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Number of electric and natural gas customers | 4.4 | SEC-NUM |
EVERSOURCE ENERGY AND SUBSIDIARIESTHE CONNECTICUT LIGHT AND POWER COMPANYNSTAR ELECTRIC COMPANY AND SUBSIDIARYPUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
COMBINED NOTES TO FINANCIAL STATEMENTS
Refer to the Glossary of Terms included in this combined Annual Report on Form 10-K for abbreviations and acronyms used throughout the combined notes to the financial statements.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. About Eversource, CL&P, NSTAR Electric and PSNHEversource Energy is a public utility holding company primarily engaged, through its wholly-owned regulated utility subsidiaries, in the energy delivery business. Eversource Energy's wholly-owned regulated utility subsidiaries consist of CL&P, NSTAR Electric and PSNH (electric utilities), Yankee Gas, NSTAR Gas and Eversource Gas Company of Massachusetts (EGMA) (natural gas utilities) and Aquarion (water utilities). Eversource provides energy delivery and/or water service to approximately 4.4 million electric, natural gas and water customers through ten regulated utilities in Connecticut, Massachusetts and New Hampshire.
On October 9, 2020, Eversource acquired certain assets and liabilities that comprised the NiSource Inc. (NiSource) natural gas distribution business in Massachusetts, which was previously doing business as Columbia Gas of Massachusetts (CMA), pursuant to an asset purchase agreement (the Agreement) entered into on February 26, 2020 between Eversource and NiSource. The natural gas distribution assets acquired from CMA were assigned to EGMA, an indirect wholly-owned subsidiary of Eversource formed in 2020. The LNG assets acquired from CMA were assigned to Hopkinton LNG Corp. The cash purchase price was $1.1 billion, plus a working capital amount of $68.6 million, as finalized in the first quarter of 2021. Eversource's consolidated financial information includes the results of the acquisition of the assets of CMA beginning on October 9, 2020. See Note 24, "Acquisition of Assets of Columbia Gas of Massachusetts," for further information.
Eversource, CL&P, NSTAR Electric and PSNH are reporting companies under the Securities Exchange Act of 1934. Eversource Energy is a public utility holding company under the Public Utility Holding Company Act of 2005. Arrangements among the regulated electric companies and other Eversource companies, outside agencies and other utilities covering interconnections, interchange of electric power and sales of utility property are subject to regulation by the FERC. Eversource's regulated companies are subject to regulation of rates, accounting and other matters by the FERC and/or applicable state regulatory commissions (the PURA for CL&P, Yankee Gas and Aquarion, the DPU for NSTAR Electric, NSTAR Gas, EGMA and Aquarion, and the NHPUC for PSNH and Aquarion).
CL&P, NSTAR Electric and PSNH furnish franchised retail electric service in Connecticut, Massachusetts and New Hampshire, respectively. NSTAR Gas and EGMA are engaged in the distribution and sale of natural gas to customers within Massachusetts and Yankee Gas is engaged in the distribution and sale of natural gas to customers within Connecticut. Aquarion is engaged in the collection, treatment and distribution of water in Connecticut, Massachusetts and New Hampshire. CL&P, NSTAR Electric and PSNH's results include the operations of their respective distribution and transmission businesses. The distribution business also includes the results of NSTAR Electric's solar power facilities.
Eversource Service, Eversource's service company, and several wholly-owned real estate subsidiaries of Eversource, provide support services to Eversource, including its regulated companies.
B. Basis of PresentationThe consolidated financial statements of Eversource, NSTAR Electric and PSNH include the accounts of each of their respective subsidiaries. Intercompany transactions have been eliminated in consolidation. The accompanying consolidated financial statements of Eversource, NSTAR Electric and PSNH and the financial statements of CL&P are herein collectively referred to as the "financial statements."
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Eversource consolidates the operations of CYAPC and YAEC, both of which are inactive regional nuclear power companies engaged in the long-term storage of their spent nuclear fuel. Eversource consolidates CYAPC and YAEC because CL&P's, NSTAR Electric's and PSNH's combined ownership and voting interests in each of these entities is greater than 50 percent. Intercompany transactions between CL&P, NSTAR Electric, PSNH and the CYAPC and YAEC companies have been eliminated in consolidation of the Eversource financial statements.
Eversource holds several equity ownership interests that are not consolidated and are accounted for under the equity method.
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Balance at December 31, 2021 | 1,054 | SEC-NUM |
Sale of Mexico Asset Management BusinessOn September 21, 2018, Citi completed the sale of its Mexico asset management business, which was part of Latin America GCB. As part of the sale, Citi derecognized total assets of $137 million and total liabilities of $41 million. The transaction resulted in a pretax gain on sale of approximately $250 million (approximately $150 million after-tax) recorded in Other revenue in 2018. Further, Citi and the buyer entered into a 10-year services framework agreement, with Citi acting as the distributor in exchange for an ongoing fee. Income before taxes for the divested business, excluding the pretax gain on sale, was as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| In millions of dollars | 2021 | 2020 | 2019 |
| Income before taxes | $ | — | | $ | — | | $ | 123 | |
Other Business Exits
Wind-Down of Korea Consumer Banking BusinessOn October 25, 2021, Citi announced its decision to wind down and close its Korea consumer banking business, which is part of Asia GCB. In connection with the announcement, Citibank Korea Inc. (CKI) commenced a voluntary termination program (VERP). Due to the voluntary nature of this termination program, no liabilities for termination benefits are recorded until CKI makes formal offers to employees that are then irrevocably accepted by those employees. Related charges are recorded as Compensation and benefits.For the year ended December 31, 2021, Citigroup recorded pretax charges of approximately $1.1 billion, composed of gross charges connected to the Korea voluntary termination program.The following table summarizes the reserve charges related to the voluntary termination program and other initiatives reported in the GCB business segment:
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| --- | --- | --- | --- | --- | --- |
| | | | | | |
| In millions of dollars | 2021 |
| Employee termination costs (pretax) | |
| Original reserve charges | $ | 1,052 | |
| Utilization | (1) | |
| Foreign exchange | 3 | |
| Balance at December 31, 2021 | $ | 1,054 | |
The total estimated cash charges for the termination program are approximately $1.1 billion, of which most are already recognized in 2021. Citi expects to recognize the remaining charges throughout 2022, as voluntary retirements are phased in and irrevocably accepted in order to minimize business and operational impacts. 160
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Increase to allowance through retained earnings for ASU 2016-13, after-tax | 2 | SEC-NUM |
Cincinnati Financial Corporation and SubsidiariesConsolidated Statements of Shareholders’ Equity
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| | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | Years ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Common Stock | | | | | |
| Beginning of year | $ | 397 | | | $ | 397 | | | $ | 397 | |
| Share-based awards | — | | | — | | | — | |
| End of year | 397 | | | 397 | | | 397 | |
| | | | | | |
| Paid-In Capital | | | | | |
| Beginning of year | 1,328 | | | 1,306 | | | 1,281 | |
| Share-based awards | (14) | | | (15) | | | (12) | |
| Share-based compensation | 33 | | | 31 | | | 30 | |
| Other | 9 | | | 6 | | | 7 | |
| End of year | 1,356 | | | 1,328 | | | 1,306 | |
| | | | | | |
| Retained Earnings | | | | | |
| Beginning of year | 10,085 | | | 9,257 | | | 7,625 | |
| Cumulative effect of change in accounting for credit losses as of January 1, 2020 | — | | | (2) | | | — | |
| | | | | | |
| Adjusted beginning of year | 10,085 | | | 9,255 | | | 7,625 | |
| Net income | 2,946 | | | 1,216 | | | 1,997 | |
| Dividends declared | (406) | | | (386) | | | (365) | |
| | | | | | |
| End of year | 12,625 | | | 10,085 | | | 9,257 | |
| | | | | | |
| Accumulated Other Comprehensive Income | | | | | |
| Beginning of year | 769 | | | 448 | | | 22 | |
| | | | | | |
| | | | | | |
| Other comprehensive income (loss) | (121) | | | 321 | | | 426 | |
| | | | | | |
| End of year | 648 | | | 769 | | | 448 | |
| | | | | | |
| Treasury Stock | | | | | |
| Beginning of year | (1,790) | | | (1,544) | | | (1,492) | |
| Share-based awards | 18 | | | 15 | | | 21 | |
| Shares acquired - share repurchase authorization | (144) | | | (261) | | | (67) | |
| Shares acquired - share-based compensation plans | (8) | | | (5) | | | (9) | |
| Other | 3 | | | 5 | | | 3 | |
| End of year | (1,921) | | | (1,790) | | | (1,544) | |
| | | | | | |
| Total Shareholders' Equity | $ | 13,105 | | | $ | 10,789 | | | $ | 9,864 | |
| | | | | | |
| (In millions) | | | | | |
| Common Stock - Shares Outstanding | | | | | |
| Beginning of year | 160.9 | | | 162.9 | | | 162.8 | |
| Share-based awards | 0.6 | | | 0.5 | | | 0.7 | |
| Shares acquired - share repurchase authorization | (1.2) | | | (2.5) | | | (0.6) | |
| Shares acquired - share-based compensation plans | (0.1) | | | (0.1) | | | (0.1) | |
| Other | 0.1 | | | 0.1 | | | 0.1 | |
| End of year | 160.3 | | | 160.9 | | | 162.9 | |
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Accompanying Notes are an integral part of these Consolidated Financial Statements.
Cincinnati Financial Corporation - 2021 10-K - Page 125
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Lessee, finance lease, discount rate | 11.01 | SEC-NUM |
CAESARS ENTERTAINMENT, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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| --- | --- | --- | --- | --- | --- |
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| Maturities of Lease Liabilities | |
| (In millions) | Operating Leases |
| | |
| 2022 | $ | 108 | |
| 2023 | 104 | |
| 2024 | 69 | |
| 2025 | 65 | |
| 2026 | 64 | |
| Thereafter | 2,011 | |
| Total future minimum lease payments | 2,421 | |
| Less: present value factor | (1,646) | |
| Total lease liability | $ | 775 | |
Finance LeasesWe have finance leases for certain equipment and real estate. As of December 31, 2021, our finance leases had remaining lease terms of up to approximately 37 years, some of which include options to extend the lease terms in one month increments. Our finance lease ROU assets and liabilities were $40 million and $43 million as of December 31, 2021, respectively, and $64 million for both finance lease ROU assets and liabilities as of December 31, 2020.Financing ObligationsVICI Leases & Golf Course Use AgreementThe fair value of the real estate assets and the related failed sale-leaseback financing obligations were estimated based on the present value of the estimated future lease payments over the lease term of 15 years, plus renewal options, using an imputed discount rate of approximately 11.01%.CEI leases certain real property assets from VICI under the following agreements: (i) for a portfolio of properties located throughout the United States (the “Regional Lease”), (ii) for Caesars Palace Las Vegas and Harrah’s Las Vegas (the “Las Vegas Lease”), and (iii) for Harrah’s Joliet Hotel & Casino (the “Joliet Lease”), (collectively, “VICI Leases”). The lease agreements, inclusive of all amendments, include (i) a 15-year initial term with four five-year renewal options, (ii) annual fixed rent payments of $1.1 billion, subject to annual escalation provisions based on the Consumer Price Index (“CPI”) and a 2% floor commencing in lease year two of the initial term and (iii) a variable element based on net revenues of the underlying leased properties, commencing in lease year eight of the initial term. The Regional Lease includes a put-call option whereby the Company may require VICI to purchase and lease back (as lessor) or whereby VICI may require the Company to sell to VICI and lease back (as lessee) the real estate components of the gaming and racetrack facilities of Harrah’s Hoosier Park Racing & Casino and Indiana Grand (“Centaur properties”). Election to exercise the option by either party must be made during the election period beginning January 1, 2022 and ending December 31, 2024. Upon either party exercising their option, the Centaur properties would be sold at a price in accordance with the agreement and leased back to CEI in accordance to the pre-existing terms of the Regional Lease. The sale of Caesars Southern Indiana to EBCI for $250 million was finalized on September 3, 2021 and as a result of the sale, Caesars’ annual payments to VICI Properties under the Regional Lease decreased by $33 million and variable rent under the lease shall exclude net revenue attributable to Caesars Southern Indiana.The Golf Course Use Agreement between the Company and VICI, encompassing four golf courses in three states, has a 35-year term (inclusive of all renewal periods), whereby the Company agrees to pay (i) an annual membership fee of $11 million, subject to annual escalation provisions based on the CPI and a 2% floor (ii) annual use fees of $3 million, including escalation provisions based on the CPI and a 2% floor commencing on the second lease year through and including the final lease year and (iii) certain per-round fees, as set forth in the agreement. Furthermore, the term of the Golf Course Use Agreement was extended such that there will be 15 years remaining until the expiration of the initial term.GLPI LeasesThe fair value of the real estate assets and the related failed sale-leaseback financing obligations were estimated based on the present value of the estimated future lease payments over the lease term of 35 years, including renewal options, using an imputed discount rate of approximately 9.75%. The value of the failed sale-leaseback financing obligations is dependent upon assumptions regarding the amount of the lease payments and the estimated discount rate of the lease payments required by a market participant.[Table of Contents](#i37dfc5eabc12461dbfc5ef573d80947e_7)92
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Forward sale price (in dollars per share) | 71.48 | SEC-NUM |
17. DIVIDEND RESTRICTIONS
Eversource parent's ability to pay dividends may be affected by certain state statutes, the ability of its subsidiaries to pay common dividends and the leverage restriction tied to its consolidated total debt to total capitalization ratio requirement in its revolving credit agreements. Pursuant to the joint revolving credit agreement of Eversource, CL&P, PSNH, NSTAR Gas, Yankee Gas, EGMA and Aquarion Water Company of Connecticut, and to the NSTAR Electric revolving credit agreement, each company is required to maintain consolidated total indebtedness to total capitalization ratio of no greater than 65 percent at the end of each fiscal quarter. As of December 31, 2021, all companies were in compliance with such covenant and in compliance with all such provisions of the revolving credit agreements that may restrict the payment of dividends as of December 31, 2021.
The Retained Earnings balances subject to dividend restrictions were $5.01 billion for Eversource, $2.23 billion for CL&P, $2.72 billion for NSTAR Electric and $504.6 million for PSNH as of December 31, 2021.
CL&P, NSTAR Electric and PSNH are subject to Section 305 of the Federal Power Act that makes it unlawful for a public utility to make or pay a dividend from any funds "properly included in its capital account." Management believes that this Federal Power Act restriction, as applied to CL&P, NSTAR Electric and PSNH, would not be construed or applied by the FERC to prohibit the payment of dividends from retained earnings for lawful and legitimate business purposes. In addition, certain state statutes may impose additional limitations on such companies and on NSTAR Gas, Yankee Gas, EGMA, Aquarion Water Company of Connecticut, Aquarion Water Company of Massachusetts and Aquarion Water Company of New Hampshire. Such state law restrictions do not restrict the payment of dividends from retained earnings or net income.
18. COMMON SHARES
The following table sets forth the Eversource parent common shares and the shares of common stock of CL&P, NSTAR Electric and PSNH that were authorized and issued, as well as the respective per share par values:
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| | Shares |
| | Par Value | | Authorized as of December 31, 2021 and 2020 | | Issued as of December 31, |
| 2021 | | 2020 |
| Eversource | $ | 5 | | | 380,000,000 | | | 357,818,402 | | | 357,818,402 | |
| CL&P | $ | 10 | | | 24,500,000 | | | 6,035,205 | | | 6,035,205 | |
| NSTAR Electric | $ | 1 | | | 100,000,000 | | | 200 | | | 200 | |
| PSNH | $ | 1 | | | 100,000,000 | | | 301 | | | 301 | |
Common Share Issuances and 2019 Forward Sale Agreement: On June 15, 2020, Eversource completed an equity offering of 6,000,000 common shares at a price per share of $86.26. Eversource used the net proceeds of this offering to fund a portion of the purchase of the assets of CMA that closed on October 9, 2020. The issuance of these common shares resulted in proceeds of $509.2 million, net of issuance costs.
In June 2019, Eversource completed an equity offering consisting of 5,980,000 common shares issued directly by the Company and 11,960,000 common shares issuable pursuant to a forward sale agreement with an investment bank. Under the forward sale agreement, 11,960,000 common shares were borrowed from third parties and sold by the underwriters. The forward sale agreement allowed Eversource, at its election and prior to May 29, 2020, to physically settle the forward sale agreement by issuing common shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially, $71.48 per share) or, alternatively, to settle the forward sale agreement in whole or in part through the delivery or receipt of shares or cash. The forward sale price was subject to adjustment daily based on a floating interest rate factor and would decrease in respect of certain fixed amounts specified in the agreement, such as dividends.
Eversource issued 6,000,000 common shares under the forward sale agreement in December 2019. On March 23, 2020, Eversource physically settled a portion of the forward sale agreement by delivering 1,500,000 common shares in exchange for net proceeds of $105.7 million. Subsequently, on March 26, 2020, Eversource physically settled the remaining portion of the forward sale agreement by delivering 4,460,000 common shares in exchange for net proceeds of $314.1 million. The forward sale price used to determine the cash proceeds received by Eversource was calculated based on the initial forward sale price, as adjusted in accordance with the forward sale agreement.
The March and June 2020 common share issuances of 5,960,000 and 6,000,000, respectively, resulted in total proceeds of $929.0 million, net of issuance costs. The June and December 2019 common share issuances of 5,980,000 and 6,000,000, respectively, resulted in total proceeds of $852.3 million. These issuances were reflected in shareholders’ equity and as financing activities on the statements of cash flows.
Issuances of shares under the forward sale agreement were classified as equity transactions. Accordingly, no amounts relating to the forward sale agreement were recorded in the financial statements until settlements took place. Prior to any settlements, the only impact of the forward sale agreement to the financial statements was the inclusion of incremental shares within the calculation of diluted EPS using the treasury stock method. See Note 21, "Earnings Per Share," to the financial statements for information on the forward sale agreement’s impact on the calculation of diluted EPS.
Eversource used the net proceeds received from the direct issuance of common shares and the net proceeds received from settlement of the forward sale agreement to repay short-term debt under the commercial paper program, to partially fund the purchase of the assets of CMA, to fund capital spending and clean energy initiatives, and for general corporate purposes.
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Expected return on plan assets | 4.0 | SEC-NUM |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)Components of net periodic benefit cost included in earnings are as follows:
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| | Defined Benefit Plans | | Postretirement Benefit Plan |
| | Fiscal Year Ended | | Fiscal Year Ended |
| (in millions) | May 29, 2022 | | May 30, 2021 | | May 31, 2020 | | May 29, 2022 | | May 30, 2021 | | May 31, 2020 |
| Service cost | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 0.1 | |
| Interest cost | 0.1 | | | 0.1 | | | 3.3 | | | 0.4 | | | 0.6 | | | 0.7 | |
| Expected return on plan assets | — | | | — | | | (4.0) | | | — | | | — | | | — | |
| Amortization of unrecognized prior service cost | — | | | — | | | — | | | — | | | (0.3) | | | (4.8) | |
| Recognized net actuarial loss | 0.1 | | | 0.1 | | | 1.8 | | | 0.4 | | | 1.9 | | | 1.5 | |
| Settlement loss recognized | — | | | — | | | 145.5 | | | — | | | — | | | — | |
| Net pension and postretirement cost (benefit) | $ | 0.2 | | | $ | 0.2 | | | $ | 146.6 | | | $ | 0.8 | | | $ | 2.2 | | | $ | (2.5) | |
The amortization of the net actuarial loss component of our fiscal 2023 net periodic benefit cost for the remaining defined benefit plan and postretirement benefit plan is expected to be approximately $0.1 million and $0.0 million, respectively.
The following benefit payments are expected to be paid between fiscal 2023 and fiscal 2032:
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| (in millions) | | Defined Benefit Plan | | Postretirement Benefit Plan |
| 2023 | | $ | 0.4 | | | $ | 1.9 | |
| 2024 | | 0.4 | | | 1.7 | |
| 2025 | | 0.4 | | | 1.7 | |
| 2026 | | 0.4 | | | 1.6 | |
| 2027 | | 0.4 | | | 1.5 | |
| 2028-2032 | | 1.6 | | | 6.0 | |
Defined Contribution Plan We have a defined contribution (401(k)) plan (Darden Savings Plan) covering most employees age 21 and older. We match contributions for participants with at least one year of service up to 6 percent of compensation, based on our performance. The match ranges from a minimum of $0.25 to $1.20 for each dollar contributed by the participant. The Darden Savings Plan also provides for a profit sharing contribution for eligible participants equal to 1.5 percent of the participant’s compensation. The Darden Savings Plan had net assets of $1.1 billion at May 29, 2022, and $1.2 billion at May 30, 2021. Expense recognized in fiscal 2022, 2021 and 2020 was $49.0 million, $14.4 million and $19.9 million, respectively. Employees classified as “highly compensated” under the IRC are not eligible to participate in the Darden Savings Plan. Instead, highly compensated employees are eligible to participate in a separate non-qualified deferred compensation (FlexComp) plan. The FlexComp plan allows eligible employees to defer the payment of part of their annual salary and all or part of their annual bonus and provides for awards that approximate the matching contributions that participants would have received had they been eligible to participate in the Darden Savings Plan, as well as an additional retirement contribution amount. Amounts payable to highly compensated employees under the FlexComp plan totaled $249.5 million and $269.8 million at May 29, 2022 and May 30, 2021, respectively. These amounts are included in other current liabilities on our accompanying consolidated balance sheets. Prior to fiscal 2021, the Darden Savings Plan included a leveraged Employee Stock Ownership Plan (ESOP). The ESOP borrowed $16.9 million from us at a variable rate of interest in July 1996 and was fully repaid during fiscal 2020. Compensation expense was recognized as contributions were accrued. Fluctuations in our stock price impacted the amount of expense recognized. Contributions to the Darden Savings Plan, plus the dividends accumulated on unallocated shares held by the ESOP, were used to pay principal, interest and expenses of the Darden Savings Plan.
NOTE 14 - STOCK-BASED COMPENSATION
In September 2015, our shareholders approved the Darden Restaurants, Inc. 2015 Omnibus Incentive Plan (2015 Plan). All equity grants subject to ASC Topic 718 after the date of approval are made under the 2015 Plan. No further equity grants after that date are permitted under the Darden Restaurants, Inc. 2002 Stock Incentive Plan, the RARE Hospitality International, Inc. 73
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2023 | 376 | SEC-NUM |
[Table of Contents](#i11f673a761214399ab28a3a12dfa4686_7)
ADOBE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)Gains and losses on derivative instruments, net of tax, recognized in our condensed consolidated statements of comprehensive income for the three and nine months ended September 2, 2022 and September 3, 2021 were associated with our foreign exchange option contracts. For the three and nine months ended September 2, 2022, we recognized $107 million and $193 million of net gains, respectively, in our condensed consolidated statements of comprehensive income. For the three and nine months ended September 3, 2021, net gains recognized in our condensed consolidated statements of comprehensive income were not material.The effects of derivative instruments on our condensed consolidated statements of income for the three and nine months ended September 2, 2022 and September 3, 2021 were primarily associated with foreign exchange option contracts. For the three and nine months ended September 2, 2022, we reclassified $54 million and $105 million of net gains, respectively, from accumulated other comprehensive income into revenue resulting from our foreign exchange option contracts. Comparatively, for the three and nine months ended September 3, 2021, we reclassified $5 million and $26 million of net losses, respectively, from accumulated other comprehensive income into revenue resulting from our foreign exchange option contracts.NOTE 7. GOODWILL AND OTHER INTANGIBLESGoodwill as of September 2, 2022 and December 3, 2021 was $12.76 billion and $12.67 billion, respectively. The increase was primarily due to the completion of business acquisitions during the nine months ended September 2, 2022. Other intangible assets subject to amortization as of September 2, 2022 and December 3, 2021 were as follows:
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| (in millions) | 2022 | | 2021 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net | | Gross Carrying Amount | | Accumulated Amortization | | Net |
| Customer contracts and relationships | $ | 1,201 | | | $ | (462) | | | $ | 739 | | | $ | 1,213 | | | $ | (379) | | | $ | 834 | |
| Purchased technology | 1,060 | | | (477) | | | 583 | | | 1,053 | | | (344) | | | 709 | |
| Trademarks | 376 | | | (161) | | | 215 | | | 376 | | | (128) | | | 248 | |
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| Other | 59 | | | (48) | | | 11 | | | 60 | | | (31) | | | 29 | |
| Other intangibles, net | $ | 2,696 | | | $ | (1,148) | | | $ | 1,548 | | | $ | 2,702 | | | $ | (882) | | | $ | 1,820 | |
Amortization expense related to other intangibles was $101 million and $303 million for the three and nine months ended September 2, 2022, respectively. Comparatively, amortization expense related to other intangibles was $83 million and $262 million for the three and nine months ended September 3, 2021, respectively. Of these amounts, $58 million and $176 million were included in cost of revenue for the three and nine months ended September 2, 2022, respectively, and $40 million and $130 million were included in cost of revenue for the three and nine months ended September 3, 2021, respectively.As of September 2, 2022, the estimated aggregate amortization expense in future periods was as follows:
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| | | | | | | | | |
| (in millions) | | Other Intangibles (1) |
| Remainder of 2022 | $ | 101 | |
| 2023 | 376 | |
| 2024 | 331 | |
| 2025 | 293 | |
| 2026 | 142 | |
| Thereafter | 286 | |
| Total expected amortization expense | $ | 1,529 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)Excludes capitalized in-process research and development which is considered indefinite lived until the completion or abandonment of the associated research and development efforts.19
| string | null | null |
Other current assets | 2,958 | SEC-NUM |
[Table of Contents](#ic9c410c95c8848f2bcb73b4a6fbb4634_4)DOVER CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands except share data and where otherwise indicated) (Unaudited)$40,000 for patents, and $21,000 for trademarks. The fair value of customer intangibles at the acquisition date was determined using the multi-period excess earnings method under the income approach. The fair value measurements of intangible assets are based on significant unobservable inputs and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates and discount rates. The fair value of assets acquired also includes trade receivables of $33,900. The gross amount is $34,606, of which $706 is expected to be uncollectible. The fair values of the assets acquired and liabilities assumed, and the related tax balances, are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change during the measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed, and the related tax balances. During the nine months ended September 30, 2022, the Company recorded measurement period adjustments primarily related to its preliminary estimates of deferred taxes and changes in net working capital. These adjustments are based on facts and circumstances that existed as of the acquisition date which resulted in an increase in goodwill of $4,219.
The following presents the updated preliminary allocation of purchase price, net of cash acquired of $10,382, to the assets acquired and liabilities assumed under the RegO acquisition, based on their estimated fair values at their acquisition dates:
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| | | Total |
| Accounts receivable | | $ | 33,900 | |
| Inventories | | 72,551 | |
| Other current assets | | 2,958 | |
| Property, plant and equipment | | 50,027 | |
| Goodwill | | 281,195 | |
| Intangible assets | | 234,000 | |
| Other assets and deferred charges | | 884 | |
| Current liabilities | | (20,150) | |
| Non-current liabilities | | (28,745) | |
| Net assets acquired | | $ | 626,620 | |
The amounts assigned to goodwill and major intangible asset classifications were as follows:
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | Amount allocated | | Useful life (in years) |
| Goodwill - tax deductible | $ | 158,894 | | | na |
| Goodwill - non-deductible | 122,301 | | | na |
| Customer intangibles | 173,000 | | | 15 |
| Patents | 40,000 | | | 12 |
| | | | | | |
| Trademarks | 21,000 | | | 16 |
| | | | | | |
| | $ | 515,195 | | | | | |
Acme Cryogenics
On December 16, 2021, the Company acquired 100% of the voting stock of Acme Cryo Intermediate Inc. ("Acme Cryogenics"), a provider of highly-engineered components and services that facilitate the production, storage, and distribution of cryogenic gases, for $292,285, net of cash acquired and inclusive of the impact of measurement period adjustments discussed below. In connection with this acquisition, the Company recorded goodwill of $164,870 non-deductible for income tax purposes. The Company also recorded intangible assets of $99,000 for customer intangibles, $21,800 for unpatented technology and $6,500 for trademarks. The fair value of customer intangibles at the acquisition date was determined using the multi-period excess earnings method under the income approach. The fair value measurements of intangible assets are based on significant unobservable inputs and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates and discount rates. The fair value of assets acquired also includes trade receivables of $14,568. The gross amount is $14,912, of which $344 is expected to be uncollectible. The fair values of the assets acquired and liabilities assumed, and the related tax balances, are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change during the measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed, and the related tax balances. During the nine months ended September 30, 2022, the Company recorded measurement period adjustments primarily related to its preliminary estimates of deferred taxes and changes in net working capital. These adjustments are based on facts and circumstances that existed as of the acquisition date which resulted in a decrease in goodwill of $4,339.
10
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Finance Lease, Liability, Payments, Due Year Two | 3 | 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.
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Additions to short-term debt | 5,781 | SEC-NUM |
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| EXXON MOBIL CORPORATION |
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
| (millions of dollars) |
| | Three Months EndedMarch 31, |
| | 2022 | | 2021 |
| Cash flows from operating activities | | | |
| Net income (loss) including noncontrolling interests | 5,750 | | | 2,796 | |
| Depreciation and depletion (including impairments) | 8,883 | | | 5,004 | |
| | | | |
| Changes in operational working capital, excluding cash and debt | 1,086 | | | 1,953 | |
| All other items – net | (931) | | | (489) | |
| Net cash provided by operating activities | 14,788 | | | 9,264 | |
| | | | |
| Cash flows from investing activities | | | |
| Additions to property, plant and equipment | (3,911) | | | (2,400) | |
| Proceeds from asset sales and returns of investments | 293 | | | 307 | |
| Additional investments and advances | (417) | | | (349) | |
| Other investing activities including collection of advances | 90 | | | 87 | |
| Net cash used in investing activities | (3,945) | | | (2,355) | |
| | | | |
| Cash flows from financing activities | | | |
| | | | |
| | | | |
| Additions to short-term debt | — | | | 5,781 | |
| Reductions in short-term debt | (2,098) | | | (10,849) | |
| Additions/(reductions) in debt with three months or less maturity | 1,366 | | | 1,003 | |
| | | | |
| Cash dividends to ExxonMobil shareholders | (3,760) | | | (3,720) | |
| Cash dividends to noncontrolling interests | (60) | | | (52) | |
| Changes in noncontrolling interests | (94) | | | 53 | |
| Common stock acquired | (2,067) | | | (1) | |
| Net cash used in financing activities | (6,713) | | | (7,785) | |
| Effects of exchange rate changes on cash | 142 | | | 27 | |
| Increase/(decrease) in cash and cash equivalents | 4,272 | | | (849) | |
| Cash and cash equivalents at beginning of period | 6,802 | | | 4,364 | |
| Cash and cash equivalents at end of period | 11,074 | | | 3,515 | |
| | | | |
| Supplemental Disclosures | | | |
| Income taxes paid | 1,798 | | | 855 | |
| Cash interest paid | | | |
| Included in cash flows from operating activities | 319 | | | 405 | |
| Capitalized, included in cash flows from investing activities | 187 | | | 151 | |
| Total cash interest paid | 506 | | | 556 | |
| | | | |
| Noncash right of use assets recorded in exchange for lease liabilities | | | |
| Operating leases | 240 | | | 265 | |
| Finance leases | 656 | | | — | |
The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.6
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Plan curtailments | 4 | SEC-NUM |
Changes in benefit obligations and plan assets were as follows:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| ($ in millions) | | June 30, 2022 | | June 30, 2021 |
| Change in benefit obligation: | | | | |
| Benefit obligation at the beginning of the year | | $ | 2,022 | | | $ | 2,051 | |
| Service cost | | 24 | | | 27 | |
| Interest cost | | 39 | | | 40 | |
| Participant contributions | | 6 | | | 6 | |
| Actuarial gain | | (341) | | | (58) | |
| Plan curtailments | | — | | | (4) | |
| Settlements | | (244) | | | (40) | |
| Benefits paid | | (70) | | | (79) | |
| Administrative expenses | | (6) | | | (7) | |
| Plan amendments | | 1 | | | (15) | |
| Divestitures | | (4) | | | (1) | |
| | | | | |
| Foreign currency translation | | (113) | | | 102 | |
| Benefit obligation at the end of the year | | $ | 1,314 | | | $ | 2,022 | |
| Accumulated benefit obligation at the end of the year | | $ | 1,269 | | | $ | 1,954 | |
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| Change in plan assets: | | | | |
| Fair value of plan assets at the beginning of the year | | $ | 1,759 | | | $ | 1,691 | |
| Actual return on plan assets | | (189) | | | 57 | |
| Employer contributions | | 35 | | | 41 | |
| Participant contributions | | 6 | | | 6 | |
| Benefits paid | | (70) | | | (79) | |
| Settlements | | (244) | | | (40) | |
| Administrative expenses | | (6) | | | (7) | |
| | | | | |
| Foreign currency translation | | (96) | | | 90 | |
| Fair value of plan assets at the end of the year | | $ | 1,195 | | | $ | 1,759 | |
| Funded status at the end of the year | | $ | (119) | | | $ | (263) | |
Actuarial gains resulting in a decrease to the benefit obligation for the fiscal year ended June 30, 2022, were primarily due to a weighted average increase in discount rates for our pension plans of 1.7 percentage points. Settlement impact is attributed to group annuity contracts, primarily a $186 million contract with Pacific Life Insurance Company, and other lump sum transfers and payments.
The following table provides information for defined benefit plans with a projected benefit obligation in excess of plan assets:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| ($ in millions) | | June 30, 2022 | | June 30, 2021 |
| Projected benefit obligation | | $ | 398 | | | $ | 1,387 | |
| Fair value of plan assets | | 189 | | | 1,072 | |
The following table provides information for defined benefit plans with an accumulated benefit obligation in excess of plan assets:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| ($ in millions) | | June 30, 2022 | | June 30, 2021 |
| Accumulated benefit obligation | | $ | 357 | | | $ | 1,351 | |
| Fair value of plan assets | | 177 | | | 1,070 | |
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Other Expenses | 5 | SEC-NUM |
(6)Pension settlements in fiscal year 2022 relate to the purchases of group annuity contracts and transfer of pension plan assets and related benefit obligations. Refer to Note 13, "Pension and Other Post-Retirement Plans," for more information. For fiscal year 2020, impact of pension settlements includes the amount of actuarial losses recognized in the consolidated income statements related to the settlement of certain defined benefit plans, not including related tax effects. (7)Net gain/(loss) on disposals includes an expense of $10 million from the disposal of non-core assets for fiscal year 2022. Refer to Note 11, "Fair Value Measurements," for more information. Fiscal year 2021 includes the gain realized upon the disposal of AMVIG and the loss upon disposal of other non-core businesses not part of material restructuring programs. Refer to Note 8, "Equity Method and Other Investments," for further information on the disposal of AMVIG and Note 5, "Divestitures," for more information about the Company's other disposals.(8)Property and other losses, net includes property and related business losses primarily associated with the destruction of the Company's Durban, South Africa, facility during general civil unrest in July 2021, net of insurance recovery.(9)Russia-Ukraine conflict impacts include $138 million of impairment charges, $57 million of restructuring and related expenses, and $5 million of other expenses for fiscal year 2022. Refer to Note 4,"Restructuring, Impairment, and Related Expenses, Net, " and Note 7, "Restructuring," for further information.
The tables below present additional financial information by reportable segments:
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | Years ended June 30, |
| ($ in millions) | | 2022 | | 2021 | | 2020 |
| Flexibles | | $ | 376 | | | $ | 336 | | | $ | 271 | |
| Rigid Packaging | | 136 | | | 127 | | | 125 | |
| Other | | 15 | | | 5 | | | 4 | |
| Total capital expenditures for the acquisition of long-lived assets | | $ | 527 | | | $ | 468 | | | $ | 400 | |
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | Years ended June 30, |
| ($ in millions) | | 2022 | | 2021 | | 2020 |
| Flexibles | | $ | 450 | | | $ | 447 | | | $ | 478 | |
| Rigid Packaging | | 120 | | | 115 | | | 111 | |
| Other | | 9 | | | 10 | | | 18 | |
| Total depreciation and amortization | | $ | 579 | | | $ | 572 | | | $ | 607 | |
Total assets by segment is not disclosed as the Company does not use total assets by segment to evaluate segment performance or allocate resources and capital.
The Company did not have sales to a single customer that exceeded 10% of consolidated net sales for the fiscal years ended June 30, 2022, 2021 and 2020, respectively.
Sales by major product were:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Years ended June 30, |
| ($ in millions) | | Segment | | 2022 | | 2021 | | 2020 |
| Films and other flexible products | | Flexibles | | $ | 10,033 | | | $ | 8,934 | | | $ | 8,637 | |
| Specialty flexible folding cartons | | Flexibles | | 1,118 | | | 1,104 | | | 1,115 | |
| Containers, preforms, and closures | | Rigid Packaging | | 3,393 | | | 2,823 | | | 2,716 | |
| Net sales | | | | $ | 14,544 | | | $ | 12,861 | | | $ | 12,468 | |
The following table provides long-lived asset information for the major countries in which the Company operates. Long-lived assets include property, plant, and equipment, net of accumulated depreciation and impairments.
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| | | June 30, |
| ($ in millions) | | 2022 | | 2021 |
| | | | | |
| United States of America | | $ | 1,720 | | | $ | 1,673 | |
| Other countries (1) | | 1,926 | | | 2,088 | |
| Long-lived assets | | $ | 3,646 | | | $ | 3,761 | |
(1)Includes the Company's country of domicile, Jersey. The Company had no long-lived assets in Jersey in any period shown. No individual country represented more than 10% of the respective totals.
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Maturities of long term debt, year four | 0.0 million | SEC-NUM |
Note 7. Debt and DerivativesCintas' outstanding debt is summarized as follows at May 31:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Interest Rate | | Fiscal YearIssued | | Fiscal YearMaturity | | 2022 | | 2021 |
| | | | | | | | | | |
| Debt due within one year | | | | | | | | | |
| Commercial paper | 1.20 | % | (1) | 2022 | | 2023 | | $ | 261,200 | | | $ | — | |
| Senior notes (2) | 2.78 | % | | 2013 | | 2023 | | 50,380 | | | — | |
| Senior notes | 4.30 | % | | 2012 | | 2022 | | — | | | 250,000 | |
| Senior notes | 2.90 | % | | 2017 | | 2022 | | — | | | 650,000 | |
| | | | | | | | | | |
| | | | | | | | | | |
| Debt issuance costs | | | | | | | (6) | | | (930) | |
| Total debt due within one year | | | | | | | $ | 311,574 | | | $ | 899,070 | |
| | | | | | | | | | |
| Debt due after one year | | | | | | | | | |
| Senior notes | 3.25 | % | | 2013 | | 2023 | | $ | — | | | $ | 300,000 | |
| Senior notes (2) | 2.78 | % | | 2013 | | 2023 | | — | | | 50,815 | |
| Senior notes (3) | 3.11 | % | | 2015 | | 2025 | | 50,965 | | | 51,301 | |
| Senior notes | 3.45 | % | | 2022 | | 2025 | | 400,000 | | | — | |
| Senior notes | 3.70 | % | | 2017 | | 2027 | | 1,000,000 | | | 1,000,000 | |
| Senior notes | 4.00 | % | | 2022 | | 2032 | | 800,000 | | | — | |
| Senior notes | 6.15 | % | | 2007 | | 2037 | | 250,000 | | | 250,000 | |
| | | | | | | | | | |
| Debt issuance costs | | | | | | | (17,033) | | | (9,283) | |
| Total debt due after one year | | | | | | | $ | 2,483,932 | | | $ | 1,642,833 | |
(1) Variable rate debt instrument. The rate presented is the variable rate at May 31, 2022.(2) Cintas assumed these senior notes with the acquisition of G&K in the fourth quarter of fiscal 2017, and they were recorded at fair value. The interest rate shown above is the effective interest rate. The principal amount of these notes is $50.0 million with a stated interest rate of 3.73%. (3) Cintas assumed these senior notes with the acquisition of G&K in the fourth quarter of fiscal 2017, and they were recorded at fair value. The interest rate shown above is the effective interest rate. The principal amount of these notes is $50.0 million with a stated interest rate of 3.88%. The average interest rate for all Cintas debt at May 31, 2022 was 3.7%, with maturity dates through fiscal year 2037. Cintas' senior notes, excluding the G&K senior notes assumed with the acquisition of G&K in fiscal 2017, are recorded at cost, net of debt issuance costs. The fair value of the long-term debt is estimated using Level 2 inputs based on general market prices. The carrying value and fair value of Cintas' debt as of May 31, 2022 were $2,811.2 million and $2,862.2 million, respectively, and as of May 31, 2021 were $2,550.0 million and $2,788.8 million, respectively.On June 1, 2021, in accordance with the terms of the notes, Cintas paid the $250.0 million aggregate principal amount outstanding of its 4.30%, 10-year senior notes that matured on that date with cash on hand. On April 1, 2022, in accordance with the terms of the notes, Cintas paid the $650.0 million aggregate principal amount outstanding of its 2.90%, 5-year senior notes that matured on that date with proceeds from short-term borrowings. On May 1, 2022, Cintas redeemed at par value the $300.0 million aggregate principal amount outstanding of its 3.25%, 10-year senior notes 30 days in advance of the maturation date with proceeds from short-term borrowings. On May 3, 2022, Cintas issued $400.0 million aggregate principal amount of senior notes that bear an interest rate of 3.45% and mature on May 1, 2025. On May 3, 2022, Cintas also issued $800.0 million aggregate principal amount of senior notes that bear an interest rate of 4.00% and mature on May 1, 2032. The net proceeds from these issuances were utilized for general business purposes, including reducing Cintas’ short-term borrowings. Letters of credit outstanding were $106.7 million and $120.6 million at May 31, 2022 and 2021, respectively. Maturities of debt during each of the next five years are $311.2 million, $0.0 million, $450.0 million, $0.0 million and $1,000.0 million, respectively.
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Fiscal 2027 | 215 | SEC-NUM |
[Table of Contents](#i2ba0bd92bcb14d27a1d59d9667569d45_7)THE ESTÉE LAUDER COMPANIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe total future minimum lease payments, over the remaining lease term, relating to the Company’s operating and finance leases for each of the next five fiscal years and thereafter is as follows:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| (In millions) | | Operating Leases | | Finance Leases |
| Fiscal 2023 | | $ | 414 | | | $ | 13 | |
| Fiscal 2024 | | 377 | | | 7 | |
| Fiscal 2025 | | 308 | | | 2 | |
| Fiscal 2026 | | 260 | | | 1 | |
| Fiscal 2027 | | 215 | | | — | |
| Thereafter | | 941 | | | — | |
| Total future minimum lease payments | | 2,515 | | | 23 | |
| Less imputed interest | | (282) | | | — | |
| Total | | $ | 2,233 | | | $ | 23 | |
Operating lease and finance lease liabilities included in the consolidated balance sheet are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | June 30 |
| | | 2022 | | 2021 |
| (In millions) | | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases |
| Total current liabilities | | $ | 365 | | | 13 | | | $ | 379 | | | $ | 18 | |
| Total noncurrent liabilities | | 1,868 | | | 10 | | | 2,151 | | | 27 | |
| Total | | $ | 2,233 | | | $ | 23 | | | $ | 2,530 | | | $ | 45 | |
The ROU assets and lease liabilities related to finance leases are included in Other assets and in Current debt and Long-term debt, respectively, in the accompanying consolidated balance sheets as of June 30, 2022 and 2021. During fiscal 2021 and fiscal 2020, as a result of the continued challenging retail environment due to the COVID-19 pandemic, certain of the Company’s freestanding stores experienced lower net sales and lower expectations of future cash flows. These changes were an indicator that the carrying amounts may not be recoverable. Accordingly, the Company performed a recoverability test by comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. For those freestanding stores that failed step one of this test, the Company then compared the assets carrying values to their estimated fair values. Specifically, for the related ROU assets, the fair value was based on discounting market rent using a real estate discount rate. As a result, the Company recognized $71 million and $215 million of long-lived asset impairments, included in Impairments of other intangible and long-lived assets, in the accompanying consolidated statements of earnings for the year ended June 30, 2021 and 2020, respectively. The fiscal 2021 impairments related to other assets (i.e. rights associated with commercial operating leases) of $27 million, operating lease right-of-use assets of $25 million and the related property, plant and equipment in certain freestanding stores of $19 million. The fiscal 2020 impairments related to operating lease ROU assets of $131 million, as well as the related property, plant and equipment and other long-lived assets in certain freestanding stores of $84 million, combined.
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Operating Loss Carryforwards, Indefinite Life | 461 | SEC-NUM |
Deferred tax assets and liabilities in the preceding table are in the following captions in the consolidated balance sheets at June 30, 2022 and 2021:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Fiscal Year Ended June 30, |
| (Dollars in millions) | 2022 | | 2021 |
| Non-current deferred tax asset | $ | 49 | | | $ | 66 | |
| Non-current deferred tax liability | (202) | | | (164) | |
| Net deferred tax liability | $ | (153) | | | $ | (98) | |
At June 30, 2022, the Company had federal net operating loss (“NOL”) carryforwards of $532 million, $211 million of which are subject to limitations under Section 382 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The majority of the $211 million federal NOL carryforwards subject to Section 382 of the Internal Revenue Code are attributed to the Company's acquisitions of Pharmatek Laboratories, Inc., Juniper Pharmaceuticals, Inc., Paragon Bioservices, Inc., and MastherCell Global Inc. (“MaSTherCell”). As of June 30, 2022, $461 million of the Company's federal NOL carryforwards have an indefinite life and the remaining NOL carryforwards will expire in fiscal years 2023 through 2037.At June 30, 2022, the Company had state tax NOL carryforwards of $431 million. Substantially all state NOL carryforwards have a twenty-year carryforward period. At June 30, 2022, the Company had non-U.S. tax NOL carryforwards of $240 million, a majority of which are available for at least three years or have an indefinite carryforward period.The Company had valuation allowances of $149 million and $65 million as of June 30, 2022 and 2021, respectively, against its deferred tax assets. The Company considered all available evidence, both positive and negative, in assessing the need for a valuation allowance against tax assets. Four possible sources of taxable income were evaluated when assessing the realizability of deferred tax assets:•carrybacks of existing NOLs (if and to the extent permitted under the tax law);•future reversals of existing taxable temporary differences; •tax planning strategies; and •future taxable income exclusive of reversing temporary differences and carryforwards. While the valuation allowance related to certain U.S. combined states was released during the fiscal year ended June 30, 2019, there remained as of June 30, 2022 a valuation allowance for the NOLs and deductible temporary differences in the remaining combined and separate states of $37 million. The state valuation allowance as of June 30, 2022 is due to the Company’s history of tax losses and anticipated loss utilization rates in separate filing status states as well as the difference in the rules related to allocated and apportioned income for separate filing status states versus combined filing status states.
The Company considered the need to maintain a valuation allowance on deferred tax assets based on management’s assessment of whether it is more likely than not that the Company would realize the value of its deferred tax assets based on future reversals of existing taxable temporary differences and the ability to generate sufficient taxable income within the carryforward period available under the applicable tax laws. During the fiscal year ended June 30, 2022, the Company established valuation allowances on NOLs and temporary differences related to certain Belgian operations in the aggregate amount of $26 million. In addition, the Company established valuation allowances on temporary differences related to intangibles in Switzerland in the amount of $62 million.
In the normal course of business, the Company's income taxes are subject to audits by federal, state, and foreign tax authorities, some of which are ongoing and may result in proposed assessments. Germany and the U.K. are among the jurisdictions where the Company has substantial tax positions. The Company is no longer subject to examinations by the relevant tax authorities for years prior to fiscal 2009. The Company’s estimate for the potential outcome for any uncertain tax issue is highly judgmental. The Company assesses its income tax positions and records benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions for which it is more likely than not that a tax benefit will be sustained, the Company records the amount that has a greater than 50% likelihood of being realized upon resolution with the taxing authority that has full knowledge of all relevant information based on the technical merit. Interest and penalties are accrued, where applicable.97
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Long Term Debt and Capital Lease Obligations Repayments of Principal in Year Four | 26 | SEC-NUM |
Long-Term and Other Obligations Other obligations consist primarily of finance leases for buildings and other loans for business and working capital needs. Maturities of long-term obligations, including finance leases of $234 million, and other short-term borrowings for future fiscal years are:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Thereafter | | Total |
| Maturities of long-term and other obligations | $ | 31 | | | $ | 31 | | | $ | 29 | | | $ | 26 | | | $ | 27 | | | $ | 4,099 | | | $ | 4,243 | |
Debt Issuance Costs Debt issuance costs associated with the Credit Agreement (other than its Revolving Credit Facility component) and the Senior Notes are presented as a reduction to the carrying value of the related debt, while debt issuance costs associated with the Revolving Credit Facility are capitalized within other long-term assets on the consolidated balance sheet. All debt issuance costs are amortized over the life of the related obligation through charges to interest expense in the consolidated statements of operations. The unamortized total debt issuance costs, including the costs associated with the Revolving Credit Facility capitalized within other long-term assets, were $42 million and $39 million as of June 30, 2022 and 2021, respectively. Amortization of debt issuance costs totaled $7 million and $6 million for the fiscal years ended June 30, 2022 and 2021, respectively. Guarantees and Security Senior Secured Credit FacilitiesAll obligations under the Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the following assets of Operating Company and each guarantor (Operating Company's parent entity, PTS Intermediate, and each of Operating Company's material domestic subsidiaries), subject to certain exceptions: •a pledge of 100% of the capital stock of Operating Company and 100% of the equity interests directly held by Operating Company and each guarantor in any wholly owned material subsidiary of Operating Company or any guarantor (which pledge, in the case of any non-U.S. subsidiary of a U.S. subsidiary, will not include more than 65% of the voting stock of such non-U.S. subsidiary); and •a security interest in, and mortgages on, substantially all tangible and intangible assets of Operating Company and of each guarantor, subject to certain limited exceptions. The Senior NotesAll obligations under the Senior Notes are general, unsecured, and subordinated to all existing and future secured indebtedness of the guarantors to the extent of the value of the assets securing such indebtedness. Each of the Senior Notes is separately guaranteed by all of Operating Company's wholly owned U.S. subsidiaries that guarantee the senior secured credit facilities. None of the Senior Notes is guaranteed by either PTS Intermediate or the Company. Debt CovenantsSenior Secured Credit FacilitiesThe Credit Agreement contains covenants that, among other things, restrict, subject to certain exceptions, Operating Company’s (and Operating Company’s restricted subsidiaries’) ability to incur additional indebtedness or issue certain preferred shares; create liens on assets; engage in mergers and consolidations; sell assets; pay dividends and distributions or repurchase capital stock; repay subordinated indebtedness; engage in certain transactions with affiliates; make investments, loans or advances; make certain acquisitions; enter into sale and leaseback transactions; amend material agreements governing Operating Company's subordinated indebtedness and change Operating Company's lines of business.The Credit Agreement also contains change of control provisions and certain customary affirmative covenants and events of default. The Revolving Credit Facility requires compliance with a net leverage covenant when there is a 30% or more draw outstanding at a period end. As of June 30, 2022, the Company was in compliance with all material covenants under the Credit Agreement. Subject to certain exceptions, the Credit Agreement permits Operating Company and its restricted subsidiaries to incur certain additional indebtedness, including secured indebtedness. None of Operating Company’s non-U.S. subsidiaries nor its dormant Puerto Rico subsidiary is a guarantor of the loans.89
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Lessee, Operating Lease, Liability, Payments, Due Year Four | 27 | SEC-NUM |
[Table of Contents](#i43d04c9d26874e33802bdf64c458414a_7)The future minimum payments for leases presented in the consolidated balance sheet at December 31, 2021, follow:
| | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | |
| | | | |
| 2022 | $ | 46 | | | |
| 2023 | 35 | | | |
| 2024 | 73 | | | |
| 2025 | 27 | | | |
| 2026 | 24 | | | |
| Thereafter | 194 | | | |
| Total payments | 399 | | | |
| Less amount representing interest | (80) | | | |
| Present value of net minimum lease payments | 319 | | | |
| Less current portion | (38) | | | |
| Long-term portion | $ | 281 | | | |
Contractual Obligations. At December 31, 2021, based on applicable prices on that date, FCX has unconditional purchase obligations (including take-or-pay contracts with terms less than one year) of $4.3 billion, primarily comprising the procurement of copper concentrate ($3.1 billion), transportation services ($0.4 billion) and electricity ($0.3 billion). Some of FCX’s unconditional purchase obligations are settled based on the prevailing market rate for the service or commodity purchased. In some cases, the amount of the actual obligation may change over time because of market conditions. Obligations for copper concentrate provide for deliveries of specified volumes to Atlantic Copper at market-based prices. Transportation obligations are primarily for South America contracted ocean freight. Electricity obligations are primarily for long-term power purchase agreements in North America and contractual minimum demand at the South America mines.
FCX’s unconditional purchase obligations by year total $1.6 billion in 2022, $1.5 billion in 2023, $0.5 billion in 2024, $0.2 billion in 2025, $0.2 billion in 2026 and $0.3 billion thereafter. During the three-year period ended December 31, 2021, FCX fulfilled its minimum contractual purchase obligations.
IUPK - Indonesia. On December 21, 2018, FCX completed the transaction with the Indonesia government regarding PT-FI’s long-term mining rights and share ownership. Concurrent with the closing of the transaction, the Indonesia government granted PT-FI an IUPK to replace its former COW, enabling PT-FI to conduct operations in the Grasberg minerals district through 2041. Under the terms of the IUPK, PT-FI has been granted an extension of mining rights through 2031, with rights to extend mining rights through 2041, subject to PT-FI completing the development of additional smelting capacity in Indonesia by the end of 2023 (an extension of which has been requested due to COVID-19 mitigation measures subject to the approval of the Indonesia government, refer to Note 12), and fulfilling its defined fiscal obligations to the Indonesia government. The IUPK, and related documentation, contains legal and fiscal terms and is legally enforceable through 2041, assuming the additional extension is received. In addition, FCX, as a foreign investor, has rights to resolve investment disputes with the Indonesia government through international arbitration.
The key fiscal terms set forth in the IUPK include a 25 percent corporate income tax rate, a 10 percent profits tax on net income, and royalty rates of 4 percent for copper, 3.75 percent for gold and 3.25 percent for silver. PT-FI’s royalties totaled $319 million in 2021, $160 million in 2020 and $106 million in 2019.
Dividend distributions from PT-FI to FCX totaled $1.0 billion in 2021 and are subject to a 10 percent withholding tax. There were no dividend distributions from PT-FI to FCX in 2020 or 2019.
The IUPK requires PT-FI to pay export duties of 5 percent, declining to 2.5 percent when smelter development progress exceeds 30 percent and eliminated when development progress for additional smelting capacity in Indonesia exceeds 50 percent. PT-FI had previously agreed to and has been paying export duties since July 2014 (refer to Note 12 for further discussion of disputed export duties). PT-FI’s export duties charged against revenues totaled $218 million in 2021, $92 million in 2020 and $66 million in 2019 (excluding $155 million associated with the historical export duty matter discussed in Note 12).
The IUPK also requires PT-FI to pay surface water taxes of $15 million annually, which began in 2019 and are recognized in production and delivery costs.
157
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Accrued Liabilities | 24.4 | SEC-NUM |
[Table of Contents](#i3d0ebbc4e2a2420f98ed7e6fe698936a_7) HASBRO, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
(22) eOne Music SaleOn April 25, 2021, the Company entered into a definitive agreement to sell eOne Music for an aggregate sales price of $385.0 million, subject to certain closing adjustments related to working capital and net debt. On June 29, 2021, the Company completed the sale of eOne Music for net proceeds of $397.0 million, including the sales price of $385.0 million and $12.0 million of closing adjustments related to working capital and net debt calculations. The final proceeds were subject to further adjustment upon completion of closing working capital, which resulted in a net outflow of $0.9 million. The Company acquired eOne Music through its acquisition of eOne in December 2019. Based on the value of the net assets held by eOne Music, which included goodwill and intangible assets allocated to eOne Music as part of the eOne acquisition, the Company recorded a pre-tax non-cash goodwill impairment charge of $108.8 million within Loss on Disposal of Business on the Consolidated Statements of Operations for the year ended December 26, 2021. The Company also recorded pre-tax cash transaction expenses of $9.5 million within Selling, Distribution and Administration expenses on the Consolidated Statements of Operations during the second quarter of 2021. The impairment charge was recorded within the Entertainment segment and the transaction costs were recorded within the Corporate and Other segment. The operations of eOne Music did not meet the criteria to be presented as discontinued operations in accordance with Accounting Standards Update No. 2014-08 (ASU 2014-08) Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity and eOne Music did not represent an individually significant component of the Company’s business. Income from operations before income taxes, attributable to eOne Music, was recorded to the Company's Consolidated Statements of Operations, within the Entertainment segment through the sale transaction closing date. Assets of $473.5 million and liabilities of $77.3 million, attributable to eOne Music, were de-consolidated as of the closing date and, as of December 26, 2021, there are no remaining carrying amounts in the Company's Consolidated Balance Sheets.The following table presents the carrying amounts of the major classes of eOne Music assets and liabilities sold on June 29, 2021 and reflects final working capital adjustments.
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| (In millions) | December 26,2021 |
| Cash and Cash Equivalents | $ | 18.2 | |
| Goodwill and Other Intangible Assets | 410.3 | |
| Prepaid Expenses | 31.0 | |
| Other Assets | 14.0 | |
| Total Assets | 473.5 | |
| | |
| Accrued Liabilities | 24.4 |
| Deferred Taxes | 36.9 |
| Other Liabilities | 16.0 |
| Total Liabilities | $ | 77.3 | |
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Investment owned, balance, shares (in shares) | 42 | SEC-NUM |
[Table of](#i56e1b64ac11b4f908f713ce45f591ccd_10) [Contents](#i56e1b64ac11b4f908f713ce45f591ccd_10)At December 31, 2021, the fair value of our equity investment in ABI was $11.9 billion (carrying value of $11.1 billion), which exceeded its carrying value by $0.8 billion or approximately 7%. In May 2022, the fair value of our equity investment in ABI declined below its carrying value and has not recovered. At June 30, 2022, the fair value of our equity investment in ABI was below its carrying value by $1.1 billion or approximately 9%. Accounting guidance requires the evaluation of the following factors when determining if the decline in fair value is other than temporary: (i) the duration and magnitude of the fair value decline; (ii) the financial condition and near-term prospects of the investee; and (iii) the investor’s intent and ability to hold its equity investment until recovery. In preparing our financial statements for the period ended June 30, 2022, we evaluated these factors and concluded that the decline in fair value of our equity investment in ABI at June 30, 2022 below its carrying value was temporary and, therefore, no impairment was recorded at that time.In preparing our financial statements for the period ended September 30, 2022, we considered the same accounting guidance described above to determine if the decline in fair value is other than temporary. We evaluated the factors related to the fair value decline, including the macroeconomic and geopolitical factors that have significantly impacted certain foreign exchange rates and global equity markets. We concluded that the decline in fair value of our equity investment in ABI at September 30, 2022 was other than temporary as we now anticipate that the full recovery to the carrying value will take longer than previously expected. As a result, we recorded a non-cash, pre-tax impairment charge of $2.5 billion for the nine and three months ended September 30, 2022, which was recorded to (income) losses from investments in equity securities in our condensed consolidated statements of earnings (losses). This impairment charge reflects the difference between the fair value of our equity investment in ABI using ABI’s share price at September 30, 2022 and the carrying value of our equity investment in ABI at September 30, 2022. At September 30, 2022, prior to recording the impairment charge, the fair value of our equity investment in ABI was below its carrying value by approximately 22%. After recording the impairment charge, each of the fair value and carrying value of our equity investment in ABI at September 30, 2022 was $9.0 billion.At September 30, 2022, the carrying value of our equity investment in ABI exceeded its share of ABI’s net assets attributable to equity holders of ABI by approximately $2.5 billion. Substantially all of this difference is comprised of goodwill and other indefinite-lived intangible assets (consisting primarily of trademarks).At September 30, 2021, the fair value of our equity investment in ABI had declined below its carrying value by $6.2 billion. We considered the same accounting guidance described above to determine if the decline in fair value was other than temporary. In preparing our financial statements for the period ended September 30, 2021, we concluded that the decline in fair value of our equity investment in ABI at September 30, 2021 was other than temporary. As a result, we recorded a non-cash, pre-tax impairment charge of $6.2 billion for the nine and three months ended September 30, 2021, which was recorded to (income) losses from investments in equity securities in our condensed consolidated statements of earnings (losses). This impairment charge reflected the difference between the fair value of our equity investment in ABI using ABI’s share price at September 30, 2021 and the carrying value of our equity investment in ABI at September 30, 2021.Investment in JUULIn December 2018, we made an investment in JUUL for $12.8 billion and received a 35% economic interest in JUUL through non-voting shares, which were converted at our election into voting shares in November 2020 (“Share Conversion”), and a security convertible into additional non-voting or voting shares, as applicable, upon settlement or exercise of certain JUUL convertible securities (the “JUUL Transaction”). At September 30, 2022, we had a 35% economic ownership interest in JUUL, consisting of 42 million voting shares.We are subject to a standstill restriction under which we may not acquire additional JUUL shares above our 35% interest and agreed not to sell or transfer any of our JUUL shares until December 20, 2024. Furthermore, at the time of the investment, we agreed to non-competition obligations generally requiring that we participate in the e-vapor business only through JUUL. In January 2020, we amended certain JUUL Transaction agreements and entered into a new cooperation agreement. One of the provisions was the option to be released from our non-compete obligation under certain circumstances, including if the carrying value of our investment in JUUL was not more than 10% of its initial carrying value of $12.8 billion. At June 30, 2022, the carrying value of our investment in JUUL was $450 million, which was less than 10% of our initial carrying value of $12.8 billion. As a result, in September 2022, we exercised our option to be released from our JUUL non-competition obligations, resulting in (i) the permanent termination of our non-competition obligations to JUUL, (ii) the loss of our JUUL board designation rights (other than the right to appoint one independent director so long as our ownership continues to be at least 10%), our preemptive rights, our consent rights and certain other rights with respect to our investment in JUUL and (iii) the conversion of our JUUL shares to single vote common stock, significantly reducing our voting power. We do not currently intend to exercise our remaining governance rights or to vote our JUUL shares other than as a passive investor.Additionally, as part of the amendment to certain JUUL Transaction agreements in January 2020, we agreed not to pursue any claims against JUUL for indemnification or reimbursement except for any non-contractual claims for contribution or indemnity where a judgment has been entered against us and JUUL with respect to certain litigation in which we and JUUL are both defendants against third-party plaintiffs.14
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Maturity term | 270 | SEC-NUM |
THE CHARLES SCHWAB CORPORATIONNotes to Consolidated Financial Statements(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
Annual maturities on all long-term debt outstanding at December 31, 2021, are as follows:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | Maturities |
| 2022 | $ | 1,036 | |
| 2023 | 829 | |
| 2024 | 3,673 | |
| 2025 | 2,237 | |
| 2026 | 3,100 | |
| Thereafter | 7,950 | |
| Total maturities | 18,825 | |
| Unamortized premium — net | 180 | |
| Debt issuance costs | (91) | |
| Total long-term debt | $ | 18,914 | |
Short-term borrowings: CSC has the ability to issue up to $5.0 billion of commercial paper notes ($1.5 billion at December 31, 2020) with maturities of up to 270 days. CSC had $3.0 billion of commercial paper notes outstanding at December 31, 2021 and none outstanding at December 31, 2020. CSC and CS&Co also have access to uncommitted lines of credit with external banks with total borrowing capacity of $1.5 billion; no amounts were outstanding as of December 31, 2021 or 2020.
Our banking subsidiaries maintain secured credit facilities with the FHLB. Amounts available under these facilities are dependent on the amount of our First Mortgages, HELOCs, and the fair value of certain of their investment securities that are pledged as collateral. As of December 31, 2021 and 2020, the collateral pledged provided a total borrowing capacity of $63.5 billion and $55.1 billion, respectively, of which no amounts were outstanding at the end of either year.
Our banking subsidiaries have access to funding through the Federal Reserve discount window. Amounts available are dependent upon the fair value of certain investment securities that are pledged as collateral. As of December 31, 2021 and 2020, our collateral pledged provided total borrowing capacity of $12.0 billion and $7.9 billion, respectively, of which no amounts were outstanding at the end of either year.
Our banking subsidiaries may engage with external banks in repurchase agreements collateralized by investment securities as another source of short-term liquidity. The Company had no borrowings outstanding pursuant to such repurchase agreements at December 31, 2021 or 2020.
TDAC maintains secured uncommitted lines of credit, under which TDAC borrows on either a demand or short-term basis and pledges client margin securities as collateral. There was $1.9 billion outstanding under the secured uncommitted lines of credit as of December 31, 2021. There were no borrowings outstanding under these secured uncommitted lines of credit as of December 31, 2020. See Note 17 for additional information.
TDAC maintains a senior unsecured committed revolving credit facility with an aggregate borrowing capacity of $600 million, which matures in April 2022. Additionally, at December 31, 2020, TDAC maintained an $850 million unsecured committed revolving credit facility which matured in April 2021 and was not renewed. There were no borrowings outstanding under the TDAC senior revolving facilities as of December 31, 2021 or December 31, 2020.
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Actual debt to capitalization percentage | 39.4 | SEC-NUM |
[Table of Contents](#i210a9c6b74ef4ff89c48a86e24b71d45_7)
Humana Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)(Unaudited)
October 2021 Term Loan Agreement
On August 16, 2022, we repaid the $2.0 billion October 2021 Term Loan Agreement without a prepayment penalty due.
For additional information regarding our October 2021 Term Loan Agreement, refer to Note 3 to the unaudited Consolidated Financial Statements included in Part I, Item 1, "Financial Statements" of this Form 10-Q and Note 13 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2021 Form 10-K.
Revolving Credit Agreements
In June 2022, we entered into a 364-day $1.5 billion unsecured revolving credit agreement (replacing the 364-day $1.5 billion unsecured revolving credit agreement entered into in June 2021, which expired in accordance with its terms). Under the 364-day revolving credit agreement, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at Term SOFR or the base rate plus a spread. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based Term SOFR, at our option.
Our credit agreements contain customary restrictive covenants and a financial covenant regarding maximum debt to capitalization of 60%, as well as customary events of default. We are in compliance with this financial covenant, with actual debt to capitalization of 39.4% as measured in accordance with the revolving credit agreements as of September 30, 2022.
At September 30, 2022, we had no borrowings and approximately $59 million of letters of credit outstanding under the revolving credit agreements, including those of KAH. Accordingly, as of September 30, 2022, we had $2.4 billion of remaining borrowing capacity under the 5-year revolving credit agreement and $1.5 billion of remaining borrowing capacity under the 364-day revolving credit agreement (which excludes the uncommitted $750 million of incremental loan facilities), none of which would be restricted by our financial covenant compliance requirement. For additional information regarding our Revolving Credit Agreements, refer to Note 13 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2021 Form 10-K.
Commercial PaperUnder our commercial paper program we may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers at any time. On February 10, 2022, we increased the size of our commercial paper program to permit the issuance of commercial paper notes in an aggregate principal amount not to exceed $4 billion compared to the prior amount not to exceed $2 billion. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The maximum principal amount outstanding at any one time during the nine months ended September 30, 2022 was $1.5 billion, with $303 million outstanding at September 30, 2022 compared to $955 million outstanding at December 31, 2021. The outstanding commercial paper at September 30, 2022 had a weighted average annual interest rate of 3.23%.Other Short-term BorrowingsWe are a member, through one subsidiary, of the Federal Home Loan Bank of Cincinnati, or FHLB. As a member we have the ability to obtain short-term cash advances, subject to certain minimum collateral requirements. At September 30, 2022 we had no outstanding short-term FHLB borrowings.
25
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Enterprise value of acquiree including existing equity value | 8.2 | SEC-NUM |
[Table of Contents](#i210a9c6b74ef4ff89c48a86e24b71d45_7)
Humana Inc.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)(Unaudited)3. ACQUISITIONS AND DIVESTITURES On August 11, 2022, we completed the sale of a 60% interest of Humana’s Kindred at Home Hospice subsidiary, or KAH Hospice, to Clayton, Dubilier & Rice, or CD&R, for cash proceeds of approximately $2.7 billion, net of cash disposed, including debt repayments from KAH Hospice to Humana of $1.9 billion. In connection with the sale we recognized a pre-tax gain, net of transaction costs, of $240 million which is reported as a gain on sale of KAH Hospice in the accompanying condensed consolidated statements of income for the three and nine months ended September 30, 2022. In June 2022, we classified KAH Hospice as held-for-sale and aggregated KAH Hospice’s assets and liabilities separately on the balance sheet. The assets, liabilities and noncontrolling interest disposed of on August 11, 2022 were as follows:
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| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | August 11, 2022 |
| | (in millions) |
| Assets | |
| Cash and cash equivalents | $ | 66 | |
| Receivables, net of allowances | 194 | |
| Other current assets | 20 | |
| Property and equipment, net | 44 | |
| Goodwill | 2,331 | |
| Other assets | 960 | |
| Total assets | $ | 3,615 | |
| Liabilities | |
| Trade accounts payable and accrued expenses | $ | 245 | |
| Other long-term liabilities | 281 | |
| Total liabilities | $ | 526 | |
| Noncontrolling interest | $ | 11 | |
Other assets included $866 million identifiable intangibles consisting of Medicare licenses and certificates of need.
Prior to the KAH Hospice disposition on August 11, 2022, as discussed above, KAH Hospice revenues for the three and nine months ended September 30, 2022 were $177 million and $958 million, respectively. Prior to the KAH Hospice disposition on August 11, 2022, KAH Hospice pretax earnings for the three and nine months ended September 30, 2022 were $24 million and $150 million, respectively.
On August 17, 2021, we acquired the remaining 60% interest in Kindred at Home, or KAH, the nation’s largest home health and hospice provider, from TPG Capital, or TPG, and Welsh, Carson, Anderson & Stowe, or WCAS, two private equity funds for an enterprise value of $8.2 billion, which included our equity value of $2.4 billion associated with our 40% minority ownership interest. We paid the approximate $5.8 billion transaction price (net of our existing equity stake) through a combination of debt financing, the assumption of existing KAH indebtedness and parent company cash.
During 2022 and 2021, we acquired various health and wellness related businesses which, individually or in the aggregate, have not had a material impact on our results of operations, financial condition, or cash flows. The results of operations and financial condition of these businesses acquired in 2022 and 2021 have been included in our condensed consolidated statements of income and condensed consolidated balance sheets from the respective acquisition dates. Acquisition-related costs recognized in 2022 and 2021 were not material to our results of operations. For asset acquisitions, the goodwill acquired is partially amortizable as deductible expenses for tax purposes. The pro forma financial information assuming the acquisitions had occurred as of the beginning of the 12
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Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued | 4 | SEC-NUM |
As of July 31, 2022, we had approximately $11 million of undistributed earnings of foreign subsidiaries which are deemed to be permanently reinvested and for which we have not recognized a deferred tax liability. We estimate that the tax liability that might be incurred if permanently reinvested earnings were remitted to the U.S. would not be material. Foreign subsidiary earnings in 2021 and thereafter are not considered permanently reinvested and we have therefore recognized a deferred tax liability and expense.A reconciliation of the activity related to unrecognized tax benefits follows:
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| (Millions) | 2022 | | 2021 | | 2020 |
| Balance at beginning of year | $ | 22 | | | $ | 23 | | | $ | 24 | |
| Increases related to prior-year tax positions | 4 | | | — | | | — | |
| Decreases related to prior-year tax positions | (10) | | | (1) | | | (1) | |
| Increases related to current-year tax positions | 1 | | | 3 | | | 2 | |
| Settlements | (2) | | | — | | | (1) | |
| Lapse of statute | (1) | | | (3) | | | (1) | |
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| Balance at end of year | $ | 14 | | | $ | 22 | | | $ | 23 | |
The decrease of unrecognized tax benefits was primarily due to audit settlements. The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was $12 million as of July 31, 2022, and $18 million as of August 1, 2021 and August 2, 2020. The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes.Our accounting policy for interest and penalties attributable to income taxes is to reflect any expense or benefit as a component of our income tax provision. The total amount of interest and penalties recognized in the Consolidated Statements of Earnings was not material in 2022, 2021, and 2020. The total amount of interest and penalties recognized in the Consolidated Balance Sheets in Other liabilities was $4 million as of July 31, 2022, and as of August 1, 2021.We file income tax returns in the U.S. federal jurisdiction and various state and non-U.S. jurisdictions. In the normal course of business, we are subject to examination by taxing authorities, including the U.S. and Canada. With limited exceptions, we have been audited for income tax purposes in the U.S. through 2020 and in Canada through 2016. In addition, several state income tax examinations are in progress for the years 2016 to 2021.12. Short-term Borrowings and Long-term DebtShort-term borrowings consist of the following:
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| (Millions) | 2022 | | 2021 |
| Commercial paper | $ | 235 | | | $ | 37 | |
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| Notes | 566 | | | — | |
| | | | |
| | | | |
| | | | |
| Finance leases | 14 | | | 11 | |
| | | | |
| Other(1) | (1) | | | — | |
| Total short-term borrowings | $ | 814 | | | $ | 48 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)Includes unamortized net discount/premium on debt issuances and debt issuance costs.The weighted-average interest rate of commercial paper, which consisted of U.S. borrowings, was 2.63% as of July 31, 2022, and 0.22% as of August 1, 2021. As of July 31, 2022, we issued $32 million of standby letters of credit. On November 2, 2020, we entered into a committed revolving credit facility totaling $1.85 billion scheduled to mature on November 2, 2023. On September 27, 2021, we replaced the facility with a new $1.85 billion committed revolving facility that matures on September 27, 2026. This facility remained unused at July 31, 2022, except for $1 million of standby letters of credit that we issued under it. The facility contains customary covenants, including a financial covenant with respect to a minimum consolidated interest coverage ratio of consolidated adjusted EBITDA to consolidated interest expense (as each is defined in the credit facility) of not less than 3.25:1.00, measured quarterly, and customary events of default for credit facilities of this type. Loans under this facility will bear interest at the rates specified in the facility, which vary based on the type of loan and certain other customary conditions. The facility supports our commercial paper program and other general corporate purposes. In March 2020, we borrowed $300 million under our previous revolving credit facility and on May 1, 2020, we repaid the borrowings.60
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Common stock, par value (in dollars per share) | 0.01 | SEC-NUM |
[Table of Contents](#i677b09687fd443618b9c84261c8e0734_7)FactSet Research Systems Inc.Consolidated Balance Sheets
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| (in thousands, except share data) | August 31, |
| 2022 | | 2021 |
| ASSETS | | | |
| Cash and cash equivalents | $ | 503,273 | | | $ | 681,865 | |
| Investments | 33,219 | | | 35,984 | |
| Accounts receivable, net of reserves of $2,776 at August 31, 2022 and $6,431 at August 31, 2021 | 204,102 | | | 151,187 | |
| Prepaid taxes | 38,539 | | | 13,917 | |
| Prepaid expenses and other current assets | 91,214 | | | 50,625 | |
| Total current assets | 870,347 | | | 933,578 | |
| | | | |
| Property, equipment and leasehold improvements, net | 80,843 | | | 131,377 | |
| Goodwill | 965,848 | | | 754,205 | |
| Intangible assets, net | 1,895,909 | | | 134,986 | |
| Deferred taxes | 3,153 | | | 2,250 | |
| Lease right-of-use assets, net | 159,458 | | | 239,064 | |
| Other assets | 38,747 | | | 29,480 | |
| TOTAL ASSETS | $ | 4,014,305 | | | $ | 2,224,940 | |
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| LIABILITIES | | | |
| Accounts payable and accrued expenses | $ | 108,395 | | | $ | 85,777 | |
| | | | |
| Current lease liabilities | 29,185 | | | 31,576 | |
| Accrued compensation | 114,808 | | | 104,403 | |
| Deferred revenues | 152,039 | | | 63,104 | |
| Dividends payable | 33,860 | | | 30,845 | |
| Total current liabilities | 438,287 | | | 315,705 | |
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| Long-term debt | 1,982,424 | | | 574,535 | |
| Deferred taxes | 8,800 | | | 14,752 | |
| Deferred revenues, non-current | 7,212 | | | 8,394 | |
| Taxes payable | 34,211 | | | 30,279 | |
| Long-term lease liabilities | 208,622 | | | 259,980 | |
| Other liabilities | 3,341 | | | 4,942 | |
| TOTAL LIABILITIES | $ | 2,682,897 | | | $ | 1,208,587 | |
| Commitments and contingencies (see Note 13) | | | |
| | | | |
| STOCKHOLDERS’ EQUITY | | | |
| Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued | $ | — | | | $ | — | |
| Common stock, $0.01 par value, 150,000,000 shares authorized, 41,653,218 and 41,163,192 shares issued, 38,044,756 and 37,615,419 shares outstanding at August 31, 2022 and 2021, respectively | 417 | | | 412 | |
| Additional paid-in capital | 1,190,350 | | | 1,048,305 | |
| Treasury stock, at cost: 3,608,462 and 3,547,773 shares at August 31, 2022 and 2021, respectively | (930,715) | | | (905,917) | |
| Retained earnings | 1,179,739 | | | 912,515 | |
| Accumulated other comprehensive loss | (108,383) | | | (38,962) | |
| TOTAL STOCKHOLDERS’ EQUITY | $ | 1,331,408 | | | $ | 1,016,353 | |
| | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 4,014,305 | | | $ | 2,224,940 | |
The accompanying notes are an integral part of these Consolidated Financial Statements.52
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Business Combination, Step Acquisition, Equity Interest in Acquiree, Fair Value | 273 | SEC-NUM |
FORD MOTOR COMPANY AND SUBSIDIARIESNOTES TO THE FINANCIAL STATEMENTSNOTE 22. ACQUISITIONS AND DIVESTITURES
Company Excluding Ford Credit
Electriphi, Inc. (“Electriphi”). On June 18, 2021, we acquired Electriphi, a California-based provider of charging management and fleet monitoring software for electric vehicles. Assets acquired primarily include goodwill, reported in Other assets (see Note 2), and software, reported in Net property. The acquisition did not have a material impact on ourfinancial statements.
Ford Lio Ho Motor Co., Ltd. (“FLH”). On April 1, 2021, we completed the sale of our controlling financial interest in FLH and its wholly owned subsidiary FLH Marketing & Service Limited, which resulted in deconsolidation of our Ford Taiwan subsidiary in the second quarter of 2021. FLH will continue to import, manufacture, and sell Ford-branded vehicles through at least 2025. We recognized a pre-tax gain of $161 million, which was reported in Other income/(loss), net in the second quarter of 2021.
Getrag Ford Transmissions GmbH (“GFT”). Prior to March 2021, Ford and Magna International Inc. (“Magna”) equally owned and operated the GFT joint venture for the purpose of developing, manufacturing, and selling transmissions. We accounted for our investment in GFT as an equity method investment. During the first quarter of 2021 and prior to our acquisition, GFT recorded restructuring charges, of which our share was $40 million. These charges are included in Equity in net income/(loss) of affiliated companies.
On March 1, 2021, we acquired Magna’s shares in the restructured GFT. The purchase price, which is subject to post-closing revisions, presently is estimated at $273 million. We expect that the purchase price revisions will be finalized by the first quarter of 2022. The restructured GFT includes the Halewood, UK and Cologne, Germany transmission plants, but excludes the Bordeaux, France transmission plant and China interests acquired by Magna. We concluded with Magna that these businesses would be better served under separate ownership. The Sanand, India transmission plant will continue under joint Ford/Magna ownership. As a result of the transaction, we consolidated the restructured GFT, remeasured our prior investment in GFT at its $273 million fair value, and recognized a pre-tax gain of $178 million in Other income/(loss), net during 2021. We estimated the fair value of GFT in negotiations with Magna based on the income approach. The significant assumptions used in the valuation included GFT’s cash flows that reflect the approved business plan, discounted at a rate typically used for a company like GFT. See Note 2 for information about goodwill recognized as part of this transaction.
Argo AI, LLC (“Argo AI”). On June 1, 2020, we completed a transaction with Volkswagen AG (“VW”) that reduced our ownership interest in the autonomous vehicle technology company Argo AI and resulted in Ford and VW holding equal interests that comprised a majority ownership of Argo AI. The transaction involved us selling a portion of our Argo AI equity to VW for $500 million and VW making additional investments in Argo AI, including contributing its Autonomous Intelligent Driving company. As a result of the transaction, we deconsolidated Argo AI, remeasured our retained investment in Argo AI at fair value, and recognized a $3.5 billion gain in Other income/(loss), of which $2.9 billion related to our retained investment in Argo AI. Our retained investment in Argo AI consists of an equity method investment and a preferred equity security investment, reflected on our consolidated balance sheets in Equity in net assets of affiliated companies and Other assets, respectively.
India. In 2019 and 2020, we recognized, in Cost of sales, pre-tax impairment charges of $804 million and $23 million, respectively, to adjust the carrying value of certain India Automotive operations held-for-sale assets to fair value less cost to sell in preparation to form a joint venture with Mahindra. In 2020, it was determined the joint venture with Mahindra would not be completed, and the assets and liabilities were reclassified as held and used. Because the carrying value of the net assets approximated fair value at December 31, 2020, the pre-tax impairment charges recorded in 2019 and 2020 were not adjusted as a result of the reclassification to held and used.
Ford Credit Segment
In the first quarter of 2020, Ford Credit completed the sale of its wholly-owned subsidiary Forso Nordic AB, recognizing a pre-tax loss of $4 million, reported in Other income/(loss), net, and cash proceeds of $1.3 billion.167
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Country Region | 353 | SEC-NUM | UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K
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| ☑ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended August 31, 2022Commission File Number: 001-34448 Accenture plc (Exact name of registrant as specified in its charter)
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| Ireland | 98-0627530 |
| (State or other jurisdiction ofincorporation or organization) | (I.R.S. Employer Identification No.) |
1 Grand Canal Square,Grand Canal Harbour,Dublin 2, Ireland (Address of principal executive offices)(353) (1) 646-2000 (Registrant’s telephone number, including area code)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 |
| Class A ordinary shares, par value $0.0000225 per share | ACN | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☑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 ☑ No ☐Indicate 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑The aggregate market value of the common equity of the registrant held by non-affiliates of the registrant on February 28, 2022 was approximately $200,173,941,446 based on the closing price of the registrant’s Class A ordinary shares, par value $0.0000225 per share, reported on the New York Stock Exchange on such date of $316.02 per share and on the par value of the registrant’s Class X ordinary shares, par value $0.0000225 per share.The number of shares of the registrant’s Class A ordinary shares, par value $0.0000225 per share, outstanding as of September 28, 2022 was 664,783,164 (which number includes 34,703,204 issued shares held by the registrant). The number of shares of the registrant’s Class X ordinary shares, par value $0.0000225 per share, outstanding as of September 28, 2022 was 500,837.
DOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A relating to the registrant’s Annual General Meeting of Shareholders, to be held on February 1, 2023, will be incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III. The definitive proxy statement will be filed with the SEC not later than 120 days after the registrant’s fiscal year ended August 31, 2022.
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Funds required to support certain subsidiary clearing house commitments | 171 | SEC-NUM |
to extend the maturity date of the Credit Facility from August 21, 2025 to October 15, 2026, among other items. We incurred new debt issuance costs of $4 million and $9 million during 2021 and 2020, respectively, relating to the Credit Facility and these costs are represented in the accompanying consolidated balance sheet as other non-current assets and will be amortized over the remaining life of the Credit Facility. No amounts were outstanding under the Credit Facility as of December 31, 2021.As of December 31, 2021, of the $3.8 billion that is currently available for borrowing under the Credit Facility, $1.0 billion is required to back-stop the amount outstanding under our U.S. dollar commercial paper program, or the Commercial Paper Program, and $171 million is required to support certain broker-dealer and other subsidiary commitments. The amount required to back-stop the amounts outstanding under the Commercial Paper Program will fluctuate as we increase or decrease our commercial paper borrowings. The remaining $2.6 billion is available for working capital and general corporate purposes including, but not limited to, acting as a back-stop to future increases in the amounts outstanding under the Commercial Paper Program.We also pay an annual commitment fee for unutilized amounts payable in arrears at a rate that ranges from 0.08% to 0.20% determined based on our current long-term debt rating. As of December 31, 2021, the applicable rate for commitments to October 2026 was 0.13%. Amounts borrowed under the facility may be prepaid at any time without premium or penalty.The Credit Facility also contains customary representations and warranties, covenants and events of default, including a leverage ratio, limitations on liens on our assets, indebtedness of non-obligor subsidiaries, the sale of all or substantially all of our assets, and other matters.•Term Loan: On August 21, 2020, we entered into a $750 million 18-month senior unsecured delayed draw term loan facility with a maturity date of February 21, 2022. We borrowed in full under the facility on September 3, 2020, and the proceeds were used to fund a portion of the purchase price for the Ellie Mae acquisition. We had the option to prepay the facility in whole or in part at any time, and paid off the full balance of the loan on December 16, 2020. Interest on borrowings under this term loan facility were based on the principal amount outstanding at the London Interbank Offered Rate, or LIBOR, plus an applicable margin, which was equal to 1.125%. We incurred new debt issuance costs of $3 million during 2020 relating to this term loan and these costs were fully amortized when the term loan was repaid on December 16, 2020. •Other: Our India subsidiaries maintain $20 million of credit lines for their general corporate purposes. As of December 31, 2021, they had borrowed $10 million, which is reflected as "other short-term debt" in the table above. Commercial Paper ProgramOur Commercial Paper Program is currently backed by the borrowing capacity available under the Credit Facility, as described above. The effective interest rate of commercial paper issuances does not materially differ from short-term interest rates, which fluctuate due to market conditions and as a result may impact our interest expense.We had net repayments of $1.4 billion under the Commercial Paper Program during 2021. We used $1.2 billion of proceeds received from the sale of our Coinbase investment to pay down the commercial paper balance. We had net issuances of $1.1 billion under the Commercial Paper Program during 2020, the proceeds of which were primarily used to fund a portion of the purchase price for the Ellie Mae acquisition. We had net issuances of $360 million under the Commercial Paper Program during 2019 the proceeds of which were used to fund the acquisition of Simplifile and for general corporate purposes. We repaid a portion of the amounts outstanding under the program during 2021, 2020 and 2019 with cash flows from operations.Commercial paper notes of $1.0 billion with original maturities ranging from three to 73 days were outstanding as of December 31, 2021, with a weighted average interest rate of 0.33% per annum, and a weighted average remaining maturity of 26 days. Commercial paper notes of $2.4 billion with original maturities ranging from four to 266 days were outstanding as of December 31, 2020 with a weighted average interest rate of 0.40% per annum, and a weighted average remaining maturity of 82 days.Fixed Rate Senior Notes•Senior Notes Issued in August 2020: On August 20, 2020, we issued $6.5 billion in aggregate principal amount of new senior notes, comprised of $1.25 billion in aggregate principal amount of floating rate senior notes due in 2023, or the Floating Rate Notes, $1.0 billion in aggregate principal amount of 0.70% senior notes due in 2023, $1.5 billion in aggregate principal amount of 1.85% senior notes due in 2032, $1.25 billion in aggregate principal amount of 2.65% senior notes due in 2040, and $1.5 billion in aggregate principal amount of 3.00% senior notes 116
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Loans receivable maturity term | 10 | SEC-NUM |
thereafter.During the second quarter of 2021, the Company sold two office buildings in Palm Beach and West Palm Beach, Florida. One of these sales also resulted in a $102 million reduction of the Company's non-recourse debt that was supporting the property.A mixed-use project in Washington, D.C. has been under development in 2021 and 2020, with the completed portion as noted above reported in properties in operation as of December 31, 2021.
(9) Loans ReceivableAt December 31, 2021 and 2020, loans receivable were as follows:
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| | As of December 31, |
| (In thousands) | 2021 | | 2020 |
| Amortized cost (net of allowance for expected credit losses): | | | |
| Real estate loans | $ | 89,431 | | | $ | 51,910 | |
| Commercial loans | 25,741 | | | 33,003 | |
| Total | $ | 115,172 | | | $ | 84,913 | |
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| Fair value: | | | |
| Real estate loans | $ | 90,793 | | | $ | 53,593 | |
| Commercial loans | 25,741 | | | 33,003 | |
| Total | $ | 116,534 | | | $ | 86,596 | |
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The real estate loans are secured by commercial and residential real estate primarily located in New York. These loans generally earn interest at fixed or stepped interest rates and have maturities through 2026. The commercial loans are with small business owners who have secured the related financing with the assets of the business. Commercial loans primarily earn interest on a fixed basis and have varying maturities generally not exceeding 10 years.Loans receivable in non-accrual status was $0.2 million as of December 31, 2021 and 2020.The following table presents the rollforward of the allowance for expected credit losses for loans receivable for the year ended December 31, 2021 and 2020:
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| | 2021 | | 2020 |
| (In thousands) | Real Estate Loans | | Commercial Loans | | Total | | Real Estate Loans | | Commercial Loans | | Total |
| Allowance for expected credit losses, beginning of period | $ | 1,683 | | | $ | 3,754 | | | $ | 5,437 | | | $ | 1,502 | | | $ | 644 | | | $ | 2,146 | |
| Cumulative effect adjustment resulting from changes in accounting principles | — | | | — | | | — | | | (905) | | | 548 | | | (357) | |
| Provision for expected credit losses | (321) | | | (3,398) | | | (3,719) | | | 1,086 | | | 2,562 | | | 3,648 | |
| Allowance for expected credit losses, end of period | $ | 1,362 | | | $ | 356 | | | $ | 1,718 | | | $ | 1,683 | | | $ | 3,754 | | | $ | 5,437 | |
The Company monitors the performance of its loans receivable and assesses the ability of the borrower to pay principal and interest based upon loan structure, underlying property values, cash flow and related financial and operating performance of the property and market conditions.In evaluating the real estate loans, the Company considers their credit quality indicators, including loan to value ratios, which compare the outstanding loan amount to the estimated value of the property, the borrower’s financial condition and performance with respect to loan terms, the position in the capital structure, the overall leverage in the capital structure and other market conditions.
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Loss expected to be reclassified | 6 | SEC-NUM |
Fair Values of Derivative Instruments
Fair values of derivative instruments on the consolidated balance sheet (in millions):
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| | 2021 | | 2020 |
| Fuel hedge contracts (not designated as hedges) | | | |
| Prepaid expenses and other current assets | $ | 71 | | | $ | 11 | |
| Other assets | 10 | | | 4 | |
| Interest rate swaps (designated as hedges) | | | |
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| Other accrued liabilities | (6) | | | (10) | |
| Other liabilities | (3) | | | (15) | |
| Gains (losses) in accumulated other comprehensive loss (AOCL) | 17 | | | (21) | |
The net cash received from settlements offset by cash paid for new fuel hedge positions was $38 million during 2021, compared to net cash paid of $14 million and $19 million during 2020 and 2019.
Pretax effect of derivative instruments on earnings and AOCL (in millions):
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| | 2021 | | 2020 | | 2019 |
| Fuel hedge contracts (not designated as hedges) | | | | | |
| Gains (losses) recognized in Aircraft fuel | $ | 104 | | | $ | (10) | | | $ | (10) | |
| Interest rate swaps (designated as hedges) | | | | | |
| Losses recognized in Aircraft rent | — | | | (3) | | | (3) | |
| Gains (losses) recognized in other comprehensive income (OCI) | 17 | | | (21) | | | (13) | |
The amounts shown as recognized in aircraft rent for cash flow hedges (interest rate swaps) represent the realized losses transferred out of AOCL to aircraft rent. Losses related to interest rate swaps on variable rate debt of $10 million were recognized in interest expense during 2021. The amounts shown as recognized in OCI are prior to the losses recognized in aircraft rent during the period. The Company expects to reclassify from OCI $6 million in interest expense within the next twelve months.
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Common stock, shares authorized (in shares) | 600,000 | SEC-NUM |
[Table of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)CADENCE DESIGN SYSTEMS, INC. CONSOLIDATED BALANCE SHEETSJanuary 1, 2022 and January 2, 2021(In thousands, except par value)
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| | As of |
| | January 1,2022 | | January 2,2021 |
| ASSETS |
| Current assets: | | | |
| Cash and cash equivalents | $ | 1,088,940 | | | $ | 928,432 | |
| Receivables, net | 337,596 | | | 338,487 | |
| Inventories | 115,721 | | | 75,956 | |
| Prepaid expenses and other | 173,512 | | | 135,712 | |
| Total current assets | 1,715,769 | | | 1,478,587 | |
| Property, plant and equipment, net | 305,911 | | | 311,125 | |
| Goodwill | 928,358 | | | 782,087 | |
| Acquired intangibles, net | 233,265 | | | 210,590 | |
| Deferred taxes | 763,770 | | | 732,290 | |
| Other assets | 439,226 | | | 436,106 | |
| Total assets | $ | 4,386,299 | | | $ | 3,950,785 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
| Current liabilities: | | | |
| | | | |
| Accounts payable and accrued liabilities | $ | 417,283 | | | $ | 349,951 | |
| Current portion of deferred revenue | 553,942 | | | 446,857 | |
| Total current liabilities | 971,225 | | | 796,808 | |
| Long-term liabilities: | | | |
| Long-term portion of deferred revenue | 101,148 | | | 107,064 | |
| Long-term debt | 347,588 | | | 346,793 | |
| Other long-term liabilities | 225,663 | | | 207,102 | |
| Total long-term liabilities | 674,399 | | | 660,959 | |
| Commitments and contingencies (Notes 8, 12 and 18) | | | |
| Stockholders’ equity: | | | |
| Preferred stock – $0.01 par value; authorized 400 shares, none issued or outstanding | — | | | — | |
| Common stock – $0.01 par value; authorized 600,000 shares; issued and outstanding shares: 276,796 and 278,941, respectively | 2,467,701 | | | 2,217,939 | |
| Treasury stock, at cost; 52,363 shares and 50,219 shares, respectively | (2,740,003) | | | (2,057,829) | |
| Retained earnings | 3,046,288 | | | 2,350,333 | |
| Accumulated other comprehensive loss | (33,311) | | | (17,425) | |
| Total stockholders’ equity | 2,740,675 | | | 2,493,018 | |
| Total liabilities and stockholders’ equity | $ | 4,386,299 | | | $ | 3,950,785 | |
See notes to consolidated financial statements.49
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Interest payment obligation in 2025 | 130.9 | SEC-NUM |
[Table of Contents](#i3d0ebbc4e2a2420f98ed7e6fe698936a_7) HASBRO, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
The detail of activity related to the programs as of December 26, 2021 is as follows:
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| (In millions) | 2018 Restructuring & 2020 Commercial Program | | eOne Integration Program | | Other | | Total |
| Remaining amounts to be paid as of December 29, 2019 | $ | 31.1 | | | $ | — | | | $ | — | | | $ | 31.1 | |
| 2020 restructuring charges | 6.9 | | | 32.5 | | | 1.5 | | | 40.9 | |
| Payments made in 2020 | (20.7) | | | (15.6) | | | (0.7) | | | (37.0) | |
| Remaining amounts to be paid as of December 27, 2020 | 17.3 | | | 16.9 | | | 0.8 | | | $ | 35.0 | |
| | | | | | | | |
| | | | | | | | |
| Payments made in 2021 | (7.5) | | | (11.8) | | | (0.8) | | | (20.1) | |
| Remaining amounts to be paid as of December 26, 2021 | $ | 9.8 | | | $ | 5.1 | | | $ | — | | | $ | 14.9 | |
(20) Commitments and ContingenciesHasbro had unused open letters of credit and related instruments of approximately $13.6 million and $16.2 million at December 26, 2021 and December 27, 2020, respectively.The Company enters into license agreements with strategic partners, inventors, designers and others for the use of intellectual properties in its products. Certain of these agreements contain provisions for the payment of guaranteed or minimum royalty amounts. In addition, the Company enters into contractual commitments to obtain film and television content distribution rights and minimum guarantee commitments related to the purchase of film and television rights for content to be delivered in the future. Under terms of existing agreements as of December 26, 2021, Hasbro may, provided the other party meets their contractual commitment, be required to pay amounts as follows: 2022: $223.7 million; 2023: $128.3 million; 2024: $65.7 million; 2025: $65.7 million; 2026: $65.7 million; and thereafter: $3.2 million. At December 26, 2021, the Company had $79.7 million of prepaid royalties, all of which are included in prepaid expenses and other current assetsInterest payment obligations on the Company's fixed-rate long-term debt are as follows: 2022: $145.9 million; 2023: $145.9 million; 2024: $145.9 million; 2025: $130.9 million; 2026: $130.9 million; and thereafter: $823.1 million. See note 11 for information on repayment terms for the Company's variable rate term loans.The Company enters into contracts with certain partners which among other things, provide the Company right of first refusal to purchase, distribute, or license certain entertainment projects or content. At December 26, 2021, the Company estimates that it may be obligated to pay $30.8 million and $5.4 million, in 2022 and 2023, respectively, related to such agreements.In connection with the Company’s agreement to form a joint venture with Discovery, the Company is obligated to make future payments to Discovery under a tax sharing agreement. The Company estimates these payments may total approximately $19.8 million and may range from approximately $0.4 million to $6.0 million per year during the period 2022 to 2026, with no remaining payments due thereafter. These payments are contingent upon the Company having sufficient taxable income to realize the expected tax deductions of certain amounts related to the joint venture.At December 26, 2021, the Company estimates payments related to inventory and tooling purchase commitments may total approximately $621.7 million, including contractual commitments under the manufacturing agreement with Cartamundi as follows: 2022: $95.0 million and 2023: $85.0 million.Hasbro is party to certain legal proceedings, as well as certain asserted and unasserted claims. Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the consolidated financial statements.See note 17 for additional information on the Company's future lease payment commitments. See note 11 for additional information on the Company's long-term debt and production financing repayments.121
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Number of short-line and regional railroads served (more than) | 230 | SEC-NUM |
CSX CORPORATION
PART IIItem 8. Financial Statements and Supplementary DataNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Nature of Operations and Significant Accounting Policies
BusinessCSX Corporation together with its subsidiaries ("CSX" or the “Company”), based in Jacksonville, Florida, is one of the nation's leading transportation companies. The Company provides rail-based transportation services including traditional rail service, the transport of intermodal containers and trailers, as well as other transportation services such as rail-to-truck transfers and bulk commodity operations.
CSX Transportation, Inc.CSX’s principal operating subsidiary, CSX Transportation, Inc. (“CSXT”), provides an important link to the transportation supply chain through its approximately 19,500 route mile rail network, which serves major population centers in 23 states east of the Mississippi River, the District of Columbia and the Canadian provinces of Ontario and Quebec. It has access to over 70 ocean, river and lake port terminals along the Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the St. Lawrence Seaway. The Company’s intermodal business links customers to railroads via trucks and terminals. CSXT also serves thousands of production and distribution facilities through track connections to more than 230 short-line and regional railroads.
CSXT is also responsible for the Company's real estate sales, leasing, acquisition and management and development activities. Substantially all of these activities are focused on supporting railroad operations.
Other EntitiesIn addition to CSXT, the Company’s subsidiaries include Quality Carriers, Inc. ("Quality Carriers"), CSX Intermodal Terminals, Inc. (“CSX Intermodal Terminals”), Total Distribution Services, Inc. (“TDSI”), Transflo Terminal Services, Inc. (“Transflo”), CSX Technology, Inc. (“CSX Technology”) and other subsidiaries. Effective July 1, 2021, CSX acquired Quality Carriers, the largest provider of bulk liquid chemicals truck transportation in North America, from Quality Distribution, Inc. For further details, refer to Note 17, Business Combinations. CSX Intermodal Terminals owns and operates a system of intermodal terminals, predominantly in the eastern United States, and also provides drayage services (the pickup and delivery of intermodal shipments) for certain customers. TDSI serves the automotive industry with distribution centers and storage locations. Transflo connects non-rail served customers to the many benefits of rail by transferring products from rail to trucks. The biggest Transflo markets are chemicals and agriculture, which include shipments of plastics and ethanol. CSX Technology and other subsidiaries provide support services for the Company.
CSX 2021 Form 10-K p.56
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Fully diluted equity interest before acquisition (as a percent) | 29 | SEC-NUM |
[Table of Contents](#i2ba0bd92bcb14d27a1d59d9667569d45_7)THE ESTÉE LAUDER COMPANIES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTE 5 – ACQUISITION OF BUSINESSES Fiscal 2021On May 18, 2021, the Company acquired additional shares in DECIEM, a Toronto-based skin care company, for $1,092 million in cash, including proceeds from the issuance of debt. DECIEM is a multi-brand beauty company with a brand portfolio that includes The Ordinary and NIOD. This acquisition is expected to further strengthen the Company’s leadership position in prestige skin care, expand its global consumer reach and complement its business in the online and specialty-multi channels. The Company originally acquired a minority interest in DECIEM in June 2017. The minority interest was accounted for as an equity method investment, which had a carrying value of $65 million at the acquisition date. The acquisition of additional shares increased the Company's fully diluted equity interest from approximately 29% to approximately 76% and was considered a step acquisition. On a fully diluted basis, the DECIEM stock options, discussed below, approximated 4% of the total capital structure. Accordingly, for purposes of determining the consideration transferred, the Company excluded the DECIEM stock options, which resulted in an increase in the Company’s post-acquisition undiluted equity interest from approximately 30% to approximately 78% and the post-acquisition undiluted equity interest of the remaining noncontrolling interest holders of approximately 22%. The Company remeasured the previously held equity method investment to its fair value of $913 million, resulting in the recognition of a gain of $848 million. The gain on the Company’s previously held equity method investment is included in Other income, net in the accompanying consolidated statements of earnings for the year ended June 30, 2021. As part of the increase in the Company's investment, the Company was granted the right to purchase (“Call Option”), and granted the remaining investors a right to sell to the Company (“Put Option”), the remaining interests after a three-year period, with a purchase price based on the future performance of DECIEM (the “net Put (Call) Option”). As a result of this redemption feature, the Company recorded redeemable noncontrolling interest, at its acquisition‑date fair value, that is classified as mezzanine equity in the accompanying consolidated balance sheets at June 30, 2021. The accounting for the DECIEM business combination was finalized during the fiscal 2022 third quarter.
A summary of the total consideration transferred, including immaterial measurement period adjustments was finalized during the fiscal 2022 third quarter and recorded as follows:
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| (In millions) | | March 31, 2022 |
| Cash paid | | $ | 1,095 | |
| Fair value of DECIEM stock options liability | | 104 | |
| Fair value of net Put (Call) Option | | 233 | |
| Total consideration for the acquired ownership interest (approximately 47.9%) | | 1,432 | |
| Fair value of previously held equity method investment (approximately 30.5%) | | 913 | |
| Fair value of redeemable noncontrolling interest (approximately 21.6%) | | 647 | |
| Total consideration transferred (100%) | | $ | 2,992 | |
As part of the acquisition of additional shares, DECIEM stock options were issued in replacement of and exchange for certain vested and unvested stock options previously issued by DECIEM. The total fair value of the DECIEM stock options of $295 million was recorded as part of the total consideration transferred, comprising of $191 million of Cash paid for vested options settled as of the acquisition date and $104 million reported as a stock options liability on the Company's consolidated balance sheet as it is not an assumed liability of DECIEM and is expected to be settled in cash upon completion of the exercise of the Put (Call). The acquisition-date fair value of the DECIEM stock options liability was calculated by multiplying the acquisition-date fair value by the number of DECIEM stock options replaced the day after the acquisition date. The stock options replaced consist of vested and partially vested stock options. See Note 18 – Stock Programs for information relating to the DECIEM stock options.
The acquisition-date fair value of the previously held equity method investment was calculated by multiplying the gross-up of the total consideration for the acquired ownership interest of $2,992 million by the related effective previously held equity interest of approximately 30.5%.
F-22
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Treasury Stock Acquired, Average Cost Per Share | 31.1 | SEC-NUM |
[Table of Contents](#i7b123d2c40e141848818780e535fa94e_7)Notes to Consolidated Financial Statements – (continued) (Amounts in Millions, Except Per Share Amounts) (Unaudited)Loss on early extinguishment of debt – During the nine months ended September 30, 2021, we recorded a loss of $74.0 related to the early extinguishment of all $250.0 aggregate principal amount of our 4.000% unsecured senior notes due 2022, all $500.0 aggregate principal amount of our 3.750% unsecured senior notes due 2023, and $250.0 of the $500.0 aggregate principal amount of our 4.200% unsecured senior notes due 2024.Other - During the three months ended September 30, 2022, the amounts recognized were primarily related to a cash gain from the sale of an equity investment. During the nine months ended September 30, 2022, the amounts recognized were primarily attributable to factors noted for the third quarter of 2022, partially offset by a non-cash loss related to the deconsolidation of a previously consolidated entity in which we maintain an equity interest in the second quarter of 2022. During the three and nine months ended September 30, 2021, the amounts recognized were primarily related to a non-cash gain related to the deconsolidation of a previously consolidated subsidiary.
Share Repurchase Program In February 2022, our Board of Directors (the "Board") reauthorized a program to repurchase, from time to time, up to $400.0 of our common stock.We may effect such repurchases through open market purchases, trading plans established in accordance with U.S. Securities and Exchange Commission ("SEC") rules, derivative transactions or other means. The timing and amount of repurchases in future periods will depend on market conditions and other funding requirements.The following table presents our share repurchase activity under our share repurchase programs for the nine months ended September 30, 2022 and 2021.
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| | Nine months ended September 30, |
| | 2022 | | 2021 |
| Number of shares repurchased | 7.1 | | | — | |
| Aggregate cost, including fees | $ | 221.6 | | | $ | — | |
| Average price per share, including fees | $ | 31.1 | | | $ | — | |
As of September 30, 2022, $178.5, excluding fees, remains available for repurchase under the share repurchase program reauthorized in 2022, which has no expiration date.
Redeemable Non-controlling InterestsMany of our acquisitions include provisions under which the non-controlling equity owners may require us to purchase additional interests in a subsidiary at their discretion. Redeemable non-controlling interests are adjusted quarterly, if necessary, to their estimated redemption value, but not less than their initial fair value. Any adjustments to the redemption value impact retained earnings or additional paid in capital, except for foreign currency translation adjustments. The following table presents changes in our redeemable non-controlling interests.
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| | Nine months ended September 30, |
| | 2022 | | 2021 |
| Balance at beginning of period | $ | 15.6 | | | $ | 93.1 | |
| Change in related non-controlling interests balance | (0.8) | | | 1.1 | |
| Changes in redemption value of redeemable non-controlling interests: | | | |
| | | | |
| Additions | 3.1 | | | 0.0 | |
| Redemptions | (9.4) | | | (22.7) | |
| Redemption value adjustments | 0.6 | | | 1.1 | |
| Balance at end of period | $ | 9.1 | | | $ | 72.6 | |
GoodwillThe Company transitioned to the new segment reporting structure effective January 1, 2022 which resulted in certain changes to our operating segments and reporting units. We have allocated goodwill to our reporting units using a relative fair 15
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Acquisition related costs | 77 | SEC-NUM |
[Table of Contents](#i31241139a24240ee889881d54ce4b5f1_7)Diamondback Energy, Inc. and Subsidiaries Condensed Notes to Consolidated Financial Statements - (Continued)(Unaudited)The purchase price allocation above is based on the fair values of the assets and liabilities of QEP as of the closing date of the QEP Merger. The majority of the measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and are therefore considered Level 3 inputs. The fair value of acquired property and equipment, including midstream assets classified in oil and natural gas properties, is based on the cost approach, which utilized asset listings and cost records with consideration for the reported age, condition, utilization and economic support of the assets. Oil and natural gas properties were valued using an income approach utilizing the discounted cash flow method, which takes into account production forecasts, projected commodity prices and pricing differentials, and estimates of future capital and operating costs which were then discounted utilizing an estimated weighted-average cost of capital for industry market participants. The fair value of QEP’s outstanding senior unsecured notes was based on unadjusted quoted prices in an active market, which are considered Level 1 inputs. The value of derivative instruments was based on observable inputs including forward commodity-price curves which are considered Level 2 inputs. Deferred income taxes represent the tax effects of differences in the tax basis and merger-date fair values of assets acquired and liabilities assumed.
With the completion of the QEP Merger, the Company acquired proved properties of $2.0 billion and unproved properties of $733 million, primarily in the Midland Basin and the Williston Basin. In October 2021, the Company completed the divestiture of the Williston Basin properties, acquired as part of the QEP Merger and consisting of approximately 95,000 net acres, to Oasis Petroleum Inc. for net cash proceeds of approximately $586 million, after customary closing adjustments. See “—Williston Basin Divestiture” below.
The results of operations attributable to the QEP Merger since the acquisition date have been included in the condensed consolidated statements of operations and include $359 million and $413 million of total revenue and $116 million and $139 million of net income for the three and six months ended June 30, 2021.
Pro Forma Financial Information
The following unaudited summary pro forma financial information for the three and six months ended June 30, 2021 has been prepared to give effect to the QEP Merger and the Guidon Acquisition as if they had occurred on January 1, 2020. The unaudited pro forma financial information does not purport to be indicative of what the combined company’s results of operations would have been if these transactions had occurred on the dates indicated, nor is it indicative of the future financial position or results of operations of the combined company.
The below information reflects pro forma adjustments for the issuance of the Company’s common stock in exchange for QEP’s outstanding shares of common stock, as well as pro forma adjustments based on available information and certain assumptions that the Company believes are reasonable, including adjustments to depreciation, depletion and amortization based on the full cost method of accounting and the purchase price allocated to property, plant, and equipment as well as adjustments to interest expense and the provision for (benefit from) income taxes.
Additionally, pro forma earnings were adjusted to exclude acquisition-related costs incurred by the Company for the QEP Merger and the Guidon Acquisition of approximately $2 million and $77 million for the three and six months ended June 30, 2021, respectively, and acquisition-related costs incurred by QEP of $31 million through the closing date of the QEP Merger. These acquisition-related costs primarily consist of one-time severance costs and the accelerated or change-in-control vesting of certain QEP share-based awards for former QEP employees based on the terms of the merger agreement relating to the QEP Merger and other bank, legal and advisory fees. The pro forma results of operations do not include any cost savings or other synergies that may result from the QEP Merger and the Guidon Acquisition or any estimated costs that have been or will be incurred by the Company to integrate the acquired assets. The pro forma financial data does not include the results of operations for any other acquisitions made during the periods presented, as they were primarily acreage acquisitions and their results were not deemed material.
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| | | | | | | | |
| | | | Three Months Ended June 30, 2021 | | | | Six Months Ended June 30, 2021 |
| | | | (In millions, except per share amounts) |
| Revenues | | | $ | 1,656 | | | | | $ | 3,137 | |
| Income (loss) from operations | | | $ | 1,022 | | | | | $ | 1,706 | |
| Net income (loss) | | | $ | 388 | | | | | $ | 534 | |
| Basic earnings (loss) per common share | | | $ | 2.14 | | | | | $ | 2.95 | |
| Diluted earnings (loss) per common share | | | $ | 2.13 | | | | | $ | 2.94 | |
12
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Maximum term of hedged forecasted transactions | 13 | SEC-NUM |
Changes in the fair value of cash flow hedges are recorded in AOCI and recorded in earnings in the period in which the hedged transaction occurs. The total amount in AOCI related to cash flow hedges of forecasted transactions was a $14 million loss at December 31, 2021. We expect to reclassify $17 million of gain to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. The total reclassified from AOCI into earnings was $(79) million, $(7) million, and $(60) million for the years ended December 31, 2021, 2020 and 2019, respectively. At December 31, 2021, the maximum term of derivative instruments that hedge forecasted transactions was approximately 13 years.
The table below presents the gains (losses) of our derivative financial instruments in the Statement of Earnings (Loss):
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| | 2021 | | 2020 |
| | | | |
| | Revenues | Debt Extinguishment Costs | Interest Expense | SG&A | Other(a) | | Revenues | Debt Extinguishment Costs | Interest Expense | SG&A | Other(a) |
| | $ | 74,196 | | $ | 6,524 | | $ | 1,876 | | $ | 11,707 | | $ | 56,719 | | | $ | 75,833 | | $ | 301 | | $ | 2,068 | | $ | 12,592 | | $ | 69,267 | |
| | | | | | | | | | | | |
| Effect of cash flow hedges | $ | 27 | | $ | — | | $ | (40) | | $ | 1 | | $ | (67) | | | $ | 15 | | $ | — | | $ | (40) | | $ | 1 | | $ | 17 | |
| | | | | | | | | | | | |
| Hedged items | | $ | 70 | | $ | 1,413 | | | | | | $ | — | | $ | (1,775) | | | |
| Derivatives designated as hedging instruments | | (66) | | (1,549) | | | | | | — | | 1,743 | | | |
| Effect of fair value hedges | | $ | 3 | | $ | (135) | | | | | | $ | — | | $ | (31) | | | |
| | | | | | | | | | | | |
| Interest rate contracts(a) | $ | 1 | | $ | 52 | | $ | (3) | | $ | — | | $ | (1) | | | $ | (1) | | $ | — | | $ | (11) | | $ | — | | $ | (18) | |
| Currency exchange contracts | (6) | | (16) | | (18) | | (127) | | 44 | | | — | | — | | — | | 129 | | (293) | |
| Other | — | | — | | — | | 183 | | 193 | | | — | | — | | — | | 86 | | (46) | |
| Effect of derivatives not designated as hedges | $ | (5) | | $ | 35 | | $ | (22) | | $ | 56 | | $ | 235 | | | $ | (1) | | $ | — | | $ | (11) | | $ | 215 | | $ | (357) | |
(a) Amounts are inclusive of cost of sales and other income.
COUNTERPARTY CREDIT RISK. Our exposures to counterparties (including accrued interest), net of collateral we held, was $564 million and $392 million at December 31, 2021 and December 31, 2020, respectively. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $159 million and $307 million at December 31, 2021 and December 31, 2020, respectively.
NOTE 21. VARIABLE INTEREST ENTITIES. In addition to the two VIEs detailed in Note 4, in our Statement of Financial Position, we have assets of $491 million and $1,733 million and liabilities of $206 million and $657 million, at December 31, 2021 and 2020, respectively, from other consolidated VIEs. The decline in assets and liabilities is primarily driven by the deconsolidation of our aeroderivative JV and the reduction of the deferred purchase price related to the discontinuation of our remaining unconsolidated receivables facility. These entities were created to help our customers facilitate or finance the purchase of GE equipment and services and have no features that could expose us to losses that would significantly exceed the difference between the consolidated assets and liabilities.
Our investments in unconsolidated VIEs were $5,034 million and $3,230 million at December 31, 2021 and 2020, respectively. Of these investments, $1,481 million and $1,141 million were owned by EFS, comprising equity method investments, primarily renewable energy tax equity investments, at December 31, 2021 and 2020, respectively. In addition, $3,333 million and $1,833 million were owned by our run-off insurance operations, primarily comprising investment securities at December 31, 2021 and 2020, respectively. The increase in investments in unconsolidated VIEs in our run-off insurance operations reflects implementation of our revised reinvestment plan, which incorporates the introduction of strategic initiatives to invest in higher-yielding asset classes. Our maximum exposure to loss in respect of unconsolidated VIEs is increased by our commitments to make additional investments in these entities described in Note 22.
NOTE 22. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIESCOMMITMENTS. We had total investment commitments of $3,130 million at December 31, 2021. The commitments primarily comprise investments by our run-off insurance operations in investment securities and other assets of $3,069 million and included within these commitments are obligations to make investments in unconsolidated VIEs of $2,996 million. See Note 21 for further information.
As of December 31, 2021, in our Aviation segment, we have committed to provide financing assistance of $2,058 million of future customer acquisitions of aircraft equipped with our engines.
GUARANTEES. At December 31, 2021, we were committed under the following guarantee arrangements:
Credit support. At December 31, 2021, we have provided $1,252 million of credit support on behalf of certain customers or associated companies, predominantly joint ventures and partnerships, using arrangements such as standby letters of credit and performance guarantees. The liability for such credit support was $42 million.
Indemnification agreements - Continuing Operations. At December 31, 2021, we have $965 million of indemnification commitments, including representations and warranties in sales of business assets, for which we recorded a liability of $95 million.2021 FORM 10-K 79
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Loss Contingency, Damages Paid, Value | 48 | SEC-NUM |
On June 21, 2021, the U.S. Supreme Court decided United States v. Arthrex, Inc. On June 28, 2021, the U.S. Supreme Court granted the government’s pending certiorari petition and vacated and remanded the Federal Circuit Court’s judgment for further consideration under Arthrex.On September 2, 2021, the Federal Circuit Court issued a remand to permit Amgen to request rehearing of the PTAB’s final written decision holding that all claims of the ’138 Patent as unpatentable.On October 4, 2021, Amgen filed a request for the USPTO Director for a rehearing and review of the Final Written Decision pursuant to Arthrex. On November 22, 2021, the Director denied this request. On December 6, 2021, Amgen filed the Notice of Director review with the patent office.Pfizer PTAB ChallengeOn February 10, 2021, Pfizer filed a petition to institute IPR proceeding at the USPTO of U.S. Patent No. 8,273,707 (the ’707 Patent), challenging claims of the ’707 Patent as unpatentable. Amgen’s preliminary response was filed on May 18, 2021.On August 17, 2021, the PTAB of the USPTO granted Pfizer’s petition to institute IPR of the ’707 Patent. On August 23, 2021, the PTAB issued the schedule for the proceeding, including oral argument (if requested) on May 18, 2022. On November 17, 2021, Amgen filed its Patent Owner’s Response.Breach of Contract ActionNovartis Pharma AG v. Amgen Inc.On April 4, 2019, Amgen filed a lawsuit in the U.S. District Court for the Southern District of New York (the New York Southern District Court) against Novartis seeking a declaratory judgment that Novartis materially breached two collaboration agreements Amgen and Novartis entered into in 2015 and 2017 (the 2015 Agreement and the 2017 Agreement, respectively) related to the development and commercialization of Aimovig due to Novartis’ affiliate Sandoz GmbH entering into a contract manufacturing agreement with Alder BioPharmaceuticals, Inc. (Alder) related to eptinezumab, an expected direct competitor to Aimovig and entrant in the CGRP-related migraine therapy market. Amgen seeks to terminate its collaboration agreements with Novartis and also seeks damages from Novartis for breach of contract and negligent misrepresentation. Also on April 4, 2019, Novartis initiated a separate lawsuit against Amgen in the same court seeking declaratory judgment that Novartis, alternatively, did not materially breach the collaboration agreements or, even if it did breach the collaboration agreements, such breach was not material and has been cured, and that Amgen may not terminate the collaboration agreements. On April 8, 2019, Amgen answered Novartis’ complaint and filed counterclaims seeking a declaratory judgment that Novartis materially breached the collaboration agreements due to its affiliate Sandoz GmbH entering into the contract manufacturing agreement with Alder. In its counterclaim, Amgen seeks to terminate its collaboration agreements with Novartis and also seeks damages from Novartis for breach of contract and negligent misrepresentation. On July 16, 2019, Novartis filed an amended complaint adding a claim for breach of contract alleging Novartis is owed amounts associated with 2018 budget overruns, and Amgen responded with a counterclaim alleging additional breaches by Novartis of the collaboration agreements. On September 17, 2019 and October 8, 2019, Novartis and Amgen, respectively, each filed its motion for judgment on the pleadings. On February 3, 2020, Amgen was granted leave to file its amended counterclaims. On February 4, 2020, Amgen filed its amended answer to Novartis’ first amended complaint and second amended counterclaims for affirmative relief to add a fraudulent inducement claim. On February 18, 2020, Novartis filed its answer and affirmative defenses to Amgen’s second amended counterclaims. On June 9, 2020, the New York Southern District Court entered an order granting Novartis’ motion for judgment on the pleadings that Novartis did not breach the 2017 Agreement, and denying Amgen’s motions for judgment on the pleadings seeking dismissal of Novartis’ amended complaint that Novartis did not breach the 2015 Agreement or the 2017 Agreement, and Novartis timely cured any breach. On June 23, 2020, Amgen filed a motion for clarification and/or reconsideration of the June 9, 2020 order, which was denied on September 14, 2020. On June 2, 2021, the parties executed agreements to settle two claims in the litigation, relating to the 2018 budget overrun dispute and certain counterclaims alleging breaches by Novartis of the 2015 and 2017 Agreements related to the development and commercialization of Aimovig, and to amend and restate the 2017 collaboration agreement. As part of the agreement, Amgen paid $48 million to Novartis to resolve the 2018 budget dispute.On October 26, 2021, the New York Southern District Court held a status conference with the parties and set the dates for Novartis’ opening brief for its motion for partial summary judgment on two claims, fraudulent inducement and negligent misrepresentation.On January 31, 2022, the parties resolved all claims in the litigation.F-51
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Fair value of trade receivables acquired | 34,606 | SEC-NUM |
[Table of Contents](#ic9c410c95c8848f2bcb73b4a6fbb4634_4)DOVER CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands except share data and where otherwise indicated) (Unaudited)$40,000 for patents, and $21,000 for trademarks. The fair value of customer intangibles at the acquisition date was determined using the multi-period excess earnings method under the income approach. The fair value measurements of intangible assets are based on significant unobservable inputs and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates and discount rates. The fair value of assets acquired also includes trade receivables of $33,900. The gross amount is $34,606, of which $706 is expected to be uncollectible. The fair values of the assets acquired and liabilities assumed, and the related tax balances, are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change during the measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed, and the related tax balances. During the nine months ended September 30, 2022, the Company recorded measurement period adjustments primarily related to its preliminary estimates of deferred taxes and changes in net working capital. These adjustments are based on facts and circumstances that existed as of the acquisition date which resulted in an increase in goodwill of $4,219.
The following presents the updated preliminary allocation of purchase price, net of cash acquired of $10,382, to the assets acquired and liabilities assumed under the RegO acquisition, based on their estimated fair values at their acquisition dates:
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| | | Total |
| Accounts receivable | | $ | 33,900 | |
| Inventories | | 72,551 | |
| Other current assets | | 2,958 | |
| Property, plant and equipment | | 50,027 | |
| Goodwill | | 281,195 | |
| Intangible assets | | 234,000 | |
| Other assets and deferred charges | | 884 | |
| Current liabilities | | (20,150) | |
| Non-current liabilities | | (28,745) | |
| Net assets acquired | | $ | 626,620 | |
The amounts assigned to goodwill and major intangible asset classifications were as follows:
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| | Amount allocated | | Useful life (in years) |
| Goodwill - tax deductible | $ | 158,894 | | | na |
| Goodwill - non-deductible | 122,301 | | | na |
| Customer intangibles | 173,000 | | | 15 |
| Patents | 40,000 | | | 12 |
| | | | | | |
| Trademarks | 21,000 | | | 16 |
| | | | | | |
| | $ | 515,195 | | | | | |
Acme Cryogenics
On December 16, 2021, the Company acquired 100% of the voting stock of Acme Cryo Intermediate Inc. ("Acme Cryogenics"), a provider of highly-engineered components and services that facilitate the production, storage, and distribution of cryogenic gases, for $292,285, net of cash acquired and inclusive of the impact of measurement period adjustments discussed below. In connection with this acquisition, the Company recorded goodwill of $164,870 non-deductible for income tax purposes. The Company also recorded intangible assets of $99,000 for customer intangibles, $21,800 for unpatented technology and $6,500 for trademarks. The fair value of customer intangibles at the acquisition date was determined using the multi-period excess earnings method under the income approach. The fair value measurements of intangible assets are based on significant unobservable inputs and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates and discount rates. The fair value of assets acquired also includes trade receivables of $14,568. The gross amount is $14,912, of which $344 is expected to be uncollectible. The fair values of the assets acquired and liabilities assumed, and the related tax balances, are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change during the measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed, and the related tax balances. During the nine months ended September 30, 2022, the Company recorded measurement period adjustments primarily related to its preliminary estimates of deferred taxes and changes in net working capital. These adjustments are based on facts and circumstances that existed as of the acquisition date which resulted in a decrease in goodwill of $4,339.
10
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Self insurance reserve, current | 11 | 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).
156
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NumberOfClaimsInSettlementAgreement | 15,295 | SEC-NUM |
[Table of Contents](#i769337f517694ce29a72abc52f207787_10)
Notes to Consolidated Financial Statements — (Continued)Becton, Dickinson and Company
MDL began in August 2021, resulting in a complete defense verdict. Trials are scheduled into fiscal year 2022 in various state and/or federal courts, including one trial currently scheduled for January 2022 in the MDL. The Company expects additional trials of Hernia Product Claims to take place over the next 12 months. The Company cannot give any assurances that the resolution of the Hernia Product Claims that have not settled, including asserted and unasserted claims and the putative class action lawsuits, will not have a material adverse effect on the Company’s business, results of operations, financial condition and/or liquidity.Women’s Health Product ClaimsAs of September 30, 2021, the Company is defending approximately 405 product liability claims involving the Company’s line of pelvic mesh devices. The majority of those claims are currently pending in various federal court jurisdictions, and a coordinated proceeding in New Jersey State Court, but claims are also pending in other state court jurisdictions. In addition, those claims include putative class actions filed in the United States. Not included in the figures above are approximately 830 filed and unfiled claims that have been asserted or threatened against the Company but lack sufficient information to determine whether a pelvic mesh device of the Company is actually at issue. The claims identified above also include products manufactured by both the Company and two subsidiaries of Medtronic plc (as successor in interest to Covidien plc) (“Medtronic”), each a supplier of the Company. Medtronic has an obligation to defend and indemnify the Company with respect to any product defect liability relating to products its subsidiaries had manufactured. In July 2015, the Company reached an agreement with Medtronic in which Medtronic agreed to take responsibility for pursuing settlement of certain of the Women’s Health Product Claims that relate to products distributed by the Company under supply agreements with Medtronic. In June 2017, the Company amended the agreement with Medtronic to transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on terms similar to the July 2015 agreement, including with respect to the obligation to make payments to Medtronic toward these potential settlements. As of September 30, 2021, the Company has paid Medtronic $161 million toward these potential settlements. The Company also may, in its sole discretion, transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on similar terms. The agreements do not resolve the dispute between the Company and Medtronic with respect to Women’s Health Product Claims that do not settle, if any. The foregoing lawsuits, unfiled claims, putative class actions, and other claims, together with claims that have settled or are the subject of agreements or agreements in principle to settle, are referred to collectively as the “Women’s Health Product Claims.” The Women’s Health Product Claims generally seek damages for personal injury allegedly resulting from use of the products.As of September 30, 2021, the Company has reached agreements or agreements in principle with various plaintiffs’ law firms to settle their respective inventories of cases totaling approximately 15,295 of the Women’s Health Product Claims. The Company believes that these Women’s Health Product Claims are not the subject of Medtronic’s indemnification obligation. These settlement agreements and agreements in principle include unfiled and previously unknown claims held by various plaintiffs’ law firms, which are not included in the approximate number of lawsuits set forth in the first paragraph of this section. Each agreement is subject to certain conditions, including requirements for participation in the proposed settlements by a certain minimum number of plaintiffs. The Company continues to engage in discussions with other plaintiffs’ law firms regarding potential resolution of unsettled Women’s Health Product Claims, which may include additional inventory settlements.A trial in the New Jersey coordinated proceeding began in March 2018, and in April 2018 a jury entered a verdict against the Company in the total amount of $68 million ($33 million compensatory; $35 million punitive). In March 2021, the Appellate Division of the New Jersey Superior Court vacated the verdict and ordered a new trial. Plaintiffs have sought appeal of the reversal to the New Jersey Supreme Court and the Company has cross-appealed on a separate issue; the court has advised it will consider the appeal and cross-appeal. Additional trials of Women’s Health Product Claims may take place over the next 12 months, which could potentially include consolidated trials.68
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Title of 12(b) Security | Common Stock, $0.01 par value | SEC-NUM |
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| | Delaware | | | | 77-0518772 | |
| (State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) |
5301 Stevens Creek Blvd., Santa Clara, California 95051 (Address of principal executive offices)
Registrant’s telephone number, including area code: (800) 227-9770
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each Class | | Trading Symbol | | Name of each Exchange on which registered |
| Common Stock, $0.01 par value | | | A | | | | New York Stock Exchange | |
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 ☒ No ☐ Indicate 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate 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 ☐ No ☒
As of August 24, 2022, the registrant had 296,040,570 shares of common stock, $0.01 par value per share, outstanding.
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Unbilled accounts receivable | 8.7 | SEC-NUM |
[Table](#i6fa56528b8724eb3888e814d9e0a196b_7) [of](#i6fa56528b8724eb3888e814d9e0a196b_7) [Contents](#i6fa56528b8724eb3888e814d9e0a196b_7)Revenue RecognitionThe timing of revenue recognition is based on the satisfaction of performance obligations. Substantially all of the performance obligations associated with our Components are satisfied at a point in time, which typically occurs at shipment of our products. Terms of direct and distributor orders are generally Freight on Board (“FOB”) shipping point for U.S. orders or Free Carrier (“FCA”) shipping point for international orders. For certain sales transactions, control transfers at delivery of the product to the customer.In cases where our free-of-charge software, mobile applications and updates are deemed to be separate performance obligations, revenue is recognized over time on a ratable basis over the estimated life of the related Reusable Hardware component.Our sales of Components include an assurance-type warranty.Contract BalancesContract balances represent amounts presented in our consolidated balance sheets when either we have transferred goods or services to the customer or the customer has paid consideration to us under the contract. These contract balances include accounts receivable and deferred revenue. Payment terms vary by contract type and type of customer and generally range from 30 to 90 days.Accounts receivable as of September 30, 2022 included unbilled accounts receivable of $8.7 million. We expect to invoice and collect all unbilled accounts receivable within twelve months.We record deferred revenue when we have entered into a contract with a customer and cash payments are received or due prior to transfer of control or satisfaction of the related performance obligation.Our performance obligations are generally satisfied within twelve months of the initial contract date. The deferred revenue balances related to performance obligations that will be satisfied after twelve months was $23.6 million as of September 30, 2022 and $16.1 million as of December 31, 2021. These balances are included in other long-term liabilities in our consolidated balance sheets. Revenue recognized in the period from performance obligations satisfied in previous periods was not material for the periods presented.Deferred Cost of SalesDeferred cost of sales are associated with transactions for which revenue recognition criteria are not met but product has shipped and released from inventory. Deferred cost of sales are included in prepaid and other current assets in our consolidated balance sheets.Incentive Compensation CostsWe generally expense incentive compensation associated with our internal sales force when incurred because the amortization period for such costs, if capitalized, would have been one year or less. We record these costs in selling, general and administrative expense in our consolidated statements of operations.
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| Senior Convertible Notes |
In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible debt instruments, amends the guidance on derivative scope exceptions for contracts in an entity’s own equity, and modifies the guidance on diluted earnings per share calculations.We previously followed in Accounting Standard Codification, or ASC, 470-20, which required us to separate each of our convertible debt instruments at issuance into two units of accounting, a liability component, based on our nonconvertible debt borrowing rate at issuance, and an equity component. Under ASU 2020-06, we now account for each of our convertible debt instruments as a single unit of accounting, a liability, because we concluded that there were no material conversion features that require bifurcation as a derivative under ASC 815-15 and our convertible debt instruments were not issued at a substantial premium. Since we adopted ASU 2020-06 using the full retrospective approach, we were required to apply the guidance to all convertible debt instruments we had outstanding as of January 1, 2020.Upon adoption of ASU 2020-06 as of January 1, 2020, we recognized $67.8 million cumulative-effect adjustment to increase retained earnings for the decrease in interest expense and $242.3 million decrease in additional paid in capital for the elimination of the equity component. We have updated these financial statements to reflect the cumulative adjustment for the periods presented. We have labeled our prior period financial statements and related notes “As Adjusted” to indicate the change required under the new accounting guidance.13
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Available-for-sale debt securities - maturities less than 1 year | 71 | SEC-NUM |
AT&T INC.SEPTEMBER 30, 2022
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ContinuedDollars in millions except per share amounts
Following is the fair value leveling for investment securities that are measured at fair value and derivatives as of September 30, 2022 and December 31, 2021. Derivatives designated as hedging instruments are reflected as “Other assets,” “Other noncurrent liabilities,” “Prepaid and other current assets” and “Accounts payable and accrued liabilities” on our consolidated balance sheets.
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| | September 30, 2022 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| Equity Securities | | | | | | | |
| Domestic equities | $ | 912 | | | $ | — | | | $ | — | | | $ | 912 | |
| International equities | 178 | | | — | | | — | | | 178 | |
| Fixed income equities | 185 | | | — | | | — | | | 185 | |
| Available-for-Sale Debt Securities | — | | | 1,142 | | | — | | | 1,142 | |
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| Liability Derivatives | | | | | | | |
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| Cross-currency swaps | — | | | (8,882) | | | — | | | (8,882) | |
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| Foreign exchange contracts | — | | | (69) | | | — | | | (69) | |
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| | December 31, 2021 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| Equity Securities | | | | | | | |
| Domestic equities | $ | 1,213 | | | $ | — | | | $ | — | | | $ | 1,213 | |
| International equities | 221 | | | — | | | — | | | 221 | |
| Fixed income equities | 219 | | | — | | | — | | | 219 | |
| Available-for-Sale Debt Securities | — | | | 1,380 | | | — | | | 1,380 | |
| Asset Derivatives | | | | | | | |
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| Cross-currency swaps | — | | | 211 | | | — | | | 211 | |
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| Liability Derivatives | | | | | | | |
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| Cross-currency swaps | — | | | (3,170) | | | — | | | (3,170) | |
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Investment SecuritiesOur investment securities include both equity and debt securities that are measured at fair value, as well as equity securities without readily determinable fair values. A substantial portion of the fair values of our investment securities is estimated based on quoted market prices. Investments in equity securities not traded on a national securities exchange are valued at cost, less any impairment, and adjusted for changes resulting from observable, orderly transactions for identical or similar securities. Investments in debt securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. The components comprising total gains and losses in the period on equity securities are as follows:
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| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Total gains (losses) recognized on equity securities | $ | (79) | | | $ | 9 | | | $ | (411) | | | $ | 151 | |
| Gains (Losses) recognized on equity securities sold | (8) | | | (2) | | | (56) | | | (2) | |
| Unrealized gains (losses) recognized on equitysecurities held at end of period | $ | (71) | | | $ | 11 | | | $ | (355) | | | $ | 153 | |
At September 30, 2022, available-for-sale debt securities totaling $1,142 have maturities as follows - less than one year: $71; one to three years: $140; three to five years: $187; five or more years: $744. 24
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Repayments of convertible debt | 1.2 | SEC-NUM |
[Table of Conten](#i207805ce14724a60909000a6c8cb9e11_7)[t](#i207805ce14724a60909000a6c8cb9e11_7)[s](#i207805ce14724a60909000a6c8cb9e11_7)Interest on the Registered Notes is payable semi-annually in arrears on June 15 and December 15 of each year. Covenants and Redemption Provisions Applicable to Registered NotesWe may redeem the Registered Notes of the applicable series, in whole or in part, at any time prior to the dates specified in the Registered Notes indenture (the “Call Dates”) by paying the principal amount and the “make-whole” premium specified in the Registered Notes indenture, plus accrued and unpaid interest. Additionally, we may redeem all or any part of the Registered Notes of the applicable series on or after the Call Dates without paying the “make-whole” premium specified in the Registered Notes indenture.
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| Registered Notes Series | Call Dates |
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| 3.15% senior unsecured notes due 2026 | March 15, 2026 |
| 4.30% senior unsecured notes due 2046 | December 15, 2045 |
If a change of control triggering event occurs, we will, in certain circumstances, be required to make an offer to repurchase the Registered Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. A change of control triggering event is defined as the occurrence of both a change of control and a rating event, each as defined in the Registered Notes indenture. Except in connection with a change of control triggering event, the Registered Notes do not have any credit rating downgrade triggers that would accelerate the maturity of the Registered Notes.The Registered Notes contain customary covenants, including limits on the incurrence of certain secured debt and sale/leaseback transactions. None of these covenants are considered restrictive to our operations and as of December 31, 2021, we were in compliance with all of our covenants.OtherWe made interest payments, including amounts allocated to interest expense from discontinued operations during 2020 and 2019 of $123 million and $127 million, respectively. We had no interest payments from discontinued operations during 2021. There are $2.2 billion of minimum principal payments due under our total long-term debt during 2022. The future minimum principal payments due are presented in the following table:
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| | TermLoans | | Convertible and Registered Notes | | Total |
| 2022 | $ | 1,000.0 | | | $ | 1,156.5 | | | $ | 2,156.5 | |
| 2023 | — | | | — | | | — | |
| 2024 | — | | | — | | | — | |
| 2025 | — | | | — | | | — | |
| 2026 | — | | | 900.0 | | | 900.0 | |
| Thereafter | — | | | 550.0 | | | 550.0 | |
| Total principal payments (a) | $ | 1,000.0 | | | $ | 2,606.5 | | | $ | 3,606.5 | |
| | | | | | |
| (a) Not included in the table above are discounts, net of premiums and issuance costs associated with the Convertible and Registered Notes and Commercial Paper, which totaled $13 million as of December 31, 2021, and have been recorded as an offset to the carrying amount of the related debt in the accompanying Consolidated Balance Sheet as of December 31, 2021. In addition, the table above does not include principal balance of $365 million under the Commercial Paper Programs. |
Subsequent EventOn February 15, 2022, the maturity date of the Convertible Notes, Fortive repaid, in cash, $1.2 billion in outstanding principal and accrued interest thereon.NOTE 12. PENSION PLANS Certain employees participate in noncontributory defined benefit pension plans. In general, our policy is to fund these plans based on considerations relating to legal requirements, underlying asset returns, the plan’s funded status, the anticipated deductibility of the contribution, local practices, market conditions, interest rates, and other factors. Our U.S. pension plans are frozen, and as such, there are no ongoing benefit accruals associated with the U.S. pension plans.79
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Two years to three years | 5,774.3 | SEC-NUM |
cash received from and paid on behalf of clients on a net basis within net increase / (decrease) in client funds obligations in the financing activities section of the Statements of Consolidated Cash Flows.
All available-for-sale securities were rated as investment grade at September 30, 2022. Expected maturities of available-for-sale securities at September 30, 2022 are as follows:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| One year or less | $ | 3,353.5 | |
| One year to two years | 5,500.0 | |
| Two years to three years | 5,774.3 | |
| Three years to four years | 6,549.4 | |
| After four years | 7,583.8 | |
| Total available-for-sale securities | $ | 28,761.0 | |
Note 7. Leases
The Company records leases on the Consolidated Balance Sheets as operating lease right-of-use (“ROU”) assets, records the current portion of operating lease liabilities within accrued expenses and other current liabilities and, separately, records long-term operating lease liabilities. The difference between total ROU assets and total lease liabilities is primarily attributable to pre-payments of our obligations and the recognition of various lease incentives.
The Company has entered into operating lease agreements for facilities and equipment. The Company's leases have remaining lease terms of up to approximately ten years.
The components of operating lease expense were as follows:
| | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
| | September 30, | | |
| | 2022 | | 2021 | | | | |
| Operating lease cost | $ | 35.6 | | | $ | 35.9 | | | | | |
| Short-term lease cost | 0.3 | | | 0.3 | | | | | |
| Variable lease cost | 3.0 | | | 2.5 | | | | | |
| Total operating lease cost | $ | 38.9 | | | $ | 38.7 | | | | | |
| | | | | | | | |
The following table provides supplemental cash flow information related to the Company's leases:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Three Months Ended |
| | September 30, |
| | 2022 | | 2021 |
| Cash paid for operating lease liabilities | $ | 33.5 | | | $ | 33.1 | |
| Operating lease ROU assets obtained in exchange for new operating lease liabilities | $ | 12.4 | | | $ | 19.5 | |
| | | | |
| | | | |
Other information related to our operating lease liabilities is as follows:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | September 30, | | June 30, |
| | 2022 | | 2022 |
| Weighted-average remaining lease term (in years) | 6 | | 6 |
| Weighted-average discount rate | 2.2 | % | | 2.2 | % |
| Current operating lease liability | $ | 88.8 | | | $ | 95.1 | |
13
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Impairment charge, Property, equipment and leasehold improvements | 30.7 | SEC-NUM |
[Table of Contents](#i677b09687fd443618b9c84261c8e0734_7)The acquisition date fair values of major classes of assets acquired and liabilities assumed are as follows:
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | Acquisition Date Fair Value | | Acquisition Date Useful Life | | Amortization Method |
| | | (in thousands) | | (in years) | | |
| Current assets | | $ | 812 | | | | | |
| | | | | | | |
| Amortizable intangible assets | | | | | | |
| Software technology | | 8,100 | | | 7 years | | Straight-line |
| Trade names | | 2,800 | | | 15 years | | Straight-line |
| | | | | | | |
| Client relationships | | 900 | | | 12 years | | Straight-line |
| Goodwill | | 30,058 | | | | | |
| Other assets | | 5,299 | | | | | |
| Current liabilities | | (3,069) | | | | | |
| Other liabilities | | (2,984) | | | | | |
| Total purchase price | | $ | 41,916 | | | | | |
Goodwill totaling $30.1 million represents the excess of the TVL purchase price over the fair value of net assets acquired and is included in the Americas segment. Goodwill generated from the TVL acquisition is not deductible for income tax purposes. The results of TVL's operations have been included in our Consolidated Financial Statements, within the Americas segment, beginning with its acquisition on November 2, 2020. Pro forma information has not been presented because the effect of the TVL acquisition is not material to our Consolidated Financial Statements. 7. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTSProperty, equipment and leasehold improvements consist of the following:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| (in thousands) | August 31, |
| 2022 | | 2021 |
| Leasehold improvements | $ | 184,425 | | | $ | 197,719 | |
| Computers and related equipment | 104,514 | | | 136,213 | |
| Furniture and fixtures | 58,143 | | | 58,212 | |
| Subtotal | $ | 347,082 | | | $ | 392,144 | |
| Less accumulated depreciation and amortization | (266,239) | | | (260,767) | |
| Property, equipment and leasehold improvements, net | $ | 80,843 | | | $ | 131,377 | |
Depreciation expense was $24.3 million, $30.4 million and $32.2 million for fiscal years 2022, 2021 and 2020, respectively.During fiscal 2022, we incurred an impairment charge of $30.7 million for property, equipment and leasehold improvements related to vacating certain leased office space. Refer to Note 4, Fair Value Measures, for more information on the property, equipment and leasehold improvements assets impairment methodology.69
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Stock Repurchase Program, Remaining Authorized Repurchase Amount | 400 | SEC-NUM |
Note 24 - Subsequent Events
On August 17, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.12 per share to be paid on September 28, 2022 to shareholders of record as of September 8, 2022. Amcor has received a waiver from the Australian Securities Exchange ("ASX") settlement operating rules, which will allow Amcor to defer processing conversions between its ordinary share and CHESS Depositary Instrument ("CDI") registers from September 7, 2022 to September 8, 2022, inclusive.
On August 17, 2022, the Company's Board of Directors approved a $400 million buyback of ordinary shares and/or CHESS Depositary Instruments ("CDIs") in the next twelve months. Pursuant to this program, purchases of the Company's ordinary shares and/or CDIs will be made subject to market conditions and at prevailing market prices, through open market purchases. The Company expects to complete the share buyback within twelve months, however, the timing, volume, and nature of repurchase may be amended, suspended, or discontinued at any time.
106
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Loss on dispositions | 194 | SEC-NUM |
[Table of Contents](#ic9c410c95c8848f2bcb73b4a6fbb4634_4)DOVER CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands except share data and where otherwise indicated) (Unaudited)Segment financial information and a reconciliation of segment results to consolidated results were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Revenue: | | | | | | | |
| Engineered Products | $ | 516,501 | | | $ | 447,798 | | | $ | 1,518,584 | | | $ | 1,318,016 | |
| Clean Energy & Fueling | 464,022 | | | 410,561 | | | 1,416,492 | | | 1,237,281 | |
| Imaging & Identification | 282,371 | | | 292,535 | | | 830,577 | | | 870,939 | |
| Pumps & Process Solutions | 433,558 | | | 438,240 | | | 1,309,880 | | | 1,261,318 | |
| Climate & Sustainability Technologies | 462,671 | | | 429,425 | | | 1,295,913 | | | 1,232,008 | |
| Intersegment eliminations | (832) | | | (290) | | | (2,539) | | | (1,716) | |
| Total consolidated revenue | $ | 2,158,291 | | | $ | 2,018,269 | | | $ | 6,368,907 | | | $ | 5,917,846 | |
| Net earnings: | | | | | | | |
| Segment earnings: | | | | | | | |
| Engineered Products | $ | 90,145 | | | $ | 67,376 | | | $ | 242,946 | | | $ | 215,315 | |
| Clean Energy & Fueling | 90,208 | | | 80,101 | | | 262,204 | | | 253,103 | |
| Imaging & Identification | 74,477 | | | 70,635 | | | 194,467 | | | 200,818 | |
| Pumps & Process Solutions | 128,573 | | | 150,275 | | | 413,238 | | | 425,929 | |
| Climate & Sustainability Technologies | 75,190 | | | 49,734 | | | 192,980 | | | 150,114 | |
| Total segment earnings | 458,593 | | | 418,121 | | | 1,305,835 | | | 1,245,279 | |
| Purchase accounting expenses (1) | 40,526 | | | 35,587 | | | 140,831 | | | 106,265 | |
| Restructuring and other costs (benefits) (2) | 8,613 | | | (3,201) | | | 27,109 | | | 11,740 | |
| Loss on dispositions (3) | — | | | — | | | 194 | | | — | |
| Corporate expense / other (4) | 27,876 | | | 33,249 | | | 93,247 | | | 110,332 | |
| Interest expense | 29,789 | | | 26,433 | | | 83,330 | | | 79,917 | |
| Interest income | (1,244) | | | (1,466) | | | (2,968) | | | (3,088) | |
| Earnings before provision for income taxes | 353,033 | | | 327,519 | | | 964,092 | | | 940,113 | |
| Provision for income taxes | 67,007 | | | 63,763 | | | 162,295 | | | 179,080 | |
| Net earnings | $ | 286,026 | | | $ | 263,756 | | | $ | 801,797 | | | $ | 761,033 | |
(1) Purchase accounting expenses are primarily comprised of amortization of intangible assets and charges related to fair value step-ups for acquired inventory sold during the period. (2) Restructuring and other costs relate to actions taken for employee reductions, facility consolidations and site closures, product line exits, and other asset charges. Restructuring and other costs consist of the following:
| | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Restructuring | $ | 7,315 | | | $ | 4,790 | | | $ | 19,781 | | | $ | 20,661 | |
| Other costs (benefits), net | 1,298 | | | (7,991) | | | 7,328 | | | (8,921) | |
| Restructuring and other costs (benefits) | $ | 8,613 | | | $ | (3,201) | | | $ | 27,109 | | | $ | 11,740 | |
(3) Loss on dispositions includes working capital adjustments related to dispositions.(4) Certain expenses are maintained at the corporate level and not allocated to the segments. These expenses include executive and functional compensation costs, non-service pension costs, non-operating insurance expenses, shared business services overhead costs, deal-related expenses and various administrative expenses relating to the corporate headquarters.
22
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Common Stock, Par or Stated Value Per Share | 0.10 | SEC-NUM |
[Table of Contents](#ie0ad6752ee3c4f669c939c9f55a2eff4_10)FRANKLIN RESOURCES, INC.CONSOLIDATED BALANCE SHEETSUnaudited
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| (in millions, except share and per share data) | | June 30,2022 | | September 30,2021 |
| Assets | | | | |
| Cash and cash equivalents | | $ | 3,806.3 | | | $ | 4,357.8 | |
| Receivables | | 1,414.8 | | | 1,428.2 | |
| Investments (including $660.8 and $588.3 at fair value at June 30, 2022 and September 30, 2021) | | 1,658.5 | | | 1,510.3 | |
| Assets of consolidated investment products | | | | |
| Cash and cash equivalents | | 672.4 | | | 289.4 | |
| Investments, at fair value | | 7,475.3 | | | 5,820.1 | |
| Property and equipment, net | | 759.1 | | | 770.0 | |
| Goodwill | | 5,807.1 | | | 4,457.7 | |
| Intangible assets, net | | 5,177.4 | | | 4,710.2 | |
| Operating lease right-of-use assets | | 486.8 | | | 448.4 | |
| Other | | 338.3 | | | 376.3 | |
| Total Assets | | $ | 27,596.0 | | | $ | 24,168.4 | |
| | | | | |
| Liabilities | | | | |
| Compensation and benefits | | $ | 1,234.3 | | | $ | 1,179.3 | |
| Accounts payable and accrued expenses | | 541.7 | | | 479.3 | |
| Commissions | | 209.8 | | | 259.8 | |
| Income taxes | | 521.2 | | | 693.6 | |
| Debt | | 3,382.2 | | | 3,399.4 | |
| Liabilities of consolidated investment products | | | | |
| Accounts payable and accrued expenses | | 451.4 | | | 558.0 | |
| Debt | | 5,496.5 | | | 3,671.0 | |
| Deferred tax liabilities | | 290.9 | | | 311.7 | |
| Operating lease liabilities | | 555.3 | | | 518.4 | |
| Other | | 1,133.9 | | | 354.3 | |
| Total liabilities | | 13,817.2 | | | 11,424.8 | |
| Commitments and Contingencies (Note 11) | | | | |
| Redeemable Noncontrolling Interests | | 1,493.7 | | | 933.0 | |
| Stockholders’ Equity | | | | |
| Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued | | — | | | — | |
| Common stock, $0.10 par value, 1,000,000,000 shares authorized; 498,356,132 and 501,807,677 shares issued and outstanding at June 30, 2022 and September 30, 2021 | | 49.8 | | | 50.2 | |
| Retained earnings | | 11,997.5 | | | 11,550.8 | |
| Accumulated other comprehensive loss | | (503.6) | | | (377.6) | |
| Total Franklin Resources, Inc. stockholders’ equity | | 11,543.7 | | | 11,223.4 | |
| Nonredeemable noncontrolling interests | | 741.4 | | | 587.2 | |
| Total stockholders’ equity | | 12,285.1 | | | 11,810.6 | |
| Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity | | $ | 27,596.0 | | | $ | 24,168.4 | |
See Notes to Consolidated Financial Statements.
5
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Eligible shares of QEP common stock to be converted into shares of Diamondback common stock (in shares) | 238,153 | SEC-NUM |
[Table of Contents](#i31241139a24240ee889881d54ce4b5f1_7)Diamondback Energy, Inc. and Subsidiaries Condensed Notes to Consolidated Financial Statements - (Continued)(Unaudited)QEP Resources, Inc.
On March 17, 2021, the Company completed its acquisition of QEP in an all-stock transaction (the “QEP Merger”). The addition of QEP’s assets increased the Company’s net acreage in the Midland Basin by approximately 49,000 net acres. Under the terms of the QEP Merger, each eligible share of QEP common stock issued and outstanding immediately prior to the effective time converted into the right to receive 0.050 of a share of Diamondback common stock, with cash being paid in lieu of any fractional shares (the “merger consideration”).
The following table presents the acquisition consideration paid to QEP stockholders in the QEP Merger (in millions, except per share data, shares in thousands):
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Consideration: | |
| Eligible shares of QEP common stock converted into shares of Diamondback common stock | 238,153 | |
| Shares of QEP equity awards included in precombination consideration | 4,221 | |
| Total shares of QEP common stock eligible for merger consideration | 242,374 | |
| Exchange ratio | 0.050 | |
| Shares of Diamondback common stock issued as merger consideration | 12,119 | |
| Closing price per share of Diamondback common stock | $ | 81.41 | |
| Total consideration (fair value of the Company's common stock issued) | $ | 987 | |
| | |
| | |
Purchase Price Allocation
The QEP Merger has been accounted for as a business combination using the acquisition method. The following table represents the preliminary allocation of the total purchase price for the acquisition of QEP to the identifiable assets acquired and the liabilities assumed based on the fair values at the acquisition date. The purchase price allocation was complete as of the first quarter of 2022. The following table sets forth the Company’s purchase price allocation (in millions):
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | |
| Total consideration | $ | 987 | |
| | |
| Fair value of liabilities assumed: | |
| Accounts payable - trade | $ | 26 | |
| Accrued capital expenditures | 38 | |
| Other accrued liabilities | 107 | |
| Revenues and royalties payable | 67 | |
| Derivative instruments | 242 | |
| Long-term debt | 1,710 | |
| Asset retirement obligations | 54 | |
| | |
| Other long-term liabilities | 63 | |
| Amount attributable to liabilities assumed | $ | 2,307 | |
| | |
| Fair value of assets acquired: | |
| Cash, cash equivalents and restricted cash | $ | 22 | |
| Accounts receivable - joint interest and other, net | 87 | |
| Accounts receivable - oil and natural gas sales, net | 44 | |
| Inventories | 18 | |
| Income tax receivable | 33 | |
| Prepaid expenses and other current assets | 7 | |
| Oil and natural gas properties | 2,922 | |
| Other property, equipment and land | 16 | |
| Deferred income taxes | 39 | |
| Other assets | 106 | |
| Amount attributable to assets acquired | 3,294 | |
| Net assets acquired and liabilities assumed | $ | 987 | |
11
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Financing costs | 5.8 | SEC-NUM |
[Table of Contents](#i36695dc5143241f795c32e47bf5f4b3d_7)CBRE GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The present value of lease payments, which are either fixed payments, in-substance fixed payments, or variable payments tied to an index or rate are recognized on the consolidated balance sheet with corresponding lease liabilities and right-of-use assets upon the commencement of the lease. These lease costs are expensed over the respective lease term in accordance with the classification of the lease (i.e., operating versus finance classification). Variable lease payments not tied to an index or rate are expensed as incurred and are not subject to capitalization.The base terms for our lease arrangements typically do not extend beyond 10 years. We commonly have renewal options in our leases, but most of these options do not create a significant economic incentive for us to extend the lease term. Therefore, payments during periods covered by these renewal options are typically not included in our lease liabilities and right-of-use assets. Specific to our vehicle leases, early termination options are common and economic penalties associated with early termination of these contracts are typically significant enough to make it reasonably certain that we will not exercise such options. Therefore, payments during periods covered by these early termination options in vehicle leases are typically included in our lease liabilities and right-of-use assets. As an accounting policy election, our short-term leases with an initial term of 12 months or less are not recognized as lease liabilities and right-of-use assets in the consolidated balance sheets. The rent expense associated with short term leases is recognized on a straight-line basis over the lease term and was not significant.Most of our office space leases include variable payments based on our share of actual common area maintenance and operating costs of the leased property. Many of our vehicle leases include variable payments based on actual service and fuel costs. For both office space and vehicle leases, we have elected the practical expedient to not separate lease components from non-lease components. Therefore, these costs are classified as variable lease payments.Lease payments are typically discounted at our incremental borrowing rate because the interest rate implicit in the lease cannot be readily determined in the absence of key inputs which are typically not reported by our lessors. Because we do not generally borrow on a collateralized basis, judgement was used to estimate the secured borrowing rate associated with our leases based on relevant market data and our inputs applied to accepted valuation methodologies. The incremental borrowing rate calculated for each lease also reflects the lease term, currency, and geography specific to each lease.Deferred Financing CostsCosts incurred in connection with financing activities are generally deferred and amortized over the terms of the related debt agreements ranging up to ten years. Debt issuance costs related to a recognized debt liability are presented in the accompanying consolidated balance sheets as a direct deduction from the carrying amount of that debt liability. Amortization of these costs is charged to interest expense in the accompanying consolidated statements of operations. Accounting Standards Update (ASU) 2015-15, “Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements” permits classifying debt issuance costs associated with a line of credit arrangement as an asset, regardless of whether there are any outstanding borrowings on the arrangement. Total deferred financing costs, net of accumulated amortization, related to our revolving line of credit have been included in other assets in the accompanying consolidated balance sheets and were $9.5 million and $13.0 million as of December 31, 2021 and 2020, respectively.During 2021, we issued $500.0 million in aggregate principal amount of 2.500% senior notes due April 1, 2031. In connection with this financing, we incurred financing, legal, advisory, and other fees of approximately $5.0 million. Additionally, we also paid off in full our $300.0 million tranche A senior term loan.During 2020, we redeemed in full our $425.0 million aggregate outstanding principal amount of 5.25% senior notes. In connection with this early redemption, we incurred costs, including a $73.6 million premium paid and the write-off of $2.0 million of unamortized premium and debt issuance costs, both of which were included in write-off of financing costs on extinguished debt in the accompanying consolidated statements of operations.During 2019, we entered into an additional incremental assumption agreement with respect to our credit agreement which: (i) extended the maturity of the U.S. dollar tranche A term loans, (ii) extended the termination date of the revolving credit commitments available and (iii) made certain changes to the interest rates and fees applicable to such tranche A term loans and revolving credit commitments. During the year ended December 31, 2019, we incurred approximately $5.8 million of financing costs, of which $2.6 million were included in write-off of financing costs on extinguished debt in the accompanying consolidated statements of operations.See Note 11 for additional information on activities associated with our debt.71
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Other investing activities, net | 2 | SEC-NUM |
[Table of Contents](#ia12bad69886c4075b7558d5239cbff30_7)CENTENE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In millions, unaudited)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2022 | | 2021 |
| Cash flows from operating activities: | | | |
| Net earnings | $ | 852 | | | $ | 697 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities |
| Depreciation and amortization | 390 | | | 361 | |
| Stock compensation expense | 70 | | | 51 | |
| | | | |
| (Gain) loss on debt extinguishment | (3) | | | 46 | |
| | | | |
| Deferred income taxes | 12 | | | 156 | |
| | | | |
| Other adjustments, net | 22 | | | 2 | |
| Changes in assets and liabilities | | | |
| Premium and trade receivables | (3,099) | | | (1,891) | |
| Other assets | (299) | | | (287) | |
| | | | |
| Medical claims liabilities | 1,767 | | | 405 | |
| Unearned revenue | 81 | | | 48 | |
| Accounts payable and accrued expenses | 957 | | | 32 | |
| Other long-term liabilities | 401 | | | 423 | |
| | | | |
| Net cash provided by operating activities | 1,151 | | | 43 | |
| Cash flows from investing activities: | | | |
| Capital expenditures | (242) | | | (187) | |
| Purchases of investments | (1,700) | | | (1,653) | |
| Sales and maturities of investments | 1,047 | | | 1,391 | |
| Acquisitions, net of cash acquired | (1,504) | | | (158) | |
| | | | |
| Other investing activities, net | (2) | | | — | |
| Net cash used in investing activities | (2,401) | | | (607) | |
| Cash flows from financing activities: | | | |
| | | | |
| Proceeds from long-term debt | 100 | | | 2,317 | |
| Payments of long-term debt | (526) | | | (2,295) | |
| Common stock repurchases | (71) | | | (29) | |
| Payments for debt extinguishment | (27) | | | (54) | |
| Debt issuance costs | — | | | (27) | |
| Other financing activities, net | 26 | | | 15 | |
| Net cash used in financing activities | (498) | | | (73) | |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 33 | | | (16) | |
| Net decrease in cash, cash equivalents and restricted cash and cash equivalents | (1,715) | | | (653) | |
| Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period | 13,214 | | | 10,957 | |
| Cash, cash equivalents, and restricted cash and cash equivalents, end of period | $ | 11,499 | | | $ | 10,304 | |
| Supplemental disclosures of cash flow information: | | | |
| Interest paid | $ | 139 | | | $ | 130 | |
| Income taxes paid | $ | 11 | | | $ | 20 | |
| | | | |
| | | | |
| The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents reported within the Consolidated Balance Sheets to the totals above: |
| | March 31, |
| | 2022 | | 2021 |
| Cash and cash equivalents | $ | 11,237 | | | $ | 9,627 | |
| Restricted cash and cash equivalents, included in restricted deposits | 262 | | | 677 | |
| Total cash, cash equivalents, and restricted cash and cash equivalents | $ | 11,499 | | | $ | 10,304 | |
The accompanying notes to the consolidated financial statements are an integral part of these statements.5
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Ownership | 49 | SEC-NUM |
[Table of Contents](#ica158fb683c247fdb170955b492f9216_7)HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)As of October 31, 2021, future unconditional purchase obligations were as follows:
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| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Fiscal Year | In millions |
| 2022 | $ | 458 | |
| 2023 | 175 | |
| 2024 | 53 | |
| 2025 | 50 | |
| 2026 | 9 | |
| Thereafter | 23 | |
| Total | $ | 768 | |
Note 20: Equity Method InvestmentsThe Company includes investments which are accounted for using the equity method, under Investments in equity interests on the Company's Consolidated Balance Sheets. As of October 31, 2021 and October 31, 2020, the Company's Investments in equity interests were $2.2 billion and primarily related to a 49% equity interest in H3C Technologies ("H3C").In the periods presented, the Company recorded its interest in the net earnings of H3C along with an adjustment to eliminate unrealized profits on intra-entity sales, and the amortization of basis difference, within Earnings from equity interests in the Consolidated Statements of Earnings.The difference between the sale date carrying value of the Company's investment in H3C and its proportionate share of the net assets fair value of H3C, created a basis difference of $2.5 billion, which was allocated as follows:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | In millions |
| Equity method goodwill | $ | 1,674 | |
| Intangible assets | 749 | |
| In-process research and development | 188 | |
| Deferred tax liabilities | (152) | |
| Other | 75 | |
| Basis difference | $ | 2,534 | |
The Company amortizes the basis difference over the estimated useful lives of the assets that gave rise to this difference. The weighted-average life of the H3C intangible assets is five years and is being amortized using the straight-line method. As of October 31, 2021 and 2020, the Company determined that no impairment of its equity method investments existed.Earnings from equity interestThe Company recorded earnings from equity interests of $180 million, $67 million and $20 million in fiscal 2021, 2020 and 2019, respectively, in the Consolidated Statements of Earnings, the components of which are as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | For the fiscal years ended October 31, |
| | 2021 | | 2020 | | 2019 |
| | In millions |
| Earnings from equity interests, net of taxes(1) | $ | 292 | | | $ | 211 | | | $ | 167 | |
| Basis difference amortization | (109) | | | (145) | | | (152) | |
| Elimination of profit on intra-entity sales adjustment | (3) | | | 1 | | | 5 | |
| Earnings from equity interests | $ | 180 | | | $ | 67 | | | $ | 20 | |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| | | | | |
(1) In fiscal 2021, earnings from equity interests, net of taxes included $260 million from H3C and $32 million from other venture investments.130
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Useful life | 15 | SEC-NUM |
Land, Building and EquipmentWe record land at cost, and record building and equipment at cost less accumulated depreciation. Equipment held under finance leases also is classified as property and equipment with the related lease obligations recorded as liabilities. We capitalize and amortize costs for internally developed computer software during the application development stage. These costs generally consist of external consulting fees and internal payroll-related costs. Our depreciation is based on estimated useful lives (ranging from three to 39.5 years) using straight-line and accelerated methods. Depreciation expense was $33 million for 2021, $33 million for 2020 and $25 million for 2019. We review our accumulated depreciation for our building, equipment and software assets and write off fully depreciated assets for obsolescence and nonuse. We monitor land, building and equipment and software assets for potential impairments. Indicators of potential impairments may include a significant decrease in the fair values of the assets, considerable cost overruns on projects, a change in legal factors or business climate or other factors that indicate that the carrying amount may not be recoverable or useful. There were no recorded land, building and equipment impairments for 2021, 2020 or 2019. Finance ReceivablesOur leasing subsidiary provides auto and equipment direct financing (leases and loans) to commercial and individual clients. We generally transfer ownership of the property to the client as the terms of the leases expire. Our lease contracts contain bargain purchase options. We account for these leases and loans as sales-type leases. We capitalize and amortize lease or loan origination costs over the life of the financing, using the effective interest method. These costs may include, but are not limited to finder fees, broker fees, filing fees and the cost of credit reports. We record income as other revenues over the financing term using the effective interest method in the consolidated statements of income. An allowance for credit losses on finance receivables is updated and reviewed on a quarterly basis. At December 31, 2021 and 2020, the allowance, including changes in the amount for each period, was immaterial.
Employee Benefit Pension PlanWe sponsor a qualified defined benefit pension plan that was modified during 2008. We closed entry into the pension plan, and only participants 40 years of age or older could elect to remain in the plan. Our pension expenses are based on certain actuarial assumptions and also are composed of several components that are determined using the projected unit credit actuarial cost method. Refer to Note 13, Employee Retirement Benefits, for more information about our defined benefit pension plan.
Share-Based CompensationWe grant qualified and nonqualified share-based compensation under authorized plans. The stock options generally vest on a graded scale over three years following the date of grant and are exercisable over 10-year periods. We grant service-based restricted stock units that cliff vest three years after the date of grant as well as service-based restricted stock units that vest ratably over the three-year vesting term. We also grant performance-based restricted stock units that vest if certain market conditions are attained. In 2021, the CFC compensation committee approved share-based awards including incentive stock options, nonqualified stock options, service-based restricted and performance-based restricted stock units. See Note 17, Share-Based Associate Compensation Plans, for further details.
Goodwill and Intangible AssetsWe recognize goodwill and intangible assets generated through acquisitions within other assets in the consolidated balance sheets. Goodwill arises when the fair value of consideration transferred exceeds the fair value of the net identifiable assets acquired at the acquisition date. Goodwill and intangible assets with an indefinite life are not amortized. Intangible assets with a definite life are amortized on a straight-line basis over the estimated useful lives as follows: broker relationships, 15 years; internally developed technology, five years; value of business acquired, over the remaining coverage period of the underlying insurance contracts, which expired during 2020. We test for impairments on an annual basis or more frequently if events or circumstances indicate that the asset might be impaired. The company performed its annual impairment test on goodwill and intangibles at September 30, which did not result in the recognition of an impairment loss. The company held goodwill of $30 million and intangible assets with an indefinite life of $31 million at December 31, 2021 and 2020, respectively.
Subsequent EventsThere were no subsequent events requiring adjustment to the consolidated financial statements or disclosure. Cincinnati Financial Corporation - 2021 10-K - Page 132
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Impairment charges (Note 4) | 40.6 | SEC-NUM |
[Table of Contents](#i8e6404ebd98d416daa7f88f48159b601_7)
EDWARDS LIFESCIENCES CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(in millions)
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Cash flows from operating activities | | | | | |
| Net income | $ | 1,503.1 | | | $ | 823.4 | | | $ | 1,046.9 | |
| Adjustments to reconcile net income to cash provided by operating activities: | | | | | |
| Depreciation and amortization | 134.8 | | | 107.2 | | | 89.3 | |
| Non-cash operating lease cost | 28.5 | | | 28.2 | | | 25.3 | |
| Stock-based compensation (Notes 2 and 14) | 109.3 | | | 92.6 | | | 81.3 | |
| | | | | | |
| Inventory write off (Note 2) | — | | | — | | | 73.1 | |
| Impairment charges (Note 4) | — | | | — | | | 40.6 | |
| Change in fair value of contingent consideration liabilities, net (Note 11) | (124.1) | | | 13.6 | | | (6.1) | |
| Deferred income taxes | (41.4) | | | (49.4) | | | 12.1 | |
| Purchased in-process research and development (Note 4) | — | | | — | | | 24.0 | |
| Other | (23.4) | | | (3.5) | | | (2.8) | |
| Changes in operating assets and liabilities: | | | | | |
| Accounts and other receivables, net | (91.1) | | | 41.9 | | | (88.0) | |
| Inventories | 19.0 | | | (120.6) | | | (105.4) | |
| Prepaid expenses and other current assets | 7.9 | | | (28.5) | | | (6.8) | |
| Accounts payable and accrued liabilities | 195.2 | | | (84.5) | | | 116.5 | |
| Litigation settlement accrual | (29.2) | | | 270.5 | | | (180.0) | |
| Income taxes | 62.0 | | | (52.9) | | | 43.2 | |
| Other | (18.5) | | | 16.3 | | | 19.7 | |
| Net cash provided by operating activities | 1,732.1 | | | 1,054.3 | | | 1,182.9 | |
| Cash flows from investing activities | | | | | |
| Capital expenditures | (325.8) | | | (407.0) | | | (254.4) | |
| | | | | | |
| Purchases of held-to-maturity investments (Note 7) | (250.0) | | | (162.0) | | | (130.2) | |
| Proceeds from sales and maturities of held-to-maturity investments (Note 7) | 138.0 | | | 212.2 | | | 50.0 | |
| Purchases of available-for-sale investments (Note 7) | (1,629.3) | | | (689.7) | | | (437.9) | |
| Proceeds from sales and maturities of available-for-sale investments (Note 7) | 391.2 | | | 564.8 | | | 359.9 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Acquisition (Note 8) | — | | | — | | | (100.2) | |
| Payment for acquisition option | (13.1) | | | (10.0) | | | (35.0) | |
| Issuances of notes receivable | (5.1) | | | (27.0) | | | (12.9) | |
| Collections of notes receivable | 20.0 | | | — | | | — | |
| Investments in intangible assets and in-process research and development | (4.0) | | | (0.3) | | | (24.0) | |
| | | | | | |
| Other | (44.4) | | | (12.1) | | | (11.1) | |
| Net cash used in investing activities | (1,722.5) | | | (531.1) | | | (595.8) | |
| Cash flows from financing activities | | | | | |
| Proceeds from issuance of debt | 5.2 | | | 16.2 | | | 18.9 | |
| Payments on debt and finance lease obligations | (7.0) | | | (17.0) | | | (28.9) | |
| Purchases of treasury stock | (512.8) | | | (625.4) | | | (263.3) | |
| | | | | | |
| Proceeds from stock plans | 158.6 | | | 140.5 | | | 160.5 | |
| | | | | | |
| | | | | | |
| Other | (0.3) | | | (1.2) | | | (2.8) | |
| Net cash used in financing activities | (356.3) | | | (486.9) | | | (115.6) | |
| Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash | 13.9 | | | (20.5) | | | (3.0) | |
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (332.8) | | | 15.8 | | | 468.5 | |
| Cash, cash equivalents, and restricted cash at beginning of year | 1,200.2 | | | 1,184.4 | | | 715.9 | |
| Cash, cash equivalents, and restricted cash at end of year | $ | 867.4 | | | $ | 1,200.2 | | | $ | 1,184.4 | |
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| | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.46
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Converted (in shares) | 22.9 | 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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Weighted-Average Exercise Price Exercised | 22.37 | SEC-NUM |
[Table of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)Stock-Based CompensationStock-based compensation expense and the related income tax benefit recognized in connection with stock options, restricted stock and the ESPP during fiscal 2021, 2020 and 2019 were as follows:
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| | (In thousands) |
| Stock options | $ | 9,051 | | | $ | 8,062 | | | $ | 6,806 | |
| Restricted stock | 181,946 | | | 173,193 | | | 164,078 | |
| ESPP | 19,093 | | | 16,013 | | | 10,663 | |
| Total stock-based compensation expense | $ | 210,090 | | | $ | 197,268 | | | $ | 181,547 | |
| | | | | | |
| Income tax benefit | $ | 33,958 | | | $ | 31,857 | | | $ | 30,118 | |
Stock-based compensation expense is reflected in Cadence’s consolidated income statements during fiscal 2021, 2020 and 2019 as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| | (In thousands) |
| Cost of product and maintenance | $ | 4,161 | | | $ | 2,922 | | | $ | 2,759 | |
| Cost of services | 3,375 | | | 3,720 | | | 3,510 | |
| Marketing and sales | 43,264 | | | 42,096 | | | 39,088 | |
| Research and development | 131,247 | | | 124,999 | | | 114,656 | |
| General and administrative | 28,043 | | | 23,531 | | | 21,534 | |
| Total stock-based compensation expense | $ | 210,090 | | | $ | 197,268 | | | $ | 181,547 | |
Stock OptionsThe exercise price of each stock option granted under Cadence’s employee equity incentive plans is equal to or greater than the closing price of Cadence’s common stock on the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The weighted average grant date fair value of options granted and the weighted average assumptions used in the model for fiscal 2021, 2020 and 2019 were as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| Dividend yield | None | | None | | None |
| Expected volatility | 31.7 | % | | 25.1 | % | | 24.4 | % |
| Risk-free interest rate | 1.02 | % | | 1.36 | % | | 2.47 | % |
| Expected term (in years) | 4.8 | | 4.8 | | 4.8 |
| Weighted average fair value of options granted | $ | 46.10 | | | $ | 19.38 | | | $ | 14.58 | |
A summary of the changes in stock options outstanding under Cadence’s equity incentive plans during fiscal 2021 is presented below:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Weighted Average | | Weighted AverageRemainingContractualTerms | | AggregateIntrinsic |
| | Shares | | Exercise Price | | (Years) | | Value |
| | (In thousands) | | | | | | (In thousands) |
| Options outstanding as of January 2, 2021 | 3,934 | | | $ | 36.72 | | | | | |
| Granted | 612 | | | 159.25 | | | | | |
| Exercised | (1,066) | | | 22.37 | | | | | |
| Forfeited | (61) | | | 61.38 | | | | | |
| Options outstanding as of January 1, 2022 | 3,419 | | | $ | 62.69 | | | 3.5 | | $ | 422,830 | |
| Options vested as of January 1, 2022 | 2,425 | | | $ | 39.16 | | | 2.7 | | $ | 356,981 | |
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Debt instrument annual interest rate (percent) | 4.20 | SEC-NUM |
[T](#ic6799676e16f4a73b9fbe61f891b870d_7)[able of Contents](#ic6799676e16f4a73b9fbe61f891b870d_7)Company, Inc., a Minnesota corporation and an indirect wholly-owned subsidiary of the company. On November 19, 2021, we amended the Note Purchase Agreement to among other things, facilitate the terms of the Receivables Securitization Facility.U.S. TRADE ACCOUNTS RECEIVABLE SECURITIZATION On November 19, 2021, we entered into a receivables purchase agreement and related transaction documents with Bank of America, N.A. and Wells Fargo Bank, N.A. to provide a receivables securitization facility (the “Receivables Securitization Facility”). The Receivables Securitization Facility is based on the securitization of our U.S. trade accounts receivable with a total availability of $300 million as of December 31, 2021. The interest rate on borrowings under the Receivables Securitization Facility is based on Bloomberg Short Term Bank Yield Index (“BSBY”) plus a margin. There is also a commitment fee we are required to pay on any unused portion of the facility. The Receivables Securitization Facility expires on November 17, 2023, unless extended by the parties and is recorded as a noncurrent liability as of December 31, 2021. The recorded amount of borrowings outstanding on the Receivables Securitization Facility approximates fair value because it can be redeemed on short notice and the interest rate floats. We consider these borrowings to be a Level 2 financial liability. Borrowings on the Receivables Securitization Facility are included within proceeds on long-term borrowings on the consolidated statement of cash flows. The Receivables Securitization Facility contains various customary affirmative and negative covenants, and it also contains customary default and termination provisions, which provide for acceleration of amounts owed under the Receivables Securitization Facility upon the occurrence of certain specified events.On February 1, 2022, we amended the Receivables Securitization Facility primarily to increase the total availability from $300 million to $500 million pursuant to the provisions of the existing agreement.
On April 26, 2017, we entered into a receivables purchase agreement and related transaction documents with The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Wells Fargo Bank, N.A. to provide a receivables securitization facility with funding of up to $250 million. On December 17, 2018, we entered into an amendment on this facility, which changed the lending parties to Wells Fargo Bank, N.A. and Bank of America, N.A. and extended the maturity date from April 26, 2019, to December 17, 2020. The facility expired on December 17, 2020, and it was not renewed; however, we entered into a new receivables securitization facility in November 2021 as described above.SENIOR NOTESOn April 9, 2018, we issued senior unsecured notes (“Senior Notes”) through a public offering. The Senior Notes bear an annual interest rate of 4.20 percent payable semi-annually on April 15 and October 15, until maturity on April 15, 2028. Taking into effect the amortization of the original issue discount and all underwriting and issuance expenses, the Senior Notes have an effective yield to maturity of approximately 4.39 percent per annum. The fair value of the Senior Notes, excluding debt discounts and issuance costs, approximated $677.1 million as of December 31, 2021, based primarily on the market prices quoted from external sources. The carrying value of the Senior Notes was $594.2 million as of December 31, 2021. If the Senior Notes were measured at fair value in the financial statements, they would be classified as Level 2 in the fair value hierarchy. We may redeem the Senior Notes, in whole or in part, at any time and from time to time prior to their maturity at the applicable redemption prices described in the Senior Notes. Upon the occurrence of a “change of control triggering event” as defined in the Senior Notes (generally, a change of control of us accompanied by a reduction in the credit rating for the Senior Notes), we will generally be required to make an offer to repurchase the Senior Notes from holders at 101 percent of their principal amount plus accrued and unpaid interest to the date of repurchase. The Senior Notes were issued under an indenture that contains covenants imposing certain limitations on our ability to incur liens; enter into sales and leaseback transactions above certain limits; and consolidate, merge, or transfer substantially all of our assets and those of our subsidiaries on a consolidated basis. It also provides for customary events of default (subject in certain cases to customary grace and cure periods), which include among other things nonpayment, breach of covenants in the indenture, and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing with respect to the Senior Notes, the trustee or holders of at least 25 percent in principal amount outstanding of the Senior Notes may declare the principal and the accrued and unpaid interest, if any, on all of the outstanding Senior Notes to be due and payable. These covenants and events of default are subject to a number of important qualifications, limitations, and exceptions that are described in the indenture. The indenture does not contain any financial ratios or specified levels of net worth or liquidity to which we must adhere.
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Expected amortization expense, year five | 50.2 | SEC-NUM |
[Table of Contents](#i1c7c95a3a35c4e5dafc8b646de4a8ff7_7)
The Banjo trade name and the Akron Brass trade name are indefinite-lived intangible assets that were also tested for impairment as of October 31, 2021, the Company’s annual impairment test date. These indefinite-lived intangible assets are tested for impairment on an annual basis in accordance with ASC 350 or more frequently if events or changes in circumstances indicate that the assets might be impaired. The Company uses the relief-from-royalty method, a form of the income approach, to determine the fair value of these trade names. The relief-from-royalty method is dependent on a number of significant management assumptions, including estimates of revenues, royalty rates and discount rates. In 2021 and 2020, there were no events or circumstances that would have required an interim impairment test.
Refer to [Note 15](#i1c7c95a3a35c4e5dafc8b646de4a8ff7_133) for discussion on impairment of definite-lived intangibles.
Amortization of intangible assets was $56.4 million, $41.8 million and $37.3 million in 2021, 2020 and 2019, respectively. Based on the intangible asset balances as of December 31, 2021, amortization expense is expected to approximate $61.3 million in 2022, $58.1 million in 2023, $53.6 million in 2024, $52.0 million in 2025 and $50.2 million in 2026. 7. Borrowings
Borrowings at December 31, 2021 and 2020 consisted of the following:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | 2021 | | 2020 |
| | (In millions) |
| 4.20% Senior Notes, repaid in June 2021 | $ | — | | | $ | 350.0 | |
| 3.20% Senior Notes, due June 2023 | 100.0 | | | 100.0 | |
| 3.37% Senior Notes, due June 2025 | 100.0 | | | 100.0 | |
| 3.00% Senior Notes, due May 2030 | 500.0 | | | 500.0 | |
| 2.625% Senior Notes, due June 2031 | 500.0 | | | — | |
| Other borrowings | 0.1 | | | 0.2 | |
| Total borrowings | 1,200.1 | | | 1,050.2 | |
| Less current portion | — | | | 0.1 | |
| Less deferred debt issuance costs | 8.4 | | | 4.8 | |
| Less unaccreted debt discount | 1.4 | | | 0.9 | |
| Long-term borrowings | $ | 1,190.3 | | | $ | 1,044.4 | |
Issuance of 2.625% Senior Notes in 2021
On May 28, 2021, the Company completed a public offering of $500.0 million in aggregate principal amount of 2.625% Senior Notes due June 2031 (the “2.625% Senior Notes”). The net proceeds from the offering were approximately $494.7 million, after deducting the issuance discount of $0.6 million, the underwriting commission of $3.3 million and offering expenses of $1.4 million. The net proceeds were used to redeem and repay the $350.0 million aggregate principal amount outstanding of its 4.20% Senior Notes due December 15, 2021 (the “4.20% Senior Notes”) and a $6.7 million make-whole redemption premium, with the remaining balance used for general corporate purposes. The 2.625% Senior Notes bear interest at a rate of 2.625% per annum, which is payable semi-annually in arrears on June 15 and December 15 of each year. The 2.625% Senior Notes mature on June 15, 2031. The 2.625% Senior Notes were issued under an Indenture, dated as of December 6, 2010 (the “Base Indenture”), between the Company and Wells Fargo Bank, National Association, as trustee (the “Trustee”), as supplemented by the Fourth Supplemental Indenture, dated as of May 28, 2021 (the “Supplemental Indenture” and, together with the Base Indenture and other supplements thereto, the “Indenture”), between the Company and the Trustee.
The Company may redeem all or a portion of the 2.625% Senior Notes at any time prior to maturity at the redemption prices set forth in the Indenture. The Indenture and the 2.625% Senior Notes contain covenants that limit the Company’s ability to, among other things, incur certain liens, enter into certain sale and leaseback transactions and enter into certain mergers, consolidations and transfers of substantially all of the Company’s assets. The terms of the 2.625% Senior Notes also require the Company to make an offer to repurchase the 2.625% Senior Notes upon a change of control triggering event (as defined in the Indenture) at a price equal to 101% of the principal amount plus accrued and unpaid interest, if any. The Indenture also provides for customary events of default, which include nonpayment, breach of covenants or warranties in the Indenture and certain events of bankruptcy, insolvency or reorganization. Generally, if an event of default occurs, the Trustee or holders of at least 25% of the then outstanding 2.625% Senior Notes may declare the principal amount of all of the 2.625% Senior Notes to be due and payable immediately.57
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2027 and thereafter | 168 | SEC-NUM |
[Table of Contents](#i40ca88ef65884b508d3f9e19d0380e84_7)NOTE 17 - LEASESThe lease cost for operating leases were as follows:
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | Six Months Ended June 30, | |
| In millions | 2022 | 2021 | 2022 | 2021 | | |
| Operating lease costs | $ | 28 | | $ | 26 | | $ | 55 | | $ | 53 | | | |
Operating cash flows from operating leases were $56 million and $52 million for the six months ended June 30, 2022 and 2021, respectively.
New operating lease assets and liabilities entered into during the six months ended June 30, 2022 and 2021 were $59 million and $23 million, respectively. Supplemental balance sheet information related to leases was as follows:
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| In millions | June 30, 2022 | December 31, 2021 |
| Operating Leases | | |
| Operating lease right-of-use assets 1 | $ | 430 | | $ | 422 | |
| Current operating lease liabilities 2 | 90 | | 92 | |
| Noncurrent operating lease liabilities 3 | 343 | | 337 | |
| Total operating lease liabilities | $ | 433 | | $ | 429 | |
1.Included in "Deferred charges and other assets" in the Condensed Consolidated Balance Sheet.2.Included in "Accrued and other current liabilities" in the Condensed Consolidated Balance Sheet.3.Included in "Other noncurrent obligations" in the Condensed Consolidated Balance Sheet.
Operating lease right-of-use ("ROU") assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide the lessor’s implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments.
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| Lease Term and Discount Rate for Operating Leases | June 30, 2022 | December 31, 2021 |
| Weighted-average remaining lease term (years) | 8.32 | 8.50 |
| Weighted average discount rate | 2.14 | % | 2.01 | % |
Maturities of lease liabilities were as follows:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Maturity of Lease Liabilities at June 30, 2022 | Operating Leases |
| In millions |
| Remainder of 2022 | $ | 55 | |
| 2023 | 90 | |
| 2024 | 76 | |
| 2025 | 54 | |
| 2026 | 40 | |
| 2027 and thereafter | 168 | |
| Total lease payments | $ | 483 | |
| Less: Interest | 50 | |
| Present value of lease liabilities | $ | 433 | |
The Company has leases in which it is the lessor, with the largest being a result of the N&B transaction. In connection with the N&B Transaction, DuPont entered into leasing agreements with IFF, whereby DuPont is leasing certain properties, including office spaces and R&D laboratories to IFF. These leases are classified as operating leases and lessor income and related expenses are not significant to the Company's Condensed Consolidated Balance Sheet or interim Consolidated Statement of Operations. Lease agreements where the Company is the lessor have final expirations through 2036.
33
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Expected future benefit payments, 2027 - 2031 | 162 | SEC-NUM |
Excluding cash, during 2021 we held approximately 87% of our pension portfolio in domestic common equity investments. The remainder of the portfolio consisted of 8% in United States government fixed-maturity investments, 3% in domestic corporate fixed-maturity investments and 2% in states, municipalities and taxable political subdivisions fixed-maturity investments. Our common equity portfolio consisted of 32% in the information technology sector, 20% in the financial sector, 13% in the healthcare sector, and 12% in the industrial sector, at year-end 2021. No additional sectors accounted for 10% or more of our common equity portfolio balance at year-end 2021. Investments in securities are valued based on the fair value hierarchy outlined in Note 3, Fair Value Measurements. The pension plan did not have any liabilities carried at fair value during the years ended December 31, 2021 and 2020. The following table shows the fair value hierarchy for those assets measured at fair value on a recurring basis at December 31, 2021 and 2020. Excluded from the table below is cash on hand of $16 million and $31 million at December 31, 2021 and 2020, respectively.
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| (Dollars in millions) | | Quoted prices inactive markets foridentical assets (Level 1) | | Significant otherobservable inputs (Level 2) | | Significantunobservableinputs (Level 3) | | Total |
| At December 31, 2021 | | | | |
| Fixed maturities, available for sale: | | | | | | | | |
| United States government | | $ | 31 | | | $ | — | | | $ | — | | | $ | 31 | |
| Corporate | | — | | | 11 | | | — | | | 11 | |
| States, municipalities and political subdivisions | | — | | | 7 | | | — | | | 7 | |
| Total fixed maturities, available for sale | | 31 | | | 18 | | | — | | | 49 | |
| Common equities | | 332 | | | — | | | — | | | 332 | |
| Total | | $ | 363 | | | $ | 18 | | | $ | — | | | $ | 381 | |
| | | | | | | | | |
| At December 31, 2020 | | | | | | | | |
| Fixed maturities, available for sale: | | | | | | | | |
| United States government | | $ | 31 | | | $ | — | | | $ | — | | | $ | 31 | |
| Corporate | | — | | | 20 | | | — | | | 20 | |
| States, municipalities and political subdivisions | | — | | | 9 | | | — | | | 9 | |
| Total fixed maturities, available for sale | | 31 | | | 29 | | | — | | | 60 | |
| Common equities | | 266 | | | — | | | — | | | 266 | |
| Total | | $ | 297 | | | $ | 29 | | | $ | — | | | $ | 326 | |
| | | | | | | | | |
Our pension plan assets included 202,337 shares of the company’s common stock at both December 31, 2021 and 2020, which had a fair value of $23 million and $18 million at December 31, 2021 and 2020, respectively. The defined benefit pension plan did not purchase any of our common stock during 2021 or 2020. The defined benefit pension plan did not sell any shares during 2021 and sold 29,776 shares of our common stock during 2020. The company paid less than $1 million in both 2021 and 2020 in cash dividends on our common stock to the pension plan. We estimate $6 million of benefit payments from the SERP during 2022. We expect to make the following benefit payments for our qualified plan and SERP, reflecting expected future service:
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | Years ended December 31, |
| | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 - 2031 |
| Expected future benefit payments | | $ | 29 | | | $ | 25 | | | $ | 27 | | | $ | 29 | | | $ | 34 | | | $ | 162 | |
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Cincinnati Financial Corporation - 2021 10-K - Page 165
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State net operating losses and other carryforwards | 869 | SEC-NUM |
[Table of Contents](#i59ca7ab3cc784e42904d434b0008a7a9_10) Notes to Consolidated Financial Statements(Dollars in millions, unless otherwise noted)
Note 14 — Income Taxes
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Federal | As of December 31, 2021 |
| | |
| | |
| Federal general business credits carryforwards and other carryforwards(a) | $ | 806 | |
| State | |
| State net operating losses and other carryforwards | 869 | |
| Deferred taxes on state tax attributes (net) | 74 | |
| Valuation allowance on state tax attributes | 22 | |
| Year in which net operating loss or credit carryforwards will begin to expire(a) | 2035 |
\_\_\_\_\_\_\_\_\_\_(a)The federal general business credit carryforward will begin expiring in 2035.Tabular Reconciliation of Unrecognized Tax BenefitsThe following table presents changes in unrecognized tax benefits.
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | Unrecognized tax benefits |
| Balance as of December 31, 2018 | $ | 408 | |
| Change to positions that only affect timing | 12 | |
| Increases based on tax positions related to 2019 | 1 | |
| Increases based on tax positions prior to 2019 | 19 | |
| Decreases based on tax positions prior to 2019 | (3) | |
| Increase from settlements with taxing authorities | 4 | |
| Balance as of December 31, 2019 | 441 | |
| | |
| Increases based on tax positions related to 2020 | 1 | |
| Increases based on tax positions prior to 2020 | 23 | |
| Decreases based on tax positions prior to 2020(a) | (346) | |
| Decrease from settlements with taxing authorities(a) | (69) | |
| Balance as of December 31, 2020 | 50 | |
| Change to positions that only affect timing | (1) | |
| Increases based on tax positions related to 2021 | 1 | |
| Increases based on tax positions prior to 2021 | 1 | |
| Decreases based on tax positions prior to 2021 | (2) | |
| Balance as of December 31, 2021 | $ | 49 | |
\_\_\_\_\_\_\_\_\_\_(a)Our unrecognized federal and state tax benefits decreased in the first quarter of 2020 by approximately $411 million due to the settlement of a federal refund claim with IRS Appeals. The recognition of these tax benefits resulted in an increase in net income of $73 million in the first quarter of 2020, reflecting a decrease to income tax expense of $67 million.Recognition of unrecognized tax benefitsThe following table presents the unrecognized tax benefits that, if recognized, would decrease the effective tax rate.
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| December 31, 2021 | $ | 39 | | | | | | | |
| December 31, 2020 | 39 | | | | | | | |
| December 31, 2019 | 429 | | | | | | | |
Reasonably possible the total amount of unrecognized tax benefits could significantly increase or decrease within 12 months after the reporting dateNo amounts are expected to significantly increase or decrease within 12 months after the reporting date. Total amounts of interest and penalties recognized122
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Long-term debt and other long-term liabilities | 1,261 | SEC-NUM |
[Table of Contents](#i82eec5aa49a24290a07e4a9f99c1e608_7) Acquisition of First Data On July 29, 2019, the Company acquired First Data, a global leader in commerce-enabling technology and solutions for merchants, financial institutions and card issuers, by acquiring 100% of the First Data stock that was issued and outstanding as of the date of acquisition. The acquisition, included within the Acceptance and Payments segments, increases the Company’s footprint as a global payments and financial technology provider by expanding the portfolio of services provided to financial institutions, corporate and merchant clients and consumers. As a result of the acquisition, First Data stockholders received 286 million shares of common stock of Fiserv, Inc., at an exchange ratio of 0.303 shares of Fiserv, Inc. for each share of First Data common stock, with cash paid in lieu of fractional shares. The Company also converted 15 million outstanding First Data equity awards into corresponding equity awards relating to common stock of Fiserv, Inc. in accordance with the exchange ratio as described in further detail within Note 16. In addition, concurrent with the closing of the acquisition, the Company made a cash payment of $16.4 billion to repay existing First Data debt. The Company funded the transaction-related expenses and the repayment of First Data debt through a combination of available cash on-hand and proceeds from debt issuances.The total purchase price paid for First Data was as follows:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | |
| (In millions) | |
| Fair value of stock exchanged for shares of Fiserv, Inc. (1) | $ | 29,293 | |
| Repayment of First Data debt | 16,414 | |
| Fair value of vested portion of First Data stock awards exchanged for Fiserv, Inc. awards (2) | 768 | |
| Total purchase price | $ | 46,475 | |
| | |
(1)The fair value of the 286 million shares of the Company’s common stock issued as of the acquisition date was determined based on a per share price of $102.30, which was the closing price of the Company’s common stock on July 26, 2019, the last trading day before the acquisition closed the morning of July 29, 2019. This includes a nominal amount of cash paid in lieu of fractional shares.(2)Represents the portion of the fair value of the replacement awards related to services provided prior to the acquisition. The remaining portion of the fair value is associated with future service and will be recognized as expense over the future service period. See Note 16 for additional information.The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, none of which is deductible for tax purposes. Goodwill is primarily attributed to synergies from future expected economic benefits, including enhanced revenue growth from expanded capabilities and geographic presence as well as substantial cost savings from duplicative overhead, streamlined operations and enhanced operational efficiency.The assets acquired and liabilities assumed of First Data have been measured at estimated fair value as of the acquisition date. In 2020, through the measurement period ended July 29, 2020, the Company identified and recorded measurement period adjustments to the preliminary purchase price allocation, which were the result of additional analysis performed and information identified based on facts and circumstances that existed as of the acquisition date. These measurement period adjustments resulted in an increase to goodwill of $304 million. The offsetting amounts to the change in goodwill were primarily related to customer relationship intangible assets, noncontrolling interests, property and equipment, payables and accrued expenses including legal contingency reserves, and deferred income taxes. The Company recorded a measurement period adjustment of $155 million to reduce the fair value of customer relationship intangible assets as a result of refinements to attrition rates. A measurement period adjustment of $126 million was recorded to reduce the fair value of noncontrolling interests based on changes to the fair value of the underlying customer relationship intangible assets and the incorporation of additional facts and circumstances that existed as of the acquisition date. A measurement period adjustment of $25 million was recorded to reduce the fair value of property and equipment to the estimated fair value of certain real property acquired. Measurement period adjustments were recorded to increase payables and accrued expenses by $37 million, reduce investments in unconsolidated affiliates by $23 million, and increase other long-term liabilities by $21 million. The remaining $169 million of adjustments were primarily comprised of deferred tax adjustments related to the measurement period adjustments. Such measurement period adjustments did not have a material impact on the consolidated statements of income. The allocation of purchase price recorded for First Data was finalized in the third quarter of 2020 as follows:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | |
| (In millions) | |
| Assets acquired (1) | |
| Cash and cash equivalents | $ | 310 | |
| Trade accounts receivable | 1,747 | |
| Prepaid expenses and other current assets | 1,047 | |
| Settlement assets (2) | 10,398 | |
| Property and equipment | 1,156 | |
| Customer relationships | 13,458 | |
| Other intangible assets | 2,814 | |
| Goodwill | 30,811 | |
| Investments in unconsolidated affiliates | 2,676 | |
| Other long-term assets | 1,191 | |
| Total assets acquired | $ | 65,608 | |
| | |
| Liabilities assumed (1) | |
| Accounts payable and accrued expenses | $ | 1,613 | |
| Short-term and current maturities of long-term debt (3) | 243 | |
| Contract liabilities | 71 | |
| Settlement obligations | 10,398 | |
| Deferred income taxes | 3,671 | |
| Long-term contract liabilities | 16 | |
| Long-term debt and other long-term liabilities (4) | 1,261 | |
| Total liabilities assumed | $ | 17,273 | |
| | |
| Net assets acquired | $ | 48,335 | |
| Redeemable noncontrolling interests | 252 | |
| Noncontrolling interests | 1,608 | |
| Total purchase price | $ | 46,475 | |
| | |
(1)In connection with the acquisition of First Data, the Company acquired two businesses which it intended to sell and subsequently sold in October 2019. Therefore, such businesses were classified as held for sale and were included within prepaid expenses and other current assets and accounts payable and accrued expenses in the above allocation of purchase price (see Note 5). (2)Includes $922 million of settlement cash and cash equivalents (see Note 1).(3)Includes foreign lines of credit, current portion of finance lease obligations and other financing obligations (see Note 12).(4)Includes the receivable securitized loan and the long-term portion of finance lease obligations (see Note 12).The fair values of the assets acquired and liabilities assumed were determined using the income and cost approaches. In many cases, the determination of the fair values required estimates about discount rates, growth and attrition rates, future expected cash flows and other future events that are judgmental. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements. Intangible assets consisting of customer relationships, technology and trade names were valued using the multi-period excess earnings method (“MEEM”), or the relief from royalty (“RFR”) method, both are forms of the income approach. A cost and market approach was applied, as appropriate, for property and equipment, including land.•Customer relationship intangible assets were valued using the MEEM method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue and profit attributable to the asset, retention rate, applicable tax rate, and contributory asset charges, among other factors), the discount rate, reflecting the risks inherent in the future cash flow stream, an assessment of the asset’s life cycle, and the tax amortization benefit, among other factors.•Technology and trade name intangible assets were valued using the RFR method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue attributable to the asset, applicable tax rate, 65
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Voluntary retirement program, liability | 17.5 | SEC-NUM |
[Table of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)The fair value for acquired agreements and relationships was determined by using the multi-period excess earnings method. This method reflects the present value of the projected cash flows that are expected to be generated from existing customers, less charges representing the contribution of other assets to those cash flows. Projected income from existing customer relationships considered customer retention rates ranging between 85% and 95%. The present value of operating cash flows from existing customers was determined using discount rates 10% and 11.5%.Cadence also assumed obligations related to deferred revenue of $6.9 million during fiscal 2020 with its acquisition of AWR. The fair value of these obligations was estimated using the cost build-up approach. The cost build-up approach determines fair value using estimates of the costs required to fulfill the contracted obligations plus an assumed profit margin, which approximates the amount that AWR would be required to pay a third party to assume the obligation.Cadence believes that its estimates and assumptions related to the fair value of its acquired intangible assets and assumed liabilities are reasonable, but significant judgment is involved.NOTE 16. RESTRUCTURING AND OTHER CHARGESCadence has initiated restructuring plans, most recently in fiscal 2020, in an effort to better align its resources with its business strategy. The charges associated with these restructuring plans have primarily been comprised of severance payments and termination benefits related to headcount reductions and charges related to impacted facilities and are included in restructuring and other charges on Cadence’s consolidated income statements.The following table presents activity for Cadence’s restructuring plans during fiscal 2021, 2020 and 2019:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | SeveranceandBenefits | | ExcessFacilities | | Total |
| | (In thousands) |
| Balance, December 29, 2018 | $ | 11,176 | | | $ | 848 | | | $ | 12,024 | |
| Restructuring | 8,649 | | | (28) | | | 8,621 | |
| Cash payments | (10,714) | | | (420) | | | (11,134) | |
| Effect of foreign currency translation | 118 | | | 9 | | | 127 | |
| Balance, December 28, 2019 | $ | 9,229 | | | $ | 409 | | | $ | 9,638 | |
| Restructuring | 7,476 | | | 1,739 | | | 9,215 | |
| Cash payments | (9,424) | | | (773) | | | (10,197) | |
| Effect of foreign currency translation | 40 | | | (3) | | | 37 | |
| Balance, January 2, 2021 | $ | 7,321 | | | $ | 1,372 | | | $ | 8,693 | |
| Restructuring | (1,480) | | | 432 | | | (1,048) | |
| Cash payments | (5,774) | | | (1,761) | | | (7,535) | |
| Effect of foreign currency translation | (67) | | | — | | | (67) | |
| Balance, January 1, 2022 | $ | — | | | $ | 43 | | | $ | 43 | |
All remaining liabilities for Cadence’s restructuring plans represent liabilities from vacated facilities and are included in accounts payable and accrued liabilities on Cadence’s consolidated balance sheet as of January 1, 2022. Restructuring liabilities included in other long-term liabilities represent liabilities from vacated facilities, and Cadence expects to make cash payments to settle these liabilities through fiscal 2022.Other Termination BenefitsDuring the second quarter of fiscal 2021, Cadence offered a voluntary retirement program to eligible employees in the United States. This program resulted in a one-time charge of $26.8 million for voluntary termination and post-employment benefits. These charges are included in each category of costs and expenses on Cadence’s consolidated income statements. As of January 1, 2022, liabilities related to the voluntary retirement program were $17.5 million and were included in accounts payable and accrued liabilities and other long-term liabilities on Cadence’s consolidated balance sheet. Cadence expects to make cash payments to settle these liabilities through fiscal 2023, including $17.0 million that is expected to be paid within the next twelve months.79
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Total consideration to be transferred for acquisition | 106 | SEC-NUM |
[Table of Contents](#ifce71646d6a145519f2ac4db7d9b12ca_7) Note 12. FAIR VALUE MEASUREMENTSFair value is measured based on an exit price, representing the amount that would be received to sell an asset or paid to satisfy a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy is established, which categorizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.A summary of financial instruments and contingent consideration recognized at fair value, and the fair value measurements used, is as follows:
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| | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Total | | Level 1 | | Level 2 | | Level 3 |
| September 30, 2022 | | | | | | | |
| Cash | $ | 231 | | | $ | 231 | | | $ | — | | | $ | — | |
| Short-term investments | 287 | | | 287 | | | — | | | — | |
| Net derivative contracts | (42) | | | — | | | (42) | | | — | |
| Contingent consideration from acquisition of Green Motion | (57) | | | — | | | — | | | (57) | |
| | | | | | | | |
| December 31, 2021 | | | | | | | |
| Cash | $ | 297 | | | $ | 297 | | | $ | — | | | $ | — | |
| Short-term investments | 271 | | | 271 | | | — | | | — | |
| Net derivative contracts | 41 | | | — | | | 41 | | | — | |
| Contingent consideration from acquisition of Green Motion | (57) | | | — | | | — | | | (57) | |
Eaton values its financial instruments using an industry standard market approach, in which prices and other relevant information is generated by market transactions involving identical or comparable assets or liabilities.On March 22, 2021, Eaton acquired Green Motion SA, a leading designer and manufacturer of electric vehicle charging hardware and related software based in Switzerland. Green Motion SA was acquired for $106 million, including $49 million of cash paid at closing and $57 million of estimated fair value of contingent future consideration based on 2023 and 2024 revenue performance. The fair value of contingent consideration liabilities is estimated by discounting contingent payments expected to be made, and may increase or decrease based on changes in revenue estimates and discount rates, with a maximum possible undiscounted value of $109 million.Other Fair Value MeasurementsLong-term debt and the current portion of long-term debt had a carrying value of $8,105 million and fair value of $7,375 million at September 30, 2022 compared to $8,566 million and $9,232 million, respectively, at December 31, 2021. The fair value of Eaton's debt instruments were estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities and is considered a Level 2 fair value measurement.
18
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Investments and Cash | 5,311 | SEC-NUM |
[Table of Contents](#i529cc89e10964e18ae4139b5b2341a84_7)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)Chubb Limited and Subsidiaries
2. Acquisitions
Cigna’s Accident and Health (A&H) and Life Insurance Business in Asian Markets
On July 1, 2022, we completed the acquisition of the life and non-life insurance companies that house the personal accident, supplemental health, and life insurance business of Cigna in six Asian markets. Chubb paid $5.36 billion in cash for the operations, which include Cigna's accident and health (A&H) and life business in Korea, Taiwan, New Zealand, Thailand, Hong Kong, and Indonesia, collectively referred to as Cigna's business in Asia. The reduction in the final purchase price from the original agreement reflects the impacts of rising interest rates and foreign exchange rates on acquired book value and other minor adjustments. This complementary strategic acquisition expands our presence and advances our long-term growth opportunity in Asia. Effective July 1, 2022, the results of operations of this acquired business are reported primarily in our Life Insurance segment and, to a lesser extent, our Overseas General Insurance segment.
The interim consolidated financial statements include the results of Cigna's business in Asia from July 1, 2022. The acquisition of Cigna's business in Asia generated $1,340 million of goodwill, attributable to expected growth and profitability, and $269 million of other intangible assets. None of the goodwill is expected to be deductible for income tax purposes. Additionally, the acquisition of Cigna's business in Asia generated $3,379 million of value of business acquired (VOBA). Refer to Note 7 for more information. Chubb financed the transaction through a combination of available cash and $2.0 billion in repurchase agreement transactions, of which $1.0 billion were outstanding as of September 30, 2022, and due to expire by the end of 2022.
The following table summarizes Chubb's best estimate of fair value of the assets acquired and liabilities assumed at July 1, 2022. The fair value of assets and liabilities, including intangible assets and tax-related items (classified below in Other assets and Other liabilities), are preliminary and may change with offsetting adjustments to goodwill. Chubb may make further adjustments to its purchase price allocation through the end of the permissible one-year measurement period. Chubb does not expect changes, if any, to materially affect its financial position, results of operations, or cash flows.
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Preliminary estimate of assets acquired and liabilities assumed from Cigna's business in Asia | July 1 |
| (in millions of U.S. dollars) | 2022 |
| Assets | |
| Investments and Cash | $ | 5,311 | |
| Accrued investment income | 33 | |
| Insurance and reinsurance balances receivable | 52 | |
| Reinsurance recoverable on losses and loss expenses | 3 | |
| Reinsurance recoverable on future policy benefits | 82 | |
| Value of business acquired | 3,379 | |
| Goodwill and other intangible assets | 1,609 | |
| Other assets | 655 | |
| Total assets | $ | 11,124 | |
| Liabilities | |
| Unpaid losses and loss expenses | $ | 10 | |
| Unearned premiums | 60 | |
| Future policy benefits | 3,844 | |
| Insurance and reinsurance balances payable | 115 | |
| Accounts payable, accrued expenses, and other liabilities | 925 | |
| Deferred tax liabilities | 839 | |
| Total liabilities | $ | 5,793 | |
| | |
| Net acquired assets, including goodwill | 5,331 | |
| Total | $ | 11,124 | |
Direct costs related to the acquisition were expensed as incurred. Cigna integration expenses were $23 million and $26 million for the three and nine months ended September 30, 2022, respectively, and include one-time costs that are directly attributable to third-party consulting fees, employee-related retention costs, and other professional and legal fees related to the acquisition.
8
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Loss on disposals of property and equipment, net | 1 | SEC-NUM |
IQVIA HOLDINGS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, |
| (in millions) | | 2021 | | 2020 | | 2019 |
| Operating activities: | | | | | | |
| Net income | | $ | 971 | | | $ | 308 | | | $ | 227 | |
| Adjustments to reconcile net income to cash provided by operating activities: | | | | | | |
| Depreciation and amortization | | 1,264 | | | 1,287 | | | 1,202 | |
| Amortization of debt issuance costs and discount | | 17 | | | 18 | | | 13 | |
| | | | | | | |
| Stock-based compensation | | 170 | | | 95 | | | 146 | |
| | | | | | | |
| Loss on disposals of property and equipment, net | | — | | | — | | | 1 | |
| (Earnings) loss from unconsolidated affiliates | | (6) | | | (7) | | | 9 | |
| Gain on investments, net | | (16) | | | (25) | | | (43) | |
| Benefit from deferred income taxes | | (138) | | | (176) | | | (157) | |
| Changes in operating assets and liabilities: | | | | | | |
| Accounts receivable and unbilled services | | (138) | | | 255 | | | (122) | |
| Prepaid expenses and other assets | | (15) | | | (146) | | | (92) | |
| Accounts payable and accrued expenses | | 244 | | | 253 | | | 240 | |
| Unearned income | | 591 | | | 180 | | | (2) | |
| Income taxes payable and other liabilities | | (2) | | | (83) | | | (5) | |
| Net cash provided by operating activities | | 2,942 | | | 1,959 | | | 1,417 | |
| Investing activities: | | | | | | |
| Acquisition of property, equipment and software | | (640) | | | (616) | | | (582) | |
| Acquisition of businesses, net of cash acquired | | (1,458) | | | (177) | | | (588) | |
| | | | | | | |
| Purchases of marketable securities, net | | (10) | | | (9) | | | (3) | |
| Investments in unconsolidated affiliates, net of payments received | | (5) | | | 10 | | | — | |
| Proceeds from sale of (investments in) equity securities | | 5 | | | (2) | | | (22) | |
| Other | | 5 | | | (2) | | | 5 | |
| Net cash used in investing activities | | (2,103) | | | (796) | | | (1,190) | |
| Financing activities: | | | | | | |
| Proceeds from issuance of debt | | 1,951 | | | 1,591 | | | 1,900 | |
| Payment of debt issuance costs | | (40) | | | (33) | | | (47) | |
| Repayment of debt | | (2,091) | | | (864) | | | (899) | |
| Proceeds from revolving credit facility | | 810 | | | 1,250 | | | 2,522 | |
| Repayment of revolving credit facility | | (600) | | | (1,635) | | | (2,776) | |
| | | | | | | |
| (Payments) proceeds related to employee stock option plans | | (59) | | | (44) | | | 11 | |
| Repurchase of common stock | | (406) | | | (447) | | | (949) | |
| Distributions to non-controlling interest, net | | — | | | (13) | | | (18) | |
| Acquisition of Quest's non-controlling interest | | (758) | | — | | | — | |
| Contingent consideration and deferred purchase price payments | | (42) | | | (22) | | | (20) | |
| Net cash used in financing activities | | (1,235) | | | (217) | | | (276) | |
| Effect of foreign currency exchange rate changes on cash | | (52) | | | 31 | | | (5) | |
| (Decrease) increase in cash and cash equivalents | | (448) | | | 977 | | | (54) | |
| Cash and cash equivalents at beginning of period | | 1,814 | | | 837 | | | 891 | |
| Cash and cash equivalents at end of period | | $ | 1,366 | | | $ | 1,814 | | | $ | 837 | |
The accompanying notes are an integral part of these consolidated financial statements.69
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Payments for ASR, amount | 1.5 | SEC-NUM |
The following table is a summary of the Company’s stock option and SAR activity for the year ended December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| In thousands, except weighted average exercise price and remaining contractual term | Shares | | WeightedAverageExercise Price | | WeightedAverageRemainingContractualTerm | | AggregateIntrinsicValue |
| Outstanding at beginning of year | 23,955 | | | $ | 69.62 | | | | | |
| Granted | 3,322 | | | $ | 74.66 | | | | | |
| Exercised | (6,366) | | | $ | 63.41 | | | | | |
| Forfeited | (694) | | | $ | 62.66 | | | | | |
| Expired | (1,156) | | | $ | 87.42 | | | | | |
| Outstanding at end of year | 19,061 | | | $ | 71.74 | | | 4.75 | | $ | 603,137 | |
| Exercisable at end of year | 9,704 | | | $ | 79.99 | | | 2.61 | | 229,034 | |
| Vested at end of year and expected to vest in the future | 18,709 | | | $ | 71.82 | | | 4.69 | | 590,514 | |
12.Shareholders’ Equity
Share Repurchases
The following share repurchase programs have been authorized by the Board:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| In billionsAuthorization Date | Authorized | | Remaining as ofDecember 31, 2021 |
| December 9, 2021 (“2021 Repurchase Program”) | $ | 10.0 | | | $ | 10.0 | |
| November 2, 2016 (“2016 Repurchase Program”) | 15.0 | | | — | |
| | | | |
Each of the share Repurchase Programs was effective immediately. The 2016 Repurchase program was terminated effective December 9, 2021. The 2021 Repurchase Program permits the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase (“ASR”) transactions, and/or other derivative transactions. The 2021 Repurchase Program can be modified or terminated by the Board at any time.
During the years ended December 31, 2021, 2020 and 2019, the Company did not repurchase any shares of common stock pursuant to the 2016 or 2021 Repurchase Programs.
Pursuant to the authorization under the 2021 Repurchase Program, the Company entered into a $1.5 billion fixed dollar ASR with Barclays Bank PLC (“Barclays”). Upon payment of the $1.5 billion purchase price on January 4, 2022, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $1.5 billion notional amount of the ASR or approximately 11.6 million shares at a price of $103.34 per share, which were placed into treasury stock in January 2022. At the conclusion of the ASR, the Company may receive additional shares equal to the remaining 20% of the $1.5 billion notional amount. The ultimate number of shares the Company may receive will depend on the daily volume-weighted average price of the Company’s stock over an averaging period, less a discount. It is also possible, depending on such weighted average price, that the Company will have an obligation to Barclays which, at the Company’s option, could be settled in additional cash or by issuing shares. Under the terms of the ASR, the maximum number of shares that could be delivered to the Company is 29.0 million.
Dividends
The quarterly cash dividend declared by the Board was $0.50 per share in 2021 and 2020. In December 2021, the Board authorized a 10% increase in the quarterly cash dividend to $0.55 per share effective in 2022. CVS Health Corporation has paid cash dividends every quarter since becoming a public company. Future dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Board.
Regulatory Requirements
The Company’s insurance business operations are conducted through subsidiaries that principally consist of health maintenance organizations (“HMOs”) and insurance companies. The Company’s HMO and insurance subsidiaries report their financial 159
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Loss contingencies, reasonably possible pretax loss exposure in excess of the amount accrued | 178 | SEC-NUM |
Notes to Condensed Consolidated Financial Statements
may be other disclosed matters for which a loss is probable or reasonably possible, but such an estimate is not possible. Disclosure of the estimate of the reasonably possible loss or range of loss above the amount accrued, if any, for any individual matter would only be considered when there have been sufficient legal and factual developments such that the Company’s ability to resolve the matter would not be impaired by the disclosure of the individual estimate.The Company currently estimates that the aggregate range of reasonably possible loss in excess of the amount accrued, if any, for the disclosed matters where such an estimate is possible is zero to $178 million, pre-tax. This disclosure is not an indication of expected loss, if any. Under accounting guidance, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote” if “the chance of the future event or events occurring is slight.” This estimate is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties. The matters underlying the estimate will change from time to time, and actual results may vary significantly from the current estimate. The estimate does not include matters or losses for which an estimate is not possible. Therefore, this estimate represents an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Company’s maximum possible loss exposure. Information is provided below regarding the nature of all of the disclosed matters and, where specified, the amount, if any, of plaintiff claims associated with these loss contingencies.Due to the complexity and scope of the matters disclosed in the “Claims related proceedings” and “Other proceedings” subsections below and the many uncertainties that exist, the ultimate outcome of these matters cannot be predicted and in the Company’s judgment, a loss, in excess of amounts accrued, if any, is not probable. In the event of an unfavorable outcome in one or more of these matters, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating results or cash flows for a particular quarterly or annual period. However, based on information currently known to it, management believes that the ultimate outcome of all matters described below, as they are resolved over time, is not likely to have a material effect on the financial position of the Company. Claims related proceedings The Company is managing various disputes in Florida that raise challenges to the Company’s practices, processes, and procedures relating to claims for personal injury protection benefits under Florida auto policies. Medical providers continue to pursue litigation under various theories that challenge the amounts that the Company pays under the personal injury protection coverage, seeking additional benefit payments, as well as applicable interest, penalties and fees. There is a pending putative class action, Revival Chiropractic v. Allstate Insurance Company, et al. (M.D. Fla., filed January 2019; appeal pending, 11th Circuit Court of Appeals), where the federal district court denied class certification and plaintiff’s request to file a renewed motion for class certification. In Revival, on June 2, 2022, the 11th Circuit certified to the Florida Supreme Court Allstate’s appeal of the federal district court’s interpretation of the state personal injury protection statute. The 11th Circuit is holding determination on plaintiff’s class certification appeal pending the outcome of the Florida Supreme Court certification. The Company is also defending litigation involving individual plaintiffs. The Company is defending putative class actions in various courts that raise challenges to the Company’s depreciation practices in homeowner property claims. In these lawsuits, plaintiffs generally allege that, when calculating actual cash value, the costs of “non-materials” such as labor, general contractor’s overhead and profit, and sales tax should not be subject to depreciation. The Company is currently defending the following lawsuits on this issue: Perry v. Allstate Indemnity Company, et al. (N.D. Ohio, filed May 2016); Lado v. Allstate Vehicle and Property Insurance Company (S.D. Ohio, filed March 2020); Maniaci v. Allstate Insurance Company (N.D. Ohio, filed March 2020); Ferguson-Luke et al. v. Allstate Property and Casualty Insurance Company (N.D. Ohio, filed April 2020); Clark v. Allstate Vehicle and Property Insurance Company (Circuit Court of Independence Co., Ark., filed February 2016); Mitchell, et al. v. Allstate Vehicle and Property Insurance Company, et al. (S.D. Ala., filed August 2021); Sims, et al. v. Allstate Fire and Casualty Insurance Company, et al. (W.D. Tex. filed June 2022); and Thompson, et al. v. Allstate Insurance Company (Circuit Court of Cole Co., Mo. filed June 2022). No classes have been certified in any of these matters. A settlement-in-principle has been reached in Thaxton v. Allstate Indemnity Company (Madison Co., Ill., filed July 2020) and Hester v. Allstate Vehicle and Property Insurance Company (St. Clair Co., Ill. filed June 2020). The Company is defending putative class actions pending in multiple states alleging that the Company underpays total loss vehicle physical damage claims on auto policies. The allegedly systematic underpayments result from one or more of the following theories: (a) the third party valuation tool used by the Company as part of a comprehensive adjustment process is allegedly flawed, biased, or contrary to applicable law; (b) the Company allegedly does not pay sales tax, title fees, registration fees, and/or other specified fees that are allegedly mandatory under policy language or state legal authority; or (c) after paying for the value of the loss vehicle, then the Company allegedly is not entitled to retain the residual salvage value, and the Company allegedly must pay salvage value to the owner (or if the loss vehicle is retained by the owner, then the Company allegedly may not apply any offset for the salvage value).The following cases are currently pending against the Company: Olberg v. Allstate Insurance Company, Allstate Fire and Casualty Insurance Company, and CCC Information Services, Inc. (W.D. Wash., filed April 2018); Bloomgarden v. Allstate Fire and Casualty Insurance 40 www.allstate.com
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Amount of multi-year committed revolving credit facility | 1 | SEC-NUM |
Note 14 - Debt
The following is a summary of the Company's debt:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | As of |
| | (in millions) | | Interest Rates | | Fiscal Year Maturities | | March 31, 2022(1) | | March 31, 2021(1) |
| | Short-term debt and current maturities of long-term debt | | | | | | | | |
| | Commercial paper(2) | | (0.40)% - (0.27)% | | 2023 | | $ | 362 | | | $ | 213 | |
| | Current maturities of long-term debt | | Various | | 2023 | | 249 | | | 556 | |
| | Current maturities of finance lease liabilities | | 0.23% - 12.79% | | 2023 | | 289 | | | 398 | |
| | Short-term debt and current maturities of long-term debt | | | | | | $ | 900 | | | $ | 1,167 | |
| | | | | | | | | | |
| | Long-term debt, net of current maturities | | | | | | | | |
| | €650 million Senior notes | | 1.75% | | 2026 | | 720 | | | 760 | |
| | $700 million Senior notes | | 1.80% | | 2027 | | 694 | | | — | |
| | €750 Senior notes | | 0.45% | | 2028 | | 828 | | | — | |
| | $650 million Senior notes | | 2.375% | | 2029 | | 644 | | | — | |
| | €600 Senior notes | | 0.95% | | 2032 | | 661 | | | — | |
| | EUR term loan | | 0.80% | | 2023 - 2024 | | — | | | 469 | |
| | $274 million Senior notes | | 4.45% | | 2023 | | — | | | 154 | |
| | $171 million Senior notes | | 4.45% | | 2023 | | — | | | 165 | |
| | $500 million Senior notes | | 4.25% | | 2025 | | — | | | 504 | |
| | | | | | | | | | |
| | $500 million Senior notes | | 4.13% | | 2026 | | — | | | 496 | |
| | £250 million Senior notes | | 2.75% | | 2025 | | — | | | 343 | |
| | $500 million Senior notes | | 4.75% | | 2028 | | — | | | 506 | |
| | $234 million Senior notes | | 7.45% | | 2030 | | — | | | 268 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | Finance lease liabilities | | 0.23% - 12.79% | | 2023 - 2027 | | 643 | | | 894 | |
| | Borrowings for assets acquired under long-term financing | | 0.00% - 6.78% | | 2023 - 2026 | | 344 | | | 672 | |
| | Mandatorily redeemable preferred stock outstanding | | 6.00% | | 2023 | | 63 | | | 63 | |
| | Other borrowings | | Various | | 2023 - 2024 | | 6 | | | 5 | |
| | Long-term debt | | | | | | 4,603 | | | 5,299 | |
| | Less: current maturities | | | | | | 538 | | | 954 | |
| | Long-term debt, net of current maturities | | | | | | $ | 4,065 | | | $ | 4,345 | |
.
(1)The carrying amounts of the senior term loans and notes as of March 31, 2022 and March 31, 2021, include the remaining principal outstanding of $3,575 million and $3,631 million, respectively, net of total unamortized debt (discounts) and premiums, and deferred debt issuance costs of $(28) million and $34 million, respectively.(2) At DXC's option, DXC can borrow up to a maximum of €1 billion or its equivalent in €, £, and $.
Senior Notes and Term Loans
During the first quarter of fiscal 2022, the Company used the proceeds from the sale of its HPS business to complete the redemption of the remaining $319 million of the two series of 4.45% senior notes due fiscal 2023. The Company also repurchased $33 million of its 4.125% senior notes due fiscal 2026 using the proceeds from the divestitures of other insignificant businesses and existing cash on hand and the remainder of these notes were subsequently redeemed in full.
105
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Preferred Stock, Shares Authorized | 50,000,000 | SEC-NUM |
2 | The AES Corporation | September 30, 2022 Form 10-QPART I: FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSCondensed Consolidated Balance Sheets (Unaudited)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | | | |
| | (in millions, except share and per share amounts) |
| ASSETS | | | |
| CURRENT ASSETS | | | |
| Cash and cash equivalents | $ | 1,553 | | | $ | 943 | |
| Restricted cash | 314 | | | 304 | |
| Short-term investments | 671 | | | 232 | |
| Accounts receivable, net of allowance for doubtful accounts of $5 and $5, respectively | 1,787 | | | 1,418 | |
| Inventory | 998 | | | 604 | |
| Prepaid expenses | 149 | | | 142 | |
| Other current assets | 1,303 | | | 897 | |
| Current held-for-sale assets | 853 | | | 816 | |
| Total current assets | 7,628 | | | 5,356 | |
| NONCURRENT ASSETS | | | |
| Property, Plant and Equipment: | | | |
| Land | 465 | | | 426 | |
| Electric generation, distribution assets and other | 26,003 | | | 25,552 | |
| Accumulated depreciation | (8,532) | | | (8,486) | |
| Construction in progress | 3,661 | | | 2,414 | |
| Property, plant and equipment, net | 21,597 | | | 19,906 | |
| Other Assets: | | | |
| Investments in and advances to affiliates | 1,121 | | | 1,080 | |
| Debt service reserves and other deposits | 167 | | | 237 | |
| Goodwill | 1,179 | | | 1,177 | |
| Other intangible assets, net of accumulated amortization of $415 and $385, respectively | 1,626 | | | 1,450 | |
| Deferred income taxes | 380 | | | 409 | |
| | | | |
| | | | |
| Other noncurrent assets, net of allowance of $57 and $23, respectively | 2,964 | | | 2,188 | |
| Noncurrent held-for-sale assets | 1,113 | | | 1,160 | |
| Total other assets | 8,550 | | | 7,701 | |
| TOTAL ASSETS | $ | 37,775 | | | $ | 32,963 | |
| LIABILITIES AND EQUITY | | | |
| CURRENT LIABILITIES | | | |
| Accounts payable | $ | 1,688 | | | $ | 1,153 | |
| Accrued interest | 210 | | | 182 | |
| Accrued non-income taxes | 244 | | | 266 | |
| Accrued and other liabilities | 1,212 | | | 1,205 | |
| | | | |
| Non-recourse debt, including $321 and $302, respectively, related to variable interest entities | 2,007 | | | 1,367 | |
| | | | |
| Current held-for-sale liabilities | 541 | | | 559 | |
| Total current liabilities | 5,902 | | | 4,732 | |
| NONCURRENT LIABILITIES | | | |
| Recourse debt | 4,668 | | | 3,729 | |
| Non-recourse debt, including $2,167 and $2,223, respectively, related to variable interest entities | 15,530 | | | 13,603 | |
| | | | |
| Deferred income taxes | 1,169 | | | 977 | |
| | | | |
| Other noncurrent liabilities | 3,167 | | | 3,358 | |
| Noncurrent held-for-sale liabilities | 677 | | | 740 | |
| Total noncurrent liabilities | 25,211 | | | 22,407 | |
| Commitments and Contingencies (see Note 8) | | | |
| Redeemable stock of subsidiaries | 1,201 | | | 1,257 | |
| EQUITY | | | |
| THE AES CORPORATION STOCKHOLDERS’ EQUITY | | | |
| Preferred stock (without par value, 50,000,000 shares authorized; 1,043,050 issued and outstanding at September 30, 2022 and December 31, 2021, respectively) | 838 | | | 838 | |
| Common stock ($0.01 par value, 1,200,000,000 shares authorized; 818,790,001 issued and 667,949,778 outstanding at September 30, 2022 and 818,717,043 issued and 666,793,625 outstanding at December 31, 2021) | 8 | | | 8 | |
| Additional paid-in capital | 6,818 | | | 7,106 | |
| Accumulated deficit | (732) | | | (1,089) | |
| Accumulated other comprehensive loss | (1,691) | | | (2,220) | |
| Treasury stock, at cost (150,840,223 and 151,923,418 shares at September 30, 2022 and December 31, 2021, respectively) | (1,832) | | | (1,845) | |
| Total AES Corporation stockholders’ equity | 3,409 | | | 2,798 | |
| NONCONTROLLING INTERESTS | 2,052 | | | 1,769 | |
| Total equity | 5,461 | | | 4,567 | |
| TOTAL LIABILITIES AND EQUITY | $ | 37,775 | | | $ | 32,963 | |
See Notes to Condensed Consolidated Financial Statements.
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Unrecognized tax benefits that may be recognized | 4.8 | SEC-NUM |
[Table of Contents](#i3b067f3fb23d442cae02253229e3471d_7)As of December 31, 2021, accumulated earnings outside the U.S. totaled $1.2 billion, the majority of which have been taxed due to the one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings and the tax on global intangible low taxed income required by the U.S. Tax Cuts and Jobs Act ("TCJA"). No provision for U.S. income and foreign withholding taxes has been provided for any remaining undistributed foreign earnings not subject to tax under the TCJA, or any additional basis differences inherent in these entities, as these amounts continue to be indefinitely reinvested. Determination of the amount of the unrecognized deferred tax liability on outside basis differences is not practicable because of the complexity of laws and regulations, the varying tax treatment of alternative repatriation scenarios and the variation due to multiple potential assumptions relating to the timing of any future repatriation.
The following is a roll forward of the Company’s unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 (in thousands):
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| Balance at beginning of year | $ | 24,105 | | | $ | 27,359 | | | $ | 64,892 | |
| Gross increases – tax positions of prior periods | 4,293 | | | 2,539 | | | 74 | |
| Gross increases – current period tax positions | 3,607 | | | 1,946 | | | 2,006 | |
| Gross decreases – tax positions of prior periods | (816) | | | (3,540) | | | (5,201) | |
| Gross decreases – lapse of applicable statute of limitations | (8,626) | | | (4,199) | | | (28,672) | |
| Gross decreases – settlements | — | | | — | | | (5,740) | |
| Balance at end of year | $ | 22,563 | | | $ | 24,105 | | | $ | 27,359 | |
As of December 31, 2021, 2020 and 2019, the Company had $23.1 million, $29.5 million and $32.6 million of unrecognized tax benefits, respectively. Total interest and penalties for unrecognized tax benefits includes $7.2 million, $7.7 million and $7.8 million as of December 31, 2021, 2020 and 2019, respectively. Interest and penalties related to unrecognized tax benefits are recorded in the provision for income taxes and were $0.5 million, $1.2 million and $1.1 million for the years ended December 31, 2021, 2020 and 2019, respectively. The amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate is $23.1 million.
As of December 31, 2021, it is reasonably possible that $4.8 million of unrecognized tax benefits may be recognized within the next 12 months due to the expiration of local statutes of limitations. Certain U.S. state and foreign income tax returns from 2011 through 2020 are currently under audit. The Company has reserved for those positions that are not more-likely-than-not to be sustained.
The Company is also involved in litigation related to certain adverse audit determinations. In the second quarter of 2018, the Company filed an appeal with the Massachusetts Appellate Tax Board contesting the adverse audit findings related to certain tax benefits and exemptions. The appeal hearing was held in late 2019. In July 2020, the Massachusetts Appellate Tax Board ruled in the Company's favor; however the Massachusetts Department of Revenue has appealed the decision in January 2022. The Company has determined that it is more-likely-than-not that it will prevail, and no reserve has been recorded related to these controversies. However, over the next 12 months, the Company's current assumptions and positions could change based on appeal decisions and other events impacting its analysis. Such events, if resolved unfavorably, could significantly impact the Company’s effective income tax rate and results of operations. The Company has estimated that an adverse ruling related to its Massachusetts controversy could result in a gross income tax charge of approximately $49.0 million, which could be partially offset by certain state tax credits of $32.0 million which are not currently benefited as a result of the Company's valuation allowance assessment.
20. Net Income per Share
Basic net income per share is computed using the weighted average number of common shares outstanding during the applicable period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential common stock. Potential common stock consists of shares issuable pursuant to stock options, RSUs, DSUs, convertible senior notes and warrants issued by the Company. The dilutive effect of outstanding awards and convertible securities is reflected in diluted earnings per share by application of the treasury stock method.
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Amount available for repurchase | 449.9 | SEC-NUM |
[Table of Contents](#i77b271276a234b51923cb690f1158463_7)
As of September 30, 2022, we expect to recognize $154.1 million of total unamortized compensation costs, net of estimated forfeitures, related to RSUs over a weighted average period of 2.4 years.
Market-Performance Based Restricted Stock Units (“MSUs”)
We grant MSUs to members of senior management. Each MSU represents the right to one share of Align’s common stock. The actual number of MSUs which will be eligible to vest will be based on the performance of Align’s stock price relative to the performance of a stock market index over the vesting period. MSUs vest over a period of three years and the maximum number eligible to vest in the future is 250% of the MSUs initially granted.
The following table summarizes the MSU performance for the nine months ended September 30, 2022:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of SharesUnderlying MSUs(in thousands) | | Weighted Average Grant Date Fair Value | | Weighted AverageRemainingContractual Term (in years) | | AggregateIntrinsic Value(in thousands) |
| Unvested as of December 31, 2021 | 174 | | | $ | 551.57 | | | | | |
| Granted 1 | 101 | | | 607.96 | | | | | |
| Vested and released | (128) | | | 396.10 | | | | | |
| Forfeited | (3) | | | 744.39 | | | | | |
| Unvested as of September 30, 2022 | 144 | | | $ | 725.73 | | | 1.2 | | $ | 29,838 | |
1 Includes MSUs vested during the period above 100% of the grant as actual shares released is based on Align’s stock performance over the vesting period.
As of September 30, 2022, we expect to recognize $47.7 million of total unamortized compensation costs, net of estimated forfeitures, related to MSUs over a weighted average period of 1.2 years.
Employee Stock Purchase Plan
As of September 30, 2022, we have 2,108,898 shares available for future issuance under our Amended and Restated 2010 Employee Stock Purchase Plan (the “2010 Purchase Plan”).
The fair value of the option component of the 2010 Purchase Plan shares was estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months EndedSeptember 30, | | Nine Months EndedSeptember 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 |
| Expected term (in years) | | 1.5 | | 1.2 | | 1.5 | | 1.1 |
| Expected volatility | | 52.3 | % | | 51.1 | % | | 50.2 | % | | 52.7 | % |
| Risk-free interest rate | | 2.9 | % | | 0.1 | % | | 1.8 | % | | 0.1 | % |
| Expected dividends | | — | | | — | | | — | | | — | |
| Weighted average fair value at grant date | | $ | 112.84 | | | $ | 257.89 | | | $ | 159.44 | | | $ | 246.84 | |
As of September 30, 2022, we expect to recognize $22.0 million of total unamortized compensation costs related to future employee stock purchases over a weighted average period of 1.1 years.
Note 9. Common Stock Repurchase Program
In May 2018, our Board of Directors authorized a plan to repurchase up to $600.0 million of our common stock (“May 2018 Repurchase Program”). As of December 31, 2021, the authorization under the May 2018 Repurchase Program was completed. In May 2021, our Board of Directors authorized a plan to repurchase up to $1.0 billion of our common stock (“May 2021 Repurchase Program”). As of September 30, 2022, we have $449.9 million available for repurchases under the May 2021 Repurchase Program.
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Present value of lease liabilities | 150.0 | SEC-NUM |
[Table of Contents](#i4552998170a04ab690e0e4bebd2d8dfd_7)
FMC CORPORATIONNotes to Condensed Consolidated Financial Statements (unaudited) — (Continued)The following table represents our future minimum operating lease payments as of, and subsequent to, September 30, 2022 under ASC 842:
| | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | |
| (in Millions) | | | | | Operating Leases Total |
| Maturity of Lease Liabilities | | | | | |
| 2022 (excluding the nine months ending September 30, 2022) | | | | | $ | 7.5 | |
| 2023 | | | | | 26.0 | |
| 2024 | | | | | 21.0 | |
| 2025 | | | | | 19.1 | |
| 2026 | | | | | 17.6 | |
| Thereafter | | | | | 89.6 | |
| Total undiscounted lease payments | | | | | $ | 180.8 | |
| Less: Present value adjustment | | | | | (30.8) | |
| Present value of lease liabilities | | | | | $ | 150.0 | |
Note 16: Pensions and Other Postretirement BenefitsThe following table summarizes the components of net annual benefit cost (income):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| (in Millions) | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Pensions | | Other Benefits | | Pensions | | Other Benefits |
| 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | | | | | | | | | |
| Service cost | $ | 0.4 | | | $ | 0.9 | | | $ | — | | | $ | — | | | $ | 2.7 | | | $ | 3.5 | | | $ | — | | | $ | — | |
| Interest cost | 7.5 | | | 6.2 | | | — | | | 0.1 | | | 22.0 | | | 18.4 | | | 0.2 | | | 0.2 | |
| Expected return on plan assets | (9.3) | | | (8.0) | | | — | | | — | | | (24.8) | | | (23.9) | | | — | | | — | |
| Amortization of prior service cost (credit) | — | | | — | | | — | | | — | | | 0.1 | | | 0.1 | | | — | | | — | |
| Recognized net actuarial and other (gain) loss | 0.2 | | | 3.1 | | | (0.2) | | | (0.3) | | | 9.2 | | | 9.5 | | | (0.6) | | | (0.7) | |
| | | | | | | | | | | | | | | | |
| Recognized loss due to settlement (1) | 0.1 | | | 0.4 | | | — | | | — | | | 0.5 | | | 0.4 | | | — | | | — | |
| Net periodic benefit cost (income) | $ | (1.1) | | | $ | 2.6 | | | $ | (0.2) | | | $ | (0.2) | | | $ | 9.7 | | | $ | 8.0 | | | $ | (0.4) | | | $ | (0.5) | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)Settlement charge relates to the U.S. nonqualified defined benefit pension plan.
Certain amounts have been adjusted to reflect the change in pension accounting method, as described in Note 1 to our condensed consolidated financial statements.
Note 17: Income TaxesOur effective income tax rates from continuing operations for the three and nine months ended September 30, 2022 were 21.1 percent and 20.9 percent, respectively. Our effective income tax rates from continuing operations for the three and nine months ended September 30, 2021 were 5.1 percent and 11.5 percent, respectively. The increase in the effective income tax rate was primarily driven by our decision to cease operations and business in Russia during the second quarter of 2022. As a result, we recorded a pre-tax charge of $76.1 million during the three months ended June 30, 2022 with minimal tax benefit. Refer to Note 9 for additional information. Also increasing the effective tax rate were certain provisions of the Tax Cuts and Jobs Act of 2017 that became effective in 2022, and geographic earnings mix. Our effective income tax rates from continuing operations for the three and nine months ended September 30, 2021 were impacted by a $17.7 million tax reserve release related to our domestic operations.We determine our interim tax provision using an Estimated Annual Effective Tax Rate methodology ("EAETR") in accordance with U.S. GAAP. The EAETR is applied to the year-to-date ordinary income, exclusive of discrete items. The tax effects of discrete items are then included to arrive at the total reported interim tax provision. The determination of the EAETR is based upon a number of estimates, including the estimated annual pretax ordinary income in each tax jurisdiction in which we operate. 38
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Common stock, shares authorized (in shares) | 2 | SEC-NUM |
[Table of Contents](#i489830d020104c22836b2147e5757c24_7)AGILENT TECHNOLOGIES, INC.CONDENSED CONSOLIDATED BALANCE SHEET(in millions, except par value and share amounts)(Unaudited)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | July 31,2022 | | October 31,2021 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 1,071 | | | $ | 1,484 | |
| Short-term investments | 6 | | | 91 | |
| Accounts receivable, net | 1,345 | | | 1,172 | |
| Inventory | 1,010 | | | 830 | |
| Other current assets | 258 | | | 222 | |
| Total current assets | 3,690 | | | 3,799 | |
| Property, plant and equipment, net | 1,054 | | | 945 | |
| Goodwill | 3,948 | | | 3,975 | |
| Other intangible assets, net | 849 | | | 981 | |
| Long-term investments | 194 | | | 185 | |
| Other assets | 749 | | | 820 | |
| Total assets | $ | 10,484 | | | $ | 10,705 | |
| LIABILITIES AND EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 558 | | | $ | 446 | |
| Employee compensation and benefits | 389 | | | 493 | |
| Deferred revenue | 498 | | | 441 | |
| Short-term debt | 180 | | | — | |
| Other accrued liabilities | 277 | | | 328 | |
| Total current liabilities | 1,902 | | | 1,708 | |
| Long-term debt | 2,732 | | | 2,729 | |
| Retirement and post-retirement benefits | 176 | | | 220 | |
| Other long-term liabilities | 583 | | | 659 | |
| Total liabilities | 5,393 | | | 5,316 | |
| Commitments and contingencies (Notes 9 and 12) | | | |
| Total equity: | | | |
| Stockholders’ equity: | | | |
| Preferred stock; $0.01 par value; 125 million shares authorized; none issued and outstanding at July 31, 2022 and October 31, 2021 | — | | | — | |
| Common stock; $0.01 par value; 2 billion shares authorized; 296 million shares at July 31, 2022 and 302 million shares at October 31, 2021 issued and outstanding | 3 | | | 3 | |
| Additional paid-in-capital | 5,311 | | | 5,320 | |
| Retained earnings | 139 | | | 348 | |
| Accumulated other comprehensive loss | (362) | | | (282) | |
| Total stockholders' equity | 5,091 | | | 5,389 | |
| | | | |
| | | | |
| Total liabilities and stockholders' equity | $ | 10,484 | | | $ | 10,705 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.5
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Payments | 1 | SEC-NUM |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | June 30, 2021 |
| ($ in millions) | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets | | | | | | | | |
| Commodity contracts | | $ | — | | | $ | 14 | | | $ | — | | | $ | 14 | |
| Forward exchange contracts | | — | | | 7 | | | — | | | 7 | |
| Interest rate swaps | | — | | | 19 | | | — | | | 19 | |
| Total assets measured at fair value | | $ | — | | | $ | 40 | | | $ | — | | | $ | 40 | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Contingent purchase consideration liabilities | | $ | — | | | $ | — | | | $ | 18 | | | $ | 18 | |
| | | | | | | | | |
| Forward exchange contracts | | — | | | 4 | | | — | | | 4 | |
| | | | | | | | | |
| Total liabilities measured at fair value | | $ | — | | | $ | 4 | | | $ | 18 | | | $ | 22 | |
The fair value of the commodity contracts was determined using a discounted cash flow analysis based on the terms of the contracts and observed market forward prices discounted at a currency specific rate. Forward exchange contract fair values were determined based on quoted prices for similar assets and liabilities in active markets using inputs such as currency rates and forward points. The fair value of the interest rate swaps was determined using a discounted cash flow method based on market based swap yield curves, taking into account current interest rates.
Contingent purchase consideration obligations arise from business acquisitions. As of June 30, 2022, the Company's contingent purchase consideration liabilities consist of a $10 million liability that is contingent on future royalty income generated by Discma AG, a subsidiary acquired in March 2017, with the $6 million balance relating to consideration for small business acquisitions where payments are contingent on the Company vacating a certain property or performance criteria. The fair value of the contingent purchase consideration liabilities was determined for each arrangement individually. The fair value was determined using the income approach with significant inputs that are not observable in the market. Key assumptions include the discount rates consistent with the level of risk of achievement and probability adjusted financial projections. The expected outcomes are recorded at net present value, which requires adjustment over the life for changes in risks and probabilities. Changes arising from modifications in forecasts related to contingent consideration are expected to be immaterial.
The fair value of contingent purchase consideration liabilities is included in other current liabilities and other non-current liabilities in the consolidated balance sheets. The change in fair value of the contingent purchase consideration liabilities, which was included in other income, net is due to the passage of time and changes in the probability of achievement used to develop the estimate.
The following table sets forth a summary of changes in the value of the Company's Level 3 financial liabilities:
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| | | | | | | | | | | | | | | | | | | | | |
| | | June 30, |
| ($ in millions) | | 2022 | | 2021 | | 2020 |
| Fair value at the beginning of the year | | $ | 18 | | | $ | 15 | | | $ | 14 | |
| | | | | | | |
| Changes in fair value of Level 3 liabilities | | — | | | 2 | | | 1 | |
| Payments | | (1) | | | — | | | — | |
| Foreign currency translation | | (1) | | | 1 | | | — | |
| Fair value at the end of the year | | $ | 16 | | | $ | 18 | | | $ | 15 | |
Assets and Liabilities Measured and Recorded at Fair Value on a Nonrecurring Basis
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a nonrecurring basis. The Company measures certain assets, including technology intangible assets, equity method and other investments, long-lived assets held for sale, and other long-lived and intangible assets at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of these assets are determined, when applicable, based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections.
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Deferred tax liability | 7 | SEC-NUM |
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| [Table of Contents](#i35a0317244714ddbbfcfc1f7731c8932_7) | emn-20220630_g1.jpg | |
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSThe major classes of divested assets and liabilities as of the date of the divestiture were as follows:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| (Dollars in millions) | |
| Assets divested | |
| Trade receivables, net of allowance for doubtful accounts | $ | 129 | |
| Inventories | 163 | |
| Other assets | 21 | |
| Properties, net of accumulated depreciation | 303 | |
| Goodwill | 399 | |
| Intangible assets, net of accumulated amortization | 14 | |
| Assets divested | 1,029 | |
| Liabilities divested | |
| Payables and other liabilities | 86 | |
| Deferred tax liability | 7 | |
| Other liabilities | 4 | |
| Liabilities divested | 97 | |
| Disposal group, net | $ | 932 | |
The Company recognized $8 million and $3 million of transaction costs for the divested business in first six months 2022 and twelve months 2021, respectively. Transaction costs are expensed as incurred and are included in SG&A in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings.
3.INVENTORIES
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | June 30, | | December 31, |
| (Dollars in millions) | 2022 | | 2021 |
| Finished goods | $ | 1,241 | | | $ | 1,007 | |
| Work in process | 283 | | | 273 | |
| Raw materials and supplies | 692 | | | 589 | |
| Total inventories at FIFO or average cost | 2,216 | | | 1,869 | |
| Less: LIFO reserve | 390 | | | 365 | |
| Total inventories | $ | 1,826 | | | $ | 1,504 | |
Inventories valued on the last-in, first-out ("LIFO") method were approximately 50 percent of total inventories at both June 30, 2022 and December 31, 2021.
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Shares of company common stock held in defined contribution plan assets (in shares) | 2,785,795 | SEC-NUM |
Return on Assets
The Company consults with internal and external advisors regarding the expected long-term rate of return on assets. The Company uses various sources in its approach to compute the expected long-term rate of return of the major asset classes expected in each of the plans. DXC utilizes long-term, asset class return assumptions of typically 30 years, which are provided by external advisors. Consideration is also given to the extent active management is employed in each asset class and also to management expenses. A single expected long-term rate of return is calculated for each plan by assessing the plan's expected asset allocation strategy, the benefits of diversification therefrom, historical excess returns from actively managed traditional investments, expected long-term returns for alternative investments and expected investment expenses. The resulting composite rate of return is reviewed by internal and external parties for reasonableness.
Retirement Plan Discount Rate
The U.K. discount rate is based on the yield curve approach using the U.K. Aon Hewitt GBP Single Agency AA Corporates-Only Curve.
Defined Contribution Plans
The Company sponsors defined contribution plans for substantially all U.S. employees and certain foreign employees. For certain plans, the Company will match employee contributions.The plans allow employees to contribute a portion of their earnings in accordance with specified guidelines. During fiscal 2022, 2021 and 2020, the Company contributed $226 million, $221 million and $192 million, respectively, to its defined contribution plans. As of March 31, 2022, plan assets included 2,785,795 shares of the Company’s common stock.
Deferred Compensation Plans
Effective as of the HPES Merger, DXC assumed sponsorship of the Computer Sciences Corporation Deferred Compensation Plan, which was renamed the “DXC Technology Company Deferred Compensation Plan” (the “DXC DCP”), and adopted the Enterprise Services Executive Deferred Compensation Plan (the “ES DCP”). Both plans are non-qualified deferred compensation plans maintained for a select group of management, highly compensated employees and non-employee directors.
The DXC DCP covers eligible employees who participated in CSC’s Deferred Compensation Plan prior to the HPES Merger. The ES DCP covers eligible employees who participated in the HPE Executive Deferred Compensation Plan prior to the HPES Merger. Both plans allow participating employees to defer the receipt of current compensation to a future distribution date or event above the amounts that may be deferred under DXC’s tax-qualified 401(k) plan, the DXC Technology Matched Asset Plan. Neither plan provides for employer contributions. As of April 3, 2017, the ES DCP does not admit new participants.
Certain management and highly compensated employees are eligible to defer all, or a portion of, their regular salary that exceeds the limitation set forth in Internal Revenue Section 401(a)(17) and all or a portion of their incentive compensation. Non-employee directors are eligible to defer up to 100% of their cash compensation. The liability under the plan, which is included in other long-term liabilities in the Company's balance sheets, amounted to $36 million as of March 31, 2022 and $42 million as of March 31, 2021. The Company's expense under the Plan totaled $2 million and $8 million for fiscal 2022 and 2021 respectively.
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Casualty-related loss (recoveries), net | 859 | SEC-NUM |
[Table of Contents](#ifa3dff468a15495db7b57c65ada0de74_7)Healthpeak Properties, Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)(Unaudited)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Three Months EndedMarch 31, |
| | 2022 | | 2021 |
| Cash flows from operating activities: | | | |
| Net income (loss) | $ | 75,343 | | | $ | 149,423 | |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | |
| Depreciation and amortization of real estate, in-place lease, and other intangibles | 177,733 | | | 157,538 | |
| Amortization of stock-based compensation | 4,721 | | | 4,364 | |
| Amortization of deferred financing costs | 2,689 | | | 2,213 | |
| Straight-line rents | (11,158) | | | (9,135) | |
| | | | |
| Amortization of nonrefundable entrance fees and above/below market lease intangibles | (24,725) | | | (23,764) | |
| Equity loss (income) from unconsolidated joint ventures | (2,148) | | | (1,008) | |
| Distributions of earnings from unconsolidated joint ventures | 237 | | | 237 | |
| | | | |
| Loss (gain) on sale of real estate under direct financing leases | (22,693) | | | — | |
| Deferred income tax expense (benefit) | (79) | | | (1,148) | |
| Impairments and loan loss reserves (recoveries), net | 132 | | | 3,242 | |
| Loss (gain) on debt extinguishments | — | | | 164,292 | |
| Loss (gain) on sales of real estate, net | (3,785) | | | (259,662) | |
| Loss (gain) upon change of control, net | — | | | (1,042) | |
| Casualty-related loss (recoveries), net | — | | | 859 | |
| | | | |
| | | | |
| Other non-cash items | (1,593) | | | (726) | |
| Changes in: | | | |
| Decrease (increase) in accounts receivable and other assets, net | (4,144) | | | 11,567 | |
| Increase (decrease) in accounts payable, accrued liabilities, and deferred revenue | 3,653 | | | (74,524) | |
| Net cash provided by (used in) operating activities | 194,183 | | | 122,726 | |
| Cash flows from investing activities: | | | |
| Acquisitions of real estate | (134,067) | | | (14,914) | |
| Development, redevelopment, and other major improvements of real estate | (178,285) | | | (135,339) | |
| Leasing costs, tenant improvements, and recurring capital expenditures | (22,839) | | | (20,710) | |
| Proceeds from sales of real estate, net | 13,265 | | | 937,492 | |
| | | | |
| Contributions to unconsolidated joint ventures | (1,486) | | | (5,924) | |
| Distributions in excess of earnings from unconsolidated joint ventures | 3,875 | | | 10,825 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Proceeds from sales/principal repayments on loans receivable and direct financing leases | 75,435 | | | — | |
| Investments in loans receivable and other | (1,860) | | | (3,704) | |
| | | | |
| Net cash provided by (used in) investing activities | (245,962) | | | 767,726 | |
| Cash flows from financing activities: | | | |
| Borrowings under bank line of credit and commercial paper | 3,732,668 | | | 3,437,200 | |
| Repayments under bank line of credit and commercial paper | (3,567,830) | | | (2,528,640) | |
| | | | |
| Repayments and repurchase of debt, excluding bank line of credit and commercial paper | (1,270) | | | (1,491,754) | |
| | | | |
| Payments for debt extinguishment and deferred financing costs | — | | | (158,011) | |
| | | | |
| Issuance of common stock and exercise of options, net of offering costs | (4) | | | 1,087 | |
| Repurchase of common stock | (11,352) | | | (12,165) | |
| Dividends paid on common stock | (163,447) | | | (164,118) | |
| | | | |
| Distributions to and purchase of noncontrolling interests | (7,509) | | | (7,718) | |
| Contributions from and issuance of noncontrolling interests | 233 | | | — | |
| Net cash provided by (used in) financing activities | (18,511) | | | (924,119) | |
| | | | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | (70,290) | | | (33,667) | |
| Cash, cash equivalents and restricted cash, beginning of period | 219,448 | | | 181,685 | |
| Cash, cash equivalents and restricted cash, end of period | $ | 149,158 | | | $ | 148,018 | |
See accompanying Notes to the Unaudited Consolidated Financial Statements.7
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Repayment for settlement of participation rights agreement | 59.8 | SEC-NUM |
shareholders of Iké to extend the put/call. In January 2020, in lieu of exercising the put/call, the Company entered into a formal agreement to sell its interests in Iké. In May 2020, the Company completed the sale of its interests in Iké and terminated its put/call obligations recognizing a net loss on sale of $3.9 million pre-tax and $2.9 million after-tax in the second quarter of 2020. Prior to the sale, in 2020, the Company recorded aggregate impairment losses and put/call valuation losses of $22.3 million compared to $163.0 million for the year ended December 31, 2019, which was comprised of a $78.3 million impairment that includes consideration of cumulative foreign currency translation losses of $38.4 million recorded in other comprehensive income and a pre-tax charge of $84.7 million related to the change in value of the put/call for the year ended December 31, 2019. In connection with the anticipated sale, the Company entered into a financial derivative in January 2020 that provided an economic hedge against declines in the Mexican Peso relative to the U.S. Dollar since the purchase price was to be paid in Mexican Pesos. The Company settled its position upon the sale, resulting in a cash inflow of $22.0 million, and net realized (losses) gains on the derivative of $20.3 million during the second quarter of 2020. In total, the Company recorded net pre-tax charges of $5.9 million and $163.0 million for the years ended December 31, 2020 and 2019, respectively, presented as Iké net losses in the consolidated statements of operations. For the year ended December 31, 2020, total impairment and put/call losses resulted in a tax benefit of $6.7 million; however, this was fully offset by a valuation allowance as the realizability of the tax losses in the related tax jurisdiction is unlikely. There was tax expense of $4.3 million on the income arising on the financial derivative in the second quarter of 2020, as such contract was originated in the U.S. tax jurisdiction. The losses in 2019 generated deferred tax assets of $48.8 million when applying the applicable effective tax rate. The Company recognized a full valuation allowance of the $48.8 million that arose in 2019 and $0.9 million established against the Iké deferred tax asset as of December 31, 2018. As such, after-tax charges of $9.3 million and $163.9 million were recorded for the years ended December 31, 2020 and 2019, respectively. In connection with the sale, the Company provided financing to Iké Grupo in an aggregate principal amount of $34.0 million (the “Iké Loan”). In April 2021, the Iké Loan was prepaid in full. Assurant Health Exit Activities The Company substantially completed its exit from the health insurance market as of December 31, 2016, a process that began in 2015. Between 2014 and 2016, the Company participated in the reinsurance, risk adjustment and risk corridor programs introduced by the Patient Protection and Affordable Health Care Act of 2010 (“ACA”). In connection with these programs, the Company held a $106.7 million gross risk corridor receivable due to the Company’s participation in the risk corridor program in 2015, which was reduced by a full valuation allowance because payments from the U.S. Department of Health and Human Services were considered unlikely, resulting in no net receivable. In December 2018, the Company subsidiary that held the receivable rights, Time Insurance Company (“TIC”), was sold to a third party. In connection with the sale, the Company and TIC entered into a participation agreement (the “Participation Agreement”) in which the Company was granted a 100% participation interest in the future claim proceeds, if any, of the risk corridor receivable recovered by TIC.The collection prospects of the risk corridor receivables began to improve following litigation challenging the legal basis for non-payment under the ACA program. This led to increasing levels of market participant interest in the purchase of the interests in such receivables, despite the remaining uncertainty of the outcome of the pending litigation. During the fourth quarter of 2019, the Company entered into an agreement with a third-party in which it received $26.7 million in cash as consideration for all future claim proceeds, less 20% of cash received in excess of the initial consideration of $26.7 million, which would be retained by the Company. The upfront cash proceeds received by the Company in 2019 were non-recourse. The Company deemed the amount to be indicative of recovery of its interests in the risk corridor receivables and accordingly adjusted the valuation allowance by $26.7 million, through a reduction to underwriting, general and administrative expenses in the consolidated statement of operations for the year ended December 31, 2019 with a corresponding increase in other assets in the consolidated balance sheet as of December 31, 2019. During the fourth quarter of 2020, the U.S. Department of Health and Human Services paid $101.4 million, net of legal and other costs, for TIC’s risk corridor receivable, which was remitted to the Company pursuant to the Participation Agreement. The Company remitted $86.5 million to the third party and retained $14.9 million related to its 20% share of the excess proceeds pursuant to the agreement. The Company adjusted the valuation allowance for the additional $74.7 million, as partially offset by the incremental payment to the third party for the additional proceeds of $59.8 million, which is accounted for similar to interest expense on the initial consideration (both recorded through underwriting, general and administrative expenses).
F-23
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Disposal Group, Including Discontinued Operation, Consideration, Working Capital | 50 | SEC-NUM |
[Table of](#i43d04c9d26874e33802bdf64c458414a_7) [C](#i43d04c9d26874e33802bdf64c458414a_7)[ontents](#i43d04c9d26874e33802bdf64c458414a_7)NOTE 2. ACQUISITIONS AND DISPOSITIONS Cobalt Business. In September 2021, FCX’s 56-percent-owned subsidiary, Koboltti Chemicals Holdings Limited (KCHL), completed the sale of its remaining cobalt business based in Kokkola, Finland (Freeport Cobalt) to Jervois Global Limited (Jervois) for $208 million (before post-closing adjustments), consisting of cash consideration of $173 million and 7 percent of Jervois common stock (valued at $35 million at the time of closing). At closing, Freeport Cobalt’s assets included cash of approximately $20 million and other net assets of $125 million. FCX recorded a gain of $60 million ($34 million to net income attributable to common stock) in 2021 associated with this transaction. In addition, KCHL will have the right to receive contingent consideration of up to $40 million based on the future performance of Freeport Cobalt. Any gain related to the contingent consideration will be recognized when received.
In fourth-quarter 2019, FCX completed the sale of its cobalt refinery in Kokkola, Finland, and related cobalt cathode precursor business (consisting of approximately $271 million of assets and $63 million of liabilities at the time of closing) to Umicore for total cash consideration of approximately $200 million, including approximately $50 million of working capital. FCX recorded a gain of $59 million in 2019 ($33 million to net loss attributable to common stock) associated with this transaction.
Following these transactions, FCX no longer has cobalt operations.
PT Smelting. On April 30, 2021, PT-FI acquired 14.5 percent of the outstanding common stock of PT Smelting, a smelter and refinery in Gresik, Indonesia, for $33 million, increasing its ownership interest from 25.0 percent to 39.5 percent. The remaining outstanding shares of PT Smelting continue to be owned by Mitsubishi Materials Corporation. PT-FI has continued to account for its investment in PT Smelting using the equity method since it does not have control over PT Smelting.
On November 30, 2021, PT-FI entered into a convertible loan agreement to fund the expansion of PT Smelting’s current capacity by 30 percent to 1.3 million metric tons of concentrate per year. Upon completion of the expansion project, targeted for year-end 2023, PT-FI’s loan will convert into PT Smelting equity resulting in a majority ownership interest and consolidation of PT Smelting in FCX’s consolidated financial statements.
Kisanfu Transaction. In December 2020, FCX completed the sale of its interests in the Kisanfu undeveloped project to a wholly owned subsidiary of China Molybdenum Co., Ltd. (CMOC) for $550 million, with after-tax net cash proceeds totaling $415 million. The Kisanfu project, located in the Democratic Republic of Congo, is an undeveloped cobalt and copper resource. FCX did not have any proven and probable mineral reserves associated with the Kisanfu project. FCX recorded a gain of $486 million in 2020 associated with this transaction.
Timok Transaction. In 2016, FCX sold an interest in the upper zone of the Timok exploration project in Serbia (the 2016 Transaction).
In December 2019, FCX completed the sale of its interest in the lower zone of the Timok exploration project to an affiliate of the purchaser in the 2016 Transaction, for cash consideration of $240 million at closing plus the right to future contingent payments of up to $150 million. These future contingent payments will be based on the future sale of products (as defined in the agreement) from the Timok lower zone. For a period of 12 months after the third anniversary of the initial sale of products from the Timok lower zone, the purchaser can settle, or FCX can demand payment of, such deferred payment obligation, in each case, for a total of $60 million. As these deferred payments are contingent upon future production (the Timok lower zone project is still pre-operational) and would result in gain recognition, no amounts were recorded upon the closing of the transaction. Subsequent recognition will be based on the gain contingency model, in which the consideration would be recorded in the period in which all contingencies are resolved and the gain is realized. This is expected to be when FCX (i) is provided periodic product sales information by the purchaser or (ii) gives notice to the purchaser or receives notice from the purchaser regarding the settlement of the deferred payments for $60 million.
In addition, in lieu of payment upon achievement of defined development milestones provided for in the 2016 Transaction, the purchaser agreed to pay $107 million in three installment payments of $45 million (collected in 2020), $50 million (collected in 2021), and $12 million by March 31, 2022. As a result of this transaction, FCX recorded a gain of $343 million in 2019, consisting of the cash consideration ($240 million) and the aggregate discounted amount of the three installment payments ($103 million).
124
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Shares issued in business combination value | 975.2 | SEC-NUM |
[Table of Contents](#i3d0ebbc4e2a2420f98ed7e6fe698936a_7) HASBRO, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
Disaggregation of revenuesThe Company disaggregates its revenues from contracts with customers by reportable segment: Consumer Products, Entertainment, and Wizards of the Coast and Digital Gaming. The Company further disaggregates revenues within its Consumer Products segment by major geographic region: North America, Europe, Latin America, and Asia Pacific; and within its Entertainment segment by category: Film & TV, Family Brands, and Music and Other. Finally, the Company disaggregates its revenues by brand portfolio into five brand categories: Franchise Brands, Partner Brands, Hasbro Gaming, Emerging Brands and TV/Film/Entertainment. We believe these collectively depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. See note 21 for additional information on disaggregation of revenues.In addition to the required disclosures below, see further discussion of the Company's revenue recognition policy in note 1.(3) Business CombinationOn December 30, 2019, the Company completed its acquisition of eOne, a global independent studio that specializes in the development, acquisition, production, distribution and sales of entertainment content. The aggregate purchase price of $4.6 billion was comprised of $3.8 billion of cash consideration for shares outstanding and $0.8 billion related to the redemption of eOne's outstanding senior secured notes and the payoff of eOne's revolving credit facility. The Company financed the acquisition with proceeds from the following debt and equity financings: (1) the issuance of senior unsecured notes in an aggregate principal amount of $2.4 billion in November 2019, (2) the issuance of 10.6 million shares of common stock at a public offering price of $95.00 per share in November 2019 (resulting in net proceeds of $975.2 million) and (3) $1.0 billion in term loans provided by a term loan agreement, which were borrowed on the date of closing. See note 11 for further discussion of the issuance of the senior unsecured notes and term loan agreement.eOne's results of operations and financial position have been included in the Company's consolidated financial statements and accompanying footnotes since the date of the acquisition, which was the beginning of the Company's fiscal year 2020. The acquisition was accounted for as a business combination under FASB Accounting Standards Codification Topic 805, Business Combinations (“Topic 805”). Pursuant to Topic 805, the Company allocated the eOne purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, December 30, 2019. The excess of the purchase price over those fair values was recorded to goodwill.89
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Additions (adjustments) | 4.0 | SEC-NUM |
performance to peer companies, based on several measures, including price to trailing 12-month earnings, price to projected earnings, price to tangible net worth and return on equity.A Guideline Transaction Method was not used in the valuations due to the impact of COVID-19 on the markets in 2020 and the absence of sufficient observable transactions post COVID-19.While DDM and Guideline Company valuation methodologies were considered in assessing fair value, the DDM was weighted more heavily since management believes that expected cash flows are the most important factor in the valuation of a business enterprise, and also considering the lack of directly-comparable peer companies. Based on the quantitative assessment performed as of October 1, 2021, the Company concluded that the estimated fair values of each reporting unit exceeded their respective book values and therefore determined that goodwill was not impaired.A roll forward of goodwill by reportable segment is provided below as of and for the years indicated:
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| | | | | | | | | | | | | | | | | | | | |
| | Global Lifestyle (1) | | Global Housing | | | | Consolidated |
| Balance at December 31, 2019 (2) | $ | 1,825.9 | | | $ | 379.5 | | | | | $ | 2,205.4 | |
| Acquisitions (3) | 374.6 | | | — | | | | | 374.6 | |
| | | | | | | | |
| Foreign currency translation and other | 9.3 | | | — | | | | | 9.3 | |
| Balance at December 31, 2020 (2) | 2,209.8 | | | 379.5 | | | | | 2,589.3 | |
| Acquisitions (3) | (10.4) | | | — | | | | | (10.4) | |
| | | | | | | | |
| Foreign currency translation and other | (7.3) | | | — | | | | | (7.3) | |
| Balance at December 31, 2021 (2) | $ | 2,192.1 | | | $ | 379.5 | | | | | $ | 2,571.6 | |
(1)As of December 31, 2021, $698.7 million, $1,420.5 million and $72.9 million of goodwill was assigned to the Connected Living, Global Automotive and Global Financial Services and Other reporting unit, respectively. As of December 31, 2020, $715.2 million, $1,421.3 million and $73.3 million of goodwill was assigned to the Connected Living, Global Automotive and Global Financial Services and Other reporting unit, respectively. (2)Consolidated goodwill reflects 1,405.9 million of accumulated impairment losses at December 31, 2021 and 2020, respectively, and $1,268.1 million of accumulated impairment losses at December 31, 2019. (3)Includes goodwill from the HYLA and AFAS acquisitions (refer to Note 3), as well as goodwill from several less significant transactions. The change during the year ended December 31, 2021, includes the application of measurement period adjustments, mainly related to the HYLA acquisition.
16. VOBA and Other Intangible Assets VOBAInformation about VOBA is as follows for the periods indicated:
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| | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Beginning balance | $ | 1,152.2 | | | $ | 1,993.7 | | | $ | 3,140.8 | |
| Additions (adjustments) | — | | | — | | | (4.0) | |
| Amortization, net of interest accrued | (567.9) | | | (835.7) | | | (1,121.0) | |
| Foreign currency translation and other | (0.9) | | | (5.8) | | | (22.1) | |
| Ending balance | $ | 583.4 | | | $ | 1,152.2 | | | $ | 1,993.7 | |
As of December 31, 2021, the outstanding VOBA balance is related to the 2018 acquisition of TWG within the Global Lifestyle segment. As of December 31, 2021, the estimated amortization of VOBA for the next five years and thereafter is as follows:
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| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Year | Amount |
| 2022 | $ | 322.5 | |
| 2023 | 177.8 | |
| 2024 | 76.2 | |
| 2025 | 3.3 | |
| 2026 | 1.4 | |
| Thereafter | 2.2 | |
| Total | $ | 583.4 | |
F-49
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System-Wide Offer Cap | 5,000 | SEC-NUM |
[Table of Contents](#i59ca7ab3cc784e42904d434b0008a7a9_10)Notes to Consolidated Financial Statements(Dollars in millions, unless otherwise noted)
Note 3 — Regulatory Mattersinfrastructure and the market structure for reliability services. The Texas legislature addressed these proposals by enacting a bill with a broad set of market reforms that, among other things, directed the PUCT to establish weatherization standards for electric generators within six months of enactment and gave the PUCT authority to impose administrative penalties if the new proposed standards, once adopted, are not met. On October 21, 2021, the PUCT adopted a rule change requiring generators by December 1, 2021 to complete a number of specified winter readiness preparations and to submit to ERCOT a report describing and certifying the completion of those preparations. The PUCT described these requirements as the first phase of its actions with respect to winter preparedness, which we completed timely, and will be followed by a second phase consisting of a year-round set of weather preparedness standards to be informed by a weather study conducted by ERCOT and submitted to the PUCT on December 15, 2021.The legislation also directs the PUCT to evaluate whether additional ancillary services are needed for reliability in the ERCOT power region to provide adequate incentives for dispatchable generation. Throughout 2021, we and others submitted various proposals to the PUCT with respect to a range of potential market reforms, including the implementation of additional ancillary service products as well as changes to the high system-wide offer cap and operating reserve demand curve, which remain pending. On December 2, 2021, the PUCT reduced ERCOT’s high system-wide offer cap to $5,000 per MWh.In February 2021, more than 70 local distribution companies (LDCs) and natural gas pipelines in multiple states throughout the mid-continent region, where we serve natural gas customers, issued operational flow orders (OFOs), curtailments or other limitations on natural gas transportation or use to manage the operational integrity of the applicable LDC or pipeline system. When in effect, gas transportation or use above these limitations is subject to significant penalties according to the applicable LDCs’ and natural gas pipelines’ tariffs. Gas transportation and supply in many states became restricted due to wells freezing and pipeline compression disruption, while demand was increasing due to the extreme cold temperatures, resulting in extremely high natural gas prices. Due to the extraordinary circumstances, many LDCs and natural gas pipelines have either voluntarily waived or have sought applicable regulatory approvals to waive the tariff penalties associated with the extreme weather event. During March 2021, three natural gas pipelines filed individual petitions with FERC requesting approval to waive OFO penalties. We also filed motions in March 2021 to intervene and filed comments in support of these FERC waiver requests. On March 25, 2021, FERC issued an order on one of the petitions approving a pipeline’s request for a limited waiver of penalties for February 15, 2021. On April 23, 2021, we and several other entities filed a request at FERC for rehearing of this order which was denied on May 24, 2021. We and the other entities filed an appeal of the rehearing of the order with the U.S. Court of Appeals for the D.C. Circuit on July 21, 2021. Additionally, we and the other entities filed a complaint requesting that FERC expand the order to include additional days of the weather event in February, from February 16 through February 19, 2021. On October 21, 2021, FERC denied the complaint finding that a pipeline has the discretion whether to waive penalties under its tariff, and on December 6, 2021 the related D.C. Circuit petition for review was withdrawn. During April 2021, FERC issued orders on the remaining petitions approving the requests to waive the penalties. During May 2021, an LDC filed a motion with the Kansas Corporation Commission (KCC) requesting the KCC to grant a waiver from the tariff and allow the LDC to reduce the amounts assessed by permitting the removal of a multiplier from the penalty calculation. On January 20, 2022, a unanimous settlement was filed with the KCC that amended previously filed October 8, 2021 and November 30, 2021 nonunanimous settlements which, if approved, would resolve this matter. We cannot reasonably predict the outcome of the KCC proceeding.Illinois Regulatory MattersClean Energy Law. On September 15, 2021, the Illinois Public Act 102-0662 was signed into law by the Governor of Illinois ("Clean Energy Law"). The Clean Energy Law establishes decarbonization requirements for Illinois as well as programs to support the retention and development of emissions-free sources of electricity. Among other things, the Clean Energy Law authorized the IPA to procure up to 54.5 million CMCs from qualifying nuclear plants for a five-year period beginning on June 1, 2022 through May 31, 2027. CMCs are credits for the carbon-free attributes of eligible nuclear power plants in PJM. Our Byron, Dresden, and Braidwood nuclear plants located in Illinois participated in the CMC procurement process and were awarded contracts that commit each plant to operate through May 31, 2027. Pursuant to these contracts, ComEd will procure CMCs based upon the number of MWhs produced annually by each plant, subject to minimum performance requirements. The price to be paid for each CMC was established through a competitive bidding process that included consumer-protection measures that capped the maximum acceptable bid amount and reduces CMC prices by an energy price index, the base residual auction capacity price in the ComEd zone of PJM, and the monetized value of any federal tax 96
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Number of taxing jurisdictions throughout the globe where we file tax returns on an annual basis | 270 | SEC-NUM |
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| | | | | | | | | | | | |
| PROVISION (BENEFIT) FOR INCOME TAXES | 2021 | 2020 | 2019 |
| Current | | | |
| U.S. Federal | $ | (1,347) | | $ | 865 | | $ | (22) | |
| Non - U.S. | 1,154 | | 1,276 | | 1,832 | |
| U.S. State | (85) | | 152 | | (373) | |
| Deferred | | | |
| U.S. Federal | (567) | | (1,898) | | (1,047) | |
| Non - U.S. | 608 | | (810) | | 59 | |
| U.S. State | (50) | | (72) | | 103 | |
| Total | $ | (286) | | $ | (487) | | $ | 552 | |
Income taxes paid were $1,330 million, $1,291 million and $2,228 million for the years ended December 31, 2021, 2020 and 2019, respectively, including payments reported in discontinued operations.
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| RECONCILIATION OF U.S. FEDERAL STATUTORY INCOME TAX RATE TO ACTUAL INCOME TAX RATE | 2021 | 2020 | 2019 |
| Amount | Rate | Amount | Rate | Amount | Rate |
| U.S. federal statutory income tax rate | $ | (773) | | 21.0 | % | $ | 1,254 | | 21.0 | % | $ | (11) | | 21.0 | % |
| Tax on global activities including exports | 155 | | (4.2) | | (47) | | (0.8) | | 505 | | (935.2) | |
| U.S. business credits(a) | (189) | | 5.1 | | (169) | | (2.8) | | (259) | | 479.6 | |
| Debt tender and related valuation allowances | 940 | | (25.5) | | — | | — | | — | | — | |
| Deductible stock and restructuring losses | (583) | | 15.8 | | (203) | | (3.4) | | (144) | | 266.7 | |
| Sale of Biopharma business | (5) | | 0.1 | | (1,447) | | (24.2) | | 633 | | (1,172.2) | |
| Goodwill impairments | — | | — | | 184 | | 3.1 | | 299 | | (553.7) | |
| All other – net(b)(c) | 169 | | (4.5) | | (59) | | (1.1) | | (471) | | 871.6 | |
| | 487 | | (13.2) | | (1,741) | | (29.2) | | 563 | | (1,043.2) | |
| Actual income tax rate | $ | (286) | | 7.8 | % | $ | (487) | | (8.2) | % | $ | 552 | | (1,022.2) | % |
(a)U.S. general business credits, primarily the credit for energy produced from renewable sources and the credit for research performed in the U.S. (b)For the year ended December 31, 2020, included $(140) million for the resolution of the IRS audit of our consolidated U.S. income tax returns for 2014-2015. For the year ended December 31, 2019, included $(378) million for the resolution of the IRS audit of our consolidated U.S. income tax returns for 2012-2013.(c)Included for each period, the expense or benefit for U.S. state taxes reported above in the consolidated (benefit) provision for income taxes, net of 21.0% federal effect.
UNRECOGNIZED TAX POSITIONS. Annually, we file over 3,000 income tax returns in over 270 global taxing jurisdictions. We are under examination or engaged in tax litigation in many of these jurisdictions. The IRS is currently auditing our consolidated U.S. income tax returns for 2016-2018. In December 2020, the IRS completed the audit of our consolidated U.S. income tax returns for 2014-2015. The Company recognized a continuing operations benefit of $140 million plus an additional net interest benefit of $96 million. In addition, the Company recorded a benefit in discontinued operations of $130 million of tax benefits and $25 million of net interest benefits. In June 2019, the IRS completed the audit of our consolidated U.S. income tax returns for 2012-2013. The Company recognized a continuing operations tax benefit of $378 million plus an additional net interest benefit of $107 million. The Company recorded an additional non-cash benefit in discontinued operations of $332 million of tax benefits and $46 million of net interest benefits. See Note 2 for further information.
In September 2021, GE resolved its dispute with the United Kingdom tax authority, HM Revenue & Customs (HMRC) in connection with interest deductions claimed by GE Capital for the years 2004-2015. As previously disclosed, HMRC had proposed to disallow interest deductions with a potential impact of approximately $1,100 million, which included a possible assessment of tax and reduction of deferred tax assets, not including interest and penalties. As part of the settlement, GE and HMRC agreed that a portion of the interest deductions claimed were disallowed, with no fault or blame attributed to either party. The resolution concluded the dispute in its entirety without interest or penalties. The adjustments result in no current tax payment to HMRC, but a deferred tax charge of $112 million as part of discontinued operations as a result of a reduction of available tax attributes, which had previously been recorded as deferred tax assets.
2021 FORM 10-K 72
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Damages sought | 1.0 | SEC-NUM |
[Table of Contents](#i1c7c95a3a35c4e5dafc8b646de4a8ff7_7)
Item 3. Legal Proceedings.
The Company and its subsidiaries are party to legal proceedings as described in [Note 11](#i1c7c95a3a35c4e5dafc8b646de4a8ff7_121) in Part II, Item 8, “Commitments and Contingencies,” and such disclosure is incorporated by reference into this Item 3, “Legal Proceedings.”
The Company's threshold for disclosing material environmental legal proceedings involving a government authority where potential monetary sanctions are involved is $1.0 million.
In addition, the Company and six of its subsidiaries are presently named as defendants in a number of lawsuits claiming various asbestos-related personal injuries, allegedly as a result of exposure to products manufactured with components that contained asbestos. These components were acquired from third party suppliers and were not manufactured by the Company or any of the defendant subsidiaries. To date, the majority of the Company’s settlements and legal costs, except for costs of coordination, administration, insurance investigation and a portion of defense costs, have been covered in full by insurance, subject to applicable deductibles. However, the Company cannot predict whether and to what extent insurance will be available to continue to cover these settlements and legal costs, or how insurers may respond to claims that are tendered to them. Asbestos-related claims have been filed in jurisdictions throughout the United States and the United Kingdom. Most of the claims resolved to date have been dismissed without payment. The balance of the claims have been settled for various immaterial amounts. Only one case has been tried, resulting in a verdict for the Company’s business unit. No provision has been made in the financial statements of the Company, other than for insurance deductibles in the ordinary course, and the Company does not currently believe the asbestos-related claims will have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.
Item 4. Mine Safety Disclosures.
Not applicable.19
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Remainder of 2022 | 4,144 | SEC-NUM |
[Table of Contents](#i77b271276a234b51923cb690f1158463_7)
Goodwill
The change in the carrying value of goodwill for the nine months ended September 30, 2022, categorized by reportable segments, is as follows (in thousands):
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| | Clear Aligner | | Systems and Services | | Total |
| Balance as of December 31, 2021 | $ | 112,208 | | | $ | 306,339 | | | $ | 418,547 | |
| Additions from acquisition | — | | | 8,729 | | | 8,729 | |
| Foreign currency translation adjustments | (6,694) | | | (42,966) | | | (49,660) | |
| Balance as of September 30, 2022 | $ | 105,514 | | | $ | 272,102 | | | $ | 377,616 | |
Intangible Long-Lived Assets
Acquired intangible long-lived assets were as follows, excluding intangibles that were fully amortized (in thousands):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Weighted Average Amortization Period (in years) | | Gross Carrying Amount as of September 30, 2022 | | AccumulatedAmortization | | AccumulatedImpairment Loss | | Net Carrying Value as of September 30, 2022 |
| Existing technology | 10 | | $ | 112,051 | | | $ | (30,589) | | | $ | (4,328) | | | $ | 77,134 | |
| Customer relationships | 10 | | 21,500 | | | (5,375) | | | — | | | 16,125 | |
| Trademarks and tradenames | 10 | | 17,200 | | | (5,925) | | | (4,179) | | | 7,096 | |
| Patents | 8 | | 6,511 | | | (5,090) | | | — | | | 1,421 | |
| | | | $ | 157,262 | | | $ | (46,979) | | | $ | (8,507) | | | 101,776 | |
| Foreign currency translation adjustments | | | | | | | | | (10,065) | |
| Total intangible assets, net 1 | | | | | | | | | $ | 91,711 | |
1 Also includes $33.5 million of fully amortized intangible assets related to customer relationships.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Weighted Average Amortization Period (in years) | | Gross CarryingAmount as of December 31, 2021 | | AccumulatedAmortization | | Accumulated Impairment Loss | | Net CarryingValue as ofDecember 31, 2021 |
| Existing technology | 10 | | $ | 104,531 | | | $ | (22,495) | | | $ | (4,328) | | | $ | 77,708 | |
| Customer relationships | 11 | | 55,000 | | | (25,891) | | | (10,751) | | | 18,358 | |
| Trademarks and tradenames | 10 | | 17,200 | | | (4,547) | | | (4,179) | | | 8,474 | |
| Patents | 8 | | 6,511 | | | (4,495) | | | — | | | 2,016 | |
| | | | $ | 183,242 | | | $ | (57,428) | | | $ | (19,258) | | | 106,556 | |
| Foreign currency translation adjustments | | | | | | | | | 3,153 | |
| Total intangible assets, net | | | | | | | | | $ | 109,709 | |
The total estimated annual future amortization expense for these acquired intangible assets as of September 30, 2022 is as follows (in thousands):
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| Fiscal Year Ending December 31, | | Amortization |
| Remainder of 2022 | | $ | 4,144 | |
| 2023 | | 16,501 | |
| 2024 | | 15,335 | |
| 2025 | | 14,959 | |
| 2026 | | 14,353 | |
| Thereafter | | 36,484 | |
| Total | | $ | 101,776 | |
16
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Percentage of labor costs relating to the deconstruction of old track | 20 | SEC-NUM |
CSX CORPORATION
PART IIItem 8. Financial Statements and Supplementary DataNOTE 6. Properties, continued
Capital ExpendituresThe Company’s capital investment includes purchased and self-constructed assets and property additions that substantially extend the service life or increase the utility of those assets. Indirect costs that can be specifically traced to capital projects are also capitalized. The Company is committed to maintaining and improving its existing infrastructure and expanding its network capacity for long-term growth. Rail operations are capital intensive and CSX accounts for these costs in accordance with GAAP and the Company’s capitalization policy. All properties are stated at historical cost less an allowance for accumulated depreciation.
The Company’s largest category of capital investment is the replacement of track assets and the acquisition or construction of new assets that enable CSX to enhance its operations or provide new capacity offerings to its customers. These construction projects are primarily completed by CSXT employees. Costs for track asset replacement and capacity projects that are capitalized include:
•labor costs, because many of the assets are self-constructed;•costs to purchase or construct new track or to prepare ground for the laying of track;•welding (rail, field and plant), which are processes used to connect segments of rail;•new ballast, which is gravel and crushed stone that holds track in line;•fuels and lubricants associated with tie, rail and surfacing work, which is the process of raising track to a designated elevation over an extended distance;•cross, switch and bridge ties, which are the braces that support the rails on a track;•gauging, which is the process of standardizing the distance between rails;•handling costs associated with installing rail, ties or ballast;•usage charge of machinery and equipment utilized in construction or installation; and•other track materials.
Labor is a significant cost in self-constructed track replacement work. CSXT engineering employees directly charge their labor to the track replacement project (the capitalized depreciable property). In replacing track, these employees concurrently perform deconstruction and installation of track material. Because of this concurrent process, CSX must estimate the amount of labor that is related to deconstruction versus installation. As a component of the depreciation study for road and track assets, management performs an analysis of labor costs related to the self-constructed track replacement work, which includes direct observation of track replacement processes. Through this analysis, CSX determined that approximately 20% of labor costs associated with track replacement is related to the deconstruction of old track, for which certain elements are expensed, and 80% is associated with the installation of new track, which is capitalized.
Capital investment related to locomotives and freight cars comprises the second largest category of the Company’s capital assets. This category includes purchases of locomotives and freight cars as well as certain equipment leases that are considered to be finance leases in accordance with the Leases Topic in the ASC. In addition, costs to modify or rebuild these assets are capitalized if the investment incurred extends the asset’s service life or improves utilization. Improvement projects must meet specified dollar thresholds to be capitalized and are reviewed by management to determine proper accounting treatment. Routine repairs, overhauls and other maintenance costs, for all asset categories, are expensed as incurred.
CSX 2021 Form 10-K p.74
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Secured Debt Outstanding Principal Balance Subject To LIBOR | 727,672 | SEC-NUM |
DAVITA INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)(unaudited)(dollars and shares in thousands, except per share data)
6. Long-term debtLong-term debt was comprised of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | As of June 30, 2022 |
| | June 30, 2022 | | December 31, 2021 | | Maturity date | | Interest rate | | Estimated fair value(1) |
| Senior Secured Credit Facilities: | | | | | | | | | |
| Term Loan A | $ | 1,553,125 | | | $ | 1,596,875 | | | 8/12/2024 | | LIBOR+1.75% | | $ | 1,537,594 | |
| Term Loan B-1 | 2,674,547 | | | 2,688,263 | | | 8/12/2026 | | LIBOR+1.75% | | $ | 2,497,358 | |
| Revolving line of credit | 425,000 | | | — | | | 8/12/2024 | | LIBOR+1.75% | | $ | 425,000 | |
| Senior Notes: | | | | | | | | | |
| 4.625% Senior Notes | 2,750,000 | | | 2,750,000 | | | 6/1/2030 | | 4.625 | % | | $ | 2,158,750 | |
| 3.75% Senior Notes | 1,500,000 | | | 1,500,000 | | | 2/15/2031 | | 3.75 | % | | $ | 1,074,375 | |
| Acquisition obligations and other notes payable(2) | 125,035 | | | 130,599 | | | 2022-2036 | | 5.24 | % | | $ | 125,035 | |
| Financing lease obligations(3) | 285,279 | | | 299,128 | | | 2023-2038 | | 4.54 | % | | |
| Total debt principal outstanding | 9,312,986 | | | 8,964,865 | | | | | | | |
| Discount, premium and deferred financing costs(4) | (50,560) | | | (56,685) | | | | | | | |
| | 9,262,426 | | | 8,908,180 | | | | | | | |
| Less current portion | (197,510) | | | (179,030) | | | | | | | |
| | $ | 9,064,916 | | | $ | 8,729,150 | | | | | | | |
| | | |
| --- | --- | --- |
| | | |
| |
(1)For the Company's senior secured credit facilities and senior notes, fair value estimates are based upon bid and ask quotes, typically a level 2 input. For acquisition obligations and other notes payable, the carrying values presented approximate their estimated fair values, based on estimates of their present values using level 2 interest rate inputs. (2)The interest rate presented for acquisition obligations and other notes payable is their weighted average interest rate based on the current fixed and variable interest rate components in effect as of June 30, 2022.(3)Financing lease obligations are measured at their approximate present values at inception. The interest rate presented is the weighted average discount rate embedded in financing leases outstanding.(4)As of June 30, 2022, the carrying amount of the Company's senior secured credit facilities have been reduced by a discount of $3,983 and deferred financing costs of $22,983, and the carrying amount of the Company's senior notes have been reduced by deferred financing costs of $38,558 and increased by a debt premium of $14,964. As of December 31, 2021, the carrying amount of the Company's senior secured credit facilities were reduced by a discount of $4,473 and deferred financing costs of $27,207, and the carrying amount of the Company's senior notes were reduced by deferred financing costs of $40,914 and increased by a debt premium of $15,909.During the first six months of 2022, the Company made regularly scheduled mandatory principal payments under its senior secured credit facilities totaling $43,750 on Term Loan A and $13,716 on Term Loan B-1.As of June 30, 2022, the Company's 2019 interest rate cap agreements have the economic effect of capping the Company's maximum exposure to LIBOR variable interest rate changes on equivalent amounts of the Company's floating rate debt, including all of Term Loan B-1 and a portion of Term Loan A. The remaining $727,672 outstanding principal balance of Term Loan A and the $425,000 balance outstanding on the revolving line of credit are subject to LIBOR-based interest rate volatility. These cap agreements are designated as cash flow hedges and, as a result, changes in their fair values are reported in other comprehensive income. The original premiums paid for the caps are amortized to debt expense on a straight-line basis over the term of each cap agreement starting from its effective date. These cap agreements do not contain credit risk-contingent features.
11
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Nondeductible transaction expenses | 0.5 | SEC-NUM |
CAESARS ENTERTAINMENT, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)Note 17. Income Taxes The components of the Company’s provision for income taxes for the years ended December 31, 2021, 2020 and 2019 are presented below.
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| Components of Income (Loss) Before Income Taxes | Years Ended December 31, |
| (In millions) | 2021 | | 2020 | | 2019 |
| United States | $ | (1,272) | | | $ | (1,608) | | | $ | 125 | |
| Outside of the U.S. | 3 | | | 2 | | | — | |
| | $ | (1,269) | | | $ | (1,606) | | | $ | 125 | |
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| Income Tax Provision (Benefit) | Years Ended December 31, |
| (In millions) | 2021 | | 2020 | | 2019 |
| United States | | | | | |
| Current | | | | | |
| Federal | $ | (1) | | | $ | (43) | | | $ | 31 | |
| State & Local | (2) | | | (24) | | | 14 | |
| Deferred | | | | | |
| Federal | (219) | | | 208 | | | 5 | |
| State & Local | (106) | | | (11) | | | (6) | |
| Outside of the U.S. | | | | | |
| Current | 2 | | | 2 | | | — | |
| Deferred | 43 | | | — | | | — | |
| | $ | (283) | | | $ | 132 | | | $ | 44 | |
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| Allocation of Income Tax Provision (Benefit) | Years Ended December 31, |
| (In millions) | 2021 | | 2020 | | 2019 |
| Income tax provision (benefit) applicable to: | | | | | |
| Income from operations | $ | (283) | | | $ | 132 | | | $ | 44 | |
| Discontinued operations | 19 | | | (9) | | | — | |
| Other comprehensive income | 3 | | | 8 | | | — | |
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2021, 2020 and 2019:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| Effective Income Tax Rate Reconciliation | Years Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Federal statutory rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
| State and local taxes | 4.2 | % | | 5.4 | % | | 5.5 | % |
| Stock compensation | 0.5 | % | | (0.1) | % | | 1.8 | % |
| Goodwill impairment and dispositions | — | % | | (1.6) | % | | 7.4 | % |
| Nondeductible transaction expenses | — | % | | (0.5) | % | | — | % |
| Nondeductible convertible notes costs | (3.3) | % | | (1.0) | % | | — | % |
| Decrease in uncertain tax positions | 0.4 | % | | 0.9 | % | | — | % |
| Change in tax rates from change in tax law | (1.2) | % | | — | % | | — | % |
| Deferred tax benefit of foreign subsidiaries held for sale | — | % | | 1.0 | % | | — | % |
| Valuation allowance | 2.6 | % | | (33.9) | % | | 1.8 | % |
| Deferred tax recognition on life insurance | (1.3) | % | | — | % | | — | % |
| Tax credits | 0.4 | % | | 0.1 | % | | (1.1) | % |
| Other | (1.0) | % | | 0.5 | % | | (1.2) | % |
| Effective income tax rate | 22.3 | % | | (8.2) | % | | 35.2 | % |
[Table of Contents](#i37dfc5eabc12461dbfc5ef573d80947e_7)109
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Business combination, consideration transferred, equity interests issued and issuable | 13.1 | SEC-NUM |
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Notes to Consolidated Financial Statements | [Table of Contents](#if18581573a6045f6b6e889320c9d1887_7) |
Note 13—Cash Flow Information
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| | Millions of Dollars |
| | Six Months EndedJune 30 |
| Cash Payments | 2022 | 2021 |
| Interest | $ | 486 | | 464 | |
| Income taxes | 3,942 | | 107 | |
| | | |
| Net Sales (Purchases) of Investments | | |
| Short-term investments purchased | $ | (1,253) | | (5,439) | |
| Short-term investments sold | 613 | | 6,842 | |
| Long-term investments purchased | (510) | | (149) | |
| Long-term investments sold | 46 | | 48 | |
| | $ | (1,104) | | 1,302 | |
In the first quarter of 2021, we acquired Concho in an all-stock transaction for $13.1 billion. In connection with this transaction, we acquired cash of $382 million, which is included in "Cash Flows From Investing Activities" on our consolidated statement of cash flows.
Note 14—Employee Benefit PlansPension and Postretirement Plans
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Millions of Dollars |
| | Pension Benefits | | Other Benefits |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | U.S. | | Int'l. | | U.S. | | Int'l. | | | | |
| Components of Net Periodic Benefit Cost | | | | | | | | | | | |
| Three Months Ended June 30 | | | | | | | | | | | |
| Service cost | $ | 16 | | | 13 | | | 18 | | | 16 | | | 1 | | | 1 |
| Interest cost | 12 | | | 21 | | | 15 | | | 20 | | | 1 | | | 1 | |
| Expected return on plan assets | (13) | | | (34) | | | (20) | | | (30) | | | — | | | — | |
| Amortization of prior service credit | — | | | — | | | — | | | — | | | (10) | | | (10) | |
| Recognized net actuarial loss | 5 | | | 2 | | | 12 | | | 8 | | | — | | | 1 | |
| Settlements | 18 | | | — | | | 42 | | | — | | | — | | | — | |
| Net periodic benefit cost | $ | 38 | | | 2 | | | 67 | | | 14 | | | (8) | | | (7) | |
| | | | | | | | | | | | |
| Six Months Ended June 30 | | | | | | | | | | | |
| Service cost | $ | 32 | | | 26 | | | 39 | | | 31 | | | 1 | | | 1 | |
| Interest cost | 24 | | | 42 | | | 28 | | | 40 | | | 2 | | | 2 | |
| Expected return on plan assets | (26) | | | (68) | | | (44) | | | (60) | | | — | | | — | |
| Amortization of prior service credit | — | | | — | | | — | | | — | | | (20) | | | (19) | |
| Recognized net actuarial loss | 11 | | | 4 | | | 27 | | | 16 | | | — | | | 1 | |
| Settlements | 22 | | | — | | | 44 | | | — | | | — | | | — | |
| Curtailments | — | | | — | | | 12 | | | — | | | — | | | — | |
| Special Termination Benefits | — | | | — | | | 9 | | | — | | | — | | | — | |
| Net periodic benefit cost | $ | 63 | | | 4 | | | 115 | | | 27 | | | (17) | | | (15) | |
| | | | | | | | | |
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| | | | | | | | | |
| 25 | ConocoPhillips 2022 Q2 10-Q | |
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Repayment of debt | 11,542 | SEC-NUM |
[Table of Contents](exhibit311q32022.htm)EPAM SYSTEMS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited) (In thousands)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2022 | | 2021 |
| Cash flows from operating activities: | | | |
| Net income | $ | 264,377 | | | $ | 339,373 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization expense | 69,126 | | | 59,804 | |
| Operating lease right-of-use assets amortization expense | 37,336 | | | 46,693 | |
| Bad debt expense | 12,888 | | | 2,573 | |
| Deferred taxes | (54,851) | | | (6,948) | |
| Stock-based compensation expense | 68,292 | | | 77,638 | |
| Unrealized loss on derivative | 20,469 | | | — | |
| Impairment charges | 21,212 | | | — | |
| Other | 63,914 | | | 4,312 | |
| Changes in assets and liabilities: | | | |
| Trade receivables and contract assets | (196,675) | | | (232,710) | |
| Prepaid and other assets | (7,787) | | | (8,768) | |
| Accounts payable | 8,769 | | | (6,468) | |
| Accrued expenses and other liabilities | (7,100) | | | 86,822 | |
| Operating lease liabilities | (41,395) | | | (48,158) | |
| Income taxes payable | 19,460 | | | (26,450) | |
| Net cash provided by operating activities | 278,035 | | | 287,713 | |
| Cash flows from investing activities: | | | |
| Purchases of property and equipment | (60,134) | | | (54,884) | |
| Purchases of short-term investments | (60,000) | | | — | |
| Proceeds from short-term investments | — | | | 60,000 | |
| Acquisition of business, net of cash acquired (Note 3) | (10,530) | | | (160,964) | |
| Purchases of non-marketable securities | (1,625) | | | (2,544) | |
| Other investing activities, net | (19,499) | | | (100) | |
| Net cash used in investing activities | (151,788) | | | (158,492) | |
| Cash flows from financing activities: | | | |
| Proceeds from issuance of stock under the employee incentive programs | 31,368 | | | 20,176 | |
| Payments of withholding taxes related to net share settlements of restricted stock units | (22,101) | | | (34,108) | |
| Proceeds from debt | 4,114 | | | — | |
| Repayment of debt | (11,542) | | | — | |
| Payment of contingent consideration for previously acquired business | (6,626) | | | (797) | |
| Purchase of noncontrolling interest | (2,254) | | | — | |
| Other financing activities, net | (3,025) | | | 231 | |
| Net cash used in financing activities | (10,066) | | | (14,498) | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (75,876) | | | (12,691) | |
| Net increase in cash, cash equivalents and restricted cash | 40,305 | | | 102,032 | |
| Cash, cash equivalents and restricted cash, beginning of period | 1,449,347 | | | 1,323,533 | |
| Cash, cash equivalents and restricted cash, end of period | $ | 1,489,652 | | | $ | 1,425,565 | |
8
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Payable balance | 217 | SEC-NUM |
CSX CORPORATION
PART IIItem 8. Financial Statements and Supplementary DataNOTE 15. Investment in Affiliates and Related-Party Transactions, continued
The following table discloses amounts related to Conrail. All amounts in the table below are included in purchased services and other expenses on the Company’s consolidated income statements.
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | Fiscal Years |
| (Dollars in Millions) | 2021 | | 2020 | | 2019 |
| | | | | | |
| Rents, fees and services | $ | 128 | | | $ | 126 | | | $ | 119 | |
| Purchase price amortization and other | 4 | | | 4 | | | 4 | |
| Equity earnings of Conrail | (44) | | | (49) | | | (42) | |
| Total Conrail Expense | $ | 88 | | | $ | 81 | | | $ | 81 | |
As required by the Related Party Disclosures Topic in the ASC, the Company has disclosed amounts below owed to Conrail, or its subsidiaries, representing liabilities under the operating, equipment and shared area agreements with Conrail. In 2014, the Company executed two promissory notes with a subsidiary of Conrail which were included in long-term debt on the consolidated balance sheets. In December 2020, the Company completed a non-cash conversion of its existing payable balance of approximately $217 million and $224 million, 2.89% notes due 2044 into new notes. The new notes for operation of the shared asset area are $441 million, 1.31% notes due 2050. Interest expense from these promissory notes was $6 million in each 2021, 2020 and 2019.
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | December | | December |
| (Dollars in Millions) | 2021 | | 2020 |
| Balance Sheet Information: | | | |
| CSX accounts payable to Conrail | $ | 100 | | | $ | 50 | |
| Promissory notes payable to Conrail subsidiary | | | |
| 1.31% CSX Promissory Note due December 2050 | 73 | | | 73 | |
| 1.31% CSXT Promissory Note due December 2050 | 368 | | | 368 | |
| | | | |
| | | | |
TTX Company TTX Company ("TTX") is a privately-held corporation engaged in the business of providing its owner-railroads with standardized fleets of intermodal, automotive and general use railcars at time and mileage rates. CSX owns about 20 percent of TTX's common stock, and the remaining is owned by the other leading North American railroads and their affiliates. Pursuant to the Investments-Equity Method topic in the ASC, CSX applies the equity method of accounting to its investment in TTX.
CSX 2021 Form 10-K p.103
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Covenant compliance, actual leverage ratio | 2.84 | SEC-NUM |
[Table of Contents](#i4552998170a04ab690e0e4bebd2d8dfd_7)
FMC CORPORATIONNotes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| (in Millions) | September 30, 2022 | | December 31, 2021 |
| Short-term foreign debt (1) | $ | 80.1 | | | $ | 112.2 | |
| Commercial paper (2) | 660.3 | | | 244.1 | |
| Total short-term debt | $ | 740.4 | | | $ | 356.3 | |
| Current portion of long-term debt | 85.9 | | | 84.5 | |
| Total short-term debt and current portion of long-term debt (3) | $ | 826.3 | | | $ | 440.8 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)At September 30, 2022, the average effective interest rate on the borrowings was 16.8 percent.(2)At September 30, 2022, the average effective interest rate on the borrowings was 3.52 percent.(3)Based on cash generated from operations, our existing liquidity facilities, which includes the revolving credit agreement with the option to increase capacity up to $2.75 billion, and our continued access to debt capital markets, we have adequate liquidity to meet any of the company's debt obligations in the near term.
Long-term debt:
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| (in Millions) | September 30, 2022 | | | | |
| Interest Rate Percentage | | MaturityDate | | September 30, 2022 | | December 31, 2021 |
| Pollution control and industrial revenue bonds (less unamortized discounts of $0.1 and $0.1, respectively) | 6.45% | | 2032 | | $ | 49.9 | | | $ | 49.9 | |
| Senior notes (less unamortized discount of $0.6 and $0.7, respectively) | 3.20% - 4.50% | | 2024 - 2049 | | 1,899.4 | | | 1,899.3 | |
| | | | | | | | |
| 2021 Term Loan Facility | 4.15% | | 2024 | | 800.0 | | | 800.0 | |
| Revolving Credit Facility (1) | 5.80% | | 2027 | | — | | | — | |
| | | | | | | | |
| Foreign debt | 0% - 15.30% | | 2023 - 2024 | | 85.9 | | | 84.7 | |
| Debt issuance cost | | | | | (16.8) | | | (17.7) | |
| Total long-term debt | | | | | $ | 2,818.4 | | | $ | 2,816.2 | |
| Less: debt maturing within one year | | | | | 85.9 | | | 84.5 | |
| Total long-term debt, less current portion | | | | | $ | 2,732.5 | | | $ | 2,731.7 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)Letters of credit outstanding under our Revolving Credit Facility totaled $160.0 million and available funds under this facility were $1,179.7 million at September 30, 2022.
Revolving Credit Facility and Term Loan AmendmentsOn June 17, 2022, we amended our Revolving Credit Facility and on June 27, 2022 we amended our 2021 Term Loan Agreement. The Revolving Credit Facility Amendment primarily increased the borrowing capacity from $1.5 billion to $2 billion and extended the maturity date by an additional year to 2027. Both agreements were amended to transition from a reference rate using the LIBOR benchmark to a reference rate using a Term SOFR benchmark.
Deferred financing fees totaling $1.5 million associated with both amendments have been deferred and are being recognized to interest expense over the life of the agreements.
CovenantsAmong other restrictions, our Revolving Credit Facility and 2021 Term Loan Facility contain financial covenants applicable to FMC and its consolidated subsidiaries related to leverage (measured as the ratio of debt to adjusted earnings) and interest coverage (measured as the ratio of adjusted earnings to interest expense). Our actual leverage for the four consecutive quarters ended September 30, 2022 was 2.84, which is below the maximum leverage of 3.50 at September 30, 2022. As amended pursuant to the Revolving Credit Agreement discussed within our 2021 Form 10-K, the maximum leverage ratio stepped down to 3.50 for the period ending December 31, 2021 and future quarters thereafter. Our actual interest coverage for the four consecutive quarters ended September 30, 2022 was 9.35, which is above the minimum interest coverage of 3.50. We were in compliance with all covenants at September 30, 2022.
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Proceeds from Sale of Machinery and Equipment | 128 | SEC-NUM |
FORD MOTOR COMPANY AND SUBSIDIARIESNOTES TO THE FINANCIAL STATEMENTSNOTE 21. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES (Continued)
Other Global Redesign Actions. In 2018, we announced our plan to end production at the Ford Aquitaine Industries plant in Bordeaux, France. We ceased production and closed the facility in July 2019. In March 2019, we announced our plan to phase-out the production of the C-Max at the Saarlouis Body and Assembly Plant in Germany. We ceased production of the C-Max in June 2019. In March 2021, we announced our plan to phase-out the production of the Mondeo at the Valencia Plant in Spain.
In addition, we are continuing to reduce our global workforce and take other restructuring actions.
The following table summarizes the activities for the years ended December 31, which are recorded in Other liabilities and deferred revenue (in millions):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| | | 2020 | | 2021 |
| Beginning balance | | $ | 734 | | | $ | 1,732 | |
| Changes in accruals (a) | | 1,598 | | | 1,150 | |
| Payments | | (631) | | | (1,883) | |
| Foreign currency translation | | 31 | | | (49) | |
| Ending balance | | $ | 1,732 | | | $ | 950 | |
\_\_\_\_\_\_\_\_\_\_(a) Excludes pension costs of $268 million and $156 million in 2020 and 2021, respectively.
We recorded $1.4 billion of non-cash charges in 2019 for the impairment of our India Automotive operations, accelerated depreciation, and other items. In 2020, we recorded $1.4 billion of non-cash charges related to the write-off of certain tax and other assets in South America, accelerated depreciation, and other items. In addition, we recognized a pre-tax net gain on sale of assets in Brazil and Russia of $39 million, with cash proceeds of $128 million. In 2021, we recorded $739 million for accelerated depreciation and other non-cash items.
We estimate that we will incur about $2 billion in total charges in 2022 related to the actions above, primarily attributable to employee separations and dealer and supplier settlements. We continue to review our global businesses and may take additional restructuring actions in markets where a path to sustained profitability is not feasible when considering the capital allocation required for those markets.
United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) Voluntary Separation Packages
As agreed in the collective bargaining agreement ratified in November 2019, during the first quarter of 2020, we offered voluntary separation packages to our UAW hourly workforce who were eligible for normal or early retirement, and recorded associated costs of $201 million in Cost of sales. All separations occurred during 2020.
Ford Credit
In June 2021, Ford Credit announced the plan of its subsidiaries in Brazil and Argentina to cease originating receivables by the end of 2021 and begin the process of selling or otherwise winding down their operations in those markets. We recorded approximately $11 million related to employee separation costs in Ford Credit interest, operating, and other expenses, the majority of which was paid in 2021.
Accumulated foreign currency translation losses included in Accumulated other comprehensive income/(loss) at December 31, 2021 of $379 million are associated with Ford Credit’s investments in Brazil and Argentina that it no longer plans to operate. We expect to reclassify these losses to income upon sale, transfer, or substantially complete liquidation of Ford Credit’s investments, which may occur over multiple reporting periods. In the fourth quarter of 2021, we recognized a $14 million gain on the liquidation of an entity in Brazil. The timing for the completion of the remaining actions is uncertain, as they may be subject to regulatory approval. We expect the majority of losses to be recognized in 2022.
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Total debt outstanding | 13,918 | SEC-NUM |
Debt Repayment Schedule As of December 31, 2021, the outstanding debt repayment schedule is as follows (in millions):
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| --- | --- | --- | --- | --- | --- |
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| 2022 | $ | 1,521 | |
| 2023 | 2,200 | |
| 2024 | — | |
| 2025 | 1,250 | |
| 2026 | — | |
| Thereafter | 9,100 | |
| Principal amounts repayable | 14,071 | |
| Debt issuance costs | (86) | |
| Unamortized balance discounts on bonds, net | (67) | |
| Total debt outstanding | $ | 13,918 | |
11.Share-Based Compensation The non-cash compensation expenses recognized in our consolidated statements of income for stock options, restricted stock and under our employee stock purchase plan were $188 million, $139 million and $139 million in 2021, 2020 and 2019, respectively, net of $13 million, $12 million and $14 million, respectively, that was capitalized as software development costs. As of December 31, 2021, we had 31.6 million shares in total under various equity plans available for future issuance as stock option and restricted stock awards. This includes the expense related to the Bakkt Incentive Units, described below.Stock Option Plans Stock options are granted with an exercise price equal to the fair value of our common stock on the grant date. We may grant, under provisions of the plans, both incentive stock options and nonqualified stock options. The options generally vest over three or four years and may generally be exercised up to ten years after the date of grant, but generally expire either 14 or 60 days after termination of employment. The shares of common stock issued under our stock option plans are made available from authorized and unissued common stock or treasury shares. The fair value is based on our closing stock price on the date of grant as well as certain other assumptions. Compensation expense arising from option grants is recognized ratably over the vesting period based on the grant date fair value, net of estimated forfeitures. The following is a summary of our stock option activity:
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| | Number of Options(in thousands) | | Weighted Average Exercise Price per Option |
| Outstanding at January 1, 2019 | 3,610 | | | $ | 46.44 | |
| Granted | 493 | | | 76.16 | |
| Exercised | (598) | | | 38.96 | |
| Forfeited | (4) | | | 77.58 | |
| Outstanding at December 31, 2019 | 3,501 | | | 51.87 | |
| Granted | 413 | | | 92.63 | |
| Exercised | (723) | | | 42.88 | |
| Forfeited | (44) | | | 75.81 | |
| Outstanding at December 31, 2020 | 3,147 | | | 58.96 | |
| Granted | 310 | | | 114.19 | |
| Exercised | (493) | | | 34.80 | |
| Forfeited | — | | | — | |
| Outstanding at December 31, 2021 | 2,964 | | | 68.77 | |
Details of stock options outstanding as of December 31, 2021 are as follows:118
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Amount recognized in other comprehensive income on interest rate swaps contracts, net of tax | 50.2 | SEC-NUM |
THE COOPER COMPANIES, INC. AND SUBSIDIARIESNotes to Consolidated Condensed Financial Statements(Unaudited)
The following table details the changes in accumulated other comprehensive income:
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| (In millions) | | Amount |
| Beginning balance gain as of October 31, 2021 | | $ | 17.2 | |
| Amount recognized in other comprehensive income on interest rate swap contracts, gross ($50.2 million, net of tax) | | 66.3 | |
| Amount reclassified from other comprehensive income into earnings, gross ($2.5 million, net of tax) | | 3.3 | |
| Ending balance gain as of April 30, 2022 | | $ | 86.8 | |
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Less: Imputed interest | 9 | SEC-NUM |
The right-of-use assets related to operating leases and the current and long-term portions of operating lease liabilities were included in Other assets, Accrued expenses and Other liabilities, respectively, in the Statement of Financial Position. The weighted-average discount rate was based on the incremental borrowing rate of the Company and its subsidiaries. As of December 31, 2021, future maturities of operating lease liabilities for the twelve months ending December 31 were as follows:
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| In millions | |
| 2022 | $ | 64 | |
| 2023 | 51 | |
| 2024 | 36 | |
| 2025 | 20 | |
| 2026 | 13 | |
| 2027 and future years | 19 | |
| Total future minimum lease payments | 203 | |
| Less: Imputed interest | (9) | |
| Operating lease liabilities | $ | 194 | |
(11) Debt
Total debt as of December 31, 2021 and 2020 was as follows:
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| In millions | 2021 | | 2020 |
| Short-term debt | $ | 778 | | | $ | 350 | |
| Long-term debt | 6,909 | | | 7,772 | |
| Total debt | $ | 7,687 | | | $ | 8,122 | |
Short-term debt— Short-term debt represents obligations with a maturity date of one year or less and is stated at cost which approximates fair value. Short-term debt also includes current maturities of long-term debt that have been reclassified to short-term. Short-term debt as of December 31, 2021 and 2020 consisted of the following:
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| In millions | 2021 | | 2020 |
| Current maturities of long-term debt | $ | 568 | | | $ | 350 | |
| Commercial paper | 210 | | | — | |
| Total short-term debt | $ | 778 | | | $ | 350 | |
As of December 31, 2021, short-term debt included $568 million related to the 1.75% Euro notes due May 20, 2022 and commercial paper of $210 million. As of December 31, 2020, short-term debt included $350 million related to the 3.375% notes due September 15, 2021, which were redeemed in full on June 15, 2021. There was no commercial paper outstanding as of December 31, 2020.
The Company may issue commercial paper to fund general corporate needs, share repurchases, and small and medium-sized acquisitions. During the third quarter of 2019, the Company entered into a $2.5 billion, five-year revolving credit facility with a termination date of September 27, 2024, which is available to provide additional liquidity, including to support the potential issuances of commercial paper. On September 22, 2021, due to the anticipated LIBOR transition, the Company agreed to suspend its right to borrow in Euro, British Pounds Sterling and Japanese Yen currencies under the revolving credit facility, effective December 31, 2021. The Company may continue to borrow in U.S. Dollars under the credit facility. This change is not expected to have a significant impact on the Company's liquidity or its commercial paper program. No amounts were outstanding under the revolving credit facility as of December 31, 2021. The Company was also in compliance with the financial covenants of the revolving credit facility as of December 31, 2021, which included a minimum interest coverage ratio. The weighted-average interest rate on commercial paper was 0.1% for the twelve months ended December 31, 2021. The Company did not have any commercial paper outstanding during 2020.
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Loss Contingency, Damages Sought, Value | 837.8 | SEC-NUM |
[Table of Contents](#i02bedaa3ef9a402693e3fc0f0d740b61_7)ContingenciesFrom time to time, we are involved in litigation that we believe is of the type common to companies engaged in our lines of business, including commercial disputes, employment issues, tax disputes and disputes involving claims by third parties that our activities infringe their patent, copyright, trademark or other IP rights, as well as regulatory investigations or inquiries. Legal proceedings and regulatory investigations or inquiries are often complex, may require the expenditure of significant funds and other resources, and the outcome of such proceedings is inherently uncertain, with material adverse outcomes possible. IP property claims generally involve the demand by a third-party that we cease the manufacture, use or sale of the allegedly infringing products, processes or technologies and/or pay substantial damages or royalties for past, present and future use of the allegedly infringing IP. Claims that our products or processes infringe or misappropriate any third-party IP rights (including claims arising through our contractual indemnification of our customers) often involve highly complex, technical issues, the outcome of which is inherently uncertain. Moreover, from time to time, we pursue litigation to assert our IP rights. Regardless of the merit or resolution of any such litigation, complex IP litigation is generally costly and diverts the efforts and attention of our management and technical personnel.Lawsuits Relating to California Institute of TechnologyCalifornia Institute of Technology (“Caltech“) filed a complaint against Broadcom and Apple Inc. on May 26, 2016 in the United States District Court for the Central District of California (the “U.S. Central District Court”), and an amended complaint adding Cypress Semiconductor Corporation as a defendant on August 15, 2016. The amended complaint alleged that chips that support certain error correction codes as specified in IEEE Standards 802.11n and 802.11ac willfully infringed four patents related to error correction coding: U.S. Patent Nos. 7,116,710; 7,421,032; 7,916,781; and 8,284,833 (“’833 patent”). Prior to trial, Caltech dismissed its claims against Cypress and withdrew its infringement allegations as to ‘833 patent. The complaint sought a preliminary and permanent injunction, damages, pre- and post-judgment interest, as well as attorneys’ fees, costs, and expenses. The trial was held in January 2020, and on January 29, 2020, the jury issued its verdict finding infringement and awarding Caltech past damages of $270.2 million from Broadcom and $837.8 million from Apple, for which Apple is seeking indemnification from Broadcom. On August 3, 2020, the U.S. Central District Court issued its judgment, awarding Caltech past damages in the amounts awarded by the jury, as well as pre- and post-judgment interest. Additionally, the U.S. Central District Court awarded Caltech an unspecified amount of ongoing royalties to be determined after the anticipated appeals process is resolved. Neither the jury nor the U.S. Central District Court found willful infringement, which if it had, could have resulted in enhanced damages up to three times the amount awarded. Broadcom and Apple appealed to the United States Court of Appeals for the Federal Circuit (the “Federal Circuit Court”) and oral arguments were heard on September 1, 2021. The Federal Circuit Court issued its decision on February 4, 2022. While the Federal Circuit Court affirmed infringement of two patents, both of which expired in August 2020, it did not address all issues and ordered a new trial on damages and on the infringement of the 7,916,781 patent, which also expired in August 2020. The Federal Circuit Court denied the petition for rehearing filed by Broadcom and Apple, and remanded the case to the U.S. Central District Court.We believe that the evidence and the law do not support the U.S. Central District Court’s findings of infringement. We cannot reasonably estimate the ultimate outcome as the Federal Circuit Court vacated the above damages, and a number of factors (including a retrial at the lower court and further appeals) could significantly change the assessment of damages. As a result, we have not recorded a reserve with respect to this litigation, in accordance with the applicable accounting standards.Other MattersIn addition to the matters discussed above, we are currently engaged in a number of legal actions in the ordinary course of our business.Contingency AssessmentWe do not believe, based on currently available facts and circumstances, that the final outcome of any pending legal proceedings or ongoing regulatory investigations, taken individually or as a whole, will have a material adverse effect on our condensed consolidated financial statements. However, lawsuits may involve complex questions of fact and law and may require the expenditure of significant funds and other resources to defend. The results of litigation or regulatory investigations are inherently uncertain, and material adverse outcomes are possible. From time to time, we may enter into confidential discussions regarding the potential settlement of such lawsuits. Any settlement of pending litigation could require us to incur substantial costs and other ongoing expenses, such as future royalty payments in the case of an IP dispute.During the periods presented, no material amounts have been accrued or disclosed in the accompanying condensed consolidated financial statements with respect to loss contingencies associated with any other legal proceedings or regulatory investigations, as potential losses for such matters are not considered probable and ranges of losses are not reasonably estimable. These matters are subject to many uncertainties and the ultimate outcomes are not predictable. There can be no assurances that the actual amounts required to satisfy any liabilities arising from the matters described above will not have a material adverse effect on our condensed consolidated financial statements.22
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Power of building | 27 | SEC-NUM |
[Table of Contents](#i1d117440a79147f69db4408bc4f22334_10)Part IV
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IRON MOUNTAIN INCORPORATEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)DECEMBER 31, 2021(In thousands, except share and per share data)5. INVESTMENTS
WEB WERKS JOINT VENTURE In April 2021, we closed on an agreement to form a joint venture (the "Web Werks JV") with the shareholders of Web Werks India Private Limited ("Web Werks"), a colocation data center provider in India. In connection with the formation of the Web Werks JV, we made an initial investment of approximately 3,750,000 Indian rupees (or approximately $50,100, based upon the exchange rate between the United States dollar and Indian rupee as of the closing date of the initial investment) in exchange for a noncontrolling interest in the form of convertible preference shares in the Web Werks JV (the “Initial Web Werks JV Investment”). These shares are convertible into a to-be-determined amount of common shares based upon the achievement of EBITDA targets for the Web Werks JV's fiscal year ending March 31, 2022.Under the terms of the Web Werks JV shareholder agreement, we are required to make additional investments over a period ending May 2023 totaling approximately 7,500,000 Indian rupees (or approximately $100,000, based upon the exchange rate as of December 31, 2021 between the United States dollar and Indian rupee). FRANKFURT JOINT VENTURE In October 2020, we formed a joint venture (the “Frankfurt JV”) with AGC Equity Partners (“AGC”) to design and develop a 280,000 square foot, 27 megawatt, hyperscale data center currently under development in Frankfurt, Germany (the “Frankfurt JV Transaction”). AGC acquired an 80% equity interest in the Frankfurt JV, while we retained a 20% equity interest (the "Frankfurt JV Investment"). The total cash consideration for the 80% equity interest sold to AGC was approximately $105,000. We received approximately $93,300 (gross of certain transaction expenses) upon the closing of the Frankfurt JV, and we are entitled to receive an additional approximately $11,700 upon the completion of development of the data center, which we expect to occur in the third quarter of 2022. In connection with the Frankfurt JV Transaction, we also entered into agreements whereby we will earn various fees, including property management and construction and development fees, for services we are providing to the Frankfurt JV. As a result of the Frankfurt JV Transaction, we recognized a gain during the year ended December 31, 2020 of approximately $24,100, representing the excess of the fair value of the consideration received over the carrying value of the assets, which consisted primarily of land and land development assets which were previously included within our Global Data Center Business segment. MAKESPACE JOINT VENTUREIn March 2019, we formed the MakeSpace JV. In the second quarter of 2020, we committed to participate in a round of equity funding for the MakeSpace JV whereby we contributed approximately $36,000 of the $45,000 being raised in installments between May 2020 through October 2021. JOINT VENTURE SUMMARYThe joint ventures, referred to above, are accounted for as equity method investments and are presented as a component of Other within Other assets, net in our Consolidated Balance Sheets. The carrying values and equity interests in our joint ventures at December 31, 2021 and 2020 are as follows:
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| | | DECEMBER 31, 2021 | | DECEMBER 31, 2020 |
| | | CARRYING VALUE | | EQUITY INTEREST | | CARRYING VALUE | | EQUITY INTEREST |
| Web Werks JV | | $ | 51,140 | | | 38.50 | % | | $ | — | | | — | % |
| Frankfurt JV | | 26,167 | | | 20.00 | % | | 26,500 | | | 20.00 | % |
| MakeSpace JV | | 30,154 | | | 49.99 | % | | 16,924 | | | 38.86 | % |
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| | IRON MOUNTAIN 2021 FORM 10-K | 100 |
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Subsets and Splits