Sensata Technologies Holding N.V. Announces Third Quarter 2010 Results

October 20, 2010
- Third quarter 2010 net revenue was $383.3 million, an increase of 26.7% from the third quarter 2009 net revenue of $302.5 million.
- Third quarter 2010 net loss was $48.4 million, or $0.28 per diluted share, versus third quarter 2009 net loss of $54.0 million, or $0.38 per diluted share.
- Third quarter 2010 Adjusted Net Income(1) was $79.2 million, or $0.45 per diluted share, an increase of 80% versus third quarter 2009 Adjusted Net Income(1) of $43.9 million, or $0.30 per diluted share.
- September 30, 2010 ending cash balance was $402.9 million.

ALMELO, Netherlands, Oct 20, 2010 /PRNewswire via COMTEX/ -- Sensata Technologies Holding N.V. (NYSE: ST) (the "Company") announces results of its operations for the third quarter and nine months ended September 30, 2010.

 

 

Highlights of the Third Quarter and Nine Months Ended September 30, 2010

Third quarter 2010 net revenue was $383.3 million, an increase of $80.8 million, or 26.7%, from the third quarter 2009 net revenue of $302.5 million. Third quarter 2010 net loss was $48.4 million, or $0.28 per share, versus a net loss of $54.0 million or $0.38 per share for the same time period in 2009. Third quarter Adjusted Net Income(1) was $79.2 million, or $0.45 per diluted share, which is 20.7% of net revenue, versus the third quarter 2009 Adjusted Net Income(1) of $43.9 million, or $0.30 per diluted share, which is 14.5% of net revenue.

For the nine months ended September 30, 2010, net revenue was $1,152.2 million, which was an increase of $355.4 million, or 44.6%, from $796.9 million for the same time period in 2009. Net income was $61.4 million, or $0.36 per diluted share, versus a net loss of $41.6 million or $0.29 per share for the nine months ended September 30, 2009. Adjusted Net Income(1) was $225.9 million, or $1.32 per diluted share, which is 19.6% of net revenue versus Adjusted Net Income(1) of $73.8 million, or $0.51 per diluted share, which is 9.3% of net revenue for the same time period in 2009.

Tom Wroe, Chairman and Chief Executive Officer, said, "Sensata had a very strong third quarter marked by solid execution and growth driven by market and product leadership across sensors and controls. Demand levels are solid, and our business model continues toprovide good visibility and flexibility for net revenue growth and strong profitability and cash flow generation." Mr. Wroe added, "Looking ahead to the fourth quarter and into 2011 we continue to believe that content growth opportunities globally, combined with emerging market growth, will enable us to deliver double-digit revenue growth independent of demand levels in the mature markets."

The Company spent $21.6 million, or 5.6% of net revenue, on research, development and engineering related costs in the third quarter of 2010. These costs reside in both the cost of revenue and the research and development lines of the Statement of Operations.

Ending cash balance at September 30, 2010 was $402.9 million. During the third quarter the Company generated cash of $112.9 million from operations, used cash of $17.2 million in investing activities and used cash of $4.1 million from financing activities.

The Company's cash conversion cycle, which is defined as days sales outstanding (DSO) plus days on hand inventory (DOH) less days payable outstanding (DPO), was 53.4 days at the end of the third quarter compared to 55.6 days at September 30, 2009.

The Company recorded a tax provision of $10.0 million for the third quarter 2010. Of the $10.0 million, approximately $3.8 million, or 4.8% of Adjusted Net Income(1), relates to taxes that are payable in cash and the remaining tax provision relates primarily to deferred tax expense attributable to amortization of tax deductible goodwill.

The Company's indebtedness at September 30, 2010 was $1.9 billion. The Company's net debt(2) was $1.5 billion resulting in a leverage ratio of 3.4x. As of September 30, 2010, the Company was in compliance with all of its financial ratios and reporting covenants included in its debt agreements related to its primary operating subsidiary, Sensata Technologies B.V.

Jeff Cote, Chief Financial Officer, said, "Our worldwide operations are executing at a high level as evidenced by our financial results. These results continue to support our thesis that we can grow our business by double-digits without mature market growth. Our leading market position, combined with low cost structure and strong cash generation position us wellfor strong growth going forward."

Guidance

The Company said it anticipates net revenue of $378 to $388 million for the fourth quarter 2010, which represents growth of 12 to 15% over the fourth quarter 2009 net revenue of $338.1 million. The Company also said it expects to achieve net income of $27 to $29 million, or earnings per share calculated in accordance with generally accepted accounting principles of $0.15 - $0.16 per diluted share in the fourth quarter 2010. In addition, the Company expects Adjusted Net Income(1) of $76 million to $79 million, or $0.43 - $0.44 per diluted share, for the fourth quarter 2010. This guidance assumes a share count of 178.6 million for the fourth quarter 2010.

Tom Wroe added, "Our third quarter revenue included a benefit of approximately $7 to $10 million from several extra weeks of production at many major automotive OEMs during the summer months. Adjusting for this benefit, the mid-point of our guidance represents normal seasonality."

The earnings per share guidance in accordance with U.S. generally accepted accounting principles ("GAAP") excludes any potential gain or loss resulting from the movement of the Euro to U.S. dollar exchange rate and the impact on our Euro denominated debt.

(1) See Non-GAAP Measures for discussion of Adjusted Net Income which includes a reconciliation of this measure to Net (Loss)/Income.

(2)Net debt represents total indebtedness including capital lease and other financing obligations, less cash and cash equivalents. The leverage ratio represents net debt divided by Adjusted EBITDA for the last twelve months.

Company Earnings Conference Call

The Company will conduct a conference call today at 8:00 AM eastern time to discuss the financial results for its third quarter 2010. The U.S. dial in number is 877-486-0682 and the non-U.S. number is 706-634-5536. The passcode is 16278641. A live webcast of the conference call will also be available on the investor relations page of the Company's web site at http://investors.sensata.com/.

For those unable to participate in the conference call, a replay will be available for one week following the call. To access the replay, the U.S. dial in number is 800-642-1687 and the non-U.S. dial in number is 706-645-9291. The replay passcode is 16278641. A replay of the call will be available by webcast for an extended period of time at the company's website, at http://investors.sensata.com/.

About Sensata Technologies Holding N.V.

Sensata Technologies Holding N.V. is one of the world's leading suppliers of sensing, electrical protection, control and power management solutions. Majority-owned by affiliates of Bain Capital Partners, LLC, a leading global private investment firm, and its co-investors, Sensata employs approximately 10,000 people in nine countries. Sensata's products improve safety, efficiency and comfort for millions of people every day in automotive, appliance, aircraft, industrial, military, heavy vehicle, heating, air-conditioning, data, telecommunications, recreational vehicle and marine applications. For more information, please visit Sensata's web site at http://www.sensata.com/.

Safe Harbor Statement

This earnings release contains forward-looking statements which may involve risks or uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Such forward-looking statements include, among other things, our anticipated results for the fourth quarter of 2010. Factors that might cause these differences include, but are not limited to, risks associated with: worldwide economic conditions; adverse developments in the automotive industry; governmental regulations, policies, and practices relating to our non-US operations and international business; fluctuations in foreign currency exchange, commodity and interest rates; competitive pressures; pricing and other pressures from customers; fundamental changes in the industries in which the Company operates; litigation and disputes involving the Company, including the extent of product liability and warranty claims asserted against the Company; labor disruptions and increased labor costs; the loss of one or more suppliers of raw materials; non-performance by suppliers; the Company's ability to protect its intellectual property; the Company's failure to comply with the covenants contained in the credit agreement governing its subsidiary's senior secured credit facility or its other debt agreements; the Company's dependence on third parties for transportation, warehousing and logistics services; compliance with Section 404 of the Sarbanes-Oxley Act of 2002; environmental, safety and governance regulations or concerns; changes in existing environmental and/or safety laws, regulations and programs; integration of acquired companies; unfunded benefit obligations; and the Company's ability to secure financing to operate and grow its business or to explore opportunities. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak to results only as of the date the statements were made; and we undertake no obligation to publicly update or revise any forward-looking statements, whether to reflect any future events or circumstances or otherwise. For a discussion of potential risks and uncertainties, please refer to the risk factors listed in our SEC filings. Copies of our filings are available from our Investor Relations department or from the SEC website, http://www.sec.gov/.

SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Statements of Operations

(Unaudited)

($ in 000s)



Three Months Ended

September 30,

Nine Months Ended

September 30,

2010

2009

2010

2009






Net revenue

$383,294

$302,468

$1,152,237

$796,855

Operating costs and expenses:





Cost of revenue

238,646

190,908

712,019

521,154

Research and development

6,112

3,569

17,253

12,692

Selling, general and administrative

39,382

33,190

156,013

95,301

Amortization of intangible assets & capitalized software

36,095

38,094

108,309

115,060

Impairment of goodwill and intangible assets

-

-

-

19,867

Restructuring

(13)

4,495

196

18,033

Total operating costs and expenses

320,222

270,256

993,790

782,107

Profit from operations

63,072

32,212

158,447

14,748

Interest expense, net

(23,008)

(36,472)

(81,536)

(114,902)

Currency translation (loss) / gain and other, net

(78,456)

(33,127)

20,525

94,101

(Loss) / income from continuing operations before taxes

(38,392)

(37,387)

97,436

(6,053)

Provision for income taxes

9,997

16,648

35,996

35,165

(Loss) / income from continuing operations, net of taxes

(48,389)

(54,035)

61,440

(41,218)

Loss from discontinued operations, net of taxes

-

-

-

(395)

Net (loss) / income

$(48,389)

$(54,035)

$61,440

$(41,613)






Net (loss) / income per share:





Basic

$(0.28)

$(0.38)

$0.37

$(0.29)

Diluted

$(0.28)

$(0.38)

$0.36

$(0.29)

Weighed average shares outstanding





Basic

171,126

144,057

164,122

144,057

Diluted

171,126

144,057

170,651

144,057


SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Balance Sheets

(Unaudited)

($ in 000s)




September 30, 2010

December 31, 2009

Assets



Current assets:



Cash and cash equivalents

$ 402,922

$ 148,468

Accounts receivable, net of allowances

202,361

180,839

Inventories

142,298

125,375

Deferred income tax assets

12,471

12,419

Prepaid expenses and other current assets

21,377

19,627

Assets held for sale

238

238

Total current assets

781,667

486,966

Property, plant and equipment, net

224,861

219,938

Goodwill

1,528,954

1,530,570

Other intangible assets, net

759,092

865,531

Deferred income tax asset

5,563

5,543

Deferred financing costs

27,794

41,147

Other assets

11,535

17,175

Total assets

$ 3,339,466

$ 3,166,870




Liabilities and shareholders' equity



Current liabilities:



Current portion of long-term debt, capital lease and

other financing obligations

$ 17,643

$ 17,139

Accounts payable

125,408

122,834

Income taxes payable

9,270

8,384

Accrued expenses and other current liabilities

104,272

92,341

Deferred income tax liabilities

749

823

Total current liabilities

257,342

241,521

Deferred income tax liabilities

194,021

165,477

Pension and post-retirement benefit obligations

47,343

49,525

Capital lease and other financing obligations, less current portion

40,022

40,001

Long-term debt, less current portion

1,856,143

2,243,686

Other long-term liabilities

24,743

39,502

Total liabilities

2,419,614

2,779,712

Total shareholders' equity

919,852

387,158

Total liabilities and shareholders' equity

$ 3,339,466

$ 3,166,870


SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

($ in 000s)




For the nine months ended


September 30, 2010

September 30, 2009

Cash flows from operating activities:



Net income / (loss)

$61,440

$(41,613)

Net loss from discontinued operations

-

(395)

Net income / (loss) from continuing operations

61,440

(41,218)

Adjustments to reconcile net income / (loss) to net cash provided by operating activities:



Depreciation

29,472

34,005

Amortization of deferred financing costs

6,512

6,775

Currency translation (gain) / loss on debt

(53,750)

28,482

Loss/(gain) on repurchase of outstanding Senior and Senior Subordinated Notes

23,474

(120,123)

Share-based compensation

23,659

1,174

Amortization of intangible assets and capitalized software

108,309

115,060

Loss on disposition of assets

12

1,159

Loss on assets held for sale

-

1,661

Deferred income taxes

28,398

25,783

Impairment of goodwill and intangible assets

-

19,867

(Decrease)/increase from changes in operating assets and liabilities

(25,848)

55,502

Net cash provided by operating activities from continuing operations

201,678

128,127

Net cash used in operating activities from discontinued operations

-

(403)

Net cash provided by operating activities

201,678

127,724




Cash flows from investing activities:



Additions to property, plant and equipment and capitalized software

(35,089)

(11,527)

Proceeds from sale of assets

364

525

Net cash provided by investing activities from discontinued operations

-

372

Net cash used in investing activities

(34,725)

(10,630)




Cash flows from financing activities:



Proceeds from issuance of ordinary shares

433,539

-

Proceeds from exercise of stock options

6,784

-

Proceeds from revolving credit facility, net

-

75,000

Payments on U.S. and Euro term loan facilities

(11,035)

(11,285)

Payments on capitalized lease and other financing obligations

(3,444)

(3,131)

Payments for repurchase of outstanding Senior and Senior Subordinated Notes

(338,343)

(57,242)

Net cash provided by financing activities

87,501

3,342

Net change in cash and cash equivalents

254,454

120,436

Cash and cash equivalents, beginning of period

148,468

77,716

Cash and cash equivalents, end of period

$402,922

$198,152


Non-GAAP Measures

Adjusted Net Income is a non-GAAP financial measure. We calculate Adjusted Net Income by adjusting GAAP Net (Loss) / Income to exclude charges associated with becoming a stand-alone company and an SEC registrant following the April 27, 2006 sale of the sensors and controls business of Texas Instruments Incorporated to affiliates of Bain Capital Partners LLP, gains and losses on currency translation on debt and other hedges, expenses incurred in connection with acquisitions, other significant items, non-cash interest, deferred income taxes and depreciation and amortization expense related to asset step-up and intangible assets. We believe Adjusted Net Income provides investors with helpful information with respect to the performance of our operations and management uses Adjusted Net Income to evaluate its ongoing operations and for internal planning and forecasting purposes. Adjusted Net Income is not a measure of liquidity. See the tables below which reconcile Net (Loss) / Income to Adjusted Net Income and Projected GAAP Earnings per share to Projected Adjusted Net Income per share.

The following (unaudited) table reconciles the Company's Net (Loss) / Income to Adjusted Net Income for the third quarter and nine months ended September 30, 2010 and 2009.

($ in 000s)


Three Months Ended

September 30,

Nine Months Ended

September 30,


2010

2009

2010

2009






Net (loss) / income

$(48,389)

$(54,035)

$61,440

$(41,613)

Acquisition, integration & financing costs and other significant items

-

7,580

-

20,654

Impairment of goodwill and intangible assets

-

-

-

19,867

Restructuring associated with downsizing

-

677

-

12,121

Stock compensation and management fees

-

1,480

-

4,174

IPO related costs

-

-

66,772

-

Gain on extinguishment of debt

-

-

-

(120,123)

Loss / (gain) on currency translation on debt and other hedges

78,927

35,125

(49,999)

27,888

Asset step-up and intangible asset, depreciation and amortization expense

35,981

38,670

109,280

117,677

Deferred income tax and other tax expense

11,3881

11,985

31,4941

25,696

Amortization of deferred financing costs and interest expense associated with uncertain tax positions

1,311

2,466

6,864

7,439

Total adjustments

127,607

97,983

164,411

115,393

Adjusted net income

$79,218

$43,948

$225,851

$73,780

Weighted average diluted shares outstanding used in adjusted net income per share calculation2

177,449

144,395

170,651

144,731

Adjusted net income per share

$0.45

$0.30

$1.32

$0.51

1Includes $5.2 million of tax related adjustments that appear on the Currency translation (loss) / gain and other, net line of the Condensed Consolidated Statements of Operations.


2The following table reconciles diluted outstanding shares in accordance with GAAP to diluted outstanding shares used in the calculation of Adjusted Net Income per share. The GAAP diluted outstanding shares number excludes certain shares due to their anti-dilutive nature given the net loss. We believe that including these shares in the diluted number for purposes of calculating Adjusted Net Income per share is more meaningful to investors.




Three Months Ended

September 30,

Nine Months Ended

September 30,


2010

2009

2010

2009






GAAP - diluted

171,126

144,057

170,651

144,057

Shares excluded from calculation due to net loss

6,323

338

-

674

Adjusted Net Income - diluted

177,449

144,395

170,651

144,731


Due to the nature of the Company's adjustments, the Company believes the following (unaudited) reconciliation of Net (Loss) / Income to Adjusted Net Income for the third quarter and nine months ended September 30, 2010 and 2009 is meaningful to investors as it identifies where in the Condensed Consolidated Statements of Operations these items are classified.


($ in 000s)

Three Months Ended

September 30, 2010

Nine Months Ended

September 30, 2010


GAAP P&L

Adjustments

Adjusted P&L

GAAP P&L

Adjustments

Adjusted P&L








Net Revenue

$383,294

$ -

$383,294

$1,152,237

$ -

$1,152,237

Operating costs and expenses:







Cost of revenue

238,646

(196)

238,450

712,019

(1,960)

710,059

Research and development

6,112

-

6,112

17,253

-

17,253

Selling, general and administrative

39,382

-

39,382

156,013

(43,300)

112,713

Amortization of intangible assets & capitalized software

36,095

(35,785)

310

108,309

(107,321)

988

Restructuring

(13)

-

(13)

196

-

196

Total operating costs and expenses

320,222

(35,981)

284,241

993,790

(152,581)

841,209

Profit from operations

63,072

35,981

99,053

158,447

152,581

311,028

Interest expense, net

(23,008)

1,311

(21,697)

(81,536)

6,864

(74,672)

Currency translation (loss) / gain and other, net

(78,456)

84,148

5,692

20,525

(21,307)

(782)

(Loss) / income from operations before taxes

(38,392)

121,440

83,048

97,436

138,138

235,574

Provision for income taxes

9,997

(6,167)

3,830

35,996

(26,273)

9,723

Net (Loss) / Income

$(48,389)

$127,607

$79,218

$61,440

$164,411

$225,851




Three Months Ended

September 30, 2009

Nine Months Ended

September 30, 2009


GAAP P&L

Adjustments

Adjusted P&L

GAAP P&L

Adjustments

Adjusted P&L








Net Revenue

$302,468

$ -

$302,468

$796,855

$ -

$796,855

Operating costs and expenses:







Cost of revenue

190,908

(3,285)

187,623

521,154

(11,739)

509,415

Research and development

3,569

-

3,569

12,692

-

12,692

Selling, general and administrative

33,190

(2,344)

30,846

95,301

(8,817)

86,484

Amortization of intangible assets & capitalized software

38,094

(37,697)

397

115,060

(113,774)

1,286

Impairment of goodwill and intangible assets

-

-

-

19,867

(19,867)

-

Restructuring

4,495

(4,495)

-

18,033

(18,033)

-

Total operating costs and expenses

270,256

(47,821)

222,435

782,107

(172,230)

609,877

Profit from operations

32,212

47,821

80,033

14,748

172,230

186,978

Interest expense, net

(36,472)

2,466

(34,006)

(114,902)

7,439

(107,463)

Currency translation (loss) / gain and other, net

(33,127)

35,711

2,584

94,101

(89,972)

4,129

(Loss) / income from continuing operations before taxes

(37,387)

85,998

48,611

(6,053)

89,697

83,644

Provision for income taxes

16,648

(11,985)

4,663

35,165

(25,696)

9,469

(Loss) / income from continuing operations, net of taxes

(54,035)

97,983

43,948

(41,218)

115,393

74,175

Loss from discontinued operations, net of taxes

-

-

-

(395)

-

(395)

Net (Loss) / Income

$(54,035)

$97,983

$43,948

$(41,613)

$115,393

$73,780


The following (unaudited) table reconciles the Company's projected GAAP earnings per share to projected Adjusted Net Income per share for the fourth quarter of 2010:



Three Months Ended


December 31, 2010


Low End

High End

Projected GAAP earnings per share

$0.15

$0.16

(Gain)/loss on currency translation on debt and other hedges*

-

-

Asset step-up and intangible asset, depreciation and amortization expense

0.20

0.20

Deferred income tax and other tax expense

0.07

0.07

Amortization of deferred financing costs and interest expense associated with uncertain tax positions

0.01

0.01

Projected Adjusted Net Income per share

$0.43

$0.44

Weighted average shares outstanding used in adjusted net income per share calculation

178,600

178,600


*The projected GAAP earnings per share guidance excludesany potential gain or loss resulting from the movement of the Euro to U.S. dollar exchange rate and the impact on our Euro denominated debt.

SENSATA TECHNOLOGIES HOLDING N.V.

Notes to (unaudited) Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows

Basis of Presentation

The accompanying (unaudited) Condensed Consolidated Statements of Operations, Condensed Balance Sheets and Condensed Statements of Cash Flows do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying financial information reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results of our operations for the interim periods presented. This information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's registration statement on our Form S-1 and the interim financial statements included in the Company's Form 10-Q for the periods ended March 31 and June 30, 2010 and the interim financial statements that will be filed for the period ended September 30, 2010.

U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Estimates used will change as new events occur or additional information is obtained. Actual results could differ from those estimates.



Contact:




Investors

News Media

Maggie Morris

Linda Megathlin

(508)236-1069

(508)236-1761

mmorris2@sensata.com

lmegathlin@sensata.com



SOURCE Sensata Technologies Holding N.V.