 and $5,437 at December 31, 2021 and 2020) | 115,172 | | | 84,913 | |
| | | | |
| Total investments | 22,171,814 | | | 18,481,766 | |
| Cash and cash equivalents | 1,568,843 | | | 2,372,366 | |
| Premiums and fees receivable (net of allowance for expected credit losses of $25,218 and $22,883 at December 31, 2021 and 2020) | 2,522,972 | | | 2,167,799 | |
| Due from reinsurers (net of allowance for expected credit losses of $7,713 and $7,801 at December 31, 2021 and 2020) | 2,923,026 | | | 2,424,502 | |
| Deferred policy acquisition costs | 676,145 | | | 556,168 | |
| Prepaid reinsurance premiums | 676,915 | | | 648,376 | |
| Trading account receivable from brokers and clearing organizations | — | | | 524,727 | |
| Property, furniture and equipment | 419,883 | | | 405,930 | |
| Goodwill | 169,652 | | | 169,652 | |
| Accrued investment income | 122,938 | | | 120,464 | |
| Current federal and foreign income taxes | 23,570 | | | 5,893 | |
| Deferred federal and foreign income taxes | 57,425 | | | 29,055 | |
| Other assets | 753,231 | | | 700,215 | |
| Total assets | $ | 32,086,414 | | | $ | 28,606,913 | |
| Liabilities and Equity | | | |
| Liabilities: | | | |
| Reserves for losses and loss expenses | $ | 15,390,888 | | | $ | 13,784,430 | |
| Unearned premiums | 4,847,160 | | | 4,073,191 | |
| Due to reinsurers | 514,980 | | | 426,124 | |
| Trading account securities sold but not yet purchased | 1,169 | | | 10,048 | |
| Trading account payable to brokers and clearing organizations | 53,636 | | | — | |
| Current federal and foreign income taxes | 21,068 | | | 41,282 | |
| Deferred federal and foreign income taxes | 17,470 | | | 42,161 | |
| Senior notes and other debt | 2,259,416 | | | 1,623,025 | |
| Subordinated debentures | 1,007,652 | | | 1,102,309 | |
| Other liabilities | 1,305,245 | | | 1,178,546 | |
| Total liabilities | 25,418,684 | | | 22,281,116 | |
| Equity: | | | |
| Preferred stock, par value $.10 per share: | | | |
| Authorized 5,000,000 shares; issued and outstanding — none | — | | | — | |
| Common stock, par value $.20 per share: | | | |
| Authorized 750,000,000 shares, issued and outstanding, net of treasury shares, 176,780,588 and 177,825,150 shares, respectively | 70,535 | | | 70,535 | |
| Additional paid-in capital | 1,016,372 | | | 1,012,483 | |
| Retained earnings | 9,015,135 | | | 8,348,381 | |
| Accumulated other comprehensive loss | (281,955) | | | (62,172) | |
| Treasury stock, at cost, 175,895,912 and 174,851,350 shares, respectively | (3,167,076) | | | (3,058,425) | |
| Total common stockholders’ equity | 6,653,011 | | | 6,310,802 | |
| Noncontrolling interests | 14,719 | | | 14,995 | |
| Total equity | 6,667,730 | | | 6,325,797 | |
| Total liabilities and equity | $ | 32,086,414 | | | $ | 28,606,913 | |
| See accompanying notes to consolidated financial statements. | | | |
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Debt instrument, covenant, leverage ratio, minimum | 0.375 | SEC-NUM |
CAESARS ENTERTAINMENT, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)CEI Revolving Credit FacilityOn July 20, 2020, the Escrow Issuer entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, U.S. Bank National Association, as collateral agent, and certain banks and other financial institutions and lenders party thereto, which provide for a five-year CEI Revolving Credit Facility in an aggregate principal amount of $1.2 billion (the “CEI Revolving Credit Facility”). On November 10, 2021, the Company amended the CEI Revolving Credit Facility to establish reserves in the total amount of $190 million which are available only for permitted use. The CEI Revolving Credit Facility matures in July 2025 and includes a letter of credit sub-facility of $250 million.The interest rate per annum applicable under the CEI Revolving Credit Facility, at the Company’s option is either (a) LIBOR adjusted for certain additional costs, subject to a floor of 0% or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by JPMorgan Chase Bank, N.A. and (iii) the one-month adjusted LIBOR rate plus 1.00%, in each case plus an applicable margin. Such applicable margin shall be 3.25% per annum in the case of any LIBOR loan and 2.25% per annum in the case of any base rate loan, subject to three 0.25% step-downs based on the Company’s total leverage ratio.Additionally, the Company is required to pay a commitment fee in respect of any unused commitments under the CEI Revolving Credit Facility in the amount of 0.50% of principal amount of the commitments of all lenders, subject to a step-down to 0.375% based upon the Company’s total leverage ratio. The Company is also required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and processing fees and charges and a fronting fee in an amount equal to 0.125% of the daily stated amount of such letter of credit.As of December 31, 2021, the Company had $924 million of available borrowing capacity under the CEI Revolving Credit Facility, after consideration of $23 million in outstanding letters of credit, $48 million committed for regulatory purposes and the reserves described above. CRC Senior Secured Notes due 2025On July 6, 2020, the Company issued $1.0 billion in aggregate principal amount of 5.75% Senior Notes due 2025 pursuant to an indenture, dated July 6, 2020 (the “CRC Senior Secured Notes”), by and among the Escrow Issuer, U.S. Bank National Association, as trustee and Credit Suisse AG, Cayman Islands Branch, as collateral agent. In connection with the consummation of the Merger, CRC assumed the rights and obligations under the CRC Senior Secured Notes and the indenture governing such notes. The CRC Senior Secured Notes will mature on July 1, 2025 with interest payable semi-annually in cash in arrears on January 1 and July 1 of each year.CEI Senior Secured Notes due 2025On July 6, 2020, the Escrow Issuer issued $3.4 billion in aggregate principal amount of 6.25% Senior Secured Notes due 2025 pursuant to an indenture dated July 6, 2020 (the “CEI Senior Secured Notes”), by and among the Escrow Issuer, U.S. Bank National Association, as trustee, and U.S. Bank National Association, as collateral agent. The Company assumed the rights and obligations under the CEI Senior Secured Notes and the indenture governing such notes on July 20, 2020. The CEI Senior Secured Notes will mature on July 1, 2025 with interest payable semi-annually in cash in arrears on January 1 and July 1 of each year. Convention Center Mortgage LoanOn September 18, 2020, the Company entered into a loan agreement with VICI to borrow a 5-year, $400 million Forum Convention Center mortgage loan (the “Mortgage Loan”). The Mortgage Loan bears interest at a rate of, initially, 7.7% per annum, which escalates annually to a maximum interest rate of 8.3% per annum. Beginning October 1, 2021, the Mortgage Loan is subject to an interest rate of 7.854% for the next twelve months.5% Convertible NotesOn October 6, 2017, Former Caesars issued $1.1 billion aggregate principal amount of 5% Convertible Notes maturing in 2024.The 5% Convertible Notes were convertible into approximately 0.014 shares of the Company’s Common Stock (“Company Common Stock”) and approximately $1.17 of cash per $1.00 principal amount of the 5% Convertible Notes. During the year ended December 31, 2021, the Company converted the remaining outstanding aggregate principal amount of the 5% Convertible Notes, which resulted in cash payments of $367 million, net of approximately $12 million paid into our trust accounts and the issuance of approximately 5 million shares of Company Common Stock. The fair value of the shares [Table of Contents](#i37dfc5eabc12461dbfc5ef573d80947e_7)98
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Finance Lease, Liability, Payments, Due Year Four | 29,778 | SEC-NUM |
Supplemental cash flow information related to leases was as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | Years Ended February 28 or 29 |
| (In thousands) | 2022 | | 2021 | | 2020 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | |
| Operating cash flows from operating leases | $ | 72,371 | | | $ | 56,762 | | | $ | 57,145 | |
| Operating cash flows from finance leases | $ | 11,194 | | | $ | 8,517 | | | $ | 4,027 | |
| Financing cash flows from finance leases | $ | 11,923 | | | $ | 7,424 | | | $ | 4,151 | |
| | | | | | |
| Lease assets obtained in exchange for lease obligations: | | | | | |
| Operating leases | $ | 50,911 | | | $ | 14,010 | | | $ | 27,136 | |
| Finance leases | $ | 32,052 | | | $ | 45,857 | | | $ | 53,111 | |
Maturities of lease liabilities were as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | As of February 28, 2022 |
| (In thousands) | Operating Leases (1) | | Finance Leases (1) |
| Fiscal 2023 | $ | 70,500 | | | $ | 26,474 | |
| Fiscal 2024 | 69,983 | | | 32,059 | |
| Fiscal 2025 | 69,475 | | | 28,830 | |
| Fiscal 2026 | 63,946 | | | 29,778 | |
| Fiscal 2027 | 57,050 | | | 25,427 | |
| Thereafter | 571,431 | | | 191,876 | |
| Total lease payments | 902,385 | | | 334,444 | |
| Less: interest | (334,919) | | | (178,975) | |
| Present value of lease liabilities | $ | 567,466 | | | $ | 155,469 | |
(1) Lease payments exclude $43.9 million of legally binding minimum lease payments for leases signed but not yet commenced.
18.SUPPLEMENTAL CASH FLOW INFORMATIONSupplemental disclosures of cash flow information:
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| | | | | | | | | | | | | | | | | | |
| | Years Ended February 28 or 29 |
| (In thousands) | 2022 | | 2021 | | 2020 |
| Cash paid for interest | $ | 91,686 | | | $ | 86,437 | | | $ | 85,607 | |
| Cash paid for income taxes | $ | 373,234 | | | $ | 247,748 | | | $ | 286,008 | |
| Non-cash investing and financing activities: | | | | | |
| Increase (decrease) in accrued capital expenditures | $ | 14,837 | | | $ | (25,595) | | | $ | 3,840 | |
| Increase in financing obligations | $ | — | | | $ | 4,726 | | | $ | 48,942 | |
See Note 17 for supplemental cash flow information related to leases.
19.COMMITMENTS AND CONTINGENCIES (A)LitigationOn October 31, 2017, Joshua Sabanovich v. CarMax Superstores California, LLC et al., a putative class action, was filed in the Superior Court of California, County of Stanislaus asserting wage and hour claims with respect to CarMax sales consultants and non-exempt employees in California. The asserted claims included failure to pay minimum wage; provide meal periods and rest breaks; pay statutory/contractual wages; reimburse for work-related expenses and provide accurate itemized wage statements; unfair competition; and Private Attorneys General Act (“PAGA”) claims. The Sabanovich lawsuit sought unspecified damages, restitution, statutory penalties, interest, cost and attorneys’ fees. The parties have reached a settlement resolving Sabanovich’s individual arbitration claims and PAGA claim, which did not have a material adverse effect on our financial condition, results of operations or cash flows. 85
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Total purchase price | 59,200 | SEC-NUM |
[Table of Contents](#ic55317410763413da1d4be4008f977bd_658)Globe Life Inc.Notes to Consolidated Financial Statements(Dollar amounts in thousands, except per share data)
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| | | Fair Value as of |
| | | August 1, 2021 |
| Assets Acquired: | | |
| Trade name | | $ | 300 | |
| Value of Customer Relationships Acquired | | 5,200 | |
| Value of Distribution Acquired | | 11,000 | |
| Goodwill | | 40,200 | |
| | | 56,700 | |
| Ceding commission | | 2,500 | |
| Total purchase price | | $ | 59,200 | |
In accordance with the applicable guidance, the Company is finalizing the estimation of the fair value of the acquired assets and may do so up to one year. If any changes are deemed necessary to the preliminary estimates and possibly goodwill, the Company will make an opening balance sheet adjustment.
Discontinued Operations: When a component of Globe Life's business is sold or expected to be sold during the ensuing year, the Company considers whether the criteria of ASC 205-20, Discontinued Operations, have been met, which includes evaluating if the disposal of a component represents a strategic shift that has, or will have, a major effect on the Company. If the disposal meets the criteria for discontinued operations, the assets and liabilities are segregated and recorded in the Consolidated Balance Sheets as "Assets and Liabilities related to discontinued operations" for all periods presented. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized. The results of operations for the discontinued component are reported in "Income from discontinued operations, net of tax" in the Consolidated Statements of Operations for current and prior periods. Discontinued operations are reported commencing in the period in which the business is either disposed of or meets the accounting criteria for discontinued operations, including any gain or loss recognized on the sale or adjustment of the carrying amount to the estimated fair value less cost to sell.
In 2016, Globe Life sold one of its operating segments, Medicare Part D. The financial results of this business are excluded from the Company's continuing operations including the Notes to the Consolidated Financial Statements. The Company received final settlement related to the assets and liabilities of the discontinued operations in 2019. Investments: Globe Life classifies all of its fixed maturity investments as available for sale. Investments classified as available for sale are carried at fair value with unrealized gains and losses, net of taxes, reflected directly in accumulated other comprehensive income (AOCI). Income from investments is recorded in "Net investment income" on the [Consolidated Statements of Operations](#ic55317410763413da1d4be4008f977bd_745). Gains and losses from sales, maturities, or other redemptions of investments are recorded in "Realized gains (losses)". Interest income and prepayment fees are recognized when earned. Premiums and discounts are amortized using the effective yield method. When amortized cost of a callable debt security exceeds the first call price, the premium is amortized to the earliest call date. Otherwise, the period of amortization or accretion generally extends from the purchase date to the maturity date.
"Policy loans", which represent loans provided to policyholders using cash values as collateral, are carried at unpaid principal balances. "Other long-term investments" include limited partnerships, commercial mortgage loan participations ("commercial mortgage loans"), equity securities, and real estate. Investments in equity securities are reported at fair value with changes in fair value, net of taxes, reflected directly in "Realized gains (losses)" in the Consolidated Statements of Operations. Investments in real estate are reported at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful life.
The investment funds consist of limited partnerships whereby the Company has a pro-rata share of ownership ranging from less than 1% to 20%. For each investment, the Company has elected the fair value option, but would have been otherwise accounted for as an equity method investment. The fair value option is assessed for each individual investment and concluded at the inception of the investment. 62 GL 2021 FORM 10-K
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Debt issuance costs | 24.3 | SEC-NUM |
[Table of Conten](#i207805ce14724a60909000a6c8cb9e11_7)[t](#i207805ce14724a60909000a6c8cb9e11_7)[s](#i207805ce14724a60909000a6c8cb9e11_7)Credit Facilities
Delayed-Draw Term LoanOn December 16, 2021, we entered into a term loan credit agreement, which provides for a 364-day delayed-draw term loan facility up to an aggregate principal amount of $1.0 billion. Borrowings under the Delayed-Draw Term Loan facility may be Base Rate Loans, Daily Floating London Interbank Offered Rate (“LIBOR”) Loans or Eurodollar Rate Loans and bear interest as follows: (1) Eurodollar Rate Loans bear interest at a variable rate equal to the London inter-bank offered rate plus a margin of between 60.0 and 80.0 basis points, depending on the Company’s long-term debt credit rating; (2) Daily Floating LIBOR Rate Loans, like Eurodollar Rate Loans, bear interest at a variable rate equal to the London inter-bank offered rate plus a margin of between 60.0 and 80.0 basis points, depending on the Company’s long-term debt credit rating; and (3) Base Rate Loans bear interest at a variable rate equal to the highest of (a) the Federal funds rate (as published by the Federal Reserve Bank of New York from time to time) plus 1/2 of 1%, (b) Bank of America’s prime rate as publicly announced from time to time and (c) the Eurodollar Rate (as defined in the Credit Agreement) plus 1%; provided that in no event will the Eurodollar Rate be less than 0.0%.We immediately drew down the full $1.0 billion available under the facility as a daily floating LIBOR rate loan (“Delayed-Draw Term Loan”) with repayment of the principal due December 15, 2022. The Delayed-Draw Term Loan bears interest at a variable rate equal to the daily LIBOR rate plus a spread of 60 basis points, based on Fortive’s current credit rating. Borrowings under the Delayed-Draw Term Loan facility are prepayable at the Company’s option in whole or in part without premium or penalty and amounts borrowed may not be reborrowed once repaid.Debt-for-Equity ExchangeOn January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $400.0 million of the Term Loan due March 2021 and (ii) $683.2 million of the Term Loan due May 2021. We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $94.4 million in the year ended December 31, 2021. Term Loan due May 2021On January 21, 2021, we repaid the remaining $316.8 million outstanding of the Term Loan due May 2021 from the cash proceeds received from Vontier in the Vontier Separation. The fees associated with the prepayment were immaterial. Our credit facility agreements require, among others, that we maintain certain financial covenants and we were in compliance with all of our financial covenants on December 31, 2021.Convertible Senior NotesOn February 22, 2019, we issued $1.4 billion in aggregate principal amount of our 0.875% Convertible Senior Notes due 2022 (the “Convertible Notes”), including $187.5 million in aggregate principal amount resulting from an exercise in full of an over-allotment option. The Convertible Notes were issued in a private placement to certain initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Convertible Notes bear interest at a rate of 0.875% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019. Of the $1.4 billion in principal amount from the issuance of the Convertible Notes, $1.3 billion was classified as debt and $102.2 million was classified as equity, using an assumed effective interest rate of 3.38%. Debt issuance costs of $24.3 million were proportionately allocated to debt and equity.On February 9, 2021, we repurchased $281 million of the Convertible Notes using the remaining cash proceeds received from Vontier in the Separation and other cash on hand. In connection with the repurchase, we recorded a loss on debt extinguishment during 2021 of $10.5 million. In addition, upon repurchase we recorded $11.6 million as a reduction to additional paid-in capital related to the equity component of the repurchased Convertible Notes. We recognized $45 million in interest expense during the year ended December 31, 2021, of which $10 million related to the contractual coupon rate of 0.875%, $6 million was attributable to the amortization of debt issuance costs, and $29 million was attributable to the amortization of the discount. Additionally, we recognized $0.3 million interest expense related to the Delayed- Draw Term Loan. We recognized $54 million in interest expense during the year ended December 31, 2020, of which $13 million related to the contractual coupon rate of 0.875%, $8 million was attributable to the amortization of debt issuance costs, and $34 million was attributable to the amortization of the discount. The discount at issuance was $102 million and is being amortized over a three-year period. The unamortized discount at December 31, 2021 was $4 million.77
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Estimated remaining costs for completion of J. Wayne Leonard Power Station | 3.1 | SEC-NUM |
[Table of Contents](#i6266d2788e5849989ad57be380853c2d_7)Entergy Corporation and SubsidiariesNotes to Financial Statements
deferred income taxes pursuant to the Tax Cuts and Jobs Act and the treatment of accumulated deferred income taxes related to reductions of rate base; (2) Entergy Louisiana’s reservation regarding treatment of a regulatory asset related to certain special orders by the LPSC; and (3) test year expenses billed from Entergy Services to Entergy Louisiana. Intervenors also objected to Entergy Louisiana’s treatment of the regulatory asset related to certain special orders by the LPSC. In August 2021 the LPSC staff issued a letter updating its objections/reservations for the 2017 test year formula rate plan evaluation report. In its letter, the LPSC staff reiterated its original objections/reservations pertaining to Entergy Louisiana’s proposed rate adjustments associated with the return of excess accumulated deferred income taxes pursuant to the Tax Cuts and Jobs Act and the treatment of accumulated deferred income taxes related to reductions of rate base, specifically how the accumulated deferred income taxes associated with uncertain tax positions have been accounted for, and test year expenses billed from Entergy Services to Entergy Louisiana. The LPSC staff further reserved its rights for future proceedings and to dispute future proposed adjustments to the 2017 test year formula rate plan evaluation report. The LPSC staff withdrew all other objections/reservations. A procedural schedule has not yet been established to resolve these issues.
Entergy Louisiana also included in its filing a presentation of an initial proposal to combine the legacy Entergy Louisiana and legacy Entergy Gulf States Louisiana residential rates, which combination, if approved, would be accomplished on a revenue-neutral basis intended not to affect the rates of other customer classes.
Commercial operation at J. Wayne Leonard Power Station (formerly St. Charles Power Station) commenced in May 2019. In May 2019, Entergy Louisiana filed an update to its 2017 formula rate plan evaluation report to include the estimated first-year revenue requirement of $109.5 million associated with the J. Wayne Leonard Power Station. The resulting interim adjustment to rates became effective with the first billing cycle of June 2019. In June 2020, Entergy Louisiana submitted information to the LPSC to review the prudence of Entergy Louisiana’s management of the project. In August 2020 discovery commenced and a procedural schedule was established with a hearing in July 2021. In February 2021 the LPSC staff filed testimony that substantially all the costs to construct J. Wayne Leonard Power Station were prudently incurred and eligible for recovery from customers. The LPSC staff further recommended that the LPSC consider monitoring the remaining $3.1 million that was estimated to be incurred for completion of the project in the event the final costs exceed the estimated amounts. In July 2021 the LPSC approved a settlement between the LPSC staff and Entergy Louisiana finding that substantially all the costs to construct J. Wayne Leonard Power Station were prudently incurred and eligible for recovery from customers.
2018 Formula Rate Plan Filing
In May 2019, Entergy Louisiana filed its formula rate plan evaluation report for its 2018 calendar year operations. The 2018 test year evaluation report produced an earned return on common equity of 10.61% leading to a base rider formula rate plan revenue decrease of $8.9 million. While base rider formula rate plan revenue will decrease as a result of this filing, overall formula rate plan revenues will increase by approximately $118.7 million. This outcome is primarily driven by a reduction to the credits previously flowed through the tax reform adjustment mechanism and an increase in the transmission recovery mechanism, partially offset by reductions in the additional capacity mechanism revenue requirements and extraordinary cost items. The filing is subject to review by the LPSC. Resulting rates were implemented in September 2019, subject to refund.
Entergy Louisiana also included in its filing a presentation of an initial proposal to combine the legacy Entergy Louisiana and legacy Entergy Gulf States Louisiana residential rates, which combination, if approved, would be accomplished on a revenue-neutral basis intended not to affect the rates of other customer classes. Entergy Louisiana contemplates that any combination of residential rates resulting from this request would be implemented with the results of the 2019 test year formula rate plan filing.
Several parties intervened in the proceeding and the LPSC staff filed its report of objections/reservations in accordance with the applicable provisions of the formula rate plan. In its report the LPSC staff re-urged reservations with respect to the outstanding issues from the 2017 test year formula rate plan filing and disputed the 78
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Debt instrument, term | 5 | SEC-NUM |
[Table of Contents](#ib0ff9808fe764fdea19589324372f96b_7)Abbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsSeptember 30, 2022(Unaudited)
Note 7 — Incentive Stock Program
In the first nine months of 2022, Abbott granted 2,634,647 stock options, 514,205 restricted stock awards and 5,427,697 restricted stock units under its incentive stock program. At September 30, 2022, approximately 87 million shares were reserved for future grants. Information regarding the number of options outstanding and exercisable at September 30, 2022 is as follows:
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| | | Outstanding | | Exercisable |
| Number of shares | | 29,048,449 | | | 23,310,464 | |
| Weighted average remaining life (years) | | 5.4 | | 4.6 |
| Weighted average exercise price | | $ | 70.22 | | | $ | 59.69 | |
| Aggregate intrinsic value (in millions) | | $ | 901 | | | $ | 890 | |
The total unrecognized share-based compensation cost at September 30, 2022 amounted to approximately $600 million which is expected to be recognized over the next three years.
Note 8 — Debt and Lines of Credit
On March 15, 2022, Abbott repaid the $750 million outstanding principal amount of its 2.55% Notes upon maturity.
Note 9 — Financial Instruments, Derivatives and Fair Value Measures
Certain Abbott foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates primarily for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar. These contracts, with gross notional amounts totaling $7.9 billion at September 30, 2022 and $8.6 billion at December 31, 2021, are designated as cash flow hedges of the variability of the cash flows due to changes in foreign exchange rates and are recorded at fair value. Accumulated gains and losses as of September 30, 2022 will be included in Cost of products sold at the time the products are sold, generally through the next twelve to eighteen months.
Abbott enters into foreign currency forward exchange contracts to manage currency exposures for foreign currency denominated third-party trade payables and receivables, and for intercompany loans and trade accounts payable where the receivable or payable is denominated in a currency other than the functional currency of the entity. For intercompany loans, the contracts require Abbott to sell or buy foreign currencies, primarily European currencies, in exchange for primarily U.S. dollars and other European currencies. For intercompany and trade payables and receivables, the currency exposures are primarily the U.S. dollar and European currencies. At September 30, 2022 and December 31, 2021, Abbott held the gross notional amounts of $10.3 billion and $12.2 billion, respectively, of such foreign currency forward exchange contracts.
Abbott has designated a yen-denominated, 5-year term loan of approximately $413 million and $521 million as of September 30, 2022 and December 31, 2021, respectively, as a hedge of the net investment in certain foreign subsidiaries. The change in the value of the debt, which is due to changes in foreign exchange rates, is recorded in Accumulated other comprehensive income (loss), net of tax.
Abbott is a party to interest rate hedge contracts with notional values totaling approximately $2.9 billion at September 30, 2022 and December 31, 2021 to manage its exposure to changes in the fair value of fixed-rate debt. These contracts are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates. The effect of the hedge is to change a fixed-rate interest obligation to a variable rate for that portion of the debt. Abbott records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount.15
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Common stock, par value (in usd per share) | 0.0001 | SEC-NUM |
[Table of Contents](#i77b271276a234b51923cb690f1158463_7)
ALIGN TECHNOLOGY, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except per share data)(unaudited)
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| | | September 30,2022 | | December 31,2021 |
| ASSETS | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 1,044,523 | | | $ | 1,099,370 | |
| Marketable securities, short-term | | 46,242 | | | 71,972 | |
| Accounts receivable, net of allowance for doubtful accounts of $9,617 and $9,245, respectively | | 859,629 | | | 897,198 | |
| Inventories | | 320,903 | | | 230,230 | |
| Prepaid expenses and other current assets | | 229,283 | | | 195,305 | |
| Total current assets | | 2,500,580 | | | 2,494,075 | |
| Marketable securities, long-term | | 50,256 | | | 125,320 | |
| Property, plant and equipment, net | | 1,199,880 | | | 1,081,926 | |
| Operating lease right-of-use assets, net | | 116,031 | | | 121,257 | |
| Goodwill | | 377,616 | | | 418,547 | |
| Intangible assets, net | | 91,711 | | | 109,709 | |
| Deferred tax assets | | 1,524,584 | | | 1,533,767 | |
| Other assets | | 52,144 | | | 57,509 | |
| Total assets | | $ | 5,912,802 | | | $ | 5,942,110 | |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 138,918 | | | $ | 163,886 | |
| Accrued liabilities | | 383,618 | | | 607,315 | |
| Deferred revenues | | 1,286,867 | | | 1,152,870 | |
| Total current liabilities | | 1,809,403 | | | 1,924,071 | |
| Income tax payable | | 127,059 | | | 118,072 | |
| Operating lease liabilities | | 96,694 | | | 102,656 | |
| Other long-term liabilities | | 185,024 | | | 174,597 | |
| Total liabilities | | 2,218,180 | | | 2,319,396 | |
| Commitments and contingencies (Notes 6 and 7) | | | | |
| Stockholders’ equity: | | | | |
| Preferred stock, $0.0001 par value (5,000 shares authorized; none issued) | | — | | | — | |
| Common stock, $0.0001 par value (200,000 shares authorized; 78,111 and 78,710 issued and outstanding, respectively) | | 8 | | | 8 | |
| Additional paid-in capital | | 1,060,698 | | | 999,006 | |
| Accumulated other comprehensive income (loss), net | | (40,745) | | | 4,326 | |
| Retained earnings | | 2,674,661 | | | 2,619,374 | |
| Total stockholders’ equity | | 3,694,622 | | | 3,622,714 | |
| Total liabilities and stockholders’ equity | | $ | 5,912,802 | | | $ | 5,942,110 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.5
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Common stock value, remaining to be authorized under continuous equity program | 705,961,000 | SEC-NUM |
[Table of](#ia143979d54ef4089bc700f871e6b0e92_7) [Contents](#ia143979d54ef4089bc700f871e6b0e92_7)In July 2020, the Company’s Board of Directors approved a stock repurchase program under which the Company may acquire shares of its common stock in open market or negotiated transactions up to an aggregate purchase price of $500,000,000 (the "2020 Stock Repurchase Program"). Purchases of common stock under the 2020 Stock Repurchase Program may be exercised at the Company’s discretion with the timing and number of shares repurchased depending on a variety of factors, including price, corporate and regulatory requirements and other corporate liquidity requirements and priorities. The 2020 Stock Repurchase Program does not have an expiration date and may be suspended or terminated at any time without prior notice. During the six months ended June 30, 2022, the Company had no repurchases of shares under this program. As of June 30, 2022, the Company had $316,148,000 remaining authorized for purchase under this program.
In May 2019, the Company commenced a fifth continuous equity program ("CEP V") under which the Company may sell (and/or enter into forward sale agreements for the sale of) up to $1,000,000,000 of its common stock from time to time. Actual sales will depend on a variety of factors to be determined by the Company, including market conditions, the trading price of the Company's common stock and the Company's determinations of the appropriate funding sources. The Company engaged sales agents for CEP V who receive compensation of up to 1.5% of the gross sales price for shares sold. The Company expects that, if entered into, it will physically settle each forward sale agreement on one or more dates specified by the Company on or prior to the maturity date of that particular forward sale agreement, in which case the Company will receive aggregate net cash proceeds at settlement equal to the number of shares underlying the particular forward agreement multiplied by the forward sale price. However, the Company may also elect to cash settle or net share settle a forward sale agreement. In connection with each forward sale agreement, the Company will pay the forward seller, in the form of a reduced initial forward sale price, a commission of up to 1.5% of the sales prices of all borrowed shares of common stock sold. During the three and six months ended June 30, 2022, the Company had no sales under this program. In December 2021, the Company entered into a forward contract under CEP V to sell 68,577 shares of common stock for approximate proceeds of $16,000,000 net of offering fees and discounts and based on the initial forward price, with settlement of the forward contract to occur on one or more dates not later than December 31, 2022. The final proceeds will be determined on the date(s) of settlement after adjustments for the Company's dividends and a daily interest factor. As of June 30, 2022, the Company had $705,961,000 remaining authorized for issuance under CEP V, after consideration of the forward contract.
In addition to CEP V, during the three months ended June 30, 2022, the Company completed an underwritten public offering of 2,000,000 shares of its common stock in connection with forward contracts entered into with certain financial institutions acting as forward purchasers. Assuming full physical settlement of the forward contracts, which the Company expects to occur no later than December 31, 2023, the Company will receive approximate proceeds of $494,200,000 net of offering fees and discounts and based on the initial forward price. The final proceeds will be determined on the date(s) of settlement and are subject to certain customary adjustments for the Company's dividends and a daily interest factor during the term of the forward contracts.
5. Investments
Unconsolidated Investments
As of June 30, 2022, the Company had investments in seven unconsolidated real estate entities with ownership interest percentages ranging from 20.0% to 50.0% and other unconsolidated investments including property technology and environmentally focused companies and investment management funds. The Company accounts for its investments in unconsolidated entities under the equity method of accounting or under the measurement alternative with the carrying amount of the investment adjusted to fair value when there is an observable transaction for the same or similar investment of the same issuer indicating a change in fair value. The significant accounting policies of the Company's unconsolidated investments are consistent with those of the Company in all material respects. Certain of these investments are subject to various buy‑sell provisions or other rights which are customary in real estate joint venture agreements. The Company and its partners in these entities may initiate these provisions to either sell the Company's interest or acquire the interest from the Company's partner.
Investments in Consolidated Real Estate Entities
During the six months ended June 30, 2022, the Company acquired two communities:
•Avalon Flatirons, located in Lafayette, CO, which contains 207 apartment homes and 16,000 square feet of commercial space and was acquired for a purchase price of $95,000,000.
•Waterford Court, located in Addison, TX, which contains 196 apartment homes and was acquired for a purchase price of $69,500,000.
The Company accounted for these purchases as asset acquisitions and recorded the acquired assets and assumed liabilities, including identifiable intangibles, at their relative fair values based on the purchase price and acquisition costs incurred. The 14
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Capital contribution | 200 | SEC-NUM |
[Table of Contents](#i82eec5aa49a24290a07e4a9f99c1e608_7) a pre-tax gain on the sale of $428 million, with the related tax expense of $112 million recorded through the income tax provision, in the consolidated statement of income for the year ended December 31, 2020. The pre-tax gain included $176 million related to the remeasurement of the Company’s 40% retained interest based upon the enterprise value of the business. The revenues, expenses and cash flows of the Investment Services business were consolidated into the Company’s financial results through the date of the sale transaction, and are reported within Corporate and Other (see Note 21). In conjunction with the sale transaction, the Company also entered into transition services agreements to provide, at fair value, various administration, business process outsourcing, technical and data center related services for defined periods to Tegra118. On February 2, 2021, Tegra118 completed a merger with a third party, resulting in a dilution of the Company’s ownership interest in the combined new entity, Wealthtech Holdings, LLC, which was subsequently renamed as InvestCloud Holdings, LLC (“InvestCloud”). In connection with the transaction, the Company made an additional capital contribution of $200 million into the combined entity and recognized a pre-tax gain of $28 million within income from investments in unconsolidated affiliates in the consolidated statement of income, with related tax expense of $6 million recorded through the income tax provision, during the year ended December 31, 2021. On June 30, 2021, the Company sold its entire ownership interest in InvestCloud for $466 million, resulting in a pre-tax gain of $33 million recorded within income from investments in unconsolidated affiliates in the consolidated statement of income, with related tax expense of $8 million recorded through the income tax provision, during the year ended December 31, 2021. The Company will continue to provide various technical and data center related services under the terms of a pre-existing transition services agreement with InvestCloud, as described above.5. Discontinued OperationsIn connection with the acquisition of First Data, the Company acquired two businesses, which it intended to sell. In October 2019, the Company completed the sales, at acquired fair value, of these two businesses for aggregate proceeds of $133 million. The sale proceeds are presented within discontinued operations in the consolidated statement of cash flows since the businesses were never considered part of the Company’s ongoing operations. The financial results of these businesses from the date of acquisition were not significant.6. Settlement Assets and Obligations Settlement assets and obligations represent intermediary balances arising from the settlement process which involves the transferring of funds between card issuers, payment networks, merchants and consumers, and collateral amounts held to manage merchant credit risk. The Company records settlement assets and obligations upon processing a payment transaction. Settlement assets represent amounts receivable from agents, bank partners, merchants and from payment networks for submitted merchant transactions, and funds received by the Company in advance of paying to merchants or payees. Settlement obligations represent the unpaid amounts that are due to merchants or payees for their payment transactions and collateral deposits.The principal components of the Company’s settlement assets and obligations were as follows at December 31:
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| (In millions) | 2021 | | 2020 | | |
| Settlement assets | | | | | |
| Cash and cash equivalents | $ | 2,361 | | | $ | 1,650 | | | |
| Receivables | 11,291 | | | 9,871 | | | |
| Total settlement assets | $ | 13,652 | | | $ | 11,521 | | | |
| Settlement obligations | | | | | |
| Payment instruments outstanding | $ | 460 | | | $ | 483 | | | |
| Card settlements and collateral deposits due to merchants | 13,192 | | | 11,038 | | | |
| Total settlement obligations | $ | 13,652 | | | $ | 11,521 | | | |
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The changes in settlement cash and cash equivalents are presented in settlement activity, net within financing activities in the consolidated statements of cash flows.69
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Converted (in dollars per share) | 55.65 | SEC-NUM |
[Table of Contents](#i2ba0bd92bcb14d27a1d59d9667569d45_7)THE ESTÉE LAUDER COMPANIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSGenerally, delivery of shares of the Company’s Class A Common Stock, if any, will be made on September 2, 2025. The PVUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as any delivery of shares of the Company's Class A Common Stock. The aggregate grant date fair value of the PVUs of approximately $20 million was estimated using the Monte Carlo Method, which requires certain assumptions. The significant assumptions used for this award were as follows:
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| Expected volatility | | 31.8 | % |
| Dividend yield | | 0.8 | % |
| Risk-free interest rate | | 0.4 | % |
| Expected term | | 3.3 years |
Share UnitsThe Company grants share units to certain non-employee directors under the Amended and Restated Non-Employee Director Share Incentive Plan. The share units are convertible into shares of the Company’s Class A Common Stock as provided for in that plan. Share units are accompanied by dividend equivalent rights that are converted to additional share units when such dividends are declared.The following is a summary of the status of the Company’s share units as of June 30, 2022 and activity during the fiscal year then ended:
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| (Shares in thousands) | | Shares | | Weighted-AverageGrant DateFair Value Per Share |
| Outstanding at June 30, 2021 | | 141.6 | | | $ | 68.73 | |
| Granted | | 2.2 | | | 332.07 | |
| Dividend equivalents | | 1.0 | | | 293.15 | |
| Converted | | (22.9) | | | 55.65 | |
| Outstanding at June 30, 2022 | | 121.9 | | | 78.01 | |
Cash UnitsCertain non-employee directors defer cash compensation in the form of cash payout share units, which are not subject to the Plans. These share units are classified as liabilities and, as such, their fair value is adjusted to reflect the current market value of the Company’s Class A Common Stock. The Company recorded $(5) million, $29 million and $2 million as compensation expense (income) to reflect additional deferrals and the change in the market value for fiscal 2022, 2021 and 2020, respectively.
DECIEM Stock Options
As a result of the fiscal 2021 acquisition of additional shares of DECIEM, the Company has a stock option plan relating to its majority-owned subsidiary DECIEM (“DECIEM Stock Option Plan”). The DECIEM stock options were issued in replacement of and exchange for certain vested and unvested DECIEM employee stock options previously issued by DECIEM. The DECIEM stock options are subject to the terms and conditions of the DECIEM 2021 Stock Option Plan. As of June 30, 2022, post-combination vested options totaled 92,028 options and post-combination unvested options totaled 2,073 options.
The DECIEM stock options are liability-classified awards as they are expected to be settled in cash and are remeasured to fair value at each reporting date through date of settlement. Total stock-based compensation expense is attributable to the exchange or replacement of and the remaining requisite service period of stock options. Due to a reduction in the fair value of the DECIEM stock options, the total stock option expense for the year ended June 30, 2022 resulted in income of $55 million, net of foreign currency remeasurements. There were no DECIEM stock options exercised during the year ended June 30, 2022.
F-69
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Net deferred gain (loss), net of tax, recorded in AOCI are expected to be reclassified into earnings | 77 | SEC-NUM |
[Table of Contents](#iafeb83384c73449bb49e90c3c5b8201e_7)
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| Fifth Third Bancorp and SubsidiariesNotes to Condensed Consolidated Financial Statements (unaudited) |
The following table reflects the changes in fair value of interest rate contracts, designated as fair value hedges and the changes in fair value of the related hedged items attributable to the risk being hedged, as well as the line items in the Condensed Consolidated Statements of Income in which the corresponding gains or losses are recorded:
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| | Condensed ConsolidatedStatements ofIncome Caption | For the three months endedJune 30, | | For the six months endedJune 30, |
| ($ in millions) | 2022 | 2021 | | 2022 | 2021 |
| Long-term debt: | | | | | | |
| Change in fair value of interest rate swaps hedging long-term debt | Interest on long-term debt | $ | (111) | | 46 | | | (263) | | (99) | |
| Change in fair value of hedged long-term debt attributable to the risk being hedged | Interest on long-term debt | 111 | | (46) | | | 263 | | 99 | |
| Available-for-sale debt and other securities: | | | | | | |
| Change in fair value of interest rate swaps hedging available-for-sale debt and other securities | Interest on securities | — | | — | | | 8 | | — | |
| Change in fair value of hedged available-for-sale debt and other securities attributable to the risk being hedged | Interest on securities | — | | — | | | (8) | | — | |
The following amounts were recorded in the Condensed Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges as of:
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| ($ in millions) | Condensed ConsolidatedBalance Sheets Caption | June 30,2022 | December 31,2021 |
| Long-term debt: | | | |
| Carrying amount of the hedged items | Long-term debt | $ | 3,072 | | 2,339 | |
| Cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged items | Long-term debt | 133 | | 396 | |
| Available-for-sale debt and other securities: | | | |
| Carrying amount of the hedged items(a) | Available-for-sale debt and other securities | — | | 465 | |
| Cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged items | Available-for-sale debt and other securities | — | | (8) | |
| Cumulative amount of fair value hedging adjustments remaining for hedged items for which hedge accounting has been discontinued | Available-for-sale debt and other securities | (15) | | — | |
(a)The carrying amount represents the amortized cost basis of the hedged items (which excludes unrealized gains and losses) plus the fair value hedging adjustments.
Cash Flow HedgesThe Bancorp may enter into interest rate swaps to convert floating-rate assets and liabilities to fixed rates or to hedge certain forecasted transactions for the variability in cash flows attributable to the contractually specified interest rate. The assets or liabilities may be grouped in circumstances where they share the same risk exposure that the Bancorp desires to hedge. The Bancorp may also enter into interest rate caps and floors to limit cash flow variability of floating-rate assets and liabilities. As of June 30, 2022, all hedges designated as cash flow hedges were assessed for effectiveness using regression analysis. The entire change in the fair value of the interest rate swap included in the assessment of hedge effectiveness is recorded in AOCI and reclassified from AOCI to current period earnings when the hedged item affects earnings. As of June 30, 2022, the maximum length of time over which the Bancorp is hedging its exposure to the variability in future cash flows is 114 months.
Reclassified gains and losses on interest rate contracts related to commercial and industrial loans are recorded within interest income in the Condensed Consolidated Statements of Income. As of June 30, 2022 and December 31, 2021, respectively, $63 million of net deferred losses, net of tax, and $353 million of net deferred gains, net of tax, on cash flow hedges were recorded in AOCI in the Condensed Consolidated Balance Sheets. As of June 30, 2022, $77 million in net unrealized losses, net of tax, recorded in AOCI are expected to be reclassified into earnings during the next 12 months. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations or the addition of other hedges subsequent to June 30, 2022.
During both the three and six months ended June 30, 2022 and 2021, there were no gains or losses reclassified from AOCI into earnings associated with the discontinuance of cash flow hedges because it was probable that the original forecasted transaction would no longer occur by the end of the originally specified time period or within the additional period of time as defined by U.S. GAAP.
102
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Auditor Firm ID | 238 | SEC-NUM |
(5)Includes outstanding awards of 20,696,747 stock options, which have a weighted-average exercise price of $61.14 and a weighted-average remaining term of 5.9 years, 1,797,696 shares of common stock issuable upon vesting of restricted stock units, and 731,651 shares of common stock reserved for issuance in connection with performance share unit grants.Refer to information under the captions entitled “Ownership of Baxter Stock — Security Ownership by Directors and Executive Officers” and “— Security Ownership by Certain Beneficial Owners” in the Proxy Statement, all of which information is incorporated herein by reference.Item 13. Certain Relationships and Related Transactions, and Director Independence.Refer to the information under the first paragraph of the caption entitled “Corporate Governance—at Baxter International Inc.—Board of Directors” and the captions entitled “Corporate Governance at Baxter International Inc.—Board of Directors—Director Independence” and “Corporate Governance at Baxter International Inc.—Other Corporate Governance Information—Certain Relationships and Related Person Transactions” in the Proxy Statement, all of which information is incorporated herein by reference.Item 14. Principal Accountant Fees and Services.Refer to the information under the caption entitled “Audit Matters — Audit and Non-Audit Fees” and “—Pre-Approval of Audit and Permissible Non-Audit Fees” in the Proxy Statement, all of which information is incorporated herein by reference.
PART IVItem 15. Exhibits and Financial Statement SchedulesThe following documents are filed as a part of this report:
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| (1) | Financial Statements: | |
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| | [Consolidated Balance Sheets](#i93d397774bdd4b7396371ce9bc3696a1_70) | 48 | |
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| | [Consolidated Statements of Income](#i93d397774bdd4b7396371ce9bc3696a1_73) | 49 | |
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| | [Consolidated Statements of Comprehensive Income](#i93d397774bdd4b7396371ce9bc3696a1_76) | 50 | |
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| | [Consolidated Statements of Changes in Equity](#i93d397774bdd4b7396371ce9bc3696a1_82) | 51 | |
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| | [Consolidated Statements of Cash Flows](#i93d397774bdd4b7396371ce9bc3696a1_85) | 52 | |
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| | [Notes to Consolidated Financial Statements](#i93d397774bdd4b7396371ce9bc3696a1_88) | 54 | |
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| | [Report of Independent Registered Public Accounting Firm (PCAOB ID](#i93d397774bdd4b7396371ce9bc3696a1_145)238[)](#i93d397774bdd4b7396371ce9bc3696a1_145) | 105 | |
| | | |
| (2) | Schedules required by Article 12 of Regulation S-X: | |
| | | |
| | [Schedule II — Qualifying and Valuation accounts for each of the three years in the period ended December 31, 202](#i93d397774bdd4b7396371ce9bc3696a1_184)[1](#i93d397774bdd4b7396371ce9bc3696a1_184) | 117 | |
| | | |
| | All other schedules have been omitted because they are not applicable or not required. | |
| | | |
| (3) | Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index, which is incorporated herein by reference. Exhibits in the Exhibit Index marked with a “C” in the left margin constitute management contracts or compensatory plans or arrangements contemplated by Item 15(b) of Form 10-K. | |
Item 16. Form 10-K Summary.Not applicable.111
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Disposal Group, Deferred Gain on Disposal | 75 | SEC-NUM |
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| [Table of Contents](#i35a0317244714ddbbfcfc1f7731c8932_7) | emn-20220630_g1.jpg | |
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSASU 2022-01 Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method: The FASB issued this update in March 2022. This ASU clarifies the guidance in Accounting Standards Codification ("ASC") 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets. This ASU amends the guidance in ASU 2017-123 (released on August 28, 2017) that, among other things, established the "last-of-layer" method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the "portfolio layer" method and addresses feedback from stakeholders regarding its application. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those years. Management does not expect that changes required by the new standard will have a significant impact on the Company's financial statements and related disclosures.
ASU 2022-02 Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures: The FASB issued this update in March 2022. This ASU updates the requirements for accounting for credit losses under ASC 326, eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310-40, and enhances creditors' disclosure requirements related to loan refinancings and restructurings for borrowers experiencing financial difficulty. This ASU also amends the guidance on "vintage disclosures" to require disclosure of gross write-offs by year of origination. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those years. Management does not expect that changes required by the new standard will have a significant impact on the Company's financial statements and related disclosures.
ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions: The FASB issued this update in June 2022, which states that when measuring the fair value of an asset or a liability, a reporting entity should consider the characteristics of the asset or liability, including restrictions on the sale of the asset or liability, if a market participant also would take those characteristics into account. Key to that determination is the unit of account for the asset or liability being measured at fair value. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is continuing to assess the impact on the Company's financial statements and related disclosures.
Working Capital Management and Off Balance Sheet Arrangements
The Company has an off balance sheet, uncommitted accounts receivable factoring program under which entire invoices may be sold, without recourse, to third-party financial institutions. Under these agreements, the Company sells the invoices at face value, less a transaction fee, which substantially equals the carrying value and fair value with no gain or loss recognized, and no credit loss exposure is retained. Available capacity under these agreements, which the Company uses as a routine source of working capital funding, is dependent on the level of accounts receivable eligible to be sold and the financial institutions' willingness to purchase such receivables. In addition, certain agreements also require that the Company continue to service, administer, and collect the sold accounts receivable at market rates. The total amounts sold under the program in second quarter 2022 and 2021 were $637 million and $298 million, respectively, and $1,139 million and $587 million in first six months 2022 and 2021, respectively.
2.DIVESTITURES
Rubber Additives Divestiture
On November 1, 2021, the Company and certain of its subsidiaries completed the sale of its rubber additives (including Crystex™ insoluble sulfur and Santoflex™ antidegradants) and other product lines and related assets and technology of the global tire additives business ("rubber additives") of its Additives & Functional Products ("AFP") segment. The sale did not include the Eastman Impera™ and other performance resins product lines of the tire additives business. The Company is providing certain business transition and post-closing services to the buyer on agreed terms. The business was not reported as a discontinued operation because the sale did not have a major effect on the Company's operations and financial results.
The total estimated consideration, after estimates of contingent consideration and post-closing adjustments and ongoing agreements through October 2027, was $687 million. The additional amount of consideration of up to $75 million is to be paid based on performance of divested rubber additives through December 2023. The divestiture resulted in a $552 million loss (including cumulative translation adjustment liquidation of $23 million and certain costs to sell of $10 million).
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Transaction price allocated to remaining performance obligations | 7.8 | SEC-NUM |
As of December 31, 2021, we had $7.8 billion of transaction price allocated to remaining performance obligations related to executed contracts with an original duration of one year or more, which are primarily included in the Americas segment. Some contracts in the United States included in this amount contain index-dependent price increases, which are not known at this time. We expect to recognize approximately 35% of this amount as revenue in 2022, 30% in 2023, 15% in each of 2024 and 2025, and 5% in 2026.Significant JudgmentsRevenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration primarily related to rebates and wholesaler chargebacks. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are included in accrued expenses and other current liabilities and accounts receivable, net on the consolidated balance sheets. Management's estimates take into consideration historical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract using the expected value method. The amount of variable consideration included in the net sales price is limited to the amount that is probable not to result in a significant reversal in the amount of the cumulative revenue recognized in a future period. Revenue recognized in the years ended December 31, 2021, 2020 and 2019 related to performance obligations satisfied in prior periods was not material. Additionally, our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately and determining the allocation of the transaction price may require significant judgment.Practical Expedients We apply a practical expedient to expense as incurred costs to obtain a contract with a customer when the amortization period would have been one year or less. We do not disclose the value of the transaction price that is allocated to unsatisfied performance obligations for contracts with an original expected length of less than one year. We have elected to use the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component if it is expected, at contract inception, that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Additionally, all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer are excluded from revenue.Accounts Receivable and Allowance for Doubtful AccountsIn the normal course of business, we provide credit to our customers, perform credit evaluations of these customers and maintain reserves for potential credit losses. In determining the amount of the allowance for doubtful accounts, we consider, among other items, historical credit losses, the past-due status of receivables, payment histories, other customer-specific information, current economic conditions and reasonable and supportable future forecasts. Receivables are written off when we determine they are uncollectible. The following table summarizes the allowance for doubtful accounts.
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| years ended December 31(in millions) | 2021 | 2020 |
| Balance at beginning of period | $ | 125 | | $ | 112 | |
| Acquisition | 13 | | — | |
| Adoption of new accounting standard | — | | 4 | |
| Charged to costs and expenses | (2) | | 11 | |
| Write-offs | (5) | | (4) | |
| Currency translation adjustments | (9) | | 2 | |
| | | |
| Balance at end of period | $ | 122 | | $ | 125 | |
Shipping and Handling CostsShipping costs, which are costs incurred to physically move product from our premises to the customer’s premises, are classified as selling, general and administrative (SG&A) expenses. Handling costs, which are costs incurred to 54
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Total future lease payments receivable | 36,462 | SEC-NUM |
[Table of Contents](#i988317c7021a4a8fa66f2208a2958f7e_10)
Supplemental cash flow information related to leases as of July 31, 2022 were as follows (In thousands):
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| | | | Year Ended July 31, |
| (In thousands) | | 2022 | | 2021 | | |
| Cash paid for amounts included in the measurement of lease liabilities | | | | | | |
| | Operating cash flows related to operating leases | | $ | 26,620 | | | $ | 28,576 | | | |
| | Operating cash flows related to finance leases | | 5 | | | 65 | | | |
| | Financing cash flows related to finance leases | | 530 | | | 1,118 | | | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | | 24,217 | | | 41,770 | | | |
| Right-of-use assets obtained in exchange for new finance lease liabilities | | — | | | — | | | |
The annual maturities of the Company’s lease liabilities as of July 31, 2022 were as follows:
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| Fiscal year (In thousands) | | Finance leases | | Operating leases |
| 2023 | | $ | 24 | | | $ | 24,650 | |
| 2024 | | 13 | | | 20,119 | |
| 2025 | | — | | | 17,683 | |
| 2026 | | — | | | 14,403 | |
| 2027 | | — | | | 10,428 | |
| Thereafter | | — | | | 48,447 | |
| Total future lease commitments | | $ | 37 | | | $ | 135,730 | |
| Less: imputed interest | | (1) | | | (18,289) | |
| Present value of lease liabilities | | $ | 36 | | | $ | 117,441 | |
Leases - Lessor
The Company’s lessor arrangements include certain facilities and various land locations, of which each qualifies as an operating lease. Certain leases also contain escalation clauses and renewal option clauses calling for increased rents. Where a lease contains an escalation clause or a concession, such as a rent holiday or tenant improvement allowance, the Company includes these items in the determination of the straight-line rental income. The effects of these escalation clauses or concessions have been reflected in lease payments receivable on a straight-line basis over the expected lease term and any variable lease income subsequent to establishing the receivable will be recognized as earned.
Future lease payments receivable under operating leases with terms greater than one year as of July 31, 2022 were as follows:
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| Fiscal year (In thousands) | | Operating leases |
| 2023 | | $ | 5,671 | |
| 2024 | | 5,533 | |
| 2025 | | 5,490 | |
| 2026 | | 5,194 | |
| 2027 | | 5,209 | |
| Thereafter | | 9,365 | |
| Total future lease payments receivable | | $ | 36,462 | |
The cost of the leased space was $51.2 million and $55.5 million as of July 31, 2022 and 2021, respectively. The accumulated depreciation associated with the leased assets was $2.8 million and $1.9 million as of July 31, 2022 and 2021, respectively. Both the leased assets and accumulated depreciation are included in Property and equipment, net on the consolidated balance sheet. Rental income from these operating leases was $14.8 million and $14.8 million for the years ended July 31, 2022 and 2021, respectively, and is included within Service revenues on the consolidated statements of income.
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Current liabilities | 3 | SEC-NUM |
The BCP Business Combination was completed on February 22, 2022. As consideration for the contribution of the Contributed Interests, ALTM issued 50 million shares of Class C Common Stock (and Altus Midstream LP issued a corresponding number of common units) to BCP’s unitholders, which are principally funds affiliated with Blackstone and I Squared Capital. ALTM’s stockholders continued to hold their existing shares of Common Stock. As a result of the transaction, the Contributor, or its designees, collectively owned approximately 75 percent of the issued and outstanding shares of ALTM Common Stock. Apache Midstream LLC, a wholly owned subsidiary of APA, which owned approximately 79 percent of the issued and outstanding shares of ALTM Common Stock prior to the BCP Business Combination, owned approximately 20 percent of the issued and outstanding shares of ALTM Common Stock after the transaction closed.As a result of the BCP Business Combination, the Company deconsolidated ALTM on February 22, 2022 and recognized a gain of approximately $609 million that reflects the difference of the Company’s share of ALTM’s deconsolidated balance sheet and the fair value of its approximate 20 percent retained ownership in the combined entity. A summary of components of the gain, including the ALTM balance sheet amounts deconsolidated at the time of close, is included below:
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| | | As of February 22, 2022 |
| | | (In millions) |
| | | |
| Fair value of Kinetik Class A Common Stock held by Company | | $ | 802 | |
| | | |
| ASSETS: | | |
| Cash and cash equivalents | | $ | 143 | |
| Other current assets | | 29 | |
| Property and equipment, net | | 184 | |
| Equity method interests | | 1,367 | |
| Other noncurrent assets | | 12 | |
| Total assets deconsolidated | | $ | 1,735 | |
| | | |
| LIABILITIES: | | |
| Current liabilities | | $ | 3 | |
| Long-term debt | | 657 | |
| Other noncurrent liabilities | | 168 | |
| Total liabilities deconsolidated | | $ | 828 | |
| | | |
| NONCONTROLLING INTERESTS: | | |
| Redeemable noncontrolling interest preferred unit limited partners | | $ | 642 | |
| Noncontrolling interest-Altus | | 72 | |
| Total noncontrolling interests deconsolidated | | $ | 714 | |
| | | |
| Net effect of deconsolidating balance sheet | | $ | (193) | |
| | | |
| Gain on deconsolidation of ALTM | | $ | 609 | |
| | | |
During the first quarter of 2022, the Company sold four million of its shares in Kinetik for cash proceeds of $224 million and recognized a loss of $25 million, including transaction fees. Refer to [Note 6—Equity Method Interests](#i28a24ff9302249c2abf373774f12d90c_61) for further detail. In connection with this secondary offering, the Company has agreed that within the next 24 months, it will invest a minimum of $100 million of these proceeds for new well drilling and completion activity at the Alpine High play in the Delaware Basin, where Kinetik has exclusive gas and NGL gathering and processing rights.
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Stock options, intrinsic value, expected to vest | 42 | SEC-NUM |
Preferred stock outstanding comprises $5,694 million of GE Series D preferred stock, in addition to $245 million of existing GE Series A, B and C preferred stock. The total carrying value of GE preferred stock at December 31, 2021 was $5,935 million and will increase to $5,940 million by the respective call dates through periodic accretion. Dividends on GE preferred stock are payable semi-annually in June and December and accretion is recorded on a quarterly basis. Dividends on GE preferred stock totaled $237 million, including cash dividends of $220 million, $474 million, including cash dividends of $295 million, and $460 million, including cash dividends of $295 million, for the years ended December 31, 2021, 2020 and 2019, respectively. On January 21, 2021, the GE Series D preferred stock became callable and its dividends converted from 5% fixed rate to 3-month LIBOR plus 3.33%. As of the filing date of this Form 10-K for the year ended December 31, 2021, the GE Series D preferred stock has not been called.
GE has 50 million authorized shares of preferred stock ($1.00 par value), of which 5,939,875 shares are outstanding as of December 31, 2021, 2020 and 2019. GE's authorized common stock consists of 1,650 million shares having a par value of $0.01 each, with 1,462 million shares issued. To facilitate settlement of employee compensation programs, we repurchased shares of 0.5 million and 0.1 million, for a total of $35.8 million and $15.3 million for the years ended December 31, 2021 and 2020, respectively.
Redeemable noncontrolling interests, presented within All other liabilities in our Statement of Financial Position, include common shares issued by our affiliates that are redeemable at the option of the holder of those interests and amounted to $148 million and $487 million as of December 31, 2021 and 2020, respectively. The decrease of $339 million was primarily due to a redeemable noncontrolling interest in our Aviation segment, which was converted into a mandatorily redeemable instrument and reclassified to All other current liabilities.
NOTE 16. SHARE-BASED COMPENSATION. We grant stock options, restricted stock units and performance share units to employees under the 2007 Long-Term Incentive Plan. Grants made under all plans must be approved by the Management Development and Compensation Committee of GE’s Board of Directors, which is composed entirely of independent directors. We record compensation expense for awards expected to vest over the vesting period. We estimate forfeitures based on experience and adjust expense to reflect actual forfeitures. When options are exercised, restricted stock units vest, and performance share awards are earned, we issue shares from treasury stock. Where applicable, the disclosures below have been adjusted to reflect the 1-for-8 reverse stock split effective July 30, 2021.
Stock options provide employees the opportunity to purchase GE shares in the future at the market price of our stock on the date the award is granted (the strike price). The options become exercisable over the vesting period, typically three years, and expire 10 years from the grant date if not exercised. Restricted stock units (RSU) provide an employee with the right to receive one share of GE stock when the restrictions lapse over the vesting period. Upon vesting, each RSU is converted into one share of GE common stock for each unit. Performance share units (PSU) and performance shares provide an employee with the right to receive shares of GE stock based upon achievement of certain performance or market metrics. Upon vesting, each PSU earned is converted into shares of GE common stock. We value stock options using a Black-Scholes option pricing model, RSUs using market price on grant date, and PSUs and performance shares using market price on grant date and a Monte Carlo simulation as needed based on performance metrics.
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| WEIGHTED AVERAGE GRANT DATE FAIR VALUE | | 2021 | 2020 | 2019 |
| Stock options | | $ | 40.64 | | $ | 28.64 | | $ | 27.84 | |
| RSUs | | 104.98 | | 63.28 | | 80.96 | |
| PSUs/Performance shares | | 108.51 | | 63.28 | | 85.84 |
Key assumptions used in the Black-Scholes valuation for stock options include: risk free rates of 1.1%, 1.0%, and 2.5%, dividend yields of 0.3%, 0.4%, and 0.4%, expected volatility of 40%, 36%, and 33%, expected lives of 6.2 years, 6.1 years, and 6.0 years, and strike prices of $105.12, $84.48, and $80.00 for 2021, 2020, and 2019, respectively.
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| STOCK-BASED COMPENSATION ACTIVITY | Stock options | | RSUs |
| Shares (in thousands) | Weighted average exercise price | Weighted average contractual term (in years) | Intrinsic value (in millions) | | Shares (in thousands) | Weighted average grant date fair value | Weighted average contractual term (in years) | Intrinsic value (in millions) |
| Outstanding at January 1, 2021 | 50,046 | | $ | 145.26 | | | | | 7,561 | | $ | 72.35 | | | |
| Granted | 494 | | 105.12 | | | | | 2,972 | | 104.98 | | | |
| Exercised | (1,252) | | 74.19 | | | | | (1,639) | | 97.91 | | | |
| Forfeited | (933) | | 80.31 | | | | | (837) | | 82.81 | | | |
| Expired | (9,941) | | 159.46 | | | | | N/A | N/A | | |
| Outstanding at December 31, 2021 | 38,414 | | $ | 144.97 | | 4.2 | $ | 193 | | | 8,057 | | $ | 77.90 | | 1.6 | $ | 761 | |
| Exercisable at December 31, 2021 | 33,551 | | 153.11 | | 3.6 | 148 | | | N/A | N/A | N/A | N/A |
| Expected to vest | 4,557 | | $ | 88.70 | | 7.9 | $ | 42 | | | 6,830 | | $ | 78.75 | | 1.5 | $ | 645 | |
Total outstanding PSUs and performance shares at December 31, 2021 were 3,215 thousand shares with a weighted average fair value of $75.66. The intrinsic value and weighted average contractual term of PSUs and performance shares outstanding were $304 million and 2.3 years, respectively. 2021 FORM 10-K 75
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Estimated recognition of deferred revenue | 312 | SEC-NUM |
[Table of Contents](#i2ba0bd92bcb14d27a1d59d9667569d45_7)THE ESTÉE LAUDER COMPANIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTE 14 – REVENUE RECOGNITION
For further information on the Company's policies relating to revenue recognition and accounts receivable see Note 2 – Summary of Significant Accounting Policies.
Accounts ReceivableAccounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $27 million and $40 million as of June 30, 2022 and June 30, 2021, respectively. Payment terms are short-term in nature and are generally less than one year.
Changes in the allowance for credit losses are as follows:
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| | | June 30 |
| (In millions) | | 2022 | | 2021 |
| Allowance for credit losses, beginning of period | | $ | 20 | | | $ | 36 | |
| ASC 326 cumulative effect adjustment (pre-tax) | | — | | | 4 | |
| Adjustment for expected credit losses | | (3) | | | (8) | |
| Write-offs, net & other | | (7) | | | (12) | |
| Allowance for credit losses, end of period | | $ | 10 | | | 20 | |
As a result of the adoption of ASC 326, the Company recorded a cumulative adjustment of approximately $3 million, net of tax, as a reduction to its fiscal 2021 opening balance of retained earnings relating to its trade receivables.The remaining balance of the allowance for doubtful accounts of $17 million, as of June 30, 2022, relates to non-credit losses, which are primarily due to customer deductions.Deferred RevenueChanges in deferred revenue are as follows:
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| | | June 30 |
| (In millions) | | 2022 | | 2021 |
| Deferred revenue, beginning of period | | $ | 371 | | | $ | 279 | |
| Revenue recognized that was included in the deferred revenue balance at the beginning of the period | | (285) | | | (201) | |
| Revenue deferred during the period | | 284 | | | 294 | |
| Other | | (8) | | | (1) | |
| Deferred revenue, end of period | | $ | 362 | | | $ | 371 | |
Transaction Price Allocated to the Remaining Performance Obligations
At June 30, 2022, the combined estimated revenue expected to be recognized in the next twelve months related to performance obligations for customer loyalty programs, gift with purchase promotions, purchase with purchase promotions and gift card liabilities that are unsatisfied (or partially unsatisfied) is $312 million. The remaining balance of deferred revenue at June 30, 2022 will be recognized beyond the next twelve months.
NOTE 15 – PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANSThe Company maintains pension plans covering substantially all of its full-time employees for its U.S. operations and a majority of its international operations. Several plans provide pension benefits based primarily on years of service and employees’ earnings. In certain instances, the Company adjusts benefits in connection with international employee transfers.F-55
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Revenue, remaining performance obligation | 1,442.5 | SEC-NUM |
[Table of Contents](#i77b271276a234b51923cb690f1158463_7)
Prepaid expenses and other current assets consist of the following (in thousands):
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| | | September 30,2022 | | December 31,2021 |
| Value added tax receivables | | $ | 132,070 | | | $ | 93,610 | |
| Prepaid expenses | | 50,567 | | | 70,218 | |
| Other current assets | | 46,646 | | | 31,477 | |
| Total prepaid expenses and other current assets | | $ | 229,283 | | | $ | 195,305 | |
Accrued liabilities consist of the following (in thousands):
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| | | September 30,2022 | | December 31,2021 |
| Accrued payroll and benefits | | $ | 137,754 | | | $ | 288,355 | |
| Accrued expenses | | 66,859 | | | 67,169 | |
| Accrued sales and marketing expenses | | 35,661 | | | 41,387 | |
| Current operating lease liabilities | | 24,173 | | | 22,719 | |
| Accrued property, plant and equipment | | 22,648 | | | 46,561 | |
| Accrued professional fees | | 21,260 | | | 31,457 | |
| | | | | |
| Other accrued liabilities | | 75,263 | | | 109,667 | |
| Total accrued liabilities | | $ | 383,618 | | | $ | 607,315 | |
Accrued warranty, which is included in the "Other accrued liabilities" category of the accrued liabilities table above, consists of the following activity (in thousands):
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| | | Nine Months EndedSeptember 30, |
| | | 2022 | | 2021 |
| Balance at beginning of period | | $ | 16,169 | | | $ | 12,615 | |
| Charged to cost of net revenues | | 11,359 | | | 13,400 | |
| Actual warranty expenditures | | (11,109) | | | (11,040) | |
| Balance at end of period | | $ | 16,419 | | | $ | 14,975 | |
Deferred revenues consist of the following (in thousands):
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| | | September 30,2022 | | December 31,2021 |
| Deferred revenues - current | | $ | 1,286,867 | | | $ | 1,152,870 | |
| Deferred revenues - long-term 1 | | $ | 152,070 | | | $ | 136,684 | |
1 Included in Other long-term liabilities within our Condensed Consolidated Balance Sheet
During the three months ended September 30, 2022 and 2021, we recognized $890.3 million and $1,015.9 million of net revenues, respectively, of which $156.5 million and $122.2 million was included in the deferred revenues balance at December 31, 2021 and 2020, respectively.
During the nine months ended September 30, 2022 and 2021, we recognized $2,833.1 million and $2,921.5 million of net revenues, respectively, of which $519.8 million and $382.4 million was included in the deferred revenues balance at December 31, 2021 and 2020, respectively.
Our unfulfilled performance obligations, including deferred revenues and backlog, as of September 30, 2022 were $1,442.5 million. These performance obligations are expected to be fulfilled over six months to five years.
Note 4. Goodwill and Intangible Assets
During the three months ended September 30, 2022, we completed an immaterial business combination which increased goodwill and existing technology intangible assets.15
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Line of Credit Facility, Additional Borrowing Capacity | 1 | SEC-NUM |
[Table of Contents](#i5ec3aabfaa534f9c8fa2d2a5b7677d19_7)
provisions from the May 2020 amendment that had increased the leverage ratio maintenance covenant from 3.5 to 1.0 to 4.5 to 1.0 until July 1, 2021 and restricted dividends and other payments on equity, and (4) included a financial maintenance covenant that requires the Company to maintain total net leverage (as calculated in accordance with the Credit Agreement) of less than 3.5 to 1.0 (or 4.0 to 1.0 for four full fiscal quarters following completion of material acquisitions, as defined in the Credit Agreement). Losses on modification of debt totaled $1 million and $4 million during the years ended December 31, 2021 and 2020, respectively, related to the June 2021 amendment and May 2020 amendment. Aptiv paid amendment fees of $6 million and $18 million during the years ended December 31, 2021 and 2020, respectively, which are reflected as financing activities in the consolidated statements of cash flows.The Tranche A Term Loan and the Revolving Credit Facility mature on June 24, 2026. Beginning on September 30, 2022, Aptiv is obligated to make quarterly principal payments on the Tranche A Term Loan according to the amortization schedule in the Credit Agreement. The Credit Agreement also contains an accordion feature that permits Aptiv to increase, from time to time, the aggregate borrowing capacity under the Credit Agreement by up to an additional $1 billion upon Aptiv’s request, the agreement of the lenders participating in the increase, and the approval of the Administrative Agent.As of December 31, 2021, Aptiv had no amounts outstanding under the Revolving Credit Facility and less than $1 million in letters of credit were issued under the Credit Agreement. Letters of credit issued under the Credit Agreement reduce availability under the Revolving Credit Facility.Loans under the Credit Agreement bear interest, at Aptiv’s option, at either (a) the Administrative Agent’s Alternate Base Rate (“ABR” as defined in the Credit Agreement) or (b) the London Interbank Offered Rate (the “Adjusted LIBO Rate” as defined in the Credit Agreement) (“LIBOR”) plus in either case a percentage per annum as set forth in the table below (the “Applicable Rate”). The June 2021 amendment also contains provisions to facilitate the replacement of the LIBOR-based rate with a Secured Overnight Financing Rate (“SOFR”) based rate upon the discontinuation or unavailability of LIBOR. The Applicable Rates under the Credit Agreement on the specified dates are set forth below:
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| | December 31, 2021 | | December 31, 2020 |
| | LIBOR plus | | ABR plus | | LIBOR plus | | ABR plus |
| Revolving Credit Facility | 1.10 | % | | 0.10 | % | | 1.10 | % | | 0.10 | % |
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| Tranche A Term Loan | 1.125 | % | | 0.125 | % | | 1.25 | % | | 0.25 | % |
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Under the June 2021 amendment, the Applicable Rate under the Credit Agreement, as well as the facility fee, may increase or decrease from time to time based on changes in the Company’s credit ratings and whether the Company achieves or fails to achieve certain sustainability-linked targets with respect to greenhouse gas emissions and workplace safety. Such adjustments may be up to 0.04% per annum on interest rate margins on the Revolving Credit Facility, 0.02% per annum on interest rate margins on the Tranche A Term Loan and up to 0.01% per annum on the facility fee. Accordingly, the interest rate is subject to fluctuation during the term of the Credit Agreement based on changes in the ABR, LIBOR, changes in the Company’s corporate credit ratings or whether the Company achieves or fails to achieve its sustainability-linked targets. The Credit Agreement also requires that Aptiv pay certain facility fees on the Revolving Credit Facility, which are also subject to adjustment based on the sustainability-linked targets as described above, and certain letter of credit issuance and fronting fees.The interest rate period with respect to LIBOR interest rate options can be set at one-, three-, or six-months as selected by Aptiv in accordance with the terms of the Credit Agreement (or other period as may be agreed by the applicable lenders). Aptiv may elect to change the selected interest rate option in accordance with the provisions of the Credit Agreement. As of December 31, 2021, Aptiv selected the one-month LIBOR interest rate option on the Tranche A Term Loan, and the rate effective as of December 31, 2021, as detailed in the table below, was based on the Company’s current credit rating and the Applicable Rate for the Credit Agreement:
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| | | | Borrowings as of | | |
| | | | December 31, 2021 | | Rates effective as of |
| | Applicable Rate | | (in millions) | | December 31, 2021 |
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| Tranche A Term Loan | LIBOR plus 1.125% | | $ | 313 | | | 1.25 | % |
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Borrowings under the Credit Agreement are prepayable at Aptiv’s option without premium or penalty.The Credit Agreement contains certain covenants that limit, among other things, the Company’s (and the Company’s subsidiaries’) ability to incur certain additional indebtedness or liens or to dispose of substantially all of its assets. In addition, under the June 2021 amendment, the Credit Agreement requires that the Company maintain a consolidated leverage ratio (the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, each as defined in the Credit Agreement) of not more than 85
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Total operating lease payments | 397 | SEC-NUM |
[Table of Contents](#iafeb83384c73449bb49e90c3c5b8201e_7)
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| Fifth Third Bancorp and SubsidiariesNotes to Condensed Consolidated Financial Statements (unaudited) |
7. Bank Premises and EquipmentThe following table provides a summary of bank premises and equipment as of:
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| ($ in millions) | June 30,2022 | December 31,2021 |
| Equipment | $ | 2,422 | | 2,392 | |
| Buildings(a) | 1,660 | | 1,668 | |
| Land and improvements(a) | 648 | | 645 | |
| Leasehold improvements | 526 | | 517 | |
| Construction in progress(a) | 93 | | 84 | |
| Bank premises and equipment held for sale: | | |
| Land and improvements | 18 | | 18 | |
| Buildings | 6 | | 6 | |
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| Accumulated depreciation and amortization | (3,255) | | (3,210) | |
| Total bank premises and equipment | $ | 2,118 | | 2,120 | |
(a)Buildings, land and improvements and construction in progress included $33 and $39 associated with parcels of undeveloped land intended for future branch expansion at June 30, 2022 and December 31, 2021, respectively.
The Bancorp monitors changing customer preferences associated with the channels it uses for banking transactions to evaluate the efficiency, competitiveness and quality of the customer service experience in its consumer distribution network. As part of this ongoing assessment, the Bancorp may determine that it is no longer fully committed to maintaining full-service banking centers at certain locations. Similarly, the Bancorp may also determine that it is no longer fully committed to building banking centers on certain parcels of land which had previously been held for future branch expansion. The Bancorp closed a total of 41 banking centers throughout its footprint during the six months ended June 30, 2022.
The Bancorp performs assessments of the recoverability of long-lived assets when events or changes in circumstances indicate that their carrying values may not be recoverable. Impairment losses associated with such assessments and lower of cost or market adjustments were $1 million and $2 million for the three months ended June 30, 2022 and 2021, respectively, and $1 million and $4 million for the six months ended June 30, 2022 and 2021, respectively. The recognized impairment losses were recorded in other noninterest income in the Condensed Consolidated Statements of Income.
8. Operating Lease EquipmentOperating lease equipment was $600 million and $616 million at June 30, 2022 and December 31, 2021, respectively, net of accumulated depreciation of $328 million and $304 million at June 30, 2022 and December 31, 2021, respectively. The Bancorp recorded lease income of $36 million and $39 million relating to lease payments for operating leases in leasing business revenue in the Condensed Consolidated Statements of Income during the three months ended June 30, 2022 and 2021, respectively, and $72 million and $78 million during the six months ended June 30, 2022 and 2021, respectively. Depreciation expense related to operating lease equipment was $30 million and $31 million during the three months ended June 30, 2022 and 2021, respectively, and $59 million and $64 million during the six months ended June 30, 2022 and 2021, respectively. The Bancorp received payments of $72 million and $80 million related to operating leases during the six months ended June 30, 2022 and 2021, respectively.
The Bancorp performs assessments of the recoverability of long-lived assets when events or changes in circumstances indicate that their carrying values may not be recoverable. As a result of these recoverability assessments, the Bancorp recognized an immaterial amount of impairment losses associated with operating lease assets during both the three months ended June 30, 2022 and 2021, and recognized $2 million and $25 million of impairment losses during the six months ended June 30, 2022 and 2021, respectively. The recognized impairment losses were recorded in leasing business revenue in the Condensed Consolidated Statements of Income.
The following table presents future lease payments receivable from operating leases for the remainder of 2022 through 2027 and thereafter:
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| As of June 30, 2022 ($ in millions) | Undiscounted Cash Flows |
| Remainder of 2022 | $ | 69 | |
| 2023 | 119 | |
| 2024 | 83 | |
| 2025 | 57 | |
| 2026 | 35 | |
| 2027 | 15 | |
| Thereafter | 19 | |
| Total operating lease payments | $ | 397 | |
90
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Total Number of apartment homes in multifamily properties upon completion of development | 2,219 | SEC-NUM |
[Table of Contents](#ie7fd49285ee64ca9b19be8c003cdb9a8_7)CAMDEN PROPERTY TRUSTNotes to Condensed Consolidated Financial Statements(Unaudited)
1. Description of BusinessBusiness. Formed on May 25, 1993, Camden Property Trust ("CPT"), a Texas real estate investment trust ("REIT"), and all consolidated subsidiaries are primarily engaged in the ownership, management, development, reposition, redevelopment, acquisition, and construction of multifamily apartment communities. Our multifamily apartment communities are referred to as "communities," "multifamily communities," "properties," or "multifamily properties" in the following discussion. As of September 30, 2022, we owned interests in, operated, or were developing 178 multifamily properties comprised of 60,652 apartment homes across the United States. Of the 178 properties, seven properties were under construction as of September 30, 2022, and will consist of a total of 2,219 apartment homes when completed. We also own land holdings which we may develop into multifamily communities in the future.2. Summary of Significant Accounting Policies and Recent Accounting PronouncementsPrinciples of Consolidation. Our condensed consolidated financial statements include our accounts and the accounts of other subsidiaries and joint ventures (including partnerships and limited liability companies) over which we have control. All intercompany transactions, balances, and profits have been eliminated in consolidation. Investments acquired or created are evaluated based on the accounting guidance relating to variable interest entities ("VIEs"), which requires the consolidation of VIEs in which we are considered to be the primary beneficiary. If the investment is determined not to be a VIE, then the investment is evaluated for consolidation primarily using a voting interest model. In determining if we have a controlling financial interest, we consider factors such as ownership interests, decision making authority, kick-out rights and participating rights. As of September 30, 2022, two of our consolidated operating partnerships were VIEs. We are considered the primary beneficiary of both consolidated operating partnerships and therefore consolidate these operating partnerships. As of September 30, 2022, we held between approximately 93% and 95% of the outstanding common limited partnership units and the sole 1% general partnership interest in each of these consolidated operating partnerships. Interim Financial Reporting. We have prepared these unaudited financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, these statements do not include all information and footnote disclosures required for annual statements. While we believe the disclosures presented are adequate for interim reporting, these interim unaudited financial statements should be read in conjunction with the audited financial statements and notes included in our 2021 Annual Report on Form 10-K.Acquisitions of Real Estate. Upon an acquisition of real estate, we determine the fair value of tangible and intangible assets, which includes land, buildings (as-if-vacant), furniture and fixtures, the value of in-place leases, including above and below market leases, and acquired liabilities. In estimating these values, we apply methods similar to those used by independent appraisers of income-producing property. Estimates of fair value of acquired debt are based upon interest rates available for the issuance of debt with similar terms and remaining maturities. Depreciation is computed on a straight-line basis over the remaining useful lives of the related tangible assets. The value of in-place leases and above or below market leases is amortized over the estimated average remaining life of leases in place at the time of acquisition; the net carrying value of in-place leases are included in other assets, net and the net carrying value of above or below market leases are included in other liabilities, net in our condensed consolidated balance sheets.We recognized amortization expense related to in-place leases of approximately $19.3 million and $8.4 million for the three months ended September 30, 2022 and 2021, respectively, and approximately $44.9 million and $10.9 million for the nine months ended September 30, 2022 and 2021, respectively. The unamortized value of in-place leases at September 30, 2022 was approximately $5.6 million, and is expected to be fully amortized by December 31, 2022. We recognized revenue related to net below-market leases of $3.4 million and $7.8 million for the three and nine months ended September 30, 2022, respectively, and approximately $0.2 million of revenue related to net below-market leases for each of the three and nine months ended September 30, 2021.During the three and nine months ended September 30, 2022, the weighted average amortization periods for in-place leases were approximately nine months and eight months, respectively, and were approximately ten months for each of the three and nine months ended September 30, 2021. During the three and nine months ended September 30, 2022, the weighted average amortization periods for net below-market leases were approximately eight months and seven months, respectively, and were approximately ten months for each of the three and nine months ended September 30, 2021.8
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Term deposit | 9.8 | SEC-NUM |
[Table](#i6fa56528b8724eb3888e814d9e0a196b_7) [of](#i6fa56528b8724eb3888e814d9e0a196b_7) [Contents](#i6fa56528b8724eb3888e814d9e0a196b_7)Conversion Rights at Our OptionDexcom may not redeem the 2025 Notes prior to May 20, 2023. On or after May 20, 2023 and prior to August 15, 2025, Dexcom may redeem for cash all or part of the 2025 Notes, at its option, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Dexcom provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.
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| Revolving Credit Agreement |
Terms of the Revolving Credit AgreementIn October 2021, we entered into a Second Amended and Restated Credit Agreement (the "Amended Credit Agreement"), which amended and restated the credit agreement we had previously entered into in December 2018 and amended in May 2020 (the “Credit Agreement”). The Amended Credit Agreement is a five-year revolving credit facility that provides for an available principal amount of $200.0 million which can be increased up to $500.0 million at our option subject to customary conditions and approval of our lenders (the “Credit Facility”). The Amended Credit Agreement will mature on October 13, 2026. Borrowings under the Amended Credit Agreement are available for general corporate purposes, including working capital and capital expenditures.Information related to availability and outstanding borrowings on our Amended Credit Agreement is as follows as of the date indicated:
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| (In millions) | September 30, 2022 |
| Available principal amount | $ | 200.0 | |
| Letters of credit sub-facility | 25.0 | |
| Outstanding borrowings | — | |
| Outstanding letters of credit | 7.3 | |
| Total available balance | $ | 192.7 | |
Revolving loans under the Amended Credit Agreement bear interest at our choice of one of three base rates plus a range of applicable rates that are based on our leverage ratio. The first base rate is the Alternate Base Rate (“ABR”) and loans comprising each ABR borrowing shall bear interest at the ABR plus the applicable rate between 0.375% to 1.000%. The ABR is the highest of (a) the prime rate last quoted by The Wall Street Journal, (b) the Federal Reserve Bank of New York (“NYFRB”) rate plus one half of 1%, and (c) the Adjusted London Interbank Offered Rate (“LIBO Rate”) for a one month interest period plus 1%. The second base rate is the Term Benchmark rate and loans comprising each Term Benchmark borrowing shall bear interest at the Adjusted LIBO Rate, the Adjusted Euro Interbank Offered Rate (“EURIBOR Rate”), the Adjusted Stockholm Interbank Offered Rate (“STIBOR Rate”), the Adjusted Canadian Dollar Offered Rate (“CDOR”), Adjusted Australian Dollar (“AUD”) Rate, the Adjusted Bank Bill Benchmark Rate (“BKBM Rate”) or the Adjusted Tokyo Interbank Offered Rate (“TIBOR Rate”), as applicable based on the currency denomination borrowed, plus the applicable rate between 1.375% to 2.000% . The third base rate is the Daily Simple RepoFunds Rate (“RFR”) and loans comprising each Daily Simple RFR Loan shall bear interest at a rate per annum equal to the applicable Daily Simple RFR plus the applicable rate between 1.375% to 2.000% plus an additional 0.0326%. We will also pay a commitment fee of between 0.175% and 0.250%, payable quarterly in arrears, on the average daily unused amount of the revolving facility based on our leverage ratio.Our obligations under the Amended Credit Agreement are guaranteed by our existing and future wholly-owned domestic subsidiaries, and are secured by a first-priority security interest in substantially all of the assets of Dexcom and the guarantors, including all or a portion of the equity interests of our domestic subsidiaries and first-tier foreign subsidiaries but excluding real property and intellectual property (which is subject to a negative pledge). The Amended Credit Agreement contains covenants that limit certain indebtedness, liens, investments, transactions with affiliates, dividends and other restricted payments, subordinated indebtedness and amendments to subordinated indebtedness documents, and sale and leaseback transactions of Dexcom or any of its domestic subsidiaries. The Amended Credit Agreement also requires us to maintain a maximum leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with these covenants as of September 30, 2022.As of September 30, 2022, we also have a guarantee facility related to our international operations which is collateralized by a $9.8 million term deposit that is included in non-current “Other assets” on our consolidated balance sheets.26
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Investments | 4,962 | SEC-NUM |
Notes to Condensed Consolidated Financial Statements
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| Note 3 | Acquisitions and Dispositions |
AcquisitionsNational General On January 4, 2021, the Company completed the acquisition of National General Holdings Corp. (“National General”), an insurance holding company serving customers predominantly through independent agents for property and casualty and accident and health products.
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| Assets and liabilities recognized in the National General acquisition (1) | | |
| ($ in millions) | | | | January 4, 2021 | | |
| Assets | | | | | | |
| Investments | | | | $ | 4,962 | | | |
| Cash | | | | 400 | | | |
| Premiums and other receivables, net | | | | 1,539 | | | |
| Deferred acquisition costs (value of business acquired) | | | | 317 | | | |
| Reinsurance recoverables, net | | | | 1,212 | | | |
| Intangible assets | | | | 1,199 | | | |
| Other assets | | | | 734 | | | |
| Goodwill (2) | | | | 1,038 | | | |
| Total assets | | | | 11,401 | | | |
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| Liabilities | | | | | | |
| Reserve for property and casualty insurance claims and claims expense | | | | 2,765 | | | |
| Reserve for future policy benefits | | | | 186 | | | |
| Unearned premiums | | | | 2,245 | | | |
| Reinsurance payable | | | | 363 | | | |
| Debt (3) | | | | 593 | | | |
| Deferred tax liabilities | | | | 162 | | | |
| Other liabilities | | | | 776 | | | |
| Total liabilities | | | | $ | 7,090 | | | |
(1)The amounts reflect allocation of assets acquired and liabilities assumed.(2)$675 million, $20 million and $343 million of goodwill were allocated to the Allstate Protection, Protection Services and Allstate Health and Benefits segments, respectively, and is non-deductible for income tax purposes. Goodwill is primarily attributable to expected synergies and future growth opportunities.(3)Subsequent to the acquisition, the Company repaid $100 million of 7.625% Subordinated Notes and $72 million of Subordinated Debentures on February 3, 2021 and March 15, 2021, respectively. As of September 30, 2022, the Company had principal balance remaining of $350 million 6.750% Senior Notes due in 2024, with a fair value adjustment of $31 million.SafeAuto On October 1, 2021, the Company completed the acquisition of Safe Auto Insurance Group, Inc. (“SafeAuto”), a non-standard auto insurance carrier focused on providing state-minimum private-passenger auto insurance direct to consumers with coverage options in 28 states for $267 million in cash.DispositionsLife and annuity business On October 1, 2021, the Company closed the sale of Allstate Life Insurance Company of New York (“ALNY”) to Wilton Reassurance Company for $400 million. On November 1, 2021, the Company closed the sale of Allstate Life Insurance Company (“ALIC”) and certain affiliates to entities managed by Blackstone for total proceeds of $4 billion, including a pre-close dividend of $1.25 billion paid by ALIC. In 2021 and prior periods, the assets and liabilities of the businesses were reclassified as held for sale and results were presented as discontinued operations.Third Quarter 2022 Form 10-Q 9
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Other assets and liabilities, net | 31.5 | SEC-NUM |
Assets Acquired and Liabilities AssumedThe following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date:
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| Estimated Fair Value at January 22, 2021 | |
| Cash | $ | 90.5 | |
| Acquired IPR&D(1) | 824.0 |
| Goodwill(2) | 126.8 |
| Deferred tax liabilities | (106.0) | |
| Other assets and liabilities, net | (31.5) | |
| Acquisition date fair value of consideration transferred | 903.8 |
| Less: | |
| Cash acquired | (90.5) | |
| Fair value of CVR liability(3) | (65.9) | |
| Cash paid, net of cash acquired | $ | 747.4 | |
(1) Acquired IPR&D intangibles primarily relate to PR001.(2) The goodwill recognized from this acquisition is not deductible for tax purposes. (3) See Note 6 for a discussion on the estimation of the CVR liability. We are unable to provide the results of operations for the three and six months ended June 30, 2022 and 2021 attributable to Prevail as those operations were substantially integrated into our legacy business.Pro forma information has not been included as this acquisition did not have a material impact on our consolidated condensed statements of operations for the three and six months ended June 30, 2021.Asset AcquisitionsThe following table summarizes our significant asset acquisitions during the six months ended June 30, 2022 and 2021:
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| Counterparty | Compound(s), Therapy or Asset | Acquisition Month | | Phase of Development(1) | | Acquired IPR&D Expense |
| BioMarin Pharmaceutical Inc. | Priority Review Voucher | February 2022 | | Not applicable | | $ | 110.0 | |
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| Rigel Pharmaceuticals, Inc. | R552, a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor, for the potential treatment of autoimmune and inflammatory diseases | March 2021 | | Phase I | | 125.0 | |
| Precision Biosciences, Inc. | Potential in vivo therapies for genetic disorders | January 2021 | | Pre-clinical | | 107.8 | |
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(1) The phase of development presented is as of the date of the arrangement and represents the phase of development of the most advanced asset acquired, where applicable.
In connection with our acquisition of Petra Pharma Corporation (Petra), we were required to make milestone payments to Petra shareholders contingent upon the occurrence of certain future events linked to the success of the mutant-selective PI3Kα inhibitor. In the second quarter of 2022, we entered into agreements with substantially all Petra shareholders to acquire their rights to receive any future milestone payments in exchange for a one-time payment. As a result of these agreements, we recognized a charge of $333.8 million as a development milestone during the three and six months ended June 30, 2022. Any remaining contingent milestones payments linked to the success of the mutant-selective PI3Kα are not expected to be material. We recognized no other significant development milestones during the three and six months ended June 30, 2022 and 2021.
16
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Common stock authorized (shares) | 800.0 | SEC-NUM |
[Table](#i6fa56528b8724eb3888e814d9e0a196b_7) [of](#i6fa56528b8724eb3888e814d9e0a196b_7) [Contents](#i6fa56528b8724eb3888e814d9e0a196b_7)
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| PART I. FINANCIAL INFORMATION |
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| ITEM 1. FINANCIAL STATEMENTS |
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| DexCom, Inc. |
| Consolidated Balance Sheets |
| (Unaudited) |
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| | September 30, 2022 | | December 31, 2021 |
| (In millions, except par value data) | | | (As Adjusted)\* |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 698.1 | | | $ | 1,052.6 | |
| Short-term marketable securities | 1,673.8 | | | 1,678.6 | |
| Accounts receivable, net | 564.1 | | | 514.3 | |
| Inventory | 311.0 | | | 357.3 | |
| Prepaid and other current assets | 151.5 | | | 81.6 | |
| Total current assets | 3,398.5 | | | 3,684.4 | |
| Property and equipment, net | 1,002.5 | | | 801.8 | |
| Operating lease right-of-use assets | 73.1 | | | 88.1 | |
| Goodwill | 24.7 | | | 26.5 | |
| Intangibles, net | 24.4 | | | 31.5 | |
| Deferred tax assets | 342.3 | | | 290.5 | |
| Other assets | 33.7 | | | 10.5 | |
| Total assets | $ | 4,899.2 | | | $ | 4,933.3 | |
| Liabilities and Stockholders’ Equity | | | |
| Current liabilities: | | | |
| Accounts payable and accrued liabilities | $ | 764.2 | | | $ | 573.0 | |
| Accrued payroll and related expenses | 112.7 | | | 125.2 | |
| Short-term operating lease liabilities | 20.9 | | | 20.5 | |
| Deferred revenue | 2.7 | | | 2.1 | |
| Total current liabilities | 900.5 | | | 720.8 | |
| Long-term senior convertible notes | 1,968.8 | | | 1,981.8 | |
| Long-term operating lease liabilities | 82.1 | | | 98.6 | |
| Other long-term liabilities | 123.3 | | | 90.0 | |
| Total liabilities | 3,074.7 | | | 2,891.2 | |
| Commitments and contingencies | | | |
| Stockholders’ equity: | | | |
| Preferred stock, $0.001 par value, 5.0 million shares authorized; no shares issued and outstanding at September 30, 2022 and December 31, 2021 | — | | | — | |
| Common stock, $0.001 par value, 800.0 million shares authorized; 393.1 million and 386.2 million shares issued and outstanding, respectively, at September 30, 2022; and 391.4 million and 388.0 million shares issued and outstanding, respectively, at December 31, 2021 | 0.4 | | | 0.4 | |
| Additional paid-in capital | 2,072.1 | | | 2,108.7 | |
| Accumulated other comprehensive income (loss) | (41.1) | | | 0.5 | |
| Retained earnings | 388.1 | | | 138.7 | |
| Treasury stock, at cost; 6.9 million shares at September 30, 2022 and 3.4 million shares at December 31, 2021 | (595.0) | | | (206.2) | |
| Total stockholders’ equity | 1,824.5 | | | 2,042.1 | |
| Total liabilities and stockholders’ equity | $ | 4,899.2 | | | $ | 4,933.3 | |
| | | | |
| \* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis. All periods presented have also been adjusted to reflect the four-for-one stock split. Refer to Note 1, “Organization and Significant Accounting Policies,” for further information. |
See accompanying notes3
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Property and equipment | 5.3 | SEC-NUM |
[Table of Contents](#iedfcb48a3788458f95ee4009debca3d0_7)FORTINET, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Platform Extension functionality, and, over time, to innovate and rebrand certain of Alaxala’s switches to offer a broader suite of secure switches globally.
Under the acquisition method of accounting in accordance with ASC 805, the total purchase price was allocated to Alaxala’s identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values using management’s best estimates and assumptions to assign fair value as of the acquisition date. The following table provides the assets acquired and liabilities assumed as of the date of acquisition:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| (in millions) | Estimated Fair Value |
| ASSETS | |
| Cash | $ | 1.1 | |
| Accounts receivable—net | 15.6 | |
| Inventory | 33.4 | |
| Prepaid expenses and other current assets | 2.9 | |
| Property and equipment | 5.3 | |
| Goodwill | 25.5 | |
| Other intangible assets | 48.0 | |
| Other long-term assets | 5.2 | |
| TOTAL ASSETS | $ | 137.0 | |
| | |
| LIABILITIES | |
| Accounts payable | $ | 11.0 | |
| Current portion of long-term debt | 20.2 | |
| Accrued and other current liabilities | 17.1 | |
| Other long-term liabilities | 6.7 | |
| TOTAL LIABILITIES | $ | 55.0 | |
| NON-CONTROLLING INTERESTS | $ | 17.8 | |
| Net purchase consideration | $ | 64.2 | |
The excess of the purchase consideration and the fair value of non-controlling interests over the fair value of net tangible and identified intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes. Goodwill is primarily attributable to the assembled workforce of Alaxala and the anticipated operational synergies.
The fair value of the non-controlling interests of $17.8 million was estimated based on the non-controlling interests’ respective share of the fair value of Alaxala.
Identified intangible assets acquired and their estimated useful lives (in years) as of August 31, 2021, were as follows (in millions, except years):
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Fair Value | | Estimated Useful Life (in years) |
| Developed technology | $ | 26.6 | | | 4 |
| Customer relationships | 10.0 | | | 10 |
| Trade name | 6.4 | | | 10 |
| Backlog | 5.0 | | | 1 |
| Total identified intangible assets: | $ | 48.0 | | | |
Developed technology relates to Alaxala’s network equipment. We valued the developed technology using the relief-from-royalty method under the income approach. This method reflects the present value of the projected cost savings that are expected to be realized by the owner of the royalty granted in exchange for the use of the asset. The economic useful life was 14
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Outstanding at end of period, Aggregate Intrinsic Value | 6 | SEC-NUM |
performance restricted stock/units granted prior to 2022 were earned based upon our achievement of annual earnings per share goals and vested over the relevant three-year period. During the three-year vesting period, a recipient of EPS performance restricted stock/units earned a total award of either 0% or 100% of the initial grant. Awards of the strategic performance restricted stock units were earned based upon the achievement of two key metrics, net sales and EPS growth, compared to strategic plan objectives during a three-year period. A recipient of strategic performance restricted stock units earned a total award ranging from 0% to 200% of the initial grant. Awards of FCF performance restricted stock units were earned based upon the achievement of free cash flow (defined as Net cash provided by operating activities less capital expenditures and certain investing and financing activities) compared to annual operating plan objectives over a three-year period. An annual objective was established each fiscal year for three consecutive years. Performance against these objectives was averaged at the end of the three-year period to determine the number of underlying units that vested at the end of the three years. A recipient of FCF performance restricted stock units earned a total award ranging from 0% to 200% of the initial grant. Awards of time-lapse restricted stock/units will vest ratably over the three-year period. In addition, we may issue special grants of restricted stock/units to attract and retain executives which vest over various periods. Awards are generally granted annually in October. Stock options are granted on a selective basis under the Long-Term Incentive Plans. The term of a stock option granted under these plans may not exceed ten years from the date of grant. The option price may not be less than the fair market value of a share of common stock on the date of the grant. Options granted under these plans generally vest ratably over a three-year period. In 2019, we also granted certain options that vest at the end of a three-year period. We last issued stock options in 2019.In 2022, we issued time-lapse restricted stock units, unrestricted stock, TSR performance restricted stock units and EPS CAGR performance restricted stock units. We last issued FCF performance restricted stock units in 2019, EPS performance restricted stock units in 2018, strategic performance restricted stock units in 2014 and special performance restricted units in 2015.In determining stock-based compensation expense, we estimate forfeitures expected to occur. Total pre-tax stock-based compensation expense and tax-related benefits recognized in Earnings from continuing operations were as follows:
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| (Millions) | 2022 | | 2021 | | 2020 |
| Total pre-tax stock-based compensation expense | $ | 59 | | | $ | 64 | | | $ | 59 | |
| Tax-related benefits | $ | 10 | | | $ | 12 | | | $ | 11 | |
In 2020, total pre-tax stock-based compensation expense recognized in Earnings (loss) from discontinued operations was $2 million. The tax-related benefits were not material.The following table summarizes stock option activity as of July 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Options | | Weighted-AverageExercisePrice | | Weighted-AverageRemainingContractualLife | | AggregateIntrinsicValue |
| | (Options inthousands) | | | | (In years) | | |
| Outstanding at August 1, 2021 | 1,372 | | | $ | 45.61 | | | | | |
| Granted | — | | | $ | — | | | | | |
| Exercised | (75) | | | $ | 38.15 | | | | | |
| Terminated | — | | | $ | — | | | | | |
| Outstanding at July 31, 2022 | 1,297 | | | $ | 46.04 | | | 4.8 | | $ | 6 | |
| Exercisable at July 31, 2022 | 1,297 | | | $ | 46.04 | | | 4.8 | | $ | 6 | |
The total intrinsic value of options exercised during 2022 and 2020 was $1 million and $2 million, respectively. The total intrinsic value of options exercised during 2021 was not material. We measured the fair value of stock options using the Black-Scholes option pricing model.We expensed stock options on a straight-line basis over the vesting period, except for awards issued to retirement eligible participants, which we expensed on an accelerated basis. As of January 2022, compensation related to stock options was fully expensed.68
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Ownership interest acquired | 97 | SEC-NUM |
Note 4 – Mergers, Acquisitions and Divestitures
A.Divestiture of International Businesses
On July 1, 2022, the Company completed the sale of its life, accident and supplemental benefits businesses in six countries (Hong Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb for approximately $5.4 billion in cash. The Company recognized a gain of $1.7 billion pre-tax ($1.4 billion after-tax), which includes recognition of previously unrealized capital losses on investments sold and translation loss on foreign currencies (see Note 14 for further information). Also see Note 5 for further information regarding the assets and liabilities of these divested businesses.
B.Acquisition of MDLIVE
On April 19, 2021, Cigna acquired 97% of MDLIVE, Inc. ("MDLIVE"), a 24/7 virtual care platform. Combined with Cigna's previously held equity investment, Cigna now owns 100% of MDLIVE. The Company's 2021 Form 10-K includes detailed disclosures of merger consideration, purchase price allocation and intangible assets identified in this transaction. In accordance with GAAP, the total consideration transferred has been allocated to the tangible and intangible net assets acquired based on management's estimates of their fair values and was finalized as of March 31, 2022 with immaterial changes to the purchase price allocation.
The results of MDLIVE have been included in the Company's Consolidated Financial Statements from the date of the acquisition. We remain on track and are nearly complete with MDLIVE integration activities. Revenues from MDLIVE and their results of operations were not material to Cigna's consolidated results of operations for the three and nine months ended September 30, 2021. The pro forma effects of this acquisition for prior periods were not material to our consolidated results of operations.C.Integration and Transaction-related CostsIn the first nine months of 2022 and 2021, the Company incurred costs related to the acquisition of MDLIVE, the sale of the U.S. Group Disability and Life business and the terminated merger with Elevance Health, Inc. ("Elevance"), formerly known as Anthem, Inc. In the first nine months of 2022, the Company also incurred costs related to the Chubb transaction. These costs were $24 million pre-tax ($23 million after-tax) for the three months ended and $112 million pre-tax ($86 million after-tax) for the nine months ended September 30, 2022, compared with $13 million pre-tax ($(35) million after-tax) for the three months ended and $58 million pre-tax ($1 million after-tax) for the nine months ended September 30, 2021. These costs consisted primarily of certain projects to separate or integrate the Company's systems, products and services, fees for legal, advisory and other professional services and certain employment-related costs. After-tax costs for the three and nine months ended September 30, 2021 included a tax benefit from the resolution of a tax matter related to the sold Group Disability and Life business. 13
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Preferred stock, par value (in dollars per share) | 0.01 | SEC-NUM |
[Table of Contents](#ic5e280ddd1ef46fe9ace2a18e7a582b7_7)
AUTODESK, INC.CONSOLIDATED BALANCE SHEETS(In millions, except per share data)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | January 31,2022 | | January 31,2021 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 1,528.4 | | | $ | 1,772.2 | |
| Marketable securities | 235.7 | | | 4.0 | |
| Accounts receivable, net | 716.1 | | | 643.1 | |
| | | | |
| Prepaid expenses and other current assets | 283.6 | | | 206.2 | |
| Total current assets | 2,763.8 | | | 2,625.5 | |
| Long-term marketable securities | 45.4 | | | — | |
| Computer equipment, software, furniture, and leasehold improvements, net | 162.5 | | | 192.8 | |
| Operating lease right-of-use assets | 304.5 | | | 416.7 | |
| Intangible assets, net | 493.8 | | | 199.3 | |
| Goodwill | 3,603.8 | | | 2,706.5 | |
| Deferred income taxes, net | 740.7 | | | 763.1 | |
| Long-term other assets | 492.3 | | | 375.9 | |
| Total assets | $ | 8,606.8 | | | $ | 7,279.8 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 120.8 | | | $ | 122.5 | |
| Accrued compensation | 341.3 | | | 322.6 | |
| Accrued income taxes | 29.7 | | | 42.6 | |
| Deferred revenue | 2,863.3 | | | 2,500.9 | |
| | | | |
| Operating lease liabilities | 86.6 | | 71.4 | |
| Current portion of long-term notes payable, net | 349.7 | | | — | |
| Other accrued liabilities | 218.0 | | | 194.7 | |
| Total current liabilities | 4,009.4 | | | 3,254.7 | |
| Long-term deferred revenue | 926.5 | | | 859.3 | |
| Long-term operating lease liabilities | 345.8 | | | 396.0 | |
| Long-term income taxes payable | 19.8 | | | 15.9 | |
| Long-term deferred income taxes | 29.4 | | | 11.4 | |
| Long-term notes payable, net | 2,277.9 | | | 1,637.2 | |
| Long-term other liabilities | 148.9 | | | 139.8 | |
| Commitments and contingencies | | | |
| Stockholders’ equity: | | | |
| Preferred stock, $0.01 par value; shares authorized 2.0; none issued or outstanding at January 31, 2022 and 2021 | — | | | — | |
| Common stock and additional paid-in capital, $0.01 par value; shares authorized 750.0; 218.2 and 219.6 issued and outstanding at January 31, 2022 and 2021, respectively | 2,923.1 | | | 2,578.9 | |
| Accumulated other comprehensive loss | (124.0) | | | (125.9) | |
| Accumulated deficit | (1,950.0) | | | (1,487.5) | |
| Total stockholders’ equity | 849.1 | | | 965.5 | |
| Total liabilities and stockholders' equity | $ | 8,606.8 | | | $ | 7,279.8 | |
See accompanying Notes to Consolidated Financial Statements.
67
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Aggregate annual maturities of long-term debt, 2023 | 2.749 | SEC-NUM |
[Table of Contents](#i769337f517694ce29a72abc52f207787_10)
Notes to Consolidated Financial Statements — (Continued)Becton, Dickinson and Company
Long-term debt The carrying value of Long-Term Debt, net of unamortized debt issuance costs, at September 30 consisted of:
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| (Millions of dollars) | | | 2021 | | 2020 |
| 3.125% Notes due November 8, 2021 | (a) | | $ | — | | | $ | 1,008 | |
| 2.894% Notes due June 6, 2022 | (a) | | — | | | 1,797 | |
| Floating Rate Notes due June 6, 2022 | | | — | | | 499 | |
| 1.000% Notes due December 15, 2022 | | | 579 | | | 584 | |
| | | | | | |
| 3.300% Notes due March 1, 2023 | (a) | | — | | | 295 | |
| 1.401% Notes due May 24, 2023 | | | 347 | | | 350 | |
| 0.632% Notes due June 4, 2023 | | | 926 | | | 933 | |
| 0.000% Notes due August 13, 2023 | (b) | | 463 | | | — | |
| 3.875% Notes due May 15, 2024 | (a) | | 146 | | | 180 | |
| 3.363% Notes due June 6, 2024 | (a) | | 994 | | | 1,742 | |
| 3.734% Notes due December 15, 2024 | (a) | | 873 | | | 1,370 | |
| 3.020% Notes due May 24, 2025 | | | 336 | | | 320 | |
| 0.034% Notes due August 13, 2025 | (b) | | 577 | | | — | |
| 1.208% Notes due June 4, 2026 | | | 693 | | | 699 | |
| 6.700% Notes due December 1, 2026 | | | 168 | | | 172 | |
| 1.900% Notes due December 15, 2026 | | | 577 | | | 582 | |
| 3.700% Notes due June 6, 2027 | | | 1,716 | | | 1,715 | |
| 7.000% Debentures due August 1, 2027 | | | 174 | | | 175 | |
| 6.700% Debentures due August 1, 2028 | | | 173 | | | 174 | |
| 0.334% Notes due August 13, 2028 | (b) | | 1,037 | | | — | |
| 2.823% Notes due May 20, 2030 | | | 744 | | | 743 | |
| 1.957% Notes due February 11, 2031 | (b) | | 992 | | | — | |
| 1.213% Notes due February 12, 2036 | (b) | | 690 | | | — | |
| 6.000% Notes due May 15, 2039 | | | 246 | | | 246 | |
| 5.000% Notes due November 12, 2040 | | | 124 | | | 124 | |
| 1.336% Notes due August 13, 2041 | (b) | | 1,034 | | | — | |
| 4.875% Notes due May 15, 2044 | | | 246 | | | 247 | |
| 4.685% Notes due December 15, 2044 | | | 1,033 | | | 1,044 | |
| 4.669% Notes due June 6, 2047 | | | 1,481 | | | 1,485 | |
| 3.794% Notes due May 20, 2050 | | | 742 | | | 742 | |
| | | | | | |
| Total Long-Term Debt | | | $ | 17,110 | | | $ | 17,224 | |
(a)All or a portion of the aggregate principal amount outstanding was retired during 2021, as further discussed below.(b)Represents notes issued during 2021, as further discussed below.The aggregate annual maturities of Long-Term Debt including interest during the fiscal years ending September 30, 2022 to 2026 are as follows: 2022 — $433 million; 2023 — $2.749 billion; 2024 — $1.559 billion; 2025 — $2.164 billion; 2026 — $1.053 billion.94
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Preferred stock, authorized (in shares) | 25.0 | SEC-NUM |
DARDEN RESTAURANTS, INC.CONSOLIDATED BALANCE SHEETS(In millions)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | May 29, 2022 | | May 30, 2021 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 420.6 | | | $ | 1,214.7 | |
| Receivables, net | 72.0 | | | 68.2 | |
| Inventories | 270.6 | | | 190.8 | |
| Prepaid income taxes | 274.8 | | | 337.2 | |
| Prepaid expenses and other current assets | 141.4 | | | 60.2 | |
| | | | |
| Total current assets | $ | 1,179.4 | | | $ | 1,871.1 | |
| Land, buildings and equipment, net | 3,356.0 | | | 2,869.2 | |
| Operating lease right-of-use assets | 3,465.1 | | | 3,776.4 | |
| Goodwill | 1,037.4 | | | 1,037.4 | |
| Trademarks | 806.3 | | | 806.3 | |
| Other assets | 291.6 | | | 295.7 | |
| Total assets | $ | 10,135.8 | | | $ | 10,656.1 | |
| | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 366.9 | | | $ | 304.5 | |
| | | | |
| Accrued payroll | 181.5 | | | 177.4 | |
| Accrued income taxes | 32.1 | | | 35.9 | |
| Other accrued taxes | 64.5 | | | 60.5 | |
| Unearned revenues | 498.0 | | | 474.2 | |
| | | | |
| Other current liabilities | 704.5 | | | 795.8 | |
| | | | |
| Total current liabilities | $ | 1,847.5 | | | $ | 1,848.3 | |
| Long-term debt | 901.0 | | | 929.8 | |
| Deferred income taxes | 201.1 | | | 221.6 | |
| Operating lease liabilities - non-current | 3,755.8 | | | 4,088.5 | |
| | | | |
| Other liabilities | 1,232.2 | | | 754.8 | |
| Total liabilities | $ | 7,937.6 | | | $ | 7,843.0 | |
| Stockholders’ equity: | | | |
| Common stock and surplus, no par value. Authorized 500.0 shares; issued 123.9 and 130.8 shares, respectively; outstanding 123.9 and 130.8 shares, respectively | 2,226.0 | | | 2,286.6 | |
| Preferred stock, no par value. Authorized 25.0 shares; none issued and outstanding | — | | | — | |
| Retained earnings (deficit) | (25.9) | | | 522.3 | |
| Accumulated other comprehensive income (loss) | (1.9) | | | 4.2 | |
| | | | |
| Total stockholders’ equity | $ | 2,198.2 | | | $ | 2,813.1 | |
| Total liabilities and stockholders’ equity | $ | 10,135.8 | | | $ | 10,656.1 | |
See accompanying notes to consolidated financial statements. 45
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Weighted-average remaining contractual term of options outstanding | 2.50 | SEC-NUM |
Table of ContentsStock OptionsThe following table summarizes our stock option activity for the three months ended June 30, 2022:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Options(in thousands) | | Weighted-AverageExercise Prices | | Weighted-AverageRemainingContractualTerm (in years) | | AggregateIntrinsic Value(in millions) |
| Outstanding as of March 31, 2022 | | 286 | | | $ | 39.28 | | | | | |
| | | | | | | | | |
| Granted | | 1 | | | 120.00 | | | | | |
| Exercised | | (21) | | | 41.71 | | | | | |
| Forfeited, cancelled or expired | | (1) | | | 63.51 | | | | | |
| Outstanding as of June 30, 2022 | | 265 | | | $ | 39.32 | | | 2.50 | | $ | 22 | |
| Vested and expected to vest | | 265 | | | $ | 39.32 | | | 2.50 | | $ | 22 | |
| Exercisable as of June 30, 2022 | | 261 | | | $ | 38.38 | | | 2.42 | | $ | 22 | |
The aggregate intrinsic value represents the total pre-tax intrinsic value based on our closing stock price as of June 30, 2022, which would have been received by the option holders had all the option holders exercised their options as of that date. We issue new common stock from our authorized shares upon the exercise of stock options.Restricted Stock UnitsThe following table summarizes our restricted stock units activity for the three months ended June 30, 2022:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | RestrictedStock Units(in thousands) | | Weighted-Average GrantDate Fair Values |
| Outstanding as of March 31, 2022 | 6,682 | | | $ | 129.57 | |
| | | | |
| Granted | 4,082 | | | 127.75 | |
| Vested | (2,046) | | | 123.08 | |
| Forfeited or cancelled | (217) | | | 131.70 | |
| Outstanding as of June 30, 2022 | 8,501 | | | $ | 130.20 | |
Performance-Based Restricted Stock UnitsOur performance-based restricted stock units vest upon the achievement of pre-determined performance-based milestones, including, but not limited to, management reporting milestones of net bookings and operating income metrics, as well as service conditions. If these performance-based milestones are not met but service conditions are met, the performance-based restricted stock units will not vest, in which case any compensation expense we have recognized to date will be reversed. Generally, the measurement periods of our performance-based restricted stock units are 3 to 4 years, with awards vesting after each annual measurement period or cliff-vesting after the completion of the total aggregate measurement period.Each quarter, we update our assessment of the probability that the performance milestones will be achieved. We amortize the fair values of performance-based restricted stock units over the requisite service period. The performance-based restricted stock units contain threshold, target and maximum milestones for each performance-based milestone. The number of shares of common stock to be issued at vesting will range from zero to 200 percent of the target number of performance-based restricted stock units attributable to each performance-based milestone based on the company’s performance as compared to these threshold, target and maximum performance-based milestones. Each performance-based milestone is weighted evenly and the number of shares that vest based on each performance-based milestone is independent from the other.21
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Expected future pre-tax compensation expense, nonvested stock options | 28.0 | SEC-NUM |
[Table of Contents](#iee2f14225b9a4b108d08cd0fe2886fa0_7)AMETEK, Inc.Notes to Consolidated Financial StatementsMarch 31, 2022(Unaudited)12. Share-Based CompensationThe Company's share-based compensation plans are described in Note 11, Share-Based Compensation, to the consolidated financial statements in Part II, Item 8, filed on the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Share Based Compensation Expense Total share-based compensation expense was as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | |
| | Three Months EndedMarch 31, | | |
| | 2022 | | 2021 | | | | |
| | (In thousands) |
| Stock option expense | $ | 3,440 | | | $ | 3,923 | | | | | |
| Restricted stock expense | 4,778 | | | 6,227 | | | | | |
| Performance restricted stock unit expense | 1,353 | | | 1,290 | | | | | |
| Total pre-tax expense | $ | 9,571 | | | $ | 11,440 | | | | | |
Pre-tax share-based compensation expense is included in the consolidated statement of income in either Cost of sales or Selling, general and administrative expenses, depending on where the recipient’s cash compensation is reported.Stock Options The fair value of each stock option grant is estimated on the grant date using a Black-Scholes-Merton option pricing model. The following weighted average assumptions were used in the Black-Scholes-Merton model to estimate the fair values of stock options granted during the periods indicated:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Three Months EndedMarch 31, 2022 | | Year Ended December 31,2021 |
| Expected volatility | 24.5 | % | | 24.2 | % |
| Expected term (years) | 5.0 | | 5.0 |
| Risk-free interest rate | 2.33 | % | | 0.85 | % |
| Expected dividend yield | 0.65 | % | | 0.66 | % |
| Black-Scholes-Merton fair value per stock option granted | $ | 32.54 | | | $ | 25.63 | |
The following is a summary of the Company’s stock option activity and related information:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Shares | | WeightedAverageExercisePrice | | WeightedAverageRemainingContractualLife | | AggregateIntrinsicValue |
| | (In thousands) | | | | (Years) | | (In millions) |
| Outstanding at December 31, 2021 | 3,352 | | | $ | 76.08 | | | | | |
| Granted | 608 | | | 134.69 | | | | | |
| Exercised | (142) | | | 62.75 | | | | | |
| Forfeited | (24) | | | 91.75 | | | | | |
| Outstanding at March 31, 2022 | 3,794 | | | $ | 76.56 | | | 6.7 | | $ | 180.4 | |
| Exercisable at March 31, 2022 | 2,361 | | | $ | 70.86 | | | 5.3 | | $ | 147.1 | |
The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2022 was $8.9 million. The total fair value of stock options vested during the three months ended March 31, 2022 was $7.3 million. As of March 31, 2022, there was approximately $28.0 million of expected future pre-tax compensation expense related to the 1.4 15
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Options granted (in shares) | 132 | SEC-NUM |
[Table of Contents](exhibit311q32022.htm)Stock Options Stock option activity under the Company’s plans is set forth below:
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| | Number ofOptions | | Weighted AverageExercise Price | | AggregateIntrinsic Value | | Weighted AverageRemaining Contractual Term (in years) |
| Options outstanding at January 1, 2022 | 2,318 | | | $ | 77.79 | | | | | |
| Options granted | 132 | | | $ | 277.70 | | | | | |
| Options exercised | (445) | | | $ | 43.30 | | | | | |
| Options forfeited | (10) | | | $ | 333.32 | | | | | |
| Options expired | (1) | | | $ | 396.69 | | | | | |
| Options outstanding at September 30, 2022 | 1,994 | | | $ | 97.40 | | | $ | 532,497 | | | 3.6 |
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| Options vested and exercisable as of September 30, 2022 | 1,694 | | | $ | 66.24 | | | $ | 502,221 | | | 2.8 |
| Options expected to vest as of September 30, 2022 | 280 | | | $ | 272.07 | | | $ | 28,521 | | | 8.5 |
As of September 30, 2022, $26.1 million of total remaining unrecognized stock-based compensation cost related to unvested stock options, net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 2.8 years. Restricted Stock and Restricted Stock UnitsService-Based AwardsThe table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the nine months ended September 30, 2022:
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| | Equity-Classified Restricted Stock | | Equity-ClassifiedEquity-SettledRestricted Stock Units | | Liability-ClassifiedCash-SettledRestricted Stock Units |
| | Number ofShares | | Weighted Average Grant DateFair Value Per Share | | Number ofShares | | Weighted Average Grant DateFair Value Per Share | | Number ofShares | | Weighted Average Grant DateFair Value Per Share |
| Unvested service-based awards outstanding at January 1, 2022 | 9 | | | $ | 167.18 | | | 576 | | | $ | 277.38 | | | 112 | | | $ | 217.28 | |
| Awards granted | — | | | $ | — | | | 644 | | | $ | 286.13 | | | 51 | | | $ | 269.60 | |
| Awards modified | — | | | $ | — | | | (3) | | | $ | 387.74 | | | 3 | | | $ | 220.00 | |
| Awards vested | (9) | | | $ | 167.18 | | | (222) | | | $ | 221.51 | | | (54) | | | $ | 182.32 | |
| Awards forfeited/cancelled | — | | | $ | — | | | (55) | | | $ | 333.41 | | | (11) | | | $ | 261.04 | |
| Unvested service-based awards outstanding at September 30, 2022 | — | | | $ | — | | | 940 | | | $ | 292.98 | | | 101 | | | $ | 258.01 | |
As of September 30, 2022, $200.9 million of total remaining unrecognized stock-based compensation cost related to service-based equity-classified restricted stock units (“RSUs”), net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 2.9 years. As of September 30, 2022, $24.9 million of total remaining unrecognized stock-based compensation cost related to service-based liability-classified cash-settled RSUs, net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 2.5 years. The liability associated with the service-based liability-classified RSUs as of September 30, 2022 and December 31, 2021, was $8.3 million and $31.5 million, respectively, and was classified as Accrued compensation and benefits expenses in the condensed consolidated balance sheets. 26
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Maximum Length of Time, Foreign Currency Cash Flow Hedge | 18 | SEC-NUM |
[Table of Contents](#i11f673a761214399ab28a3a12dfa4686_7)
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTSWe may use derivatives to partially offset our business exposure to foreign currency and interest rate risk on expected future cash flows and certain existing assets and liabilities. We do not use any of our derivative instruments for trading purposes.We enter into master netting arrangements to mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty. We do not offset fair value amounts recognized for derivative instruments under master netting arrangements. We also enter into collateral security agreements with certain of our counterparties to exchange cash collateral when the net fair value of certain derivative instruments fluctuates from contractually established thresholds. Collateral posted is included in prepaid expenses and other current assets and collateral received is included in accrued expenses on our condensed consolidated balance sheets.Cash Flow HedgesIn countries outside the United States, we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange option contracts or forward contracts to hedge a portion of our forecasted foreign currency denominated revenue. These foreign exchange contracts, carried at fair value, have maturities of up to 12 months. In June 2019, we entered into Treasury lock agreements with large financial institutions which fixed benchmark U.S. Treasury rates for an aggregate notional amount of $1 billion of our future debt issuance. These derivative instruments hedged the impact of changes in the benchmark interest rate to future interest payments and were settled upon debt issuance in the first quarter of fiscal 2020. We incurred a loss related to the settlement of the instruments which is amortized to interest expense over the term of our debt due February 1, 2030. [See Note 14 for further details regarding our debt.](#i11f673a761214399ab28a3a12dfa4686_82)As of September 2, 2022, we had net derivative gains on our foreign exchange option contracts expected to be recognized within the next 18 months, of which $165 million of gains are expected to be recognized into revenue within the next 12 months. In addition, we had net derivative losses on our Treasury lock agreements, of which $5 million is expected to be recognized into interest expense within the next 12 months.Non-Designated HedgesOur derivatives not designated as hedging instruments consist of foreign currency forward contracts that we primarily use to hedge monetary assets and liabilities denominated in non-functional currencies.The fair value of derivative instruments on our condensed consolidated balance sheets as of September 2, 2022 and December 3, 2021 were as follows:
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| (in millions) | 2022 | | 2021 |
| | Fair Value AssetDerivatives | | Fair ValueLiabilityDerivatives | | Fair Value AssetDerivatives | | Fair ValueLiabilityDerivatives |
| Derivatives designated as hedging instruments: | | | | | | | |
| Foreign exchange option contracts(1) | $ | 179 | | | $ | — | | | $ | 91 | | | $ | — | |
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| Derivatives not designated as hedging instruments: | | | | | | | |
| Foreign exchange forward contracts(1) | 4 | | | 9 | | | 7 | | | 8 | |
| Total derivatives | $ | 183 | | | $ | 9 | | | $ | 98 | | | $ | 8 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)Fair value asset derivatives are included in prepaid expenses and other current assets and fair value liability derivatives are included in accrued expenses on our condensed consolidated balance sheets.18
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Term of award | 10 | SEC-NUM |
The components of the Company’s share-based compensation expense, net of forfeitures, were as follows:
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| | Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Stock option | $ | 20 | | | $ | 23 | | | $ | 31 | |
| Restricted stock | 24 | | | 24 | | | 22 | |
| Restricted stock units | 108 | | | 99 | | | 82 | |
| Liability awards | 92 | | | 67 | | | 53 | |
| Total | $ | 244 | | | $ | 213 | | | $ | 188 | |
For the years ended December 31, 2021, 2020 and 2019, total income tax benefit recognized by the Company related to share-based compensation expense was $51 million, $45 million and $40 million, respectively.As of December 31, 2021, there was $148 million of total unrecognized compensation cost related to non-vested awards under the Company’s share-based compensation plans, which is expected to be recognized over a weighted-average period of 3.1 years.Amended and Restated Ameriprise Financial 2005 Incentive Compensation PlanThe 2005 ICP, which was amended and approved by shareholders on April 30, 2014, provides for the grant of cash and equity incentive awards to directors, employees and independent contractors, including stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance shares and similar awards designed to comply with the applicable federal regulations and laws of jurisdiction. Under the 2005 ICP, a maximum of 54.4 million shares may be issued. Of this total, no more than 4.5 million shares may be issued after April 30, 2014 for full value awards, which are awards other than stock options and stock appreciation rights. Shares issued under the 2005 ICP may be authorized and unissued shares or treasury shares.Ameriprise Financial 2008 Employment Incentive Equity Award PlanThe 2008 Plan is designed to align employees’ interests with those of the shareholders of the Company and attract and retain new employees. The 2008 Plan provides for the grant of equity incentive awards to new employees, primarily those, who became employees in connection with a merger or acquisition, including stock options, restricted stock awards, restricted stock units, and other equity-based awards designed to comply with the applicable federal and foreign regulations and laws of jurisdiction. Under the 2008 Plan, a maximum of 6.0 million shares may be issued.Stock OptionsStock options granted under the 2005 ICP and the 2008 Plan have an exercise price not less than 100% of the current fair market value of a share of the Company’s common stock on the grant date and a maximum term of 10 years. Stock options granted generally vest ratably over three to four years. Vesting of option awards may be accelerated based on age and length of service. Stock options granted are expensed on a straight-line basis over the vesting period based on the fair value of the awards on the date of grant. The grant date fair value of the options is calculated using a Black-Scholes option-pricing model.The following weighted average assumptions were used for stock option grants:
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| | 2021 | | 2020 | | 2019 |
| Dividend yield | 2.5 | % | | 2.5 | % | | 3.0 | % |
| Expected volatility | 36 | % | | 27 | % | | 27 | % |
| Risk-free interest rate | 0.4 | % | | 1.4 | % | | 2.4 | % |
| Expected life of stock option (years) | 5.0 | | 5.0 | | 5.0 |
The dividend yield assumption represents the Company’s expected dividend yield based on its historical dividend payouts and management’s expectations. The expected volatility is based on the Company’s historical and implied volatilities. The risk-free interest rate for periods within the expected option life is based on the U.S. Treasury yield curve at the grant date. The expected life of the option is based on the Company’s past experience and other considerations.The weighted average grant date fair value for options granted during 2021, 2020 and 2019 was $48.48, $31.53 and $24.67, respectively. 132
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Debt instrument, basis spread on SOFR rate | 1.00 | SEC-NUM |
[Table of Contents](#i3944da1428384b81954c2cd4a4fd88bf_7)10.DebtOn June 30, 2022, we entered into a credit agreement (2022 Credit Agreement) with PNC Bank, National Association as administrative agent, swing line lender, and an L/C issuer, the lenders party thereto, and the other L/C issuers party thereto. The 2022 Credit Agreement refinanced our previous credit agreements in their entirety. Terms used in this description of the 2022 Credit Agreement with initial capital letters that are not otherwise defined herein are as defined in the 2022 Credit Agreement. The term loan facility was advanced by the lenders thereunder to refinance and replace our (i) Credit Agreement, dated as of February 22, 2019, as amended, among us, as borrower, Bank of America, N.A., as administrative agent, swing line lender and an L/C issuer, the lenders party thereto, and the other L/C issuers party thereto and (ii) Credit Agreement, dated as of November 9, 2020, among us, as borrower, Bank of America, N.A., as administrative agent, and the lenders party thereto (together, the “Prior Credit Agreements”).The 2022 Credit Agreement provides for a $755.0 million unsecured term loan facility and a $500.0 million unsecured revolving loan facility, which includes a $50.0 million sublimit for the issuance of letters of credit. The revolving loan facility is available for working capital and general corporate purposes. Each of the term loan facility and the revolving loan facility matures on June 30, 2027.Borrowings under the term loan and revolving loan facilities accrue interest at a rate that is based on the Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. The base rate is the highest of (i) the Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, National Association prime rate, and (iii) Daily Simple SOFR plus an adjustment for SOFR plus 1.00%. The applicable margin for the borrowings is a percentage per annum based on the lower of (1) a pricing level determined by our then-current consolidated leverage ratio and (2) a pricing level determined by our public debt rating (if available).
The 2022 Credit Agreement also provides for the option to add certain foreign subsidiaries as borrowers and to borrow in Euros, Sterling, Yen and Swiss Francs under the revolving loan facility, up to a sublimit of $150.0 million. Borrowings under the revolving loan facility denominated in these currencies will accrue interest at a rate that is based on (a) for Euros, €STR, (b) for Sterling, SONIA, (c) for Yen, TONAR and (d) for Swiss Francs, SARON, plus an applicable margin calculated as described above.Under the 2022 Credit Agreement the weighted average interest rate in effect during the three months ended September 30, 2022 was 3.05%. Under the 2022 Credit Agreement and Prior Credit Agreements, the weighted average interest rate in effect during nine months ended September 30, 2022 was 2.11%. Under the Prior Credit Agreements, the weighted average interest rate in effect during the three and nine months ended September 30, 2021 was 1.33% and 1.41%, respectively. The rate in effect for the fourth quarter under the 2022 Credit Agreement is 4.53%.The 2022 Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The 2022 Credit Agreement also contains a financial covenant requiring us and our subsidiaries to maintain a consolidated leverage ratio not in excess of 3.50 to 1.00 as of the end of any fiscal quarter (for the four-quarter period ending on such date) with an opportunity for a temporary increase in such consolidated leverage ratio to 4.00 to 1.00 upon the consummation of certain qualified acquisitions for which the aggregate consideration is at least $250.0 million.As of September 30, 2022, we had $755.0 million of borrowings outstanding under the term loan, with a carrying value of $753.5 million, which is net of $1.5 million of unamortized debt discounts and issuance costs. The total amount was included in long-term debt. As of September 30, 2022, no borrowings were outstanding under the revolving loan facility. As of December 31, 2021, we had $755.0 million of borrowings outstanding under the Prior Credit Agreements, with a carrying value of $753.6 million, which is net of $1.4 million of unamortized debt discounts and issuance costs. The total amount was included in long-term debt. As of December 31, 2021, no borrowings were outstanding under the revolving loan facility. We were in compliance with all covenants under the 2022 Credit Agreement and the Prior Credit Agreements as of September 30, 2022 and December 31, 2021, respectively.
16
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Weighted average grant date fair value, Forfeited or expired (in dollars per share) | 25.56 | SEC-NUM |
[Table of Contents](#i1f1d4643819f4c4aa82d0bc4fb2f7f45_7)GENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
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| | Cruise Restricted Stock Units | | Cruise Stock Options |
| | Shares (in millions) | | Weighted-Average Grant Date Fair Value | | Weighted-Average Remaining Contractual Term in Years | | Shares (in millions) | | Weighted-Average Grant Date Fair Value | | Weighted-Average Remaining Contractual Term in Years |
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| Units outstanding at January 1, 2022 | 66.2 | | | $ | 18.82 | | | 8.1 | | 23.8 | | | $ | 7.07 | | | 2.0 |
| Granted | 34.5 | | | $ | 27.74 | | | | | 2.9 | | | $ | 15.77 | | | |
| Settled or exercised | (35.8) | | | $ | 29.00 | | | | | (2.2) | | | $ | 20.97 | | | |
| Forfeited or expired | (4.5) | | | $ | 25.56 | | | | | — | | | $ | — | | | |
| Units outstanding at June 30, 2022(a) | 60.4 | | | $ | 29.00 | | | 1.6 | | 24.6 | | | $ | 18.79 | | | 2.0 |
\_\_\_\_\_\_\_\_\_\_(a) Weighted average fair values include the impact of the remeasurement triggered by the modification. Post modification, certain awards are liability-awards resulting in ongoing remeasurement based on changes to the awards' fair value.
Our weighted-average assumptions used to value Cruise stock options are a dividend yield of 0.00% and 0.00%, expected volatility of 57.3% and 55.0%, a risk-free interest rate of 2.47% and 0.78% and an expected option life of 6.57 and 6.25 years for options issued during the six months ended June 30, 2022 and 2021. The expected volatility is based on the historical volatility of comparable public company data as Cruise Holdings is not publicly traded and therefore, does not have any trading history of its common stock.
Total compensation expense related to Cruise Holdings' share-based awards was $158 million for the three months ended June 30, 2022 and an insignificant amount for three months ended June 30, 2021. Total compensation expense related to Cruise Holdings' share-based awards was $1.3 billion for the six months ended June 30, 2022, which, when excluding the compensation expense for the three months ended June 30, 2022, primarily represents the impact of the modification to outstanding awards, and an insignificant amount for the six months ended June 30, 2021. During the three months ended June 30, 2022, GM conducted a quarterly tender offer and paid $0.2 billion in cash to settle tendered Cruise Class B Common Shares. No cash was paid to settle share-based awards for the three months ended March 31, 2022. Total unrecognized compensation expense for Cruise Holdings’ nonvested equity awards granted was $1.9 billion at June 30, 2022. Total units outstanding were 85 million at June 30, 2022. The expense related to RSUs and stock options is expected to be recorded over a weighted-average period of 1.7 years.
Note 19. Segment Reporting
We analyze the results of our business through the following reportable segments: GMNA, GMI, Cruise and GM Financial. The chief operating decision-maker evaluates the operating results and performance of our automotive segments and Cruise through earnings before interest and income taxes (EBIT)-adjusted, which is presented net of noncontrolling interests. The chief operating decision-maker evaluates GM Financial through earnings before income taxes (EBT)-adjusted because interest income and interest expense are part of operating results when assessing and measuring the operational and financial performance of the segment. Each segment has a manager responsible for executing our strategic initiatives. While not all vehicles within a segment are individually profitable on a fully allocated cost basis, those vehicles attract customers to dealer showrooms and help maintain sales volumes for other, more profitable vehicles and contribute towards meeting required fuel efficiency standards. As a result of these and other factors, we do not manage our business on an individual brand or vehicle basis.
Substantially all of the trucks, crossovers, cars and automobile parts produced are marketed through retail dealers in North America and through distributors and dealers outside of North America, the substantial majority of which are independently owned. In addition to the products sold to dealers for consumer retail sales, trucks, crossovers and cars are also sold to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. Fleet sales are completed through the dealer network and in some cases directly with fleet customers. Retail and fleet customers can obtain a wide range of after-sale vehicle services and products through the dealer network, such as maintenance, light repairs, collision repairs, vehicle accessories and extended service warranties.
GMNA meets the demands of customers in North America and GMI primarily meets the demands of customers outside North America with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet and GMC brands. We also have equity ownership stakes in entities that meet the demands of customers in other countries, primarily China, with vehicles developed, manufactured and/or marketed under the Baojun, Buick, Cadillac, Chevrolet and Wuling brands. Cruise is 24
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Sales-Type and Direct Financing Leases, Lease Receivable, to be Received, Year One | 6 | SEC-NUM |
20 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2022 and 20219. LEASESLESSOR — The Company has operating leases for certain generation contracts that contain provisions to provide capacity to a customer, which is a stand-ready obligation to deliver energy when required by the customer. Capacity receipts are generally considered lease elements as they cover the majority of available output from a facility. The allocation of contract payments between the lease and non-lease elements is made at the inception of the lease. Lease receipts from such contracts are recognized as lease revenue on a straight-line basis over the lease term, whereas variable lease receipts are recognized when earned. The following table presents lease revenue from operating leases in which the Company is the lessor for the periods indicated (in millions):
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Operating Lease Revenue | 2022 | | 2021 | | 2022 | | 2021 |
| Total lease revenue | $ | 134 | | | $ | 193 | | | $ | 408 | | | $ | 454 | |
| Less: Variable lease revenue | (14) | | | (24) | | | (37) | | | (63) | |
| Total Non-variable lease revenue | $ | 120 | | | $ | 169 | | | $ | 371 | | | $ | 391 | |
The following table presents the underlying gross assets and accumulated depreciation of operating leases included in Property, plant and equipment, net for the periods indicated (in millions):
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| Property, Plant and Equipment, Net | | September 30, 2022 | | December 31, 2021 |
| Gross assets | | $ | 1,701 | | | $ | 2,423 | |
| Less: Accumulated depreciation | | (398) | | | (765) | |
| Net assets | | $ | 1,303 | | | $ | 1,658 | |
The option to extend or terminate a lease is based on customary early termination provisions in the contract, such as payment defaults, bankruptcy, and lack of performance on energy delivery. The Company has not recognized any early terminations as of September 30, 2022. Certain leases may provide for variable lease payments based on usage or index-based (e.g., the U.S. Consumer Price Index) adjustments to lease payments. The following table shows the future lease receipts as of September 30, 2022 for the remainder of 2022 through 2026 and thereafter (in millions):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| | Future Cash Receipts for |
| | Sales-Type Leases | | Operating Leases |
| 2022 | $ | 6 | | | $ | 121 | |
| 2023 | 24 | | | 372 | |
| 2024 | 24 | | | 373 | |
| 2025 | 24 | | | 374 | |
| 2026 | 24 | | | 273 | |
| Thereafter | 361 | | | 723 | |
| Total | $ | 463 | | | $ | 2,236 | |
| Less: Imputed interest | (263) | | | |
| Present value of total lease receipts | $ | 200 | | | |
Battery Storage Lease Arrangements — The Company constructs and operates projects consisting only of a stand-alone battery energy storage system (“BESS”) facility, as well as projects that pair a BESS with solar energy systems. These projects allow more flexibility on when to provide energy to the grid. The Company will enter into PPAs for the full output of the facility that allow customers the ability to determine when to charge and discharge the BESS. These arrangements include both lease and non-lease elements under ASC 842, with the BESS component typically constituting a sales-type lease. The Company recognized lease income on sales-type leases through interest income of $4 million and $20 million for the three and nine months ended September 30, 2022, respectively; and $3 million and $11 million for the three and nine months ended September 30, 2021, respectively. During the second quarter of 2022, the Company recognized a full allowance of $20 million on a sales-type lease receivable at AES Gilbert. See Note 14—Other Income and Expense for further information.Prior to January 1, 2022, due to the variable-based nature of lease payments under certain contracts, the Company recorded a loss at commencement of sales-type leases of $13 million for the nine months ended September 30, 2021. These amounts are recognized in Other expense in the Condensed Consolidated Statement of Operations. See Note 14—Other Income and Expense for further information. Effective January 1, 2022, the Company adopted ASU 2021-05 in which lessors classify and account for certain leases with primarily variable-based lease payments as operating leases. The Company adopted this standard on a prospective basis. See Note 1—Financial Statement Presentation for further information.
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Other Restructuring Costs | 0.7 | SEC-NUM |
[Table of Contents](#ibf86fcdc129f446cb1f3b45cc16d49fe_7)ALBEMARLE CORPORATION AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements(Unaudited)See below for a reconciliation of adjusted EBITDA, the non-GAAP financial measure, from Net (loss) income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP (in thousands):
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| | Lithium | | Bromine | | Catalysts | | Reportable Segments Total | | All Other | | Corporate | | Consolidated Total |
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| Three months ended March 31, 2022 | | | | | | | | | | | | | |
| Net income (loss) attributable to Albemarle Corporation | $ | 261,689 | | | $ | 116,561 | | | $ | 3,989 | | | $ | 382,239 | | | $ | — | | | $ | (128,856) | | | $ | 253,383 | |
| Depreciation and amortization | 38,526 | | | 12,673 | | | 12,921 | | | 64,120 | | | — | | | 2,454 | | | 66,574 | |
| | | | | | | | | | | | | | |
| Loss on sale of interest in properties(a) | 8,400 | | | — | | | — | | | 8,400 | | | — | | | — | | | 8,400 | |
| Acquisition and integration related costs(b) | — | | | — | | | — | | | — | | | — | | | 1,724 | | | 1,724 | |
| Interest and financing expenses(c) | — | | | — | | | — | | | — | | | — | | | 27,834 | | | 27,834 | |
| Income tax expense | — | | | — | | | — | | | — | | | — | | | 80,530 | | | 80,530 | |
| Non-operating pension and OPEB items | — | | | — | | | — | | | — | | | — | | | (5,280) | | | (5,280) | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Other(d) | — | | | — | | | — | | | — | | | — | | | (1,235) | | | (1,235) | |
| Adjusted EBITDA | $ | 308,615 | | | $ | 129,234 | | | $ | 16,910 | | | $ | 454,759 | | | $ | — | | | $ | (22,829) | | | $ | 431,930 | |
| Three months ended March 31, 2021 | | | | | | | | | | | | | |
| Net income (loss) attributable to Albemarle Corporation | $ | 74,630 | | | $ | 82,113 | | | $ | 12,916 | | | $ | 169,659 | | | $ | 20,016 | | | $ | (93,998) | | | $ | 95,677 | |
| Depreciation and amortization | 31,806 | | | 12,527 | | | 12,511 | | | 56,844 | | | 1,463 | | | 3,953 | | | 62,260 | |
| | | | | | | | | | | | | | |
| Acquisition and integration related costs(b) | — | | | — | | | — | | | — | | | — | | | 2,162 | | | 2,162 | |
| | | | | | | | | | | | | | |
| Interest and financing expenses(e) | — | | | — | | | — | | | — | | | — | | | 43,882 | | | 43,882 | |
| Income tax expense | — | | | — | | | — | | | — | | | — | | | 22,107 | | | 22,107 | |
| Non-operating pension and OPEB items | — | | | — | | | — | | | — | | | — | | | (5,465) | | | (5,465) | |
| Other(f) | — | | | — | | | — | | | — | | | — | | | 9,431 | | | 9,431 | |
| Adjusted EBITDA | $ | 106,436 | | | $ | 94,640 | | | $ | 25,427 | | | $ | 226,503 | | | $ | 21,479 | | | $ | (17,928) | | | $ | 230,054 | |
(a)Expense recorded as a result of revised estimates of the obligation to construct certain lithium hydroxide conversion assets in Kemerton, Western Australia, due to anticipated cost overruns from supply chain, labor and COVID-19 pandemic related issues. The corresponding obligation was recorded in Accrued liabilities to be transferred to Mineral Resources Limited (“MRL”), which maintains a 40% ownership interest in these Kemerton assets. (b)Costs related to the acquisition, integration and potential divestitures for various significant projects, recorded in Selling, general and administrative expenses (“SG&A”).(c)Included in Interest and financing expenses is the correction of an out of period error of $17.5 million related to the overstatement of capitalized interest in prior periods. See Note 1, “Basis of Presentation,” for further details.(d)Included amounts for the three months ended March 31, 2022 recorded in:•SG&A - $4.3 million of gains from the sale of legacy properties not part of our operations, partially offset by $2.8 million of charges for environmental reserves at sites not part of our operations and $0.7 million of facility closure expenses related to offices in Germany.•Other income, net - $0.6 million gain related to a settlement received from a legal matter in a prior period. (e)Included in Interest and financing expenses is a loss on early extinguishment of debt of $27.8 million for the three months ended March 31, 2021. See Note 9, “Long-Term Debt,” for additional information.(f)Included amounts for the three months ended March 31, 2021 recorded in:▪SG&A - $5.5 million of expenses primarily related to non-routine labor and compensation related costs that are outside normal compensation arrangements.▪Other income, net - $3.9 million of expenses primarily related to asset retirement obligation charges to update of an estimate at a site formerly owned by Albemarle.
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Revenue, remaining performance obligation, expected timing of satisfaction, period | 12 | SEC-NUM |
forwards, options and spot exchanges of currency, as necessary, and economically hedges the net currency risks by entering into offsetting derivatives with established financial institution counterparties. The changes in fair value related to these instruments are recorded in revenues, net in the Consolidated Statements of Income. Revenue is also derived from the sale of equipment in certain of the Company’s businesses, which is recognized at the time the device is sold and control has passed to the customer. This revenue is recognized gross of the cost of sales related to the equipment in revenues, net within the Consolidated Statements of Income. The related cost of sales for the equipment is recorded in processing expenses within the Consolidated Statements of Income.Revenues from contracts with customers, within the scope of Topic 606, represents approximately 75% of total consolidated revenues, net, for the year ended December 31, 2021. Disaggregation of RevenuesThe Company provides its services to customers across different payment solutions and geographies. Revenue, net by solution (in millions) as of and for the years ended December 31 (in millions):
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| | | | | | | | | | | | | | | | | | | | | | | | |
| Revenues by Solution Category\*1 | | 2021 | | 2020 | | 2019 | |
| Fuel | | $ | 1,180.1 | | | $ | 1,057.2 | | | $ | 1,173.0 | | | | |
| Corporate payments | | 600.0 | | | 434.0 | | | 450.0 | | | | |
| Tolls | | 306.0 | | | 292.0 | | | 357.2 | | | | |
| Lodging | | 309.6 | | | 207.0 | | | 212.6 | | | | |
| Gift | | 179.5 | | | 154.4 | | | 180.2 | | | | |
| Other | | 258.5 | | | 244.3 | | | 275.9 | | | | |
| Consolidated revenues, net | | $ | 2,833.7 | | | $ | 2,388.9 | | | $ | 2,648.8 | | | | |
\*Columns may not calculate due to rounding. 1Reflects certain reclassifications of revenue between solution categories as the Company realigned its Corporate Payments solution, resulting in reclassification of Payroll Card revenue from Corporate Payments to Other.The table below presents the Company's revenues, net by geography as of and for the years ended December 31 (in million).
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| | | | | | | | | | | | | | | | | | | | | |
| Revenues by Geography | | 2021 | | 2020 | | 2019 |
| United States (country of domicile) | | $ | 1,785.2 | | | $ | 1,467.5 | | | $ | 1,595.3 | |
| Brazil | | 368.1 | | | 344.2 | | | 427.9 | |
| United Kingdom | | 321.8 | | | 262.9 | | | 275.2 | |
| Other | | 358.6 | | | 314.2 | | | 350.4 | |
| Consolidated revenues, net | | $ | 2,833.7 | | | $ | 2,388.9 | | | $ | 2,648.8 | |
| | | | | | | |
Contract LiabilitiesDeferred revenue contract liabilities for customers subject to ASC 606 were $73.7 million and $73.0 million as of December 31, 2021 and 2020, respectively. We expect to recognize approximately $43.3 million of these amounts in revenues within 12 months and the remaining $30.4 million over the next five years as of December 31, 2021. The amount and timing of revenue recognition is affected by several factors, including contract modifications and terminations, which could impact the estimate of amounts allocated to remaining performance obligations and when such revenues could be recognized. Revenue recognized for the year ended December 31, 2021, that was included in the deferred revenue contract liability as of January 1, 2021, was approximately $41.0 million. Costs to Obtain or Fulfill a ContractWith the adoption of ASC 606, the Company began capitalizing the incremental costs of obtaining a contract with a customer if the Company expects to recover those costs. The incremental costs of obtaining a contract are those that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, a sales commission). Costs incurred to fulfill a contract are capitalized if those costs meet all of the following criteria:a.The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.b.The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.c.The costs are expected to be recovered.67
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Share-Based Compensation, Arrangement By Share-Based Payment, Stock Awards, Performance Goals, EBITDAP Weight | 40 | SEC-NUM |
Stock award activity for the years ended December 31, 2021, 2020, and 2019, was as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | Stock Awards(in thousands) | | Weighted-AverageGrant Date FairValue | | WeightedAverageRemainingContractual Term |
| Outstanding as of December 31, 2018 | | 399 | | | $ | 174.07 | | | 0.7 years |
| Granted | | 132 | | | 210.16 | | | |
| Adjustment due to performance | | 114 | | | 135.86 | | | |
| Vested | | (265) | | | 135.86 | | | |
| Forfeited | | (6) | | | 232.60 | | | |
| Outstanding as of December 31, 2019 | | 374 | | | 201.92 | | | 0.9 years |
| Granted | | 132 | | | 225.80 | | | |
| Adjustment due to performance | | 48 | | | 199.58 | | | |
| Vested | | (157) | | | 199.58 | | | |
| Forfeited | | (16) | | | 231.06 | | | |
| Outstanding as of December 31, 2020 | | 381 | | | 211.77 | | | 1.0 year |
| Granted | | 213 | | | 181.66 | | | |
| Adjustment due to performance | | 19 | | | 259.03 | | | |
| Vested | | (100) | | | 259.03 | | | |
| Forfeited | | (28) | | | 202.81 | | | |
| Outstanding as of December 31, 2021 | | 485 | | | $ | 190.36 | | | 1.0 year |
Vested awards include stock awards that fully vested during the year based on the level of achievement of the relevant performance goals. The performance goals for outstanding RPSRs granted in 2021, 2020, and 2019 were based on three metrics as defined in the grant agreements: earnings before interest, taxes, depreciation, amortization, and pension ("EBITDAP"), weighted at 40%, pension-adjusted return on invested capital ("ROIC"), weighted at 40%, and relative EBITDAP growth, weighted at 20%. The Company's EBITDAP growth will be measured against EBITDAP growth of the S&P Aerospace and Defense Select Index.
Compensation Expense
The Company recorded $33 million, $23 million, and $30 million of expense related to stock awards for the years ended December 31, 2021, 2020, and 2019, respectively. The Company recorded $8 million, $6 million, and $6 million as tax benefits related to stock awards for the years ended December 31, 2021, 2020, and 2019, respectively.
The Company recognized tax benefits for the years ended December 31, 2021, 2020, and 2019, of $4 million, $5 million, and $11 million, respectively, from the issuance of stock in settlement of stock awards.
Unrecognized Compensation Expense
As of December 31, 2021, the Company had $4 million of unrecognized compensation expense associated with RSRs granted in 2021 and 2020, which will be recognized over a weighted average period of 1.6 years, and $28 million of unrecognized expense associated with RPSRs granted in 2021 and 2020, which will be recognized over a weighted average period of 1.1 years.
19. SUBSIDIARY GUARANTORS
As described in Note 13: Debt, the Company issued senior notes through the consolidating parent company, HII. Performance of the Company's obligations under its senior notes outstanding as of December 31, 2021, including any repurchase obligations resulting from a change of control, is fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of HII's existing and future material domestic subsidiaries ("Subsidiary Guarantors"). The Subsidiary Guarantors are 100% owned by HII. Each HII subsidiary that did not provide a guarantee ("Non-Guarantors") is not material and HII, as the parent company issuer, did not have independent assets or operations. There are no significant restrictions on the ability of the parent company and the Subsidiary 103
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Performance shares, performance period | 3-year | SEC-NUM |
[Table of Contents](#i31241139a24240ee889881d54ce4b5f1_7)Diamondback Energy, Inc. and Subsidiaries Condensed Notes to Consolidated Financial Statements - (Continued)(Unaudited)Restricted Stock Units
The following table presents the Company’s restricted stock unit activity during the six months ended June 30, 2022 under the Equity Plan:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Restricted Stock Units | | Weighted Average Grant-DateFair Value |
| Unvested at December 31, 2021 | 1,079,589 | | | $ | 62.09 | |
| Granted | 319,035 | | | $ | 132.84 | |
| Vested | (178,185) | | | $ | 92.82 | |
| Forfeited | (39,231) | | | $ | 68.58 | |
| Unvested at June 30, 2022 | 1,181,208 | | | $ | 76.35 | |
The aggregate fair value of restricted stock units that vested during the six months ended June 30, 2022 was $17 million. As of June 30, 2022, the Company’s unrecognized compensation cost related to unvested restricted stock units was $70 million, which is expected to be recognized over a weighted-average period of 1.9 years.
Performance Based Restricted Stock Units
The following table presents the Company’s performance restricted stock units activity under the Equity Plan for the six months ended June 30, 2022:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Performance Restricted Stock Units | | Weighted Average Grant-Date Fair Value |
| Unvested at December 31, 2021 | 456,459 | | | $ | 100.17 | |
| Granted | 126,905 | | | $ | 237.13 | |
| | | | |
| | | | |
| Unvested at June 30, 2022(1) | 583,364 | | | $ | 129.96 | |
(1)A maximum of 1,408,973 units could be awarded based upon the Company’s final TSR ranking.
As of June 30, 2022, the Company’s unrecognized compensation cost related to unvested performance based restricted stock awards and units was $45 million, which is expected to be recognized over a weighted-average period of 1.6 years.
In March 2022, eligible employees received performance restricted stock unit awards totaling 126,905 units from which a minimum of 0% and a maximum of 200% of the units could be awarded based upon the measurement of total stockholder return of the Company’s common stock as compared to a designated peer group during the 3-year performance period of January 1, 2022 to December 31, 2024 and cliff vest at December 31, 2024 subject to continued employment. The initial payout of the March 2022 awards will be further adjusted by a TSR modifier that may reduce the payout or increase the payout up to a maximum of 250%.
The fair value of each performance restricted stock unit issuance is estimated at the date of grant using a Monte Carlo simulation, which results in an expected percentage of units to be earned during the performance period.
The following table presents a summary of the grant-date fair values of performance restricted stock units granted and the related assumptions for the awards granted during the period presented:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | |
| | 2022 | | | | |
| Grant-date fair value | $ | 237.13 | | | | | |
| | | | | | |
| Risk-free rate | 1.44 | % | | | | |
| Company volatility | 72.10 | % | | | | |
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Increase (decrease) in fine imposed by Greek competition authority | 10.5 | SEC-NUM |
COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements (continued) (Dollars in Millions Except Share and Per Share Amounts)(Unaudited)
subsidiary jointly and severally liable for any tax due from the Seller’s Brazilian subsidiary. The case has been pending since 2002, and the Lower Federal Court has not issued a decision. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal counsel, that the Company should ultimately prevail in this action. The Company is challenging this action vigorously.
In December 2005, the Brazilian internal revenue authority issued to the Company’s Brazilian subsidiary a tax assessment with interest, penalties and any court-mandated fees of approximately $50, at the current exchange rate, based on a claim that certain purchases of U.S. Treasury bills by the subsidiary and their subsequent disposition during the period 2000 to 2001 were subject to a tax on foreign exchange transactions. The Company had been disputing the assessment within the internal revenue authority’s administrative appeals process. However, in November 2015, the Superior Chamber of Administrative Tax Appeals denied the Company’s final administrative appeal, and the Company has filed a lawsuit in the Brazilian federal court. In the event the Company is unsuccessful in this lawsuit, further appeals are available within the Brazilian federal courts. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal counsel, that the tax assessment is without merit and that the Company should ultimately prevail. The Company is challenging this assessment vigorously.
Competition Matter
Certain of the Company’s subsidiaries were historically subject to actions and, in some cases, fines, by governmental authorities in a number of countries related to alleged competition law violations. Substantially all of these matters also involved other consumer goods companies and/or retail customers. The Company’s policy is to comply with antitrust and competition laws and, if a violation of any such laws is found, to take appropriate remedial action and to cooperate fully with any related governmental inquiry. The status as of September 30, 2022 of such competition law matters pending against the Company during the nine months ended September 30, 2022 is set forth below.
▪In July 2014, the Greek competition law authority issued a statement of objections alleging a restriction of parallel imports into Greece. The Company responded to this statement of objections. In July 2017, the Company received the decision from the Greek competition law authority in which the Company was fined $11. The Company appealed the decision to the Greek courts. In April 2019, the Greek courts affirmed the judgment against the Company’s Greek subsidiary, but reduced the fine to $10.5 and dismissed the case against Colgate-Palmolive Company. The Company’s Greek subsidiary and the Greek competition authority have appealed the decision to the Greek Supreme Court.
Talcum Powder Matters
The Company has been named as a defendant in civil actions alleging that certain talcum powder products that were sold prior to 1996 were contaminated with asbestos and/or caused mesothelioma and other cancers. Many of these actions involve a number of co-defendants from a variety of different industries, including suppliers of asbestos and manufacturers of products that, unlike the Company’s products, were designed to contain asbestos. As of September 30, 2022, there were 224 individual cases pending against the Company in state and federal courts throughout the United States, as compared to 203 cases as of June 30, 2022 and 171 cases as of December 31, 2021. During the three months ended September 30, 2022, 33 new cases were filed and 12 cases were resolved by voluntary dismissal or settlement. During the nine months ended September 30, 2022, 72 cases were filed and 19 cases were resolved by voluntary dismissal or settlement. The values of the settlements in the quarter and year-to-date period presented were not material, either individually or in the aggregate, to the Company’s results of operations in either such period.
A significant portion of the Company’s costs incurred in defending and resolving these claims has been, and the Company believes that a portion of such costs will continue to be, covered by insurance policies issued by several primary, excess and umbrella insurance carriers, subject to deductibles, exclusions, retentions, policy limits and insurance carrier insolvencies.
While the Company and its legal counsel believe that these cases are without merit and intend to challenge them vigorously, there can be no assurances regarding the ultimate resolution of these matters.
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Payments for Other Taxes | 310 | SEC-NUM |
[Table of Contents](#i988dd6b5140d4a1b8c6b4c50f020743f_10)was conveyed to Sylvamo Corporation as part of the spin-off transaction on October 1, 2021.
Summarized financial information for Ilim is presented in the following tables:
Balance Sheet
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| | | | | | | | | | | | |
| In millions | 2021 | | 2020 |
| Current assets | $ | 1,010 | | | $ | 739 | |
| Noncurrent assets | 3,145 | | | 2,733 | |
| Current liabilities | 1,212 | | | 674 | |
| Noncurrent liabilities | 2,047 | | | 2,249 | |
| Noncontrolling interests | 24 | | | 17 | |
Income Statement
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| In millions | 2021 | | 2020 | | 2019 |
| Net sales | $ | 2,693 | | | $ | 2,015 | | | $ | 2,189 | |
| Gross profit | 1,432 | | | 838 | | | 1,025 | |
| Income from continuing operations | 635 | | | 115 | | | 438 | |
| Net income | 613 | | | 113 | | | 424 | |
GRAPHIC PACKAGING INTERNATIONAL PARTNERS, LLC The Company completed the transfer of its North American Consumer Packaging business in exchange for an initial 20.5% ownership interest (79,911,591 units) in Graphic Packaging International Partners, LLC (GPIP) in 2018. The Company has since fully monetized its investment in GPIP with transactions beginning in the first quarter 2020 through the second quarter 2021.
GPIP Monetization Transactions
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| | | | | | | | | | | | | | | | | | |
| Date | Transaction Type | Units | Proceeds | Pre-Tax Gain | After-Tax Gain |
| In millions except units | | | | | |
| 2020 First Quarter | Units exchange | 15,150,784 | | $ | 250 | | $ | 33 | | $ | 25 | |
| 2020 Third Quarter | Units exchange | 17,399,414 | | 250 | — | | — | |
| 2021 First Quarter | Units exchange and open market sale | 24,588,316 | | 397 | 33 | 25 | |
| 2021 First Quarter | TRA (a) | | | 42 | 31 | |
| 2021 Second Quarter | Units exchange and open market sale | 22,773,077 | | 403 | 64 | 48 | |
| 2021 Second Quarter | TRA (a) | | | 66 | 50 | |
(a) The TRA entitles the Company to 50% of the amount of any tax benefits projected to be realized by GPIP upon the Company's exchange of its units. The Company made income tax payments of $310 million in 2021 as a result of the monetization of its investment in GPIP.
As of June 30, 2021, the Company no longer had an ownership interest in GPIP. The Company recorded equity earnings of $4 million, $40 million and $46 million for the twelve months ended December 31, 2021, 2020 and 2019, respectively. The Company received cash dividends from GPIP of $5 million, $20 million and $27 million during 2021, 2020 and 2019, respectively.
The Company's remaining equity method investments are not material.
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Company match (up to) (as a percent) | 4 | SEC-NUM |
[Table of Contents](#i677b09687fd443618b9c84261c8e0734_7)Stock-based Awards Available for GrantA summary of stock-based awards available for grant is as follows:
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| (in thousands) | Stock-based AwardsAvailable for Grant under theEmployee Stock Option Plan | Stock-based AwardsAvailable for Grant under theNon-Employee Stock Option Plan |
| Balance at August 31, 2019 | 6,067 | | 264 | |
| | | |
| Granted - stock option awards | (424) | | (16) | |
| | | |
| Granted - RSUs(1) | (93) | | — | |
| Granted - PSUs(1) | (91) | | — | |
| Forfeited - stock-based awards(2) | 167 | | 2 | |
| Balance at August 31, 2020 | 5,626 | | 250 | |
| Granted - stock option awards | (418) | | (12) | |
| Granted - RSUs(1) | (157) | | — | |
| Granted - PSUs(1) | (91) | | — | |
| Forfeited - stock-based awards(2) | 120 | | — | |
| Balance at August 31, 2021 | 5,080 | | 238 | |
| Granted - stock option awards | (348) | | (6) | |
| Granted - RSUs(1) | (180) | | (4) | |
| Granted - PSUs(1) | (77) | | — | |
| Forfeited - stock-based awards(2) | 194 | | 4 | |
| Balance at August 31, 2022 | 4,669 | | 232 | |
(1)Each Restricted Stock Award granted is equivalent to 2.5 shares granted under the LTIP.(2)Under the LTIP, for each Restricted Stock Award canceled/forfeited, an equivalent of 2.5 shares is added back to the available stock-based awards balance.
17. EMPLOYEE BENEFIT PLANSDefined Contribution PlanWe established our 401(k) Plan in fiscal 1993. The 401(k) Plan is a defined contribution plan covering all full-time, U.S. employees of FactSet and is subject to the provisions of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 ("IRC"). Each year, participants may contribute up to 60% of their eligible annual compensation, subject to annual limitations established by the IRC. We matched up to 4% of employees’ earnings, capped at the Internal Revenue Service annual maximum. Company matching contributions are subject to a five-year graduated vesting schedule. All full-time, U.S. employees are eligible for the matching contribution by FactSet. We contributed $12.0 million, $11.6 million, and $11.3 million in matching contributions to employee 401(k) accounts during fiscal 2022, 2021 and 2020, respectively.18. SEGMENT INFORMATIONOperating segments are defined as components of an enterprise that have the following characteristics: (i) they engage in business activities from which they may earn revenue and incur expense, (ii) their operating results are regularly reviewed by the chief operating decision maker ("CODM") for resource allocation decisions and performance assessment, and (iii) their discrete financial information is available. Our Chief Executive Officer functions as our CODM. Our operating segments are consistent with our reportable segments and how we, including our CODM, manage our business and the geographic markets in which we serve. Our internal financial reporting structure is based on three segments: the Americas; EMEA; and Asia Pacific. The Americas segment serves our clients throughout North, Central, and South America. The EMEA segment serves our clients in Europe, the Middle East, and Africa. The Asia Pacific segment serves our clients in Asia and Australia. Segment revenues reflect sales to our clients based on their respective geographic locations. 86
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Health care coverage extension period | 36 | SEC-NUM |
[Table of Contents](#i43adbcd383bc4dc48977980bcb999d17_79) HP INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)Note 4: Retirement and Post-Retirement Benefit Plans (Continued)
Plan Asset Allocations Refer to the fair value hierarchy table above for actual assets allocations across the benefit plans. The weighted-average target asset allocations across the benefit plans represented in the fair value tables above were as follows:
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| | | 2021 Target Allocation |
| Asset Category | | U.S. Defined Benefit Plans | | Non-U.S. DefinedBenefit Plans | | Post-RetirementBenefit Plans |
| Equity-related investments | | 24.0 | % | | 36.4 | % | | — | % |
| Debt securities | | 76.0 | % | | 34.8 | % | | 98.3 | % |
| Real estate | | — | % | | 10.1 | % | | — | % |
| Cash and cash equivalents | | — | % | | 2.7 | % | | 1.7 | % |
| Other | | — | % | | 16.0 | % | | — | % |
| Total | | 100.0 | % | | 100.0 | % | | 100.0 | % |
Investment Policy HP’s investment strategy is to seek a competitive rate of return relative to an appropriate level of risk depending on the funded status of each plan and the timing of expected benefit payments. The majority of the plans’ investment managers employ active investment management strategies with the goal of outperforming the broad markets in which they invest. Risk management practices include diversification across asset classes and investment styles and periodic rebalancing toward asset allocation targets. A number of the plans’ investment managers are authorized to utilize derivatives for investment or liability exposures, and HP may utilize derivatives to affect asset allocation changes or to hedge certain investment or liability exposures.The target asset allocation selected for each U.S. plan (pension and post-retirement) reflects a risk/return profile HP believes is appropriate relative to each plan’s liability structure and return goals. HP conducts periodic asset-liability studies for U.S. plans to model various potential asset allocations in comparison to each plan’s forecasted liabilities and liquidity needs and to develop a policy glide path which adjusts the asset allocation with funded status. Due to the strong funded status for the U.S. Pension Plan, consistent with our policy, steps have been taken to de-risk the portfolio by reallocation of assets to liability hedging fixed-income investments. HP also invests a portion of the U.S. defined benefit plan assets in private market securities such as private equity funds to provide diversification and a higher expected return on assets. Outside the United States, asset allocation decisions are typically made by an independent board of trustees for the specific plan. As in the United States, investment objectives are designed to generate returns that will enable the plan to meet its future obligations. In some countries, local regulations may restrict asset allocations, typically leading to a higher percentage of investment in fixed-income securities than would otherwise be deployed. HP reviews the investment strategy and where appropriate, can offer some assistance in the selection of investment managers, with final decisions on asset allocation and investment managers made by the board of trustees for the specific plan.Basis for Expected Long-Term Rate of Return on Plan AssetsThe expected long-term rate of return on plan assets reflects the expected returns for each major asset class in which the plan invests and the weight of each asset class in the target mix. Expected asset returns reflect the current yield on government bonds, risk premiums for each asset class and expected real returns which considers each country’s specific inflation outlook. Because HP’s investment policy is to employ primarily active investment managers who seek to outperform the broader market, the expected returns are adjusted to reflect the expected additional returns net of fees. Retirement Incentive ProgramAs part of the Fiscal 2020 Plan, HP announced the voluntary EER program for its U.S. employees in October 2019. Voluntary participation in the EER program was limited to those employees who were at least 50 years old with 20 or more years of service at HP. Employees accepted into the EER program left HP on dates ranging from December 31, 2019 to September 30, 2020. The EER benefit was a cash lump sum payment which was calculated based on years of service at HP at the time of the retirement and ranging from 13 to 52 weeks of pay. All employees participating in the EER program were offered the opportunity to continue health care coverage at the active employee contribution rates for up to 36 months following retirement. In addition, HP provided up to $12,000 in employer credits under the Retirement Medical Savings Account (“RMSA”) program. In relation to the continued health care 78
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Effect of tax rate change on deferred tax assets | 12,297 | SEC-NUM |
[Table of Contents](#i89c3c9328e454b30b2c14123b867f3f0_7)EQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The tax benefit (expenses) for income taxes consisted of the following components for the years ended December 31, (in thousands):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| Current: | | | | | |
| Federal | $ | 7,753 | | | $ | 4,552 | | | $ | (17,906) | |
| State and local | (156) | | | 1,597 | | | (4,624) | |
| Foreign | (76,450) | | | (171,092) | | | (135,356) | |
| Subtotal | (68,853) | | | (164,943) | | | (157,886) | |
| Deferred: | | | | | |
| Federal | 11,060 | | | 16,553 | | | (7,459) | |
| State and local | (1,411) | | | 704 | | | (1,775) | |
| Foreign | (50,020) | | | 1,535 | | | (18,232) | |
| Subtotal | (40,371) | | | 18,792 | | | (27,466) | |
| Income tax expense | $ | (109,224) | | | $ | (146,151) | | | $ | (185,352) | |
State and foreign taxes not based on income are included in general and administrative expenses and the aggregate amounts were not significant for the years ended December 31, 2021, 2020 and 2019.The fiscal 2021, 2020, and 2019 income tax benefit (expenses) differed from the amounts computed by applying the U.S. federal income tax rate of 21% to pre-tax income as a result of the following for the years ended December 31 (in thousands):
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| | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| Federal tax at statutory rate | $ | (127,880) | | | $ | (109,906) | | | $ | (145,445) | |
| State and local tax (expense) benefit | (1,513) | | | 2,071 | | | (5,852) | |
| Deferred tax assets generated in current year not benefited | (19,703) | | | (12,852) | | | (5,398) | |
| Foreign income tax rate differential | (18,918) | | | (16,364) | | | (11,610) | |
| Non-deductible expenses | (10,579) | | | (4,427) | | | (1,021) | |
| Stock-based compensation expense | (1,385) | | | (954) | | | (2,105) | |
| Change in valuation allowance | (595) | | | 390 | | | (2,870) | |
| Foreign financing activities | (4,805) | | | (11,743) | | | (18,738) | |
| Loss on divestments | — | | | — | | | (3,277) | |
| Uncertain tax positions reserve | 50,059 | | | (38,014) | | | (35,724) | |
| Tax adjustments related to REIT | 39,164 | | | 50,107 | | | 63,614 | |
| Change in deferred tax adjustments | (1,251) | | | (136) | | | (10,574) | |
| Effect of tax rate change on deferred tax assets | (12,297) | | | — | | | — | |
| Other, net | 479 | | | (4,323) | | | (6,352) | |
| Total income tax expense | $ | (109,224) | | | $ | (146,151) | | | $ | (185,352) | |
Of the unrecognized tax benefits being realized in the year ended December 31, 2021, approximately $32.0 million is related to the uncertain tax position inherited from the Metronode Acquisition in 2018, which is related to an outstanding income tax audit at the time of the acquisition. The uncertain tax position was covered by an indemnification agreement with the Seller. The income tax audit was settled during 2021, as such, the realization of the unrecognized tax benefits resulted in an impairment of the indemnification asset for the same amount, which has been included in Other Income (Expense) on the Consolidated Statements of Operations for the year ended December 31, 2021.Our accounting policy is to treat any tax on Global Intangible Low-Taxed Income ("GILTI") inclusions as a current period cost included in the tax expense in the year incurred. We believe the GILTI inclusion provision will F-54
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Subsets and Splits