SENSATA TECHNOLOGIES HOLDING PLC The following discussion and analysis of our financial condition and results of operations supplements, and should be read in conjunction with, the discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 2021 Annual Report. The following discussion should also be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Amounts and percentages in the following discussions have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
Overview
In the first quarter of 2022, our net revenue increased 3.5% from the first quarter of 2021. This revenue growth was primarily driven by outgrowth to market and revenue from acquisitions completed in 2021, offset somewhat by market declines. In addition, we continued to drive new business wins, most of which were in areas representing our megatrend initiatives, and which will help drive future revenue growth. Operating income decreased$31.5 million to$125.9 million (12.9% of net revenue) in the first quarter of 2022, compared to$157.5 million (16.7% of net revenue) in the prior year period. Refer to discussion under the heading Results of Operations elsewhere in this Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"). Income before taxes decreased to$30.0 million in the first quarter of 2022, compared to$74.0 million in the first quarter of 2021. Much of this decline related to a mark-to-market loss on our investment in Quanergy as discussed further under the heading Quanergy below. Global supply chain disruptions and shortages continue to pressure our margins; however, we have made progress in recovering some of these additional costs from our customers through increased pricing. Acquisitions In the first quarter of 2022, we completed the strategic acquisition of Elastic M2M for$51.2 million . Elastic M2M is a privately-held innovator of connected intelligence for operational assets across heavy-duty transport, warehouse, supply chain and logistics, industrial, light-duty passenger car, and a variety of other industry segments. Elastic M2M primarily serves telematics service providers and resellers, enabling them to leverage Elastic M2M's cloud platform and analytics capabilities to deliver sensor-based operational insights to their end users. This acquisition augments our cloud capabilities critical to delivering actionable sensor-based insights, an increasingly important capability in this fast-growing industry segment. OnApril 22, 2022 , we signed a stock purchase agreement to acquire Dynapower, a leading provider of high-voltage power conversion solutions for clean energy segments, for an aggregate cash purchase price of$580 million , subject to working 20
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capital and other adjustments. Dynapower's revenue is expected to exceed$100 million on an annualized basis in 2022 with projected revenue growth in excess of 30% over the next several years. We expect to complete the acquisition in the third quarter of 2022, subject to regulatory approvals and other customary closing conditions. Dynapower is a leader in power conversion systems including inverters, converters, and rectifiers for renewable energy generation, green hydrogen production, electric vehicle charging stations, and microgrid applications, as well as industrial and defense applications. Dynapower also provides aftermarket sales and service to maintain its equipment in the field. We are acquiring Dynapower as a foundational addition to our Clean Energy Solutions strategy and complement to our recent acquisitions of GIGAVAC, Lithium Balance, and Spear.
Quanergy
Since fiscal year 2016, we have held a$50.0 million investment in Quanergy Series B Preferred Stock, which was classified as an equity investment without a readily determinable fair value. As discussed in Note 14: Fair Value Measures included elsewhere in this Quarterly Report on Form 10-Q, in the first quarter of 2022, Quanergy became a public company traded on the NYSE, as a result of a business combination with CITIC. Upon closing of the business combination, our$50 million investment in Quanergy Series B Preferred stock was converted to 5.0 million common shares of Quanergy (at a$10 per share implied valuation). We also contributed$7.5 million to a PIPE investment to Quanergy in exchange for 750,000 unregistered common shares. Our investment in these two instruments was$57.5 million atFebruary 8, 2022 . Effective as of the date of the business combination (February 8, 2022 ), we entered into the Support Agreement with Quanergy in exchange for 2.5 million warrants, converted to common stock on that date, valued at$17.6 million as of close of businessFebruary 8, 2022 . This additional investment of$17.6 million was recorded as deferred income and will be recognized on a straight-line basis over the four-year term of the agreement. Accordingly, we held 8.25 million common shares of Quanergy onMarch 31, 2022 , with a carrying value of$75.1 million . The share price of Quanergy onMarch 31, 2022 was$1.84 per share, representing a market value of$15.2 million . As a result, we recorded a$59.9 million mark-to-market adjustment loss on this investment in the first quarter of 2022, which was recorded in other, net. OnApril 26, 2022 , we announced that our Board had declared a quarterly dividend of$0.11 per share, payable onMay 25, 2022 to shareholders of record as ofMay 11, 2022 . Results of Operations The table below presents our historical results of operations, in millions of dollars and as a percentage of net revenue, for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 . We have derived the results of operations from the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Amounts and percentages in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. For the three months ended March 31, 2022 March 31, 2021 Amount Margin* Amount Margin* Net revenue: Performance Sensing$ 717.7 73.6 %$ 714.5 75.8 % Sensing Solutions 258.1 26.4 228.0 24.2 Net revenue 975.8 100.0 942.5 100.0 Operating costs and expenses 849.8 87.1 785.1 83.3 Operating income 125.9 12.9 157.5 16.7 Interest expense, net (45.4) (4.7) (44.0) (4.7) Other, net (50.5) (5.2) (39.4) (4.2) Income before taxes 30.0 3.1 74.0 7.9 Provision for income taxes 7.6 0.8 20.3 2.2 Net income$ 22.4 2.3 %$ 53.7 5.7 % __________________________
* Represents the amount presented divided by total net revenue.
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Net Revenue
Net revenue for the three months endedMarch 31, 2022 increased 3.5% compared to the three months endedMarch 31, 2021 . Excluding a decrease of 0.6% attributed to changes in foreign currency exchange rates and an increase of 4.1% due to the effect of acquisitions, net revenue for the three months endedMarch 31, 2022 was flat on an organic basis. However, we achieved market outgrowth of 790 basis points in the three months endedMarch 31, 2022 . Organic revenue growth (or decline), discussed throughout this MD&A, is a financial measure not presented in accordance withU.S. GAAP. Refer to the section entitled Non-GAAP Financial Measures below for additional information related to our use of organic revenue growth (or decline). Performance Sensing Performance Sensing net revenue for the three months endedMarch 31, 2022 increased 0.4% compared to the three months endedMarch 31, 2021 . Excluding a decrease of 0.7% attributed to changes in foreign currency exchange rates and an increase of 4.8% due to the effect of acquisitions, Performance Sensing net revenue for the three months endedMarch 31, 2022 decreased 3.7% on an organic basis, representing market outgrowth of 650 basis points. Automotive net revenue for the three months endedMarch 31, 2022 declined 6.4% compared to the three months endedMarch 31, 2021 . Excluding a decline of 0.6% attributed to changes in foreign currency exchange rates, Automotive net revenue for the three months endedMarch 31, 2022 declined 5.8% on an organic basis, representing market outgrowth of 410 basis points. HVOR net revenue for the three months endedMarch 31, 2022 grew 21.1% compared to the three months endedMarch 31, 2021 . Excluding a decline of 0.6% attributed to changes in foreign currency exchange rates and growth of 19.2% due to the effect of acquisitions, HVOR net revenue for the three months endedMarch 31, 2022 grew 2.5% on an organic basis, representing 1,340 basis points of market outgrowth in the quarter.
Sensing Solutions
Sensing Solutions net revenue for the three months endedMarch 31, 2022 increased 13.2% compared to the three months endedMarch 31, 2021 . Excluding a decline of 0.5% attributed to changes in foreign currency exchange rates and growth of 2.1% due to the effect of acquisitions, Sensing Solutions net revenue for the three months endedMarch 31, 2022 increased 11.6% on an organic basis. The organic revenue growth reflects the launch of new industrial electrification applications, somewhat offset by declines in the Industrial and Aerospace markets.
Operating costs and expenses
Operating costs and expenses for the three months endedMarch 31, 2022 and 2021 are presented, in millions of dollars and as a percentage of net revenue, in the following table. Amounts and percentages in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. For the three months ended March 31, 2022 March 31, 2021 Amount Margin* Amount Margin* Operating costs and expenses: Cost of revenue$ 657.1 67.3 %$ 635.3 67.4 % Research and development 46.0 4.7 36.0 3.8 Selling, general and administrative 95.7 9.8 77.1 8.2 Amortization of intangible assets 37.4 3.8 32.1 3.4 Restructuring and other charges, net 13.7 1.4 4.6 0.5 Total operating costs and expenses$ 849.8 87.1 %$ 785.1 83.3 % __________________________
* Represents the amount presented divided by total net revenue.
Cost of revenue
For the three months endedMarch 31, 2022 , cost of revenue as a percentage of net revenue decreased slightly from the three months endedMarch 31, 2021 . The most significant drivers of cost of revenue as a percentage of net revenue in the first quarter of 2022, which largely offset, were the favorable effect of changes in foreign currency exchange rates and productivity headwinds. Increased costs related to industry-wide supply chain shortages were largely offset by recovery from customers in the form of pricing increases. 22
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Research and development expense
For the three months endedMarch 31, 2022 , research and development ("R&D") expense increased from the three months endedMarch 31, 2021 primarily as a result of (1) higher spend to support megatrend growth initiatives and (1) incremental R&D expense related to acquired businesses. R&D expense related to megatrends during the three months endedMarch 31, 2022 was$16.4 million , an increase of$5.1 million from the three months endedMarch 31, 2021 .
Selling, general and administrative expense
For the three months endedMarch 31, 2022 , selling, general and administrative ("SG&A") expense increased from the three months endedMarch 31, 2021 , primarily as a result of (1) incremental SG&A expense related to acquired businesses, including related transaction costs, (2) higher selling costs, and (3) higher share-based compensation, partially offset by the favorable impact of changes in foreign currency exchange rates.
Amortization of intangible assets
For the three months endedMarch 31, 2022 , amortization expense increased from the three months endedMarch 31, 2021 primarily due to increased intangibles from recent acquisitions partially offset by the effect of the economic benefit amortization method.
Restructuring and other charges, net
For the three months endedMarch 31, 2022 , restructuring and other charges, net increased from the three months endedMarch 31, 2021 . This increase is primarily due to acquisition-related incentive compensation of$15.0 million related to Elastic M2M milestones which were met in the first quarter partially offset by a$6.2 million reduction in the liability for contingent consideration for Spear. Refer to Note 5: Restructuring and Other Charges, Net of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information on our restructuring and other charges, net. Operating income In the three months endedMarch 31, 2022 , operating income decreased compared to the three months endedMarch 31, 2021 , primarily due to (1) increased restructuring and other charges as described above, (2) higher selling costs, (3) increased amortization expense as described above, (4) higher spend to support our megatrends initiatives, and (5) higher share-based compensation, partially offset by the favorable effect of changes in foreign currency exchange rates.
Acquired businesses had a minor net impact on our operating income in the first quarter of 2022 compared to the first quarter of 2021.
Interest expense, net
For the three months endedMarch 31, 2022 , interest expense, net increased from the three months endedMarch 31, 2021 , primarily as a result of interest expense on the 4.0% Senior Notes, which were issued onMarch 29, 2021 andApril 8, 2021 partially offset by the reduced interest expense resulting from ourMarch 5, 2021 redemption of the 6.25% Senior Notes.
Other, net
Other, net primarily includes currency remeasurement gains and losses on net monetary assets, gains and losses on foreign currency and commodity forward contracts not designated as hedging instruments, losses related to debt refinancing, and the portion of our net periodic benefit cost excluding service cost. In the three months endedMarch 31, 2022 , other, net represented a net loss of$50.5 million , an increase of$11.1 million compared to a net loss of$39.4 million in the three months endedMarch 31, 2021 . This increase was primarily due to$59.3 million in mark-to-market losses on equity investments, primarily related to Quanergy, partially offset by the non-recurrence of$30.1 million loss on debt financing related to the redemption of our 6.25% Senior Notes in the first quarter of 2021 and increased gains from our commodity forward contracts.
Provision for income taxes
For the three months endedMarch 31, 2022 , provision for income taxes decreased$12.7 million from the three months endedMarch 31, 2021 , predominantly related to the overall decrease in income before tax, driven in part by a$59.9 million mark-to-market loss on our investment in Quanergy.
The provision for income taxes consists of (1) current tax expense, which relates primarily to our profitable operations in tax jurisdictions with limited or no net operating loss carryforwards and withholding taxes related to management fees, royalties,
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and the repatriation of foreign earnings; and (2) deferred tax expense (or benefit), which represents adjustments in book-to-tax basis differences primarily related to (a) book versus tax basis in intangible assets, (b) changes in net operating loss carryforwards, (c) changes in tax rates, and (d) changes in our assessment of the realizability of our deferred tax assets.
Non-GAAP Financial Measures
This section provides additional information regarding certain non-GAAP
financial measures, including organic revenue growth (or decline), adjusted
operating income, adjusted operating margin, adjusted net income, adjusted
earnings per share ("EPS"), free cash flow, net leverage ratio, and adjusted
earnings before interest, taxes, depreciation, and amortization ("EBITDA"),
which are used by our management, Board of Directors, and investors. We use
these non-GAAP financial measures internally to make operating and strategic
decisions, including the preparation of our annual operating plan, evaluation of
our overall business performance, and as a factor in determining compensation
for certain employees.
The use of our non-GAAP financial measures has limitations. They should be
considered as supplemental in nature and are not intended to be considered in
isolation from, or as an alternative to, reported net revenue growth (or
decline), operating income, operating margin, net income, diluted EPS, operating
cash flows, total debt, finance lease and other financing obligations, or
EBITDA, respectively, calculated in accordance with U.S. GAAP. In addition, our
measures of organic revenue growth (or decline), adjusted operating income,
adjusted operating margin, adjusted net income, adjusted EPS, free cash flow,
net leverage ratio, and adjusted EBITDA may not be the same as, or comparable
to, similar non-GAAP financial measures presented by other companies.
Organic revenue growth (or decline)
Organic revenue growth (or decline) is defined as the reported percentage change in net revenue, calculated in accordance withU.S. GAAP, excluding the period-over-period impact of foreign currency exchange rate differences as well as the net impact of material acquisitions and divestitures for the 12-month period following the respective transaction date(s). We believe that organic revenue growth (or decline) provides investors with helpful information with respect to our operating performance, and we use organic revenue growth (or decline) to evaluate our ongoing operations as well as for internal planning and forecasting purposes. We believe that organic revenue growth (or decline) provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior-year period.
Adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS
We define adjusted operating income as operating income, determined in accordance withU.S. GAAP, excluding certain non-GAAP adjustments which are described below. Adjusted operating margin is calculated by dividing adjusted operating income by net revenue determined in accordance withU.S. GAAP. We define adjusted net income as follows: net income (or loss) determined in accordance withU.S. GAAP, excluding certain non-GAAP adjustments which are described in Non-GAAP Adjustments below. Adjusted EPS is calculated by dividing adjusted net income by the number of diluted weighted-average ordinary shares outstanding in the period. Management uses adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS as measures of operating performance, for planning purposes (including the preparation of our annual operating budget), to allocate resources to enhance the financial performance of our business, to evaluate the effectiveness of our business strategies, in communications with our Board of Directors and investors concerning our financial performance, and as factors in determining compensation for certain employees. We believe investors and securities analysts also use these non-GAAP financial measures in their evaluation of our performance and the performance of other similar companies. These non-GAAP financial measures are not measures of liquidity.
Free cash flow
Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software. We believe free cash flow is useful to management and investors as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to, among other things, fund acquisitions, repurchase ordinary shares, and (or) accelerate the repayment of debt obligations.
Adjusted EBITDA
Adjusted EBITDA is defined as net income (or loss), determined in accordance withU.S. GAAP, excluding interest expense, net, provision for (or benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable: (1) restructuring related and other, (2) financing and other transaction costs, (3) deferred 24
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loss or gain on derivative instruments, and (4) step-up inventory amortization. Refer to Non-GAAP Adjustments below for additional discussion of these adjustments.
Net leverage ratio
Net leverage ratio represents net debt (total debt, finance lease and other financing obligations less cash and cash equivalents) divided by last twelve months ("LTM") adjusted EBITDA. We believe that the net leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.
Non-GAAP adjustments
Many of our non-GAAP adjustments relate to a series of strategic initiatives developed by our management aimed at better positioning us for future revenue growth and an improved cost structure. These initiatives have been modified from time to time to reflect changes in overall market conditions and the competitive environment facing our business. These initiatives include, among other items, acquisitions, divestitures, restructurings of certain business, supply chain, or corporate activities, and various financing transactions. We describe these adjustments in more detail below, each of which is net of current tax impacts, as applicable. •Restructuring related and other: includes charges, net related to certain restructuring and other exit activities as well as other costs (or income) that we believe are either unique or unusual to the identified reporting period, and that we believe impact comparisons to prior period operating results. Such costs include charges related to optimization of our manufacturing processes to increase productivity. This type of activity occurs periodically, however each action is unique, discrete, and driven by various facts and circumstances. Such amounts are excluded from internal financial statements and analyses that management uses in connection with financial planning, and in its review and assessment of our operating and financial performance, including the performance of our segments. •Financing and other transaction costs: includes losses or gains related to debt financing transactions, losses or gains related to the divestiture of a business, and costs incurred, including for legal, accounting, and other professional services, that are directly related to an acquisition, divestiture, or equity financing transaction. •Deferred loss or gain on derivative instruments: includes unrealized losses or gains on derivative instruments that do not qualify for hedge accounting as well as the impact of commodity prices on our raw material costs relative to the strike price on our commodity forward contracts. •Step-up depreciation and amortization: includes depreciation and amortization expense associated with the step-up in fair value of assets acquired in connection with a business combination (e.g., property, plant and equipment, definite-lived intangible assets, and inventories). •Deferred taxes and other tax related: includes adjustments for book-to-tax basis differences due primarily to the step-up in fair value of fixed and intangible assets and goodwill, the utilization of net operating losses, and adjustments to our valuation allowance in connection with certain acquisitions and tax law changes. Other tax related items include certain adjustments to unrecognized tax benefits and withholding tax on repatriation of foreign earnings. •Amortization of debt issuance costs. We adjust our results recorded in accordance withU.S. GAAP by the amortization of debt issuance costs, which are deferred as a contra-liability against our long-term debt, net on the consolidated balance sheets and which are reflected in interest expense on the consolidated statements of operations.
•Where applicable, the current income tax effect of non-GAAP adjustments.
Our definition of adjusted net income excludes the deferred provision for (or
benefit from) income taxes and other tax related items described above. As we
treat deferred income taxes as an adjustment to compute adjusted net income, the
deferred income tax effect associated with the reconciling items presented below
would not change adjusted net income for any period presented.
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Non-GAAP reconciliations
The following tables present reconciliations of certain financial measures calculated in accordance withU.S. GAAP to the related non-GAAP financial measures for the periods presented. Refer to Non-GAAP Adjustments section above for additional information related to these adjustments. Amounts and percentages in the tables below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding. For the three months ended March 31, 2022 For the three months ended March 31, 2021 (Dollars in millions, except per Operating Operating share amounts) Operating Income Margin Net Income Diluted EPS Operating Income Margin Net Income Diluted EPS Reported (GAAP)$ 125.9
12.9 %
16.7 %$ 53.7 $ 0.34 Non-GAAP adjustments: Restructuring related and other 4.1 0.4 4.0 0.03 4.5 0.5 7.3 0.05 Financing and other transaction 15.8 1.6 74.6 0.47 4.6 0.5 32.8 0.21 costs Step-up depreciation and 35.9 3.7 35.9 0.23 29.7 3.2 29.7 0.19 amortization Deferred loss/(gain) on 0.7 0.1 (7.0) (0.04) 1.8 0.2 2.2 0.01 derivative instruments Amortization of debt issuance - - 1.7 0.01 - - 1.7 0.01
costs
Deferred taxes and other tax - - (8.3) (0.05) - - 10.1 0.06 related Total adjustments 56.6 5.8 101.0 0.64 40.6 4.3 83.9 0.53 Adjusted (non-GAAP)$ 182.5 18.7 %$ 123.4 $ 0.78 $ 198.1 21.0 %$ 137.6 $ 0.86
The following table provides a reconciliation of net cash provided by operating
activities in accordance with
For the three months ended March 31,
(in millions) 2022 2021
Net cash provided by operating activities $ 47.4 $ 104.5
Additions to property, plant and equipment and
capitalized software (35.7) (27.2)
Free cash flow $ 11.7 $ 77.3 The following table provides a reconciliation of net income in accordance with
For the three months ended
March 31,
(in millions) LTM 2022 2021
Net income $ 332.3 $ 22.4 $ 53.7
Interest expense, net 180.7 45.4 44.0
Provision for income taxes 37.6 7.6 20.3
Depreciation expense 125.3 31.5 31.2
Amortization of intangible assets 139.4 37.4 32.1
EBITDA 815.4 144.4 181.3
Non-GAAP Adjustments
Restructuring related and other 20.4 4.1 7.4
Financing and other transaction costs 80.2 75.1 35.9
Deferred (gain)/loss on derivative instruments (0.5) (8.8) 3.0
Adjusted EBITDA $ 915.5 $ 214.9 $ 227.6
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The following table provides a reconciliation of total debt, finance lease and
other financing obligations in accordance with
(Dollars in millions) March 31, 2022 December 31, 2021
Current portion of long-term debt, finance lease and other financing obligations
$ 6.7 $ 6.8
Finance lease and other financing obligations, less current portion
26.3 26.6
Long-term debt, net 4,215.5 4,214.9
Total debt, finance lease and other financing obligations 4,248.5 4,248.3
Less: discount, net of premium (4.8) (5.2)
Less: deferred financing costs (25.4) (26.7)
Total gross indebtedness 4,278.7 4,280.2
Less: cash and cash equivalents 1,608.5 1,709.0
Net debt $ 2,670.2 $ 2,571.3
Adjusted EBITDA (LTM) $ 915.5 $ 928.3
Net leverage ratio 2.9 2.8
Liquidity and Capital Resources
As ofMarch 31, 2022 andDecember 31, 2021 , we held cash and cash equivalents in the following regions (amounts have been calculated based on unrounded numbers; accordingly, certain amounts may not appear to recalculate due to the effect of rounding): (In millions) March 31, 2022 December 31, 2021 United Kingdom $ 17.3 $ 20.4 United States 17.3 25.0 The Netherlands 1,180.5 1,304.3 China 336.3 293.8 Other 57.1 65.4 Total$ 1,608.5 $ 1,709.0 The amount of cash and cash equivalents held in these geographic regions fluctuates throughout the year due to a variety of factors, such as our use of intercompany loans and dividends and the timing of cash receipts and disbursements in the normal course of business. Our earnings are not considered to be permanently reinvested in certain jurisdictions in which they were earned. We recognize a deferred tax liability on these unremitted earnings to the extent the remittance of such earnings cannot be recovered in a tax-free manner.
Cash Flows:
The table below summarizes our primary sources and uses of cash for the three months endedMarch 31, 2022 and 2021. We have derived this summarized statements of cash flows from the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding. For the three months ended (In millions) March 31, 2022 March 31, 2021 Net cash provided by/(used in): Operating activities: Net income adjusted for non-cash items $ 150.5$ 162.8 Changes in operating assets and liabilities, net (103.2) (58.3) Operating activities 47.4 104.5 Investing activities (90.9) (49.0) Financing activities (57.0) (23.5) Net change$ (100.5) $ 31.9 27
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Operating activities. Net cash provided by operating activities decreased in the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 , primarily due to increased raw material purchases in order to maximize production flexibility given widespread parts shortages in our supply chain and in anticipation of volume increases later in the year, a cash payment of$7.5 million for earned acquisition-related incentive compensation related to Elastic M2M, and timing of supplier payments and customer receipts. Investing activities. Net cash used in investing activities increased in the three months endedMarch 31, 2022 primarily due to cash paid for the acquisitions of Elastic M2M and the$7.5 million PIPE investment in Quanergy. In fiscal year 2022, we anticipate capital expenditures of approximately$165.0 million to$175.0 million , which we expect to be funded from cash on hand. Financing activities. In the three months endedMarch 31, 2022 , net cash used in financing activities increased primarily due to$67.3 million cash paid for share repurchases following the resumption of our program in the fourth quarter of 2021, partially offset by the nonrecurrence of$31.1 million of payments related to debt financing in the three months endedMarch 31, 2021 .
Indebtedness and Liquidity
As of
Capital Resources
Senior Secured Credit Facilities
The credit agreement governing our secured credit facility (as amended, the "Credit Agreement") provides for the Senior Secured Credit Facilities consisting of the Term Loan, the Revolving Credit Facility, and incremental availability (the "Accordion") under which additional secured credit facilities could be issued under certain circumstances.
Sources of liquidity
Our sources of liquidity include cash on hand, cash flows from operations, and available capacity under the Revolving Credit Facility. As ofMarch 31, 2022 , we had$416.1 million available under the Revolving Credit Facility, net of$3.9 million of obligations in respect of outstanding letters of credit issued thereunder. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As ofMarch 31, 2022 , no amounts had been drawn against these outstanding letters of credit. Availability under the Accordion varies each period based on our attainment of certain financial metrics as set forth in the terms of the Credit Agreement and the indentures under which our senior notes were issued (the "Senior Notes Indentures"). As ofMarch 31, 2022 , availability under the Accordion was approximately$1.0 billion . We believe, based on our current level of operations and taking into consideration the restrictions and covenants included in the Credit Agreement and Senior Notes Indentures, that the sources of liquidity described above will be sufficient to fund our operations, capital expenditures, ordinary share repurchases, and debt service for at least the next twelve months. However, we cannot make assurances that our business will generate sufficient cash flows from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Further, our highly-leveraged nature may limit our ability to procure additional financing in the future. Our ability to raise additional financing, and our borrowing costs, may be impacted by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by certain credit metrics such as interest coverage and leverage ratios. As ofApril 20, 2022 , Moody's Investors Service's corporate credit rating for STBV was Ba2 with a stable outlook, andStandard & Poor's corporate credit rating for STBV was BB+ with a stable outlook. Any future downgrades to STBV's credit ratings may increase our future borrowing costs but will not reduce availability under the Credit Agreement. Restrictions and Covenants The Credit Agreement provides that if our senior secured net leverage ratio exceeds a specified level we are required to use a portion of our excess cash flow, as defined in the Credit Agreement, generated by operating, investing, or financing activities to prepay some or all of the outstanding borrowings under the Senior Secured Credit Facilities. The Credit Agreement also requires mandatory prepayments of the outstanding borrowings under the Senior Secured Credit Facilities upon certain asset dispositions and casualty events, in each case subject to certain reinvestment rights, and upon the incurrence of certain indebtedness (excluding any permitted indebtedness). These provisions were not triggered during the three months endedMarch 31, 2022 . 28
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The Credit Agreement and the Senior Notes Indentures contain restrictions and covenants that limit the ability of our wholly-owned subsidiary, STBV, and certain of its subsidiaries to, among other things, incur subsequent indebtedness, sell assets, pay dividends, and make other restricted payments. For a full discussion of these restrictions and covenants, refer to Part II, Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations-Capital Resources included in our 2021 Annual Report. These restrictions and covenants, which are subject to important exceptions and qualifications set forth in the Credit Agreement and Senior Notes Indentures, were taken into consideration when we established our share repurchase programs and will be evaluated periodically with respect to future potential funding of those programs. As ofMarch 31, 2022 , we believe we were in compliance with all covenants and default provisions under our credit arrangements.
Share repurchase programs
From time to time, our Board of Directors has authorized various share repurchase programs, which may be modified or terminated by our Board at any time. We currently have an authorized$500.0 million share repurchase program (the "January 2022 Program") under which approximately$449.5 million remained available as ofMarch 31, 2022 .
Recently Issued Accounting Pronouncements
There are no recently issued accounting standards that have been adopted in the current period or will be adopted in future periods that have had or are expected to have a material impact on our consolidated financial position or results of operations.
Critical Accounting Policies and Estimates
For a discussion of the critical accounting policies that require the use of significant judgments and estimates by management, refer to Part II, Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates included in our 2021 Annual Report.
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