0000935494-22-000007 | 10-K | XBRL Viewer | National Instruments Corp

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Assets
Cash and cash equivalents	$ 211,106	$ 260,232
Short-term investments	0	59,923
Accounts receivable, net	341,275	266,869
Inventories, net	289,243	194,012
Prepaid expenses and other current assets	89,925	68,470
Total current assets	931,549	849,506
Property and equipment, net	253,668	254,399
Goodwill	575,992	467,547
Intangible assets, net	220,418	172,719
Operating lease right-of-use assets	58,641	67,674
Other long-term assets	74,717	72,643
Total assets	2,114,985	1,884,488
Liabilities and stockholders' equity
Accounts payable and accrued expenses	83,218	51,124
Accrued compensation	111,261	87,068
Deferred revenue	137,818	132,151
Other lease liabilities	13,137	15,801
Other taxes payable	59,109	48,129
Debt, current	0	5,000
Other current liabilities	40,671	42,578
Total current liabilities	445,214	381,851
Debt, non-current	300,000	92,036
Deferred income taxes	14,249	25,288
Income tax payable - non-current	54,195	61,623
Deferred revenue - non-current	32,822	36,335
Operating lease liabilities - non-current	30,468	35,854
Other long-term liabilities	14,340	26,630
Total liabilities	891,288	659,617
Commitments and contingencies
Stockholders' equity:
Preferred stock: par value $0.01; 5,000,000 shares authorized; none issued and outstanding	0	0
Common stock: par value $0.01; 360,000,000 shares authorized; 132,293,898 and 131,246,615 shares issued and outstanding, respectively	1,323	1,312
Additional paid-in capital	1,129,647	1,033,284
Retained earnings	112,858	211,101
Accumulated other comprehensive loss	(20,131)	(20,826)
Total stockholders’ equity	1,223,697	1,224,871
Total liabilities and stockholders’ equity	$ 2,114,985	$ 1,884,488

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	360,000,000	360,000,000
Common stock, shares issued (in shares)	132,293,898	131,246,615
Common stock, shares outstanding (in shares)	132,293,898	131,246,615

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Net sales:
Total net sales	$ 1,469,681	$ 1,286,671	$ 1,353,215
Cost of sales:
Total cost of sales	420,963	371,121	336,891
Gross profit	1,048,718	915,550	1,016,324
Operating expenses:
Sales and marketing	467,352	465,509	473,392
Research and development	335,986	280,381	272,452
General and administrative	127,215	129,863	122,768
Total operating expenses	930,553	875,753	868,612
Gain on sale of business/asset	0	159,753	26,842
Operating income	118,165	199,550	174,554
Other (expense) income	(14,590)	(788)	5,990
Income before income taxes	103,575	198,762	180,544
Provision for income taxes	14,260	55,103	18,393
Net income	$ 89,315	$ 143,659	$ 162,151
Basic earnings per share (in dollars per share)	$ 0.68	$ 1.10	$ 1.23
Weighted average shares outstanding - basic (in shares)	132,311	131,082	131,722
Diluted earnings per share (in dollars per share)	$ 0.67	$ 1.09	$ 1.22
Weighted average shares outstanding - diluted (in shares)	133,562	131,799	132,734
Dividends declared per share (in dollars per share)	$ 1.08	$ 1.04	$ 1.00
Product
Net sales:
Total net sales	$ 1,304,609	$ 1,137,603	$ 1,215,014
Cost of sales:
Total cost of sales	406,342	359,861	329,364
Software maintenance
Net sales:
Total net sales	165,072	149,068	138,201
Cost of sales:
Total cost of sales	$ 14,621	$ 11,260	$ 7,527

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Statement of Comprehensive Income [Abstract]
Net income	$ 89,315	$ 143,659	$ 162,151
Other comprehensive income (loss), before tax and net of reclassification adjustments:
Foreign currency translation adjustment	(13,113)	15,765	(3,346)
Unrealized gain (loss) on securities available-for-sale	420	(398)	1,141
Unrealized gain (loss) on derivative instruments	17,270	(19,694)	(2,629)
Other comprehensive income (loss), before tax	4,577	(4,327)	(4,834)
Tax provision (benefit) related to items of other comprehensive income	3,882	(4,571)	(695)
Other comprehensive income (loss), net of tax	695	244	(4,139)
Comprehensive income	$ 90,010	$ 143,903	$ 158,012

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Cash flow from operating activities:
Net income	$ 89,315	$ 143,659	$ 162,151
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	99,402	87,064	73,541
Stock-based compensation	74,583	58,376	51,438
Disposal gain on sale of business/assets	0	(159,753)	(26,842)
Loss from equity-method investees	5,719	2,942	1,060
Deferred income taxes	(15,796)	7,771	(12,680)
Changes in operating assets/ liabilities (net of effects of acquisitions and divestitures):
Accounts receivable	(75,492)	(17,260)	(7,193)
Inventories	(90,480)	7,617	(6,773)
Prepaid expenses and other assets	(5,274)	(5,427)	(8,986)
Accounts payable and accrued expenses	31,303	(10)	4,034
Deferred revenue	6,096	6,417	5,579
Taxes, accrued compensation, and other current liabilities	24,123	49,371	(10,924)
Net cash provided by operating activities	143,499	180,767	224,405
Cash flow from investing activities:
Capital expenditures	(40,975)	(49,652)	(60,857)
Proceeds from sale of assets/business, net of cash divested	0	160,266	32,492
Capitalization of internally developed software	(1,463)	(4,054)	(9,065)
Additions to other intangibles	(2,751)	(1,441)	(1,209)
Acquisitions of equity-method investments	(15,753)	(9,761)	(13,670)
Acquisitions, net of cash received	(223,080)	(334,981)	0
Purchases of short-term investments	0	(206,330)	(185,267)
Sales and maturities of short-term investments	60,297	384,652	219,628
Net cash used in investing activities	(223,725)	(61,301)	(17,948)
Cash flow from financing activities:
Proceeds from term loan	0	170,000	0
Payments on term loan	(98,750)	(71,250)	0
Proceeds from revolving line of credit	300,000	20,000	0
Payments of revolving line of credit	0	(20,000)	0
Debt issuance costs	(1,993)	(1,893)	0
Proceeds from issuance of common stock	32,518	31,947	33,191
Repurchase of common stock	(55,000)	(48,713)	(171,316)
Dividends paid	(143,113)	(136,545)	(131,855)
Other	0	0	(837)
Net cash provided by (used in) financing activities	33,662	(56,454)	(270,817)
Effect of exchange rate changes on cash	(2,562)	2,604	(410)
Net change in cash and cash equivalents	(49,126)	65,616	(64,770)
Cash and cash equivalents at beginning of period	260,232	194,616	259,386
Cash and cash equivalents at end of period	211,106	260,232	194,616
Supplemental disclosures:
Interest paid	2,619	1,131	0
Income taxes paid	$ 40,520	$ 45,182	$ 46,096

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income/(Loss)
Beginning balance (in shares) at Dec. 31, 2018		132,655,941
Beginning balance at Dec. 31, 2018	$ 1,238,358	$ 1,327	$ 897,544	$ 356,418	$ (16,931)
Increase (Decrease) in Stockholders' Equity
Net income	162,151			162,151
Other comprehensive (loss) income, net of tax	(4,139)				(4,139)
Issuance of common stock under employee plans (in shares)		1,848,594
Issuance of common stock under employee plans	32,354	$ 18	32,336
Stock-based compensation	50,797		50,797
Repurchase of common stock (in shares)		(4,000,000)
Repurchase of common stock	(171,316)	$ (40)	(27,099)	(144,177)
Dividends paid	(131,855)			(131,855)
Ending balance (in shares) at Dec. 31, 2019		130,504,535
Ending balance at Dec. 31, 2019	1,176,350	$ 1,305	953,578	242,537	(21,070)
Increase (Decrease) in Stockholders' Equity
Net income	143,659			143,659
Other comprehensive (loss) income, net of tax	244				244
Issuance of common stock under employee plans (in shares)		2,132,137
Issuance of common stock under employee plans	31,947	$ 21	31,926
Stock-based compensation	57,929		57,929
Repurchase of common stock (in shares)		(1,390,057)
Repurchase of common stock	(48,713)	$ (14)	(10,149)	(38,550)
Dividends paid	$ (136,545)			(136,545)
Ending balance (in shares) at Dec. 31, 2020	131,246,615	131,246,615
Ending balance at Dec. 31, 2020	$ 1,224,871	$ 1,312	1,033,284	211,101	(20,826)
Increase (Decrease) in Stockholders' Equity
Net income	89,315			89,315
Other comprehensive (loss) income, net of tax	695				695
Issuance of common stock under employee plans (in shares)		2,386,781
Issuance of common stock under employee plans	32,518	$ 24	32,494
Stock-based compensation	74,411		74,411
Repurchase of common stock (in shares)		(1,339,498)
Repurchase of common stock	(55,000)	$ (13)	(10,542)	(44,445)
Dividends paid	$ (143,113)			(143,113)
Ending balance (in shares) at Dec. 31, 2021	132,293,898	132,293,898
Ending balance at Dec. 31, 2021	$ 1,223,697	$ 1,323	$ 1,129,647	$ 112,858	$ (20,131)

Operations and summary of significant accounting policies

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Operations and summary of significant accounting policies

National Instruments Corporation (the "Company," "NI," "we," "us" or "our") is a Delaware corporation. We provide flexible application software and modular, multifunction hardware that users combine with industry-standard computers, networks and third-party devices to create automated test and automated measurement systems. Our software-centric approach helps our customers quickly and cost-effectively design, prototype and deploy custom-defined solutions for their design, control and test application needs. We offer hundreds of products used to create virtual instrumentation systems for general, commercial, industrial and scientific applications. Our products may be used in different environments, and consequently, specific application of our products is determined by the customer and often is not known to us.

These financial statements have been prepared in accordance with U.S. generally accepted accounting principles.

Principles of consolidation

The Consolidated Financial Statements include the accounts of National Instruments Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of estimates

The preparation of our financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Although these estimates are based on management's best knowledge of current events and actions that may impact the company in the future, actual results may be materially different from the estimates.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

Gain on Sale of Business/Assets

Sale of Office Building

During the year ended December 31, 2019, we recognized a gain of $26.8 million from the sale of our 136,000 square foot office building and property located at 6504 Bridgepoint Parkway, Austin, Texas. At the time of sale, we did not occupy the building and had been leasing the building to third parties for several years. The disposal gain is presented as "Gain on sale of business/asset" in the Consolidated Statements of Income, in accordance with ASC 360 - Property, Plant and Equipment.

Divestiture of AWR

On January 15, 2020, we completed the sale of our AWR Corporation subsidiary ("AWR") for approximately $161 million. We recognized a gain of approximately $160 million on the sale. The gain is included within "Gain on sale of business/asset" in the consolidated statements of income, which also included approximately $1 million of transaction costs.

The divestiture of AWR resulted in the derecognition of the following assets and liabilities (in thousands):




Assets
Cash	$	1,027
Accounts receivable, net	7,233
Prepaid and other current assets	283
Goodwill	7,221
Other non-current assets	556
Total Assets	$	16,320

Liabilities
Deferred revenue	15,296
Other current liabilities	940
Cumulative translation adjustment	(660)
Total liabilities and stockholders' equity	15,576

Total assets divested, net (including cash)	$	744

Revenue Recognition

Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of our products or services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Nature of Goods and Services

We derive revenues from two primary sources: products and software maintenance.

Product revenues are primarily generated from the sale of off-the-shelf modular test and measurement hardware components and related drivers, and application software licenses. Sales of most hardware components may also include optional extended hardware warranties, which typically provide additional service-type coverage for three years from the purchase date. Our software licenses typically provide for a perpetual right to use our software. We also offer some term-based software licenses that expire, which are referred to as subscription arrangements. We do not customize software for customers and installation services are not required. The software is delivered before related services are provided and is functional without professional services, updates and technical support. We sell our customer support contracts as a percentage of net software purchases to which the support is related. Revenues from offerings related to our hardware and software products such as extended hardware warranties, training, consulting and installation services are not significant and are presented within product revenues, as further discussed below.

Software maintenance revenues consists of post-contract customer support that provides the customer with unspecified upgrades and technical support. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices of software licenses are estimated based on our established pricing practices and maximize the use of observable inputs. Standalone selling prices of hardware products are typically estimated based on observable transactions when these services are sold on a standalone basis.

Our typical performance obligations include the following:


Performance Obligation	When performance obligation is typically satisfied	When payment is typically due	How standalone selling price is typically estimated
Product revenue
Modular hardware	When customer obtains control of the product (point-in-time)	Within 30-90 days of shipment	Observable in transactions without multiple performance obligations
Software licenses	When software media is delivered to customer or made available for download electronically, and the applicable license period has begun (point-in-time)	Within 30-90 days of the beginning of license period	Perpetual/Subscription licenses: Value relationships based on (i) the directly observable pricing of the license bundled with software maintenance and (ii) the directly observable pricing of software maintenance renewals, when they are sold on a standalone basis. Enterprise-wide term licenses: Residual method
Extended hardware warranty	Ratably over the course of the support contract (over time)	Within 30-90 days of the beginning of the contract period	Observable in renewal transactions
Other related support offerings	As work is performed (over time) or course is delivered (point-in-time)	Within 30-90 days of delivery	Observable in transactions without multiple performance obligations
Software maintenance revenue
Software maintenance	Ratably over the course of the support contract (over time)	Within 30-90 days of the beginning of the contract period	Observable in renewal transactions

Significant Judgments

Judgment is required to determine the standalone selling price ("SSP") for each distinct performance obligation. We use a single amount to estimate SSP for items that are not sold separately, including perpetual and term licenses sold with software maintenance. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount that needs to be allocated based on the relative SSP of the various products and services.

Due to the various benefits from and the nature of our enterprise agreement program, judgment is required to assess the pattern of delivery, including the utilization of certain benefits across our portfolio of customers. Additionally, whether a renewal option represents a distinct performance obligation could significantly impact the timing of revenue recognized.

Our products are generally sold with a right of return which is accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. Changes to our estimated variable consideration were not material for the periods presented.

Contract Balances

Timing of revenue recognition may differ from the timing of payment from customers. We record a receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. Based on the nature of our contracts with customers, we do not typically recognize unbilled receivables related to revenues recognized in excess of amounts billed.

In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with efficient and predictable ways of purchasing our products and services, not to receive financing from our customers or to provide customers with financing. Examples include invoicing at the beginning of a maintenance service term with revenue recognized ratably over the contract period.

Accounts Receivable

Accounts receivable are recorded net of allowance for credit losses of $7.0 million and $6.5 million at December 31, 2021 and 2020, respectively. The allowance for credit losses reflects the best estimate of future losses over the contractual life of outstanding accounts receivable and is determined on the basis of historical bad debts, customer concentrations, customer creditworthiness and current economic trends.


(In thousands)
Year	Description	Balance at Beginning of Period		Provisions		Write-Offs	Balance at End of Period
2019	Allowance for credit losses	$	3,490	$	396	343	$	3,543
2020	Allowance for credit losses	$	3,543	$	3,669	693	$	6,519
2021	Allowance for credit losses	$	6,519	$	672	179	$	7,012

Contract Liabilities

We recognize contract liabilities, presented in our Consolidated Balance Sheet as "Deferred revenue" when we have an obligation to transfer goods or services to a customer for which we have received consideration (or an amount of consideration is due) from the customer. Refer to Note 2 - Revenue of Notes to Consolidated Financial Statements for additional information, including changes in our contract liability during the years ended December 31, 2021 and December 31, 2020.

Refund Liability

A refund liability for estimated sales returns is made by reducing recorded revenue based on historical experience. We analyze historical returns, current economic trends and changes in customer demand of our products when evaluating the adequacy of our sales returns refund liability. Our sales return refund liability was $3.2 million and $2.6 million at each of December 31, 2021 and 2020 and is presented within "Other Current Liabilities" on our balance sheet.

Assets Recognized from the 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 incentive programs meet the requirements to be capitalized. Capitalized incremental costs related to initial contracts and renewals are amortized over the same period because the commissions paid on both the initial contract and renewals are commensurate with one another. Total capitalized costs to obtain a contract were not material during the periods presented and are included in other long-term assets on our consolidated balance sheets. The net effect of capitalization and amortization of these costs was not material to our results of operating during the periods presented.

Shipping and handling costs

Our shipping and handling costs charged to customers are included in net sales, and the associated expense is recorded in cost of sales.

Cash and cash equivalents

Cash and cash equivalents include cash and highly liquid investments with maturities of three months or less at the date of acquisition.

Investments

We value our available-for-sale debt instruments based on pricing from third-party pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. We classify all of our fixed income available-for-sale securities as having Level 2 inputs. The valuation techniques used to measure the fair value of our financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques. We believe all of these sources reflect the credit risk associated with each of our available-for-sale debt investments. Short-term investments consist of available-for-sale debt securities issued by states of the U.S. and political subdivisions of the U.S., corporate debt securities and debt securities issued by U.S. government organizations and agencies.

Our investments in debt securities are classified as available-for-sale and accordingly are reported at fair value, with unrealized gains and losses reported as other comprehensive income, a component of stockholders’ equity. Investments with maturities beyond one year are classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

We periodically assess our available-for-sale debt securities for impairment and credit losses based on the specific identification method. We record an allowance for credit loss when a decline in fair value is due to credit-related factors. We consider various factors in determining whether an investment is impaired, including the severity of the impairment, changes in underlying credit ratings, forecasted recovery, our intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When we conclude that a credit-related impairment has occurred, we assess whether we intend to sell the security or if it is more likely than not that we will be required to sell the security before recovery. If either of these two conditions is met, we recognize a charge in earnings equal to the entire difference between the security’s amortized cost basis and its fair value. If we do not intend to sell a security and it is not more likely than not that we will be required to sell the security before recovery, the unrealized loss is separated into an amount representing the credit loss, which is recognized in “Other (expense) income” in our Consolidated Statements of Income, and the amount related to all other factors, which is recorded in accumulated other comprehensive income (loss).

In addition, we from time to time make equity investments in non-publicly traded companies. Equity investments in which we do not have control but have the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method. We record our proportionate share of the net income or loss of our equity method investees, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within "Other (expense) income" in the Consolidated Statement of Income. Profits or losses related to intra-entity sales with our equity method investees are eliminated until realized by the investor or investee. Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them. Equity method goodwill is not amortized or tested for impairment; instead the equity method investment is tested for impairment. We record our interest in the net earnings of our equity method investments based on the most recently available financial statements of the investees. At December 31, 2021, the difference between the carrying amount of our equity-method investments and our share of the underlying equity in net assets of our investments was approximately $25 million. The basis difference is primarily attributable to intangible assets and equity-method goodwill.

The carrying amount of the investment in equity interests is adjusted to reflect our interest in net earnings, dividends received and other-than-temporary impairments. We review the carrying amount for impairment whenever factors indicate that the carrying amount of the investment might not be recoverable. In such a case, the decrease in value is recognized in the period the impairment occurs in the Consolidated Statement of Income.

All other non-marketable equity investments do not have readily determinable fair values and are recorded at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes. We periodically review our non-marketable equity investments for other-than-temporary declines in fair value and write-down specific investments to their fair values when we determine that an other-than-temporary decline has occurred.

We did not record any other-than-temporary impairments on our investment securities during 2021, 2020, and 2019.

Inventories, net

Inventories are stated at the lower of cost or net realizable value. Cost is determined using standard costs, which approximate the first-in first-out (“FIFO”) method. Cost includes the acquisition cost of purchased components, parts and subassemblies, in-bound freight costs, labor and overhead.

Inventory is shown net of adjustment for excess and obsolete inventories of $18.9 million, $17.0 million and $15.5 million at December 31, 2021, 2020 and 2019, respectively.


(In thousands)
Year	Description	Balance at Beginning of Period		Provisions		Write-Offs	Balance at End of Period
2019	Adjustment for excess and obsolete inventories	$	15,385	$	6,046	5,942	$	15,489
2020	Adjustment for excess and obsolete inventories	$	15,489	$	8,163	6,616	$	17,036
2021	Adjustment for excess and obsolete inventories	$	17,036	$	9,986	8,090	$	18,932

Property and equipment, net

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from twenty to forty years for buildings, and three to seven years for purchased internal use software and for equipment which are each included in furniture and equipment.

Business combinations

We account for business combinations using the acquisition method of accounting and, accordingly, allocate the fair value of acquisition consideration to the assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The results of operations of the businesses acquired are included in our consolidated statement of income beginning on the date of the acquisition.

Intangible assets, net

We capitalize costs related to the development and acquisition of certain software products. Capitalization of costs begins when technological feasibility has been established and ends when the product is available for general release to customers. Technological feasibility for our products is established when the product is available for beta release. Amortization is computed on an individual product basis for those products available for market and is recognized based on the product’s estimated economic life, generally three to six years.

We use the services of outside counsel to search for, document, and apply for patents. Those costs, along with any filing or application fees, are capitalized. Costs related to patents which are abandoned are written off. Once a patent is granted, the patent costs are amortized ratably over the legal life of the patent, generally ten to seventeen years.

Leasehold improvements are amortized over the shorter of the life of the lease or the asset.

Intangible assets with finite useful lives, including developed technology, customer-related intangible assets, patents, trademarks, and backlog are subject to amortization over the expected period of economic benefit to us. We evaluate whether events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life.

Intangible assets related to in-process research and development (“IPR&D”) projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. If and when development is complete, the associated assets would be deemed long-lived and would then be amortized based on their respective estimated useful lives at that point in time. Indefinite-lived intangible assets are tested for impairment at least annually during the fourth quarter of our fiscal year. In testing indefinite-lived intangible assets for impairment, we may first perform a qualitative assessment of whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount, and, if so, we then quantitatively compare the fair value of the indefinite-lived intangible asset to its carrying amount. We determine the fair value of our indefinite-lived intangible assets using a discounted cash flow method.

The carrying values of long-lived assets, including identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, a recoverability test is performed utilizing undiscounted cash flows expected to be generated by that asset or asset group compared to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models or, when available, quoted market values and third-party appraisals. It is not possible for us to predict the likelihood of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment.

Goodwill

The excess purchase price over the fair value of assets acquired is recorded as goodwill. As businesses are acquired, we assign assets acquired (including goodwill) and liabilities assumed to either our existing reporting unit or a newly identified reporting unit as of the date of the acquisition. In the event a disposal group meets the definition of a business, goodwill is allocated to the disposal group based on the relative fair value of the disposal group to the related reporting unit. As we have one operating segment comprised of components with similar economic characteristics, we allocate goodwill to one reporting unit for goodwill impairment testing. Goodwill is tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach based on the market capitalization of the reporting unit. Our annual impairment test was performed as of November 30, 2021. No impairment of goodwill was identified during 2021 and 2020. Goodwill is deductible for tax purposes in certain jurisdictions.

Concentrations of credit risk

At December 31, 2021, we had $211 million in cash and cash equivalents. Our cash and cash equivalent balances are held in numerous financial institutions throughout the world, including substantial amounts held outside of the U.S. The most significant of our operating accounts was our Citibank operating account owned by our entity in Hungary which held approximately $13 million or 6% of our total cash and cash equivalents at a bank that carried Baa1/BBB+/A ratings at December 31, 2021.

The following table presents the geographic distribution of our cash, cash equivalents, and short-term investments as of December 31, 2021 (in millions):


	Domestic	International	Total




Cash and Cash Equivalents	$107.7	$103.4	$211.1
	51%	49%

Figures may not sum due to rounding.

The goal of our investment policy is to manage our investment portfolio to preserve principal and liquidity while maximizing the return on our investment portfolio through the full investment of available funds. We place our cash investments in instruments that meet credit quality standards, as specified in our corporate investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument. Our cash equivalents and short-term investments carried ratings from the major credit rating agencies that were in accordance with our corporate investment policy. Our investment policy allows investments in the following: government and federal agency obligations, repurchase agreements (“Repos”), certificates of deposit and time deposits, corporate obligations, medium term notes and deposit notes, commercial paper including asset-backed commercial paper (“ABCP”), puttable bonds, general obligation and revenue bonds, money market funds, taxable commercial paper, corporate notes/bonds, municipal notes, municipal obligations and tax exempt commercial paper. All such instruments must carry minimum ratings of A1/P1/F1, MIG1/VMIG1/SP1 and A2/A/A, as applicable, all of which are considered “investment grade”. Our investment policy for marketable securities requires that all securities mature in five years or less, with a weighted average maturity of no longer than 24 months with at least 10% maturing in 90 days or less. (See Note 3 – Short-term investments of Notes to Consolidated Financial Statements for further discussion and analysis of our investments).

Concentration of credit risk with respect to trade accounts receivable is limited due to our large number of customers and their dispersion across many countries and industries. No single customer accounted for more than 3% of our sales for the years ended December 31, 2021, 2020, and 2019, respectively. The largest trade account receivable from any individual customer at December 31, 2021 was approximately $9.3 million.

Key supplier risk

Our manufacturing processes use large volumes of high-quality components and subassemblies supplied by outside sources. Several of these items are available through sole or limited sources. Supply shortages or quality problems in connection with these key items could require us to procure items from replacement suppliers, which would cause significant delays in fulfillment of orders and likely result in additional costs. In order to manage this risk, we maintain safety stock of some of these single sourced components and subassemblies and perform regular assessments of a suppliers' performance, grading key suppliers in critical areas such as quality and “on-time” delivery.

Warranty reserve

We offer a one-year limited warranty on most hardware products which is included in the terms of sale of such products. We also offer optional extended warranties on our hardware products for which the related revenue is recognized ratably over the warranty period. Provision is made for estimated future warranty costs at the time of the sale for the estimated costs that may be incurred under the limited warranty. Our estimate is based on historical experience and product sales during the period.

The warranty reserve for the years ended December 31, 2021, 2020, and 2019 was as follows:


(In thousands)
	2021		2020		2019
Balance at the beginning of the year	$	2,872	$	2,561	$	3,173
Accruals for warranties issued during the year	2,790		2,668		2,356
Accruals related to pre-existing warranties	195		486		(376)
Settlements made (in cash or in kind) during the year	(2,647)		(2,843)		(2,592)
Balance at the end of the year	$	3,210	$	2,872	$	2,561

Loss contingencies

We accrue for probable losses from contingencies, including legal defense costs, on an undiscounted basis, when such costs are considered probable of being incurred and are reasonably estimable. We periodically evaluate available information, both internal and external, relative to such contingencies and adjust this accrual as necessary.

Other (Expense) Income

Other (expense) income consisted of the following amounts:


(in thousands)	2021		2020		2019
Interest income	$	375	$	3,899	$	8,129
Interest expense	(3,780)		(1,883)		(40)
Loss from equity-method investments	(5,719)		(2,942)		(1,060)
Net foreign exchange loss	(4,973)		(141)		(1,846)
Other	(493)		279		807
Other (expense) income	$	(14,590)	$	(788)	$	5,990

Advertising expense

We expense costs of advertising as incurred. Advertising expense for the years ended December 31, 2021, 2020, and 2019 was $20 million, $15 million, and $7 million, respectively.

Foreign currency translation

The functional currency for a substantial majority of our international sales operations is the applicable local currency. The assets and liabilities of these operations are translated at the rate of exchange in effect on the balance sheet date and sales and expenses are translated at average rates. The resulting gains or losses from translation are included in a separate component of other comprehensive income. Gains and losses resulting from re-measuring monetary asset and liability accounts that are denominated in a currency other than a subsidiary’s functional currency are included in net foreign exchange gain (loss) and are included in net income.

Foreign currency hedging instruments

All of our derivative instruments are recognized on the balance sheet at their fair value. We currently use foreign currency forward contracts to hedge our exposure to material foreign currency denominated receivables and forecasted foreign currency cash flows.

On the date the derivative contract is entered into, we designate the derivative as a hedge of the variability of foreign currency cash flows to be received or paid (“cash flow” hedge) or as a hedge of our foreign denominated net receivable positions (“other derivatives”). Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are deemed to be highly effective are recorded in other comprehensive income. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative is reported as a component of accumulated OCI and reclassified into earnings in the same line item (net sales, operating expenses, or cost of sales) associated with the forecasted transaction and in the same period or periods during which the hedged transaction is realized. The gain or loss on the other derivatives as well as the offsetting gain or loss on the hedged item attributable to the hedged risk is recognized in current earnings under the line item “Net foreign exchange gain (loss)”. We do not enter into derivative contracts for speculative purposes.

We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking various hedge transactions at the inception of the hedge. This process includes linking all derivatives that are designated as cash flow hedges to specific forecasted transactions. We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the hedging instruments are highly effective in offsetting changes in cash flows of hedged items.

We prospectively discontinue hedge accounting if (1) it is determined that the derivative is no longer highly effective in offsetting changes in the fair value of a hedged item (forecasted transactions); or (2) the derivative is de-designated as a hedge instrument, because it is unlikely that a forecasted transaction will occur. When hedge accounting is discontinued, the derivative is sold, and the resulting gains and losses are recognized immediately in earnings.

Leases

We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the right to obtain substantially all of the economic benefits or outputs from the asset. We combine lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) with the non-lease components (e.g., common-area maintenance costs) for our office leases. For our leases of other asset classes that contain both lease components and non-lease components, we allocate the consideration in the contract to each component based on its standalone price.

Leases with terms greater than 12 months are classified as either operating or finance leases at the commencement date. For these leases, we record the related asset and obligation at the present value of lease payments. The discount rate used to calculate the present value of the lease payments is typically our incremental borrowing rate, as the rate implicit in the lease is generally not known or determinable. The lease term includes any noncancellable period for which we have the right to use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Operating leases are recognized as a single lease cost on a straight-line basis over the lease term. Our remaining lease terms range from approximately 1 year to 92 years, some of which may include options to extend the lease for up to 9 years, and some of which may include options to terminate the leases within 1 year. Such operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the accompanying consolidated balance sheets.

Amounts related to finance lease activities and income from leasing activities were not material for the periods presented. (See Note 9 – Leases for further information on our lease balances).

Income taxes

We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts. We account for GILTI in deferred taxes. Valuation allowances are established when necessary to reduce deferred tax assets to amounts which are more likely than not to be realized. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial position or our results of operations. In estimating future tax consequences, all expected future events are considered other than enactments of changes in tax laws or rates. We account for uncertainty in income taxes recognized in our financial statements using prescribed recognition thresholds and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on our tax returns. Our policy is to recognize interest and penalties related to income tax matters in income tax expense.

Earnings per share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net income by the weighted average number of common shares and common share equivalents outstanding (if dilutive) during each period. The number of common share equivalents, which includes restricted stock units (“RSUs”), is computed using the treasury stock method.

The reconciliation of the denominators used to calculate basic EPS and diluted EPS for years ended December 31, 2021, 2020, and 2019 are as follows:


	Years ended December 31,
(In thousands)	2021	2020	2019
Weighted average shares outstanding-basic	132,311	131,082	131,722
Plus: Common share equivalents
RSUs	1,251	717	1,012
Weighted average shares outstanding-diluted	133,562	131,799	132,734

Stock awards to acquire 125,200 shares, 251,400 shares, and 94,200 shares for the years ended December 31, 2021, 2020, and 2019, respectively, were excluded in the computations of diluted EPS because the effect of including the stock awards would have been anti-dilutive.

Stock-based compensation

Stock-based compensation costs are based on the fair value on the date of grant for all RSUs and on the date of enrollment for the employee stock purchase plan. We recognize compensation expense ratably over the requisite service period of the awards. Performance-based restricted stock units ("PRSUs") are RSU awards that vest based on a market condition. The market condition currently used is our stockholder return relative to the total stockholder return of the companies included in the Russell 2000 Index at the end of the three-year performance period.

The fair values of RSUs, with service-based vesting conditions, are estimated using their market price on the date of grant. The fair values of rights under employee stock purchase plans are estimated using the Black-Scholes option-pricing model. The fair values of PRSUs are estimated using a Monte Carlo simulation. The determination of fair value of the PRSUs is affected by our stock price and a number of assumptions including the expected volatility, expected dividend yield and the risk-free interest rate. Our expected volatility at the date of grant was based on the historical volatilities of our stock and the companies included in the Russell 2000 Index over the performance period. Refer to Note 12 – Authorized shares of common and preferred stock and stock-based compensation plans for additional information on our equity-based compensation programs.

Comprehensive income

Our comprehensive income is comprised of net income, foreign currency translation and unrealized gains and losses on forward contracts and securities available-for-sale. Comprehensive income in 2021, 2020, and 2019 was $90 million, $144 million and $158 million, respectively.

Recently Adopted Accounting Pronouncements

Clarification of Equity Method Transition

In January 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815,” which clarifies the interaction of the accounting for equity investments under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We adopted ASU 2020-01 on January 1, 2021, and the new standard did not have a material impact on our consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In November 2021, the FASB issued ASU No. 2021-10 (“ASU 2021-10”), Government Assistance, to increase transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. ASU 2021-10 is effective for annual periods beginning after December 15, 2021. Early adoption is permitted. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU No. 2021-08 (“ASU 2021-08”), Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers to improve the accounting for acquired revenue contracts with customers in a business combination to address recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. ASU 2021-08 is effective for annual periods beginning after December 15, 2022 on a prospective basis. Early adoption is permitted. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements and related disclosures.

Revenue

12 Months Ended

Dec. 31, 2021

Revenue from Contract with Customer [Abstract]

Revenue

Disaggregation of Revenues

We disaggregate revenue from contracts with customers based on the timing of transfer of goods or services to customers (point-in-time or over time) and geographic region based on the billing location of the customer. Before the second quarter of 2020, we included net sales attributable to our operations in India within the EMEA region. In the second quarter of 2020, we began including these amounts within APAC geographic region, to reflect recent changes within our organizational structure. We have recast historical comparative information to conform to the December 31, 2020 presentation. The geographic regions are now presented as the Americas, EMEA and APAC to reflect this change.

Total net sales based on the disaggregation criteria described above are as follows:


			Year Ended December 31,
	2021
(In thousands)
Net sales:	Point-in-Time(1)		Over Time		Total
Americas	$	503,839	$	93,417	$	597,256
EMEA	285,842		89,782		375,624
APAC	454,684		42,117		496,801
Total net sales (1)	$	1,244,365	$	225,316	$	1,469,681


			Year Ended December 31,
	2020
(In thousands)
Net sales:	Point-in-Time(1)		Over Time		Total
Americas	$	430,779	$	77,669	$	508,448
EMEA	263,473		82,162		345,635
APAC	391,937		40,651		432,588
Total net sales (1)	$	1,086,189	$	200,482	$	1,286,671


			Year Ended December 31,
	2019
(In thousands)
Net sales:	Point-in-Time(1)		Over Time		Total
Americas	$	446,703	$	91,976	$	538,679
EMEA	299,850		76,700		376,550
APAC	401,191		36,795		437,986
Total net sales (1)	$	1,147,744	$	205,471	$	1,353,215
(1) Net sales contain hedging gains and losses, which do not represent revenues recognized from customers. See Note 5 -Derivative instruments and hedging activities of Notes to Consolidated Financial Statements for more information on the impact of our hedging activities on our results of operations

Information about Contract Balances

Amounts collected in advance of services being provided are accounted for as deferred revenue. Nearly all of our deferred revenue balance is related to extended hardware and software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 90 days of contract inception. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers, such as invoicing at the beginning of a subscription term with a portion of the revenue recognized ratably over the contract period, or to provide customers with financing, such as multi-year on-premises licenses that are invoiced annually with revenue recognized upfront.

Changes in deferred revenue, current and long-term, during the twelve months ended December 31, 2021 and December 31, 2020 were as follows:


	Amount
	(In thousands)
Deferred Revenue at December 31, 2019	$	164,925
Deferral of revenue billed in current period, net of recognition	124,769
Recognition of revenue deferred in prior periods	(118,308)
Acquisitions/Divestitures	(7,999)
Foreign currency translation impact	5,099
Deferred Revenue at December 31, 2020	$	168,486
Deferral of revenue billed in current period, net of recognition	132,374
Recognition of revenue deferred in prior periods	(126,263)
Acquisitions/Divestitures	343
Foreign currency translation impact	(4,300)
Deferred Revenue at December 31, 2021	$	170,640

For the twelve months ended December 31, 2021, revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price) was not material. Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables. Unbilled receivables are included in "Other current assets" and "Other long-term assets" on the consolidated balance sheet. Based on the nature of our contracts with customers, we do not typically recognize unbilled receivables related to revenues recognized in excess of amounts billed. For the year ended December 31, 2021, amounts recognized related to unbilled receivables were not material.

Unsatisfied Performance Obligations

Revenue expected to be recognized in any future period related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, and excluding contracts where revenue is recognized as invoiced, was approximately $61 million as of December 31, 2021. Since we typically invoice customers at contract inception, this amount is included in our current and non-current deferred revenue balances. As of December 31, 2021, we expect to recognize approximately 50% of the revenue related to these unsatisfied performance obligations during 2022, 31% during 2023, and 19% thereafter.

Practical Expedients

As discussed in Note 1 - Operations and summary of significant accounting policies and elsewhere in Note 2 - Revenue of Notes to Consolidated Financial Statements, we have elected the following practical expedients in accordance with the new revenue standard:

•We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses.

•We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

•We do not consider the time value of money for contracts with original durations of one year or less.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045

+ Details

Investments

12 Months Ended

Dec. 31, 2021

Cash, Cash Equivalents, and Short-term Investments [Abstract]

Investments

The following tables summarize unrealized gains and losses related to our short-term investments designated as available-for-sale debt securities:

(In thousands)

As of December 31, 2021

Adjusted Cost

Gross
Unrealized Gain

Gross
Unrealized Loss

Fair Value

Corporate bonds

—

Short-term investments

—


(In thousands)	As of December 31, 2020
	Adjusted Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value


Corporate bonds	$	59,761	$	163	$	(1)	$	59,923


Short-term investments	$	59,761	$	163	$	(1)	$	59,923

The following tables summarize the contractual maturities of our short-term investments designated as available-for-sale debt securities:

(In thousands)

As of December 31, 2021

Adjusted Cost

Fair Value

Due in less than 1 year

—

Total available-for-sale debt securities

—

Due in less than 1 year

Adjusted Cost

Fair Value

Corporate bonds

—

Total available-for-sale debt securities

—

Equity-Method Investments

The carrying value of our equity method investments was $32 million and $25 million as of December 31, 2021 and 2020, respectively. During the years ended December 31, 2021 and 2020, net sales to our equity-method investees were approximately $5.3 million and $1.0 million, respectively and purchases from our equity-method investees were not material.

During the first quarter of 2021, we determined there was an other than temporary impairment for one of our equity-method investments, based on revised forecasts. We recorded a $3.5 million impairment loss related to this investment. Our proportionate share of the income/loss from equity-method investments is included within "Other (expense) income". Refer to Note 1 - Basis of Presentation of Notes to Consolidated Financial Statements for additional information on these amounts for the year ended December 31, 2021, 2020, and 2019.

Fair value measurements

12 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

Fair value measurements

We define fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market that market participants may use when pricing the asset or liability.

We follow a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value measurement is determined based on the lowest level input that is significant to the fair value measurement. The three values of the fair value hierarchy are the following:

Level 1 – Quoted prices in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3 – Inputs that are not based on observable market data

Assets and liabilities measured at fair value on a recurring basis are summarized below:


(In thousands)	Fair Value Measurements at Reporting Date Using
Description	December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash and cash equivalents available for sale:
Money market funds	$	101,290	$	101,290	$	—	$	—







Other assets:
Derivatives	12,407		—		12,407		—
Total Assets	$	113,697	$	101,290	$	12,407	$	—

Liabilities
Derivatives	$	(9,468)	—		(9,468)		—
Total Liabilities	$	(9,468)	$	—	$	(9,468)	$	—


(In thousands)	Fair Value Measurements at Reporting Date Using
Description	December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash and cash equivalents available for sale:
Money Market Funds	$	145,466	$	145,466	$	—	$	—



Short-term investments available for sale:
Corporate bonds	59,923		—		59,923		—



Other Assets:
Derivatives	6,124		—		6,124		—
Total Assets	$	211,513	$	145,466	$	66,047	$	—

Liabilities
Derivatives	$	(19,359)	$	—	$	(19,359)	$	—
Total Liabilities	$	(19,359)	$	—	$	(19,359)	$	—

We value our available-for-sale short-term investments based on pricing from third party pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. We classify all of our fixed income available-for-sale securities as having Level 2 inputs. The valuation techniques used to measure the fair value of our financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques. We believe all of these sources reflect the credit risk associated with each of our available-for-sale short-term investments. Short-term investments available-for-sale consists of debt securities issued by states of the U.S. and political subdivisions of the U.S., corporate debt securities and debt securities issued by U.S. government organizations and agencies. All of our short-term investments available-for-sale have contractual maturities of less than 60 months as of December 30, 2020.

Derivatives include foreign currency forward contracts. Our foreign currency forward contracts are valued using an income approach (Level 2) based on the spot rate less the contract rate multiplied by the notional amount. We consider counterparty credit risk in the valuation of our derivatives. However, counterparty credit risk did not impact the valuation of our derivatives during the year ended December 31, 2021. There were not any transfers in or out of Level 1 or Level 2 during the year ended December 31, 2021.

As of December 31, 2020, our short-term investments did not include any foreign sovereign debt from any country other than the United States. All of our short-term investments that are located outside of the U.S. are denominated in the U.S. dollar.

Non-financial assets such as equity method investments, goodwill, intangible assets, and property, plant and equipment are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment is recognized. The amounts related to all assets and liabilities required to be measured at fair value on a nonrecurring basis were not material at December 31, 2021 and December 31, 2020.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities approximate their fair values because of the short-term nature of these instruments. The carrying value of our variable-rate long-term debt approximates fair value.

Derivative instruments and hedging activities

12 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative instruments and hedging activities

We recognize all of our derivative instruments as either assets or liabilities in our statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.

We have direct operations in approximately 40 countries. Sales outside of the Americas accounted for approximately 59%, 60% and 60% of our net sales during each of the years ended December 31, 2021, 2020, and 2019, respectively. Our activities expose us to a variety of market risks, including the effects of changes in foreign currency exchange rates. These financial risks are monitored and managed by us as an integral part of our overall risk management program.

We maintain a foreign currency risk management strategy that uses derivative instruments (foreign currency forward contracts) to help protect our earnings and cash flows from fluctuations caused by the volatility in currency exchange rates. Movements in foreign currency exchange rates pose a risk to our operations and competitive position since exchange rate changes may affect our profitability and cash flow, and the business or pricing strategies of our non-U.S. based competitors.

The vast majority of our foreign sales are denominated in the customers’ local currency. We use foreign currency forward contracts as hedges of forecasted sales that are denominated in foreign currencies and as hedges of foreign currency denominated receivables. These contracts are entered into to help protect against the risk that the eventual dollar-net-cash inflows resulting from such sales or firm commitments will be adversely affected by changes in exchange rates. We also use foreign currency forward contracts as hedges of forecasted expenses that are denominated in foreign currencies. These contracts are entered into to help protect against the risk that the eventual dollar-net-cash outflows resulting from foreign currency operating and cost of revenue expenses will be adversely affected by changes in exchange rates.

We designate foreign currency forward contracts as cash flow hedges of forecasted revenues or forecasted expenses. In addition, we hedge our foreign currency denominated balance sheet exposures using foreign currency forward contracts that are not designated as hedging instruments. None of our derivative instruments contain a credit-risk-related contingent feature.

Cash flow hedges

To help protect against the reduction in value caused by a fluctuation in foreign currency exchange rates of forecasted foreign currency cash flows resulting from international sales over the next one to three years, we have instituted a foreign currency cash flow hedging program. We hedge portions of our forecasted revenue and forecasted expenses denominated in foreign currencies with forward contracts. For forward contracts, when the value of the dollar changes significantly against the foreign currencies, the change in the present value of future foreign currency cash flows may be offset by the change in the fair value of the forward contracts designated as hedges. We use foreign currency forward contracts for up to 100% of our forecasted exposures in selected currencies (primarily in Euro, Japanese yen, Hungarian forint, British pound, Malaysian ringgit, Korean won, and Chinese yuan) and limit the duration of these contracts to 40 months or less.

For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative is reported as a component of accumulated OCI and reclassified into earnings in the same line item (net sales, operating expenses, or cost of sales) associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. Hedge effectiveness of foreign currency forwards designated as cash flow hedges is measured by comparing the hedging instrument’s cumulative change in fair value from inception to maturity to the forecasted transaction’s terminal value.

We held forward contracts with the following notional amounts:


(In thousands)	U.S. Dollar Equivalent
	As of December 31, 2021		As of December 31, 2020
Chinese yuan	$	99,066	$	45,553
Euro	145,351		219,115
Japanese yen	43,128		73,399
Hungarian forint	54,939		82,429
British pound	25,947		25,133
Malaysian ringgit	29,624		36,249
Korean won	$	21,180	$	22,301
Total forward contracts notional amount	$	419,235	$	504,179

The contracts in the foregoing table had contractual maturities of 24 months or less as of December 31, 2021 and 36 months or less as of December 31, 2020.

At December 31, 2021, we expect to reclassify $5.6 million of gains on derivative instruments from accumulated OCI to net sales during the next twelve months when the hedged international sales occur, $1.7 million of losses on derivative instruments from accumulated OCI to cost of sales when the cost of sales are incurred and $1.3 million of losses on derivative instruments from accumulated OCI to operating expenses during the next twelve months when the hedged operating expenses occur. Expected amounts are based on derivative valuations at December 31, 2021. Actual results may vary as a result of changes in the corresponding exchange rates subsequent to this date.

Other Derivatives

Other derivatives not designated as hedging instruments consist primarily of foreign currency forward contracts that we use to hedge our foreign denominated monetary assets and liabilities to help protect against the change in value caused by a fluctuation in foreign currency exchange rates. We typically attempt to hedge up to 90% of our outstanding foreign denominated net receivables or net payables and typically limit the duration of these foreign currency forward contracts to approximately 90 days. The gain or loss on the derivatives as well as the offsetting gain or loss on the hedge item attributable to the hedged risk is recognized in current earnings under the line item “Other (expense) income.” As of December 31, 2021 and December 31, 2020, we held foreign currency forward contracts that were not designated as hedging instruments with a notional amount of $94 million and $89 million, respectively.

The following tables present the fair value of derivative instruments on our Consolidated Balance Sheets and the effect of derivative instruments on our Consolidated Statements of Income.


	Asset Derivatives
		December 31, 2021		December 31, 2020
(In thousands)
	Balance Sheet Location	Fair Value		Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts - ST forwards	Prepaid expenses and other current assets	$	8,993	$	1,564
Foreign exchange contracts - LT forwards	Other long-term assets	2,908		3,117
		$	11,901	$	4,681
Derivatives not designated as hedging instruments
Foreign exchange contracts - ST forwards	Prepaid expenses and other current assets	$	506	$	1,443
		$	506	$	1,443
Total derivatives		$	12,407	$	6,124


	Liability Derivatives
		December 31, 2021		December 31, 2020
(In thousands)
	Balance Sheet Location	Fair Value		Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts - ST forwards	Other current liabilities	$	(6,425)	$	(12,549)
Foreign exchange contracts - LT forwards	Other long-term liabilities	(2,377)		(6,328)
		$	(8,802)	$	(18,877)
Derivatives not designated as hedging instruments
Foreign exchange contracts - ST forwards	Other current liabilities	$	(666)	$	(482)
		$	(666)	$	(482)
Total derivatives		$	(9,468)	$	(19,359)

The following tables present the effect of derivative instruments on our Consolidated Statements of Income for the years ended December 31, 2021 and 2020, respectively:


December 31, 2021
(In thousands)
Derivatives in Cash Flow Hedging Relationship	Gain or (Loss) Recognized in OCI on Derivative		Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Gain or (Loss) Reclassified from Accumulated OCI into Income
Foreign exchange contracts - forwards	$	24,082	Net sales	$	(4,229)

Foreign exchange contracts - forwards	(4,004)		Cost of sales	(452)

Foreign exchange contracts - forwards	(2,808)		Operating expenses	(355)
Total	$	17,270		$	(5,036)


December 31, 2020
(In thousands)
Derivatives in Cash Flow Hedging Relationship	Gain or (Loss) Recognized in OCI on Derivative		Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Gain or (Loss) Reclassified from Accumulated OCI into Income
Foreign exchange contracts - forwards	$	(22,813)	Net sales	$	4,322

Foreign exchange contracts - forwards	1,925		Cost of sales	(2,165)

Foreign exchange contracts - forwards	1,194		Operating expenses	(1,603)
Total	$	(19,694)		$	554


(In thousands)
Derivatives not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income		Amount of Gain (Loss) Recognized in Income
		December 31, 2021		December 31, 2020
Foreign exchange contracts - forwards	Other (expense) income	$	(4,944)	$	810

Total		$	(4,944)	$	810

Gains or losses recognized in OCI on our derivatives are reported net of gains or losses reclassified from accumulated OCI into income.

Inventories

12 Months Ended

Dec. 31, 2021

Inventory Disclosure [Abstract]

Inventories

Inventories, net at December 31, 2021 and December 31, 2020 consist of the following:


(In thousands)	December 31, 2021		December 31, 2020

Raw materials	$	181,676	$	99,942
Work-in-process	14,573		11,307
Finished goods	92,994		82,763
Total	$	289,243	$	194,012

Property and equipment

12 Months Ended

Dec. 31, 2021

Property, Plant and Equipment [Abstract]

Property and equipment

Property and equipment at December 31, 2021 and December 31, 2020 consist of the following:


(In thousands)	December 31, 2021		December 31, 2020

Land	$	12,390	$	12,424
Buildings	238,949		232,094
Furniture and equipment	450,889		427,807
	702,228		672,325
Accumulated depreciation	(448,560)		(417,926)
Total, net	$	253,668	$	254,399

Depreciation expense for the years ended December 31, 2021, 2020, and 2019, was $40 million, $40 million and $38 million, respectively.

Intangible assets, net and Goodwill

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets, net and Goodwill

Intangible assets at December 31, 2021 and December 31, 2020 are as follows:


(In thousands)	December 31, 2021						December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Capitalized software development costs	$	45,671	$	(36,457)	$	9,214	$	115,251	$	(83,706)	$	31,545
Acquired technology	148,155		(34,264)		113,891		105,486		(17,913)		87,573
Customer relationships	93,931		(19,717)		74,214		40,273		(10,026)		30,247
Patents	36,217		(29,316)		6,901		35,803		(25,578)		10,225
Other	32,962		(16,764)		16,198		27,440		(14,311)		13,129
Total	$	356,936	$	(136,518)	$	220,418	$	324,253	$	(151,534)	$	172,719

Software development costs capitalized in 2021, 2020, and 2019 were $2 million, $4 million, and $10 million, respectively, and related amortization expense was $24 million, $29 million, and $28 million, respectively. Capitalized software development costs for the years ended December 31, 2021, 2020, and 2019 included costs related to stock-based compensation of $0.2 million, $0.3 million and $0.5 million, respectively. The related amounts in the table above are net of fully amortized assets.

Amortization of capitalized software development costs is computed on an individual product basis for those products available for market and is recognized based on the product’s estimated economic life, which range from three to six years. Acquired technology, customer relationships and other intangible assets are amortized over their useful lives, which range from five to ten years. Patents are amortized using the straight-line method over their estimated period of benefit, generally ten to seventeen years. Total intangible assets amortization expenses were $60 million, $48 million, and $37 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Capitalized software development costs, acquired technology, patents and other intangible assets had weighted-average remaining useful lives of 1.7 years, 3.5 years, 5.0 years, and 2.5 years, respectively, as of December 31, 2021. The estimated future amortization expense related to intangible assets as of December 31, 2021 was as follows:


	Amount
	(In thousands)
2022	$	51,279
2023	43,250
2024	40,019
2025	35,383
2026	22,669
Thereafter	27,818
Total	$	220,418

Goodwill

A reconciliation of the beginning and ending carrying amounts of goodwill is as follows:


	Amount
	(In thousands)
Balance as of December 31, 2019	$	262,242
Acquisitions	203,065
Divestiture	(7,221)

Foreign currency translation impact	9,461
Balance as of December 31, 2020	$	467,547
Acquisitions	114,178

Purchase price adjustments	1,973
Foreign currency translation impact	(7,706)
Balance as of December 31, 2021	$	575,992

Leases

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Leases

The components of operating lease expense were as follows:


	Years Ended December 31,
(In thousands)	2021	2020
Operating Lease Cost (a)	21,173	$	21,637
(a) Includes variable and short-term lease costs

Supplemental cash flow information related to operating leases were as follows:


	Years Ended December 31,
(In thousands)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for operating lease liabilities	$	19,087	$	20,005
Supplemental non-cash information:
Operating lease right-of-use assets obtained in exchange for new operating lease obligations	$	8,707	$	12,252

Maturities of lease liabilities as of December 31, 2021 were as follows:


(In thousands)
Years ending December 31,			Operating Leases
2022			$	14,541
2023			10,201
2024			8,785
2025			5,843
2026			5,034
Thereafter			2,858
Total future minimum lease payments			47,262
Less imputed interest			3,657
Total			$	43,605

	Years Ended December 31,
	2021		2020
Weighted Average Remaining Lease Term (years)
Operating Leases	4.3		4.6

Weighted Average Discount Rate
Operating Leases	3.8	%	4.9		%

As of December 31, 2021, we have additional operating leases, that have not commenced during the period, which were not material.

Income taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income taxes

The components of income before income taxes are as follows:


(In thousands)	Years Ended December 31,
	2021		2020		2019
Domestic	$	33,368	$	189,486	$	98,476
Foreign	70,207		9,276		82,068
Total	$	103,575	$	198,762	$	180,544

The provision for income taxes charged to operations is as follows:


(In thousands)	Years Ended December 31,
	2021		2020		2019
Current tax expense:
U.S. federal	$	10,979	$	25,949	$	18,212
State	3,135		4,793		2,705
Foreign	15,942		16,590		10,156
Total current	$	30,056	$	47,332	$	31,073
Deferred tax expense (benefit):
U.S. federal	$	(8,485)	$	10,056	$	(9,168)
State	(732)		885		(1,218)
Foreign	(6,676)		(5,100)		(3,045)
Total deferred	$	(15,893)	$	5,841	$	(13,431)
Change in valuation allowance	97		1,930		751
Total provision	$	14,260	$	55,103	$	18,393

Deferred tax liabilities (assets) at December 31, 2021 and 2020 were as follows:


(In thousands)	December 31,
	2021		2020
Capitalized software	$	1,956	$	7,134
Depreciation and amortization	8,202		11,142
Intangible assets	25,526		29,384

Right of use asset	7,246		9,029


Unrealized exchange loss	—		3,658
Undistributed earnings of foreign subsidiaries	2,865		2,600
Unrealized gain on derivative instruments	481		—
Gross deferred tax liabilities	46,276		62,947
Operating loss carryforwards	(92,069)		(101,187)
Vacation and other accruals	(6,188)		(6,296)
Inventory valuation and warranty provisions	(2,566)		(2,178)
Doubtful accounts and sales provisions	(1,759)		(1,435)
Unrealized gain on derivative instrument	—		(3,394)
Deferred revenue	(5,997)		(6,831)
Operating lease liabilities	(7,847)		(9,737)
Accrued expenses	(194)		(213)

Global intangible low-taxed income	(2,714)		(2,580)

Stock-based compensation	(6,786)		(6,384)
Research and development tax credit carryforward	(33)		—

Foreign tax credit carryforward	(1,468)		(1,016)

Cumulative translation adjustment on undistributed earnings	(873)		(451)
Unrealized exchange loss	(758)		—
Other	(3,446)		(4,246)
Gross deferred tax assets	(132,698)		(145,948)
Valuation allowance	83,630		93,042
Net deferred tax (asset) liability	$	(2,792)	$	10,041

A reconciliation of income taxes at the U.S. federal statutory income tax rate to our effective tax rate follows:


	Years Ended December 31,
	2021		2020		2019
U.S. federal statutory rate	21	%	21	%	21	%
Foreign taxes greater (less) than federal statutory rate	(3)		6		—
Outside basis difference on asset held for sale	—		2		(6)
Research and development tax credits	(4)		(2)		(3)
Enhanced deduction for certain research and development expenses	(5)		(2)		(3)
State income taxes, net of federal tax benefit	2		1		—
Nondeductible officer compensation	2		1		1

Change in intercompany prepaid tax asset	(1)		1		—



Foreign-derived intangible income deduction	(4)		(2)		(3)
Global intangible low-taxed income inclusion ("GILTI")	2		—		1
Amortization of intangible assets	3		1		—

Transition tax on deferred foreign income	—		—		1
Global intangible low-taxed income deferred	—		—		—
Foreign tax on undistributed foreign earnings	—		—		—
Other	1		1		1
Effective tax rate	14	%	28	%	10	%

The Tax Cuts and Jobs Act was enacted on December 22, 2017 (the "Tax Act"). The Act reduced the US federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. In 2018 and 2017, we recorded tax expense related to the enactment-date effects of the Act that included recording the one-time transition tax liability related to undistributed earnings of certain foreign subsidiaries that were not previously taxed, adjusting deferred tax assets and liabilities and recognizing the effects of electing to account for GILTI in deferred taxes. As of December 31, 2017, we recognized a provisional amount of $69.9 million, which was included as a component of income tax expense from continuing operations. During 2018, we reduced the provisional amounts recorded at December 31, 2017 by $4.2 million and included these adjustments as a reduction of income tax expense from continuing operations. During 2019, we recorded a $2.6 million net tax expense related to an increase in the 2017 one-time transition tax on accumulated foreign earnings as a result of final tax regulations issued in 2019. The amount of transition tax payable as of December 31, 2021 was $61.2 million, of which $7 million is due in the next 12 months and $54.2 million is payable during 2023 through 2025.

As of December 31, 2021, we had federal tax net operating loss carryforwards of $2.0 million, which may be carried forward indefinitely, and tax credit carryforwards of $1.5 million which expire during the years 2028 to 2031. Certain of these carryforwards are subject to limitations following a change in ownership. We do not expect to utilize certain of these tax credit carryforwards and have recorded a valuation allowance of $1.5 million against those credits at December 31, 2021.

As of December 31, 2021, 28 of our subsidiaries had available, for income tax purposes, foreign net operating loss carryforwards of an aggregate of approximately $963 million, of which $872 million expires during the years 2022 to 2038 and $91 million of which may be carried forward indefinitely. Our tax valuation allowance relates primarily to our ability to realize certain of these foreign net operating loss carryforwards.

Effective January 1, 2010, a new tax law in Hungary provided for an enhanced deduction for the qualified research and development expenses of NI Hungary Software and Hardware Manufacturing Kft. (“NI Hungary”). During the three months ended December 31, 2009, we obtained confirmation of the application of this new tax law for the qualified research and development expenses of NI Hungary. Based on the application of this new tax law to the qualified research and development expense of NI Hungary, we do not expect to have sufficient future taxable income in Hungary to realize the benefits of NI Hungary’s deferred tax assets. Therefore, we had a full valuation allowance against those assets at December 31, 2021.

Earnings from our operations in Malaysia are free of tax under a tax holiday effective January 1, 2013. This tax holiday expires in 2037. If we fail to satisfy the conditions of the tax holiday, this tax benefit may be terminated early. The tax holiday in Malaysia resulted in income tax benefits of $3.9 million and $2.0 million for the years ended December 31, 2021 and 2020, respective1y. The impact of the tax holiday on a per share basis for each of the years ended December 31, 2021 and 2020 was a benefit of $0.03 and $0.02 per share, respectively.

We have not provided for foreign withholding or distribution taxes on approximately $2.4 million of certain non-U.S. subsidiaries' undistributed earnings as of December 31, 2021. These earnings would become subject to withholding or distribution taxes of approximately $194,000, if they were remitted to the parent company as dividends. We intend to permanently reinvest these undistributed earnings.

We account for uncertainty in income taxes recognized in our financial statements using prescribed recognition thresholds and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on our tax returns. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:

(In thousands)

December 31, 2021

December 31, 2020

Balance at beginning of period