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Percentage of Weekly Indemnity Paid After Deductible Second Period has Passed | 80 | SEC-NUM |
[Table of Contents](#i6266d2788e5849989ad57be380853c2d_7)Entergy Corporation and SubsidiariesNotes to Financial Statements
included three nuclear power reactors that were sold (FitzPatrick sold in March 2017, Vermont Yankee sold in January 2019, and Pilgrim sold in August 2019) in addition to the recently sold Indian Point Energy Center.
Property Insurance
Entergy’s nuclear owner/licensee subsidiaries are members of NEIL, a mutual insurance company that provides property damage coverage, including decontamination and reactor stabilization, to the members’ nuclear generating plants. The property damage insurance limits procured by Entergy for its Utility plants and Entergy Wholesale Commodity plants are in compliance with the financial protection requirements of the NRC.
The Utility plants’ (ANO 1 and 2, Grand Gulf, River Bend, and Waterford 3) property damage insurance limits are $1.5 billion per occurrence at each plant with an additional $100 million per nuclear property occurrence that is shared among the plants. The nuclear property deductible is $10 million per site at the Utility plants, except for earth movement, flood, and windstorm. Property damage from earth movement is excluded from the first $500 million in coverage for all Utility plants. Property damage from flood is excluded from the first $500 million in coverage at ANO 1 and 2 and Grand Gulf. Property damage from flood for Waterford 3 and River Bend includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a maximum deductible of $50 million. Property damage from wind for all of the Utility nuclear plants includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a total maximum deductible of $50 million.
The Entergy Wholesale Commodities’ plants (Palisades and Big Rock Point) have property damage insurance limits as follows: Big Rock Point - $50 million per occurrence and Palisades - $1.115 billion per occurrence. For losses that are considered non-nuclear in nature, the property damage insurance limit at Palisades is $500 million. The nuclear property deductible is $10 million at Palisades and $5 million at Big Rock Point, except for earth movement, flood, and windstorm. Property damage from earth movement, flood, and windstorm at Palisades includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a maximum deductible of $50 million. Property damage from earth movement, flood, and windstorm at Big Rock Point includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a maximum deductible of $14 million.
The valuation basis of the insured property at Palisades has been changed from replacement cost to actual cash value, given the site’s age, anticipated ownership horizon and/or shutdown status.
In addition, Waterford 3 and Grand Gulf are also covered under NEIL’s Accidental Outage Coverage program. Accidental outage coverage provides indemnification for the actual cost incurred in the event of an unplanned outage resulting from property damage covered under the NEIL Primary Property Insurance policy, subject to a deductible period. The indemnification for the actual cost incurred is based on market power prices at the time of the loss. After the deductible period has passed, weekly indemnities for an unplanned outage, covered under NEIL’s Accidental Outage Coverage program, would be paid according to the amounts listed below:
•100% of the weekly indemnity for each week for the first payment period of 52 weeks; then•80% of the weekly indemnity for each week for the second payment period of 52 weeks; and thereafter•80% of the weekly indemnity for an additional 58 weeks for the third and final payment period.
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Goodwill impairment analysis, terminal value growth rate | 3 | SEC-NUM |
[Table of Contents](#i3d0ebbc4e2a2420f98ed7e6fe698936a_7) HASBRO, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
During the second quarter of 2021, the Company entered into a definitive agreement to sell the Entertainment One Music business ("eOne Music") for an aggregate sales price of $385.0 million, subject to certain closing adjustments related to working capital and net debt. 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, during 2021, within Loss on Disposal of Business in the Consolidated Statements of Operations, and within the Entertainment segment. On June 29, 2021, during the Company's fiscal third quarter, the eOne Music sale was completed and associated goodwill and intangible assets were removed from the consolidated financial statements. There were no underlying business conditions that provided an indication of the existence of impairment. During the fourth quarter of 2021 the Company performed a quantitative goodwill assessment with respect to each of its reporting units and determined that the fair values of the Company’s reporting units exceeded their carrying values. As a result of this assessment, the Company concluded that, other than the Music goodwill impairment loss noted above, there was no other impairment to any of its reporting units. Accordingly, no goodwill impairment was recorded as a result of the quantitative test for the year ended December 26, 2021.During the fourth quarter of 2020 the Company performed a qualitative goodwill assessment with respect to its reporting units, including eOne, and determined that it was not necessary to perform a quantitative assessment for the goodwill of the Company's reporting units. During the fourth quarter of 2019, the Company took a number of actions to react to a rapidly changing mobile gaming industry that resulted in a modification to the Company’s long-term plan for its Backflip business. These modifications included organizational actions and related personnel changes, the extension of launch dates for games currently in or planned for development and the addition of partners for the development of future games releases. The modifications resulted in changes to the long-term projections for the Backflip business. The goodwill impairment analysis involved comparing the Backflip carrying value to its estimated fair value, which was calculated based on the Income Approach. Discounted cash flows serve as the primary basis for the Income Approach. The Company utilized forecasted cash flows for the Backflip reporting unit that included assumptions including but not limited to: expected revenues to be realized based on planned future mobile game releases, expected EBITDA margins derived in part based on expected future royalty costs, advertising and marketing costs, development costs, overhead costs, and expected future tax rates. The cash flows beyond the forecast period were estimated using a terminal value growth rate of 3%. To calculate the fair value of the future cash flows under the Income Approach, a discount rate of 19% was utilized, representing the reporting unit’s estimated weighted-average cost of capital. Based on the results of the impairment test, the Company determined that the carrying value of the Backflip reporting unit exceeded its estimated fair value. Based on this assessment, the Company recorded an impairment charge of $86.3 million in the fourth quarter of 2019, in the Company’s Wizards of the Coast & Digital Gaming segment, which was the full amount of remaining goodwill associated with the Backflip reporting unit.Based on its qualitative assessment of goodwill for all reporting units with the exception of Backflip in 2019, the Company concluded there was no other impairment of goodwill during 2019. Other Intangible Assets, NetThe following table represents a summary of the Company’s other intangible assets, net at December 26, 2021 and December 27, 2020:
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| | | | | | | | | | | | |
| (In millions) | 2021 | | 2020 |
| Acquired product rights | $ | 2,101.7 | | | 2,374.7 | |
| Licensed rights of entertainment properties | 45.0 | | | 45.0 | |
| Accumulated amortization | (1,050.4) | | | (964.6) | |
| Amortizable intangible assets | 1,096.3 | | | 1,455.1 | |
| Product rights with indefinite lives | 75.7 | | | 75.7 | |
| Total other intangibles assets, net | $ | 1,172.0 | | | 1,530.8 | |
Certain intangible assets relating to rights obtained in the Company’s acquisition of Milton Bradley in 1984 and Tonka in 1991 are not amortized. These rights were determined to have indefinite lives and are included as product rights with indefinite lives in the table above. The Company tests these assets for impairment on an annual basis in the fourth quarter of each year or when an event occurs or circumstances change that indicate that the 95
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Goodwill and other intangible assets | 1,609 | 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.
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| --- | --- | --- | --- | --- | --- |
| | | | | | |
| 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.
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Exercisable at period end (in dollars per share) | 68.92 | SEC-NUM |
[Table of Contents](#i300266b18f874ae1b9a15c90da441bb4_7)
The Credit Agreement contains financial and operating covenants. Pursuant to the Credit Agreement, we are required to maintain a ratio of total debt to annual earnings before interest, taxes, depreciation and amortization (EBITDA), calculated based on the four consecutive fiscal quarters ending with the most recent fiscal quarter, of not greater than 3.50 to 1.00 as of the end of each fiscal quarter. Upon the consummation of any Qualified Acquisition (as defined in the Credit Agreement) and us providing notice to the Administrative Agent, the ratio increases to 4.00 to 1.00 for the fiscal quarter in which the acquisition is consummated and the three consecutive fiscal quarters thereafter. The operating covenants include, among other things, limitations on (i) the incurrence of indebtedness by our subsidiaries, (ii) liens on our and our subsidiaries assets, and (iii) certain fundamental changes and the disposition of assets by us and our subsidiaries. The Credit Agreement contains other customary covenants, representations and warranties, and events of default.The Credit Facility matures, and all amounts outstanding thereunder become due and payable in full, on March 8, 2026, subject to two one-year extensions at our option, the consent of the extending lenders and certain other conditions. We may prepay amounts borrowed and terminate commitments under the Credit Facility at any time without premium or penalty.As of July 3, 2022, there were no borrowings outstanding under the Credit Facility, and we were in compliance with all financial and operating covenants.
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| 5. STOCKHOLDERS’ EQUITY |
As of July 3, 2022, approximately 1.9 million shares remained available for future grants under the 2015 Stock and Incentive Compensation Plan.Restricted StockRestricted stock activity was as follows:
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| | Restricted Stock Units (RSU) | | Performance Stock Units(PSU)(1) | | Weighted-Average Grant Date Fair Value per Share |
| Units in thousands | | | RSU | | PSU |
| Outstanding at January 2, 2022 | 1,130 | | | 328 | | | $ | 345.66 | | | $ | 466.42 | |
| Awarded | 1,075 | | | 16 | | | $ | 326.85 | | | $ | 360.42 | |
| Vested | (85) | | | — | | | $ | 376.44 | | | $ | — | |
| Cancelled | (106) | | | (8) | | | $ | 345.84 | | | $ | 437.46 | |
| Outstanding at July 3, 2022 | 2,014 | | | 336 | | | $ | 334.26 | | | $ | 427.53 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_(1)The number of units reflect the estimated number of shares to be issued at the end of the performance period. Awarded units are presented net of performance adjustments. Stock OptionsStock option activity was as follows:
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| Units in thousands | Options | | Weighted-AverageExercise Price | | Performance Stock Options(1) | | Weighted-AverageExercise Price |
| Outstanding at January 2, 2022 | 8 | | | $ | 66.42 | | | 17 | | | $ | 85.54 | |
| Granted | 180 | | | $ | 330.25 | | | — | | | $ | — | |
| | | | | | | | |
| | | | | | | | |
| Outstanding at July 3, 2022 | 188 | | | $ | 319.27 | | | 17 | | | $ | 85.54 | |
| Exercisable at July 3, 2022 | 8 | | | $ | 68.92 | | | — | | | $ | — | |
\_\_\_\_\_\_\_\_\_\_\_\_\_(1)The number of units reflect awards that have been granted and for which it is assumed to be probable that the underlying performance goals will be achieved.
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Common stock authorized for repurchase (in shares) | 196 | SEC-NUM |
[Table of Contents](#i988317c7021a4a8fa66f2208a2958f7e_10)NOTE 10 – Fair Value Measurements The following table summarizes the carrying values and fair values of the Company’s financial instruments that were not carried at fair value in the consolidated balance sheets:
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| | July 31, 2022 | | July 31, 2021 |
| (In thousands) | Carrying Value Total | | | | Fair Value Total | | Carrying Value Total | | | | Fair Value Total |
| Assets | | | | | | | | | | | |
| Cash equivalents | $ | 1,236,990 | | | | | $ | 1,237,337 | | | $ | 754,300 | | | | | $ | 754,304 | |
| | | | | | | | | | | | |
| Total Assets | $ | 1,236,990 | | | | | $ | 1,237,337 | | | $ | 754,300 | | | | | $ | 754,304 | |
| Liabilities | | | | | | | | | | | |
| | | | | | | | | | | | |
| Long-term fixed rate debt, including current portion | $ | — | | | | | $ | — | | | $ | 399,733 | | | | | $ | 432,027 | |
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| | | | | | | | | | | | |
| Total Liabilities | $ | — | | | | | $ | — | | | $ | 399,733 | | | | | $ | 432,027 | |
During the year ended July 31, 2022, no transfers were made between any levels within the fair value hierarchy. The fair value of the Senior Notes is based on the discounted value of each interest and principal payment calculated utilizing market interest rates of similar types of borrowing arrangements and was classified within Level II of the fair value hierarchy. See Note 1 — Summary of Significant Accounting Policies and Note 9 — Long-Term Debt.
NOTE 11 — Net Income Per Share
The table below reconciles basic weighted average shares outstanding to diluted weighted average shares outstanding:
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| | | Year Ended July 31, |
| (In thousands) | | 2022 | | 2021 | | 2020 |
| Weighted average common shares outstanding | | 237,419 | | | 236,252 | | | 233,202 | |
| Effect of dilutive securities | | 3,732 | | | 4,038 | | | 5,454 | |
| Weighted average common and dilutive potential common shares outstanding | | 241,151 | | | 240,290 | | | 238,656 | |
There were no material adjustments to net income required in calculating diluted net income per share. Excluded from the dilutive earnings per share calculation were 3,722,762; 4,090,250; and 1,575,167 options to purchase the Company’s common stock for the years ended July 31, 2022, 2021 and 2020, respectively, because their inclusion would have been anti-dilutive.
NOTE 12 — Stockholders’ Equity
General
The Company has authorized the issuance of 400 million shares of common stock, with a par value of $0.0001, of which 238,040,974 shares were issued and outstanding at July 31, 2022. As of July 31, 2022 and 2021, the Company had reserved 14,378,120 and 15,326,030 shares of common stock, respectively, for the issuance of options, restricted stock or restricted stock units granted under the Company’s stock option plans and 1,100,458 and 1,194,213 shares of common stock, respectively, for the issuance of shares under the Copart, Inc. Employee Stock Purchase Plan (“ESPP”). The Company has authorized the issuance of five million shares of preferred stock, with a par value of $0.0001, none of which were issued or outstanding at July 31, 2022 or 2021, which have the rights and preferences as the Company’s Board of Directors shall determine, from time to time.
Stock Repurchases
On September 22, 2011, the Company’s Board of Directors approved an 80 million share increase in the stock repurchase program, bringing the total current authorization to 196 million shares. The repurchases may be effected through solicited or unsolicited transactions in the open market or in privately negotiated transactions. No time limit has been placed on the duration of the stock repurchase program. Subject to applicable securities laws, such repurchases will be made at such times and in such amounts as the Company deems appropriate and may be discontinued at any time. For fiscal 2022 and 2021, the Company did not repurchase any shares of its common stock under the program. As of July 31, 2022, the total number of shares repurchased under the program was 114,549,198, and 81,450,802 shares were available for repurchase under the program. 75
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Basis difference in LYONs | 11 | SEC-NUM |
[Table of Contents](#ia72a687f7b8a4bb1b43219ab5b663314_7)NOTE 7. INCOME TAXES Earnings from continuing operations before income taxes for the years ended December 31 were as follows ($ in millions):
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| | 2021 | | 2020 | | 2019 |
| United States | $ | 2,500 | | | $ | 1,655 | | | $ | 854 | |
| Non-U.S. | 5,098 | | | 2,840 | | | 2,451 | |
| Total | $ | 7,598 | | | $ | 4,495 | | | $ | 3,305 | |
The provision for income taxes from continuing operations for the years ended December 31 were as follows ($ in millions):
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| | 2021 | | 2020 | | 2019 |
| Current: | | | | | |
| Federal U.S. | $ | 183 | | | $ | (321) | | | $ | 453 | |
| Non-U.S. | 1,134 | | | 580 | | | 800 | |
| State and local | 163 | | | 72 | | | 35 | |
| Deferred: | | | | | |
| Federal U.S. | (156) | | | 530 | | | (297) | |
| Non-U.S. | (23) | | | (16) | | | (128) | |
| State and local | (50) | | | 4 | | | 10 | |
| Income tax provision | $ | 1,251 | | | $ | 849 | | | $ | 873 | |
Noncurrent deferred tax assets and noncurrent deferred tax liabilities are included in other assets and other long-term liabilities, respectively, in the accompanying Consolidated Balance Sheets. Deferred income tax assets and liabilities as of December 31 were as follows ($ in millions):
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| | | | | | | | | | | | |
| | 2021 | | 2020 |
| Deferred tax assets: | | | |
| Allowance for doubtful accounts | $ | 19 | | | $ | 24 | |
| Inventories | 93 | | | 99 | |
| Pension and postretirement benefits | 105 | | | 259 | |
| Environmental and regulatory compliance | 38 | | | 27 | |
| Other accruals and prepayments | 348 | | | 341 | |
| Stock-based compensation expense | 76 | | | 68 | |
| Operating lease liabilities | 252 | | | 215 | |
| Tax credit and loss carryforwards | 544 | | | 569 | |
| Valuation allowances | (242) | | | (264) | |
| Total deferred tax asset | 1,233 | | | 1,338 | |
| Deferred tax liabilities: | | | |
| Property, plant and equipment | (79) | | | (50) | |
| Insurance, including self-insurance | (520) | | | (713) | |
| Basis difference in LYONs | — | | | (11) | |
| Operating lease right-of-use assets | (235) | | | (204) | |
| Goodwill and other intangibles | (3,962) | | | (3,814) | |
| Total deferred tax liability | (4,796) | | | (4,792) | |
| Net deferred tax liability | $ | (3,563) | | | $ | (3,454) | |
The Company evaluates the future realizability of tax credits and loss carryforwards considering the anticipated future earnings of the Company’s subsidiaries as well as tax planning strategies in the associated jurisdictions. Deferred taxes associated with U.S. entities consist of net deferred tax liabilities of approximately $2.1 billion and $1.9 billion as of December 31, 2021 and 2020, respectively. Deferred taxes associated with non-U.S. entities consist of net deferred tax liabilities of approximately $1.5 billion and $1.6 billion as of December 31, 2021 and 2020, respectively. During 2021, the Company’s valuation allowance 83
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Cumulative upward adjustments for observable price changes | 41 | SEC-NUM |
[Table of Contents](#id0d7a71b05ce452ea9fdb54f3cb359c7_7)eBay Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)In 2021, we recorded an upward adjustment for observable price change of $41 million and downward adjustments for impairment of $170 million to the carrying values of strategic investments accounted for as equity investments without readily determinable fair values. The downward adjustments for impairment included a $160 million impairment charge related to our equity investment in Paytm Mall, which resulted in no remaining carrying value for this equity investment. The upward and downward adjustments were recorded in gain (loss) on equity investments and warrant, net on our consolidated statement of income.
For such equity investments without readily determinable fair values still held at December 31, 2021, the cumulative upward adjustment for observable price changes was $41 million and cumulative downward adjustment for observable price changes and impairments was $291 million.
In 2020, when our investment in KakaoBank was accounted for as an equity investment without a readily determinable fair value, we recorded an upward adjustment for an observable price change of $239 million to the carrying value and invested an additional $18 million in cash in exchange for equity in KakaoBank. The upward adjustment was recorded in gain (loss) on equity investments and warrant, net on our consolidated statement of income for the year ended December 31, 2020.
The following table summarizes unrealized gains and losses related to equity investments held at December 31, 2021 and presented within gain (loss) on equity investments and warrant, net for the periods indicated (in millions):
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| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 |
| Net gains/(losses) recognized during the period on equity investments | $ | (2,716) | | | $ | 200 | |
| Less: Net gains/(losses) recognized during the period on equity investments sold during the period (1) | 92 | | | — | |
| Total unrealized gains/(losses) on equity investments still held at December 31, 2021 | $ | (2,808) | | | $ | 200 | |
(1)Includes gains/(losses) realized on the change in fair value of the shares sold on the respective dates of sale.
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Net earnings per common share attributable to Hasbro, Inc.: Basic (in dollars per share) | 2.51 | SEC-NUM |
[Table of Contents](#i3d0ebbc4e2a2420f98ed7e6fe698936a_7) HASBRO, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
•Restructuring and related costs of $73.4 million which includes severance and retention costs, as well as $40.9 million in impairment charges for certain definite-lived intangible and production assets. The impairment charges of $40.9 million were driven by the change in strategy for the combined company's entertainment assets.Pursuant to Topic 805, unaudited supplemental pro forma results of operations for the year ended December 29, 2019, as if the acquisition of eOne had occurred on December 31, 2018, the first day of the Company’s 2019 fiscal year are presented below (in millions, except per share amounts):
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| | | Year Ended |
| (In millions, except per share data) | | December 29, 2019 |
| Revenues | | $ | 5,936.0 | |
| Net earnings | | 351.3 | |
| Net earnings attributable to Hasbro, Inc. | | 345.9 | |
| | | |
| Net earnings per common share attributable to Hasbro, Inc.: | | |
| Diluted | | $ | 2.51 | |
| Basic | | $ | 2.51 | |
These pro forma results do not represent financial results that would have been realized had the acquisition occurred on December 31, 2018.The unaudited pro forma results include certain pro forma adjustments to net earnings that were directly attributable to the acquisition, as if the acquisition had occurred on December 31, 2018, including the following:•elimination of transaction costs of $24.3 million for the year ended December 29, 2019, incurred by Hasbro and eOne related to the eOne Acquisition, included in Selling, Distribution and Administration;•additional amortization expense of $38.8 million for the year ended December 29, 2019, that would have been recognized as a result of the allocation of purchase consideration to definite-lived intangible assets subject to amortization;•estimated differences in interest expense of $75.4 million for the year ended December 29, 2019, as a result of incurring new debt and extinguishing historical eOne debt;•total adjustments to Other (Income) Expense of $74.8 million for the year ended December 29, 2019, consisting of:◦elimination of a gain of $94.6 million for the year ended December 29, 2019, related to the mark to market of foreign exchange forward and option contracts, which the Company entered into in order to hedge a portion of the British pound sterling purchase price for the eOne Acquisition; and◦elimination of a charge of $19.8 million for the year ended December 29, 2019, related to premiums paid by eOne in connection with the 2019 early redemption and refinancing of its senior secured notes and the related write-off of unamortized deferred finance charges associated with the senior secured notes;•the income tax effect of the pro forma adjustments resulted in income tax benefits of $12.3 million for the year ended December 29, 2019, calculated using a blended statutory income tax rate of 22.5% for the eOne adjustments, and a blended statutory tax rate of 21% for the Hasbro adjustments.91
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Decrease in unrecognized tax benefits is reasonably possible | 30.9 | SEC-NUM |
Nine Months Ended September 30, 2021
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| | | Interest RateSwaps | | DefinedBenefitPension Plans | | ForeignCurrencyTranslationAdjustments | | Total |
| Balance – December 31, 2020 | | $ | (78,104) | | | $ | (9,309) | | | $ | (11,815) | | | $ | (99,228) | |
| Other comprehensive income (loss) activity during the period: | | | | | | | | |
| Change in AOCL before reclassifications to income | | — | | | — | | | (1,172) | | | (1,172) | |
| Reclassifications from AOCL to income (2), (3) | | 16,256 | | | 307 | | | — | | | 16,563 | |
| Other comprehensive income (loss), net | | 16,256 | | | 307 | | | (1,172) | | | 15,391 | |
| Balance – September 30, 2021 | | $ | (61,848) | | | $ | (9,002) | | | $ | (12,987) | | | $ | (83,837) | |
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(1)Amounts in parentheses represent debits (deferred losses).(2)$5.2 million and $7.4 million of the reclassifications related to interest rate swaps (cash flow hedges) were recorded in Interest expense, net, for the three months ended September 30, 2022 and 2021, respectively. $17.5 million and $21.7 million of the reclassifications related to interest rate swaps (cash flow hedges) were recorded in Interest expense, net, for the nine months ended September 30, 2022 and 2021, respectively. See Note 8 — Debt and Note 11 — Derivatives and Hedging for information regarding the cash flow hedges.(3)The reclassifications related to defined benefit pension plans were recorded in Other income, net.
The estimated net amount of the existing losses on the Company’s interest rate swaps that are reported in Accumulated other comprehensive loss, net at September 30, 2022 that is expected to be reclassified into earnings within the next 12 months is $20.3 million.
Note 10 — Income Taxes
The provision for income taxes was $58.5 million and $50.0 million for the three months ended September 30, 2022 and 2021, respectively, and $172.1 million and $208.6 million for the nine months ended September 30, 2022 and 2021, respectively.
The effective income tax rate was 25.2% and 25.1% for the three months ended September 30, 2022 and 2021, respectively, and 23.8% and 26.3% for the nine months ended September 30, 2022 and 2021, respectively. During the second quarter of 2021, the United Kingdom enacted legislation raising its corporate tax rate from 19% to 25% effective April 2023, which led to a higher effective income tax rate for the nine months ended September 30, 2021 as compared to the same period in 2022.
The Company had gross unrecognized tax benefits of $158.2 million on September 30, 2022 and $150.0 million on December 31, 2021. It is reasonably possible that gross unrecognized tax benefits will decrease by approximately $30.9 million within the next twelve months due to the anticipated closure of audits and the expiration of certain statutes of limitation.
Note 11 — Derivatives and Hedging
The Company enters into a limited number of derivative contracts to mitigate the cash flow risk associated with changes in interest rates on variable-rate debt and changes in foreign exchange rates on forecasted foreign currency transactions. The Company accounts for its outstanding derivative contracts in accordance with FASB ASC Topic 815, which requires all derivatives, including derivatives designated as accounting hedges, to be recorded on the balance sheet at fair value. The tables below provide information regarding the Company’s outstanding derivative contracts as of the dates indicated (in thousands, except for number of contracts).
22
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Fixed interest rate | 4.300 | SEC-NUM |
[Table of Contents](#i8e6404ebd98d416daa7f88f48159b601_7)EDWARDS LIFESCIENCES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)10. DEBT AND CREDIT FACILITIES (Continued)
The following is a summary of the Notes as of December 31, 2021 and 2020:
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| | December 31, |
| | 2021 | | 2020 |
| | Amount | | EffectiveInterest Rate | | Amount | | EffectiveInterest Rate |
| | (in millions) | | | | (in millions) | | |
| Fixed-rate 4.300% 2018 Notes | $ | 600.0 | | | 4.329 | % | | $ | 600.0 | | | 4.329 | % |
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| | | | | | | | |
| Unamortized discount | (1.0) | | | | | (1.1) | | | |
| Unamortized debt issuance costs | (3.3) | | | | | (3.9) | | | |
| | | | | | | | |
| Total carrying amount | $ | 595.7 | | | | | $ | 595.0 | | | |
As of December 31, 2021 and 2020, the fair value of the Notes was $675.4 million and $711.2 million, respectively, based on observable market prices in less active markets and categorized as Level 2 (Note 11). The debt issuance costs, as well as the discount, are being amortized to interest expense over the term of the Notes.
The Company has a Five-Year Credit Agreement ("the Credit Agreement") which matures on April 28, 2023. The Credit Agreement provides up to an aggregate of $750.0 million in borrowings in multiple currencies. The Company may increase the amount available under the Credit Agreement, subject to agreement of the lenders, by up to an additional $250.0 million in the aggregate. Borrowings generally bear interest at the London interbank offered rate ("LIBOR"), or a comparable or successor rate, plus a spread ranging from 0.9% to 1.3%, depending on the leverage ratio, as defined in the Credit Agreement. The Company also pays a facility fee ranging from 0.1% to 0.2%, depending on the leverage ratio, on the entire credit commitment available, whether drawn or not. The facility fee is expensed as incurred. During 2021, the spread over LIBOR was 0.9% and the facility fee was 0.1%. Issuance costs of $2.4 million are being amortized to interest expense over the term of the Credit Agreement. As of December 31, 2021 and 2020, there were no borrowings outstanding under the Credit Agreement. Amounts outstanding under the Credit Agreement, if any from time to time, are classified as long-term obligations in accordance with the terms of the Credit Agreement. The Credit Agreement is unsecured and contains various financial and other covenants, including a maximum leverage ratio, as defined in the Credit Agreement. The Company was in compliance with all covenants at December 31, 2021.
The weighted-average interest rate under all debt obligations was 3.4% and 3.5% at December 31, 2021 and 2020, respectively.
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Extinguishment of Debt, Amount | 970.8 | SEC-NUM |
[Table of Contents](#ic085909a172f44ef92ae922b1099b569_7)The Company evaluated the 2021 Credit Agreement for derivatives pursuant to ASC 815, Derivatives and Hedging, and identified embedded derivatives that required bifurcation as the features are not clearly and closely related to the host instrument. The embedded derivatives were a default provision, which could require additional interest payments, and a provision requiring contingent payments to compensate the lenders for changes in tax deductions. The Company determined that the fair value of these embedded derivatives was immaterial as of March 26, 2022.
Pursuant to ASC 470, Debt (ASC 470), the accounting for the refinancing was evaluated on a creditor-by-creditor basis to determine whether each transaction should be accounted for as a modification or extinguishment. Certain creditors under the 2018 Credit Agreement did not participate in this refinancing transaction and ceased being creditors of the Company. As a result, the Company recorded a debt extinguishment loss of $0.7 million in the first quarter of fiscal 2022 to write-off the pro-rata amount of unamortized debt discount and deferred issuance costs related to these creditors. For the remainder of the creditors, this transaction was accounted for as a modification. Pursuant to ASC 470, third-party costs of $7.0 million were recorded as a reduction to debt representing deferred issuance costs and fees paid directly to the lenders.
Interest expense, weighted average interest rates, and the interest rate at the end of period under the 2021 and 2018 Credit Agreements were as follows:
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| | Three Months Ended | | Six Months Ended |
| | March 26, 2022 | | March 27, 2021 | | March 26, 2022 | | March 27, 2021 |
| Interest expense | $ | 5.7 | | | $ | 5.3 | | | $ | 11.0 | | | $ | 11.8 | |
| Weighted average interest rate | 1.13 | % | | 1.12 | % | | 1.11 | % | | 1.17 | % |
| Interest rate at end of period | 1.46 | % | | 1.11 | % | | 1.46 | % | | 1.11 | % |
The 2021 Credit Agreement contains two financial covenants; a total leverage ratio and an interest coverage ratio, both of which are measured as of the last day of each fiscal quarter. These terms, and calculations thereof, are defined in further detail in the 2021 Credit Agreement. As of March 26, 2022, the Company was in compliance with these covenants.
Senior Notes
On September 28, 2020, the Company completed a private placement of $950 million aggregate principal amount of its Senior Notes due 2029 at an offering price of 100% of the aggregate principal amount of the 2029 Senior Notes. The Company used the net proceeds of the 2029 Senior Notes offering and cash on hand to redeem in full its 4.375% Senior Notes due 2025 (the "2025 Senior Notes") in the aggregate principal amount of $950.0 million on October 15, 2020 at an aggregate redemption price of $970.8 million, which included a premium payment $20.8 million.
2025 Senior Notes
Immediately prior to redemption in full of the 2025 Senior Notes on October 15, 2020, the total aggregate principal balance of 2025 Senior Notes was $950.0 million. Since the Company used the proceeds from the 2029 Senior Notes offering to redeem the 2025 Senior Notes, the Company evaluated the accounting for this transaction under ASC 470 to determine modification versus extinguishment accounting on a creditor-by-creditor basis. Certain 2025 Senior Note holders either did not participate in this refinancing transaction or reduced their holdings, and these transactions were accounted for as extinguishments. As a result, the Company recorded a debt extinguishment loss in the first quarter of fiscal 2021 of $21.6 million. For the remaining 2025 Senior Notes holders who participated in the refinancing, these transactions were accounted for as modifications because on a creditor-by-creditor basis the present value of the cash flows between the debt instruments before and after the transaction was less than 10%. The Company recorded a portion of the transaction expenses of $5.8 million to interest expense pursuant to ASC 470, subtopic 50-40. The remaining debt issuance costs of $7.9 million and debt discount of $6.4 million related to the modified debt is being amortized over the new term of the 2029 Senior Notes using the effective interest method.
2028 Senior Notes As of March 26, 2022, the Company had Senior Notes due 2028 outstanding in the aggregate principal balance of $400 million. The 2028 Senior Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain of the Company's domestic subsidiaries and mature on February 1, 2028.
2029 Senior Notes20
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Customer Requested Rate on Equity | 9.15 | SEC-NUM |
[Table of Co](#i2c056a9f8317485ea6601862f5b0559f_7)[ntents](#i2c056a9f8317485ea6601862f5b0559f_7)Service Disconnection MoratoriumFrom March 2020 through March 2021, the ICC limited disconnection activities and late fees for customer nonpayment to varying degrees based on customer class. In March 2021, the ICC issued an order allowing Ameren Illinois to resume disconnection activities for all residential customers through a phased-in approach, which began in April 2021 for customers with the largest past due balances and in June 2021 for all remaining residential customers. The March 2021 order also required Ameren Illinois to offer deferred payment arrangements extending to 18 months to all residential customers through June 2021. In addition, the order requires Ameren Illinois to extend the financial assistance program established by a June 2020 ICC order through 2021. Ameren Illinois is allowed to recover up to $4 million in costs incurred during 2021 related to this financial assistance program. These costs will be deferred as regulatory assets and the portion associated with Ameren Illinois’ electric distribution business will be recovered through its bad debt rider and the portion associated with its natural gas distribution business will be recovered through a special purpose rider.FederalTransmission Formula Rate RevisionsIn February 2020, the MISO, on behalf of Ameren Missouri, Ameren Illinois, and ATXI, filed requests with the FERC to revise each company’s transmission formula rate calculations with respect to the calculation used for materials and supplies inventories included in rate base. In May 2020, the FERC issued orders approving the revisions prospectively. In addition, the FERC declined to order refunds for earlier periods, as requested by intervenors in Ameren Illinois’ filing, but directed its audit staff to review historical rate recovery in connection with an ongoing FERC audit. In June 2020, Ameren Missouri, Ameren Illinois, and ATXI filed requests for rehearing arguing, among other things, the revisions should be applied retrospectively to include the period January 1, 2019, to June 1, 2020, and that the FERC should not require refunds for periods prior to 2019. In July 2020, the FERC denied the rehearing requests without addressing the issues raised. In July 2020, Ameren Missouri, Ameren Illinois, and ATXI filed an appeal of the July 2020 rehearing denials to the United States Court of Appeals for the District of Columbia Circuit, which is under no deadline to address the appeal. In October 2020, the FERC issued an order reaffirming its May 2020 order and denying the arguments raised in the rehearing requests filed by Ameren Missouri, Ameren Illinois, and ATXI. In November 2020, Ameren Missouri, Ameren Illinois, and ATXI filed an appeal of the October 2020 order to the United States Court of Appeals for the District of Columbia Circuit. The court of appeals is under no deadline to address either appeal. Regardless of the outcome of the appeal, the impacts of the May 2020 and October 2020 orders were immaterial to Ameren’s, Ameren Missouri’s, or Ameren Illinois’ results of operations, financial position, or liquidity.In March 2021, the FERC issued an order related to an intervenor challenge to Ameren Illinois’ 2020 transmission formula rate update. As a result of this order, in March 2021, Ameren Illinois recorded a regulatory liability of $9 million, largely as a reduction of electric operating revenues, to reflect expected refunds, including interest, primarily related to the historical rate recovery of materials and supplies inventories included in rate base. In April 2021, Ameren Illinois filed a request for rehearing with the FERC regarding its March 2021 order. In May 2021, the FERC denied the rehearing request without addressing the issues raised. In July 2021, Ameren Illinois filed an appeal of the March 2021 order and the May 2021 rehearing denial to the United States Court of Appeals for the District of Columbia Circuit. In August 2021, the United States Court of Appeals for the District of Columbia Circuit granted a motion to consolidate the July 2021, July 2020, and November 2020 appeals. In November 2021, the FERC issued an order reaffirming its March 2021 order and denying the arguments raised in the rehearing request filed by Ameren Illinois. In December 2021, Ameren Illinois filed an appeal of the November 2021 order to the United States Court of Appeals for the District of Columbia Circuit. In December 2021, Ameren Illinois filed a motion to consolidate the December 2021 appeal with the July 2020, November 2020, and July 2021 appeals. In January 2022, the United States Court of Appeals for the District of Columbia issued an order granting the motion to consolidate the appeals. The court is under no deadline to address the appeal.FERC Complaint CasesIn November 2013, a customer group filed a complaint case with the FERC seeking a reduction in the allowed base ROE for FERC-regulated transmission rate base under the MISO tariff from 12.38% to 9.15%. In September 2016, the FERC issued an order in the November 2013 complaint case, which lowered the allowed base ROE to 10.32%, or a 10.82% total allowed ROE with the inclusion of a 50 basis point incentive adder for participation in an RTO, that was effective from late September 2016 forward. The September 2016 order also required refunds for the period November 2013 to February 2015, which were paid in 2017. In November 2019, the FERC issued an order addressing the November 2013 complaint case, which set the allowed base ROE at 9.88%, superseding the 10.32% previously ordered, and required refunds, with interest, for the periods November 2013 to February 2015 and from late September 2016 forward. In December 2019, the MISO transmission owners, including Ameren Missouri, Ameren Illinois, and ATXI, filed requests for rehearing with the FERC. In May 2020, the FERC issued an order addressing the requests for rehearing, which set the allowed base ROE at 10.02%, superseding the 9.88% previously ordered, and required refunds, with interest, for the periods November 2013 to February 2015 and from late September 2016 forward. In June 2020, various parties filed requests for rehearing with the FERC, challenging the new ROE methodology established by the May 2020 order. In July 2020, the FERC denied the rehearing requests without addressing the issues raised, and indicated it will address the requests for rehearing in a future order. Also, in July 2020, Ameren Missouri, Ameren Illinois, and ATXI filed 110
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Increase in authorized stock repurchase amount | 1.25 | SEC-NUM |
[Table of Contents](#iedfcb48a3788458f95ee4009debca3d0_7)FORTINET, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes stock-based compensation expense, including stock-based compensation expense related to awards classified as liabilities, by award type (in millions):
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| | Three Months Ended | | |
| | March 31,2022 | | March 31,2021 | | | | |
| RSUs | $ | 48.3 | | | $ | 45.8 | | | | | |
| Stock options | 5.6 | | | 4.2 | | | | | |
| Total stock-based compensation expense | $ | 53.9 | | | $ | 50.0 | | | | | |
Total income tax benefit associated with stock-based compensation that is recognized in the condensed consolidated statements of income is as follows (in millions):
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| | Three Months Ended | | |
| | March 31,2022 | | March 31,2021 | | | | |
| Income tax benefit associated with stock-based compensation | $ | 11.8 | | | $ | 11.0 | | | | | |
Share Repurchase Program
In October 2021, under the Share Repurchase Program originally approved by our board of directors in January 2016 (the “Repurchase Program”), our board of directors approved a $1.25 billion increase and extended the term to February 28, 2023, bringing the aggregate amount authorized to be repurchased to $4.25 billion. Share repurchases may be made by us from time to time in privately negotiated transactions or in open-market transactions. The Repurchase Program does not require us to purchase a minimum number of shares, and may be suspended, modified or discontinued at any time without prior notice.
During the three months ended March 31, 2022, we repurchased 2.3 million shares of common stock under the Repurchase Program in open-market transactions at a weighted-average price of $304.13 per share for an aggregate purchase price of $691.2 million. As of March 31, 2022, $829.6 million remained available for future share repurchases under the Repurchase Program.
14. INCOME TAXES
Our effective tax rate was negative 6% for the three months ended March 31, 2022, compared to an effective tax rate of 10% for the same period last year. The effective tax rates for the periods presented are primarily comprised of U.S. federal and state taxes, withholding taxes, foreign taxes, the tax benefit from foreign-derived intangible income deduction (the “FDII deduction”) and excess tax benefits from stock-based compensation expense. The tax rates for the three months ended March 31, 2022 and 2021 were composed of U.S. federal and state taxes, withholding taxes and foreign taxes that amounted to $38.5 million and $35.7 million, respectively. The tax rate for the three months ended March 31, 2022 was impacted by a tax benefit of $14.4 million from the FDII deduction and excess tax benefits from stock-based compensation expense of $32.2 million. The tax rate for the three months ended March 31, 2021 was impacted by a tax benefit of $7.3 million from the FDII deduction and excess tax benefits from stock-based compensation expense of $16.2 million. The change of effective tax rate from March 31, 2021 to March 31, 2022 primarily resulted from the increase in the FDII deduction and excess tax benefits from stock-based compensation expense.
As of March 31, 2022 and December 31, 2021, unrecognized tax benefits were $75.6 million and $73.3 million, respectively. If recognized, $67.6 million of the unrecognized tax benefits would favorably affect our effective tax rate. It is our policy to include accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of March 31, 2022 and December 31, 2021, accrued interest and penalties were $14.4 million and $13.3 million, respectively. It is reasonably possible that our gross unrecognized tax benefits will decrease by up to $19.0 million in the next 12 months, due to the lapse of statutes of limitation in various jurisdictions. This decrease, if recognized, would favorably impact our effective tax rate, and would be recognized as additional tax benefits.
We file income tax returns in the U.S. federal jurisdiction and in various U.S. state and foreign jurisdictions. Generally, we are no longer subject to examination by U.S federal income tax authorities for tax years prior to 2015. We are no longer subject to U.S. state and foreign income tax examinations by tax authorities for tax years prior to 2010. We currently 22
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Annual maturities of long-term debt, thereafter | 2,940 | SEC-NUM |
CAESARS ENTERTAINMENT, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)proceeds received for the cost to replace damaged property were in excess of the respective carrying value of the assets. The property will remain closed until the second half of 2022 when construction of a new land-based casino is expected to be complete.Note 12. Long-Term Debt
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| | December 31, 2021 | | December 31, 2020 |
| (Dollars in millions) | Final Maturity | | Rates | | Face Value | | Book Value | | Book Value |
| Secured Debt | | | | | | | | | |
| Baltimore Revolving Credit Facility | 2022 | | variable | | $ | — | | | $ | — | | | $ | — | |
| CRC Revolving Credit Facility | 2022 | | variable | | — | | | — | | | — | |
| Baltimore Term Loan | 2024 | | variable | | 282 | | | 275 | | | — | |
| CRC Term Loan | 2024 | | variable | | 4,512 | | | 4,190 | | | 4,133 | |
| CEI Revolving Credit Facility | 2025 | | variable | | — | | | — | | | — | |
| CRC Incremental Term Loan | 2025 | | variable | | 1,778 | | | 1,705 | | | 1,707 | |
| CRC Senior Secured Notes | 2025 | | 5.75% | | 1,000 | | | 985 | | | 981 | |
| CEI Senior Secured Notes | 2025 | | 6.25% | | 3,400 | | | 3,346 | | | 3,333 | |
| Convention Center Mortgage Loan | 2025 | | 7.85% | | 400 | | | 399 | | | 397 | |
| Unsecured Debt | | | | | | | | | |
| 5% Convertible Notes | 2024 | | 5.00% | | — | | | — | | | 288 | |
| CRC Notes | 2025 | | 5.25% | | — | | | — | | | 1,499 | |
| CEI Senior Notes | 2027 | | 8.125% | | 1,700 | | | 1,673 | | | 1,768 | |
| Senior Notes | 2029 | | 4.625% | | 1,200 | | | 1,183 | | | — | |
| Special Improvement District Bonds | 2037 | | 4.30% | | 49 | | | 49 | | | 51 | |
| Long-term notes and other payables | | | | | 2 | | | 2 | | | 2 | |
| Total debt | | 14,323 | | | 13,807 | | | 14,159 | |
| Current portion of long-term debt | | (70) | | | (70) | | | (67) | |
| Deferred finance charges associated with the CEI Revolving Credit Facility | | — | | | (15) | | | (19) | |
| Long-term debt | | $ | 14,253 | | | $ | 13,722 | | | $ | 14,073 | |
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| Unamortized premiums, discounts and deferred finance charges | | | | $ | 531 | | | $ | 883 | |
| Fair value | | $ | 14,713 | | | | | |
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| Annual Estimated Debt Service Requirements | | | | |
| | Years Ended December 31, | | | | |
| (In millions) | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total |
| Annual maturities of long-term debt | $ | 70 | | | $ | 70 | | | $ | 4,714 | | | $ | 6,526 | | | $ | 3 | | | $ | 2,940 | | | $ | 14,323 | |
| Estimated interest payments | 770 | | | 790 | | | 790 | | | 540 | | | 200 | | | 320 | | | 3,410 | |
| Total debt service obligation (a) | $ | 840 | | | $ | 860 | | | $ | 5,504 | | | $ | 7,066 | | | $ | 203 | | | $ | 3,260 | | | $ | 17,733 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(a)Debt principal payments are estimated amounts based on contractual maturity and repayment dates. Interest payments are estimated based on the forward-looking LIBOR curve, where applicable, and include the estimated impact of the four interest rate swap agreements related to our CRC Credit Facility (see Note 8). Actual payments may differ from these estimates.Current Portion of Long-Term DebtThe current portion of long-term debt as of December 31, 2021 includes the principal payments on the term loans, other unsecured borrowings, and special improvement district bonds that are contractually due within 12 months. The Company may, from time to time, seek to repurchase its outstanding indebtedness. Any such purchases may be funded by existing cash balances or the incurrence of debt. The amount and timing of any repurchase will be based on business and market conditions, capital availability, compliance with debt covenants and other considerations.[Table of Contents](#i37dfc5eabc12461dbfc5ef573d80947e_7)96
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Common stock, shares, issued | 198.3 | SEC-NUM |
Cincinnati Financial Corporation and SubsidiariesConsolidated Balance Sheets
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| (Dollars in millions, except per share data) | | December 31, | | December 31, |
| | | 2021 | | 2020 |
| Assets | | | | |
| Investments | | | | |
| Fixed maturities, at fair value (amortized cost: 2021—$12,230; 2020—$11,312) | | $ | 13,022 | | | $ | 12,338 | |
| Equity securities, at fair value (cost: 2021—$4,121; 2020—$3,927) | | 11,315 | | | 8,856 | |
| Other invested assets | | 329 | | | 348 | |
| Total investments | | 24,666 | | | 21,542 | |
| Cash and cash equivalents | | 1,139 | | | 900 | |
| Investment income receivable | | 144 | | | 136 | |
| Finance receivable | | 98 | | | 95 | |
| Premiums receivable | | 2,053 | | | 1,879 | |
| Reinsurance recoverable | | 570 | | | 517 | |
| Prepaid reinsurance premiums | | 78 | | | 65 | |
| Deferred policy acquisition costs | | 905 | | | 805 | |
| Land, building and equipment, net, for company use (accumulated depreciation: 2021—$303; 2020—$285) | | 205 | | | 213 | |
| Other assets | | 570 | | | 438 | |
| Separate accounts | | 959 | | | 952 | |
| Total assets | | $ | 31,387 | | | $ | 27,542 | |
| | | | | |
| Liabilities | | | | |
| Insurance reserves | | | | |
| Loss and loss expense reserves | | $ | 7,305 | | | $ | 6,746 | |
| Life policy and investment contract reserves | | 3,014 | | | 2,915 | |
| Unearned premiums | | 3,271 | | | 2,960 | |
| Other liabilities | | 1,092 | | | 982 | |
| Deferred income tax | | 1,744 | | | 1,299 | |
| Note payable | | 54 | | | 54 | |
| Long-term debt and lease obligations | | 843 | | | 845 | |
| Separate accounts | | 959 | | | 952 | |
| Total liabilities | | 18,282 | | | 16,753 | |
| | | | | |
| Commitments and contingent liabilities (Note 16) | | | | |
| | | | | |
| Shareholders' Equity | | | | |
| Common stock, par value—$2 per share; (authorized: 2021 and 2020—500 million shares; issued: 2021 and 2020—198.3 million shares) | | 397 | | | 397 | |
| Paid-in capital | | 1,356 | | | 1,328 | |
| Retained earnings | | 12,625 | | | 10,085 | |
| Accumulated other comprehensive income | | 648 | | | 769 | |
| Treasury stock, at cost (2021—38.0 million shares and 2020—37.4 million shares) | | (1,921) | | | (1,790) | |
| Total shareholders' equity | | 13,105 | | | 10,789 | |
| Total liabilities and shareholders' equity | | $ | 31,387 | | | $ | 27,542 | |
| | | | | |
Accompanying Notes are an integral part of these Consolidated Financial Statements.Cincinnati Financial Corporation - 2021 10-K - Page 122
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Capital investment | 325 | SEC-NUM |
CAESARS ENTERTAINMENT, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)COVID-19 Insurance ClaimsThe COVID-19 public health emergency had a significant impact on the Company’s business and employees, as well as the communities where the Company operates and serves. The Company purchased broad property insurance coverage to protect against “all risk of physical loss or damage” and resulting business interruption, unless specifically excluded by policies. The Company submitted claims for losses incurred as a result of the COVID-19 public health emergency which are expected to exceed $2 billion. The insurance carriers under the Company’s insurance policies have asserted that the policies do not cover losses incurred by the Company as a result of the COVID-19 public health emergency and have refused to make payments under the applicable policies. Therefore, on March 19, 2021, the Company filed a lawsuit against its insurance carriers in the state court in Clark County, Nevada. On June 8, 2021, the Company filed an amended complaint. Litigation is proceeding and there can be no assurance as to the outcome of the litigation.Contractual CommitmentsCapital CommitmentsHarrah’s New OrleansIn April 2020, the Company and the State of Louisiana, by and through the Louisiana Gaming Control Board, entered into an Amended and Restated Casino Operating Contract. Additionally, the Company, New Orleans Building Corporation and the City entered into a Second Amended and Restated Lease Agreement. Based on these amendments related to Harrah’s New Orleans, the Company is required to make certain payments and to make a capital investment of $325 million on or around Harrah’s New Orleans by July 15, 2024. In connection with the capital investment in Harrah’s New Orleans, construction has begun and we are in the process of rebranding the property as Caesars New Orleans which we expect to be complete in 2024.Atlantic CityAs required by the New Jersey Gaming Control Board in connection with its approval of the Merger, we funded $400 million in escrow to provide funds for a three year capital expenditure plan in the state of New Jersey. This amount is currently included in restricted cash in Other assets, net. As of December 31, 2021, our restricted cash balance in the escrow account was $297 million for future capital expenditures in New Jersey.Sports Sponsorship/Partnership ObligationsWe have agreements with certain professional sports leagues and teams, sporting event facilities and media companies for tickets, suites, and advertising, marketing, promotional and sponsorship opportunities including communication with partner customer databases. Additionally, a selection of such partnerships provide Caesars with exclusivity to access the aforementioned rights within the casino and/or sports betting category. In connection with the launch of the Caesars Sportsbook app, we entered into a significant marketing campaign with distinguished actors, athletes and other media personalities. As of December 31, 2021, obligations related to these agreements were $997 million, which include obligations assumed in the William Hill Acquisition, with contracts extending through 2040. These obligations include leasing of event suites that are generally considered short term leases for which we do not record a right of use asset or lease liability. We recognize expenses in the period services are received in accordance with the various agreements. In addition, assets or liabilities may be recorded related to the timing of payments as required by the respective agreement.Self-InsuranceWe are self-insured for workers compensation and other risk insurance, as well as health insurance and general liability. Our total estimated self-insurance liability was $221 million and $223 million as of December 31, 2021 and 2020, respectively, which is included in Accrued other liabilities on our Balance Sheets.The assumptions, including those related to the COVID-19 public health emergency, utilized by our actuaries are subject to significant uncertainty and if outcomes differ from these assumptions or events develop or progress in a negative manner, the Company could experience a material adverse effect and additional liabilities may be recorded in the future. Contingent LiabilitiesWeather disruption - Lake CharlesOn August 27, 2020, Hurricane Laura made landfall on Lake Charles as a Category 4 storm severely damaging the Isle of Capri Casino Lake Charles (“Lake Charles”). During the year ended December 31, 2021, the Company received insurance proceeds of $44 million related to damaged fixed assets and remediation costs. The Company also recorded a gain of $21 million as [Table of Contents](#i37dfc5eabc12461dbfc5ef573d80947e_7)95
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Warranty period for products | 90 | SEC-NUM |
(c)Product WarrantiesThe following table summarizes the activity related to the product warranty liability (in millions):
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | July 30, 2022 | | July 31, 2021 | | July 25, 2020 |
| Balance at beginning of fiscal year | $ | 336 | | | $ | 331 | | | $ | 342 | |
| Provisions for warranties issued | 415 | | | 496 | | | 561 | |
| Adjustments for pre-existing warranties | 3 | | | — | | | (8) | |
| Settlements | (421) | | | (491) | | | (564) | |
| Balance at end of fiscal year | $ | 333 | | | $ | 336 | | | $ | 331 | |
We accrue for warranty costs as part of our cost of sales based on associated material product costs, labor costs for technical support staff, and associated overhead. Our products are generally covered by a warranty for periods ranging from 90 days to five years, and for some products we provide a limited lifetime warranty.(d)Financing and Other GuaranteesIn the ordinary course of business, we provide financing guarantees for various third-party financing arrangements extended to channel partners customers. Payments under these financing guarantee arrangements were not material for the periods presented.Channel Partner Financing Guarantees We facilitate arrangements for third-party financing extended to channel partners, consisting of revolving short-term financing, with payment terms generally ranging from 60 to 90 days. These financing arrangements facilitate the working capital requirements of the channel partners, and, in some cases, we guarantee a portion of these arrangements. The volume of channel partner financing was $27.9 billion, $26.7 billion, and $26.9 billion in fiscal 2022, 2021, and 2020, respectively. The balance of the channel partner financing subject to guarantees was $1.4 billion and $1.3 billion as of July 30, 2022 and July 31, 2021, respectively.Financing Guarantee Summary The aggregate amounts of channel partner financing guarantees outstanding at July 30, 2022 and July 31, 2021, representing the total maximum potential future payments under financing arrangements with third parties along with the related deferred revenue, are summarized in the following table (in millions):
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | July 30, 2022 | | July 31, 2021 |
| Maximum potential future payments | $ | 188 | | | $ | 155 | |
| Deferred revenue | (9) | | | (16) | |
| Total | $ | 179 | | | $ | 139 | |
(e)IndemnificationsIn the normal course of business, we have indemnification obligations to other parties, including customers, lessors, and parties to other transactions with us, with respect to certain matters. We have agreed to indemnify against losses arising from a breach of representations or covenants or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time or circumstances within which an indemnification claim can be made and the amount of the claim.It is not possible to determine the maximum potential amount for claims made under the indemnification obligations due to uncertainties in the litigation process, coordination with and contributions by other parties and the defendants in these types of cases, and the unique facts and circumstances involved in each particular case and agreement. Historically, indemnity payments made by us have not had a material effect on our Consolidated Financial Statements.In addition, we have entered into indemnification agreements with our officers and directors, and our Amended and Restated Bylaws contain similar indemnification obligations to our agents. (f)Legal ProceedingsBrazil Brazilian authorities have investigated our Brazilian subsidiary and certain of its former employees, as well as a Brazilian importer of our products, and its affiliates and employees, relating to alleged evasion of import taxes and alleged improper transactions involving the subsidiary and the importer. Brazilian tax authorities have assessed claims against our Brazilian subsidiary based on a theory of joint liability with the Brazilian importer for import taxes, interest, and penalties. In addition to claims asserted by the Brazilian federal tax authorities in prior fiscal years, tax authorities from the Brazilian state of Sao Paulo have asserted similar claims on the same legal basis in prior fiscal years. The asserted claims by Brazilian federal tax authorities are for calendar years 2003 through 2007, and the asserted claims by the tax authorities from the state of Sao Paulo are for calendar years 2005 through 2007. The total asserted claims by Brazilian state 90
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Threshold consecutive trading days | 20 | SEC-NUM |
[Table of Contents](#ia72a687f7b8a4bb1b43219ab5b663314_7)repurchased under the program will be determined by the Company’s management based on its evaluation of market conditions and other factors. The Repurchase Program may be suspended or discontinued at any time. Any repurchased shares will be available for use in connection with the Company’s equity compensation plans (or any successor plan) and for other corporate purposes. As of December 31, 2021, 20 million shares remained available for repurchase pursuant to the Repurchase Program. The Company expects to fund any future stock repurchases using the Company’s available cash balances or proceeds from the issuance of debt.Except in connection with the Envista Split-Off in 2019, neither the Company nor any “affiliated purchaser” repurchased any shares of Company common stock during 2021, 2020 or 2019. Refer to Note 3 for discussion of the 22.9 million shares of Danaher common stock tendered to and repurchased by the Company in connection with the Envista Split-Off. The following table summarizes the Company’s share activity for the years ended December 31 (shares in millions):
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| Preferred stock - shares issued: | | | | | |
| Balance, beginning of period | 3.4 | | | 1.7 | | | — | |
| Issuance of MCPS | — | | | 1.7 | | | 1.7 | |
| Balance, end of period | 3.4 | | | 3.4 | | | 1.7 | |
| | | | | | |
| Common stock - shares issued: | | | | | |
| Balance, beginning of period | 851.3 | | | 835.5 | | | 817.9 | |
| Issuance of common stock attributable to stock-based compensation | 3.4 | | | 4.5 | | | 4.6 | |
| Common stock issued in connection with acquisitions | 0.1 | | | — | | | — | |
| Common stock issued in connection with LYONs’ conversions | 0.9 | | | 0.4 | | | 0.9 | |
| Other issuance of common stock | — | | | 10.9 | | | 12.1 | |
| Balance, end of period | 855.7 | | | 851.3 | | | 835.5 | |
In May 2020, the Company completed the underwritten public offering of 10.9 million shares of Danaher common stock at a price to the public of $163.00 per share (the “2020 Common Stock Offering”), resulting in net proceeds of approximately $1.7 billion, after deducting expenses and the underwriters’ discount of $54 million. Simultaneously, the Company completed the underwritten public offering of 1.72 million shares of its 5.0% MCPS Series B, without par value and with a liquidation preference of $1,000 per share (the “2020 MCPS Offering”), resulting in net proceeds of approximately $1.7 billion, after deducting expenses and the underwriters’ discount of $49 million. The Company has used the net proceeds from the 2020 Common Stock Offering and the 2020 MCPS Offering for general corporate purposes. On March 1, 2019, the Company completed the underwritten public offering of 12.1 million shares of Danaher common stock at a price to the public of $123.00 per share (the “2019 Common Stock Offering”), resulting in net proceeds of approximately $1.4 billion, after deducting expenses and the underwriters’ discount of $45 million. Simultaneously, the Company completed the underwritten public offering of 1.65 million shares of its 4.75% MCPS Series A, without par value and with a liquidation preference of $1,000 per share (the “2019 MCPS Offering”), resulting in net proceeds of approximately $1.6 billion, after deducting expenses and the underwriters’ discount of $50 million. The Company used the net proceeds from the 2019 Common Stock Offering and the 2019 MCPS Offering to fund a portion of the cash consideration payable for, and certain costs associated with, the Cytiva Acquisition. Prior to the completion of the Cytiva Acquisition, the Company invested the net proceeds in short-term bank deposits and/or interest-bearing, investment-grade securities.Unless converted earlier in accordance with the terms of the applicable certificate of designations, each share of MCPS Series A and MCPS Series B (together, the “MCPS Shares”) will mandatorily convert on their respective Mandatory Conversion Date, set forth below, into a number of shares of the Company’s common stock between the applicable Minimum Conversion Rate and the applicable Maximum Conversion Rate, set forth below (subject to further anti-dilution adjustments). The number of shares of the Company’s common stock issuable upon conversion will be determined based on the average volume-weighted average price per share of the Company’s common stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day immediately before the applicable Mandatory Conversion Date. Subject to certain exceptions, at any time prior to the Mandatory Conversion Date, holders may elect to convert the MCPS Shares into common stock based on the applicable Minimum Conversion Rate (subject to further anti-dilution adjustments). In the event of a fundamental change, the MCPS Shares will convert at the fundamental change rates specified in the applicable certificate of designations, and the holders of MCPS Shares would be entitled to a fundamental change make-whole dividend. In both 2021 and 2020, holders converted 20 shares of MCPS Series A into 133 and 132 shares of Danaher common stock, respectively.105
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Additions to capitalized exploratory well costs pending the determination of proved reserves | 267 | SEC-NUM |
PART I - FINANCIAL INFORMATION (CONT’D.)HESS CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)1. Basis of Presentation The financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position at September 30, 2022 and December 31, 2021, the consolidated results of operations for the three and nine months ended September 30, 2022 and 2021, and consolidated cash flows for the nine months ended September 30, 2022 and 2021. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year.The financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by generally accepted accounting principles (GAAP) in the United States have been condensed or omitted from these interim financial statements. These statements, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021. 2. InventoriesInventories consisted of the following:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | September 30,2022 | | December 31,2021 |
| | | | |
| | (In millions) |
| Crude oil and natural gas liquids | $ | 96 | | | $ | 52 | |
| Materials and supplies | 182 | | | 171 | |
| Total Inventories | $ | 278 | | | $ | 223 | |
3. Property, Plant and EquipmentCapitalized Exploratory Well Costs: The following table discloses the net changes in capitalized exploratory well costs pending determination of proved reserves during the nine months ended September 30, 2022 (in millions):
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Balance at January 1, 2022 | $ | 681 | |
| Additions to capitalized exploratory well costs pending the determination of proved reserves | 267 | |
| Reclassifications to wells, facilities and equipment based on the determination of proved reserves | (93) | |
| Balance at September 30, 2022 | $ | 855 | |
The preceding table excludes well costs of $19 million incurred and expensed during the first nine months of 2022. Additions to capitalized exploratory well costs pending the determination of proved reserves are related to wells drilled on the Stabroek Block (Hess 30%), offshore Guyana, the Huron-1 well (Hess 40%) in the Gulf of Mexico, and the Zanderij-1 well on Block 42 (Hess 33%), offshore Suriname. Reclassifications to wells, facilities and equipment based on the determination of proved reserves resulted from the sanction of the Yellowtail Field development project, the fourth sanctioned project on the Stabroek Block. At September 30, 2022, exploratory well costs capitalized for greater than one year following completion of drilling of $497 million was comprised of the following:Guyana: Approximately 90% of the capitalized well costs in excess of one year relate to successful exploration wells where hydrocarbons were encountered on the Stabroek Block. The operator plans further appraisal drilling on the Block and is conducting pre-development planning for additional phases of development.Joint Development Area (JDA): Approximately 8% of the capitalized well costs in excess of one year relates to the JDA (Hess 50%) in the Gulf of Thailand, where hydrocarbons were encountered in three successful exploration wells drilled in the western part of Block A-18. The operator has submitted a development plan concept to the regulator to facilitate ongoing commercial negotiations for an extension of the existing gas sales contract to include development of the western part of the Block.Malaysia: Approximately 2% of the capitalized well costs in excess of one year relate to the North Malay Basin (Hess 50%), offshore Peninsular Malaysia, where hydrocarbons were encountered in one successful exploration well. Subsurface evaluation and pre-development studies are ongoing.7
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Insurance proceeds (2) | 16 | SEC-NUM |
28 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2022 and 2021In August 2020, AES Andes reached an agreement with Minera Escondida and Minera Spence to early terminate two PPAs of the Angamos coal-fired plant in Chile, further accelerating AES Andes' decarbonization strategy. As a result of the termination payment, Angamos recognized a contract liability of $655 million, of which $55 million was derecognized each month through the end of the remaining performance obligation in August 2021.A significant financing arrangement exists for our Mong Duong plant in Vietnam. The plant was constructed under a build, operate, and transfer contract and will be transferred to the Vietnamese government after the completion of a 25 year PPA. The performance obligation to construct the facility was substantially completed in 2015. Contract consideration related to the construction, but not yet collected through the 25 year PPA, was reflected on the Condensed Consolidated Balance Sheet. As of September 30, 2022 and December 31, 2021, Mong Duong met the held-for-sale criteria and the loan receivable balance of approximately $1.2 billion net of CECL reserve of $29 million and $30 million, respectively, was classified as held-for-sale assets. Of the loan receivable balance, $96 million and $91 million was classified as Current held-for-sale assets, respectively, and $1.1 billion was classified as Noncurrent held-for-sale assets.Remaining Performance Obligations — The transaction price allocated to remaining performance obligations represents future consideration for unsatisfied (or partially unsatisfied) performance obligations at the end of the reporting period. As of September 30, 2022, the aggregate amount of transaction price allocated to remaining performance obligations was $10 million, primarily consisting of fixed consideration for the sale of renewable energy credits (“RECs”) in long-term contracts in the U.S. We expect to recognize revenue on approximately one-fifth of the remaining performance obligations in 2022 and 2023, with the remainder recognized thereafter. 14. OTHER INCOME AND EXPENSEOther income generally includes gains on insurance recoveries in excess of property damage, gains on asset sales and liability extinguishments, favorable judgments on contingencies, allowance for funds used during construction, and other income from miscellaneous transactions. Other expense generally includes losses on asset sales and dispositions, losses on legal contingencies, defined benefit plan non-service costs, and losses from other miscellaneous transactions. The components are summarized as follows (in millions):
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| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 |
| Other Income | Gain on remeasurement of investment (1) | $ | — | | | $ | — | | | $ | 26 | | | $ | — | |
| | Insurance proceeds (2) | — | | | — | | | 16 | | | — | |
| | AFUDC (US Utilities) | 4 | | | 2 | | | 9 | | | 6 | |
| | Legal settlements | — | | | — | | | 6 | | | — | |
| | | | | | | | | |
| | Gain on acquired customer contracts | — | | | — | | | 5 | | | — | |
| | Gain on remeasurement of contingent consideration (3) | — | | | 32 | | | 3 | | | 32 | |
| | Gain on remeasurement to acquisition-date fair value (4) | — | | | 8 | | | — | | | 220 | |
| | Other | — | | | 6 | | | 15 | | | 16 | |
| | Total other income | $ | 4 | | | $ | 48 | | | $ | 80 | | | $ | 274 | |
| | | | | | | | | |
| Other Expense | Allowance for lease receivable (5) | $ | — | | | $ | — | | | $ | 20 | | | $ | — | |
| | Loss on sale and disposal of assets | — | | | 6 | | | 9 | | | 13 | |
| | | | | | | | | |
| | | | | | | | | |
| | Loss on commencement of sales-type leases (6) | — | | | — | | | — | | | 13 | |
| | Legal contingencies and settlements | 8 | | | 2 | | | 8 | | | 2 | |
| | | | | | | | | |
| | Other | 2 | | | 4 | | | 14 | | | 4 | |
| | Total other expense | $ | 10 | | | $ | 12 | | | $ | 51 | | | $ | 32 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1) Related to the remeasurement of our existing investment in 5B, accounted for using the measurement alternative.(2) Primarily related to insurance recoveries associated with property damage at TermoAndes. (3) Related to the remeasurement of contingent consideration on the Great Cove Solar acquisition at AES Clean Energy. See Note 18—Acquisitions for further information.(4) For the three months ended September 30, 2021, primarily related to the $6 million remeasurement of our existing equity interest in Gas Natural Atlántico II, S. de. R.L.’s assets to their acquisition-date fair value. See Note 6—Investments in and Advances to Affiliates for further information. For the nine months ended September 30, 2021, primarily related to the $214 million remeasurement of our existing equity interest in sPower’s development platform as part of the step acquisition to form AES Clean Energy Development. See Note 18—Acquisitions for further information.(5) Related to a full allowance recognized on a sales-type lease receivable at AES Gilbert due to a fire incident in April 2022.(6) Related to a loss recognized at commencement of a sales-type lease at AES Renewable Holdings. See Note 9—Leases for further information.
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Net unrealized gains | 1,462 | SEC-NUM |
[Table of Contents](#i89c3c9328e454b30b2c14123b867f3f0_7)EQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
result in no material financial statement impact provided we satisfy our REIT distribution requirement with respect to the GILTI inclusions.As a result of our conversion to a REIT effective January 1, 2015, it is no longer our intent to indefinitely reinvest undistributed foreign earnings. However, no deferred tax liability has been recognized to account for this change because the expected recovery of the basis difference will not result in material U.S. taxes in the post-REIT conversion periods due to the fact that the majority of our foreign subsidiaries are either QRSs or owned directly by our REIT and QRSs, and the foreign withholding tax effect would be immaterial. We continue to assess the foreign withholding tax impact of our current policy and do not believe the distribution of our foreign earnings would trigger any significant foreign withholding taxes, as the majority of the foreign jurisdictions where we operate do not impose withholding taxes on dividend distributions to a corporate U.S. parent.The types of temporary differences that give rise to significant portions of our deferred tax assets and liabilities are set out below as of December 31 (in thousands):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | 2021 | | 2020 (1) |
| Deferred tax assets: | | | |
| Stock-based compensation expense | $ | 9,057 | | | $ | 5,583 | |
| Net unrealized losses | — | | | 17,268 | |
| Operating lease liabilities | 225,261 | | | 187,912 | |
| Capital lease liabilities | 13,927 | | | 26,655 | |
| Deferred revenue | 14,429 | | | 10,785 | |
| Loss carryforwards and tax credits | 201,132 | | | 117,150 | |
| Others, net | 7,257 | | | 4,296 | |
| Gross deferred tax assets | 471,063 | | | 369,649 | |
| Valuation allowance | (100,746) | | | (82,344) | |
| Total deferred tax assets, net | 370,317 | | | 287,305 | |
| Deferred tax liabilities: | | | |
| Net unrealized gains | (1,462) | | | — | |
| Property, plant and equipment | (262,532) | | | (145,314) | |
| Right-of-use assets | (233,199) | | | (201,714) | |
| Deferred income | (33,052) | | | (31,538) | |
| Intangible assets | (120,543) | | | (132,681) | |
| Total deferred tax liabilities | (650,788) | | | (511,247) | |
| Net deferred tax liabilities | $ | (280,471) | | | $ | (223,942) | |
| | | |
| --- | --- | --- |
| | | |
| |
(1) The prior year amounts presented in the table above have been reclassified to conform with the current year presentation.
The tax basis of REIT assets, excluding investments in TRSs, is greater than the amounts reported for such assets in the accompanying consolidated balance sheet by approximately $2.2 billion as of December 31, 2021.Our accounting for deferred taxes involves weighing positive and negative evidence concerning the realizability of our deferred tax assets in each taxing jurisdiction. After considering evidence such as the nature, frequency and severity of current and cumulative financial reporting losses, the sources of future taxable income, taxable income in carryback years permitted by the tax laws and tax planning strategies, we concluded that valuation allowances were required in certain jurisdictions. The operations in most of the jurisdictions for which a valuation allowance has been established have a history of significant losses as of December 31, 2021. As such, we do not believe these operations have established a sustained history of profitability and that a valuation allowance is, therefore, necessary. We also provided a valuation allowance against certain gross deferred tax assets in certain taxing jurisdictions as these deferred tax assets are not expected to be realizable in the foreseeable future.F-55
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Ownership interest (as a percent) | 50 | SEC-NUM |
[Table of Contents](#i0302cc7c03c44d0c8270f104de834cdb_7)CF INDUSTRIES HOLDINGS, INC.
8. Equity Method Investment We have a 50% ownership interest in Point Lisas Nitrogen Limited (PLNL), which operates an ammonia production facility in the Republic of Trinidad and Tobago. We include our share of the net earnings from this equity method investment as an element of earnings from operations because PLNL provides additional production to our operations and is integrated with our other supply chain and sales activities in the Ammonia segment.As of March 31, 2022, the total carrying value of our equity method investment in PLNL was $84 million, $38 million more than our share of PLNL’s book value. The excess is attributable to the purchase accounting impact of our acquisition of the investment in PLNL and reflects the revaluation of property, plant and equipment. The increased basis for property, plant and equipment is being amortized over a remaining period of approximately 11 years. Our equity in earnings of PLNL is different from our ownership interest in income reported by PLNL due to amortization of this basis difference. We have transactions in the normal course of business with PLNL reflecting our obligation to purchase 50% of the ammonia produced by PLNL at current market prices. Our ammonia purchases from PLNL totaled $74 million and $26 million for the three months ended March 31, 2022 and 2021, respectively.
9. Fair Value Measurements Our cash and cash equivalents and other investments consist of the following:
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| | March 31, 2022 |
| | Cost Basis | | UnrealizedGains | | UnrealizedLosses | | Fair Value |
| | (in millions) |
| Cash | $ | 207 | | | $ | — | | | $ | — | | | $ | 207 | |
| Cash equivalents: | | | | | | | |
| U.S. and Canadian government obligations | 2,324 | | | — | | | — | | | 2,324 | |
| Other debt securities | 86 | | | — | | | — | | | 86 | |
| Total cash and cash equivalents | $ | 2,617 | | | $ | — | | | $ | — | | | $ | 2,617 | |
| | | | | | | | |
| Nonqualified employee benefit trusts | 17 | | | 2 | | | — | | | 19 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| | Cost Basis | | UnrealizedGains | | UnrealizedLosses | | Fair Value |
| | (in millions) |
| Cash | $ | 121 | | | $ | — | | | $ | — | | | $ | 121 | |
| Cash equivalents: | | | | | | | |
| U.S. and Canadian government obligations | 1,452 | | | — | | | — | | | 1,452 | |
| Other debt securities | 55 | | | — | | | — | | | 55 | |
| Total cash and cash equivalents | $ | 1,628 | | | $ | — | | | $ | — | | | $ | 1,628 | |
| | | | | | | | |
| Nonqualified employee benefit trusts | 17 | | | 3 | | | — | | | 20 | |
Under our short-term investment policy, we may invest our cash balances, either directly or through mutual funds, in several types of investment-grade securities, including notes and bonds issued by governmental entities or corporations. Securities issued by governmental entities include those issued directly by the U.S. and Canadian federal governments; those issued by state, local or other governmental entities; and those guaranteed by entities affiliated with governmental entities.11
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Payments for Repurchase of Common Stock | 1,914 | SEC-NUM |
[Table of Contents](#i43c0112b46aa4245817525f4da15c00d_7)Advanced Micro Devices, Inc.Condensed Consolidated Statements of Cash Flows(Unaudited)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Three Months Ended |
| | March 26,2022 | | March 27,2021 |
| | (In millions) |
| Cash flows from operating activities: | | | |
| Net income | $ | 786 | | | $ | 555 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 609 | | | 95 | |
| Stock-based compensation | 199 | | | 85 | |
| | | | |
| Amortization of operating lease right-of-use assets | 19 | | | 12 | |
| Amortization of inventory fair value adjustment | 89 | | | — | |
| Loss on debt redemption, repurchase and conversion | — | | | 6 | |
| Loss on sale or disposal of property and equipment | 15 | | | 8 | |
| Deferred income taxes | (342) | | | 73 | |
| (Gains) losses on equity investments, net | 44 | | | 8 | |
| Other | (2) | | | (1) | |
| Changes in operating assets and liabilities | | | |
| Accounts receivable, net | (672) | | | (112) | |
| Inventories | (26) | | | (254) | |
| Receivables from related parties | (1) | | | 3 | |
| Prepaid expenses and other assets | (260) | | | 33 | |
| Payables to related parties | 121 | | | (38) | |
| Accounts payable | 4 | | | 466 | |
| Accrued liabilities and other | 412 | | | (41) | |
| Net cash provided by operating activities | 995 | | | 898 | |
| Cash flows from investing activities: | | | |
| Purchases of property and equipment | (71) | | | (66) | |
| Purchases of short-term investments | (100) | | | (858) | |
| Proceeds from maturity of short-term investments | 964 | | | 200 | |
| Cash received from acquisition of Xilinx | 2,366 | | | — | |
| Other | (1) | | | 2 | |
| Net cash provided by (used in) investing activities | 3,158 | | | (722) | |
| Cash flows from financing activities: | | | |
| | | | |
| | | | |
| Proceeds from sales of common stock through employee equity plans | 2 | | | 2 | |
| Repurchases of common stock | (1,914) | | | — | |
| Common stock repurchases for tax withholding on employee equity plans | (35) | | | (10) | |
| Other | (1) | | | — | |
| Net cash used in financing activities | (1,948) | | | (8) | |
| Net increase in cash, cash equivalents, and restricted cash | 2,205 | | | 168 | |
| Cash, cash equivalents, and restricted cash at beginning of period | 2,535 | | | 1,595 | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 4,740 | | | $ | 1,763 | |
| Supplemental cash flow information: | | | |
| Non-cash investing and financing activities: | | | |
| Purchases of property and equipment, accrued but not paid | $ | 67 | | | $ | 34 | |
| Issuance of common stock to settle convertible debt | $ | — | | | $ | 24 | |
6
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Current assets, net of cash acquired | 60.1 | SEC-NUM |
[Table of Contents](#i90c0b6fc77a94e699123e3f505f83787_7)3. Acquisitions On October 19, 2021, the Company acquired 100 percent of the shares and related assets of Giant Factories, Inc. (Giant), a Canada-based manufacturer of residential and commercial water heaters for $198.6 million, net of cash acquired. The purchase price increased by $2.5 million during the three months ended June 30, 2022 as a result of final working capital adjustments. The Company incurred acquisition costs of approximately $1.3 million in 2021. Under the purchase agreement for the Giant acquisition, an escrow of approximately $8 million was set aside from the purchase price to satisfy any potential obligations of the former owners of Giant, should they arise. Goodwill decreased by $2.3 million during the three months ended June 30, 2022 due to the net impact of a measurement period adjustment, primarily related to income tax matters, partially offset by the final working capital adjustment. The purchase price allocation remains preliminary and subject to final valuation adjustments that will be completed within the one year period following the acquisition date. The addition of Giant increases the Company's North America market penetration, creating additional capacity and enhancing the Company's distribution capabilities. Giant is included in the North America segment.The following table summarizes the preliminary allocation of fair value of the assets acquired and liabilities assumed at the date of acquisition. Of the $53.8 million of acquired identifiable intangible assets, $43.9 million has been assigned to trademarks that are not subject to amortization and $9.2 million has been assigned to customer relationships which are amortized over 22 years, and the remaining $0.7 million has been assigned to non-compete agreements which are amortized over five years. The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill. The following table summarizes the estimated fair values of Giant's assets acquired and liabilities assumed at the date of acquisition:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| October 19, 2021 (dollars in millions) | |
| Current assets, net of cash acquired | $ | 60.1 | |
| Property, plant and equipment | 55.8 | |
| Intangible assets | 53.8 | |
| Goodwill | 77.6 | |
| Total assets acquired | 247.3 | |
| Current liabilities | (39.2) | |
| Long Term liabilities | (9.5) | |
| Net assets acquired | $ | 198.6 | |
In addition, during the second quarter of 2022, the Company acquired a privately-held water treatment company. The Company paid an aggregate cash purchase price of $5.5 million, net of cash acquired. The addition of the company acquired expands the Company's water treatment platform and is included in the North America segment for reporting purposes.As required under ASC 805 Business Combinations, results of operations have been included in the Company’s consolidated financial statements from the date of their acquisition.4. LeasesThe Company’s lease portfolio consists of operating leases for buildings and equipment, such as forklifts and copiers, primarily in the United States and China. The Company defines a lease as a contract that gives the Company the right to control the use of a physical asset for a stated term. The Company pays the lessor for that right, with a series of payments defined in the contract and a corresponding right of use operating lease asset and liability are recorded. The Company has elected not to record leases with an initial term of 12 months or less on its condensed consolidated balance sheet. To determine balance sheet amounts, required legal payments are discounted using the Company’s incremental borrowing rate as of the inception of the lease. The incremental borrowing rate is the rate of interest that the Company would incur if it were to borrow, on a collateralized basis, an amount equal to the value of the leased item over a similar term, in a similar economic environment. Variable lease components not based on an index or rate are excluded from the measurement of the lease asset and liability and expensed as incurred for all asset classes.Certain leases include one or more options to renew or terminate. Renewal terms can extend the lease term from one to five years and options to terminate can be effective within one year. The exercise of lease renewal or termination is at the Company’s discretion and when it is determined to be reasonably certain to renew or terminate, the option is reflected in the measurement of lease asset and liability. The Company’s lease agreements do not contain any material residual value 9
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Change in estimated exposure | 19 | SEC-NUM |
[Table of Contents](#ic4907372b5a74ad699ec049e915a6266_10)Additionally, Winter Storm Uri, a severe winter weather storm in the U.S. Gulf Coast in February 2021, disrupted our operations and caused power and natural gas prices to spike significantly in Texas. We remain in litigation of a dispute regarding energy management services related to the impact of this event, and other disputes may arise from such power price increases. In addition, legislative action may affect power supply and energy management charges. While it is reasonably possible that we could incur additional costs related to power supply and energy management services in Texas related to the winter storm, it is too early to estimate potential losses, if any, given significant unknowns resulting from the unusual nature of this event.EnvironmentalIn the normal course of business, we are involved in legal proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA," the federal Superfund law), Resource Conservation and Recovery Act ("RCRA"), and similar state and foreign environmental laws relating to the designation of certain sites for investigation or remediation. Presently, there are 32 sites on which a final settlement has not been reached where we, along with others, have been designated a potentially responsible party by environmental authorities or are otherwise engaged in investigation or remediation, including cleanup activity at certain of our current and former manufacturing sites. We continually monitor these sites for which we have environmental exposure.Accruals for environmental loss contingencies are recorded when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The consolidated balance sheets at 31 December 2021 and 30 September 2021 included an accrual of $75.6 and $76.7, respectively, primarily as part of other noncurrent liabilities. The environmental liabilities will be paid over a period of up to 30 years. We estimate the exposure for environmental loss contingencies to range from $74 to a reasonably possible upper exposure of $88 as of 31 December 2021.Actual costs to be incurred at identified sites in future periods may vary from the estimates, given inherent uncertainties in evaluating environmental exposures. Using reasonably possible alternative assumptions of the exposure level could result in an increase to the environmental accrual. Due to the inherent uncertainties related to environmental exposures, a significant increase to the reasonably possible upper exposure level could occur if a new site is designated, the scope of remediation is increased, a different remediation alternative is identified, or a significant increase in our proportionate share occurs. We do not expect that any sum we may have to pay in connection with environmental matters in excess of the amounts recorded or disclosed above would have a material adverse impact on our financial position or results of operations in any one year.PaceAt 31 December 2021, $39.2 of the environmental accrual was related to the Pace facility.In 2006, we sold our Amines business, which included operations at Pace, Florida, and recognized a liability for retained environmental obligations associated with remediation activities at Pace. We are required by the Florida Department of Environmental Protection ("FDEP") and the United States Environmental Protection Agency ("USEPA") to continue our remediation efforts. We recognized a before-tax expense of $42 in fiscal year 2006 in results from discontinued operations and recorded an environmental accrual of $42 in continuing operations on the consolidated balance sheets.During the second quarter of fiscal year 2020, we completed an updated cost review of the environmental remediation status at the Pace facility. The review was completed in conjunction with requirements to maintain financial assurance per the Consent Order issued by the FDEP discussed below. Based on our review, we expect ongoing activities to continue for 30 years. Additionally, we will require near-term spending to install new groundwater recovery wells and ancillary equipment, in addition to future capital to consider the extended time horizon for remediation at the site. As a result of these changes, we increased our environmental accrual for this site by $19 in continuing operations on the consolidated balance sheets and recognized a before-tax expense of $19 in results from discontinued operations in the second quarter of fiscal year 2020. There has been no change to the estimated exposure range related to the Pace facility since the second quarter of fiscal year 2020.23
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Acquired other liabilities | 1.1 | SEC-NUM |
Note 2 — Acquisition
On June 17, 2021, the Company acquired 100% of the outstanding capital stock of Pulse Q&A Inc. (“Pulse”), a privately-held company based in San Francisco, California, for an aggregate purchase price of $29.9 million. Pulse is a technology-enabled community platform.
During 2021, the Company paid $22.9 million in cash for Pulse after considering the cash acquired with the business, amounts held in escrow and certain other purchase price adjustments. During the three months ended September 30, 2022, the Company paid $4.1 million of deferred consideration held in escrow. In addition to the purchase price, the Company may also be required to pay up to $4.5 million in cash based on the continuing employment of certain key employees. Such amounts are recognized as compensation expense over three years post-acquisition and reported in Acquisition and integration charges in the Condensed Consolidated Statements of Operations.
The Company recorded $31.0 million of goodwill and finite-lived intangible assets and $1.1 million of liabilities on a net basis for the Pulse acquisition.
Note 3 — Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair values of the tangible and identifiable intangible net assets acquired. Evaluations of the recoverability of goodwill are performed in accordance with FASB ASC Topic 350, which requires an annual assessment of potential goodwill impairment at the reporting unit level and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.
When performing the annual assessment of the recoverability of goodwill, the Company initially performs a qualitative analysis evaluating whether any events or circumstances occurred or exist that provide evidence that it is more likely than not that the fair value of any of the Company’s reporting units is less than the related carrying amount. If the Company does not believe that it is more likely than not that the fair value of any of the Company’s reporting units is less than the related carrying amount, then no quantitative impairment test is performed. However, if the results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount, then a quantitative impairment test is performed. Evaluating the recoverability of goodwill requires judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of the estimates are subject to uncertainty.
The Company’s most recent annual impairment test of goodwill was a qualitative analysis conducted during the quarter ended September 30, 2022 that indicated no impairment. Subsequent to completing the 2022 annual impairment test, there were no events or changes in circumstances noted that required an interim impairment test.
The table below presents changes to the carrying amount of goodwill by segment during the nine months ended September 30, 2022 (in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Research | | Conferences | | Consulting | | Total |
| Balance at December 31, 2021 (1) | $ | 2,670,934 | | | $ | 184,021 | | | $ | 96,362 | | | $ | 2,951,317 | |
| | | | | | | | |
| Foreign currency translation impact | (12,751) | | | (148) | | | (2,278) | | | (15,177) | |
| Balance at September 30, 2022 (1) | $ | 2,658,183 | | | $ | 183,873 | | | $ | 94,084 | | | $ | 2,936,140 | |
| | | |
| --- | --- | --- |
| | | |
| |
(1)The Company does not have any accumulated goodwill impairment losses.
11
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Increase in per capita cost of covered health care benefits assumed for next fiscal year (as a percent) | 8 | SEC-NUM |
[Table of Contents](#ic0f1e00f8fa04a87b8ba424679040b3d_7)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Pension Benefits | | Post-retirement Benefits |
| (in thousands) | | 2021 | | 2020 | | 2021 | | 2020 |
| Change in Plan Assets | | | | | | | | |
| Fair Value of Plan Assets at Beginning of Year | | $ | 1,553,532 | | | $ | 1,477,288 | | | $ | — | | | $ | — | |
| Actual Return on Plan Assets | | 211,054 | | | 183,647 | | | — | | | — | |
| Participant Contributions | | — | | | — | | | 2,113 | | | 2,344 | |
| Employer Contributions | | 10,712 | | | 8,562 | | | 21,105 | | | 18,646 | |
| Benefits Paid | | (76,702) | | | (115,965) | | | (23,218) | | | (20,990) | |
| Fair Value of Plan Assets at End of Year | | $ | 1,698,596 | | | $ | 1,553,532 | | | $ | — | | | $ | — | |
| Funded Status at End of Year | | $ | (13,362) | | | $ | (113,354) | | | $ | (274,666) | | | $ | (285,293) | |
Amounts recognized in the Consolidated Statements of Financial Position as of October 31, 2021, and October 25, 2020, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Pension Benefits | | Post-retirement Benefits |
| (in thousands) | | 2021 | | 2020 | | 2021 | | 2020 |
| Pension Assets | | $ | 289,096 | | | $ | 183,232 | | | $ | — | | | $ | — | |
| Employee-related Expenses | | (11,173) | | | (9,332) | | | (19,589) | | | (19,669) | |
| Pension and Post-retirement Benefits | | (291,285) | | | (287,254) | | | (255,077) | | | (265,624) | |
| Net Amount Recognized | | $ | (13,362) | | | $ | (113,354) | | | $ | (274,666) | | | $ | (285,293) | |
The accumulated benefit obligation for all pension plans was $1.7 billion and $1.6 billion as of October 31, 2021, and October 25, 2020, respectively. The following table provides information for pension plans with projected and accumulated benefit obligations in excess of plan assets:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| (in thousands) | | 2021 | | 2020 |
| Projected Benefit Obligation | | $ | 302,458 | | | $ | 296,585 | |
| Accumulated Benefit Obligation | | 292,877 | | | 288,359 | |
| Fair Value of Plan Assets | | — | | | — | |
Weighted-average assumptions used to determine benefit obligations are as follows:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| | | 2021 | | 2020 |
| Discount Rate | | 3.00 | % | | 3.06 | % |
| Rate of Future Compensation Increase (For Plans that Base Benefits onFinal Compensation Level) | | 4.14 | % | | 4.09 | % |
Weighted-average assumptions used to determine net periodic benefit costs are as follows:
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | 2021 | | 2020 | | 2019 |
| Discount Rate | | 3.06 | % | | 3.37 | % | | 4.55 | % |
| Rate of Future Compensation Increase (For Plans that Base Benefits on Final Compensation Level) | | 4.09 | % | | 4.06 | % | | 3.96 | % |
| Expected Long-term Return on Plan Assets | | 6.75 | % | | 7.00 | % | | 7.15 | % |
The expected long-term rate of return on plan assets is based on fair value and developed in consultation with outside advisors. A range is determined based on the composition of the asset portfolio, historical long-term rates of return, and estimates of future performance.
For measurement purposes, an 8 percent annual rate of increase in the per capita cost of covered health care benefits for pre-Medicare and post-Medicare retirees’ coverage is assumed for 2022. The pre-Medicare and post-Medicare rate is assumed to decrease to 5 percent for 2027 and remain steady thereafter. The Company’s funding policy is to make annual contributions of not less than the minimum required by applicable regulations. The Company expects to make contributions of $31.1 million during fiscal 2022 that represent benefit payments for unfunded plans. 50
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Total consolidated net leverage ratio | 0.80 | SEC-NUM |
[Table of Contents](#i988317c7021a4a8fa66f2208a2958f7e_10)Borrowings under the Second Amended and Restated Credit Agreement bear interest based on, at our option, either (1) the applicable fixed rate plus 1.00% to 1.75% or (2) the daily rate plus 0% to 0.75%, in each case, depending on Copart’s consolidated total net leverage ratio. Additionally, the unused revolving commitments under the Second Amended and Restated Credit Agreement are subject to the payment of a customary commitment fee at a range of 0.175% to 0.275%, depending on Copart’s consolidated total net leverage ratio. The applicable fixed rates described above with respect to borrowings denominated in (1) U.S. Dollars is SOFR plus certain “spread adjustments” described in the Second Amended and Restated Credit Agreement, (2) Pounds Sterling is SONIA plus certain “spread adjustments” described in the Second Amended and Restated Credit Agreement, (3) Euro is EURIBOR, and (4) Canadian Dollars is CDOR. The Company had no outstanding borrowings under the Revolving Loan Facility as of as of July 31, 2022 or 2021.
The Company’s obligations under the Second Amended and Restated Credit Agreement are guaranteed by certain of the Company’s domestic subsidiaries meeting materiality thresholds set forth in the Second Amended and Restated Credit Agreement. Such obligations, including the guaranties, are secured by substantially all of the assets of the Company and the assets of the subsidiary guarantors pursuant to a Security Documents Confirmation Agreement as part of the Second Amended and Restated Credit Agreement.
The Second Amended and Restated Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends, or make distributions on and repurchase stock, in each case subject to certain exceptions. The Company is also required to maintain compliance, measured at the end of each fiscal quarter, with a consolidated total net leverage ratio and a consolidated interest coverage ratio. The Second Amended and Restated Credit Agreement contains no restrictions on the payment of dividends and other restricted payments, as defined, as long as (1) the consolidated total net leverage ratio, as defined, both before and after giving effect to any such dividend or restricted payment on a pro forma basis, is less than 3.25:1, in an unlimited amount, (2) if clause (1) is not available, so long as the consolidated total net leverage ratio both before and after giving effect to any such dividend on a pro forma basis is less than 3.50:1, in an aggregate amount not to exceed the available amount, as defined, and (3) if clauses (1) and (2) are not available, in an aggregate amount not to exceed $50.0 million; provided, that, minimum liquidity, as defined, shall be not less than $75.0 million both before and after giving effect to any such dividend or restricted payment. As of July 31, 2022, the consolidated total net leverage ratio was (0.80):1. Minimum liquidity requirement as of July 31, 2022 was $2.6 billion. Accordingly, the Company does not believe that the provisions of the Second Amended and Restated Credit Agreement represent a significant restriction to its ability to pay dividends or to the successful future operations of the business. The Company has not paid a cash dividend since becoming a public company in 1994. The Company was in compliance with all covenants related to the Second Amended and Restated Credit Agreement as of July 31, 2022.
Related to the execution of the second Amended and Restated Credit Agreement, the Company incurred $2.7 million in costs, which was capitalized as debt issuance fees. The debt discount is amortized to interest expense over the term of the respective debt instruments and are classified as reductions of the outstanding liability.
Note Purchase Agreement
On December 3, 2014, the Company entered into a Note Purchase Agreement and sold to certain purchasers (collectively, the “Purchasers”) $400.0 million in aggregate principal amount of senior secured notes (the “Senior Notes”) consisting of (i) $100.0 million aggregate principal amount of 4.07% Senior Notes, Series A, due December 3, 2024; (ii) $100.0 million aggregate principal amount of 4.19% Senior Notes, Series B, due December 3, 2026; (iii) $100.0 million aggregate principal amount of 4.25% Senior Notes, Series C, due December 3, 2027; and (iv) $100.0 million aggregate principal amount of 4.35% Senior Notes, Series D, due December 3, 2029. Interest on each of the Senior Notes was due and payable quarterly, in arrears. The Company used proceeds from the Note Purchase Agreement for general corporate purposes.
Subsequently on May 24, 2022, the Company retired 100% of the Senior Notes. The Company paid $420.6 million to retire the Senior Notes which included an additional $16.8 million make-whole payment, to the holders of the Senior Notes, and $3.8 million in accrued interest.
74
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Forfeited (in shares) | 813 | SEC-NUM |
[Table of Contents](#if58bf2b7da5f49b78db442640b215d13_7)
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| --- | --- | --- |
| | | |
| Restricted Stock Unit and Restricted Stock Activity |
A summary of restricted stock unit (RSU) and restricted stock activity for the nine months ended April 30, 2022 was as follows:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| (Shares in thousands) | Numberof Shares | | WeightedAverageGrant DateFair Value |
| Nonvested at July 31, 2021 | 9,038 | | | $ | 345.86 | |
| | | | |
| Granted (1) | 2,134 | | | 568.65 | |
| Vested | (2,205) | | | 318.74 | |
| Forfeited | (813) | | | 354.69 | |
| Nonvested at April 30, 2022 | 8,154 | | | $ | 410.63 | |
(1)Includes approximately 583,000 RSUs granted to the employees of Mailchimp in substitution of outstanding equity incentive awards with a grant date fair value of $355 million and approximately 325,000 RSUs granted to the employees of Mailchimp in connection with the acquisition with a grant date fair value of $211 million. See Note 5, "Business Combinations."At April 30, 2022, there was approximately $2.8 billion of unrecognized compensation cost related to non-vested RSUs and restricted stock with a weighted average vesting period of 2.7 years. We will adjust unrecognized compensation cost for actual forfeitures as they occur.
| | | |
| --- | --- | --- |
| | | |
| Stock Option Activity |
A summary of stock option activity for the nine months ended April 30, 2022 was as follows:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Options Outstanding |
| (Shares in thousands) | Number of Shares | | WeightedAverageExercisePrice Per Share |
| Balance at July 31, 2021 | 2,204 | | | $ | 251.48 | |
| | | | |
| Granted | — | | | — | |
| Exercised | (151) | | | 166.02 | |
| Canceled or expired | (20) | | | 503.05 | |
| Balance at April 30, 2022 | 2,033 | | | $ | 255.38 | |
| | | | |
| Exercisable at April 30, 2022 | 1,400 | | | $ | 188.29 | |
At April 30, 2022, there was approximately $53 million of unrecognized compensation cost related to non-vested stock options with a weighted average vesting period of 2.6 years. We will adjust unrecognized compensation cost for actual forfeitures as they occur.
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| --- | --- | --- |
| | | |
| 11. Litigation |
Beginning in May 2019, various legal proceedings were filed and certain regulatory inquiries were commenced in connection with our provision and marketing of free online tax preparation programs. We believe that the allegations contained within these legal proceedings are without merit and continue to defend our interests in them. These proceedings included, among others, multiple putative class actions that were consolidated into a single putative class action in the Northern District of California in September 2019 (the “Intuit Free File Litigation”). In August 2020, the Ninth Circuit Court of Appeals ordered that the putative class action claims be resolved through arbitration. In May 2021, the Intuit Free File Litigation was dismissed on a non-class basis after we entered into an agreement that resolved the matter on an individual non-class basis for an immaterial amount, without any admission of wrongdoing.These proceedings also included individual demands for arbitration that were filed beginning in October 2019. On February 23, 2022 and May 23, 2022, we entered into settlement agreements that will resolve all of these pending arbitration claims, without any admission of wrongdoing. The ultimate amount that we are required to pay under these agreements will depend on the number of claimants that provide releases of claims thereunder. During the nine months ended April 30, 2022, we accrued an immaterial amount based on our estimate of the probable payments we could make under these agreements. While we believe our accrual is adequate, the final payments required under these agreements could differ from our recorded estimate.
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| | Intuit Q3 Fiscal 2022 Form 10-Q | 26 | |
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Common stock discount to fair market value for ESPP purchases | 10 | SEC-NUM |
[Table of Contents](#i3944da1428384b81954c2cd4a4fd88bf_7)11.Income TaxesOur income before income tax provision, income tax provision and effective tax rates were as follows:
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| (in thousands, except percentages) | September 30,2022 | | September 30,2021 | | September 30,2022 | | September 30,2021 |
| Income before income tax provision | $ | 117,981 | | | $ | 103,898 | | | $ | 318,904 | | | $ | 280,381 | |
| Income tax provision | 22,006 | | | 18,556 | | | $ | 53,141 | | | $ | 28,925 | |
| Effective tax rate | 18.7 | % | | 17.9 | % | | 16.7 | % | | 10.3 | % |
The increase in the effective tax rate from the prior year was primarily due to decreased benefits related to stock-based compensation.Tax expense for the nine months ended September 30, 2022 and 2021 benefited from deductions related to stock-based compensation, many of which were recognized discretely. These benefits were partially offset by non-deductible compensation.12.Stock Repurchase Program Under our stock repurchase program, we repurchased shares as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Nine Months Ended |
| (in thousands, except per share data) | September 30,2022 | | September 30,2021 |
| Number of shares repurchased | 500 | | 97 | |
| Average price paid per share | $ | 311.14 | | | $ | 371.83 | |
| Total cost | $ | 155,571 | | | $ | 35,993 | |
All of the shares repurchased during the nine months ended September 30, 2022 were repurchased during the first quarter. As of September 30, 2022, 2.0 million shares remained available for repurchase under the program. 13.Stock-Based CompensationOn May 12, 2022, our stockholders approved the ANSYS, Inc. 2022 Employee Stock Purchase Plan (2022 ESPP) and the reservation by our board of directors of 750,000 shares of common stock for issuance under the 2022 ESPP. The 2022 ESPP allows our employees and employees of our designated subsidiaries to purchase shares of our common stock at a discount to fair market value of 10% in accordance with the terms and conditions of the 2022 ESPP.Total stock-based compensation expense and its net impact on basic and diluted earnings per share are as follows:
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| (in thousands, except per share data) | September 30,2022 | | September 30,2021 | | September 30,2022 | | September 30,2021 |
| Cost of sales: | | | | | | | |
| Maintenance and service | $ | 2,621 | | | $ | 2,753 | | | $ | 7,448 | | | $ | 9,834 | |
| Operating expenses: | | | | | | | |
| Selling, general and administrative | 27,077 | | | 25,420 | | | 67,117 | | | 66,158 | |
| Research and development | 17,272 | | | 15,971 | | | 47,554 | | | 46,156 | |
| Stock-based compensation expense before taxes | 46,970 | | | 44,144 | | | 122,119 | | | 122,148 | |
| Related income tax benefits | (9,984) | | | (10,743) | | | (42,037) | | | (62,151) | |
| Stock-based compensation expense, net of taxes | $ | 36,986 | | | $ | 33,401 | | | $ | 80,082 | | | $ | 59,997 | |
| Net impact on earnings per share: | | | | | | | |
| Basic earnings per share | $ | (0.42) | | | $ | (0.38) | | | $ | (0.92) | | | $ | (0.69) | |
| Diluted earnings per share | $ | (0.42) | | | $ | (0.38) | | | $ | (0.92) | | | $ | (0.68) | |
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Finance Lease Liability, 2022 | 15 | SEC-NUM |
[Table of Contents](#i0c857804d60248b2bbe1d8282b20bbb1_7)Expected Maturities - As of December 31, 2021, expected maturities of lease liabilities were as follows (in millions):
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| | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total | | Less: amount representing interest | | Present value of minimum lease payments |
| Operating Leases: | | | | | | | | | | | | | | | | | |
| Alliant Energy | $2 | | | $2 | | | $2 | | | $2 | | | $2 | | | $7 | | $17 | | $3 | | $14 |
| IPL | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | | 6 | | 11 | | 2 | | 9 |
| WPL | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | 6 | | 1 | | 5 |
| Finance Leases: | | | | | | | | | | | | | | | | | |
| Alliant Energy | — | | | — | | | — | | | — | | | 1 | | | 19 | | 20 | | 8 | | 12 |
| WPL | 15 | | | 15 | | | 15 | | | 6 | | | 1 | | | 19 | | 71 | | 18 | | 53 |
NOTE 11. REVENUESRevenues from Alliant Energy’s, IPL’s and WPL’s utility businesses are primarily from electric and gas sales provided to customers based on approved tariffs or specific contracts with customers. IPL’s and WPL’s primary performance obligations under such arrangements are to deliver electricity and gas, and their customers simultaneously receive and consume the electricity and gas. For such arrangements, revenues are recognized equivalent to the value of the electricity or gas supplied during each period, including amounts billed during each period and changes in amounts estimated to be billed at the end of each period. IPL and WPL apply the right to invoice method to measure progress towards completing performance obligations to transfer electricity and gas to their customers.
IPL provides retail electric and gas service to customers in Iowa, and WPL provides retail and wholesale electric and retail gas service to customers in Wisconsin. IPL also sells electricity to wholesale customers in Minnesota, Illinois and Iowa, as well as steam from its Prairie Creek Generating Station to high-pressure steam customers in Iowa.
IPL’s and WPL’s retail electric and gas revenues include sales to residential, commercial and industrial customers. IPL’s and WPL’s retail electric and gas customer prices are based on IPL’s and WPL’s cost of service and are determined through general rate review proceedings and various tariff filings with the IUB and PSCW, respectively. Such tariff-based services provide electricity or gas to customers without a defined contractual term.
IPL and WPL have wholesale electric market-based rate authority from FERC allowing them to participate in wholesale energy markets (e.g. MISO) and transact directly with third parties. This authority from FERC allows sales of electricity referred to as bulk power sales based on current market values. FERC also allows IPL and WPL to enter into power supply agreements with municipalities and rural electric cooperatives with defined contractual terms, which include standard pricing mechanisms that are detailed in current tariffs accepted by FERC through wholesale rate review proceedings.
Revenues from Alliant Energy’s non-utility business customers are primarily from its Travero business, which includes a short-line rail freight service in Iowa; a Mississippi River barge, rail and truck freight terminal in Illinois; freight brokerage services; and a rail-served warehouse in Iowa, which began operations in 2021.
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| | 74 | |
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Cash flow hedge loss to be reclassified within the next twelve months | 5 | SEC-NUM |
[Table of Contents](#ifce71646d6a145519f2ac4db7d9b12ca_7) The impact of derivative and non-derivative instruments designated as hedges to the Consolidated Statements of Income and Comprehensive Income is as follows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gain (loss) recognized inother comprehensive(loss) income | | Location of gain (loss)reclassified fromAccumulated othercomprehensive loss | | Gain (loss) reclassifiedfrom Accumulated othercomprehensive loss |
| | Three months endedSeptember 30 | | | | Three months endedSeptember 30 |
| (In millions) | 2022 | | 2021 | | | | 2022 | | 2021 |
| Derivatives designated as cash flow hedges | | | | | | | | | |
| Forward starting floating-to-fixed interest rate swaps | $ | (36) | | | $ | 1 | | | Interest expense - net | | $ | 1 | | | $ | — | |
| | | | | | | | | | |
| Currency exchange contracts | (8) | | | (6) | | | Net sales and Cost of products sold | | (1) | | | 3 | |
| Commodity contracts | (3) | | | (3) | | | Cost of products sold | | (3) | | | 2 | |
| Non-derivative designated as net investment hedges | | | | | | | | | |
| Foreign currency denominated debt | 164 | | | 74 | | | Interest expense - net | | — | | | — | |
| Total | $ | 117 | | | $ | 66 | | | | | $ | (3) | | | $ | 5 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | Gain (loss) recognized inother comprehensive(loss) income | | Location of gain (loss)reclassified fromAccumulated othercomprehensive loss | | Gain (loss) reclassifiedfrom Accumulated othercomprehensive loss |
| | Nine months ended September 30 | | | | Nine months ended September 30 |
| (In millions) | 2022 | | 2021 | | | | 2022 | | 2021 |
| Derivatives designated as cash flow hedges | | | | | | | | | |
| Forward starting floating-to-fixedinterest rate swaps | $ | 202 | | | $ | 62 | | | Interest expense - net | | $ | 1 | | | $ | — | |
| | | | | | | | | | |
| Currency exchange contracts | (18) | | | (11) | | | Net sales and Cost of products sold | | 3 | | | (2) | |
| Commodity contracts | (11) | | | 2 | | | Cost of products sold | | — | | | 7 | |
| Non-derivative designated as net investment hedges | | | | | | | | | |
| Foreign currency denominated debt | 405 | | | 178 | | | Interest expense - net | | — | | | — | |
| Total | $ | 577 | | | $ | 231 | | | | | $ | 4 | | | $ | 5 | |
At September 30, 2022, a loss of $5 million of estimated unrealized net gains or losses associated with our cash flow hedges were expected to be reclassified to income from Accumulated other comprehensive loss within the next twelve months. These reclassifications relate to our designated foreign currency and commodity hedges that will mature in the next 12 months.
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Allowance for credit losses at acquisition date | 4 | SEC-NUM |
The following table presents consumer TDRs that defaulted for which the payment default occurred within one year of a permanent modification. Default is defined as 60 days past due.
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| | | | | | | | | |
| | Years ended December 31, |
| In millions of dollars | 2021 | 2020 |
| North America | | |
| Residential first mortgages | $ | 57 | | $ | 71 | |
| Home equity loans | 8 | | 14 | |
| Credit cards | 252 | | 317 | |
| Personal, small business and other | 4 | | 4 | |
| Total | $ | 321 | | $ | 406 | |
| International | | |
| Residential mortgages | $ | 38 | | $ | 26 | |
| Credit cards | 152 | | 178 | |
| Personal, small business and other | 96 | | 78 | |
| Total | $ | 286 | | $ | 282 | |
Purchased Credit-Deteriorated Assets
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| | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, |
| | 2021 | 2020 |
| In millions of dollars | Credit cards | Mortgages(1) | Installment and other | Credit cards | Mortgages(1) | Installment and other |
| Purchase price | $ | — | | $ | 23 | | $ | — | | $ | 4 | | $ | 49 | | $ | — | |
| Allowance for credit losses at acquisition date | — | | — | | — | | 4 | | — | | — | |
| Discount or premium attributable to non-credit factors | — | | — | | — | | — | | — | | — | |
| Par value (amortized cost basis) | $ | — | | $ | 23 | | $ | — | | $ | 8 | | $ | 49 | | $ | — | |
(1) Includes loans sold to agencies that were bought back at par due to repurchase agreements.
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2025 | 4,230 | SEC-NUM |
Notes to the Consolidated Financial StatementsNOTE 7. COMMITMENTS AND CONTINGENCIES
Aircraft Purchase Commitments
Our future aircraft purchase commitments totaled approximately $19.9 billion at September 30, 2022.
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| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Aircraft purchase commitments |
| (in millions) | Total |
| Three months ending December 31, 2022 | $ | 1,380 | |
| 2023 | 3,440 | |
| 2024 | 3,640 | |
| 2025 | 4,230 | |
| 2026 | 3,700 | |
| Thereafter | 3,500 | |
| Total | $ | 19,890 | |
Our future aircraft purchase commitments included the following aircraft at September 30, 2022:
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| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Aircraft purchase commitments by fleet type | |
| Aircraft Type | Purchase Commitments |
| A220-300 | 50 | |
| A321-200neo | 147 | |
| A330-900neo | 20 | |
| A350-900 | 18 | |
| B-737-900ER | 3 | |
| B-737-10 | 100 | |
| Total | 338 | |
Aircraft Orders
During the June 2022 quarter, we agreed to acquire four B-737-900ER and one A330-900 aircraft. Deliveries of the pre-owned B-737-900ER aircraft are expected to occur by the end of 2022 and delivery of the new A330-900 aircraft is expected to occur in 2024.
In July 2022, we entered into a purchase agreement with Boeing for 100 Boeing 737-10 aircraft, the largest model in the 737 MAX family of aircraft, to start delivery in 2025 with the option to purchase an additional thirty 737-10 aircraft. Also in July 2022, we exercised purchase rights for 12 A220-300 aircraft with Airbus.
Legal Contingencies
We are involved in various legal proceedings related to employment practices, environmental issues, antitrust matters and other matters concerning our business. We record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will be unfavorable and the amount of loss can be reasonably estimated. Although the outcome of the legal proceedings in which we are involved cannot be predicted with certainty, we believe that the resolution of current matters will not have a material adverse effect on our Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. September 2022 Form 10-Q 15
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Lesser of fair market value | 85 | SEC-NUM |
[Table of Contents](#ifb4765332bfb410ba6ce53d196f7d99d_7)Employee Stock Purchase PlanThe Company maintains a nonqualified employee stock purchase plan (the “ESPP”) that expires in 2027 through which employee participants (other than the Company’s executive officers) may use payroll deductions to acquire Company common stock at a purchase price of 85% of the fair market value of the common stock at the end of a three-month purchase period. A total of 2.0 million shares may be issued under the ESPP, and as of December 31, 2021, there were 1.6 million shares of common stock reserved for issuance under the ESPP. The ESPP is considered compensatory. During the years ended December 31, 2021, 2020 and 2019, the Company issued 80 thousand, 86 thousand and 88 thousand shares, respectively, under the ESPP.Note 12: Long-Term DebtThe Company obtains long-term debt through AWCC primarily to fund capital expenditures of the Regulated Businesses and to lend funds to parent company to refinance debt and for other purposes. Presented in the table below are the components of long-term debt as of December 31:
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| | Rate | | Weighted Average Rate | | Maturity | | 2021 | | 2020 |
| Long-term debt of AWCC: (a) | | | | | | | | | |
| Senior notes—fixed rate | 2.30%-8.27% | | 3.83% | | 2023-2051 | | $ | 8,965 | | | $ | 8,191 | |
| Private activity bonds and government funded debt—fixed rate | 0.60%-2.45% | | 1.63% | | 2023-2031 | | 190 | | | 191 | |
| Long-term debt of other American Water subsidiaries: | | | | | | | | | |
| Private activity bonds and government funded debt—fixed rate | 0.00%-5.50% | | 1.70% | | 2022-2048 | | 739 | | | 735 | |
| Mortgage bonds—fixed rate | 6.35%-9.19% | | 7.36% | | 2023-2039 | | 534 | | | 565 | |
| Mandatorily redeemable preferred stock | 8.47%-9.75% | | 8.60% | | 2024-2036 | | 4 | | | 5 | |
| Finance lease obligations | 12.25% | | 12.25% | | 2026 | | 1 | | | 1 | |
| Long-term debt | | | | | | | 10,433 | | | 9,688 | |
| Unamortized debt (discount) premium, net (b) | | | | | | | (9) | | | (4) | |
| Unamortized debt issuance costs | | | | | | | (23) | | | (22) | |
| Less current portion of long-term debt | | | | | | | (57) | | | (329) | |
| Total long-term debt | | | | | | | $ | 10,344 | | | $ | 9,333 | |
(a)This indebtedness is considered “debt” for purposes of a support agreement between parent company and AWCC, which serves as a functional equivalent of a full and unconditional guarantee by parent company of AWCC’s payment obligations under such indebtedness.(b)Includes debt discount, net of fair value adjustments previously recognized in acquisition purchase accounting.All mortgage bonds and $738 million of the private activity bonds and government funded debt held by the Company’s subsidiaries were collateralized as of December 31, 2021.Long-term debt indentures contain a number of covenants that, among other things, limit, subject to certain exceptions, AWCC from issuing debt secured by the Company’s consolidated assets. Certain long-term notes require the Company to maintain a ratio of consolidated total indebtedness to consolidated total capitalization of not more than 0.70 to 1.00. The ratio as of December 31, 2021 was 0.60 to 1.00. In addition, the Company has $859 million of notes which include the right to redeem the notes at par value, in whole or in part, from time to time, subject to certain restrictions, with a weighted average interest rate of 1.84%.112
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December 31, 2025 | 69 | SEC-NUM |
The following table presents the expected future benefit payments for the Company’s Pension Plans:
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| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | (in millions) |
| Expected benefit payments by fiscal year ending: | |
| December 31, 2022 | $70 | |
| December 31, 2023 | 68 | |
| December 31, 2024 | 68 | |
| December 31, 2025 | 69 | |
| December 31, 2026 | 69 | |
| December 31, 2027 - 2031 | 339 | |
401(k) PlanCitizens sponsors a 401(k) Plan under which employee tax-deferred/Roth after-tax contributions to the 401(k) Plan are matched by the Company after completion of one year of service. Contributions for substantially all employees are matched at 100% up to an overall limitation of 4% on a pay period basis. In addition, substantially all employees will receive an additional 1% of earnings after completion of one year of service, subject to limits set by the Internal Revenue Service. Amounts expensed by the Company were $63 million in 2021 compared to $78 million in 2020 and $72 million in 2019.NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table presents the changes in the balances, net of income taxes, of each component of AOCI:
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| (in millions) | | Net Unrealized Gains (Losses) on Derivatives | | Net Unrealized Gains (Losses) on Debt Securities | | Employee Benefit Plans | | Total AOCI |
| Balance at January 1, 2019 | | ($143) | | | ($490) | | | ($463) | | | ($1,096) | |
| Other comprehensive income (loss) before reclassifications | | 103 | | | 501 | | | — | | | 604 | |
| | | | | | | | | |
| Amounts reclassified to the Consolidated Statements of Operations | | 43 | | | (15) | | | 48 | | | 76 | |
| Net other comprehensive income (loss) | | 146 | | | 486 | | | 48 | | | 680 | |
| Cumulative effect of change in accounting principle | | — | | | 5 | | | — | | | 5 | |
| Balance at December 31, 2019 | | $3 | | | $1 | | | ($415) | | | ($411) | |
| Other comprehensive income (loss) before reclassifications | | 97 | | | 382 | | | — | | | 479 | |
| | | | | | | | | |
| Amounts reclassified to the Consolidated Statements of Operations | | (111) | | | (3) | | | (14) | | | (128) | |
| Net other comprehensive income (loss) | | (14) | | | 379 | | | (14) | | | 351 | |
| | | | | | | | | |
| Balance at December 31, 2020 | | ($11) | | | $380 | | | ($429) | | | ($60) | |
| Other comprehensive income (loss) before reclassifications | | (49) | | | (528) | | | — | | | (577) | |
| | | | | | | | | |
| Amounts reclassified to the Consolidated Statements of Operations | | (101) | | | (8) | | | 81 | | | (28) | |
| Net other comprehensive income (loss) | | (150) | | | (536) | | | 81 | | | (605) | |
| | | | | | | | | |
| Balance at December 31, 2021 | | ($161) | | | ($156) | | | ($348) | | | ($665) | |
| Primary location in the Consolidated Statement of Operations of amounts reclassified from AOCI | | Net interest income | | Securities gains, net | | Other operating expense | | |
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| | | Citizens Financial Group, Inc. | 127 |
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Weighted average exercise price (in dollars per share) | 162.41 | SEC-NUM |
[Table of](#i7860c65eab2647ffbae7e3867c1cf525_7) [Contents](#i7860c65eab2647ffbae7e3867c1cf525_7)Stock-Based Compensation Expense
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| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months endedSeptember 30, | | Nine months endedSeptember 30, |
| (Millions) | | 2022 | | 2021 | | 2022 | | 2021 |
| Cost of sales | | $ | 8 | | | $ | 8 | | | $ | 41 | | | $ | 39 | |
| Selling, general and administrative expenses | | 31 | | | 30 | | | 145 | | | 151 | |
| Research, development and related expenses | | 5 | | | 5 | | | 40 | | | 37 | |
| Stock-based compensation expenses | | 44 | | | 43 | | | 226 | | | 227 | |
| Income tax benefits | | (10) | | | (13) | | | (56) | | | (89) | |
| Stock-based compensation expenses (benefits), net of tax | | $ | 34 | | | $ | 30 | | | $ | 170 | | | $ | 138 | |
Stock Option ProgramThe following table summarizes stock option activity during the nine months ended September 30, 2022:
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| (Options in thousands) | | Number of Options | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life (months) | | Aggregate Intrinsic Value (millions) |
| Under option — | | | | | | | | |
| January 1 | | 34,560 | | | $ | 163.52 | | | | | |
| Granted | | 3,776 | | | 162.39 | | | | | |
| Exercised | | (1,722) | | | 98.27 | | | | | |
| Forfeited | | (537) | | | 178.08 | | | | | |
| September 30 | | 36,077 | | | 166.30 | | | 60 | | $ | 17 | |
| Options exercisable | | | | | | | | |
| September 30 | | 28,670 | | | $ | 166.58 | | | 49 | | $ | 17 | |
Stock options vest over a period from one year to three years with the expiration date at 10 years from date of grant. As of September 30, 2022, there was $59 million of compensation expense that has yet to be recognized related to non-vested stock option based awards. This expense is expected to be recognized over the remaining weighted-average vesting period of 22 months. The total intrinsic values of stock options exercised were $107 million and $306 million during the nine months ended September 30, 2022 and 2021, respectively. Cash received from options exercised was $166 million and $425 million for the nine months ended September 30, 2022 and 2021, respectively. The Company’s actual tax benefits realized for the tax deductions related to the exercise of employee stock options were $22 million and $65 million for the nine months ended September 30, 2022 and 2021, respectively.For the primary 2022 annual stock option grant, the weighted average fair value at the date of grant was calculated using the Black-Scholes option-pricing model and the assumptions that follow. Stock Option Assumptions
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| | | Annual 2022 |
| Exercise price | | $ | 162.41 | |
| Risk-free interest rate | | 1.9 | % |
| Dividend yield | | 2.9 | % |
| Expected volatility | | 21.8 | % |
| Expected life (months) | | 83 |
| Black-Scholes fair value | | $ | 25.34 | |
Expected volatility is a statistical measure of the amount by which a stock price is expected to fluctuate during a period. For the 2022 annual grant date, the Company estimated the expected volatility based upon the following three volatilities of 3M stock: the median of the term of the expected life rolling volatility; the median of the most recent term of the expected life volatility; and the implied volatility on the grant date. The expected term assumption is based on the weighted average of historical grants.53
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Preferred stock, authorized shares (in shares) | 50.0 | SEC-NUM |
[Table of Contents](#i8e6404ebd98d416daa7f88f48159b601_7)
EDWARDS LIFESCIENCES CORPORATIONCONSOLIDATED BALANCE SHEETS(in millions, except par value)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | December 31, |
| | 2021 | | 2020 |
| ASSETS |
| Current assets | | | |
| Cash and cash equivalents | $ | 862.8 | | | $ | 1,183.2 | |
| Short-term investments (Note 7) | 604.0 | | | 219.4 | |
| Accounts receivable, net of allowances of $9.3 and $9.6, respectively | 582.2 | | | 514.6 | |
| Other receivables | 82.7 | | | 88.2 | |
| Inventories (Note 5) | 726.7 | | | 802.3 | |
| | | | |
| Prepaid expenses | 85.2 | | | 75.1 | |
| Other current assets | 237.1 | | | 208.2 | |
| Total current assets | 3,180.7 | | | 3,091.0 | |
| Long-term investments (Note 7) | 1,834.2 | | | 801.6 | |
| Property, plant, and equipment, net (Note 5) | 1,546.6 | | | 1,395.2 | |
| Operating lease right-of-use assets (Note 6) | 92.1 | | | 94.2 | |
| Goodwill (Note 9) | 1,167.9 | | | 1,173.2 | |
| Other intangible assets, net (Note 9) | 323.6 | | | 331.4 | |
| Deferred income taxes | 246.7 | | | 230.9 | |
| Other assets | 110.8 | | | 119.6 | |
| Total assets | $ | 8,502.6 | | | $ | 7,237.1 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY |
| Current liabilities | | | |
| Accounts payable | $ | 204.5 | | | $ | 196.5 | |
| Accrued and other liabilities (Note 5) | 802.3 | | | 670.2 | |
| Operating lease liabilities (Note 6) | 25.5 | | | 27.2 | |
| | | | |
| | | | |
| Total current liabilities | 1,032.3 | | | 893.9 | |
| Long-term debt (Note 10) | 595.7 | | | 595.0 | |
| Contingent consideration liabilities (Notes 8 and 11) | 62.0 | | | 186.1 | |
| Taxes payable (Note 17) | 190.0 | | | 215.3 | |
| Operating lease liabilities (Note 6) | 69.1 | | | 72.7 | |
| Uncertain tax positions (Note 17) | 259.0 | | | 214.4 | |
| Litigation settlement accrual (Note 3) | 191.3 | | | 233.0 | |
| Other liabilities | 267.3 | | | 252.4 | |
| Total liabilities | 2,666.7 | | | 2,662.8 | |
| Commitments and contingencies (Notes 6, 10, and 18) | | | |
| Stockholders' equity (Notes 14 and 21) | | | |
| Preferred stock, $0.01 par value, authorized 50.0 shares, no shares outstanding | — | | | — | |
| Common stock, $1.00 par value, 1,050.0 shares authorized, 642.0 and 636.4 shares issued, and 624.1 and 624.3 shares outstanding, respectively | 642.0 | | | 636.4 | |
| Additional paid-in capital | 1,700.4 | | | 1,438.1 | |
| Retained earnings | 6,068.1 | | | 4,565.0 | |
| Accumulated other comprehensive loss | (157.7) | | | (161.1) | |
| Treasury stock, at cost, 17.9 and 12.1 shares, respectively | (2,416.9) | | | (1,904.1) | |
| Total stockholders' equity | 5,835.9 | | | 4,574.3 | |
| Total liabilities and stockholders' equity | $ | 8,502.6 | | | $ | 7,237.1 | |
The accompanying notes are an integral part of these consolidated financial statements.43
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Amount allocated to functional component | 36.0 | SEC-NUM |
[Table of Contents](#iedfcb48a3788458f95ee4009debca3d0_7)FORTINET, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The total outstanding debt is summarized below (in millions, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Maturity | | Coupon Rate | | Effective Interest Rate | | March 31,2022 | | December 31,2021 |
| Debt | | | | | | | | | |
| 2026 Senior Notes | March 2026 | | 1.0% | | 1.3% | | $ | 500.0 | | | $ | 500.0 | |
| 2031 Senior Notes | March 2031 | | 2.2% | | 2.3% | | 500.0 | | | 500.0 | |
| Total debt | | | | | | | 1,000.0 | | | 1,000.0 | |
| Less: Unamortized discount and debt issuance costs | | | | | | | 11.1 | | | 11.6 | |
| Total long-term debt | | | | | | | $ | 988.9 | | | $ | 988.4 | |
As of March 31, 2022 and December 31, 2021, we accrued interest payable of $0.7 million and $4.7 million, and there are no financial covenants with which we must comply. During the three months ended March 31, 2022 and 2021 we recorded $4.5 million and $1.3 million of total interest expense in relation to these Senior Notes, respectively. No interest costs were capitalized for the three months ended March 31, 2022 and 2021, as the costs that qualified for capitalization were not material.
The total estimated fair value of the outstanding Senior Notes was approximately $899.5 million, including accrued and unpaid interest, as of March 31, 2022. The fair value was determined based on observable market prices of identical instruments in less active markets. The estimated fair values are based on Level 2 inputs.
11. MUTUAL COVENANT-NOT-TO-SUE AND RELEASE AGREEMENT
In January 2020, we entered into an agreement with a competitor in the network security industry whereby, in February 2020, the competitor party paid us a lump sum of $50.0 million for a seven-year mutual covenant-not-to-sue for patent claims. Pursuant to this agreement, at the end of this first seven-year period, either party may extend the agreement for an additional seven-year mutual covenant-not-to-sue in return for this competitor paying us an additional $50.0 million. This agreement arose after expiration of previous agreements between the parties whereby the competitor had paid us sums for a limited term license to certain of our intellectual property (“IP”) and a limited term mutual covenant-not-to-sue.
We concluded that the agreement was a 14-year contract with a total transaction price of $100.0 million, and that it contained two material distinct performance obligations: (1) the right to use our existing patents, and (2) the right to use any patents that we develop over the term of the contract. We allocated $36.0 million to the functional patents, which was recognized upon commencement of the contract; the remaining $64.0 million, representing the right to utilize future patents, will be recognized over the contract term. We further concluded that our existing patents represent functional IP that should be recognized upon granting our competitor access. We also concluded that the right to receive additional functional IP that we will develop in the future represents a stand ready obligation. Therefore, the transaction price allocated to this obligation is recognized ratably over the 14-year contract term. We estimated the stand-alone selling price of each distinct performance obligation and allocated the $100.0 million transaction price.
During each of the three months ended March 31, 2022 and 2021, we recorded $1.1 million gain on IP matter in our condensed consolidated statements of income. We had $4.1 million in accrued liabilities and $5.2 million in accrued liabilities and other liabilities in our condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively.
12. COMMITMENTS AND CONTINGENCIES
The following table summarizes our inventory purchase commitments as of March 31, 2022 (in millions):
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | Total | | 2022 | | Thereafter |
| Inventory purchase commitments | $ | 1,372.6 | | | $ | 1,283.3 | | | $ | 89.3 | |
Inventory Purchase Commitments—Our independent contract manufacturers and certain component suppliers procure components and build our products based on our forecasts. These forecasts are based on estimates of future demand for our products, which are in turn based on historical trends and an analysis from our sales and marketing organizations, adjusted for extended lead times, changes in supplier delivery commitments and other supply chain matters and other market conditions. 18
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Measurement period adjustment, increase (decrease) in goodwill | 304 | 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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Common stock, par value (in dollars per share) | 0.01 | SEC-NUM |
[Index to Consolidated Financial Statements](#ibab9fb71d67648f0b758869f160b7f4b_100)
Consolidated Balance Sheets
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | At December 31, |
| In millions, except per share amounts | 2021 | | 2020 |
| Assets: | | | |
| Cash and cash equivalents | $ | 9,408 | | | $ | 7,854 | |
| Investments | 3,117 | | | 3,000 | |
| Accounts receivable, net | 24,431 | | | 21,742 | |
| Inventories | 17,760 | | | 18,496 | |
| Other current assets | 5,292 | | | 5,277 | |
| Total current assets | 60,008 | | | 56,369 | |
| Long-term investments | 23,025 | | | 20,812 | |
| Property and equipment, net | 12,896 | | | 12,606 | |
| Operating lease right-of-use assets | 19,122 | | | 20,729 | |
| Goodwill | 79,121 | | | 79,552 | |
| Intangible assets, net | 29,026 | | | 31,142 | |
| Separate accounts assets | 5,087 | | | 4,881 | |
| Other assets | 4,714 | | | 4,624 | |
| Total assets | $ | 232,999 | | | $ | 230,715 | |
| | | | |
| Liabilities: | | | |
| Accounts payable | $ | 12,544 | | | $ | 11,138 | |
| Pharmacy claims and discounts payable | 17,330 | | | 15,795 | |
| Health care costs payable | 8,808 | | | 7,936 | |
| Policyholders’ funds | 4,301 | | | 4,270 | |
| Accrued expenses | 17,670 | | | 14,243 | |
| Other insurance liabilities | 1,303 | | | 1,557 | |
| Current portion of operating lease liabilities | 1,646 | | | 1,638 | |
| | | | |
| Current portion of long-term debt | 4,205 | | | 5,440 | |
| Total current liabilities | 67,807 | | | 62,017 | |
| Long-term operating lease liabilities | 18,177 | | | 18,757 | |
| Long-term debt | 51,971 | | | 59,207 | |
| Deferred income taxes | 6,270 | | | 6,794 | |
| Separate accounts liabilities | 5,087 | | | 4,881 | |
| Other long-term insurance liabilities | 6,402 | | | 7,007 | |
| Other long-term liabilities | 1,904 | | | 2,351 | |
| Total liabilities | 157,618 | | | 161,014 | |
| Commitments and contingencies (Note 16) | | | |
| | | | |
| Shareholders’ equity: | | | |
| Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding | — | | | — | |
| Common stock, par value $0.01: 3,200 shares authorized; 1,744 shares issued and 1,322 shares outstanding at December 31, 2021 and 1,733 shares issued and 1,310 shares outstanding at December 31, 2020 and capital surplus | 47,377 | | | 46,513 | |
| Treasury stock, at cost: 422 and 423 shares at December 31, 2021 and 2020 | (28,173) | | | (28,178) | |
| Retained earnings | 54,906 | | | 49,640 | |
| Accumulated other comprehensive income | 965 | | | 1,414 | |
| Total CVS Health shareholders’ equity | 75,075 | | | 69,389 | |
| Noncontrolling interests | 306 | | | 312 | |
| Total shareholders’ equity | 75,381 | | | 69,701 | |
| Total liabilities and shareholders’ equity | $ | 232,999 | | | $ | 230,715 | |
See accompanying notes to consolidated financial statements.105
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Impact of curtailments | 3 | SEC-NUM |
[Table of Contents](#i5ec3aabfaa534f9c8fa2d2a5b7677d19_7)
The amounts shown below reflect the change in the non-U.S. defined benefit pension obligations during 2021 and 2020.
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 |
| | (in millions) |
| Benefit obligation at beginning of year | $ | 977 | | | $ | 900 | |
| | | | |
| Service cost | 18 | | | 18 | |
| Interest cost | 19 | | | 20 | |
| | | | |
| Actuarial (gain) loss | (62) | | | 36 | |
| Benefits paid | (36) | | | (38) | |
| Impact of curtailments | (3) | | | — | |
| | | | |
| | | | |
| | | | |
| Exchange rate movements and other | (52) | | | 41 | |
| Benefit obligation at end of year | 861 | | | 977 | |
| Change in plan assets: | | | |
| Fair value of plan assets at beginning of year | 438 | | | 403 | |
| Actual return on plan assets | 23 | | | 40 | |
| Aptiv contributions | 25 | | | 28 | |
| | | | |
| Benefits paid | (36) | | | (38) | |
| | | | |
| | | | |
| Exchange rate movements and other | (12) | | | 5 | |
| Fair value of plan assets at end of year | 438 | | | 438 | |
| Underfunded status | (423) | | | (539) | |
| Amounts recognized in the consolidated balance sheets consist of: | | | |
| Non-current assets | 29 | | | 1 | |
| Current liabilities | (17) | | | (21) | |
| Non-current liabilities | (435) | | | (519) | |
| Total | (423) | | | (539) | |
| Amounts recognized in accumulated other comprehensive loss consist of (pre-tax): | | | |
| Actuarial loss | 101 | | | 197 | |
| Prior service cost | — | | | 5 | |
| Total | $ | 101 | | | $ | 202 | |
The benefit obligations were impacted by actuarial gains of $62 million and losses of $36 million during the years ended December 31, 2021 and 2020, respectively, primarily due to changes in the discount rates used to measure the benefit obligation.89
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Noncancelable lease commitments, operating leases | 2,483.9 | SEC-NUM |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)The weighted-average remaining lease terms and discount rates as of May 29, 2022 and May 30, 2021 are as follows:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| (in millions) | | May 29, 2022 | | May 30, 2021 |
| Weighted-Average Remaining Lease Term (Years) | | | | |
| Operating leases | | 15.4 | | 16.2 |
| Finance leases | | 22.6 | | 21.8 |
| Weighted-Average Discount Rate (1) | | | | |
| Operating leases | | 4.2 | % | | 4.2 | % |
| Finance leases | | 3.9 | % | | 4.4 | % |
(1)We cannot determine the interest rate implicit in our leases. Therefore, the discount rate represents our incremental borrowing rate and is determined based on the risk-free rate, adjusted for the risk premium attributed to our corporate credit rating for a secured or collateralized instrument.
The annual maturities of our lease liabilities as of May 29, 2022 are as follows:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| (in millions) | | | | |
| Fiscal Year | | Operating Leases | | Finance Leases |
| 2023 | | 373.0 | | 60.7 |
| 2024 | | 375.4 | | | 63.4 |
| 2025 | | 380.0 | | | 63.9 |
| 2026 | | 381.7 | | | 65.2 |
| 2027 | | 384.5 | | | 66.4 |
| Thereafter | | 3,653.0 | | | 1,290.2 | |
| Total future lease commitments (1) | | $ | 5,547.6 | | | $ | 1,609.8 | |
| Less imputed interest | | (1,606.0) | | | (574.6) | |
| Present value of lease liabilities (2) | | $ | 3,941.6 | | | $ | 1,035.2 | |
(1)Of the $5,547.6 million of total future operating lease commitments and $1,609.8 million of total future finance lease commitments, $2,483.9 million and $603.2 million, respectively, are non-cancelable.(2)Excludes approximately $200.9 million of net present value of lease payments related to 49 real estate leases signed, but not yet commenced. 66
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Recognized charges | 27.7 | SEC-NUM |
[Table of Contents](#i754bc30884284e56b9b1a914458fa36e_7)securities that would have a dilutive effect on EPS. All stock options with an exercise price lower than the average market share price of our common stock for the period are assumed to have a dilutive effect on EPS. The dilutive share base for the three months ended September 30, 2022 excluded approximately 467,770 shares related to stock options that would have an antidilutive effect on the computation of diluted earnings per share. Due to a net loss for the nine months ended September 30, 2022, no incremental shares are included in the computation of diluted earnings per share because the effect would be antidilutive. Approximately 1.9 million shares related to stock options and share-based awards were therefore excluded from the dilutive share base for the nine months ended September 30, 2022. The dilutive share base for the three and nine months ended September 30, 2021 excluded approximately 234,813 shares related to stock options that would have an antidilutive effect on the computation of diluted earnings per share.
The effect of the potential shares needed to settle the conversion spread on the Convertible Notes is included in diluted EPS if the effect is dilutive. The effect depends on the market share price of our common stock at the time of conversion and would be dilutive if the average market share price of our common stock for the period exceeds the conversion price. For the three and nine months ended September 30, 2022, the Convertible Notes were not included in the computation of diluted EPS as the effect would have been anti-dilutive. Further, the effect of the related capped call transactions is not included in the computation of diluted EPS as it is always anti-dilutive.
The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three and nine months ended September 30, 2022 and 2021:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
| | | | | | | | |
| | (in thousands) |
| | | | | | | | |
| Basic weighted-average number of shares outstanding | 275,030 | | | 291,502 | | | 278,411 | | | 294,262 | |
| Plus: Dilutive effect of stock options and other share-based awards | 405 | | | 1,005 | | | — | | | 1,159 | |
| Diluted weighted-average number of shares outstanding | 275,435 | | | 292,507 | | | 278,411 | | | 295,421 | |
NOTE 12 - SUPPLEMENTAL BALANCE SHEET INFORMATION
Cash, cash equivalents and restricted cash
A reconciliation of the amounts of cash and cash equivalents and restricted cash in the consolidated balance sheets to the amount in the consolidated statements of cash flows is as follows:
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| | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | | | |
| | (in thousands) |
| Cash and cash equivalents | $ | 1,993,840 | | | $ | 1,979,308 | |
| Restricted cash included in prepaid expenses and other current assets | 132,458 | | | 143,715 | |
| Cash included in assets held for sale | 31,195 | | | — | |
| Cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | 2,157,493 | | | $ | 2,123,023 | |
Long-lived assets
As a result of actions taken in the third quarter of 2022 to further reduce our facility footprint in certain markets around the world, we recognized charges of $27.7 million, primarily related to certain lease right-of-use assets, leasehold improvements, furniture and fixtures and equipment, to reduce the carrying amount of each asset group to estimated fair value. The charges were presented within selling, general and administrative expenses in our consolidated statement of income for the 26
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Total debt, unamortized discount & issuance costs, | 19,507 | SEC-NUM |
[Table of Contents](#ic55317410763413da1d4be4008f977bd_658)Globe Life Inc.Notes to Consolidated Financial Statements(Dollar amounts in thousands, except per share data)Note 11—Debt
The following table presents information about the terms and outstanding balances of Globe Life's debt. Selected Information about Debt Issues
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| | | | | | | | 2021 | | 2020 |
| Instrument | Issue Date | | Maturity Date | | Coupon Rate | | ParValue | | Unamortized Discount & Issuance Costs | | BookValue | | FairValue | | BookValue |
| Senior notes | 5/27/1993 | | 5/15/2023 | | 7.875% | | $ | 165,612 | | | $ | (396) | | | $ | 165,216 | | | $ | 180,444 | | | $ | 164,954 | |
| Senior notes(1) | 9/24/2012 | | 9/15/2022 | | 3.800% | | 150,000 | | | (248) | | | 149,752 | | | 153,284 | | | 149,414 | |
| Senior notes | 9/27/2018 | | 9/15/2028 | | 4.550% | | 550,000 | | | (5,051) | | | 544,949 | | | 625,801 | | | 544,328 | |
| Senior notes | 8/21/2020 | | 8/15/2030 | | 2.150% | | 400,000 | | | (4,222) | | | 395,778 | | | 395,208 | | | 395,157 | |
| Junior subordinated debentures(2) | — | | — | | — | | — | | | — | | | — | | | — | | | 290,652 | |
| Junior subordinated debentures | 11/17/2017 | | 11/17/2057 | | 5.275% | | 125,000 | | | (1,604) | | | 123,396 | | | 128,856 | | | 123,381 | |
| Junior subordinated debentures | 6/14/2021 | | 6/15/2061 | | 4.250% | | 325,000 | | | (7,845) | | | 317,155 | | | 336,700 | | | — | |
| | | | | | | | 1,715,612 | | | (19,366) | | | 1,696,246 | | | 1,820,293 | | | 1,667,886 | |
| Less current maturity of long-term debt(1) | | 150,000 | | | (248) | | | 149,752 | | | 153,284 | | | — | |
| Total long-term debt | | 1,565,612 | | | (19,118) | | | 1,546,494 | | | 1,667,009 | | | 1,667,886 | |
| | | | | | | | | | | | | | | | |
| Current maturity of long-term debt(1) | | 150,000 | | | (248) | | | 149,752 | | | 153,284 | | | — | |
| Commercial paper | | 330,033 | | | (141) | | | 329,892 | | | 329,892 | | | 254,918 | |
| Total short-term debt | | 480,033 | | | (389) | | | 479,644 | | | 483,176 | | | 254,918 | |
| | | | | | | | | | | | | | | | |
| Total debt | | $ | 2,045,645 | | | $ | (19,507) | | | $ | 2,026,138 | | | $ | 2,150,185 | | | $ | 1,922,804 | |
(1)An additional $150 million par value and book value is held by insurance subsidiaries that eliminates in consolidation. (2)The $300 million of 6.125% Junior subordinated debentures were redeemed on July 15, 2021.
The commercial paper has the highest priority of all the debt, followed by senior notes then junior subordinated debentures. The senior notes due 2023 are noncallable, the remaining senior notes are callable under a make-whole provision, and the junior subordinated debentures are subject to an optional redemption five years from issuance. Interest on the 4.25% junior subordinated debentures is payable quarterly while all other long-term debt is payable semi-annually.
Contractual Debt Obligations: The following table presents expected scheduled principal payments under our contractual debt obligations:
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| | Year Ended December 31, |
| | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter |
| Debt obligations | $ | 480,033 | | | $ | 165,612 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,400,000 | |
Credit Facility: On September 30, 2021, Globe Life amended the credit agreement dated August 24, 2020, which provides for a $750 million revolving credit facility that may be increased to $1 billion. The amended credit facility matures September 30, 2026, and may be extended up to two one-year periods upon the Company's request. Pursuant to this agreement, the participating lenders have agreed to make revolving loans to Globe Life and to issue secured or unsecured letters of credit. The Company has not drawn on any of the credit to date.104 GL 2021 FORM 10-K
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Age over which all employees have 401K benefits available | 21 | SEC-NUM |
[Table of Contents](#i16ebb68f4bd84ff99a771b20ec27c3fc_7)The aggregate fair values and carrying values of our long-term borrowings were as follows:
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| | | January 29, 2022 | | January 30, 2021 |
| (in millions) | | Fair Value | | Carrying Value | | Fair Value | | Carrying Value |
| Level 1 | | | | | | | | |
| Senior Notes | | $ | 3,558.5 | | | $ | 3,423.4 | | | $ | 3,654.4 | | | $ | 3,231.5 | |
The fair values of our Senior Notes were determined using Level 1 inputs as quoted prices in active markets for identical assets or liabilities are available. The carrying value of our Revolving Credit Facility approximates its fair value because the interest rates vary with market interest rates.Note 8 - Shareholders’ EquityPreferred StockWe are authorized to issue 10,000,000 shares of Preferred Stock, $0.01 par value per share. No preferred shares are issued and outstanding at January 29, 2022 and January 30, 2021.Net Income Per ShareThe following table sets forth the calculations of basic and diluted net income per share:
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| | | Year Ended |
| | | January 29, | | January 30, | | February 1, |
| (in millions, except per share data) | | 2022 | | 2021 | | 2020 |
| Basic net income per share: | | | | | | |
| Net income | | $ | 1,327.9 | | | $ | 1,341.9 | | | $ | 827.0 | |
| Weighted average number of shares outstanding | | 227.9 | | | 236.4 | | | 237.2 | |
| Basic net income per share | | $ | 5.83 | | | $ | 5.68 | | | $ | 3.49 | |
| Diluted net income per share: | | | | | | |
| Net income | | $ | 1,327.9 | | | $ | 1,341.9 | | | $ | 827.0 | |
| Weighted average number of shares outstanding | | 227.9 | | | 236.4 | | | 237.2 | |
| Dilutive effect of stock options and restricted stock (as determined by applying the treasury stock method) | | 1.1 | | | 0.9 | | | 1.1 | |
| Weighted average number of shares and dilutive potential shares outstanding | | 229.0 | | | 237.3 | | | 238.3 | |
| Diluted net income per share | | $ | 5.80 | | | $ | 5.65 | | | $ | 3.47 | |
At January 29, 2022, January 30, 2021 and February 1, 2020, substantially all of the stock options outstanding were included in the calculation of the weighted average number of shares and dilutive potential shares outstanding.Share Repurchase ProgramsWe repurchased 9,156,898, 3,982,478 and 1,967,355 shares of common stock on the open market in fiscal 2021, fiscal 2020 and fiscal 2019, respectively, for $950.0 million, $400.0 million and $200.0 million, respectively. At January 29, 2022, we had $2.5 billion remaining under Board repurchase authorization.Note 9 – Employee Benefit PlansDollar Tree Retirement Savings PlanWe maintain a 401(k) plan which is available to all full-time, United States-based employees over 21 years of age. Eligible employees may make elective salary deferrals. We may make contributions, at our discretion, to eligible employees who have completed one year of service in which they have worked at least 1,000 hours.
61
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Loss Contingencies, share of damages | 15 | SEC-NUM |
[Table of Contents](#i988dd6b5140d4a1b8c6b4c50f020743f_10)agreeing to comply with the order subject to its sufficient cause defenses.
•Operable Unit 1: In October 2016, the Company and another PRP received a special notice letter from the EPA inviting participation in the remedial design component of the landfill remedy for the Allied Paper Mill, which is also known as Operable Unit 1. The Record of Decision establishing the final landfill remedy for the Allied Paper Mill was issued by the EPA in September 2016. The Company responded to the Allied Paper Mill special notice letter in December 2016. In February 2017, the EPA informed the Company that it would make other arrangements for the performance of the remedial design.
In addition, in December 2019, the United States published notice in the Federal Register of a proposed consent decree with NCR Corporation (one of the parties to the allocation/apportionment litigation described below), the State of Michigan and natural resource trustees under which NCR would make payments of more than $100 million and perform work in Operable Unit 5, Areas 2, 3, and 4 at an estimated cost of $136 million. In December 2020, the Federal District Court approved the proposed consent decree.
The Company’s CERCLA liability has not been finally determined with respect to these or any other portions of the site, and except as noted above, the Company has declined to perform any work or reimburse the EPA at this time. As noted below, the Company is involved in allocation/apportionment litigation with regard to the site. Accordingly, it is premature to predict the outcome or estimate our maximum reasonably possible loss or range of loss with respect to this site. We have recorded a liability for future remediation costs at the site that are probable and reasonably estimable, and it remains reasonably possible that additional losses in excess of this recorded liability could be material.
The Company was named as a defendant by Georgia-Pacific Consumer Products LP, Fort James Corporation and Georgia Pacific LLC in a contribution and cost recovery action for alleged pollution at the site. NCR Corporation and Weyerhaeuser Company are also named as defendants in the suit. The suit seeks contribution under CERCLA for costs purportedly expended by plaintiffs ($79 million as of the filing of the complaint) and for future remediation costs. In June 2018, the Court issued its Final Judgment and Order, which fixed the past cost amount at approximately $50 million (plus interest to be determined) and allocated to the Company a 15% share of responsibility for those past costs. The Court did not address responsibility for future costs in its decision. In July 2018, the Company and each of the other parties filed notices appealing the Final Judgment and prior orders incorporated into that Judgment. The Company appeal is pending.
Harris County: International Paper and McGinnis Industrial Maintenance Corporation (MIMC), a subsidiary of Waste Management, Inc. (WMI), are PRPs at the San Jacinto River Waste Pits Superfund Site in Harris County, Texas. The PRPs have been actively participating in the activities at the site and share the costs of these activities.
In October 2017, the EPA issued a Record of Decision (ROD) selecting the final remedy for the site: removal and relocation of the waste material from both the northern and southern impoundments. The EPA did not specify the methods or practices needed to perform this work. The EPA’s selected remedy was accompanied by a cost estimate of approximately $115 million ($105 million for the northern impoundment, and $10 million for the southern impoundment). Subsequent to the issuance of the ROD, there have been numerous meetings between the EPA and the PRPs, and the Company continues to work with the EPA and MIMC/WMI to develop the remedial design.
To this end, in April 2018, the PRPs entered into an Administrative Order on Consent (AOC) with the EPA, agreeing to work together to develop the remedial design for the northern impoundment. That remedial design work is ongoing. The AOC does not include any agreement to perform waste removal or other construction activity at the site. Rather, it involves adaptive management techniques and a pre-design investigation, the objectives of which include filling data gaps (including but not limited to post-Hurricane Harvey technical data generated prior to the ROD and not incorporated into the selected remedy), refining areas and volumes of materials to be addressed, determining if an excavation remedy is able to be implemented in a manner protective of human health and the environment, and investigating potential impacts of remediation activities to infrastructure in the vicinity.
During the first quarter of 2020, through a series of meetings among the Company, MIMC/WMI, our consultants, the EPA and the Texas Commission on Environmental Quality (TCEQ), progress was made to resolve key technical issues previously preventing the Company from determining the manner in which the selected remedy for the northern impoundment would be feasibly implemented. As a result of these developments the Company reserved the following amounts in relation to remediation at this site: (a) $10 million for the southern impoundment; and (b) 72
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Derivative liability, notional amount | 5.0 | SEC-NUM |
[Table of Contents](#i82eec5aa49a24290a07e4a9f99c1e608_7) 14. Accumulated Other Comprehensive LossChanges in accumulated other comprehensive loss by component, net of income taxes, consisted of the following:
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| | | | | | | | | |
| | | Year Ended December 31, 2021 |
| (In millions) | | Cash FlowHedges | | ForeignCurrencyTranslation | | Pension Plans | | Total |
| Balance at December 31, 2020 | | $ | (121) | | | $ | (254) | | | $ | (12) | | | $ | (387) | |
| Other comprehensive income (loss) before reclassifications | | 6 | | | (422) | | | 50 | | | (366) | |
| Amounts reclassified from accumulated other comprehensive loss | | 8 | | | — | | | — | | | 8 | |
| Net current-period other comprehensive income (loss) | | 14 | | | (422) | | | 50 | | | (358) | |
| Balance at December 31, 2021 | | $ | (107) | | | $ | (676) | | | $ | 38 | | | $ | (745) | |
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| | | | | | | | | |
| | | Year Ended December 31, 2020 |
| (In millions) | | Cash FlowHedges | | ForeignCurrencyTranslation | | Pension Plans | | Total |
| Balance at December 31, 2019 | | $ | (141) | | | $ | (33) | | | $ | (6) | | | $ | (180) | |
| Other comprehensive income (loss) before reclassifications | | 5 | | | (221) | | | (6) | | | (222) | |
| Amounts reclassified from accumulated other comprehensive loss | | 15 | | | — | | | — | | | 15 | |
| Net current-period other comprehensive income (loss) | | 20 | | | (221) | | | (6) | | | (207) | |
| | | | | | | | | |
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| Balance at December 31, 2020 | | $ | (121) | | | $ | (254) | | | $ | (12) | | | $ | (387) | |
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The Company has entered into forward exchange contracts, which have been designated as cash flow hedges, to hedge foreign currency exposure to the Indian Rupee. The notional amount of these derivatives was $341 million and $259 million, and the fair value totaling $6 million and $9 million is reported primarily in prepaid expenses and other current assets in the consolidated balance sheets at December 31, 2021 and 2020, respectively. Based on the amounts recorded in accumulated other comprehensive loss at December 31, 2021, the Company estimates that it will recognize gains of approximately $5 million in cost of processing and services during the next twelve months as foreign exchange forward contracts settle.The Company previously entered into treasury lock agreements (“Treasury Locks”), designated as cash flow hedges, in the aggregate notional amount of $5.0 billion to manage exposure to fluctuations in benchmark interest rates in anticipation of the issuance of fixed rate debt in connection with the acquisition and refinancing of certain indebtedness of First Data and its subsidiaries. In June 2019, concurrent with the issuance of U.S dollar-denominated senior notes (see Note 12), the Treasury Locks were settled resulting in a payment, included in cash flows from operating activities, of $183 million recorded in accumulated other comprehensive loss, net of income taxes, that will be amortized to earnings over the terms of the originally forecasted interest payments. Based on the amounts recorded in accumulated other comprehensive loss at December 31, 2021, the Company estimates that it will recognize approximately $19 million in interest expense, net during the next twelve months related to settled interest rate hedge contracts.To reduce exposure to changes in the value of the Company’s net investments in certain of its foreign currency-denominated subsidiaries due to changes in foreign currency exchange rates, the Company uses its foreign currency-denominated debt as an economic hedge of its net investments in such foreign currency-denominated subsidiaries. The Company has designated its Euro- and British Pound-denominated senior notes and Euro commercial paper notes as net investment hedges to hedge a portion of its net investment in certain subsidiaries whose functional currencies are the Euro and the British Pound. Accordingly, foreign currency transaction gains or losses on the qualifying net investment hedge instruments are recorded as foreign currency translation within other comprehensive income (loss) in the consolidated statements of comprehensive income and will remain in accumulated other comprehensive loss in the consolidated balance sheets until the sale or complete liquidation of the underlying foreign subsidiaries. The Company recorded a foreign currency translation gain (loss) of $110 82
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Cross currency swap contracts | 15,994 | SEC-NUM |
NOTE 8. LEASES
Maturities of operating lease liabilities were as follows:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| (in thousands) | September 30, 2022 |
| | |
| 2022 (remainder of year) | $ | 4,472 | |
| 2023 | 23,458 | |
| 2024 | 19,693 | |
| 2025 | 15,629 | |
| 2026 | 13,098 | |
| Thereafter | 53,809 | |
| Total lease payments | 130,159 | |
| Less imputed interest | (17,879) | |
| Total | $ | 112,280 | |
Total minimum future lease payments for leases that have not commenced as of September 30, 2022, are approximately $7.9 million, and those leases will commence between 2022 and 2024.
Supplemental cash flow information for leases was as follows:
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| (in thousands) | | For the Nine Months EndedSeptember 30, 2022 | | For the Nine Months EndedSeptember 30, 2021 |
| | | | | |
| Cash paid for amounts included in the measurement of operating leases liabilities | | $ | 17,715 | | | $ | 17,232 | |
| Right-of-use assets obtained in exchange for operating lease obligations, net of earlylease terminations | | $ | 26,040 | | | $ | 33,052 | |
NOTE 9. OTHER CURRENT AND LONG-TERM ASSETS
Other current assets consisted of the following:
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| (in thousands) | September 30, 2022 | | December 31, 2021 |
| | | | |
| Customer acquisition costs | $ | 49,834 | | | $ | 48,942 | |
| Contract assets, net (1) | 42,255 | | | 37,772 | |
| Prepaid expenses | 39,696 | | | 41,997 | |
| Taxes receivable | 22,570 | | | 19,464 | |
| Foreign currency exchange contracts | 22,331 | | | 6,512 | |
| Cross currency swap contracts | 15,994 | | | — | |
| Deferred sales commissions | 6,438 | | | 6,475 | |
| Other assets | 17,518 | | | 12,661 | |
| Other current assets | $ | 216,636 | | | $ | 173,823 | |
(1) Contract assets, net, are net of allowances for credit loss. Refer to "Note 6. Credit Losses."19
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Aggregate grant-date fair before forfeiture | 12,160 | SEC-NUM |
INVITATION HOMES INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollar amounts in thousands)
During the year ended December 31, 2019, 77,926 of such PRSUs were forfeited; and during the year ended December 31, 2020, all outstanding merger-related PRSUs vested. Certain of these PRSUs achieved performance in excess of the target level, resulting in the issuance of an additional 4,756 shares of common stock which are reflected as an increase in the number of awards granted and vested in the table below. •Bonus and Retention Awards: During the year ended December 31, 2018, we granted 136,941 RSUs to employees (the “2018 Bonus Awards”). Each of the 2018 Bonus Awards is a time-vesting award which vests in three equal annual installments based on an anniversary date of March 1, 2018, subject to continued employment through the applicable vesting date. As of December 31, 2021, the retention awards issued during the year ended December 31, 2017 were fully vested.Assumed AwardsIn connection with the SWH merger, we assumed the terms of award agreements governing 949,698 (as calculated in number of INVH shares of common stock) non-vested RSUs granted prior to the Merger Date under SWH’s equity incentive plans. Each assumed award was a time-vesting award that was issued with service periods ranging from three years to four years, unless accelerated pursuant to the original agreement or otherwise modified. During the year ended December 31, 2020, the final SWH equity awards were fully vested.Outperformance AwardsOn May 1, 2019, the Compensation Committee approved one-time equity based awards with market based vesting conditions in the form of PRSUs and OP Units (the “Outperformance Awards”). The Outperformance Awards may be earned based on the achievement of rigorous absolute total shareholder return and relative total shareholder return thresholds over a three year performance period ending on March 31, 2022. Upon completion of the performance period, the dollar value of the awards earned under the absolute and relative total shareholder return components will be separately calculated, and the number of earned Outperformance Awards will be determined based on the earned dollar value of the awards and the stock price at the performance certification date. Earned awards will vest 50% on March 31, 2022 and 25% on each of the first and second anniversaries of such date, subject to continued employment. The current aggregate $12,160 grant-date fair value of the Outperformance Awards still outstanding was determined based on Monte-Carlo option pricing models which estimate the probability of the vesting conditions being satisfied.F-37
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APSC and MPSC Argued Equity Capital Structure, Percentage | 35.98 | SEC-NUM |
[Table of Contents](#i6266d2788e5849989ad57be380853c2d_7)Entergy Corporation and SubsidiariesNotes to Financial Statements
equity and 63% debt. In the alternative, the LPSC argues that the equity ratio should be no higher than 49%, the composite equity ratio of System Energy and the other Entergy operating companies who purchase under the Unit Power Sales Agreement. The APSC and MPSC recommend that 35.98% be set as the common equity ratio for System Energy. As an alternative, the APSC and MPSC propose that System Energy’s common equity be set at 46.75% based on the median equity ratio of the proxy group for setting the return on equity.
In September 2019 the FERC trial staff filed its rebuttal testimony in the return on equity proceeding. For the first refund period, the FERC trial staff calculates an authorized return on equity for System Energy of 9.40% based on the application of the FERC’s proposed methodology and an updated proxy group. For the second refund period, based on the study period ending May 31, 2019, the FERC trial staff rebuttal testimony argues for a return on equity of 9.63%. In September 2019 the FERC trial staff also filed direct and answering testimony relating to System Energy’s capital structure. The FERC trial staff argues that the average capital structure of the proxy group used to develop System Energy’s return on equity should be used to establish the capital structure. Using this approach, the FERC trial staff calculates the average capital structure for its proposed proxy group of 46.74% common equity, and 53.26% debt.
In October 2019, System Energy filed answering testimony disputing the FERC trial staff’s, the LPSC’s, and the APSC’s and MPSC’s arguments for the use of a hypothetical capital structure and arguing that the use of System Energy’s actual capital structure is just and reasonable.
In November 2019, in a proceeding that did not involve System Energy, the FERC issued an order addressing the methodology for determining the return on equity applicable to transmission owners in MISO. Thereafter, the procedural schedule in the System Energy proceeding was amended to allow the participants to file supplemental testimony addressing the order in the MISO transmission owner proceeding (Opinion No. 569).
In February 2020 the LPSC, the MPSC and APSC, and the FERC trial staff filed supplemental testimony addressing Opinion No. 569 and how it would affect the return on equity evaluation for the two complaint periods concerning System Energy. For the first refund period, based on their respective interpretations and applications of the Opinion No. 569 methodology, the LPSC argues for an authorized return on equity for System Energy of 8.44%; the MPSC and APSC argue for an authorized return on equity of 8.41%; and the FERC trial staff argues for an authorized return on equity of 9.22%. For the second refund period and on a prospective basis, based on their respective interpretations and applications of the Opinion No. 569 methodology, the LPSC argues for an authorized return on equity for System Energy of 7.89%; the MPSC and APSC argue that an authorized return on equity of 8.01% may be appropriate; and the FERC trial staff argues for an authorized return on equity of 8.66%.
In April 2020, System Energy filed supplemental answering testimony addressing Opinion No. 569. System Energy argues that the Opinion No. 569 methodology is conceptually and analytically defective for purposes of establishing just and reasonable authorized return on equity determinations and proposes an alternative approach. As its primary recommendation, System Energy continues to support the return on equity determinations in its March 2019 testimony for the first refund period and its June 2019 testimony for the second refund period. Under the Opinion No. 569 methodology, System Energy calculates a “presumptively just and reasonable range” for the authorized return on equity for the first refund period of 8.57% to 9.52%, and for the second refund period of 8.28% to 9.11%. System Energy argues that these ranges are not just and reasonable results. Under its proposed alternative methodology, System Energy calculates an authorized return on equity of 10.26% for the first refund period, which also falls within the presumptively just and reasonable range calculated for the second refund period and prospectively.
In May 2020 the FERC issued an order on rehearing of Opinion No. 569 (Opinion No. 569-A). In June 2020 the procedural schedule in the System Energy proceeding was further revised in order to allow parties to address the Opinion No. 569-A methodology. Pursuant to the revised schedule, in June 2020, the LPSC, MPSC and APSC, and the FERC trial staff filed supplemental testimony addressing Opinion No. 569-A and how it would affect the return on equity evaluation for the two complaint periods concerning System Energy. For the first refund 95
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Purchase discount from market price (percent) | 85 | SEC-NUM |
[Table of Contents](#i89c3c9328e454b30b2c14123b867f3f0_7)EQUINIX, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
•2000 Director Option Plan: Under the 2000 Director Option Plan, each non-employee board member who was not previously an employee would receive an automatic initial nonstatutory stock option grant as well as an annual non-statutory stock option grant on the date of our regular Annual Meeting of Stockholders. On December 18, 2008, our Board of Directors passed resolutions eliminating all automatic stock option grant mechanisms under the 2000 Director Option Plan and replaced them with an automatic RSU grant mechanism under the 2000 Equity Incentive Plan. On June 18, 2020, the 2000 Director Option Plan was terminated and all shares remaining available under this Plan were retired.•2001 Supplemental Stock Plan: Under the 2001 Supplemental Stock Plan, non-statutory stock options and RSAs/RSUs may be granted to consultants and employees who are not executive officers or board members, at not less than 85% of the fair value on the date of grant. Current stock options granted under the 2001 Supplemental Stock Plan generally vest over four years. On June 18, 2020, the 2001 Supplemental Stock Plan was terminated and all shares remaining available under this Plan were retired.•2004 Employee Stock Purchase Plan (the "2004 Purchase Plan"): The 2004 Purchase Plan permits eligible employees to purchase common stock on favorable terms via payroll deductions of up to 15% of the employee's cash compensation, subject to certain share and statutory dollar limits. Two overlapping offering periods commence during each calendar year, on each February 15 and August 15 or such other periods or dates as determined by the Compensation Committee from time to time, and the offering periods last up to 24 months with a purchase date every 6 months. The price of each share purchased is 85% of the lower of a) the fair value per share of common stock on the last trading day before the commencement of the applicable offering period or b) the fair value per share of common stock on the purchase date. •2020 Equity Incentive Plan: On April 23, 2020, our Board of Directors approved the 2020 Equity Plan, which provides for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, RSAs, RSUs, other stock-based incentive awards, dividend equivalents, and cash-based incentive awards. The 2020 Equity Plan's awards may be granted to employees, non-employee members of the Board and consultants. Equity awards granted under the 2020 Equity Incentive Plan generally vest over four years. The maximum numbers of shares of our common stock available for issuance under the 2020 Equity Plan is equal to the sum of 4.0 million shares and the shares transferred from the 2000 Equity Incentive Plan.The Equity compensation plans are administered by the Compensation Committee of the Board of Directors (the "Compensation Committee"), and the Compensation Committee may terminate or amend these plans, with approval of the stockholders as may be required by applicable law, at any time. As of December 31, 2021, shares reserved and available for issuance under the equity compensation plans are as follows:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Shares reserved | | Shares available for grant |
| | | | |
| | | | |
| 2004 Purchase Plan | 5,392,206 | | | 2,640,649 | |
| 2020 Equity Incentive Plan | 4,660,322 | | | 3,969,920 | |
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Debt exchange additional cash consideration | 85 | SEC-NUM |
In connection with the redemption of certain of the notes during the year ended December 31, 2020, discussed above, associated interest rate swap contracts with an aggregate notional value of $3.65 billion were terminated. In addition, because of historically low interest rates, during the year ended December 31, 2020, we terminated interest rate swaps with an aggregate notional amount of $5.2 billion that hedged the 3.625% 2024 Notes, the 2.60% 2026 Notes, the 4.663% 2051 Notes and portions of the 3.625% 2022 Notes and the 3.125% 2025 Notes, which resulted in the receipt of $576 million of cash and reduced counterparty credit risk. Immediately following the terminations of these contracts, we entered into new interest rate swap agreements at then-current interest rates on the same $5.2 billion principal amount of notes. See Note 18, Derivative instruments.The effective interest rates on notes for which we have entered into interest rate swap contracts and the related notional amounts of these contracts were as follows (dollar amounts in millions):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2021 | | December 31, 2020 |
| Notes | | Notional amounts | Effective interest rates | | Notional amounts | Effective interest rates |
| 3.625% 2022 Notes | | $ | — | | N/A | | $ | 750 | | LIBOR + 2.7% |
| 3.625% 2024 Notes | | 1,400 | | LIBOR + 3.2% | | 1,400 | | LIBOR + 3.2% |
| 3.125% 2025 Notes | | 1,000 | | LIBOR + 1.8% | | 1,000 | | LIBOR + 1.8% |
| 2.60% 2026 Notes | | 1,250 | | LIBOR + 1.8% | | 1,250 | | LIBOR + 1.8% |
| 2.45% 2030 Notes | | 1,000 | | LIBOR + 1.0% | | — | | N/A |
| 2.30% 2031 Notes | | 500 | | LIBOR + 0.8% | | — | | N/A |
| 4.663% 2051 Notes | | 1,500 | | LIBOR +4.1% | | 1,500 | | LIBOR + 4.1% |
| Total notional amounts | | $ | 6,650 | | | | $ | 5,900 | | |
N/A = not applicable
Debt exchangeIn 2020, we completed a private offering to exchange portions of certain outstanding senior notes due 2037 through 2043 (collectively, Old Notes), listed below, for the $940 million principal amount of the newly issued 2.77% 2053 Notes (the Exchange Offer).The following principal amounts of each series of Old Notes were validly tendered and subsequently canceled in connection with the Exchange Offer (in millions):
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | Principal amount exchanged |
| 6.375% 2037 Notes | $ | 74 | |
| 6.90% 2038 Notes | $ | 37 | |
| 6.40% 2039 Notes | $ | 133 | |
| 5.75% 2040 Notes | $ | 39 | |
| 5.15% 2041 Notes | $ | 245 | |
| 5.65% 2042 Notes | $ | 72 | |
| 5.375% 2043 Notes | $ | 76 | |
The 2.77% 2053 Notes bear interest at a lower fixed coupon rate while requiring higher principal repayment at a later maturity date as compared to those of the Old Notes that were exchanged. There were no other significant changes to the terms between the Old Notes and the 2.77% 2053 Notes. In connection with the Exchange Offer, $85 million was paid to holders of the Old Notes (the cash consideration).The Exchange Offer was accounted for as a debt modification, and accordingly, deferred financing costs and discounts associated with the Old Notes, the cash consideration and the $264 million discount associated with the 2.77% 2053 Notes are being accreted over the term of these newly issued notes and recorded as Interest expense, net, in the Consolidated Statements of Income.F-35
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Proceeds from debt | 984.4 | SEC-NUM |
[Table of Contents](#ib44c212f2b9b4d609af803980a71c2da_7)EQT CORPORATION AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements (Unaudited)Credit Facility. The Company has a $2.5 billion credit facility. On June 28, 2022, the Company entered into the Third Amended and Restated Credit Agreement (the Third Amendment) with the lenders party thereto and PNC Bank, National Association, as administrative agent, swing line lender and L/C issuer, amending and restating the Second Amended and Restated Credit Agreement, dated as of July 31, 2017 (the Credit Agreement). The Third Amendment, among other things, (i) extends the maturity date of the commitments and loans under the Credit Agreement to June 28, 2027 and provides, at the Company's option, two one-year extensions thereafter, subject to the approval of the lenders, (ii) allows for commitment increases of up to $500 million, subject to the agreement of the Company and new or existing lenders and (iii) allows for Base Rate Loans, Term SOFR Rate Loans and Swing Line Loans (each defined in the Third Amendment).
The Company had approximately $27 million and $440 million of letters of credit outstanding under its credit facility as of September 30, 2022 and December 31, 2021, respectively.
Under the Company's credit facility, for the three months ended September 30, 2022 and 2021, the maximum amount of outstanding borrowings was $1,216 million and $1,652 million, respectively, the average daily balances were approximately $717 million and $813 million, respectively, and interest was incurred at a weighted average annual interest rate of 3.8% and 1.9%, respectively. Under the Company's credit facility, for the nine months ended September 30, 2022 and 2021, the maximum amount of outstanding borrowings was $1,300 million and $1,652 million, respectively, the average daily balances were approximately $624 million and $525 million, respectively, and interest was incurred at a weighted average annual interest rate of 2.8% and 2.0%, respectively.
3.125% Senior Notes and 3.625% Senior Notes. On May 17, 2021, the Company issued $500 million aggregate principal amount of 3.125% senior notes due May 15, 2026 and $500 million aggregate principal amount of 3.625% senior notes due May 15, 2031. After deducting offering costs of $15.6 million, net proceeds from the sale of the notes of $984.4 million were used to partly fund the Alta Acquisition (defined in Note 9). The covenants of the 3.125% senior notes and 3.625% senior notes are consistent with the Company's existing senior unsecured notes; however, the 3.125% senior notes and 3.625% senior notes include an offer to repurchase provision applicable upon the occurrence of certain change of control events specified in the applicable indentures.
Convertible Notes. In April 2020, the Company issued $500 million aggregate principal amount of 1.75% convertible senior notes (the Convertible Notes) due May 1, 2026 unless earlier redeemed, repurchased or converted.
Holders of the Convertible Notes may convert their Convertible Notes at their option at any time prior to the close of business on January 30, 2026 under the following circumstances:•during any quarter as long as the last reported price of EQT common stock for at least 20 trading days (consecutive or otherwise) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price on each such trading day (the Sale Price Condition);•during the five-business-day period after any five-consecutive-trading-day period (the measurement period) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period is less than 98% of the product of the last reported price of EQT common stock and the conversion rate for the Convertible Notes on each such trading day; •if the Company calls any or all of the Convertible Notes for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding such redemption date; and •upon the occurrence of certain corporate events set forth in the Convertible Notes indenture.
On or after February 1, 2026, holders of the Convertible Notes may convert their Convertible Notes at their option at any time until the close of business on the second scheduled trading date immediately preceding May 1, 2026.
The Company may not redeem the Convertible Notes prior to May 5, 2023. On or after May 5, 2023 and prior to February 1, 2026, the Company may redeem for cash all or any portion of the Convertible Notes at its option at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest up to the redemption date as long as the last reported price per share of EQT common stock has been at least 130% of the conversion price in effect for at least 20 trading days (consecutive or otherwise) during any 30-consecutive-trading-day period ending on the trading day immediately preceding the date on which the Company delivers notice of redemption. A sinking fund is not provided for the Convertible Notes.
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CARES Act annual payroll tax installment due resulting from deferred tax payments | 32 | SEC-NUM |
[Table of Contents](#i6266d2788e5849989ad57be380853c2d_7)Entergy Corporation and SubsidiariesNotes to Financial Statements
Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.
Entergy anticipates that the effect of TCJA may continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) IRS audit adjustments to or amendments of federal and state income tax returns that include modifications to the computation of taxable income resulting from TCJA; and 2) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future tax expense adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these events also could potentially affect the regulatory liability for income taxes.
Coronavirus Aid, Relief, and Economic Security Act
In response to the economic impacts of the COVID-19 pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act provisions that result in the most significant opportunities for tax relief to Entergy and the Registrant Subsidiaries are (i) permitting a five-year carryback of 2018-2020 NOLs, (ii) removing the 80 percent limitation on NOLs carried to tax years beginning before 2021, (iii) increasing the limitation on interest expense deductibility for 2019 and 2020, (iv) accelerating available refunds for minimum tax credit carryforwards, modifying limitations on charitable contributions during 2020, and (v) delaying the payment of employer payroll taxes. Entergy deferred approximately $64 million of 2020 payroll tax payments, payable in equal installments over two years. The initial installment of $32 million was paid in December 2021. The second installment will be paid in December 2022.
Entergy Wholesale Commodities Restructuring
In the fourth quarter 2019, two separate events occurred resulting in a reduction of tax expense of $174 million. In November 2019 an Entergy Wholesale Commodities subsidiary recognized a reduction in income tax expense of $18 million in connection with the accounting method on power contracts associated with the Palisades nuclear power station. Additionally, Entergy’s ownership of Indian Point 2 and Indian Point 3 was restructured. The restructuring required Entergy to recognize Indian Point 2 and Indian Point 3 nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $156 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the gain and the increase in the tax basis of the assets represents a tax accounting temporary difference.
Immediately prior to the restructuring, through its ownership of Indian Point 2 and Indian Point 3, Entergy donated property to Stony Brook University and recognized an associated tax deduction resulting in a decrease to tax expense of $19 million.
In the fourth quarter 2020, Entergy’s ownership of Palisades was restructured. The restructuring required Entergy to recognize Palisades’ nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $9.2 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the gain and the increase in the tax basis of the assets represents a tax accounting temporary difference.
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Antidilutive securities excluded from computation of earnings per common share (in shares) | 0.1 | SEC-NUM |
10. EARNINGS PER SHARE
The following table reconciles the income and share data used in the basic and diluted earnings per share (EPS) computations:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | |
| In millions of dollars, except per share amounts | | | 2021 | 2020 | 2019 |
| Earnings per common share | | | | | |
| Income from continuing operations before attribution of noncontrolling interests | | | $ | 22,018 | | $ | 11,107 | | $ | 19,471 | |
| Less: Noncontrolling interests from continuing operations | | | 73 | | 40 | | 66 | |
| Net income from continuing operations (for EPS purposes) | | | $ | 21,945 | | $ | 11,067 | | $ | 19,405 | |
| Loss from discontinued operations, net of taxes | | | 7 | | (20) | | (4) | |
| Citigroup’s net income | | | $ | 21,952 | | $ | 11,047 | | $ | 19,401 | |
| Less: Preferred dividends(1) | | | 1,040 | | 1,095 | | 1,109 | |
| Net income available to common shareholders | | | $ | 20,912 | | $ | 9,952 | | $ | 18,292 | |
| Less: Dividends and undistributed earnings allocated to employee restricted and deferred shares with rights to dividends, applicable to basic EPS | | | 154 | | 73 | | 121 | |
| Net income allocated to common shareholders for basic EPS | | | $ | 20,758 | | $ | 9,879 | | $ | 18,171 | |
| Weighted-average common shares outstanding applicable to basic EPS (in millions) | | | 2,033.0 | | 2,085.8 | | 2,249.2 | |
| Basic earnings per share(2) | | | | | |
| Income from continuing operations | | | $ | 10.21 | | $ | 4.75 | | $ | 8.08 | |
| Discontinued operations | | | — | | (0.01) | | — | |
| Net income per share—basic | | | $ | 10.21 | | $ | 4.74 | | $ | 8.08 | |
| Diluted earnings per share | | | | | |
| Net income allocated to common shareholders for basic EPS | | | $ | 20,758 | | $ | 9,879 | | $ | 18,171 | |
| Add back: Dividends allocated to employee restricted and deferred shares with rights to dividends that are forfeitable | | | 31 | | 30 | | 33 | |
| Net income allocated to common shareholders for diluted EPS | | | $ | 20,789 | | $ | 9,909 | | $ | 18,204 | |
| Weighted-average common shares outstanding applicable to basic EPS (in millions) | | | $ | 2,033.0 | | $ | 2,085.8 | | $ | 2,249.2 | |
| Effect of dilutive securities | | | | | |
| Options(3) | | | — | | 0.1 | | 0.1 | |
| Other employee plans | | | 16.4 | | 13.1 | | 16.0 | |
| Adjusted weighted-average common shares outstanding applicable to diluted EPS (in millions)(4) | | | 2,049.4 | | 2,099.0 | | 2,265.3 | |
| Diluted earnings per share(2) | | | | | |
| Income from continuing operations | | | $ | 10.14 | | $ | 4.73 | | $ | 8.04 | |
| Discontinued operations | | | — | | (0.01) | | — | |
| Net income per share—diluted | | | $ | 10.14 | | $ | 4.72 | | $ | 8.04 | |
(1)See Note 20 to the Consolidated Financial Statements for the potential future impact of preferred stock dividends.(2)Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.(3)During 2021, there were no weighted-average options outstanding. During 2021, no significant options to purchase shares of common stock were outstanding. During 2020, weighted-average options to purchase 0.1 million shares of common stock were outstanding but not included in the computation of earnings per share because the weighted-average exercise price of $56.25 per share was anti-dilutive.(4)Due to rounding, weighted-average common shares outstanding applicable to basic EPS and the effect of dilutive securities may not sum to weighted-average common shares outstanding applicable to diluted EPS.
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Recognized prior service (cost) credit | 1 | SEC-NUM |
The Company sponsors a qualified defined contribution plan covering substantially all U.S. employees. Under this plan, the Company matches 100% of participants’ contributions up to 4% of compensation and 75% of participants’ contributions from over 4% to 8%. Employees that are still eligible to accrue benefits under the pension plans are limited to a 50% match of up to 6% of the participants’ compensation.In addition to pension benefits, certain health care and life insurance benefits are provided to qualifying U.S. employees upon retirement from IFF. Such coverage is provided through insurance plans with premiums based on benefits paid. The Company does not generally provide health care or life insurance coverage for retired employees of foreign subsidiaries; such benefits are provided in most foreign countries by government-sponsored plans, and the cost of these programs is not material.The Company offers a non-qualified Deferred Compensation Plan ("DCP") for certain key employees and non-employee directors. Eligible employees and non-employee directors may elect to defer receipt of salary, incentive payments and Board of Directors’ fees into participant-directed investments which are generally invested by the Company in individual variable life insurance contracts it owns that are designed to informally fund savings plans of this nature. The cash surrender value of life insurance is based on the net asset values of the underlying funds available to plan participants. At December 31, 2021 and December 31, 2020, the Consolidated Balance Sheets reflect liabilities of approximately $64 million and $59 million, respectively, related to the DCP in Other liabilities and approximately $26 million and $29 million, respectively, included in Capital in excess of par value related to the portion of the DCP that will be paid out in IFF shares.The total cash surrender value of life insurance contracts the Company owns in relation to the DCP and post-retirement life insurance benefits amounted to $52 million and $49 million at December 31, 2021 and 2020, respectively, and are recorded in Other assets in the Consolidated Balance Sheets.The plan assets and benefit obligations of the defined benefit pension plans are measured at December 31 of each year.
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| | U.S. Plans | | Non-U.S. Plans |
| (DOLLARS IN MILLIONS) | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
| Components of net periodic benefit cost | | | | | | | | | | | |
| Service cost for benefits earned(1) | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | 41 | | | $ | 24 | | | $ | 19 | |
| Interest cost on projected benefit obligation(2) | 71 | | | 17 | | | 22 | | | 10 | | | 13 | | | 18 | |
| Expected return on plan assets(2) | (106) | | | (28) | | | (28) | | | (55) | | | (46) | | | (43) | |
| Net amortization of deferrals(2) | 29 | | | 8 | | | 6 | | | 19 | | | 15 | | | 11 | |
| Settlements and curtailments(2) | — | | | — | | | — | | | (10) | | | 5 | | | — | |
| | | | | | | | | | | | |
| Net periodic benefit cost | (5) | | | (2) | | | 1 | | | 5 | | | 11 | | | 5 | |
| Defined contribution and other retirement plans | 36 | | | 13 | | | 9 | | | 33 | | | 7 | | | 9 | |
| Total expense | $ | 31 | | | $ | 11 | | | $ | 10 | | | $ | 38 | | | $ | 18 | | | $ | 14 | |
| Changes in plan assets and benefit obligations recognized in OCI | | | | | | | | | | | |
| Net actuarial (gain) loss | $ | 12 | | | $ | (1) | | | | | $ | (135) | | | $ | 70 | | | |
| Recognized actuarial loss | (9) | | | (8) | | | | | (10) | | | (20) | | | |
| Prior service cost | — | | | — | | | | | (2) | | | — | | | |
| Recognized prior service (cost) credit | — | | | — | | | | | 1 | | | — | | | |
| Currency translation adjustment | — | | | — | | | | | (16) | | | 28 | | | |
| Total (gain) loss recognized in OCI (before tax effects) | $ | 3 | | | $ | (9) | | | | | $ | (162) | | | $ | 78 | | | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (1)Included as a component of Operating Profit.(2)Included as a component of Other Income (Expense), net. 90
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Equity Method Investment, Amount Sold | 28 | SEC-NUM |
Note 5 - Divestitures
Year ended June 30, 2022
During the third quarter of fiscal year 2022, the Company completed the disposal of non-core assets in the Flexibles reporting segment. The Company recorded an expense of $10 million during the fiscal year ended June 30, 2022 to adjust the long-lived assets to their fair value less cost to sell.
Year ended June 30, 2021
As part of optimizing its portfolio under the 2019 Bemis Integration Plan, the Company completed the disposal of a non-core European hospital supplies business, which was part of the Flexibles reportable segment. The resulting gain from the sale has been recorded in the line restructuring, impairment, and related expenses, net, in the consolidated statements of income. Refer to Note 4, "Restructuring, Impairment, and Related Expenses, Net" and Note 7, "Restructuring."
The Company also completed the disposal of two non-core businesses in India and Argentina in the Flexibles segment during the first quarter of fiscal year 2021, recording a loss on sale of $6 million, which was primarily driven by the reclassification of cumulative translation adjustments through the income statements that had previously been recorded in other comprehensive income/(loss).
The Company sold its equity investment in AMVIG Holdings Limited ("AMVIG") in the first quarter of fiscal year 2021. Refer to Note 8, "Equity Method and Other Investments."
Year ended June 30, 2020
Closing of the Bemis acquisition was conditional upon the receipt of regulatory approvals, approval by both Amcor and Bemis shareholders, and satisfaction of other customary conditions. In order to satisfy certain regulatory approvals, the Company was required to divest three of Bemis' medical packaging facilities located in the United Kingdom and Ireland ("EC Remedy") and three Amcor medical packaging facilities in the United States ("U.S. Remedy"). The U.S. Remedy was completed during the fourth quarter of fiscal year 2019 and the Company received $214 million resulting in a gain of $159 million. The EC Remedy was completed during the first quarter of fiscal year 2020 and the Company received $397 million and recorded a loss on the sale of $9 million which is the result of the reclassification of accumulated foreign currency translation amounts from accumulated other comprehensive loss to earnings from discontinued operations upon sale of the EC Remedy.
In addition, the Company sold an equity method investment acquired through the Bemis acquisition in the third quarter of fiscal year 2020 for proceeds of $28 million. There was no gain or loss on sale as the investment was recorded at fair value upon acquisition.
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Total interest payments on consolidated borrowings, 2026 | 1,009 | SEC-NUM |
In the second quarter of 2021, we completed a debt tender to repurchase a total of $7,275 million of debt, comprising $4,084 million of GE-issued debt with maturities ranging from 2022 through 2050, and $3,191 million of GE assumed debt with maturities ranging from 2021 through 2039. In the fourth quarter of 2021, we completed a debt tender to repurchase a total of $25,350 million of debt, comprised of $7,744 million of GE-issued debt with maturities ranging from 2022 through 2050, $4,718 million of GE assumed debt with maturities ranging from 2022 through 2040 and $12,888 million of GE Capital issued debt with maturities ranging from 2022 through 2039.
See Note 20 for further information about borrowings and associated interest rate swaps.
Long-term debt maturities over the next five years follow.
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| | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2023 | 2024 | 2025 | 2026 |
| Debt issued by GE | $ | 1,249 | | | $ | 482 | | $ | 175 | | $ | 905 | | $ | 31 | |
| Debt assumed by GE | 1,645 | | | 1,627 | | 498 | | 236 | | 1,137 | |
| Debt issued by GE Capital | 1,370 | | (a) | 1,297 | | 111 | | 700 | | 159 | |
(a)Fixed and floating rate notes of $309 million contain put options with exercise dates in 2022, which have final maturity beyond 2036.
The total interest payments on consolidated borrowings are estimated to be $1,245 million, $1,130 million, $1,081 million, $1,047 million and $1,009 million for 2022, 2023, 2024, 2025 and 2026, respectively.
NOTE 11. INSURANCE LIABILITIES AND ANNUITY BENEFITS. Insurance liabilities and annuity benefits comprise substantially all obligations to annuitants and insureds in our run-off insurance operations. Our insurance operations (net of eliminations) generated revenues of $3,106 million, $2,865 million and $2,802 million, profit (loss) of $566 million, $197 million and $(821) million and net earnings (loss) of $444 million, $143 million and $(663) million for the years ended December 31, 2021, 2020 and 2019, respectively. These operations were supported by assets of $49,894 million and $50,067 million at December 31, 2021 and 2020, respectively. A summary of our insurance contracts is presented below:
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| | | | | | | | | | | | | | | | | | |
| December 31, 2021 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
| Future policy benefit reserves | $ | 17,097 | | $ | 8,902 | | $ | 188 | | $ | 3,394 | | $ | 29,581 | |
| Claim reserves | 4,546 | | 258 | | 585 | | — | | 5,389 | |
| Investment contracts | — | | 955 | | 954 | | — | | 1,909 | |
| Unearned premiums and other | 15 | | 184 | | 89 | | — | | 287 | |
| | | | | | |
| | | | | | |
| Total | $ | 21,658 | | $ | 10,299 | | $ | 1,815 | | $ | 3,394 | | $ | 37,166 | |
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| | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | | | | |
| Future policy benefit reserves | $ | 16,934 | | $ | 9,207 | | $ | 181 | | $ | 8,160 | | $ | 34,482 | |
| Claim reserves | 4,393 | | 275 | | 694 | | — | | 5,362 | |
| Investment contracts | — | | 1,034 | | 1,016 | | — | | 2,049 | |
| Unearned premiums and other | 19 | | 189 | | 89 | | — | | 298 | |
| | | | | | |
| | | | | | |
| Total | $ | 21,346 | | $ | 10,705 | | $ | 1,980 | | $ | 8,160 | | $ | 42,191 | |
(a) The decrease in Other adjustments of $4,766 million is a result of the higher margin resulting from the 2021 premium deficiency test and the decline in unrealized gains on investment securities.
Claim reserve activity included incurred claims of $1,699 million, $1,801 million and $1,873 million, of which $(46) million, $(1) millionand $(36) million related to the recognition of adjustments to prior year claim reserves arising from our periodic reserve evaluation in the years ended December 31, 2021, 2020 and 2019, respectively. Paid claims were $1,709 million, $1,728 million and $1,626 million in the years ended December 31, 2021, 2020 and 2019, respectively.
Reinsurance recoveries are recorded as a reduction of insurance losses and annuity benefits in our Statement of Earnings (Loss) and amounted to $351 million, $350 million and $362 million for the years ended December 31, 2021, 2020 and 2019, respectively. Reinsurance recoverables, net of allowances of $1,654 million and $1,510 million, are included in non-current All other assets in our Statement of Financial Position, and amounted to $2,651 million and $2,552 million at December 31, 2021 and 2020, respectively. The vast majority of our remaining net reinsurance recoverables are secured by assets held in a trust for which we are the beneficiary.
2021 FORM 10-K 65
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Amount of cash draws under arrangement during the period | 18 | SEC-NUM |
draws and repayments under the program were presented as cash receipts from sold receivables within investing activities in the Statement of Consolidated Cash Flows. The Company had $26 net cash repayments ($18 in draws and $44 in repayments) for the three months ended March 31, 2021 in connection with this arrangement.The second accounts receivables securitization arrangement is one in which the Company, through a wholly-owned special purpose entity (“SPE”), has a receivables purchase agreement (the “Receivables Purchase Agreement”) such that the SPE may sell certain receivables to financial institutions until the earlier of August 30, 2024 or a termination event. The Receivables Purchase Agreement also contains customary representations and warranties, as well as affirmative and negative covenants. Pursuant to the Receivables Purchase Agreement, the Company does not maintain effective control over the transferred receivables, and therefore accounts for these transfers as sales of receivables. This accounts receivable securitization arrangement totaled $325 at both March 31, 2022 and December 31, 2021 of which $250 was drawn as of both March 31, 2022 and December 31, 2021. As collateral against the sold receivables, the SPE maintains a certain level of unsold receivables, which were $100 and $79 at March 31, 2022 and December 31, 2021, respectively.The Company sold $464 and $84 of its receivables without recourse and received cash funding under this program during the three months ended March 31, 2022 and March 31, 2021, respectively, resulting in derecognition of the receivables from the Company’s Consolidated Balance Sheet. Costs associated with the sales of receivables are reflected in the Company’s Statement of Consolidated Operations for the periods in which the sales occur. Cash receipts from sold receivables under the Receivables Purchase Agreement are presented within operating activities in the Statement of Consolidated Cash Flows.Other Customer Receivable SalesIn the first quarter of 2022, the Company sold $106 of certain customers’ receivables in exchange for cash ($110 was outstanding from customers at March 31, 2022), the proceeds from which are presented in changes in receivables within operating activities in the Statement of Consolidated Cash Flows. In the first quarter of 2021, the Company sold $66 of certain customers’ receivables in exchange for cash, the proceeds from which are presented in changes in receivables within operating activities in the Statement of Consolidated Cash Flows.K. Inventories
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| Finished goods | $ | 487 | | | $ | 478 | |
| Work-in-process | 676 | | | 631 | |
| Purchased raw materials | 279 | | | 256 | |
| Operating supplies | 41 | | | 37 | |
| Total inventories | $ | 1,483 | | | $ | 1,402 | |
At March 31, 2022 and December 31, 2021, the portion of inventories valued on a last-in, first-out (“LIFO”) basis was $588 and $523, respectively. These amounts exclude the effects of LIFO valuation reductions, which were $201 and $192 at March 31, 2022 and December 31, 2021, respectively.L. Properties, Plants, and Equipment, net
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| Land and land rights(1) | $ | 90 | | | $ | 91 | |
| Structures(1) | 959 | | | 1,034 | |
| Machinery and equipment | 3,961 | | | 3,932 | |
| | 5,010 | | | 5,057 | |
| Less: accumulated depreciation and amortization(1) | 2,770 | | | 2,772 | |
| | 2,240 | | | 2,285 | |
| Construction work-in-progress | 160 | | | 182 | |
| Properties, plants, and equipment, net | $ | 2,400 | | | $ | 2,467 | |
(1)The Company reached an agreement to sell the corporate center and, as a result, it was classified as held for sale and included in Prepaid expenses and other current assets in the Consolidated Balance Sheet. The carrying value of the building was $40 at March 31, 2022, and no material gain or loss is expected upon finalization of the sale. The Company intends to lease a portion of the property back from the purchaser.
15
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Issuance of collateralized loan obligation notes | 398.6 | SEC-NUM |
Assurant, Inc.Consolidated Statements of Cash FlowsYears Ended December 31, 2021, 2020 and 2019
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | (in millions) |
| Operating activities | | | | | |
| Net income attributable to stockholders | $ | 1,372.4 | | | $ | 441.8 | | | $ | 382.6 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Noncash revenues, expenses, gains and losses included in income: | | | | | |
| (Income) loss from discontinued operations (7) | (758.9) | | | 77.7 | | | (80.4) | |
| Deferred tax expense | 131.7 | | | 202.4 | | | 100.8 | |
| | | | | | |
| Depreciation and amortization | 171.6 | | | 142.3 | | | 125.5 | |
| Net realized (gains) losses on investments, including impairment losses | (128.2) | | | 8.2 | | | (57.0) | |
| Loss on extinguishment of debt | 20.7 | | | — | | | 31.4 | |
| Net loss on sales of businesses and buildings | — | | | — | | | 17.0 | |
| Stock based compensation expense | 66.7 | | | 57.9 | | | 55.9 | |
| Other intangible asset impairment | 1.7 | | | 2.7 | | | 16.2 | |
| | | | | | |
| Iké related charges, net of derivative gains (1) | — | | | 1.7 | | | 163.0 | |
| Changes in operating assets and liabilities: | | | | | |
| Insurance policy reserves and expenses | 1,454.6 | | | 697.3 | | | 1,304.5 | |
| Premiums and accounts receivable | (424.2) | | | 194.0 | | | (58.5) | |
| Commissions payable | (43.3) | | | 171.3 | | | 102.6 | |
| Reinsurance recoverable | (445.5) | | | (232.3) | | | (404.3) | |
| Reinsurance balance payable | 81.6 | | | 2.3 | | | 25.7 | |
| Funds withheld under reinsurance | 6.5 | | | 37.9 | | | 44.6 | |
| Deferred acquisition costs and value of business acquired (2) | (879.1) | | | (456.6) | | | (780.7) | |
| Taxes receivable (3) | (157.1) | | | 24.4 | | | 14.1 | |
| Other assets and other liabilities | 163.2 | | | (260.9) | | | 105.0 | |
| Other | (3.9) | | | 2.2 | | | 20.3 | |
| Net cash provided by operating activities - discontinued operations | 151.2 | | | 227.7 | | | 285.1 | |
| Net cash provided by operating activities | 781.7 | | | 1,342.0 | | | 1,413.4 | |
| Investing activities | |
| Sales of: | | | | | |
| Fixed maturity securities available for sale | 1,361.8 | | | 515.4 | | | 1,729.8 | |
| Equity securities | 30.4 | | | 23.8 | | | 77.4 | |
| Other invested assets | 141.1 | | | 113.1 | | | 128.9 | |
| | | | | | |
| Subsidiaries, net of cash transferred (7) | 1,315.6 | | | — | | | — | |
| Iké foreign currency hedge (1) | — | | | 22.0 | | | — | |
| Maturities, calls, prepayments, and scheduled redemption of: | | | | | |
| Fixed maturity securities available for sale | 971.0 | | | 804.8 | | | 541.2 | |
| Commercial mortgage loans on real estate | 19.8 | | | 26.2 | | | 18.1 | |
| Purchases of: | | | | | |
| Fixed maturity securities available for sale | (3,007.7) | | | (1,503.9) | | | (2,183.0) | |
| Equity securities | (57.7) | | | (31.5) | | | (73.2) | |
| Commercial mortgage loans on real estate | (133.9) | | | (5.5) | | | — | |
| Other invested assets (4) | (71.6) | | | (99.5) | | | (50.8) | |
| Property and equipment and other | (187.4) | | | (121.2) | | | (110.3) | |
| Subsidiary, net of cash transferred (5) | (16.6) | | | (458.6) | | | (7.6) | |
| Net cash outflow related to sale of interests in Iké and termination of put/call obligations (1) | — | | | (73.3) | | | — | |
| Consolidated investment entities: | | | | | |
| Purchases of investments | — | | | (353.1) | | | (1,311.0) | |
| Sale of investments | — | | | 550.2 | | | 935.1 | |
| Change in short-term investments | (65.2) | | | 68.8 | | | (39.0) | |
| Other | 3.2 | | | 2.9 | | | 7.5 | |
| Net cash used in investing activities - discontinued operations | (145.2) | | | (215.8) | | | (282.9) | |
| Net cash provided by (used in) investing activities | 157.6 | | | (735.2) | | | (619.8) | |
| Financing activities | | | | | |
| | | | | | |
| Issuance of debt, net of issuance costs (Note 19) | 347.2 | | | 243.7 | | | 346.7 | |
| Repayment of debt, including tender offer premium (Note 19) | (419.8) | | | — | | | (379.6) | |
| Issuance of collateralized loan obligation notes | — | | | — | | | 398.6 | |
| Issuance of debt for consolidated investment entities | — | | | — | | | 189.1 | |
| Repayment of debt for consolidated investment entities | — | | | (1.2) | | | (319.3) | |
| Borrowing under secured revolving credit facility | — | | | 200.0 | | | — | |
| Payments on secured revolving credit facility | — | | | (200.0) | | | — | |
| Acquisition of common stock | (839.3) | | | (297.0) | | | (271.8) | |
| Common stock dividends paid | (157.6) | | | (154.6) | | | (151.4) | |
| Preferred stock dividends paid | (4.7) | | | (18.7) | | | (18.7) | |
| Employee stock purchases and withholdings | (15.6) | | | (10.3) | | | 19.7 | |
| Proceeds from transfer of rights to ACA recoverables (Note 4) | — | | | — | | | 26.7 | |
| Proceeds repaid on transfer of rights to ACA recoverable | — | | | (26.7) | | | — | |
| | | | | | |
| Other (6) | — | | | — | | | (19.2) | |
| Net cash (used in) provided by financing activities - discontinued operations | — | | | — | | | — | |
| Net cash (used in) provided by financing activities | (1,089.8) | | | (264.8) | | | (179.2) | |
| Effect of exchange rate changes on cash and cash equivalents - continuing operations | (23.5) | | | 19.4 | | | (1.6) | |
| Effect of exchange rate changes on cash and cash equivalents - discontinued operations | 0.2 | | | 0.1 | | | 0.3 | |
| Effect of exchange rate changes on cash and cash equivalents | (23.3) | | | 19.5 | | | (1.3) | |
| Change in cash and cash equivalents | (173.8) | | | 361.5 | | | 613.1 | |
| Cash and cash equivalents at beginning of period | 2,228.6 | | | 1,867.1 | | | 1,254.0 | |
| Cash and cash equivalents at end of period | 2,054.8 | | | 2,228.6 | | | 1,867.1 | |
| Less: Cash reclassified as held for sale (8) | (14.0) | | | — | | | — | |
| Less: Cash and cash equivalents of discontinued operations at end of period | — | | | 21.0 | | | 9.0 | |
| Cash and cash equivalents of continuing operations at end of period | $ | 2,040.8 | | | $ | 2,207.6 | | | $ | 1,858.1 | |
| Supplemental information: | | | | | |
| Income taxes paid | $ | 221.1 | | | $ | 98.5 | | | $ | 93.1 | |
| Interest paid on debt | $ | 109.8 | | | $ | 103.6 | | | $ | 103.2 | |
(1)Relates to Iké disposition and related financing. Refer to Note 4 for additional information. (2)Refer to Notes 13 and 16 for further detail on amortization of DAC and VOBA, respectively. (3)The year ended December 31, 2020 includes receipt of $204.9 million federal tax refund, which includes interest, related to the ability to carryback net operating losses to prior periods under the CARES Act. Refer to Note 12 for additional information. (4)The year ended December 31, 2020 includes loan to Iké Grupo. Refer to Note 4 for additional information. (5)Amounts for the year ended December 31, 2020 primarily consists of $135.8 million in cash consideration for the acquisition of American Financial & Automotive Services, Inc. (“AFAS”), net of $39.6 million of cash acquired, $276.8 million in cash consideration for the acquisition of HYLA Mobile, Inc. (“HYLA”) net of $72.0 million of cash acquired, and $46.0 million in total cash consideration, net of $23.9 million of cash acquired for four business acquisitions within the Global Lifestyle business. Refer to Note 3 for additional information. (6)Amounts for the year ended December 31, 2019 relates to the settlement of a contingent payable from the Company’s acquisition of certain renewal rights in a prior year. (7)Relates to the sale of the disposed Global Preneed business, net of $27.3 million of cash transferred. For additional information, refer to Note 4.(8)Relates to the held for sale of John Alden Life Insurance Company (“JALIC”), refer to Note 4 for further information.
See the accompanying Notes to the Consolidated Financial Statements F-7
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Net foreign currency translation adjustments attributable to noncontrolling interests | 133 | SEC-NUM |
facts and circumstances as of December 31, 2021, would result in an incremental annual tax liability that would increase the Company’s effective tax rate by approximately 3.5 percent.The Company does not know when the Tax Court will issue its opinion regarding the effect of Brazilian legal restrictions on the payment of royalties by the Company’s licensee in Brazil for the 2007 through 2009 tax years. After the Tax Court issues its opinion on the Company’s Brazilian licensee, the Company and the IRS will be provided time to agree on the tax impact, if any, of both opinions, after which the Tax Court would render a final decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit and pay the tax liability and interest related to the 2007 through 2009 tax years. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $5.0 billion (including interest accrued through April 1, 2022), plus any additional interest accrued through the time of payment. Some or all of this amount would be refunded if the Company were to prevail on appeal. Risk Management ProgramsThe Company has numerous global insurance programs in place to help protect the Company from the risk of loss. In general, we are self-insured for large portions of many different types of claims; however, we do use commercial insurance above our self-insured retentions to reduce the Company’s risk of catastrophic loss. Our reserves for the Company’s self-insured losses are estimated using actuarial methods and assumptions of the insurance industry, adjusted for our specific expectations based on our claims history. Our self-insurance reserves totaled $228 million and $229 million as of April 1, 2022 and December 31, 2021, respectively.NOTE 9: OTHER COMPREHENSIVE INCOME AOCI attributable to shareowners of The Coca-Cola Company is separately presented in our consolidated balance sheet as a component of The Coca-Cola Company’s shareowners’ equity, which also includes our proportionate share of equity method investees’ AOCI. OCI attributable to noncontrolling interests is allocated to, and included in, our consolidated balance sheet as part of the line item equity attributable to noncontrolling interests.AOCI attributable to shareowners of The Coca-Cola Company consisted of the following, net of tax (in millions):
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| | April 1,2022 | December 31,2021 |
| Net foreign currency translation adjustments | $ | (11,719) | | $ | (12,595) | |
| Accumulated net gains (losses) on derivatives | 84 | | 20 | |
| Unrealized net gains (losses) on available-for-sale debt securities | (97) | | (62) | |
| Adjustments to pension and other postretirement benefit liabilities | (1,608) | | (1,693) | |
| Accumulated other comprehensive income (loss) | $ | (13,340) | | $ | (14,330) | |
The following table summarizes the allocation of total comprehensive income between shareowners of The Coca-Cola Company and noncontrolling interests (in millions):
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Three Months Ended April 1, 2022 |
| | Shareowners ofThe Coca-Cola Company | NoncontrollingInterests | Total |
| Consolidated net income | $ | 2,781 | | $ | 12 | | $ | 2,793 | |
| Other comprehensive income: | | | |
| Net foreign currency translation adjustments | 876 | | 133 | | 1,009 | |
| Net gains (losses) on derivatives1 | 64 | | — | | 64 | |
| Net change in unrealized gains (losses) on available-for-sale debt securities2 | (35) | | — | | (35) | |
| Net change in pension and other postretirement benefit liabilities | 85 | | — | | 85 | |
| | | | |
| Total comprehensive income (loss) | $ | 3,771 | | $ | 145 | | $ | 3,916 | |
1Refer to Note 6 for additional information related to the net gains or losses on derivative instruments.2Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.17
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Contingent Consideration maximum earn-out period | 2.4 | SEC-NUM |
AGILENT TECHNOLOGIES, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
Our money market funds and trading securities are generally valued using quoted market prices and therefore are classified within level 1 of the fair value hierarchy. Our derivative financial instruments are classified within level 2, as there is not an active market for each hedge contract, but the inputs used to calculate the value of the instruments are tied to active markets. Our deferred compensation liability is classified as level 2 because, although the values are not directly based on quoted market prices, the inputs used in the calculations are observable.
Short- term investments - equity securities with readily determinable fair value ("RDFV") are shares in marketable equity securities which are classified as level 1 in the fair value hierarchy as they are measured based on quotes in active markets. Equity securities with RDFV also include potential shares received from an equity investment in a company that went public and can vest under certain stock performance circumstances, and these have been classified as level 2 because the fair value was calculated using the Monte Carlo simulation method in which quoted market price and other observable inputs are used.
Other investments represent shares we own in a special fund that targets underlying investments of approximately 40 percent in debt securities and 60 percent in equity securities. These shares have been classified as level 2 because, although the shares of the fund are not traded on any active stock exchange, each of the individual underlying securities are or can be derived from and hence we have a readily determinable value for the underlying securities, from which we are able to determine the fair market value for the special fund itself.
Trading securities, which are comprised of mutual funds, bonds and other similar instruments, other investments and deferred compensation liability are reported at fair value, with gains or losses resulting from changes in fair value recognized currently in net income. Certain derivative instruments are reported at fair value, with unrealized gains and losses, net of tax, included in accumulated other comprehensive income (loss) within stockholders' equity. Realized gains and losses from the sale of these instruments are recorded in net income.
Gains and losses reflected in other income (expense), net for our equity investments with RDFV and equity investments without RDFV are summarized below:
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | July 31, | | July 31, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) |
| Net gain (loss) recognized during the period on equity securities | $ | 2 | | | $ | 9 | | | $ | (60) | | | $ | 24 | |
| Less: net gain on equity securities sold during the period | $ | 12 | | | $ | — | | | $ | 12 | | | $ | — | |
| Unrealized gain (loss) on equity securities | $ | (10) | | | $ | 9 | | | $ | (72) | | | $ | 24 | |
Contingent Consideration. The fair value of the contingent consideration liability relates to milestone payments in connection with the acquisition of advanced artificial intelligence technology in February 2022 and the acquisition of Resolution Bioscience in April 2021.
Resolution Bioscience. The fair value of the potential future milestone payments, which is set to certain revenue and technical targets, was based on (i) the probability of achieving the relevant revenue targets and technical milestones and (ii) the timing of achieving such milestones, which are significant unobservable inputs, and has been classified as Level 3. We used the Monte Carlo simulation approach to estimate the fair value of the revenue component which resulted in a fair value of zero. The probability-weighted expected return method was used to estimate the fair value of the technical target component. Assumptions used in the calculations include probability of success, duration of the earn-out and discount rate. A change in any of these unobservable inputs can significantly change the fair value of the contingent consideration. As of July 31, 2022, the expected maximum earn-out period for the contingent payments does not exceed 2.4 years and potential future payments will not exceed $145 million.
20
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Deferred shares | 7,475,528 | SEC-NUM |
Contractual maturities of the Company’s future minimum lease payments are as follows:
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| (In thousands) | December 31, 2021 | | | |
| Contractual Maturities: | | | | |
| 2022 | $ | 44,962 | | | | |
| 2023 | 43,674 | | | | |
| 2024 | 37,663 | | | | |
| 2025 | 28,109 | | | | |
| 2026 | 21,486 | | | | |
| Thereafter | 68,019 | | | | |
| Total undiscounted future minimum lease payments | 243,913 | | | | |
| Less: Discount impact | 35,184 | | | | |
| Total lease liability | $ | 208,729 | | | | |
(22) Stock Incentive PlanPursuant to the Company's stock incentive plan, the Company may issue restricted stock units ("RSUs") to employees of the Company and its subsidiaries. The RSUs generally vest three to five years from the award date and are subject to other vesting and forfeiture provisions contained in the award agreement. The following table summarizes RSU information for the three years ended December 31, 2021:
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| RSUs granted and unvested at beginning of period: | 3,804,336 | | | 4,124,260 | | | 5,062,661 | |
| Granted | 848,660 | | | 962,453 | | | 840,796 | |
| Vested | (1,015,973) | | | (1,111,588) | | | (1,447,522) | |
| Canceled | (207,344) | | | (170,789) | | | (331,675) | |
| RSUs granted and unvested at end of period: | 3,429,679 | | | 3,804,336 | | | 4,124,260 | |
Upon vesting, shares of the Company’s common stock equal to the number of vested RSUs are issued or deferred to a later date, depending on the terms of the specific award agreement. As of December 31, 2021, 7,475,528 RSUs had been deferred. RSUs that have not yet vested and vested RSUs that have been deferred are not considered to be issued and outstanding shares.
The fair value of RSUs at the date of grant are recorded as unearned compensation, a component of stockholders’ equity, and expensed over the vesting period. Following is a summary of changes in unearned compensation for the three years ended December 31, 2021:
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| (In thousands) | 2021 | | 2020 | | 2019 |
| Unearned compensation at beginning of year | $ | 132,310 | | | $ | 128,390 | | | $ | 129,669 | |
| RSUs granted, net of cancellations | 56,711 | | | 54,270 | | | 53,583 | |
| RSUs expensed | (46,441) | | | (47,108) | | | (47,329) | |
| RSUs forfeitures | (7,045) | | | (3,242) | | | (7,533) | |
| Unearned compensation at end of year | $ | 135,535 | | | $ | 132,310 | | | $ | 128,390 | |
109
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Payments for repurchase of equity | 2.1 | SEC-NUM |
[Table of Contents](#i1f1d4643819f4c4aa82d0bc4fb2f7f45_7)GENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)Note 15. Income Taxes In the three months ended June 30, 2022 and 2021, Income tax expense of $490 million and $971 million was primarily due to tax expense attributable to entities included in our effective tax rate calculation.
In the six months ended June 30, 2022, Income tax expense of $462 million was primarily due to tax expense attributable to entities included in our effective tax rate calculation, partially offset by the release of a valuation allowance against certain Cruise deferred tax assets that were considered realizable due to the reconsolidation of Cruise for U.S. tax purposes. In the six months ended June 30, 2021, Income tax expense of $2.1 billion was primarily due to tax expense attributable to entities included in our effective tax rate calculation and the establishment of a valuation allowance against Cruise deferred tax assets that were considered no longer realizable.
In the six months ended June 30, 2022, GM entered into a Share Purchase Agreement with SoftBank Vision Fund (AIV M2) L.P. (SoftBank), pursuant to which GM acquired SoftBank’s equity ownership stake in GM Cruise Holdings LLC (Cruise Holdings) and separately, made an additional $1.35 billion investment in Cruise in place of SoftBank. As of March 31, 2022, GM’s ownership in Cruise increased above the 80% threshold which allowed for inclusion of Cruise in our U.S. Federal consolidated income tax return and the release of a valuation allowance of $482 million against certain Cruise deferred tax assets. Refer to Note 16 to our condensed consolidated financial statements for additional information regarding the Share Purchase Agreement with SoftBank.
At June 30, 2022, we had $20.2 billion of net deferred tax assets consisting of net operating losses and income tax credits, capitalized research expenditures and other timing differences that are available to offset future income tax liabilities, partially offset by valuation allowances.
Note 16. Stockholders' Equity and Noncontrolling InterestsWe have 2.0 billion shares of preferred stock and 5.0 billion shares of common stock authorized for issuance. We had no shares of preferred stock issued and outstanding at June 30, 2022 and December 31, 2021. We had 1.5 billion shares of common stock issued and outstanding at June 30, 2022 and December 31, 2021.
Cruise Preferred Shares In 2021, Cruise Holdings issued $2.7 billion of Class G Preferred Shares (Cruise Class G Preferred Shares) to Microsoft Corporation (Microsoft), Walmart Inc. (Walmart) and other investors, including $1.0 billion to General Motors Holdings LLC. All proceeds related to the Cruise Class G Preferred Shares are designated exclusively for working capital and general corporate purposes of Cruise Holdings. In addition, we, Cruise Holdings and Microsoft entered into a long-term strategic relationship to accelerate the commercialization of self-driving vehicles with Microsoft being the preferred public cloud provider.
The Cruise Class G Preferred Shares participate pari passu with holders of Cruise Holdings common stock and Class F Preferred Shares (Cruise Class F Preferred Shares) in any dividends declared. The Cruise Class G and Cruise Class F Preferred Shares convert into the class of shares to be issued to the public in an initial public offering (IPO) at specified exchange ratios. No covenants or other events of default exist that can trigger redemption of the Cruise Class G and Cruise Class F Preferred Shares. The Cruise Class G and Cruise Class F Preferred Shares are entitled to receive the greater of their carrying value or a pro-rata share of any proceeds or distributions upon the occurrence of a merger, sale, liquidation or dissolution of Cruise Holdings, and are classified as noncontrolling interests in our condensed consolidated financial statements.
In March 2022, under the Share Purchase Agreement, we acquired SoftBank’s Cruise Class A-1, Class F and Class G Preferred Shares for $2.1 billion and made an additional $1.35 billion investment in Cruise in place of SoftBank. SoftBank no longer has an ownership interest in or has any rights with respect to Cruise.
Cruise Common Shares In the three months ended June 30, 2022, Cruise Holdings issued $0.7 billion of Class B Common Shares to settle vested awards under Cruise's 2018 Employee Incentive Plan. In addition, Cruise Holdings issued $0.4 billion of Class B Common Shares, primarily to us, to fund the payment of statutory tax withholding obligations resulting from the settlement or exercise of vested awards. Also, GM conducted a quarterly tender offer and paid $0.2 billion in cash to settle tendered Cruise Class B Common Shares. The Class B Common Shares are classified as noncontrolling interests in our condensed consolidated financial statements except for certain shares that are liability classified that have a recorded value of $0.4 billion at June 30, 2022. Refer to Note 18 for additional information on Cruise stock incentive awards.
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Derivative liability fair value | 639 | SEC-NUM |
[Table of Contents](#i84fa46872c0e4324b82e25f92cc079f4_7)FIDELITY NATIONAL INFORMATION SERVICES, INC.AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
On March 2, 2021, FIS completed the issuance and sale of Senior USD Notes with an aggregate principal amount of $5.5 billion with interest rates ranging from 0.4% to 3.1% and maturities ranging from 2023 to 2041 ("new Senior USD Notes"). A portion of the proceeds from the debt issuance was used to purchase and redeem certain Senior Notes as discussed above, with the remaining proceeds used to repay a portion of our commercial paper notes. The new Senior USD Notes are subject to customary covenants, including, among others, customary events of default. The new Senior USD Notes also include redemption provisions at the option of FIS, similar to the other Senior Notes.
Revolving Credit Facility
On March 2, 2021, FIS entered into an amendment to the Revolving Credit Facility agreement to amend certain covenant provisions, revise lender commitments for certain counterparties, and extend the scheduled maturity date to March 2, 2026. As of September 30, 2022, the borrowing capacity under the Revolving Credit Facility was $2,914 million (net of $2,422 million of capacity backstopping our commercial paper notes).
Fair Value of Debt
The fair value of the Company's long-term debt is estimated to be approximately $2,040 million and $570 million higher than the carrying value, excluding the fair value of the interest rate swaps and unamortized discounts, as of September 30, 2022, and December 31, 2021, respectively.
(7) Financial Instruments
Fair Value Hedges
The Company holds interest rate swaps with aggregate notional amounts of $1,854 million, £925 million and €500 million at each of September 30, 2022, and December 31, 2021, converting the interest rate exposure on certain of the Company's Senior USD Notes, Senior GBP Notes and Senior Euro Notes, as applicable, from fixed to variable. These swaps are designated as fair value hedges for accounting purposes with a net liability fair value of $639 million and $85 million reflected as a decrease in the long-term debt balance at September 30, 2022, and December 31, 2021, respectively (see Note 6).
Net Investment Hedges
The purpose of the Company's net investment hedges, as discussed below, is to reduce the volatility of FIS' net investment value in its Euro- and Pound Sterling-denominated operations due to changes in foreign currency exchange rates.
The Company recorded net investment hedge aggregate gain (loss) for the change in fair value as Foreign currency translation adjustments and related income tax (expense) benefit within Other comprehensive earnings (loss), net of tax, on the consolidated statements of comprehensive earnings (loss) of $983 million and $386 million during the three months and $2,116 million and $678 million during the nine months ended September 30, 2022 and 2021, respectively. The amounts included in Accumulated other comprehensive earnings (loss) (“AOCI”) for the net investment hedges will remain in AOCI until the complete or substantially complete liquidation of our investment in the underlying foreign operations. No ineffectiveness has been recorded on the net investment hedges.
Foreign Currency-Denominated Debt Designations
The Company designates certain foreign currency-denominated debt as net investment hedges of its investment in Euro- and Pound Sterling-denominated operations. As of September 30, 2022, and December 31, 2021, an aggregate €7,848 million and €8,275 million, respectively, was designated as a net investment hedge of the Company's investment in Euro-denominated operations related to Senior Euro Notes with maturities ranging from 2022 to 2039 and ECP Notes. As of September 30, 2022, and December 31, 2021, an aggregate £665 million and £1,193 million, respectively, was designated as a net investment hedge of the Company's Pound Sterling-denominated operations related to the Senior GBP Notes with maturities ranging from 2029 to 2031 at September 30, 2022.
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Public Utilities, Approved Rate Increase (Decrease), Amount | 4 | SEC-NUM |
[Table of Contents](#i59ca7ab3cc784e42904d434b0008a7a9_10)Notes to Consolidated Financial Statements(Dollars in millions, unless otherwise noted)
Note 10 — Asset Retirement ObligationsNDT FundsNDT funds have been established for each of our nuclear units to satisfy our nuclear decommissioning obligations, as required by the NRC, and withdrawals from these funds for reasons other than to pay for decommissioning are restricted pursuant to NRC requirements until all decommissioning activities have been completed. Generally, NDT funds established for a particular unit may not be used to fund the decommissioning obligations of any other unit.The NDT funds associated with our nuclear units have been funded with amounts collected from the previous owners and their respective utility customers. PECO is authorized to collect funds, in revenues, through regulated rates for decommissioning the former PECO nuclear plants, and these collections are scheduled through the operating lives of these former PECO plants. The amounts collected from PECO customers are remitted to us and deposited into the NDT funds for the unit for which funds are collected. Every five years, PECO files a rate adjustment with the PAPUC that reflects PECO’s calculations of the estimated amount needed to decommission each of the former PECO units based on updated fund balances and estimated decommissioning costs. The rate adjustment is used to determine the amount collectible from PECO customers. On March 31, 2017, PECO filed its Nuclear Decommissioning Cost Adjustment with the PAPUC proposing an annual recovery from customers of approximately $4 million. On August 8, 2017, the PAPUC approved the filing and the new rates became effective January 1, 2018.Any shortfall of funds necessary for decommissioning, determined for each generating station unit, are generally required to be funded by us, with the exception of a shortfall for the current decommissioning activities at Zion Station, where certain decommissioning activities have been transferred to a third-party (see Zion Station Decommissioning below) and the former PECO nuclear plants where, through PECO, we have recourse to collect additional amounts from PECO customers related to a shortfall of NDT funds for those units, subject to certain limitations and thresholds, as prescribed by an order from the PAPUC that limits collection of amounts associated with the first $50 million of any shortfall of trust funds compared to decommissioning costs, as well as 5% of any additional shortfalls, on an aggregate basis for all former PECO units. The initial $50 million and up to 5% of any additional shortfalls would be borne by us. No recourse exists to collect additional amounts from utility customers for any of our other nuclear units. With respect to the former ComEd and former PECO units, any funds remaining in the NDTs after all decommissioning has been completed are required to be refunded to ComEd’s or PECO’s customers, subject to certain limitations that allow sharing of excess funds with us related to the former PECO units. With respect to our other nuclear units, we retain any funds remaining after decommissioning. However, in connection with CENG's acquisition of the Nine Mile Point and Ginna plants and settlements with certain regulatory agencies, certain conditions pertaining to NDT funds apply that, if met, could possibly result in obligations to make payments to certain third parties (clawbacks). For Nine Mile Point and Ginna, the clawback provisions are triggered only in the event that the required decommissioning activities are discontinued or not started or completed in a timely manner. In the event that the clawback provisions are triggered for Nine Mile Point, then, depending upon the triggering event, an amount equal to 50% of the total amount withdrawn from the funds for non-decommissioning activities as defined in the agreement or 50% of any excess funds in the trust funds above the amounts required for decommissioning (including SNF management and site restoration) is to be paid to the Nine Mile Point sellers. In the event that the clawback provisions are triggered for Ginna, then an amount equal to any estimated cost savings realized by not completing any of the required decommissioning activities is to be paid to the Ginna sellers. We expect to comply with applicable regulations and timely commence and complete all required decommissioning activities.We had NDT funds totaling $16,064 million and $14,599 million as of December 31, 2021 and 2020, respectively. The NDT funds also include $126 million and $134 million for the current portion of the NDT funds as of December 31, 2021 and 2020, respectively, which are included in Other current assets in the Consolidated Balance Sheets. See Note 22 — Supplemental Financial Information for additional information on activities of the NDT funds.Accounting Implications of the Regulatory Agreements with ComEd and PECOBased on the regulatory agreements with the ICC and PAPUC that dictate our obligations related to the shortfall or excess of NDT funds necessary for decommissioning the former ComEd units on a unit-by-unit basis and the former PECO units in total, decommissioning-related activities net of applicable taxes, including realized and 113
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Stock-based compensation expense unrecognized | 19.3 | SEC-NUM |
[Table of Contents](#ic0f1e00f8fa04a87b8ba424679040b3d_7)
On June 3, 2021, the Company issued $950.0 million aggregate principal amount of its 0.650% notes due 2024 (the "2024 Notes"), $750.0 million aggregate principal amount of its 1.700% notes due 2028 (the "2028 Notes"), and $600.0 million aggregate principal amount of its 3.050% notes due 2051 (the "2051 Notes"). Interest will accrue per annum at the stated rates with interest on the notes being paid semi-annually in arrears on June 3 and December 3 of each year, commencing December 3, 2021. Interest rate risk was hedged utilizing interest rate locks on the 2028 Notes and 2051 Notes. The Company lifted the hedges in conjunction with the issuance of these notes. See Note F - Derivatives and Hedging for additional details. The 2024 Notes may be redeemed in whole or in part one year after their issuance without penalty for early partial payments or full redemption. The 2028 Notes and 2051 Notes may be redeemed in whole or in part at any time at the applicable redemption price. If a change of control triggering event occurs, the Company must offer to purchase the notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.
Unsecured Revolving Credit Facility: On May 6, 2021, the Company entered into an unsecured revolving credit agreement with Wells Fargo Bank, National Association as administrative agent, swingline lender and issuing lender, U.S. Bank National Association, JPMorgan Chase Bank, N.A. and BofA Securities, Inc. as syndication agents and the lenders party thereto. In connection with entering the revolving credit agreement, the Company terminated its existing credit facility that was entered into on June 24, 2015. The revolving credit agreement provides for an unsecured revolving credit facility with an aggregate principal commitment amount at any time outstanding of up to $750.0 million with an uncommitted increase option of an additional $375.0 million upon the satisfaction of certain conditions. The unsecured revolving line of credit bears interest, at the Company’s election, at either a Base Rate plus margin of 0.0% to 0.150% or the Eurocurrency Rate plus margin of 0.575% to 1.150% and a variable fee of 0.050% to 0.100% is paid for the availability of this credit line. Extensions of credit under the facility may be made in the form of revolving loans, swingline loans and letters of credit. The lending commitments under the agreement are scheduled to expire on May 6, 2026, at which time the Company will be required to pay in full all obligations then outstanding. As of October 31, 2021, and October 25, 2020, the Company had no outstanding draws from these facilities.
Debt Covenants: The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. As of October 31, 2021, the Company was in compliance with all of these covenants. Total interest paid in the last three fiscal years is as follows:
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| 2021 | | $ | 25.1 | |
| 2020 | | 14.5 | |
| 2019 | | 19.0 | |
Note MStock-Based CompensationThe Company issues stock options, restricted stock units, and restricted shares as part of its stock incentive plans for employees and non-employee directors. Stock-based compensation expense for fiscal years 2021, 2020, and 2019, was $24.7 million, $22.5 million, and $19.7 million, respectively. The Company recognizes stock-based compensation expense ratably over the vesting period or the individual's retirement eligibility date. At October 31, 2021, there was $19.3 million of total unrecognized compensation expense from stock-based compensation arrangements granted under the plans. This compensation is expected to be recognized over a weighted-average period of approximately 1.4 years. During fiscal years 2021, 2020, and 2019, cash received from stock option exercises was $45.9 million, $81.8 million, and $59.9 million, respectively.Shares issued for option exercises, restricted stock units, and restricted shares may be either authorized but unissued shares or shares of treasury stock. The number of shares available for future grants was 12.5 million at October 31, 2021, 13.7 million at October 25, 2020, and 14.9 million at October 27, 2019.Stock Options: The Company’s policy is to grant options with the exercise price equal to the market price of the common stock on the date of grant. Options typically vest over four years and expire ten years after the date of the grant.Effective with fiscal 2020 grants, the Company has determined the equity award value for eligible employees will be delivered 50 percent in stock options as described above and 50 percent in restricted stock units with a three-year cliff vesting period.
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Equity interest | 75 | SEC-NUM |
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| PART II | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | Table of Contents |
more dilutive than the two-class method. For the years ended February 28, 2022, and February 29, 2020, net income (loss) per common share – diluted for Class A Stock is computed using the two-class method. Net income (loss) per common share – diluted for Class B Stock is computed using the two-class method and does not assume conversion of Class B Stock into shares of Class A Stock.
2. ACQUISITIONS AND DIVESTITURES
AcquisitionsMy Favorite NeighborIn November 2021, we acquired the remaining 65% ownership interest in My Favorite Neighbor, a super-luxury, DTC focused wine business as well as certain wholesale sourced brands. This transaction primarily included the acquisition of goodwill, trademarks, inventory, and property, plant, and equipment. In addition, the My Favorite Neighbor transaction includes an earn-out over 10 years based on performance, with a 50% minimum guarantee due at the end of the earn-out period. The results of operations of My Favorite Neighbor are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.
We recognized a gain of $13.5 million for the year ended February 28, 2022, related to the remeasurement of our previously held 35% equity interest in My Favorite Neighbor to the acquisition-date fair value. This gain is included in selling, general, and administrative expenses within our consolidated results of operations. See Note 10 for further discussion.
Copper & KingsIn September 2020, we acquired the remaining ownership interest in Copper & Kings. This acquisition included a collection of traditional and craft batch-distilled American brandies and other select spirits. The transaction primarily included the acquisition of inventory and property, plant, and equipment. The results of operations of Copper & Kings are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.
Empathy WinesIn June 2020, we acquired Empathy Wines, including the acquisition of a digitally-native wine brand which strengthens our position in the DTC and other eCommerce markets. This transaction primarily included the acquisition of goodwill, trademarks, and inventory. In addition, the purchase price for Empathy Wines includes an earn-out over five years based on performance. The results of operations of Empathy Wines are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.
Nelson’s Green BrierIn May 2019, we increased our ownership interest in Tennessee-based Nelson’s Green Brier to 75%, resulting in consolidation of the business and recognition of a 25% noncontrolling interest. This acquisition included a portfolio of craft bourbon and whiskey products. The fair value of the business combination was allocated primarily to goodwill, trademarks, inventory, and property, plant, and equipment. The results of operations of Nelson’s Green Brier are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.
We recognized a gain of $11.8 million for the year ended February 29, 2020, related to the remeasurement of our previously held 20% equity interest in Nelson’s Green Brier to the acquisition-date fair value. This gain is included in selling, general, and administrative expenses within our consolidated results of operations.
DivestituresPaul Masson DivestitureOn January 12, 2021, we sold the Paul Masson Grande Amber Brandy brand, related inventory, and interests in certain contracts. We received cash proceeds of $267.4 million, net of post-closing adjustments, which
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| Constellation Brands, Inc. FY 2022 Form 10-K | #WORTHREACHINGFOR I 74 |
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Compensation expense yet to be recognized | 19,076 | SEC-NUM |
[Table of Contents](#i3e760ad3c5f94c5892b7ddc949ade806_7)
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| | Year Ended June 30, |
| Monte Carlo award inputs: | 2022 | | 2021 | | 2020 |
| Compensation Peer Group:1 | | | | | |
| Volatility | 28.6 | % | | 25.2 | % | | 16.8 | % |
| Risk free interest rate | 0.32 | % | | 0.11 | % | | 1.34 | % |
| Annual dividend based on most recent quarterly dividend | $ | 1.84 | | | $ | 1.72 | | | $ | 1.60 | |
| Dividend yield | 1.1 | % | | 1.0 | % | | 1.1 | % |
| Beginning average percentile rank for TSR | 65 | % | | 37 | % | | 63 | % |
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| S&P 1500 IT Index: | | | | | |
| Volatility | | | 25.2 | % | | 16.8 | % |
| Risk free interest rate | | | 0.11 | % | | 1.34 | % |
| Annual dividend based on most recent quarterly dividend | | | $ | 1.72 | | | $ | 1.60 | |
| Dividend yield | | | 1.0 | % | | 1.1 | % |
| Beginning average percentile rank for TSR | | | 30 | % | | 61 | % |
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1For fiscal 2022, S&P 1500 S&S Index participants were included in the Compensation Peer Group.
At June 30, 2022, there was $19,076 of compensation expense, excluding forfeitures, that has yet to be recognized related to non-vested restricted stock unit awards, which will be recognized over a weighted-average remaining contractual term of 1.12 years.The fair value of restricted units at vest date totaled $12,139, $21,652, and $11,248 for the fiscal years ended June 30, 2022, 2021, and 2020, respectively.
NOTE 11. EARNINGS PER SHAREThe following table reflects the reconciliation between basic and diluted earnings per share.
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| | Year Ended June 30, |
| | 2022 | | 2021 | | 2020 |
| Net Income | $ | 362,916 | | | $ | 311,469 | | | $ | 296,668 | |
| Common share information: | | | | | |
| Weighted average shares outstanding for basic earnings per share | 73,324 | | | 75,546 | | | 76,787 | |
| Dilutive effect of stock options, restricted stock units, and restricted stock | 162 | | | 112 | | | 147 | |
| Weighted average shares outstanding for diluted earnings per share | 73,486 | | | 75,658 | | | 76,934 | |
| Basic earnings per share | $ | 4.95 | | | $ | 4.12 | | | $ | 3.86 | |
| Diluted earnings per share | $ | 4.94 | | | $ | 4.12 | | | $ | 3.86 | |
Per share information is based on the weighted average number of common shares outstanding for each of the fiscal years. Stock options, restricted stock units, and restricted stock have been included in the calculation of earnings per share to the extent they are dilutive. The two-class method for computing EPS has not been applied because no outstanding awards contain non-forfeitable rights to participate in dividends. There were 7 anti-dilutive weighted average shares excluded from the weighted average shares outstanding for diluted earnings per share for fiscal 2022, 11 shares were excluded for fiscal 2021, and 2 shares were excluded for fiscal 2020.
NOTE 12. EMPLOYEE BENEFIT PLANSThe Company established an employee stock purchase plan in 2006. The plan allows the majority of employees the opportunity to directly purchase shares of the Company at 85% of the closing price of the Company's stock on or around the fifteenth day of each month. During the fiscal years ended June 30, 2022, 2021 and 2020, employees 56
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Prepaid maintenance transferred | 12 | SEC-NUM |
Fiscal 2021 Divestitures
HHS Sale
On October 1, 2020, DXC completed the sale of its HHS Business to Veritas Capital. The sale was accomplished by the cash purchase of all equity interests and assets attributable to the HHS Business for a total enterprise value of $5.0 billion (including $85 million related to future services to be provided by the Company). As part of the sale of the HHS business, $272 million of repurchased receivables, previously sold under the Milano Receivables Facility ("Milano Facility") (see Note 6 - "Receivables" to the financial statements), $12 million of prepaid maintenance, and $48 million of software licenses were transferred to the HHS Business. DXC made payment for these assets during the third quarter of fiscal 2021. The repurchase of receivables and payment on prepaid maintenance are reported as operating cash outflows, and the payment for software license is considered an investing cash outflow. The HHS Sale resulted in a pre-tax gain on sale of $2,014 million, net of closing costs. The sale price is subject to adjustment based on changes in actual closing net working capital. Final potential working capital adjustments are pending. Approximately $3.5 billion of the sale proceeds were used to prepay debt.
DXC's post-divestiture relationship with the HHS Business is governed by the Purchase Agreement, which provides for the allocation of assets, employees, liabilities and obligations (including property, employee benefits, litigation, and tax-related assets and liabilities) between DXC and the HHS Business attributable to periods prior to, at and after the divestment. In addition, DXC and the HHS Business have service and commercial contracts that generally extend through fiscal 2023.
The divestment of the HHS Business, reported as part of the GBS segment, did not meet the requirements for presentation as discontinued operations as it did not represent a strategic shift that would have a major effect on DXC's operations and financial results and was included in income from continuing operations prior to its divestment.82
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Equity Method Investment, Increase | 134 | SEC-NUM |
[Table of Contents](#id353055757fb42afb305a023bc295188_7)The Term Loan Credit Agreement contains certain covenants described in [Note 7](#id353055757fb42afb305a023bc295188_76).As described above, the entry into the Term Loan Credit Agreement reduced availability under the Bridge Facility by $1.5 billion, resulting in $9.5 billion in Bridge Facility commitments remaining as of June 30, 2022. The Company completed offerings of USD- and Euro-denominated notes on July 14, 2022 and July 19, 2022, respectively, reducing the availability of remaining Bridge Facility commitments to $552 million. See [Note 18](#id353055757fb42afb305a023bc295188_142) for further information.During the six months ended June 30, 2022, the Company paid $63 million in fees related to the Bridge Facility commitment, $23 million and $37 million of which were amortized to interest expense in the three and six months ended June 30, 2022, respectively, and $26 million of which were recorded as a deferred asset as of June 30, 2022 and will be amortized to interest expense.Korea Engineering Plastics Co. RestructuringOn April 1, 2022, the Company completed the restructuring of Korea Engineering Plastics Co. ("KEPCO"), a joint venture owned 50% by the Company and 50% by Mitsubishi Gas Chemical Company, Inc. KEPCO was first formed in 1987 to manufacture and market polyoxymethylene ("POM") in Asia, with a particular focus on serving domestic demand in South Korea. KEPCO will now focus solely on manufacturing and supplying high quality products to its stockholders, who will independently market them globally. As part of the restructuring of KEPCO, the Company paid KEPCO $5 million and will pay 5 equal annual installments of €24 million on October 1 of each year beginning in 2022. This resulted in an increase to the Company's investment in KEPCO of $134 million. The Company's joint venture partner will be making similar payments to KEPCO. The restructuring did not result in a change in ownership percentage of KEPCO, nor a change in control, and will continue to be accounted for as an equity method investment.4. Inventories
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| | (In $ millions) |
| Finished goods | 1,122 | | | 1,014 | |
| Work-in-process | 85 | | | 75 | |
| Raw materials and supplies | 506 | | | 435 | |
| Total | 1,713 | | | 1,524 | |
5. Goodwill and Intangible Assets, NetGoodwill
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| | EngineeredMaterials | | Acetate Tow | | Acetyl Chain | | Total | |
| | (In $ millions) | |
| As of December 31, 2021 | 1,030 | | | 149 | | | 233 | | | 1,412 | | |
| Acquisitions ([Note 3](#id353055757fb42afb305a023bc295188_46)) | 2 | | | — | | | — | | | 2 | | (1) |
| Exchange rate changes | (46) | | | (2) | | | (18) | | | (66) | | |
| As of June 30, 2022(2) | 986 | | | 147 | | | 215 | | | 1,348 | | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)Represents goodwill related to the acquisition of Santoprene.(2)There were no accumulated impairment losses as of June 30, 2022.11
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Debt instrument, percentage of principal amount redeemed, threshold | 85 | SEC-NUM |
2021 Debt IssuancesIn 2021, Danaher Corporation completed an underwritten public offering of U.S. dollar-denominated senior unsecured notes due 2051. The following summarizes the key terms of the offerings in aggregate ($ in millions):
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| 2051 U.S. Notes | December 10, 2021 | | $ | 1,000 | | | 2.8 | % | | 99.396 | % | | December 10, 2051 | | June 10 and December 10 |
The Company received net proceeds from the notes issued on December 10, 2021, after underwriting discounts and commissions and offering expenses, of approximately $984 million. The proceeds from the issuance have been and will be used for general corporate purposes, including the redemption of the €800 million aggregated principal amount of 2.5% senior unsecured notes due 2025. Covenants and Redemption Provisions Applicable to NotesWith respect to the 2027 and 2032 Yen Notes; the 2024, 2025 (prior to their repayment in the fourth quarter of 2021), 2026, 2027 and 2030 Euronotes; the 2025, 2045, 2050 and 2051 U.S. Notes; the 2022, 2024, 2029, 2039 and 2049 Biopharma Notes; and the 2026, 2028, 2031, 2039 and 2049 Biopharma Euronotes, at any time prior to the applicable maturity date, the Company may redeem the applicable series of notes in whole or in part, by paying the principal amount accrued and unpaid interest and, until the par call date specified in the applicable indenture or comparable governing document, the “make-whole” premium specified therein (and in the case of the Yen Notes, net of certain swap-related gains or losses as applicable). With respect to each of the 2023 and 2028 CHF Bonds, at any time after 85% or more of the applicable bonds have been redeemed or purchased and canceled, the Company may redeem some or all of the remaining bonds for their principal amount plus accrued and unpaid interest. With respect to the 2021 (prior to their repayment in the first quarter of 2021), 2027 and 2032 Yen Notes; Floating Rate 2022, 2024, 2025 (prior to their repayment in the fourth quarter of 2021), 2026, 2027 and 2030 Euronotes; the 2023 and 2028 CHF Bonds; and the 2026, 2028, 2031, 2039 and 2049 Biopharma Euronotes, the Company may redeem such notes and bonds upon the occurrence of specified, adverse changes in tax laws, or interpretations under such laws, at a redemption price equal to the principal amount of the bonds to be redeemed.If a change of control triggering event occurs with respect to any of the 2021 (prior to their repayment in the first quarter of 2021), 2027 and 2032 Yen Notes; the 2022, Floating Rate 2022, 2024, 2025 (prior to their repayment in the fourth quarter of 2021), 2026, 2027 and 2030 Euronotes; the 2025, 2045, 2050 and 2051 U.S. Notes; the 2023 and 2028 CHF Bonds; the 2022, 2024, 2029, 2039 and 2049 Biopharma Notes; or the 2026, 2028, 2031, 2039 and 2049 Biopharma Euronotes, each holder of such notes may require the Company to repurchase some or all of such notes and bonds at a purchase price equal to 101% (100% in the case of the 2027 and 2032 Yen Notes) of the principal amount of the notes and bonds, plus accrued and unpaid interest (and in the case of the Yen Notes, certain swap-related losses as applicable). A change of control triggering event means the occurrence of both a change of control and a rating event, each as defined in the applicable indenture or comparable governing document. Except in connection with a change of control triggering event, the Company does not have any credit rating downgrade triggers that would accelerate the maturity of a material amount of outstanding debt. Each holder of the 2027 and 2032 Yen Notes may also require the Company to repurchase some or all of its notes at a purchase price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest and certain swap-related losses as applicable, in certain circumstances whereby such holder comes into violation of economic sanctions laws as a result of holding such notes.The respective indentures or comparable governing documents under which the above-described notes and bonds were issued contain customary covenants including, for example, limits on the incurrence of secured debt and sale-leaseback transactions. None of these covenants are considered restrictive to the Company’s operations and as of December 31, 2021, the Company was in compliance with all of its debt covenants.LYONsIn 2001, the Company issued $830 million (value at maturity) in LYONs. Pursuant to the terms of the indenture that governs the Company’s LYONs, each $1,000 of principal amount at maturity could be converted into 38.1998 shares of Danaher common stock at any time on or before the maturity date of January 22, 2021.During the year ended December 31, 2021, holders of certain of the Company’s LYONs converted such LYONs into an aggregate of approximately 912 thousand shares of the Company’s common stock, par value $0.01 per share. The Company’s deferred tax liability of $10 million associated with the book and tax basis difference in the converted LYONs was transferred to additional paid-in capital. The residual LYONS not converted into shares of the Company’s stock were redeemed at face value on January 22, 2021. 95
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Changes in fair value of contingent consideration included in Interest and other income/(loss), net | 8,520 | SEC-NUM |
[Table of Contents](exhibit311q32022.htm)As part of the acquisition of Emakina, the Company acquired rights to purchase certain noncontrolling interests in consolidated subsidiaries of Emakina in exchange for future cash payments determined by the future profitability of certain subsidiaries. The Company determines the fair value of these rights by (i) estimating the fair value of the noncontrolling interests in consolidated subsidiaries by applying an EBITDA multiple adjusted for a lack of control and marketability, less (ii) the fair value of expected future payments to settle the related contractual obligations. The Company purchased the majority of the noncontrolling interest in consolidated subsidiaries during the nine months ended September 30, 2022. The Company determines the fair value of the contingent consideration liabilities using Monte Carlo simulations or probability-weighted expected return methods. The fair value of the contingent consideration for the PolSource acquisition attributable to future revenues and earnings was measured utilizing a Monte Carlo simulation, based on future revenue and earnings projections of the business, revenue volatility and asset volatility of comparable companies, and a discount rate. The discount rate used to determine the fair value of this contingent consideration was 0.4% as of the acquisition date. The fair value of the contingent consideration for the PolSource acquisition attributable to future operating metrics was measured using a probability-weighted expected return method, based on the expected future payments using the earnout formula and performance targets specified in the purchase agreement and adjusting those estimates to reflect the probability of their achievement. The weighted-average estimated future payments were then discounted to present value using a rate based on EPAM’s cost of debt. The discount rate used to determine the fair value of this contingent consideration was 0.4% as of the acquisition date.The fair value of the contingent consideration for all other acquisitions was determined using a probability-weighted expected return method and is based on the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. Although there is significant judgment involved, the Company believes its estimates and assumptions are reasonable. In determining fair value, the Company considered a variety of factors, including future performance of the acquired businesses using financial projections developed by the Company and market risk assumptions that were derived for revenue growth and earnings before interest and taxes. The Company estimated future payments using the earnout formula and performance targets specified in the purchase agreements and adjusted those estimates to reflect the probability of their achievement. Those weighted-average estimated future payments were then discounted to present value using a rate based on the weighted-average cost of capital of guideline companies. The discount rate used to determine the fair value of contingent consideration for the 2022 Acquisitions ranged from a minimum of 13.0% to a maximum of 15.0%. The discount rate used to determine the fair value of contingent consideration for the CORE acquisition was 13.0%. The discount rates used to determine the fair value of contingent consideration for the Other 2021 Acquisitions ranged from a minimum of 15.0% to a maximum of 22.0%. Changes in financial projections, market risk assumptions, discount rates or probability assumptions related to achieving the various earnout criteria would result in a change in the fair value of the recorded contingent liabilities. Such changes, if any, are recorded within Interest and other income/(loss), net in the Company’s condensed consolidated statement of income.A reconciliation of the beginning and ending balances of Level 3 acquisition-related contingent consideration using significant unobservable inputs for the nine months ended September 30, 2022 is as follows:
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| | | Amount |
| Contingent consideration liabilities as of January 1, 2022 | | $ | 23,114 | |
| Acquisition date fair value of contractual contingent liabilities - 2022 Acquisitions | | 2,645 | |
| Changes in fair value of contingent consideration included in Interest and other income/(loss), net | | 8,520 | |
| Payment of contingent consideration for previously acquired businesses | | (11,328) | |
| Effect of net foreign currency exchange rate changes | | (2,099) | |
| Contingent consideration liabilities as of September 30, 2022 | | $ | 20,852 | |
See Note 2, “Impact of the Invasion of Ukraine” for discussion of the nonrecurring level 3 fair value assessment used in the impairment tests of long-lived assets in Russia.
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Additional increase to the Credit Agreement | 1.0 | SEC-NUM |
[Table of Conten](#i207805ce14724a60909000a6c8cb9e11_7)[t](#i207805ce14724a60909000a6c8cb9e11_7)[s](#i207805ce14724a60909000a6c8cb9e11_7)The Convertible Notes matured on February 15, 2022, as described in the Subsequent Event section below.Revolving Credit FacilityOn June 16, 2016, we entered into a five-year $1.5 billion Revolving Credit Facility that expired on June 16, 2021. On November 30, 2018, we entered into an amended and restated agreement (the “Credit Agreement”) extending the availability period of the Revolving Credit Facility to November 30, 2023 and increased the facility to $2.0 billion. The Revolving Credit Facility is subject to a one year extension option at our request and with the consent of the lenders. The Credit Agreement also contains an option permitting us to request an increase in the amounts available under the Credit Agreement of up to an aggregate additional $1.0 billion. On April 24, 2020, we amended the $2.0 billion Revolving Credit Facility as described above. The Credit Agreement contains customary representations, warranties, conditions precedent, events of default, indemnities, and affirmative and negative covenants. As of December 31, 2021 and December 31, 2020, we were in compliance with all covenants under the Credit Agreement and had no borrowings outstanding under the Revolving Credit Facility.Commercial Paper ProgramsWe periodically issue commercial paper under our U.S. dollar and Euro-denominated commercial paper programs (“Commercial Paper Programs”). Under these programs, we may issue unsecured promissory notes with maturities not exceeding 397 and 183 days, respectively. During 2020 we paid down and refinanced our outstanding commercial paper with the Term Loan that was initially due March 2021 and was retired in the Debt-for-Equity Exchange. In August 2021, we resumed borrowing under our Commercial Paper Program. Credit support for the Commercial Paper Programs is provided by a five-year $2.0 billion senior unsecured revolving credit facility that expires on November 30, 2023 (the “Revolving Credit Facility”). As of December 31, 2021, no borrowings were outstanding under the Revolving Credit Facility. The details of our Commercial Paper Programs as of December 31, 2021 were as follows ($ in millions):
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| | Carrying value | | Annual effective rate | | Weighted average remaining maturity (in days) |
| U.S. dollar-denominated commercial paper | $ | 364.9 | | | 0.32 | % | | 30.3 |
The availability of the Revolving Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor in maintaining the Commercial Paper Programs’ credit ratings. We expect to limit any future borrowings under the Revolving Credit Facility to amounts that would leave sufficient credit available under the facility to allow us to borrow, if needed, to repay any outstanding commercial paper as it matures.Our ability to access the commercial paper market, and the related costs of these borrowings, is affected by the strength of our credit rating and market conditions. Any downgrade in our credit rating would increase the cost of borrowing under our commercial paper programs and the Credit Agreement, and could limit or preclude our ability to issue commercial paper. If our access to the commercial paper market is adversely affected due to a downgrade, change in market conditions, or otherwise, we would expect to rely on a combination of available cash, operating cash flow, and the Revolving Credit Facility to provide short-term funding. In such event, the cost of borrowings under the Revolving Credit Facility could be higher than the historic cost of commercial paper borrowings.We classified our borrowings outstanding under the Commercial Paper Programs as of December 31, 2021 as long-term debt in the accompanying Consolidated Balance Sheets as we have the intent and ability, as supported by availability under the Revolving Credit Facility referenced above, to refinance these borrowings for at least one year from the balance sheet date.Proceeds from borrowings under the commercial paper programs are typically available for general corporate purposes, including acquisitions. Registered NotesAs of December 31, 2021, we had outstanding the following senior notes, collectively the “Registered Notes”:•$900 million aggregate principal amount of senior notes due June 15, 2026 issued at 99.644% of their principal amount and bearing interest at the rate of 3.15% per year.•$350 million and $200 million aggregate principal amounts of senior notes due June 15, 2046 issued at 99.783% and 101.564%, respectively, of their principal amounts and bearing interest at the rate of 4.30% per year.78
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Attorneys’ fees and expenses | 6.5 | SEC-NUM |
[Table](#i433d81903e814837b268e57261b357cb_7) [of Contents](#i433d81903e814837b268e57261b357cb_7)up to the next whole number if the number of directors on the Board were not an even multiple of five) and had certain rights regarding committee participation, so long as Liberty Expedia Holdings satisfied certain stock ownership requirements. The Former Governance Agreement was terminated on July 26, 2019 upon the closing of the Liberty Expedia Transaction, at which time, pursuant to the Merger Agreement, each of the three directors serving on the Expedia Group Board of Directors who were nominated by Liberty Expedia Holdings resigned from the Board. New Governance AgreementSimultaneously with the entry into the Merger Agreement, the Company and Mr. Diller entered into a Second Amended and Restated Governance Agreement (the “Governance Agreement,” the rights contemplated by which and by the Exchange Agreement were agreed by Mr. Diller to be deemed to be in recognition and in lieu of Mr. Diller’s existing rights under the Former Governance Agreement and the Stockholders Agreement), which provided, among other things, that Mr. Diller could exercise a right (the “Purchase/Exchange Right”) during the nine month period following the closing of the Combination, to acquire up to 7,276,547 shares of Expedia Group Class B common stock by (1) exchange with the Company (or its wholly owned subsidiary) for an equivalent number of shares of Expedia Group common stock, or (2) purchase from the Company (or its wholly owned subsidiary) at a price per share equal to the average closing price of Expedia Group common stock for the five trading days immediately preceding notice of exercise (any shares acquired pursuant to the Purchase/Exchange Right, the “Additional Shares”). The Purchase/Exchange Right could be exercised from time to time in whole or in part. On April 10, 2020, the Company and Mr. Diller entered into Amendment No. 1 (the “Governance Agreement Amendment”) to the New Governance Agreement. The Governance Agreement Amendment was entered into pursuant to the stipulation and order entered by the Delaware Court of Chancery on March 30, 2020 (the “Order”), and was approved by the Special Litigation Committee of the Board of Directors of the Company formed to, among other things, investigate and evaluate the claims raised against certain current and former members of the Board of Directors and officers of the Company in the consolidated action captioned In re Expedia Group Stockholders Litigation, Consolidated Case No. 2019-0494-JTL (the “Delaware Litigation”). Pursuant to the Order, Mr. Diller was not permitted to exercise the Purchase/Exchange Right prior to the Special Litigation Committee notifying Mr. Diller that it had completed its investigation of the claims raised in the Delaware Litigation (the “Completion Date”). The Governance Agreement Amendment extended the deadline by which Mr. Diller may have exercised the Purchase/Exchange Right to December 7, 2020 (the close of business on the forty-fifth day following the Completion Date). The Purchase/Exchange Right expired unexercised on December 7, 2020. Subject to limited exception, no current or future holder of Original Shares may (and no holder of Additional Shares would have been permitted to) participate in, or vote in favor of, or tender shares into, any change of control transaction involving at least 50% of the outstanding shares or voting power of capital stock of the Company, unless such transaction provides for the same per share consideration and mix of consideration (or election right) and the same participation rights for shares of Class B common stock and shares of Expedia Group common stock. These requirements negotiated by the Expedia Group Special Committee and agreed to by Mr. Diller under the Governance Agreement did not exist under the Former Governance Agreement.At the 2019 Annual Meeting of the Company’s stockholders, the Company's stockholders approved a proposal to amend the Company's certificate of incorporation to reflect the aforementioned transfer restrictions, automatic conversion provisions and change-of-control restrictions reflected in the Governance Agreement. The amendment was filed with the Secretary of State of Delaware on December 3, 2019, and became effective at 11:59 p.m., Eastern Time, on December 3, 2019.On November 2, 2021, the parties to the Delaware Litigation and the Special Litigation Committee entered into a Stipulation of Compromise and Settlement (the “Settlement Agreement”) which sets forth the terms and conditions for the proposed settlement and dismissal with prejudice of the Delaware Litigation, subject to review and approval by the court. On January 19, 2022, the court entered its Order and Final Judgment (the “Settlement Order”) approving the proposed settlement set forth in the Settlement Agreement, dismissing the litigation with prejudice and extinguishing and releasing the claims that were or would have been asserted in the litigation against the defendants and related persons. The court also awarded plaintiff’s attorneys’ fees and expenses in the sum of $6.5 million. Pursuant to the Settlement Agreement, Mr. Diller, the other defendants, the Special Litigation Committee of the board of directors, and the Company agreed to the following governance and related provisions, among others:•Board and Executive Management Composition. Prior to Mr. Diller’s departure from all roles at the Company (“Mr. Diller’s Departure”), no more than two of Mr. Diller’s immediate family members (including Mr. Diller) will serve on the Company’s board of directors at any time. Following Mr. Diller’s Departure (a) no immediate family member of Mr. Diller will serve in an executive position at the Company or as chair of the Company’s board of directors and (b) no more than one Diller family member will serve on the board of directors at any time. The Company agreed that, following Mr. Diller’s Departure, in the event that no family member of Mr. Diller is serving on the Company’s board, the Company will nominate one Diller family member or family-designated representative to serve on the board of directors (subject to the support of two-thirds of the independent directors if the new nominee is a Diller family member), so long as Mr. Diller, his family members and certain related parties (collectively with Mr. Diller and his F- 42
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Total unpaid principal balance of loan modifications | 369 | SEC-NUM |
Credit Quality InformationNonperforming loans were $9 million and $21 million as of December 31, 2021 and 2020, respectively. All other loans were considered to be performing.Commercial LoansCommercial Mortgage LoansThe Company reviews the credit worthiness of the borrower and the performance of the underlying properties in order to determine the risk of loss on commercial mortgage loans. Loan-to-value ratio is the primary credit quality indicator included in this review. Based on this review, the commercial mortgage loans are assigned an internal risk rating, which management updates when credit risk changes. Commercial mortgage loans which management has assigned its highest risk rating were less than 1% of total commercial mortgage loans as of both December 31, 2021 and 2020. Loans with the highest risk rating represent distressed loans which the Company has identified as impaired or expects to become delinquent or enter into foreclosure within the next six months. Total commercial mortgage loan modifications through December 31, 2020 due to the COVID-19 pandemic consisted of 93 loans with a total unpaid balance of $369 million. Modifications primarily consisted of short-term forbearance and interest only payments. There were no additional modifications during the year ended December 31, 2021. As of December 31, 2021, there were no loans remaining that were modified due to COVID-19. All loans returned to their normal payment schedules. Total commercial mortgage loans past due were nil as of December 31, 2021 and 2020, respectively.The tables below present the amortized cost basis of commercial mortgage loans by the year of origination and loan-to-value ratio:
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| | | December 31, 2021 |
| Loan-to-Value Ratio | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total |
| | (in millions) |
| > 100% | | $ | — | | | $ | — | | | $ | 20 | | | $ | 10 | | | $ | — | | | $ | 29 | | | $ | 59 | |
| 80% - 100% | | 9 | | | 2 | | | 9 | | | 2 | | | — | | | 29 | | | 51 | |
| 60% - 80% | | 142 | | | 80 | | | 60 | | | 23 | | | 61 | | | 138 | | | 504 | |
| 40% - 60% | | 42 | | | 33 | | | 86 | | | 74 | | | 57 | | | 401 | | | 693 | |
| < 40% | | 11 | | | 8 | | | 48 | | | 6 | | | 58 | | | 478 | | | 609 | |
| Total | | $ | 204 | | | $ | 123 | | | $ | 223 | | | $ | 115 | | | $ | 176 | | | $ | 1,075 | | | $ | 1,916 | |
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| | | December 31, 2020 |
| Loan-to-Value Ratio | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total |
| | (in millions) |
| > 100% | | $ | — | | | $ | — | | | $ | 2 | | | $ | — | | | $ | — | | | $ | 10 | | | $ | 12 | |
| 80% - 100% | | 15 | | | 16 | | | 12 | | | 3 | | | 7 | | | 15 | | | 68 | |
| 60% - 80% | | 89 | | | 166 | | | 27 | | | 32 | | | 46 | | | 144 | | | 504 | |
| 40% - 60% | | 23 | | | 57 | | | 74 | | | 155 | | | 113 | | | 551 | | | 973 | |
| < 40% | | 7 | | | 23 | | | 80 | | | 99 | | | 64 | | | 895 | | | 1,168 | |
| Total | | $ | 134 | | | $ | 262 | | | $ | 195 | | | $ | 289 | | | $ | 230 | | | $ | 1,615 | | | $ | 2,725 | |
Loan-to-value ratio is based on income and expense data provided by borrowers at least annually and long-term capitalization rate assumptions based on property type. 102
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2024 | 125 | SEC-NUM |
AGILENT TECHNOLOGIES, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
The component parts of other intangible assets as of July 31, 2022 and October 31, 2021 are shown in the table below:
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| | Other Intangible Assets |
| | GrossCarryingAmount | | AccumulatedAmortization | | Net BookValue |
| | (in millions) |
| As of October 31, 2021 | | | | | |
| Purchased technology | $ | 1,742 | | | $ | 972 | | | $ | 770 | |
| Trademark/Tradename | 196 | | | 133 | | | 63 | |
| Customer relationships | 357 | | | 228 | | | 129 | |
| Backlog | 8 | | | 3 | | | 5 | |
| Third-party technology and licenses | 11 | | | 8 | | | 3 | |
| Total amortizable intangible assets | 2,314 | | | 1,344 | | | 970 | |
| In-Process R&D | 11 | | | — | | | 11 | |
| Total | $ | 2,325 | | | $ | 1,344 | | | $ | 981 | |
| As of July 31, 2022 | | | | | |
| Purchased technology | $ | 1,735 | | | $ | 1,047 | | | $ | 688 | |
| Trademark/Tradename | 196 | | | 144 | | | 52 | |
| Customer relationships | 353 | | | 278 | | | 75 | |
| Backlog | 8 | | | 7 | | | 1 | |
| Third-party technology and licenses | 32 | | | 9 | | | 23 | |
| Total amortizable intangible assets | 2,324 | | | 1,485 | | | 839 | |
| In-Process R&D | 10 | | | — | | | 10 | |
| Total | $ | 2,334 | | | $ | 1,485 | | | $ | 849 | |
During the nine months ended July 31, 2022, there were no additions to goodwill. During the nine months ended July 31, 2022, we recorded $21 million of other intangible assets related to the acquisition of advanced artificial intelligence technology. During the nine months ended July 31, 2022, other intangible assets in total decreased $3 million due to the impact of foreign currency translation.
In general, for U.S. federal tax purposes, goodwill from asset purchases is deductible; however, any goodwill created as part of a stock acquisition is not deductible.
Each quarter we review the events and circumstances to determine if impairment of indefinite-lived intangible assets and goodwill is indicated. During the three and nine months ended July 31, 2022 and 2021 we did not identify any triggering events or circumstances which would indicate an impairment of goodwill or indefinite-lived intangible assets.
Amortization expense of intangible assets was $48 million and $150 million for the three and nine months ended July 31, 2022, respectively. Amortization expense of intangible assets was $54 million and $144 million for the three and nine months ended July 31, 2021, respectively.
Future amortization expense related to existing finite-lived purchased intangible assets for the remainder of fiscal year 2022 and for each of the next five fiscal years and thereafter is estimated below:
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| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Estimated future amortization expense: | |
| (in millions) | |
| Remainder of 2022 | $ | 41 | |
| 2023 | $ | 143 | |
| 2024 | $ | 125 | |
| 2025 | $ | 100 | |
| 2026 | $ | 71 | |
| 2027 | $ | 69 | |
| Thereafter | $ | 290 | |
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Stock Option Granted Contractual Term | 10 | SEC-NUM |
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| (Dollars in millions) | Foreign Currency Translation Adjustment | | Pension Liability Adjustments | | Derivatives and Hedges | | Marketable Securities | | Other | | Total |
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| Balance at June 30, 2019 | $ | (304) | | | $ | (49) | | | $ | — | | | $ | — | | | $ | (1) | | | $ | (354) | |
| Other comprehensive loss before reclassifications | (31) | | | — | | | (3) | | | — | | | — | | | (34) | |
| Amounts reclassified from other comprehensive loss | — | | | 2 | | | — | | | — | | | — | | | 2 | |
| Balance at June 30, 2020 | (335) | | | (47) | | | (3) | | | — | | | (1) | | | (386) | |
| Other comprehensive loss before reclassifications | 67 | | | — | | | 3 | | | (1) | | | — | | | 69 | |
| | | | | | | | | | | | |
| Balance at June 30, 2021 | (268) | | | (47) | | | — | | | (1) | | | (1) | | | (317) | |
| Other comprehensive income (loss) before reclassifications | (110) | | | 8 | | | 27 | | | (3) | | | — | | | (78) | |
| Amounts reclassified from other comprehensive loss | — | | | 1 | | | — | | | — | | | — | | | 1 | |
| Balance at June 30, 2022 | $ | (378) | | | $ | (38) | | | $ | 27 | | | $ | (4) | | | $ | (1) | | | $ | (394) | |
14. STOCK-BASED COMPENSATION The Company’s stock-based compensation is comprised of stock options, restricted stock units, performance-based restricted stock units, and restricted stock.2014 and 2018 Omnibus Incentive PlansIn 2014, the Company’s board of directors adopted, and the holder of a majority of the shares approved, the 2014 Omnibus Incentive Plan (the “2014 Plan”). The 2014 Plan provided certain members of management, employees, and directors of the Company and its subsidiaries with the opportunity to obtain various incentives, including grants of stock options, restricted stock units (defined below), and restricted stock. In October 2018, the Company’s shareholders approved the 2018 Omnibus Incentive Plan (the “2018 Plan”), and, as a result, new awards may no longer be issued under the 2014 Plan, although it remains in effect as to any previously granted award. The 2018 Plan is substantially similar to the 2014 Plan, except that (a) a total of 15,600,000 shares of Common Stock (subject to adjustment) may be issued under the 2018 Plan, (b) each share of Common Stock issuable under the 2018 Plan pursuant to a restricted stock or restricted stock unit award will reduce the number of reserved shares by 2.25 shares, and (c) the 2018 Plan imposes a limit on the aggregate value of awards that may be made in a single year to a non-employee director. Both the 2014 Plan and the 2018 Plan permit “net settlement” of vested awards, pursuant to which the award holder forfeits a portion of the vested award to satisfy the purchase price (in the case of options), the holder’s withholding tax obligation, if any (in all cases), or both. Where the holder net-settles the tax obligation, the Company pays the amount of the withholding tax to the U.S. government in cash, which is accounted for as an adjustment to Additional Paid in Capital.Stock Compensation Expense Stock compensation expense recognized in the consolidated statements of operations was $54 million, $51 million, and $48 million in fiscal 2022, 2021, and 2020, respectively. Stock compensation expense is classified in selling, general, and administrative expenses as well as cost of sales. The Company has elected to account for forfeitures as they occur. Stock OptionsStock options granted under the 2014 Plan or 2018 Plan, as applicable, during fiscal 2022, 2021, and 2020 represent approximately 183,000, 231,000, and 329,000 shares of Common Stock, respectively. Each stock option granted under the 2014 Plan or 2018 Plan vests in equal annual installments over a four-year period from the date of grant, contingent upon the participant’s continued employment with the Company, except for a small number of grants that vest based on the achievement of operating performance targets set forth in the award documents.Methodology and Assumptions All outstanding stock options have an exercise price per share equal to the fair market value of one share of Common Stock on the date of grant. All outstanding stock options have a contractual term of 10 years, subject to forfeiture under certain 107
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Payment to affinity partner | 100 | SEC-NUM |
The following table presents the components of lease expense:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Years Ended December 31, |
| Lease cost | | Income Statement Classification | | 2021 | | 2020 | | 2019 |
| | | | | (in millions) |
| Operating lease cost | | General and administrative expense | | $ | 57 | | | $ | 57 | | | $ | 58 | |
| Finance lease costs: | | | | | | | | |
| Amortization of ROU assets | | General and administrative expense | | 13 | | | 10 | | | 8 | |
| Interest on lease liabilities | | Interest and debt expense | | 2 | | | 2 | | | 2 | |
| Total lease cost | | | | $ | 72 | | | $ | 69 | | | $ | 68 | |
The following table presents the weighted-average lease term and weighted-average discount rate related to operating and finance leases:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2021 | | December 31, 2020 |
| Lease term and discount rate | | Finance Leases | | Operating Leases | | Finance Leases | | Operating Leases |
| Weighted-average remaining lease term (years) | | 3.8 | | 7.2 | | 4.8 | | 5.8 |
| Weighted-average discount rate | | 3.4 | % | | 2.1 | % | | 3.4 | % | | 2.6 | % |
The following table presents supplemental cash flow information related to operating and finance leases:
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| Supplemental cash flow information | | 2021 | | 2020 | | 2019 |
| | | (in millions) |
| Operating cash flows: | | | | | | |
| Cash paid for amounts included in measurement of operating lease liabilities | | $ | 50 | | | $ | 65 | | | $ | 62 | |
| Cash paid for amounts included in measurement of finance lease liabilities | | 2 | | | 2 | | | 2 | |
| Financing cash flows: | | | | | | |
| Cash paid for amounts included in measurement of finance lease liabilities | | $ | 9 | | | $ | 12 | | | $ | 13 | |
The following table presents the maturities of lease liabilities:
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| Maturity of Lease Liabilities | | December 31, 2021 |
| Finance Leases | | Operating Leases |
| | | (in millions) |
| 2022 | | $ | 11 | | | $ | 68 | |
| 2023 | | 11 | | | 61 | |
| 2024 | | 11 | | | 51 | |
| 2025 | | 10 | | | 45 | |
| 2026 | | — | | | 38 | |
| Thereafter | | — | | | 104 | |
| Total lease payments | | 43 | | | 367 | |
| Less: Interest | | 3 | | | 26 | |
| Present value of lease liabilities | | $ | 40 | | | $ | 341 | |
19. Disposal of Business On October 1, 2019, the Company completed the sale of AAH to American Family Insurance Mutual Holding Company (American Family Insurance). The Company received gross proceeds of $1.1 billion in cash at closing. After a payment to an affinity partner, the net proceeds were $1.0 billion. The Company recognized a gain on disposal of $213 million in the fourth quarter of 2019, which is net of the $100 million payment to an affinity partner. 20. Share-Based Compensation The Company’s share-based compensation plans consist of the Amended and Restated Ameriprise Financial 2005 Incentive Compensation Plan (the “2005 ICP”), the Ameriprise Financial 2008 Employment Incentive Equity Award Plan (the “2008 Plan”), the Ameriprise Financial Franchise Advisor Deferred Compensation Plan (“Franchise Advisor Deferral Plan”) and the Ameriprise Advisor Group Deferred Compensation Plan (“Advisor Group Deferral Plan”). 131
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Due within one year | 20 | SEC-NUM |
[Table of Contents](#ie1b09d57e49a40aaa81f572e6311eac9_10)DTE Energy Company — DTE Electric CompanyCombined Notes to Consolidated Financial Statements (Unaudited) — (Continued)The costs of securities sold are determined on the basis of specific identification. The following table sets forth DTE Electric's gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds:
| | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2022 | | 2021 |
| | | | | | (In millions) |
| Realized gains | | | | | $ | 14 | | | $ | 24 | |
| Realized losses | | | | | $ | (5) | | | $ | (2) | |
| Proceeds from sale of securities | | | | | $ | 207 | | | $ | 271 | |
Realized gains and losses from the sale of securities and unrealized gains and losses incurred by the Fermi 2 trust are recorded to Regulatory assets and the Nuclear decommissioning liability. Realized gains and losses from the sale of securities and unrealized gains and losses on the low-level radioactive waste funds are recorded to the Nuclear decommissioning liability.The following table sets forth DTE Electric's fair value and unrealized gains and losses for the nuclear decommissioning trust funds:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| | FairValue | | UnrealizedGains | | UnrealizedLosses | | FairValue | | UnrealizedGains | | UnrealizedLosses |
| | (In millions) |
| Equity securities | $ | 1,033 | | | $ | 488 | | | $ | (13) | | | $ | 1,107 | | | $ | 546 | | | $ | (9) | |
| Fixed income securities | 609 | | | 11 | | | (30) | | | 644 | | | 23 | | | (6) | |
| Private equity and other | 236 | | | 70 | | | (2) | | | 205 | | | 58 | | | (8) | |
| Hedge funds and similar investments | 95 | | | 1 | | | (4) | | | 76 | | | 1 | | | (2) | |
| Cash equivalents | 37 | | | — | | | — | | | 39 | | | — | | | — | |
| | $ | 2,010 | | | $ | 570 | | | $ | (49) | | | $ | 2,071 | | | $ | 628 | | | $ | (25) | |
The following table summarizes the fair value of the fixed income securities held in nuclear decommissioning trust funds by contractual maturity:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | March 31, 2022 |
| | (In millions) |
| Due within one year | $ | 20 | |
| Due after one through five years | 127 | |
| Due after five through ten years | 98 | |
| Due after ten years | 265 | |
| | $ | 510 | |
Fixed income securities held in nuclear decommissioning trust funds include $99 million of non-publicly traded commingled funds that do not have a contractual maturity date.36
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Return on equity percent | 9.9 | SEC-NUM |
[Table of Contents](#ie1b09d57e49a40aaa81f572e6311eac9_10)DTE Energy Company — DTE Electric CompanyCombined Notes to Consolidated Financial Statements (Unaudited) — (Continued)Such contracts consist of varying types of performance obligations across the segments, including the supply and delivery of energy related products and services. Contracts with variable volumes and/or variable pricing, including those with pricing provisions tied to a consumer price or other index, have also been excluded as the related consideration under the contract is variable at inception of the contract. Contract lengths vary from cancellable to multi-year.The Registrants expect to recognize revenue for the following amounts related to fixed consideration associated with remaining performance obligations in each of the future periods noted:
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | DTE Energy | | DTE Electric |
| | (In millions) |
| 2022 | $ | 218 | | | $ | 6 | |
| 2023 | 296 | | | 7 | |
| 2024 | 183 | | | 7 | |
| 2025 | 106 | | | 1 | |
| 2026 | 63 | | | — | |
| 2027 and thereafter | 365 | | | — | |
| | $ | 1,231 | | | $ | 21 | |
NOTE 6 — REGULATORY MATTERS2021 Securitization FilingOn June 23, 2021, the MPSC issued a financing order authorizing DTE Electric to issue Securitization bonds for qualified costs of up to $236 million, including $73 million for the net book value of the River Rouge generation plant, $157 million for tree trimming surge program costs, and $6 million for other qualified costs. The financing order further authorized customer charges for the timely recovery of the debt service costs on the Securitization bonds and other ongoing qualified costs.On March 17, 2022, DTE Electric closed on the issuance of Securitization bonds of $236 million. Refer to Note 10 to the Consolidated Financial Statements, “Long-Term Debt,” for additional information regarding the terms of the bonds and use of proceeds. Upon closing the transaction, DTE Electric recognized Securitized regulatory assets of $230 million, which were reclassified from existing Regulatory assets for the net book value of the River Rouge plant and tree trimming surge program. Debt service costs relating to tree trimming will be recovered over a period not to exceed 5 years, while amounts relating to River Rouge will be recovered over a period not to exceed 14 years.2022 Electric Rate Case FilingDTE Electric filed a rate case with the MPSC on January 21, 2022 requesting an increase in base rates of $388 million based on a projected twelve-month period ending October 31, 2023. The requested increase in base rates is primarily due to an increase in net plant resulting from generation and distribution investments, as well as related increases to depreciation and property tax expenses. The rate filing also requested an increase in return on equity from 9.9% to 10.25% and includes projected changes in sales. A final MPSC order in this case is expected in November 2022.
28
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Cash payments associated with transaction | 185 | SEC-NUM |
Investments in private equity, real estate and collective funds held within our pension plans. Most investments are generally valued using the net asset value (NAV) per share as a practical expedient for fair value provided certain criteria are met. The NAVs are determined based on the fair values of the underlying investments in the funds. Investments that are measured at fair value using the NAV practical expedient are not required to be classified in the fair value hierarchy. Investments classified within Level 3 primarily relate to real estate and private equities which are valued using unobservable inputs, primarily by discounting expected future cash flows, using comparative market multiples, third-party pricing sources, or a combination of these approaches as appropriate. See Note 12 for further information.
NONRECURRING FAIR VALUE MEASUREMENTS. Certain assets are measured at fair value on a nonrecurring basis. These assets may include loans and long-lived assets reduced to fair value upon classification as held for sale, impaired loans based on the fair value of the underlying collateral, impaired equity securities without readily determinable fair value, equity method investments and long-lived assets, and remeasured retained investments in formerly consolidated subsidiaries upon a change in control that results in the deconsolidation of that subsidiary and retention of a noncontrolling stake in the entity. Assets written down to fair value when impaired and retained investments are not subsequently adjusted to fair value unless further impairment occurs.
Equity investments without readily determinable fair value and Associated companies. Equity investments without readily determinable fair value and associated companies are valued using market observable data such as transaction prices when available. When market observable data is unavailable, investments are valued using either a discounted cash flow model, comparative market multiples, third-party pricing sources or a combination of these approaches as appropriate. These investments are generally included in Level 3.
Long-lived Assets. Fair values of long-lived assets are primarily derived internally and are based on observed sales transactions for similar assets. In other instances for which we do not have comparable observed sales transaction data, collateral values are developed internally and corroborated by external appraisal information. Adjustments to third-party valuations may be performed in circumstances where market comparables are not specific to the attributes of the specific collateral or appraisal information may not be reflective of current market conditions due to the passage of time and the occurrence of market events since receipt of the information.
ACCOUNTING CHANGES. On January 1, 2021, we adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU removes certain exceptions from the guidance in ASC 740 related to intra-period tax allocations, interim calculations and the recognition of deferred tax liabilities for outside basis differences and clarifies and simplifies several other aspects of accounting for income taxes. Different transition methods apply to the various income tax simplifications. For the changes requiring a retrospective or modified retrospective transition, the adoption of the new standard did not have a material impact to our financial statements.
On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 requires us to prospectively record an allowance for credit losses for the current expected credit losses inherent in the asset over its expected life, replacing the incurred loss model that recognized losses only when they became probable and estimable. We recorded a $221 million increase in our allowance for credit losses and a $175 million decrease to retained earnings, net of tax, reflecting the cumulative effect on retained earnings.
NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS. On December 1, 2021, we completed the sale of GE's share of our boiler manufacturing business in China in our Power segment. In connection with the transaction, we recorded a loss on the disposal of this business of $170 million in Other income in our Statement of Earnings (Loss). See Note 18 for further information.
On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment for total consideration of $21,112 million (after certain working capital adjustments) and incurred $185 million of cash payments directly associated with the transaction. As a result, in 2020, we recognized a pre-tax gain of $12,362 million ($11,213 million after-tax) in our Statement of Earnings (Loss).
DISCONTINUED OPERATIONS primarily comprise our GE Capital Aviation Services (GECAS) business, discontinued in 2021, our mortgage portfolio in Poland, and other trailing assets and liabilities associated with prior dispositions. Results of operations, financial position and cash flows for these businesses are reported as discontinued operations for all periods presented and the notes to the financial statements have been adjusted on a retrospective basis.
GECAS. On November 1, 2021 we completed the combination of our GECAS business with AerCap for total consideration consisting of $22,583 million subject to future closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interest) valued at approximately $6,583 million based on AerCap’s closing share price of $59.04 on October 29, 2021, and a $1,000 million AerCap senior note with an interest rate of 1.899% and a maturity date of November 1, 2025. In connection with the closing of the transaction, the Company recorded a non-cash pre-tax loss of $3,312 million ($3,882 million after-tax) in discontinued operations. Additionally, we have elected to prospectively measure our investment in AerCap at fair value and expect to fully monetize our stake over time.
We have continuing involvement with AerCap, primarily through our ownership interest, ongoing sales or leases of products and services, and transition services that we provide to AerCap. For the year ended December 31, 2021, we had direct and indirect sales of $29 million and purchases of $22 million with AerCap, primarily related to engine sales through airframers and engine leases, respectively. 2021 FORM 10-K 56
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Tax benefit on settlement of U.S. defined benefit plan | 24.9 | SEC-NUM |
[Table of Contents](#i3d0ebbc4e2a2420f98ed7e6fe698936a_7) HASBRO, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
(4) Other Comprehensive Earnings (Loss)Components of other comprehensive earnings (loss) are presented within the consolidated statements of comprehensive earnings (loss). The following table presents the related tax effects on changes in other comprehensive earnings (loss) for each of the three fiscal years ended December 26, 2021.
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| (In millions) | 2021 | | 2020 | | 2019 |
| Other comprehensive earnings (loss), tax effect: | | | | | |
| Tax (expense) on unrealized holding (losses) gains | $ | — | | | $ | (0.2) | | | (0.2) | |
| Tax (expense) benefit on cash flow hedging activities | (1.0) | | | (3.4) | | | 0.2 | |
| Tax benefit on foreign currency translation amounts | (7.2) | | | 2.1 | | | — | |
| Tax (expense) benefit on changes in unrecognized pension amounts | (1.5) | | | 2.6 | | | (3.5) | |
| Reclassifications to earnings, tax effect: | | | | | |
| Tax (benefit) expense on cash flow hedging activities | (0.5) | | | 4.3 | | | 2.3 | |
| Tax benefit on amortization of unrecognized pension and postretirement amounts reclassified to the consolidated statements of operations | (0.6) | | | (0.8) | | | (2.0) | |
| Tax benefit on settlement of U.S. defined benefit plan | — | | | — | | | (24.9) | |
| Total tax effect on other comprehensive earnings (loss) | $ | (10.8) | | | 4.6 | | | (28.1) | |
Changes in the components of accumulated other comprehensive earnings (loss), net of tax for each of the three fiscal years ended December 26, 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Pension andPostretirementAmounts | | Gains(Losses) onDerivativeInstruments | | UnrealizedHoldingGains (Losses) onAvailablefor-SaleSecurities | | ForeignCurrencyTranslationAdjustments | | TotalAccumulatedOtherComprehensiveEarnings (Loss) |
| 2021 | | | | | | | | | |
| Balance at December 27, 2020 | $ | (40.7) | | | (22.1) | | | 0.3 | | | (132.5) | | | (195.0) | |
| Current period other comprehensive earnings (loss) | 3.4 | | | 13.5 | | | (0.1) | | | (61.9) | | | (45.1) | |
| Reclassifications from AOCE to earnings | 2.2 | | | 2.6 | | | — | | | — | | | 4.8 | |
| Balance at December 26, 2021 | $ | (35.1) | | | (6.0) | | | 0.2 | | | (194.4) | | | (235.3) | |
| 2020 | | | | | | | | | |
| Balance at December 29, 2019 | $ | (36.1) | | | (5.2) | | | (0.3) | | | (142.6) | | | (184.2) | |
| | | | | | | | | | |
| Current period other comprehensive earnings (loss) | (6.6) | | | 2.4 | | | 0.5 | | | 10.1 | | | 6.4 | |
| Reclassifications from AOCE to earnings | 2.0 | | | (19.3) | | | — | | | — | | | (17.2) | |
| Balance at December 27, 2020 | $ | (40.7) | | | (22.1) | | | 0.3 | | | (132.5) | | | (195.0) | |
| 2019 | | | | | | | | | |
| Balance at December 30, 2018 | $ | (143.1) | | | 1.5 | | | (0.9) | | | (152.2) | | | (294.7) | |
| Current period other comprehensive earnings (loss) | 14.8 | | | 11.7 | | | 0.6 | | | 9.6 | | | 36.7 | |
| Reclassifications from AOCE to earnings | 92.2 | | | (18.4) | | | — | | | — | | | 73.8 | |
| Balance at December 29, 2019 | $ | (36.1) | | | (5.2) | | | (0.3) | | | (142.6) | | | (184.2) | |
92
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Proceeds from sale of assets | 1 | SEC-NUM |
[Table of Contents](#ie1b09d57e49a40aaa81f572e6311eac9_10)DTE Energy CompanyConsolidated Statements of Cash Flows (Unaudited)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2022 | | 2021 |
| | (In millions) |
| Operating Activities | | | |
| Net Income | $ | 394 | | | $ | 397 | |
| Adjustments to reconcile Net Income to Net cash from operating activities: | | | |
| Depreciation and amortization | 358 | | | 368 | |
| Nuclear fuel amortization | 3 | | | 15 | |
| Allowance for equity funds used during construction | (8) | | | (7) | |
| Deferred income taxes | 18 | | | 41 | |
| Equity (earnings) losses of equity method investees | 11 | | | (32) | |
| Dividends from equity method investees | 1 | | | 42 | |
| | | | |
| Asset (gains) losses and impairments, net | — | | | 1 | |
| Changes in assets and liabilities: | | | |
| Accounts receivable, net | 18 | | | 107 | |
| Inventories | 129 | | | 52 | |
| Prepaid postretirement benefit costs | (27) | | | (15) | |
| Accounts payable | (42) | | | (20) | |
| Gas inventory equalization | 108 | | | 68 | |
| Accrued pension liability | (25) | | | (24) | |
| Accrued postretirement liability | (8) | | | (3) | |
| Derivative assets and liabilities | 108 | | | 126 | |
| Regulatory assets and liabilities | (154) | | | 128 | |
| Other current and noncurrent assets and liabilities | (76) | | | (187) | |
| Net cash from operating activities | 808 | | | 1,057 | |
| Investing Activities | | | |
| Plant and equipment expenditures — utility | (737) | | | (630) | |
| Plant and equipment expenditures — non-utility | (27) | | | (39) | |
| | | | |
| Proceeds from sale of assets | — | | | 1 | |
| Proceeds from sale of nuclear decommissioning trust fund assets | 207 | | | 271 | |
| Investment in nuclear decommissioning trust funds | (209) | | | (273) | |
| Distributions from equity method investees | 2 | | | 4 | |
| Contributions to equity method investees | (1) | | | (2) | |
| Notes receivable | (8) | | | (27) | |
| Other | (9) | | | (10) | |
| Net cash used for investing activities | (782) | | | (705) | |
| Financing Activities | | | |
| Issuance of long-term debt, net of discount and issuance costs | 1,119 | | | 989 | |
| Redemption of long-term debt | (250) | | | — | |
| | | | |
| | | | |
| Short-term borrowings, net | (514) | | | 14 | |
| | | | |
| Repurchase of common stock | (55) | | | (54) | |
| Dividends paid on common stock | (171) | | | (210) | |
| Contributions from noncontrolling interests | 1 | | | 12 | |
| Distributions to noncontrolling interests | (5) | | | (14) | |
| | | | |
| | | | |
| | | | |
| | | | |
| Other | (30) | | | (35) | |
| Net cash from financing activities | 95 | | | 702 | |
| Net Increase in Cash, Cash Equivalents, and Restricted Cash | 121 | | | 1,054 | |
| Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 35 | | | 516 | |
| Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 156 | | | $ | 1,570 | |
| | | | |
| Supplemental disclosure of non-cash investing and financing activities | | | |
| Plant and equipment expenditures in accounts payable | $ | 300 | | | $ | 208 | |
| | | | |
| | | | |
| | | | |
See Combined Notes to Consolidated Financial Statements (Unaudited)9
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Payments and Accruals to Acquire Property, Plant. and Equipment | 666 | SEC-NUM |
(c) Gain on sale of subsidiary for the fiscal years ended June 30, 2022 and 2021 is affiliated with the sale of the Blow-Fill-Seal Business. Loss on sale of subsidiary for the fiscal year ended June 30, 2020 is affiliated with the disposal of a facility in Australia.(d) Refer to Note 15, Other expense, net, for details of financing charges and foreign currency translation adjustments recorded within other expense, net.The following table includes total assets for each segment, as well as reconciling items necessary to total the amounts reported in the consolidated balance sheets. Total Assets
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| (Dollars in millions) | June 30, 2022 | | June 30, 2021 |
| Biologics | $ | 5,734 | | | $ | 4,973 | |
| Softgel and Oral Technologies | 2,685 | | | 1,604 | |
| Oral and Specialty Delivery | 1,006 | | | 1,269 | |
| Clinical Supply Services | 700 | | | 483 | |
| Corporate and eliminations | 382 | | | 783 | |
| Total assets | $ | 10,507 | | | $ | 9,112 | |
Capital Expenditures
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended June 30, |
| (Dollars in millions) | 2022 | | 2021 | | 2020 |
| Biologics | $ | 453 | | | $ | 516 | | | $ | 330 | |
| Softgel and Oral Technologies | 109 | | | 61 | | | 54 | |
| Oral and Specialty Delivery | 57 | | | 64 | | | 55 | |
| Clinical Supply Services | 17 | | | 26 | | | 10 | |
| Corporate | 30 | | | 19 | | | 17 | |
| Total capital expenditures | $ | 666 | | | $ | 686 | | | $ | 466 | |
The following table presents long-lived assets(1) by geographic area:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | | | Long-Lived Assets (1) |
| | | | | | |
| (Dollars in millions) | | | | | | | June 30, 2022 | | June 30, 2021 |
| United States | | | | | | | $ | 2,267 | | | $ | 1,867 | |
| Europe | | | | | | | 747 | | | 541 | |
| Other | | | | | | | 113 | | | 116 | |
| | | | | | | | | | |
| Total | | | | | | | $ | 3,127 | | | $ | 2,524 | |
(1) Long-lived assets include property, plant, and equipment, net of accumulated depreciation.For further details on segment and geographic information, see Note 2, Revenue Recognition.19. SUPPLEMENTAL BALANCE SHEET INFORMATIONSupplemental balance sheet information at June 30, 2022 and June 30, 2021 is detailed in the following tables.Inventories116
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2027 | 87 | SEC-NUM |
Baker Hughes CompanyNotes to Unaudited Condensed Consolidated Financial StatementsOTHER INTANGIBLE ASSETSIntangible assets are comprised of the following:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | December 31, 2021 |
| | GrossCarryingAmount | AccumulatedAmortization | Net | GrossCarryingAmount | AccumulatedAmortization | Net |
| Customer relationships | $ | 1,789 | | $ | (701) | | $ | 1,088 | | $ | 1,922 | | $ | (752) | | $ | 1,170 | |
| Technology | 1,089 | | (763) | | 326 | | 1,090 | | (747) | | 343 | |
| Trade names and trademarks | 288 | | (174) | | 114 | | 292 | | (169) | | 123 | |
| Capitalized software | 1,249 | | (999) | | 250 | | 1,311 | | (1,057) | | 254 | |
| | | | | | | |
| | | | | | | |
| Finite-lived intangible assets | 4,415 | | (2,637) | | 1,778 | | 4,615 | | (2,725) | | 1,890 | |
| Indefinite-lived intangible assets | 2,202 | | — | | 2,202 | | 2,241 | | — | | 2,241 | |
| Total intangible assets (1) | $ | 6,617 | | $ | (2,637) | | $ | 3,980 | | $ | 6,856 | | $ | (2,725) | | $ | 4,131 | |
(1)During the three and nine months ended September 30, 2022, we recorded intangible asset impairments to customer relationships of $12 million and capitalized software of $5 million. See "Note 17. Restructuring, Impairment and Other" for further information.Intangible assets are generally amortized on a straight-line basis with estimated useful lives ranging from 1 to 35 years. Amortization expense for the three months ended September 30, 2022 and 2021 was $54 million and $59 million, respectively, and $164 million and $193 million for the nine months ended September 30, 2022 and 2021, respectively.Estimated amortization expense for the remainder of 2022 and each of the subsequent five fiscal years is expected to be as follows:
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| --- | --- | --- | --- | --- | --- |
| | | | | | |
| Year | Estimated Amortization Expense |
| Remainder of 2022 | $ | 54 | |
| 2023 | 207 | |
| 2024 | 194 | |
| 2025 | 154 | |
| 2026 | 109 | |
| 2027 | 87 | |
Baker Hughes Company 2022 Third Quarter Form 10-Q | 10
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Proceeds from sales of businesses, net of fees paid | 203 | SEC-NUM |
[TABLE OF CONTENTS](#i72efc1fa764e42bfa26060268f6277f4_7)HONEYWELL INTERNATIONAL INC.CONSOLIDATED STATEMENT OF CASH FLOWS(Unaudited)
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2022 | | 2021 |
| | (Dollars in millions) |
| Cash flows from operating activities: | | | |
| Net income | $ | 3,946 | | | $ | 4,168 | |
| Less: Net income (loss) attributable to the noncontrolling interest | (1) | | | 54 | |
| Net income attributable to Honeywell | 3,947 | | | 4,114 | |
| Adjustments to reconcile net income attributable to Honeywell to net cash provided by operating activities: | | | |
| Depreciation | 494 | | | 506 | |
| Amortization | 411 | | | 427 | |
| Gain on sale of non-strategic businesses and assets | (10) | | | (95) | |
| Repositioning and other charges | 714 | | | 338 | |
| Net payments for repositioning and other charges | (316) | | | (505) | |
| Pension and other postretirement income | (778) | | | (862) | |
| Pension and other postretirement benefit payments | (14) | | | (29) | |
| Stock compensation expense | 163 | | | 172 | |
| Deferred income taxes | 208 | | | 189 | |
| | | | |
| Other | 200 | | | (106) | |
| Changes in assets and liabilities, net of the effects of acquisitions and divestitures: | | | |
| Accounts receivable | (660) | | | (419) | |
| Inventories | (390) | | | (516) | |
| Other current assets | 125 | | | (324) | |
| Accounts payable | (365) | | | 379 | |
| Accrued liabilities | (821) | | | 106 | |
| Net cash provided by operating activities | 2,908 | | | 3,375 | |
| Cash flows from investing activities: | | | |
| Expenditures for property, plant and equipment | (525) | | | (614) | |
| Proceeds from disposals of property, plant and equipment | 11 | | | 18 | |
| Increase in investments | (834) | | | (1,989) | |
| Decrease in investments | 884 | | | 1,906 | |
| Receipts from Garrett Motion Inc. | 409 | | | 375 | |
| Receipts from settlements of derivative contracts | 773 | | | 88 | |
| Cash paid for acquisitions, net of cash acquired | (178) | | | (1,334) | |
| Proceeds from sales of businesses, net of fees paid | — | | | 203 | |
| Net cash provided by (used for) investing activities | 540 | | | (1,347) | |
| Cash flows from financing activities: | | | |
| Proceeds from issuance of commercial paper and other short-term borrowings | 5,310 | | | 3,640 | |
| Payments of commercial paper and other short-term borrowings | (5,324) | | | (3,637) | |
| Proceeds from issuance of common stock | 121 | | | 171 | |
| Proceeds from issuance of long-term debt | 2 | | | 2,509 | |
| Payments of long-term debt | (1,818) | | | (3,355) | |
| Repurchases of common stock | (2,827) | | | (2,499) | |
| Cash dividends paid | (2,028) | | | (1,950) | |
| Other | (45) | | | (74) | |
| Net cash used for financing activities | (6,609) | | | (5,195) | |
| Effect of foreign exchange rate changes on cash and cash equivalents | (349) | | | (21) | |
| Net decrease in cash and cash equivalents | (3,510) | | | (3,188) | |
| Cash and cash equivalents at beginning of period | 10,959 | | | 14,275 | |
| Cash and cash equivalents at end of period | $ | 7,449 | | | $ | 11,087 | |
The Notes to Consolidated Financial Statements are an integral part of this statement.
4 Honeywell International Inc.
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Purchase price of common stock percent | 90 | SEC-NUM |
CVS Health Corporation and its subsidiaries are also currently under income tax examinations by a number of state and local tax authorities. As of December 31, 2021, no examination has resulted in any proposed adjustments that would result in a material change to the Company’s operating results, financial condition or liquidity.
Substantially all material state and local income tax matters have been concluded for fiscal years through 2014. Certain state exams are likely to be concluded and certain state statutes of limitations will lapse in 2022, but the change in the balance of the Company’s uncertain tax positions is projected to be immaterial. In addition, it is reasonably possible that the Company’s unrecognized tax benefits could change within the next twelve months due to the anticipated conclusion of various examinations with the IRS for various years. An estimate of the range of the possible change cannot be made at this time.
The Company records interest expense related to unrecognized tax benefits and penalties in the income tax provision. The Company accrued interest expense of approximately $40 million, $34 million and $49 million in 2021, 2020 and 2019, respectively. The Company had approximately $151 million and $121 million accrued for interest and penalties as of December 31, 2021 and 2020, respectively.
As of December 31, 2021, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate is approximately $669 million, after considering the federal benefit of state income taxes.
11.Stock Incentive Plans
The terms of the CVS Health 2017 Incentive Compensation Plan (“ICP”) provide for grants of annual incentive and long-term performance awards to executive officers and other officers and employees of the Company or any subsidiary of the Company, as well as equity compensation to outside directors of CVS Health Corporation. Payment of such annual incentive and long-term performance awards will be in cash, stock, other awards or other property, at the discretion of the Management Planning and Development Committee (the “MP&D Committee”) of the Board. The ICP allows for a maximum of 58 million shares of CVS Health Corporation common stock to be reserved and available for grants. As of December 31, 2021, there were approximately 30 million shares of CVS Health Corporation common stock available for future grants under the ICP.
Upon the acquisition of Aetna (the “Aetna Acquisition”) on November 28, 2018, approximately 22 million shares of Aetna common stock subject to awards outstanding under the Amended Aetna Inc. 2010 Stock Incentive Plan (“SIP”) were assumed by CVS Health Corporation. In addition, in accordance with the merger agreement, shares which were available for future issuance under the SIP were converted into approximately 32 million shares of CVS Health Corporation common stock reserved and available for issuance pursuant to future awards. Subsequent to the expiration of the SIP on May 21, 2020, the ICP is the only compensation plan under which the Company grants stock options, restricted stock and other stock-based awards to its employees.
Stock-Based Compensation Expense
Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the stock award (generally three to five years) using the straight-line method. The following table is a summary of stock-based compensation for the years ended December 31, 2021, 2020 and 2019:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| In millions | 2021 | | 2020 | | 2019 |
| Stock options and stock appreciation rights (“SARs”) (1) | $ | 80 | | | $ | 71 | | | $ | 76 | |
| Restricted stock units and performance stock units | 404 | | | 329 | | | 377 | |
| Total stock-based compensation | $ | 484 | | | $ | 400 | | | $ | 453 | |
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)Includes the ESPP.
ESPP
The Company’s Employee Stock Purchase Plan (“ESPP”) provides for the purchase of up to 60 million shares of CVS Health Corporation common stock. Under the ESPP, eligible employees may purchase common stock at the end of each six month offering period at a purchase price equal to 90% of the lower of the fair market value on the first day or the last day of the offering period. During 2021, approximately 3 million shares of common stock were purchased under the provisions of the ESPP at an average price of $60.51 per share. As of December 31, 2021, approximately 31 million shares of common stock were available for issuance under the ESPP.
156
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Residual value of leased pipeline | 17 | SEC-NUM |
[Table of Contents](#ie1b09d57e49a40aaa81f572e6311eac9_10)DTE Energy Company — DTE Electric CompanyCombined Notes to Consolidated Financial Statements (Unaudited) — (Continued)NOTE 12 — LEASESLessorDuring the first quarter 2022, DTE Energy completed construction of and began operating certain energy infrastructure assets for a large industrial customer under a long-term agreement, where the assets will transfer to the customer at the end of the contract term in 2040. DTE Energy has accounted for a portion of the agreement as a finance lease arrangement, recognizing an additional net investment of $33 million.The components of DTE Energy’s net investment in finance leases for remaining periods were as follows:
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | DTE Energy |
| | March 31, 2022 |
| | (In millions) |
| 2022 | $ | 19 | |
| 2023 | 26 | |
| 2024 | 27 | |
| 2025 | 27 | |
| 2026 | 26 | |
| 2027 and Thereafter | 335 | |
| Total minimum future lease receipts | 460 | |
| Residual value of leased pipeline | 17 | |
| Less unearned income | 248 | |
| Net investment in finance lease | 229 | |
| Less current portion | 6 | |
| | $ | 223 | |
Interest income recognized under finance leases was $5 million and $4 million for the three months ended March 31, 2022 and 2021, respectively.DTE Energy’s lease income associated with operating leases, including the line items in which it was included on the Consolidated Statements of Operations, was as follows:
| | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2022 | | 2021 |
| | | | | | (In millions) |
| Fixed payments | | | | | $ | 4 | | | $ | 14 | |
| Variable payments | | | | | 16 | | | 17 | |
| | | | | | $ | 20 | | | $ | 31 | |
| | | | | | | | |
| Operating revenues | | | | | $ | 20 | | | $ | 21 | |
| Other income | | | | | — | | | 10 | |
| | | | | | $ | 20 | | | $ | 31 | |
44
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Above market leases | 0.1 | SEC-NUM |
Table of ContentsConsolidated Statements of Cash Flows—Supplemental DisclosuresThe following tables provide supplemental disclosures related to the Consolidated Statements of Cash Flows:
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | |
| | Six Months Ended | | |
| | June 30, | | |
| | 2022 | | 2021 | | |
| | (In thousands) |
| SUPPLEMENTAL DISCLOSURES: | | | | | |
| Total interest costs incurred | $ | 72,824 | | | $ | 76,284 | | | |
| Interest capitalized | (9,177) | | | (13,022) | | | |
| Interest expense | $ | 63,647 | | | $ | 63,262 | | | |
| Cash paid for interest, net of amounts capitalized | $ | 61,973 | | | $ | 60,782 | | | |
| Cash paid for income taxes | $ | 607 | | | $ | 320 | | | |
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| DownREIT operating partnership units redeemed for common shares | $ | 1,385 | | | $ | 5,121 | | | |
| Shares issued under dividend reinvestment plan | $ | 866 | | | $ | 866 | | | |
| 5.417% Series 1 Cumulative Convertible Preferred Shares redeemed for common shares | $ | 175 | | | $ | — | | | |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | |
| | June 30, | | December 31, | | |
| | 2022 | | 2021 | | |
| | (In thousands) |
| RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: | | | | | |
| Cash and cash equivalents | $ | 176,559 | | | $ | 162,132 | | | |
| Restricted cash (1) | 17,998 | | | 13,031 | | | |
| Total cash, cash equivalents, and restricted cash | $ | 194,557 | | | $ | 175,163 | | | |
(1)Restricted cash balances are included in "prepaid expenses and other assets" on our consolidated balance sheets.
NOTE 3—REAL ESTATEOn April 20, 2022, we acquired the fee interest in Kingstowne Towne Center, a 227,000 square foot shopping center located in Kingstowne, Virginia for $100.0 million. Approximately $4.3 million and $0.1 million of net assets acquired were allocated to other assets for "acquired lease costs" and "above market leases," respectively, and $10.5 million of net assets acquired were allocated to other liabilities for "below market leases."
NOTE 4—DEBTOn June 29, 2022, we repaid the $16.1 million mortgage loan on one of the buildings at our Hoboken property, at par.During both the three and six months ended June 30, 2022, the maximum amount of borrowings outstanding under our $1.0 billion revolving credit facility was $114.0 million. The weighted average amount of borrowings outstanding was $57.7 million and $30.9 million, respectively, and the weighted average interest rate, before amortization of debt fees, was 2.0% and 1.9%, respectively, for the three and six months ended June 30, 2022. At June 30, 2022, our revolving credit facility had no balance outstanding.Effective April 1, 2022, as a result of the change in our credit rating, the spread over LIBOR on our revolving credit facility increased from 77.5 basis points to 82.5 basis, and the spread over LIBOR on our unsecured term loan increased from 80 basis points to 85 basis points.Our revolving credit facility, term loan, and certain notes require us to comply with various financial covenants, including the maintenance of minimum shareholders' equity and debt coverage ratios and a maximum ratio of debt to net worth. As of June 30, 2022, we were in compliance with all default related debt covenants.
15
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U.S. repatriation tax commitments, 2024 | 1,467 | SEC-NUM |
Commitments – U.S. repatriation taxUnder the 2017 Tax Act, we elected to pay in eight annual installments the repatriation tax related primarily to prior indefinitely invested earnings of our foreign operations. The following table summarizes the remaining scheduled repatriation tax payments as of December 31, 2021 (in millions):
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| | Amounts |
| 2022 | $ | 587 | |
| 2023 | 1,100 | |
| 2024 | 1,467 | |
| 2025 | 1,834 | |
| Total remaining U.S. repatriation tax commitments | $ | 4,988 | |
F-54
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Shareholder Activism Related Costs | 7 | SEC-NUM |
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | December 31, |
| (DOLLARS IN MILLIONS) | 2021 | | 2020 | | 2019 |
| Segment Adjusted Operating EBITDA: | | | | | |
| Nourish | $ | 1,172 | | | $ | 599 | | | $ | 658 | |
| Health & Biosciences | 625 | | | 40 | | | 33 | |
| Scent | 463 | | | 416 | | | 425 | |
| Pharma Solutions | 165 | | | — | | | — | |
| Total | 2,425 | | | 1,055 | | | 1,116 | |
| Depreciation & Amortization | (1,156) | | | (325) | | | (323) | |
| Interest Expense | (289) | | | (132) | | | (138) | |
| Other income, net | 58 | | | 7 | | | 30 | |
| Operational Improvement Initiatives (a) | — | | | — | | | (2) | |
| | | | | | |
| Frutarom Integration Related Costs (b) | (4) | | | (10) | | | (55) | |
| Restructuring and Other Charges | (41) | | | (17) | | | (30) | |
| Gains (Losses) on Sale of Assets | 1 | | | (4) | | | (3) | |
| Shareholder Activism Related Costs (c) | (7) | | | — | | | — | |
| Business Divestiture Costs (d) | (42) | | | — | | | — | |
| Employee Separation Costs (e) | (29) | | | (3) | | | — | |
| Frutarom Acquisition Related Costs (f) | (2) | | | (1) | | | (6) | |
| Compliance Review & Legal Defense Costs (g) | — | | | (3) | | | (11) | |
| N&B Inventory Step-Up Costs | (368) | | | — | | | — | |
| N&B Transaction Related Costs (h) | (91) | | | (29) | | | (21) | |
| N&B Integration Related Costs (i) | (101) | | | (97) | | | — | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Income Before Taxes | $ | 354 | | | $ | 441 | | | $ | 557 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | | | | |
| (a) | Represents accelerated depreciation related to plant relocations in India and China. |
| (b) | Represents costs related to the integration of the Frutarom acquisition. For 2021, costs primarily related to performance stock awards. For 2020, costs primarily related to advisory services, retention bonuses and performance stock awards. For 2019, costs primarily related to advisory services. |
| (c) | Represents shareholder activist related costs, primarily professional fees. |
| (d) | Represents costs related to the Company's sales and planned sales of businesses, primarily legal and professional fees. |
| (e) | Represents costs related to severance, including accelerated stock compensation expense, for certain employees and executives who have been separated or will separate from the Company. |
| (f) | Represents transaction-related costs and expenses related to the acquisition of Frutarom. For 2021, amount primarily includes earn-out payments, net of adjustments. For 2020, amount primarily includes earn-out payments, net of adjustments, amortization for inventory "step-up" costs and transaction costs primarily related to the 2019 Acquisition Activity. For 2019, amount primarily includes amortization for inventory "step-up" costs and transaction costs. |
| (g) | Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits. |
| (h) | Represents transaction costs and expenses related to the transaction with N&B, primarily legal and professional fees. |
| (i) | Represents costs primarily related to advisory services for the integration of the transaction with N&B, primarily consulting fees. |
| | |
| | |
The Company has not disclosed revenues at a lower level than provided herein, such as revenues from external customers by product, as it is impracticable for it to do so.The Company had no customers that accounted for greater than 10% of consolidated net sales in 2021, 2020 and 2019. 88
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Units adjustment due to vontier separation (in dollars per share) | 60.40 | SEC-NUM |
[Table of Conten](#i207805ce14724a60909000a6c8cb9e11_7)[t](#i207805ce14724a60909000a6c8cb9e11_7)[s](#i207805ce14724a60909000a6c8cb9e11_7)Options outstanding as of December 31, 2021 are summarized below (in millions; except price per share and number of years):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Outstanding | | Vested |
| Exercise Price | Shares | | Average Exercise Price | | Average Remaining Life(in years) | | Shares | | Average Exercise Price |
| $10.67 - $29.47 | 0.5 | | | $ | 25.64 | | | 1 | | 0.5 | | | $ | 25.64 | |
| $29.48 - $37.95 | 2.1 | | | 34.37 | | | 3 | | 2.1 | | | 34.37 | |
| $37.96 - $58.78 | 1.6 | | | 46.78 | | | 5 | | 1.2 | | | 46.05 | |
| $58.79 - $67.64 | 4.5 | | | 64.93 | | | 8 | | 0.7 | | | 63.35 | |
| $67.65 - $78.03 | 1.7 | | | 69.69 | | | 8 | | 0.3 | | | 68.29 | |
| Total shares | 10.4 | | | | | | | 4.8 | | | |
The following summarizes aggregate intrinsic value and cash receipts related to stock options that were exercised under the Stock Plan for the years ended December 31 ($ in millions):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | 2019 |
| Aggregate intrinsic value of stock options exercised | $ | 55.9 | | | $ | 65.8 | | | $ | 52.5 | |
| Cash receipts from stock options exercised | $ | 52.4 | | | $ | 46.7 | | | $ | 40.0 | |
| | | | | | |
| |
Stock AwardsThe following summarizes information related to Stock Award activity under the Stock Plan for the years ended December 31, 2021, 2020, and 2019 (in millions; except price per share):
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Number ofStock Awards (a) | | Weighted AverageGrant-DateFair Value |
| Unvested as of January 1, 2019 | 2.1 | | | $ | 49.04 | |
| Granted | 1.1 | | | 64.72 | |
| Vested | (0.6) | | | 40.86 | |
| Forfeited | (0.3) | | | 56.16 | |
| Unvested as of December 31, 2019 | 2.3 | | | 57.74 | |
| Granted | 1.0 | | | 64.14 | |
| Vested | (0.6) | | | 50.82 | |
| Forfeited | (0.2) | | | 61.00 | |
| Adjustment due to Vontier Separation (b) | (0.2) | | | 60.40 | |
| Unvested as of December 31, 2020 | 2.3 | | | 63.04 | |
| Granted | 1.1 | | | 68.90 | |
| Vested | (0.5) | | | 55.78 | |
| Forfeited | (0.3) | | | 65.28 | |
| Unvested as of December 31, 2021 | 2.6 | | | 66.43 | |
| | | | |
| (a) The outstanding stock awards as of December 31, 2019 have been adjusted by a factor of 1.20, as noted above, due to the Separation. (b) The “Adjustment due to Vontier Separation” reflects the cancellation of unvested awards held by Vontier employees as of October 8, 2020, which were replaced by Vontier equity awards issued by Vontier as part of the Separation. |
NOTE 18. CAPITAL STOCK AND EARNINGS PER SHARE Common StockUnder our amended and restated certificate of incorporation, as of July 1, 2016, our authorized capital stock consists of 2.0 billion common shares with a par value of $0.01 per share and 15 million preferred shares with a par value of $0.01 per share. Each share of our common stock entitles the holder to one vote on all matters to be voted upon by common stockholders. Our Board is authorized to issue shares of preferred stock in one or more series and has discretion to determine the rights, preferences, privileges, and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges, and liquidation preferences, of each series of preferred stock. The Board’s authority to issue preferred stock with voting rights or 98
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Expected total future rental income to be received | 108 | SEC-NUM |
13. LeasesWe lease certain facilities and equipment related primarily to administrative, R&D and sales and marketing activities. Leases with terms of 12 months or less are expensed on a straight-line basis over the term and are not recorded in the Consolidated Balance Sheets.Most leases include one or more options to renew, with renewal terms that may extend the lease term up to seven years. The exercise of lease renewal options is at our sole discretion. In addition, some of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements neither contain residual value guarantees nor impose significant restrictions or covenants. We sublease certain real estate to third parties. Our sublease portfolio consists of operating leases from former R&D and administrative space.The following table summarizes information related to our leases, all of which are classified as operating, included in our Consolidated Balance Sheets (in millions):
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| | | | | | | | | | | | | | | |
| | | December 31, |
| Consolidated Balance Sheets locations | | 2021 | | 2020 |
| Assets: | | | | |
| Other noncurrent assets | | $ | 566 | | | $ | 408 | |
| Liabilities: | | | | |
| Accrued liabilities | | $ | 145 | | | $ | 153 | |
| Other noncurrent liabilities | | 525 | | | 306 | |
| Total lease liabilities | | $ | 670 | | | $ | 459 | |
The components of net lease costs were as follows (in millions):
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| | | | | | | | | | | | | | | | | | | | | |
| | | Years ended December 31, |
| Lease costs | | 2021 | | 2020 | | 2019 |
| Operating(1) | | $ | 237 | | | $ | 223 | | | $ | 204 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Sublease income | | (38) | | | (34) | | | (33) | |
| Total net lease costs | | $ | 199 | | | $ | 189 | | | $ | 171 | |
\_\_\_\_\_\_\_\_\_\_\_\_(1) Includes short-term leases and variable lease costs, which were not material for the years ended December 31, 2021, 2020 and 2019.Maturities of lease liabilities as of December 31, 2021, were as follows (in millions):
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | |
| Maturity dates | | Amounts | | | | |
| 2022 | | $ | 148 | | | | | |
| 2023 | | 148 | | | | | |
| 2024 | | 75 | | | | | |
| 2025 | | 49 | | | | | |
| 2026 | | 44 | | | | | |
| Thereafter | | 289 | | | | | |
| Total lease payments(1) | | 753 | | | | | |
| Less imputed interest | | (83) | | | | | |
| Present value of lease liabilities | | $ | 670 | | | | | |
\_\_\_\_\_\_\_\_\_\_\_\_(1) Includes future rental commitments for abandoned leases of $138 million. We expect to receive total future rental income of $108 million related to noncancelable subleases for abandoned facilities. F-31
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Maximum matching contribution | 13,725 | SEC-NUM |
The assumptions for the valuation of employee stock purchase rights are summarized as follows:
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| | | | | | | | | | | | | | | | | | |
| | EMPLOYEE STOCK PURCHASE RIGHTS |
| Years Ended | July 30, 2022 | | July 31, 2021 | | July 25, 2020 |
| Weighted-average assumptions: | | | | | |
| Expected volatility | 27.9 | % | | 29.2 | % | | 22.2 | % |
| Risk-free interest rate | 0.1 | % | | 0.3 | % | | 1.8 | % |
| Expected dividend | 3.2 | % | | 3.2 | % | | 3.0 | % |
| Expected life (in years) | 1.2 | | 1.3 | | 1.3 |
| Weighted-average estimated grant date fair value per share | $ | 12.90 | | | $ | 12.46 | | | $ | 10.20 | |
The valuation of employee stock purchase rights and the related assumptions are for the employee stock purchases made during the respective fiscal years.We used third-party analyses to assist in developing the assumptions used in our Black-Scholes model. We are responsible for determining the assumptions used in estimating the fair value of our share-based payment awards. We used the implied volatility for traded options (with contract terms corresponding to the expected life of the employee stock purchase rights) on our stock as the expected volatility assumption required in the Black-Scholes model. The implied volatility is more representative of future stock price trends than historical volatility. The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock purchase rights. The dividend yield assumption is based on the history and expectation of dividend payouts at the grant date.(f)Employee 401(k) PlansWe sponsor the Cisco Systems, Inc. 401(k) Plan (the “Plan”) to provide retirement benefits for our employees. As allowed under Section 401(k) of the Internal Revenue Code, the Plan provides for tax-deferred salary contributions and after-tax contributions for eligible employees. The Plan allows employees to contribute up to 75% of their annual eligible earnings to the Plan on a pretax and after-tax basis, including Roth contributions. Employee contributions are limited to a maximum annual amount as set periodically by the Internal Revenue Code. We match pretax and Roth employee contributions up to 100% of the first 4.5% of eligible earnings that are contributed by employees. Therefore, the maximum matching contribution that we may allocate to each participant’s account will not exceed $13,725 for the 2022 calendar year due to the $305,000 annual limit on eligible earnings imposed by the Internal Revenue Code. All matching contributions vest immediately. Our matching contributions to the Plan totaled $306 million, $290 million, and $295 million in fiscal 2022, 2021, and 2020, respectively.The Plan allows employees who meet the age requirements and reach the Plan contribution limits to make catch-up contributions (pretax or Roth) not to exceed the lesser of 75% of their annual eligible earnings or the limit set forth in the Internal Revenue Code. Catch-up contributions are not eligible for matching contributions. In addition, the Plan provides for discretionary profit-sharing contributions as determined by the Board of Directors. Such contributions to the Plan are allocated among eligible participants in the proportion of their salaries to the total salaries of all participants. There were no discretionary profit-sharing contributions made in fiscal 2022, 2021, and 2020.We also sponsor other 401(k) plans as a result of acquisitions of other companies. Our contributions to these plans were not material to Cisco on either an individual or aggregate basis for any of the fiscal years presented.(g)Deferred Compensation PlansThe Cisco Systems, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”), a nonqualified deferred compensation plan, became effective in 2007. As required by applicable law, participation in the Deferred Compensation Plan is limited to a select group of our management employees. Under the Deferred Compensation Plan, which is an unfunded and unsecured deferred compensation arrangement, a participant may elect to defer base salary, bonus, and/or commissions, pursuant to such rules as may be established by Cisco, up to the maximum percentages for each deferral election as described in the plan. We may also, at our discretion, make a matching contribution to the employee under the Deferred Compensation Plan. A matching contribution equal to 4.5% of eligible compensation in excess of the Internal Revenue Code limit for qualified plans for calendar year 2022 that is deferred by participants under the Deferred Compensation Plan (with a $1.5 million cap on eligible compensation) will be made to eligible participants’ accounts at the end of calendar year 2022. The total deferred compensation liability under the Deferred Compensation Plan, together with deferred compensation plans assumed from acquired companies, was approximately $760 million and $845 million as of July 30, 2022 and July 31, 2021, respectively, and was recorded primarily in other long-term liabilities. 96
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Warranty term on software embedded in products | 90 | SEC-NUM |
[Table of Contents](#ie5b53d08516744208c4d15ed88453ce2_7)historical return rates applied against current-period shipments. Specific customer returns and allowances are considered when determining our sales return reserve estimate.Our policy applies to the accounting for individual contracts. However, we have elected a practical expedient to apply the guidance to a portfolio of contracts or performance obligations with similar characteristics so long as such application would not differ materially from applying the guidance to the individual contracts (or performance obligations) within that portfolio. Consequently, we have chosen to apply the portfolio approach when possible, which we do not believe will happen frequently. Additionally, we will evaluate a portfolio of data, when possible, in various situations, including accounting for commissions, rights of return and transactions with variable consideration.We report revenue net of sales taxes. We include shipping charges billed to customers in revenue and the related shipping costs are included in cost of product revenue.Contract Balances A contract asset is recognized when we have a contractual right to consideration for both completed and partially completed performance obligations that have not yet been invoiced. Contract assets are included in other current assets in the accompanying consolidated balance sheets.A contract liability is recognized when we have received customer payments in advance of our satisfaction of a performance obligation under a contract that is cancellable. Contract liabilities are included in other current liabilities and other long-term liabilities in the accompanying consolidated balance sheets.Assets Recognized from Costs to Obtain a Contract with a Customer We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain sales commissions earned by our sales force meet the requirements for capitalization. These costs are deferred and then amortized over a period of benefit that we have determined to be five years. Total capitalized costs to obtain a contract are included in other current and long-term assets on our consolidated balance sheets. As of December 31, 2021 and 2020, total capitalized costs to obtain contracts were $11.5 million and $10.1 million, respectively.Research and Development Expenses Costs related to the research, design and development of our products are charged to research and development expenses as incurred. Software development costs are capitalized beginning when a product’s technological feasibility has been established and ending when the product is available for general release to customers. Generally, our products are released soon after technological feasibility has been established. As a result, costs incurred subsequent to achieving technological feasibility have not been significant and accordingly, all software development costs have been expensed as incurred. Warranty We generally offer a one-year warranty on all of our hardware products and a 90-day warranty against defects in the software embedded in the products. We use judgment and estimates when determining warranty costs based on historical costs to replace product returns within the warranty period at the time we recognize revenue. We accrue for potential warranty claims at the time of shipment as a component of cost of revenues based on historical experience and other relevant information. We reserve for specifically identified products if and when we determine we have a systemic product failure. Although we engage in extensive product quality programs, if actual product failure rates or use of materials differ from estimates, additional warranty costs may be incurred, which could reduce our gross margin. The accrued warranty liability is recorded in accrued liabilities in the accompanying consolidated balance sheets. Segment Reporting We develop, market and sell cloud networking solutions, which primarily consist of our switching and routing platforms and related network applications, and there are no segment managers who are held accountable for operations or operating results below the Company level. Our chief operating decision maker is 79
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Proceeds from settlement of Variable Interest Entities | 4,850 | SEC-NUM |
[Table of Contents](#i988dd6b5140d4a1b8c6b4c50f020743f_10)[CONSOLIDATED STATEMENT OF CASH FLOWS](#i988dd6b5140d4a1b8c6b4c50f020743f_142)
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| In millions for the years ended December 31 | 2021 | 2020 | 2019 |
| OPERATING ACTIVITIES | | | |
| Net earnings (loss) | $ | 1,754 | | $ | 482 | | $ | 1,220 | |
| Depreciation, amortization, and cost of timber harvested | 1,210 | | 1,287 | | 1,306 | |
| Deferred income tax provision (benefit), net | (291) | | 9 | | 212 | |
| Restructuring and other charges, net | 509 | | 195 | | 57 | |
| Periodic pension (income) expense, net | (112) | | 32 | | 93 | |
| Net (gains) losses on mark to market investments | 32 | | — | | — | |
| Net (gains) losses on sales and impairments of businesses | (358) | | 465 | | 205 | |
| Net (gains) losses on sales of equity method investments | (205) | | (35) | | — | |
| Net (gains) losses on sales of fixed assets | (86) | | — | | — | |
| Antitrust fines | — | | — | | 32 | |
| Equity method dividends received | 159 | | 162 | | 273 | |
| Equity (earnings) losses, net | (313) | | (77) | | (250) | |
| Other, net | 157 | | 219 | | 120 | |
| Changes in current assets and liabilities | | | |
| Accounts and notes receivable | (596) | | 59 | | 246 | |
| Contract assets | (49) | | 35 | | 2 | |
| Inventories | (263) | | 35 | | (1) | |
| Accounts payable and accrued liabilities | 519 | | 141 | | 139 | |
| Interest payable | (32) | | (55) | | (19) | |
| Other | (5) | | 109 | | (25) | |
| CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES | 2,030 | | 3,063 | | 3,610 | |
| INVESTMENT ACTIVITIES | | | |
| Invested in capital projects, net of insurance recoveries | (549) | | (751) | | (1,276) | |
| Acquisitions, net of cash acquired | (80) | | (65) | | (103) | |
| Proceeds from sales of equity method investments | 908 | | 500 | | — | |
| Proceeds from sales of businesses, net of cash divested | 827 | | 40 | | 81 | |
| Proceeds from settlement of Variable Interest Entities | 4,850 | | — | | — | |
| Proceeds from sale of fixed assets | 101 | | 8 | | 18 | |
| Other | (3) | | (1) | | (20) | |
| CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES | 6,054 | | (269) | | (1,300) | |
| FINANCING ACTIVITIES | | | |
| Repurchases of common stock and payments of restricted stock tax withholding | (839) | | (42) | | (535) | |
| Issuance of debt | 1,512 | | 583 | | 534 | |
| Reduction of debt | (2,509) | | (2,278) | | (1,507) | |
| Change in book overdrafts | 65 | | 35 | | (66) | |
| Dividends paid | (780) | | (806) | | (796) | |
| Reduction of Variable Interest Entity loans | (4,220) | | — | | — | |
| Distribution to Sylvamo Corporation | (130) | | — | | — | |
| Net debt tender premiums paid | (456) | | (188) | | (18) | |
| Other | (18) | | (4) | | (1) | |
| CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES | (7,375) | | (2,700) | | (2,389) | |
| Cash Included in Assets Held for Sale | — | | (2) | | — | |
| Effect of Exchange Rate Changes on Cash | (9) | | (8) | | 1 | |
| Change in Cash and Temporary Investments | 700 | | 84 | | (78) | |
| Cash and Temporary Investments | | | |
| Beginning of the period | 595 | | 511 | | 589 | |
| End of the period | $ | 1,295 | | $ | 595 | | $ | 511 | |
The accompanying notes are an integral part of these financial statements.50
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Payment of debt issuance costs | 6.7 | SEC-NUM |
[Table of Contents](#ie0ad6752ee3c4f669c939c9f55a2eff4_10)
FRANKLIN RESOURCES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSUnaudited[Table continued from previous page]
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| | | | | | | | | | | | | | | |
| | | Nine Months Ended June 30, |
| (in millions) | | 2022 | | 2021 |
| | | | | |
| Issuance of common stock | | $ | 13.6 | | | $ | 11.0 | |
| Dividends paid on common stock | | (437.1) | | | (418.6) | |
| Repurchase of common stock | | (154.0) | | | (135.8) | |
| Proceeds from issuance of debt | | — | | | 748.3 | |
| Payment of debt issuance costs | | — | | | (6.7) | |
| Payment on debt | | — | | | (250.0) | |
| Proceeds from debt of consolidated investment products | | 4,345.2 | | | 1,636.2 | |
| Payments on debt of consolidated investment products | | (2,469.3) | | | (488.7) | |
| Payments on contingent consideration liabilities | | (4.1) | | | — | |
| Noncontrolling interests | | 194.9 | | | 447.2 | |
| Net cash provided by financing activities | | 1,489.2 | | | 1,542.9 | |
| Effect of exchange rate changes on cash and cash equivalents | | (68.1) | | | 25.1 | |
| Increase (decrease) in cash and cash equivalents | | (168.5) | | | 371.3 | |
| Cash and cash equivalents, beginning of period | | 4,647.2 | | | 3,989.8 | |
| Cash and Cash Equivalents, End of Period | | $ | 4,478.7 | | | $ | 4,361.1 | |
| | | | | |
| Supplemental Disclosure of Cash Flow Information | | | | |
| Cash paid for income taxes | | $ | 456.7 | | | $ | 434.6 | |
| Cash paid for interest | | 61.8 | | | 76.2 | |
| Cash paid for interest by consolidated investment products | | 107.0 | | | 75.7 | |
See Notes to Consolidated Financial Statements.
9
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Derivative, expiration date | 6/30/2024 | SEC-NUM |
DAVITA INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)(unaudited)(dollars and shares in thousands, except per share data)
The following table summarizes the Company’s interest rate cap agreements outstanding as of June 30, 2022 and December 31, 2021, which are classified in "Other long-term assets" on its consolidated balance sheet:
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| | | | | | | | | | Six months ended June 30, 2022 | | Fair value |
| | Notional amount | | LIBOR maximum rate | | Effective date | | Expiration date | | Debt expense | | Recorded OCI gain | | June 30, 2022 | | December 31, 2021 |
| 2019 cap agreements | $ | 3,500,000 | | | 2.00% | | 6/30/2020 | | 6/30/2024 | | $ | 2,754 | | | $ | 72,416 | | | $ | 84,619 | | | $ | 12,203 | |
See Note 9 for further details on amounts reclassified from accumulated other comprehensive loss and recorded as debt expense related to the Company’s interest rate cap agreements for the three and six months ended June 30, 2022 and 2021.The Company’s weighted average effective interest rate on its senior secured credit facilities at the end of the second quarter of 2022 was 3.77%, based on the current margins in effect for its senior secured credit facilities as of June 30, 2022, as detailed in the table above.The Company’s overall weighted average effective interest rate for the three and six months ended June 30, 2022 was 3.68% and 3.41%, and as of June 30, 2022 was 4.10%.As of June 30, 2022, the Company’s interest rates were fixed on approximately 50% of its total debt.As of June 30, 2022, the Company had $575,000 available and $425,000 drawn on its $1,000,000 revolving line of credit under its senior secured credit facilities. Credit available under this facility is reduced by the amount of any letters of credit outstanding under this facility, of which there were none as of June 30, 2022. The Company also had approximately $108,070 in letters of credit outstanding under a separate bilateral secured letter of credit facility as of June 30, 2022. 7. Commitments and contingenciesThe majority of the Company’s revenues are from government programs and may be subject to adjustment as a result of: (i) examination by government agencies or contractors, for which the resolution of any matters raised may take extended periods of time to finalize; (ii) differing interpretations of government regulations by different Medicare contractors or regulatory authorities; (iii) differing opinions regarding a patient’s medical diagnosis or the medical necessity of services provided; and (iv) retroactive applications or interpretations of governmental requirements. In addition, the Company’s revenues from commercial payors may be subject to adjustment as a result of potential claims for refunds, as a result of government actions or as a result of other claims by commercial payors.The Company operates in a highly regulated industry and is a party to various lawsuits, demands, claims, qui tam suits, governmental investigations (which frequently arise from qui tam suits) and audits (including, without limitation, investigations or other actions resulting from its obligation to self-report suspected violations of law) and other legal proceedings, including, without limitation, those described below. The Company records accruals for certain legal proceedings and regulatory matters to the extent that the Company determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. As of June 30, 2022 and December 31, 2021, the Company’s total recorded accruals with respect to legal proceedings and regulatory matters, net of anticipated third party recoveries, were immaterial. While these accruals reflect the Company’s best estimate of the probable loss for those matters as of the dates of those accruals, the recorded amounts may differ materially from the actual amount of the losses for those matters, and any anticipated third party recoveries for any such losses may not ultimately be recoverable. Additionally, in some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal proceedings and regulatory matters, which also may be impacted by various factors, including, without limitation, that they may involve indeterminate claims for monetary damages or may involve fines, penalties or non-monetary remedies; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; are in the early stages of the proceedings; or may result in a change of business practices. Further, there may be various levels of judicial review available to the Company in connection with any such proceeding.The following is a description of certain lawsuits, claims, governmental investigations and audits and other legal proceedings to which the Company is subject.12
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Subsets and Splits