UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 7, 2020
VERTIV HOLDINGS CO
Exact name of registrant as specified in its charter
Delaware 3679 81-2376902
(State or other Jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification Number)
1050 Dearborn Drive, Columbus, Ohio 43085
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: 614-888-0246
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A common stock, $0.0001 par value per share VRT New York Stock Exchange
Units, each consisting of one share of Class A common stock, $0.0001 par value per share, and one-third of one redeemable warrant to purchase one share of Class A common stock VERT.U New York Stock Exchange
Redeemable warrants to purchase Class A common stock
VRT WS New York Stock Exchange
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company T
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o




Explanatory Note

This Amendment No. 2 on Form 8-K/A (“Amendment No. 2”) amends Item 9.01 of the Current Report on Form 8-K filed by Vertiv Holdings Co (the “Company”) on February 7, 2020, as amended by Amendment No. 1 on Form 8-K/A filed on February 7, 2020 (together, the “Original Report”), in which the Company reported, among other events, the completion of the Business Combination (as defined in the Original Report).

This Amendment No. 2 (i) amends the financial statements provided under Item 9.01(a) in the Original Report to include the audited financial statements of Vertiv Holdings, LLC (“Vertiv Holdings”) as of and for the year ended December 31, 2019, and (ii) includes the Management’s Discussion and Analysis of Financial Condition and Results of Operations of Vertiv Holdings for the year ended December 31, 2019.

This Amendment No. 2 does not amend any other item of the Original Report or purport to provide an update or a discussion of any developments at the Company or its subsidiaries, including Vertiv Holdings, subsequent to the filing date of the Original Report. The information previously reported in or filed with the Original Report is hereby incorporated by reference to this Form 8-K/A.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Business Acquired

The audited consolidated financial statements of Vertiv Holdings as of and for the year ended December 31, 2019 are filed herewith as Exhibit 99.1 and incorporated herein by reference.

Also included herewith as Exhibit 99.2 and incorporated herein by reference is the Management’s Discussion and Analysis of Financial Condition and Results of Operations of Vertiv Holdings for the year ended December 31, 2019.

(b) Exhibits

EXHIBIT INDEX
Exhibit No. Description
99.1
99.2





SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: March 11, 2020 Vertiv Holdings Co
/s/ Rob Johnson
Name: Rob Johnson
Title: Chief Executive Officer

Exhibit 99.1

Report of Independent Registered Public Accounting Firm

The Board of Directors
Vertiv Holdings, LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vertiv Holdings, LLC (the Company) as of December 31, 2019 and 2018, the related consolidated statements of earnings (loss), comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material aspects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ Ernst & Young LLP
Grandview Heights, Ohio
March 11, 2020




CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
VERTIV HOLDINGS, LLC
(Dollars in millions)
December 31, 2019 December 31, 2018 December 31, 2017
Net sales
Net sales - products $ 3,356.1    $ 3,230.3    $ 2,913.3   
Net sales - services 1,075.1    1,055.3    966.1   
Net sales 4,431.2    4,285.6    3,879.4   
Costs and expenses
Cost of sales - products 2,349.2    2,274.5    2,028.4   
Cost of sales - services 629.0    590.7    538.4   
Cost of sales 2,978.2    2,865.2    2,566.8   
Selling, general and administrative expenses 1,100.8    1,223.8    1,086.0   
Other deductions, net 146.1    178.8    254.4   
Interest expense, net 310.4    288.8    379.3   
Loss from Continuing Operations before income taxes (104.3)   (271.0)   (407.1)  
Income tax expense (benefit) 36.5    49.9    (19.7)  
Loss from Continuing Operations (140.8)   (320.9)   (387.4)  
Earnings from Discontinued Operations - net of income taxes —    6.9    17.8   
Net loss $ (140.8)   $ (314.0)   $ (369.6)  



































See accompanying Notes to the Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
VERTIV HOLDINGS, LLC
(Dollars in millions)
December 31, 2019 December 31, 2018 December 31, 2017
Net loss $ (140.8)   $ (314.0)   $ (369.6)  
Other comprehensive income (loss), net of tax:
Foreign currency translation (10.3)   (90.6)   142.1   
Pension (1)
(13.4)   (1.1)   1.9   
Comprehensive loss $ (164.5)   $ (405.7)   $ (225.6)  

(1)Net of income taxes of $0.1, $0.0, and $0.0 for the years ended December 31, 2019, 2018 and 2017, respectively.














































See accompanying Notes to the Consolidated Financial Statements

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CONSOLIDATED BALANCE SHEETS
VERTIV HOLDINGS, LLC
(Dollars in millions, except shares outstanding)
December 31, 2019 December 31, 2018
ASSETS
Current assets
Cash and cash equivalents $ 223.5    $ 215.1   
Accounts receivable, less allowances of $19.9 and $17.6 at 2019 and 2018, respectively 1,212.2    1,251.8   
Inventories 401.0    486.5   
Other current assets 180.7    141.9   
Total current assets 2,017.4    2,095.3   
Property, plant and equipment, net 428.2    441.7   
Other assets
Goodwill 605.8    634.0   
Other intangible assets, net 1,441.6    1,564.2   
Deferred income taxes 9.0    10.4   
Other 155.4    48.8   
Total other assets 2,211.8    2,257.4   
Total assets $ 4,657.4    $ 4,794.4   
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $ 636.8    $ 778.2   
Accrued expenses and other liabilities 867.7    804.3   
Income taxes 15.2    23.9   
Total current liabilities 1,519.7    1,606.4   
Long-term debt, net 3,467.3    3,427.8   
Deferred income taxes 124.7    160.0   
Other long-term liabilities 250.5    140.5   
Total liabilities 5,362.2    5,334.7   
Equity
Class A Units, 850,000 issued and outstanding —    —   
Class B Units, 150,000 issued and outstanding —    —   
Additional paid-in capital 277.7    277.7   
Accumulated deficit (1,000.6)   (859.8)  
Accumulated other comprehensive income 18.1    41.8   
Total equity (704.8)   (540.3)  
Total liabilities and equity $ 4,657.4    $ 4,794.4   

















See accompanying Notes to the Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOW
VERTIV HOLDINGS, LLC (Dollars in millions)
December 31, 2019 December 31, 2018 December 31, 2017
Cash flows from operating activities:
Net loss $ (140.8)   $ (314.0)   $ (369.6)  
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation 57.1    60.4    64.5   
Amortization 145.8    156.6    279.8   
Deferred income taxes (13.8)   (40.3)   (85.9)  
Amortization of debt discount and issuance costs 27.9    25.5    52.0   
Gain on sale of business —    (6.9)   (33.2)  
Changes in operating working capital (36.4)   (110.0)   46.8   
Other 17.7    6.8    (4.0)  
Net cash provided by (used for) operating activities 57.5    (221.9)   (49.6)  
Cash flows from investing activities:
Capital expenditures (47.6)   (64.6)   (36.7)  
Investments in capitalized software (22.7)   (41.2)   (7.7)  
Proceeds from disposition of property, plant and equipment 5.0    18.0    —   
Acquisition of business, net of cash acquired —    (124.3)   (211.4)  
Proceeds from sale of business —    4.4    1,244.0   
Collection of note receivable —    —    59.7   
Other —    —    10.2   
Net cash (used for) provided by investing activities (65.3)   (207.7)   1,058.1   
Cash flows from financing activities:
Borrowings from ABL revolving credit facility 491.8    565.1    500.0   
Repayments of ABL revolving credit facility (591.2)   (320.0)   (500.0)  
Proceeds from the issuance of PIK notes —    —    482.5   
Proceeds from term loan, net of discount —    —    325.0   
Proceeds from issuance of 10.00% Notes, net of discount 114.2    —    —   
Repayments of term loan —    —    (575.0)  
Debt issuance and related costs —    —    (39.6)  
Dividends to JV Holdings —    —    (1,024.0)  
Settlement of contingent consideration —    —    (43.0)  
Net cash provided by (used for) financing activities 14.8    245.1    (874.1)  
Effect of exchange rate changes on cash, cash equivalents and restricted cash 1.4    11.6    14.2   
Increase (decrease) in cash, cash equivalents and restricted cash 8.4    (172.9)   148.6   
Beginning cash, cash equivalents and restricted cash 225.3    398.2    249.6   
Ending cash, cash equivalents and restricted cash $ 233.7    $ 225.3    $ 398.2   
Changes in operating working capital
Accounts Receivable $ 39.8    $ (139.6)   $ (106.8)  
Inventories 85.5    (73.7)   1.2   
Other current assets (41.6)   (66.5)   5.0   
Accounts payable (140.8)   101.9    57.3   
Accrued expenses 34.8    50.2    47.5   
Income taxes (14.1)   17.7    42.6   
Total changes in operating working capital $ (36.4)   $ (110.0)   $ 46.8   
Supplemental Disclosures
Cash paid during the year for interest $ 271.5    $ 259.6    $ 213.1   
Cash paid during the year for income tax, net 48.7    58.0    72.6   
Property and equipment acquired through capital lease obligations 1.8    4.2    —   



See accompanying Notes to the Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF EQUITY
VERTIV HOLDINGS, LLC
(Dollars in millions)
Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total
Balance as of December 31, 2016 $ —    $ 1,301.7    $ (171.2)   $ (10.5)   $ 1,120.0   
Net Loss —    —    (369.6)   —    (369.6)  
Dividends to JV Holdings —    (1,024.0)   —    —    (1,024.0)  
Other comprehensive income, net of tax —    —    —    144.0    144.0   
Balance as of December 31, 2017 —    277.7    (540.8)   133.5    (129.6)  
Net Loss —    —    (314.0)   —    (314.0)  
ASC 606 cumulative adjustment —    —    (5.0)   —    (5.0)  
Other comprehensive loss, net of tax —    —    —    (91.7)   (91.7)  
Balance as of December 31, 2018 —    277.7    (859.8)   41.8    (540.3)  
Net Loss —    —    (140.8)   —    (140.8)  
Other comprehensive loss, net of tax —    —    —    (23.7)   (23.7)  
Balance as of December 31, 2019 $ —    $ 277.7    $ (1,000.6)   $ 18.1    $ (704.8)  



































See accompanying Notes to the Consolidated Financial Statements


5


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Vertiv Holdings, LLC ("Holdings LLC", and together with its majority-owned subsidiaries, “Vertiv”, "we", "our", or "the Company") provide mission-critical infrastructure technologies and life cycle services for data centers, communication networks, and commercial and industrial environments. Vertiv’s offerings include power conditioning and uninterruptible power systems, thermal management, integrated data center control devices, software, monitoring, and service. Vertiv manages and reports results of operations for three business segments: Americas; Asia Pacific; and Europe, Middle East & Africa.

A majority of the issued and outstanding equity interests in Holdings, LLC are held directly by Vertiv JV Holdings, LLC ("JV Holdings").
The controlling interests of Holdings LLC are ultimately held by certain private equity investment funds sponsored by Platinum Equity, LLC (such funds, collectively, "Platinum") in the form of Class A Units in Holdings LLC, and a subordinated interest in distributions is indirectly held by Emerson Electric Co. ("Emerson") in the form of Class B Units in Holdings LLC. Distributions to Emerson are contingent upon JV Holdings first receiving a threshold return on their initial investment.

On December 10, 2019, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Vertiv Holdings Co (formerly known as GS Acquisition Holdings Corp), a special purpose acquisition company. As contemplated in the Merger Agreement, the resulting business combination was accounted for as a reverse capitalization, with no goodwill or other intangible assets recorded in accordance with Generally Accepted Accounting Principles. The business combination was completed on February 7, 2020 (the "Closing Date"). See Note 20 for additional information.

Basis of Presentation

The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). Preparation of the consolidated financial statements requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and notes. Actual results could differ from these estimates. Management has evaluated subsequent events through the date the consolidated financial statements were available to be issued. Certain prior period amounts have been reclassified to conform to footnote presentation for the current year.

The consolidated financial statements include the accounts of Vertiv Holdings, LLC and its majority owned
subsidiaries and, when applicable, entities for which Holdings, LLC has a controlling financial interest or is the
primary beneficiary. The results of businesses acquired or disposed of are included in the consolidated financial
statements from the date of the acquisition or up to the date of disposal, respectively.

All intercompany transactions among Company entities have been eliminated. Sale and purchase transactions between the Company and other Emerson affiliates are included in the consolidated financial statements. See Note 13 for additional information regarding related party transactions.

Revenue recognition
The Company recognizes revenue from the sale of manufactured products and services when control of promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. The majority of the Company’s sales agreements contain performance obligations satisfied at a point in time when control is transferred to the customer. Sales for service contracts, including installation, inventory with no alternative use and an enforceable right of payment upon customer termination and other discrete services, generally are recognized over time as the services are provided. Payments received in advance for service arrangements are recorded as deferred revenue and recognized in net sales when the revenue recognition criteria are met. Unbilled revenue is recorded when performance obligations have been satisfied, but the Company does not have present right to payment.

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For agreements with multiple performance obligations, judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes. In these types of agreements we allocate sales price to each distinct obligation on a relative stand-alone selling price basis. The majority of revenue from arrangements with multiple performance obligations is recognized when tangible products are delivered, with smaller portions for associated installation and commissioning recognized shortly thereafter. Generally, contract duration is short term, and cancellation, termination or refund provisions apply only in the event of contract breach. These provisions have historically not been invoked.
Payment terms vary by the type and location of the customer and the products or services offered. Revenue from our sales have not been adjusted for the effects of a financing component as we expect that the period between when we transfer control of the product and when we receive payment to be one year or less. Sales, value add, and other taxes collected concurrent with revenue are excluded from sales. The Company records amounts billed to customers for shipping and handling in a sales transaction as revenue. Shipping and handling costs are treated as fulfillment costs and are included in costs of sales.
The Company records reductions to sales for prompt payment discounts, customer and distributor incentives including rebates, and returns at the time of the initial sale. Rebates are estimated based on sales terms, historical experience, trend analysis, and projected market conditions in the various markets served. Returns are estimated at the time of the sale primarily based on historical experience and recorded gross on the condensed consolidated balance sheet.
Sales commissions are expensed when the amortization period is less than a year and are generally not capitalized as they are typically earned at the completion of the contract when the customer is invoiced or when the customer pays Vertiv. We typically offer warranties that are consistent with standard warranties in the jurisdictions where we sell our goods and services. Our warranties are generally assurance type warranties for which we promise that our goods and services meet contract specifications. In limited circumstances, we sell warranties that extend the warranty coverage beyond the standard coverage offered on specific products. Sales for these separately-priced warranties are recorded based on their stand-alone selling price and are recognized as revenue over the length of the warranty period.

Foreign Currency Translation
The functional currency for substantially all of the Company’s non-U.S. subsidiaries is the local currency. Adjustments resulting from translating local currency financial statements into U.S. dollars are reflected in accumulated other comprehensive income (loss). Transactions denominated in currencies other than the subsidiaries’ functional currencies are subject to changes in exchange rates with resulting gains/losses recorded in net earnings (loss).

Cash and Cash Equivalents
Cash and cash equivalents are reflected on the consolidated balance sheets and consist of highly liquid investments with original maturities of three months or less.

The following table provides a reconciliation of the amount of cash, cash equivalents and restricted cash reported within the consolidated balance sheets. Restricted cash represents amounts held in an escrow account related to payment of specific tax indemnities related to the acquisition of Vertiv.
December 31, 2019 December 31, 2018 December 31, 2017
Cash and cash equivalents $ 223.5    $ 215.1    $ 388.0   
Restricted cash included in other current assets 10.2    10.2    10.2   
Total cash, cash equivalents, and restricted cash $ 233.7    $ 225.3    $ 398.2   


7


Accounts Receivable and Allowance for Doubtful Accounts
The Company’s accounts receivable are derived from customers located in the U.S. and numerous foreign jurisdictions. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers. The Company establishes an allowance for uncollectible accounts receivable based on historical experience and any specific customer collection issues that the Company has identified. Write-offs are recorded against the allowance for doubtful accounts when all reasonable efforts for collection have been exhausted.

Inventories
Inventories are stated at the lower of cost, using the first-in, first-out method, or net realizable value and the majority is valued based on standard costs. The remainder is valued based on average actual costs. Standard costs are revised at the beginning of each fiscal year. The impact from annually resetting standards, as well as operating variances incurred throughout the year, are allocated to inventories and recognized in cost of sales as product is sold.

The following are the components of inventory:
December 31, 2019 December 31, 2018
Inventories
Raw materials $ 180.2    $ 201.0   
Finished Products 162.6    201.4   
Work in process 58.2    84.1   
Total inventories $ 401.0    $ 486.5   

Fair Value Measurement
Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, establishes a formal hierarchy and framework for measuring certain financial statement items at fair value, and requires disclosures about fair value measurements and the reliability of valuation inputs. Under ASC 820, measurement assumes the transaction to sell an asset or transfer a liability occurs in the principal or at least the most advantageous market for that asset or liability. Within the hierarchy, Level 1 instruments use observable market prices for the identical item in active markets and have the most reliable valuations. Level 2 instruments are valued through broker/dealer quotation or through market-observable inputs for similar items in active markets, including forward and spot prices, interest rates and volatilities. Level 3 instruments are valued using inputs not observable in an active market, such as company-developed future cash flow estimates, and are considered the least reliable. The carrying value approximates fair value for cash and cash equivalents, accounts receivable and accounts payable because of the relatively short-term maturity of these instruments.

Debt Issuance Costs, Premiums and Discounts
Debt issuance costs, premiums and discounts are amortized into interest expense over the terms of the related loan agreements using the effective interest method or other methods which approximate the effective interest method.  Debt issuance costs related to a recognized debt liability are presented on the balance sheets as a direct deduction from the carrying amount of that debt liability, consistent with discounts.

Property, Plant and Equipment and Definite Lived Intangible Assets
The Company records investments in land, buildings, and machinery and equipment at cost, which includes the then fair values of assets acquired in business combinations. Depreciation is computed principally using the straight-line method over estimated service lives, which are 30 to 40 years for buildings and 10 to 12 years for machinery and equipment. The Company’s definite lived identifiable intangible assets that are subject to amortization are amortized on a straight-line basis over their estimated useful lives. Definite lived identifiable intangibles consist of intellectual property such as patented and unpatented technology and trademarks, customer relationships and capitalized software. Definite lived identifiable intangible assets are also subject to evaluation for potential impairment if events or circumstances indicate the carrying value may not be recoverable. Long-lived tangible and intangible assets are reviewed for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. Impairment losses are recognized based on

8


estimated fair values if the sum of expected future undiscounted cash flows of the related assets is less than the carrying values.

Following are the components of property, plant and equipment:
December 31, 2019 December 31, 2018
Property, plant and equipment, net
Machinery and equipment $ 280.7    $ 254.8   
Buildings 243.2    234.0   
Land 46.7    51.7   
Construction in progress 21.9    15.9   
Property, plant and equipment, at cost 592.5    556.4   
Less: Accumulated depreciation (164.3)   (114.7)  
Property, plant and equipment, net $ 428.2    $ 441.7   

Goodwill and Other Indefinite Lived Intangible Assets
Assets and liabilities acquired in business combinations are accounted for using the acquisition method and recorded at their respective fair values. Goodwill represents the excess of consideration paid over the net assets acquired and is assigned to the reporting unit that acquires the business. A reporting unit is an operating segment as defined in ASC 280, Segment Reporting, or a business one level below an operating segment if discrete financial information for that business is prepared and regularly reviewed by segment management. The Company conducts annual impairment tests of goodwill in the fourth quarter or more frequently if events or circumstances indicate a reporting unit’s fair value may be less than its carrying value. If an initial assessment indicates it is more likely than not goodwill may be impaired, it is evaluated by comparing the reporting unit’s estimated fair value to its carrying value. If its carrying value exceeds its estimated fair value, goodwill impairment is recognized to the extent that recorded goodwill exceeds the fair value of goodwill. Estimated fair values of the reporting unit are Level 3 measures and are developed under an income approach that discounts estimated future cash flows using risk-adjusted interest rates and also the market approach.

Indefinite lived intangible assets consist of certain trademarks which are also evaluated annually for impairment or upon the occurrence of a triggering event. Impairment is determined to exist when the fair value is less than the carrying value of the assets being tested.

Product Warranties
Warranties generally extend for one to two years from the date of sale. Provisions for warranty are determined primarily based on historical warranty cost as a percentage of sales, adjusted for specific issues that may arise.
Product warranty expense is approximately one percent of sales and the product warranty accrual is reflected in accrued expenses in the consolidated balance sheets.

The change in product warranty accrual is as follows:
December 31, 2019 December 31, 2018 December 31, 2017
Beginning balance $ 44.9    $ 40.0    $ 37.4   
Provision charge to expense 48.7    41.0    32.4   
Paid/utilized (50.3)   (36.1)   (29.8)  
Ending balance $ 43.3    $ 44.9    $ 40.0   


9


Derivative Instruments and Hedging Activities
In the normal course of business, the Company is exposed to changes in foreign currency exchange rates and commodity prices due to its worldwide presence and business profile. The Company’s foreign currency exposures relate to transactions denominated in currencies that differ from the functional currencies of its subsidiaries. Primary commodity exposures are price fluctuations on forecasted purchases of copper and aluminum and related products. As part of the Company’s risk management strategy, derivative instruments are selectively used in an effort to minimize the impact of these exposures. All derivatives are associated with specific underlying exposures and the Company does not hold derivatives for trading or speculative purposes. The duration of hedge positions is less than one year.

All derivatives are accounted for under ASC 815, Derivatives and Hedging, and recognized at fair value. For derivatives hedging variability in future cash flows, the effective portion of any gain or loss is deferred in equity and recognized when the underlying transaction impacts earnings. For derivatives hedging the fair value of existing assets or liabilities, both the gain or loss on the derivative and the offsetting loss or gain on the hedged item are recognized in earnings each period. To the extent that any hedge is not fully effective at offsetting changes in the underlying hedged item, there could be a net earnings impact. The Company also uses derivatives to hedge economic exposures that do not receive deferral accounting under ASC 815. The underlying exposures for these hedges relate primarily to the revaluation of certain foreign-currency denominated assets and liabilities. Gains or losses from the ineffective portion of any hedge, as well as any gains or losses on derivative instruments not designated as hedges, are recognized in the consolidated statements of earnings (loss) immediately.

As of December 31, 2019, 2018, and 2017 no outstanding currency and commodity hedges received deferral accounting treatment. Accordingly, the Company recognized mark-to-market gains/(losses) of $(0.4), $1.2, and $(1.3) during the years ended December 31, 2019, 2018, and 2017 respectively. The fair values of the outstanding hedge instruments were measured using valuations based upon quoted prices for similar assets and liabilities in active markets (Level 2) and are valued by reference to similar financial instruments, adjusted for terms specific to the contracts.

Income Taxes
The provision for income taxes is determined using the asset and liability approach of ASC 740 by jurisdiction on a legal entity by legal entity basis. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes result from differences between the financial and tax basis of the Company’s assets and liabilities and are measured using enacted rates in effect for the year in which the temporary differences are expected to be recovered or settled. The impact of a change in income tax rates on deferred tax assets and liabilities is recognized in earnings in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The tax carryforwards reflected in the Company’s consolidated financial statements have been determined using the separate return method. The tax carryforwards include net operating losses and tax credits.

The Company’s extensive operations and the complexity of global tax regulations require assessments of uncertainties in estimating the taxes the Company will ultimately pay. The Company recognizes liabilities for anticipated tax audit uncertainties in the U.S. and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due.

APB 23 of ASC 740-30 provides guidance that U.S. companies do not need to recognize tax effects on outside basis differences that are indefinitely reinvested. As of December 31, 2019 and 2018, the Company has provided for U.S. federal income taxes, foreign withholding and other taxes on outside basis differences in certain foreign subsidiaries that are not indefinitely reinvested. Certain earnings in certain foreign affiliates are indefinitely reinvested, but determining the impact of such amounts was not practicable.

Commitments and Contingencies
Certain conditions may exist as of the date of the financial statements which may result in a loss to the Company, but will only be resolved when one or more future events occur or fail to occur. Such liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when the Company assesses that it is probable that a future liability has been incurred and the amount can be reasonably estimated.

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Recoveries of costs from third parties, which the Company assesses as being probable of realization, are recorded to the extent of related contingent liabilities accrued. Legal costs incurred in connection with matters relating to contingencies are expensed in the period incurred. The Company records gain contingencies when realized.

Recently Adopted Accounting Pronouncements
Effective January 1, 2019, we adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2016-02, Leases, which requires the recognition of lease assets and liabilities by lessees for those leases classified as operating leases under previous guidance. The Company adopted the standard effective January 1, 2019 using the modified retrospective transition option of applying the standard at the adoption date. The Company elected the package of practical expedients permitted under the transition guidance, which among other things, allowed the Company to carry forward the historical lease classification. As a result of the adoption, the Company recorded both operating lease right-of-use assets of $110.4 and operating lease liabilities of $113.2 as of December 31, 2019. The adoption had no impact on the consolidated statements of earnings (loss), comprehensive income (loss) and cash flows for the year ended December 31, 2019. Refer to Note 8 - Leases for additional information pertaining to the adoption of the new standard.
In December 2019, the FASB issued ASU 2019-12: Income Taxes to simplify the accounting for income taxes. The new guidance removes certain exceptions to the general principles of ASC 740 related to intraperiod tax allocation exceptions, deferred tax liabilities related to outside basis differences, and year-to-date losses in interim periods. The Company adopted the amendments as of January 1, 2019 and has determined that the impact on the consolidated financial statements is not material and no adjustment to retained earnings is necessary.

Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a service contract hosting arrangement with those of developing or obtaining internal-use software. This standard is effective for the Company January 1, 2020. The Company will adopt the guidance prospectively to all implementation costs incurred after the date of adoption.

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326), a new standard to replace the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The standard is effective for the Company January 1, 2020, and early adoption is permitted. The adoption of ASU 2016-13 is not expected to have a material impact on its consolidated financial statements.

(2) ACQUISITIONS

Acquisition of Geist

On February 1, 2018, certain of our subsidiaries acquired assets and assumed liabilities related to the business of Geist, as well as outstanding ownership interests of each of Geist Shenzen Trading Limited Company and Geist Europe Ltd. (together, “Geist”), for $123.6 of cash. Geist is a leading manufacturer of rack power distribution units, intelligent power, airflow management, environmental monitoring and infrastructure management solutions for data centers. During the second quarter of 2018, we completed the acquisition for an additional $2.5 of cash related to the purchase of additional assets. The Company used the acquisition method of accounting to account for these transactions. Under the acquisition method of accounting, the assets acquired and liabilities assumed in the transactions were recorded at their respective estimated fair values at the acquisition date. The fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market.


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The total aggregate purchase consideration, net of cash acquired, was as follows:
Purchase Consideration
Cash $ 126.1   
Purchase consideration 126.1   
Less: Cash acquired (1.8)  
Purchase consideration, net of cash acquired $ 124.3   

Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their respective estimated fair values as of the closing date. The purchase price was finalized during the fourth quarter of 2018.
The following table summarizes the values of the assets acquired and liabilities assumed at the closing date:
 Purchase Price Allocation
Current assets $ 18.1   
Property, plant and equipment, net 28.5   
Intangible assets 40.4   
Total identifiable assets 87.0   
Current liabilities 5.3   
Total identifiable liabilities assumed 5.3   
Goodwill 42.6   
Purchase consideration, net of cash acquired $ 124.3   

Goodwill is calculated as the excess of the consideration transferred over the fair value of the net assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill include the future growth potential of Geist and its assembled workforce. Goodwill was assigned to the Americas and EMEA segments and is expected to be deductible for income tax purposes in the U.S.

The following table details the total identifiable intangible assets acquired, their useful lives and fair values:

Useful Life
(Years)
Fair Value
Customer relationships 15 $ 21.9   
Developed technology 15 12.4   
Trademarks   6.1   
Total finite-lived identifiable intangible assets $ 40.4   
Weighted average useful life of finite-lived intangibles (years) 13.5   

Acquisition of Energy Labs, Inc.

On December 28, 2017, Vertiv acquired Energy Labs, Inc. ("Energy Labs"), a leading provider of direct and indirect air handling systems and modular data center solutions for $149.5. The Company used the acquisition method of accounting to account for this transaction. Under the acquisition method of accounting, the assets acquired and liabilities assumed in the transaction were recorded at their respective estimated fair values at the acquisition date. The U.S. GAAP purchase price includes estimated contingent consideration of $12.8 at the date of acquisition related to the potential maximum $34.5 payment contingent on the achievement of 2018 adjusted income measures. The Company determined the fair value of the contingent consideration based on an income approach using a risk-neutral simulation model. Inputs include the financial forecasts of the future operating results of Energy Labs, the probability of reaching the forecast, and the associated discount rate. At December 31, 2017, a discount rate of 14.8% was utilized in the valuation. On an undiscounted basis, the range of outcomes was zero to $34.5. The fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market. The contingent consideration was revalued each quarter under the same valuation technique applied during purchase accounting. The fair value of contingent consideration decreased during the year

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ended December 31, 2018 by $10.0 to $2.8 due to remeasurement which was recognized in other deductions, net, in the consolidated statement of earnings (loss) and represents our best estimate of the final amount due under this arrangement.

The total aggregate purchase consideration, net of cash acquired, was as follows:
Purchase Consideration
Cash $ 144.2   
Contingent consideration 12.8   
Purchase consideration 157.0   
Less: Cash acquired (7.5)  
Purchase consideration, net of cash acquired $ 149.5   

Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their respective estimated fair values as of the closing date. The purchase price was finalized during the fourth quarter of 2018.

The following table summarizes the values of the assets acquired and liabilities assumed at the closing date:

Purchase Price Allocation
Current assets $ 26.4   
Property, plant and equipment, net 23.6   
Intangible assets 73.7   
Total identifiable assets 123.7   
Current liabilities 13.3   
Deferred income taxes 23.1   
Total identifiable liabilities assumed 36.4   
Goodwill 62.2   
Purchase consideration, net of cash acquired $ 149.5   

Goodwill is calculated as the excess of the consideration transferred over the fair value of the net assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill include the future growth potential of Energy Labs and its assembled workforce. All of the goodwill was assigned to the Americas segment and none of the goodwill is expected to be deductible for income tax purposes.
The following table details the total identifiable intangible assets acquired, their useful lives and fair values:

Useful Life
(Years)
Fair Value
Customer relationships 10 $ 59.7   
Trademarks   3.3   
Capitalized software   7.5   
Other Intangibles   3.2   
Total finite-lived identifiable intangible assets $ 73.7   
Weighted average useful life of finite-lived intangibles (years) 8.9   

For financial accounting purposes, there were certain items including amortizable intangible assets and the excess of fair value of assets over tax basis that were treated as temporary differences.

During 2017 Vertiv made net payments of $75.0 to finalize the acquisition accounting with Emerson Network Power related to the 2016 acquisition.

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(3) REVENUE

Beginning with the first quarter of 2019, we revised our sales by product and service. Accordingly, we have restated our disaggregated revenue table by product and service offering below to conform with the 2019 presentation.
We have determined the following types of performance obligations exist within our contracts with customers:
Critical infrastructure & solutions

We identify delivery of products as performance obligations within the critical infrastructure & solutions offering. Such products include AC and DC power management, thermal management, modular hyperscale type data center sites, as well as hardware for managing IT equipment. We generally satisfy these performance obligations and recognize revenue for these products at a point in time when control has transferred to the customer. The transfer of control generally occurs when the product has been shipped or delivery has occurred, depending on shipping terms.

For customized products that the customer controls at the customer’s site while we build and customize the product, we recognize revenue over time because the customer obtains control of the asset as it is built. For these products, we use an input method to recognize revenue based on costs incurred relative to total estimated project costs as this represents the most faithful measure of the goods transferred to the customer.

Services & software solutions

Services include preventative maintenance, acceptance testing, engineering and consulting, performance assessments, remote monitoring, training, spare parts, and digital critical infrastructure software. Services are generally recognized as the services are provided, or straight-line for stand-ready contracts, because the customer simultaneously receives and consumes the benefit as we perform the services. We recognize revenue for software applications at a point in time upon transfer of the software and monitoring services are recognized over time.

I.T. and edge infrastructure and solutions

Performance obligations within I.T. and edge infrastructure include the delivery of racks, rack power, rack power distribution, rack thermal systems, and configurable integrated solutions. For these performance obligations, we recognize revenue at a point in time based on when transfer of control occurs.

Disaggregation of Revenues

The following table disaggregates our revenue by product and service offering and timing of transfer of control:
Year Ended December 31, 2019
Americas Asia Pacific Europe, Middle East, & Africa Total
Sales by Product and Service Offering:
Critical infrastructure & solutions $ 1,355.4    $ 763.2    $ 514.0    $ 2,632.6   
Services & software solutions 679.4    336.0    283.5    1,298.9   
I.T. & edge infrastructure and solutions 194.3    178.8    126.6    499.7   
Total $ 2,229.1    $ 1,278.0    $ 924.1    $ 4,431.2   
Timing of revenue recognition:
Products and services transferred at a point in time $ 1,592.4    $ 1,007.1    $ 748.9    $ 3,348.4   
Products and services transferred over time 636.7    270.9    175.2    1,082.8   
Total $ 2,229.1    $ 1,278.0    $ 924.1    $ 4,431.2   


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Year Ended December 31, 2018
Americas Asia Pacific Europe, Middle East, & Africa Total
Sales by Product and Service Offering:
Critical infrastructure & solutions $ 1,246.4    $ 723.9    $ 481.5    $ 2,451.8   
Services & software solutions 669.8    339.1    267.2    1,276.1   
I.T. & edge infrastructure and solutions 229.5    181.2    147.0    557.7   
Total $ 2,145.7    $ 1,244.2    $ 895.7    $ 4,285.6   
Timing of revenue recognition:
Products and services transferred at a point in time $ 1,530.6    $ 973.5    $ 701.8    $ 3,205.9   
Products and services transferred over time 615.1    270.7    193.9    1,079.7   
Total $ 2,145.7    $ 1,244.2    $ 895.7    $ 4,285.6   

The opening and closing balances of our current and long-term contract assets and current and long-term deferred revenue are as follows:
Balances at
December 31, 2019
Balances at
December 31, 2018
Deferred revenue - current (1)
$ 160.9    $ 170.5   
Deferred revenue - noncurrent (2)
41.3    36.5   
Other contract liabilities - current (1)
39.8    29.8   

(1) Current deferred revenue and contract liabilities are included within accrued expenses.
(2) Noncurrent deferred revenue is recorded within other long-term liabilities.

Deferred revenue consists primarily of maintenance, extended warranty and other service contracts. We expect to recognize revenue of $21.8, $12.8 and $6.7 in the years ending December 31, 2021, 2022, and thereafter, respectively.

(4) DISCONTINUED OPERATIONS

On July 27, 2017, the Company entered into an agreement to sell its critical power business for approximately $1,250.0. The sale closed on October 31, 2017. The decision to divest this business was part of our strategy to focus on applying resources toward business and technological advancements in our core data center, telecommunications and commercial and industrial markets.
We determined the sale of the critical power business represents discontinued operations as it constitutes a disposal of an operating segment, meets held for sale criteria, and is a strategic shift that will have a major effect on our operations and financial results. As a result, we reclassified the related earnings (loss) from continuing operations to earnings (loss) from discontinued operations - net of income taxes on the consolidated statement of earnings (loss) for all the periods presented. No amounts for shared general and administrative operating support expense were allocated to the discontinued operation.
As a result of the transaction, Vertiv recorded an after-tax gain on the sale of the business of approximately $33.2 for the year ended December 31, 2017. During 2018, Vertiv recorded additional after-tax gain on the sale of the business of $6.9, related to a $4.4 working capital settlement and $2.5 of other tax adjustments.
The following table provides the major classes of line items constituting the results of the discontinued operations during the year ended December 31, 2017. The year ended December 31, 2017, includes the results of operations as a discontinued operation for the Company's critical power business through October 31, 2017, the date of its disposition, and the gain on the disposition of the discontinued operation.

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December 31, 2017
Net sales
Net sales $ 365.9   
Costs and expenses
Cost of sales 204.3   
Selling, general and administrative expenses 91.1   
Other deductions (income), net 55.3   
Interest expense, net 28.7   
Earnings (loss) before income taxes (13.5)  
Income tax expense 1.9   
Earnings (loss) from Discontinued Operations - before gain on sale of discontinued operations $ (15.4)  
Gain on Disposition of Discontinued Operations - net of income taxes 33.2   
Earnings (loss) from Discontinued Operations - net of income taxes $ 17.8   

There were no assets and liabilities of discontinued operations on the Consolidated Balance Sheet at December 31, 2019 or 2018.
The following table summarizes the depreciation, amortization, and capitalized expenditures for discontinued operations during the year ended December 31, 2017.
December 31, 2017
Depreciation $ 2.5   
Amortization 55.0   
Capital expenditures 0.6   

(5) RESTRUCTURING COSTS

Restructuring expense reflects costs associated with the Company's efforts to continually improve operational efficiency and deploy assets to remain competitive on a worldwide basis. Shutdown costs include severance, benefits, stay bonuses, lease and contract terminations and asset write-downs. Start-up and moving costs include costs of moving fixed assets, employee training and relocation. Vacant facility costs include security, maintenance, utilities and other costs.
Restructuring expenses were $20.7, $46.2, $41.6 for the years ended December 31, 2019, 2018 and 2017, respectively. These expenses are recorded in other deductions, net in the consolidated statements of earnings (loss). The Company expects full year 2020 restructuring expense to be approximately $7.9. This expense primarily will relate to severance and benefits as part of the organizational re-alignment initiatives.
The change in the liability for restructuring costs for the year ended December 31, 2019 follows:
2018  Paid/
Utilized
 Expense 2019
Severance and benefits $ 24.6    $ (21.6)   $ 18.6    $ 21.6   
Lease and contract terminations —    —    —    —   
Vacant facility and other shutdown costs 1.2    (1.3)   0.7    0.6   
Start-up and moving costs —    (1.4)   1.4    —   
Total $ 25.8    $ (24.3)   $ 20.7    $ 22.2   




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The change in the liability for restructuring costs for the year ended December 31, 2018 follows:
2017  Paid/
Utilized
 Expense 2018
Severance and benefits $ 20.1    $ (28.7)   $ 33.2    $ 24.6   
Lease and contract terminations 2.2    (2.2)   —    —   
Vacant facility and other shutdown costs 5.9    (15.2)   10.5    1.2   
Start-up and moving costs 0.1    (2.6)   2.5    —   
Total $ 28.3    $ (48.7)   $ 46.2    $ 25.8   
The change in liability for the restructuring costs for the year ended December 31, 2017 follows:
2016  Paid/
Utilized
 Expense 2017
Severance and benefits $ 14.8    $ (24.7)   $ 30.0    $ 20.1   
Lease and contract terminations 0.2    (0.3)   2.3    2.2   
Vacant facility and other shutdown costs 0.2    (2.4)   8.1    5.9   
Start-up and moving costs 0.4    (1.5)   1.2    0.1   
Total $ 15.6    $ (28.9)   $ 41.6    $ 28.3   
Restructuring expense by business segment follows:
December 31, 2019 December 31, 2018 December 31, 2017
Americas $ 5.3    $ 13.7    $ 11.7   
Asia Pacific 3.9    8.3    13.6   
Europe, Middle East & Africa 11.1    19.0    15.5   
Corporate 0.4    5.2    0.8   
Total $ 20.7    $ 46.2    $ 41.6   

(6) GOODWILL AND OTHER INTANGIBLES

The change in the carrying value of goodwill by segment follows:
 Americas  Asia Pacific  Europe, Middle East & Africa  Total
Balance, December 31, 2017 $ 356.4    $ 53.1    $ 186.6    $ 596.1   
Foreign currency translation 1.9    (2.5)   (10.5)   (11.1)  
Measurement period adjustments (1)
9.0    0.3    3.0    12.3   
Acquisitions (1)
29.2    —    7.5    36.7   
Balance, December 31, 2018 $ 396.5    $ 50.9    $ 186.6    $ 634.0   
Foreign currency translation and other (25.0)   (0.6)   (2.6)   (28.2)  
Balance, December 31, 2019 $ 371.5    $ 50.3    $ 184.0    $ 605.8   

(1)Represents measurement period adjustments related to the Geist and Energy Labs acquisitions. See note 2 for additional information.









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The gross carrying amount and accumulated amortization of identifiable intangible assets by major class follow:
As of December 31, 2019 Gross Accumulated Amortization Net
Customer relationships $ 1,099.2    $ (268.2)   $ 831.0   
Developed Technology 328.2    (105.4)   222.8   
Capitalized software 103.3    (35.8)   67.5   
Trademarks 38.6    (12.4)   26.2   
Favorable operating leases 2.1    (2.1)   —   
Total finite-lived identifiable intangible assets $ 1,571.4    $ (423.9)   $ 1,147.5   
Indefinite-lived Trademarks 294.1    —    294.1   
Total Intangible Assets $ 1,865.5    $ (423.9)   $ 1,441.6   
As of December 31, 2018 Gross Accumulated Amortization Net
Customer relationships $ 1,102.0    $ (180.4)   $ 921.6   
Developed Technology 326.2    (70.5)   255.7   
Capitalized software 81.6    (17.9)   63.7   
Trademarks 38.6    (7.7)   30.9   
Favorable operating leases 2.1    (1.8)   0.3   
Backlog 139.2    (139.2)   —   
Total finite-lived identifiable intangible assets $ 1,689.7    $ (417.5)   $ 1,272.2   
Indefinite-lived Trademarks 292.0    —    292.0   
Total Intangible Assets $ 1,981.7    $ (417.5)   $ 1,564.2   

Total intangible asset amortization expense for the years ended December 31, 2019, 2018 and 2017, was $145.8, $156.6, $224.8, respectively. Based on intangible asset balances as of December 31, 2019, expected amortization expense is $145.2 in 2020, $145.9 in 2021, $137.9 in 2022, $133.2 in 2023, $133.0 in 2024.

(7) DEBT

Long-term debt consists of the following as of December 31, 2019 and 2018:
December 31, 2019 December 31, 2018
Term Loan due 2023 $ 2,070.0    $ 2,070.0   
9.250% Senior notes due 2024 750.0    750.0   
12.00%/13.00% PIK notes due 2022 500.0    500.0   
ABL Revolving Credit Facility 145.2    245.1   
10.00% notes due 2024 120.0    —   
Unamortized discount and issuance costs (117.9)   (137.3)  
Long-term debt, net $ 3,467.3    $ 3,427.8   

Contractual maturities of the Company’s debt obligations as of December 31, 2019 are shown below:

Term Loan 9.250% Senior Notes PIK Notes ABL 10.00% Notes Total
2020 $ —    $ —    $ —    $ —    $ —    $ —   
2021 —    —    —    145.2    —    145.2   
2022 —    —    500.0    —    —    500.0   
2023 2,070.0    —    —    —    —    2,070.0   
2024 —    750.0    —    —    120.0    870.0   
Total $ 2,070.0    $ 750.0    $ 500.0    $ 145.2    $ 120.0    $ 3,585.2   


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Term Loan

On November 30, 2016, Vertiv Group and Vertiv Intermediate II entered into a $2,320.0 senior term loan credit agreement that matures on November 30, 2023 with JPMorgan Chase Bank, N.A. as administrative agent and collateral agent (the “Term Loan Facility”, and the loan thereunder, the "Term Loan"). On February 9, 2017, Vertiv Group made a voluntary partial prepayment of $75.0 on the Term Loan, reducing the outstanding principal amount to $2,245.0.

On March 17, 2017, Vertiv Group, Vertiv Intermediate II, certain of their subsidiaries, the relevant lenders under the Term Loan Facility and the administrative agent under the Term Loan Facility amended the Term Loan Facility (the "Amended Term Loan Facility") to reduce the interest payable thereunder to the LIBO Rate (as defined in the documentation governing the Amended Term Loan Facility), plus the applicable margin of 4.00% per annum, or the Base Rate (as defined in the documentation governing the Amended Term Loan Facility) as in effect from time to time, plus the applicable margin of 3.00% per annum. The loans under the Amended Term Loan Facility amortize in quarterly installments in an amount equal to 1.00% per annum beginning in June 2020, and include other customary mandatory prepayments including: (a) commencing with the fiscal year ending December 31, 2018 (as clarified in that certain Amendment No. 2 described below), 75% (subject to step-downs based on first lien net leverage ratios) of Excess Cash Flow (as defined in documentation governing the Amended Term Loan Facility) and (b) subject to certain exceptions and reinvestment rights, the Term Loan requires that 100% of the net cash proceeds from certain asset sales, insurance recovery and condemnation events and unpermitted debt issuances are applied to repay the loans thereunder.

Subject to customary conditions, the Amended Term Loan Facility allows for an increase in the commitments thereunder by an amount not to exceed the sum of (i) $325.0, (ii) all previous voluntary prepayments of the loans thereunder as of the relevant date of determination (other than the prepayment described in the immediately subsequent paragraph), and (iii) an unlimited amount so long as the first lien net leverage ratio as of the relevant date of determination does not exceed 3.05 to 1.00 on a pro forma basis. The obligations of Vertiv Group under the Term Loan are guaranteed by Vertiv Intermediate II, and Vertiv Group's existing and future direct and indirect wholly-owned domestic subsidiaries, with certain exceptions, and secured by (i) first priority liens and security interests on substantially all of the fixed assets of Vertiv Group and the guarantors and (ii) second priority liens and security interests on substantially all current assets of Vertiv Group and the guarantors.

On November 1, 2017, Amendment No. 2 to the Term Loan Facility was executed and a $500.0 partial prepayment of the loans under the Amended Term Facility was made as a condition to the effectiveness of such Amendment No. 2. Amendment No. 2 also permitted the payment of a one-time dividend in connection with the sale of our critical power business and eliminated the quarterly installments of 1.00% per annum beginning in June 2020. The terms of the loan under the Amended Term Facility were otherwise unchanged. Lender fees of $8.7 were capitalized and are being amortized over the remaining life of the debt and $29.2 of original issuance costs were written off due to the prepayment. Additionally, $99.0 in consent fees and $6.2 of legal and administrative fees were expensed and are included in interest expense in the year ended December 31, 2017.

In December 2017, Vertiv Group, the guarantors party to the Amended Term Loan Facility on such date and JPMorgan Chase Bank, N.A., as administrative agent and the incremental lender, further modified the Amended Term Loan Facility to provide for an incremental borrowing of $325.0 on the Term Loan, resulting in a principal balance of $2,070.0 and $4.2 of issuance costs capitalized.

9.250% Senior Notes

On October 17, 2016, Vertiv Group issued $750.0 aggregate principal amount of 9.250% senior notes maturing on October 15, 2024 (the “2024 Notes”). The proceeds of the 2024 Notes were used to finance the Transaction and related costs.

Each 2024 Note bears interest at a rate of 9.250% per annum payable semi-annually on April 15 and October 15 of each year, which commenced with April 15, 2017. Prior to the maturity date, the 2024 Notes are also subject to repurchase of up to 100% of the outstanding aggregate principal at a redemption price of 100% plus an applicable premium (as defined in the indenture to the 2024 Notes) and accrued and unpaid interest. The 2024 Notes rank contractually equal in right of payment to all of Vertiv Group's other existing and future senior unsecured

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indebtedness. Each 2024 Note is guaranteed on a senior unsecured basis by all of Vertiv Group's domestic subsidiaries that are borrowers under or guarantee the Term Loan (as defined below) and the ABL Revolving Credit Facility. On October 27, 2017, Vertiv Group entered into a supplemental indenture to permit the payment of a one-time dividend in connection with the sale of our critical power business and to lower the cap on indebtedness permitted under the indenture.

12.00%/13.00% Senior PIK Toggle Notes due 2022

On February 9, 2017, Vertiv Intermediate Holding Corporation ("Holdco"), a wholly owned subsidiary of Vertiv Holding, issued $500.0 of 12.00%/13.00% Senior PIK Toggle Notes due 2022 (the "2022 Notes"). Holdco used the proceeds from the offering to (a) pay a cash dividend to its sole stockholder and (b) repay $75.0 of outstanding loans under the Term Loan. Holdco's only material asset is the capital stock of Vertiv Intermediate Holding II Corporation ("Vertiv Intermediate II"), another holding corporation whose only material assets are its equity interest in Vertiv Group. Other than the 2022 Notes and its ownership of the capital stock of Vertiv Intermediate II, Holdco has no independent operations. Each note bears interest (a) at a cash interest rate of 12.00% per annum (b) at a "PIK" interest rate of 13.00% for interest paid through increases in the principal amount of notes outstanding or through issuances of new notes (upon satisfaction of certain conditions), either of which is payable semi-annually on February 15 and August 15 of each year, commencing with August 15, 2017. The 2022 Notes rank contractually equal in right of payment to all of Holdco's other existing and future senior unsecured indebtedness. On October 27, 2017, Holdco entered into a supplemental indenture to permit the payment of a one-time dividend in connection with the sale of the our critical power business and to lower the cap on indebtedness permitted under the indenture.

ABL Revolving Credit Facility

On November 30, 2016, Vertiv Group, as lead borrower, certain of its subsidiaries, as borrowers, and Vertiv Intermediate II entered into an aggregate $400.0 asset-based revolving credit agreement (the "ABL Revolving Credit Agreement") that matures on November 30, 2021 (such facility, the “ABL Revolving Credit Facility”) with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent. Subject to certain terms and conditions, the ABL Revolving Credit Agreement allows Vertiv Group to increase the commitments under the ABL Revolving Credit Facility by an aggregate amount not to exceed $150.0, During the year ended December 31, 2019, Vertiv Group increased the limit on the ABL Revolving Credit Facility to $455.0. As of December 31, 2019, we have $95.0 of incremental capacity remaining. The commitments under the ABL Revolving Credit Agreement are bifurcated into (i) commitments in respect of a U.S. dollar-denominated sub-facility (the "U.S. Sub-facility") and (ii) commitments with respect of one or more sub-facilities available in multiple currencies outside of the U.S. dollar (collectively, the "Foreign Sub-facilities"). The obligations under the ABL Revolving Credit Facility are guaranteed (or, in the case of certain subsidiaries, co-borrowed) by Vertiv Intermediate II and Vertiv Group's existing and future direct and indirect wholly-owned domestic subsidiaries, with certain exceptions, and secured by (i) first priority liens and security interests on substantially all of the current assets of Vertiv Group and the guarantors, and (ii) second priority liens and security interests on substantially all of the fixed assets of Vertiv Group and the guarantors. In addition, the obligations in respect of the Foreign Sub-facilities are guaranteed (or in the case of certain subsidiaries, co-borrowed) by certain foreign subsidiaries of Vertiv Group, and secured by the assets of such foreign subsidiaries that are included in the asset base.

At the Vertiv Group's option, U.S. Sub-facility loans under the ABL Revolving Credit Facility bear interest at either (a) a LIBOR rate, plus an initial applicable margin of 1.75% (or 2.75% for borrowings within the FILO tranche), or (b) a base rate (not less than 2.00%) plus an initial applicable margin of 0.75% (or 1.75% for borrowings within the FILO tranche). Foreign Sub-facilities bear interest at the benchmark rate applicable to the elected currency each loan is carried in, plus an applicable margin. The applicable margin for all loans under the ABL Revolving Credit Facility following the Closing Date is the initial applicable margin. Following the Company’s first full fiscal quarter after the Closing Date and each quarter thereafter, the applicable margin is subject to an increase or decrease of 25 basis points from the initial applicable margin as determined by the average available borrowings for the preceding quarter. The ABL Revolving Credit Facility also requires a commitment fee be paid to the lenders on the average daily unused portion thereof at a rate of 0.25% per annum through maturity.

At December 31, 2019, the Company had $287.2 of availability under the ABL Revolving Credit Facility, net of
letters of credit outstanding in the aggregate principal amount of $22.6.


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10.00% Notes

During May 2019, Vertiv Group issued $120.0 aggregate principal amount of 10.00% senior secured second lien notes maturing on May 15, 2024 (with a springing maturity to November 15, 2021 if the Holdco’s PIK Toggle Notes are not repaid, redeemed or discharged, or the maturity with respect thereto is not otherwise extended, on or prior to November 15, 2021). Each note bears interest at a rate of 10.00% per annum payable semi-annually on May 15 and November 15 of each year.  The obligations of Vertiv Group under the notes are guaranteed by Vertiv Group’s existing and future direct and indirect wholly-owned domestic subsidiaries, with certain exceptions, and secured by liens junior in priority to the first priority liens securing each of Vertiv Group’s existing revolving credit agreement and existing term loan credit agreement.

(8) LEASES

The Company leases office space, warehouses, vehicles, and equipment. Leases have remaining lease terms of 1 year to 20 years, some of which have renewal and termination options. Termination options are exercisable at the Company's option. Terms and conditions to extend or terminate are recognized as part of the right-of-use assets and lease liabilities where prescribed by the guidance. The majority of our leases are operating leases. Finance leases are immaterial to our consolidated financial statements.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other operating leases are recorded on the balance sheet with a corresponding operating lease asset, net, representing the right to use the underlying asset for the lease term and the operating lease liabilities representing the obligation to make lease payments arising from the lease. The Company's lease agreements do not contain any material residual value guarantees or restrictive covenants.

Operating lease assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate, adjusted for lease term and foreign currency, based on the information available at lease commencement date. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term.

Operating lease expense is as follows:

Year ended December 31, 2019
Operating lease cost $ 49.7   
Short-term and variable lease cost 31.6   
Total lease cost $ 81.3   

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

Year ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows - payments on operating leases $ 51.7   
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases $ 157.0   








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Supplemental balance sheet information related to operating leases is as follows:

Financial statement line item December 31, 2019
Operating lease right-of-use assets Other assets $ 110.4   
Operating lease liabilities Accrued expenses and other liabilities 35.0   
Operating lease liabilities Other long-term liabilities 78.2   
Total lease liabilities $ 113.2   


Weighted average remaining lease terms and discount rates for operating leases are as follows:

December 31, 2019
Weighted Average Remaining Lease Term 4.5 years   
Weighted Average Discount Rate 7.3  %

Maturities of lease liabilities at December 31, 2019 are as follows:
December 31, 2019
Operating Leases
2020 $ 43.3   
2021 31.6   
2022 24.1   
2023 18.0   
2024 10.6   
Thereafter 14.2   
Total Lease Payments 141.8   
Less: Imputed Interest (28.6)  
Present value of lease liabilities $ 113.2   

As previously disclosed in our 2018 financial statements and under the previous lease accounting standard, future minimum annual rentals under noncancellable long-term leases, exclusive of maintenance, taxes, insurance and other operating costs as of December 31, 2018 were as follows:

2019 $ 51.4   
2020 37.2   
2021 25.4   
2022 17.9   
2023 12.4   
Thereafter 19.2   
Total noncancelable long-term leases $ 163.5   












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(9) PENSION PLANS

Most of the Company’s employees participate in defined contribution plans, including 401(k), profit sharing, and other savings plans that provide retirement benefits.

Certain U.S. and non-U.S. employees participate in Company specific or statutorily required defined benefit plans. In general, the Company’s policy is to fund these plans based on legal requirements, required benefit payments, and other factors.

Retirement plans expense includes the following components:
U.S. Plans
December 31, 2019 December 31, 2018 December 31, 2017
Company defined benefit plans:
Service cost $ —    $ —    $ 0.1   
Interest cost —    —    0.4   
Expected return on plan assets —    —    (0.6)  
Net amortization —    0.2    —   
Net periodic pension expense —    0.2    (0.1)  
Settlement —    (0.1)   0.9   
Defined contribution plans 13.5    12.7    14.8   
Total $ 13.5    $ 12.8    $ 15.6   

Non-U.S. Plans
December 31, 2019 December 31, 2018 December 31, 2017
Company defined benefit plans:
Service cost $ 2.4    $ 2.6    $ 2.8   
Interest cost 2.4    2.3    2.6   
Expected return on plan assets (0.9)   (0.7)   (0.9)  
Net amortization —    —    —   
Net periodic pension expense 3.9    4.2    4.5   
Curtailment —    (1.3)   (1.6)  
Settlement —    —    0.1   
Defined contribution plans 2.8    3.7    2.6   
Total $ 6.7    $ 6.6    $ 5.6   

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Details of the changes in the actuarial present value of the projected benefit obligation and the fair value of plan assets for defined benefit pension plans follow:
U.S. Plans
December 31, 2019 December 31, 2018
Projected benefit obligation, beginning $ 0.9    $ 4.4   
Service cost —    —   
Interest cost —    —   
Actuarial loss —    (0.6)  
Benefits paid —    (0.2)  
Acquisition/Divestiture —    —   
Settlements —    (2.7)  
Projected benefit obligation, ending $ 0.9    $ 0.9   
Fair value of plan assets, beginning —    3.7   
Employer contributions 0.1    0.1   
Benefits paid (0.1)   (0.2)  
Acquisition/Divestiture —    —   
Settlements —    (2.7)  
Foreign currency translation and other —    (0.9)  
Fair value of plan assets, ending $ —    $ —   
Net amount recognized in the balance sheet $ (0.9)   $ (0.9)  
Amounts recognized in the balance sheet:
Noncurrent asset $ —    $ —   
Current liability (0.1)   —   
Noncurrent liability (0.8)   (0.9)  
Net amount recognized in the balance sheet $ (0.9)   $ (0.9)  
Accumulated other comprehensive loss $ —    $ —   


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Non-U.S. Plans
December 31, 2019 December 31, 2018
Projected benefit obligation, beginning $ 75.5    $ 76.7   
Service cost 2.4    2.6   
Interest cost 2.4    2.3   
Actuarial loss 13.4    4.8   
Benefits paid (2.4)   (2.2)  
Participant contributions 0.3    0.3   
Acquisition/Divestiture —    —   
Settlements —    (0.1)