Sensata Technologies Holding N.V. Announces Fourth Quarter and Full Year 2010 Results

January 24, 2011

- Fourth quarter 2010 net revenue was $387.8 million, an increase of 14.7% from the fourth quarter 2009 net revenue of $338.1 million.
- Fourth quarter 2010 Adjusted Net Income(1) was $80.6 million, or $0.45 per diluted share, an increase of 60.1% versus fourth quarter 2009 Adjusted Net Income(1) of $50.3 million, or $0.34 per diluted share.
- Fourth quarter 2010 net income was $68.6 million, or $0.38 per diluted share, versus fourth quarter 2009 net income of $13.9 million, or $0.10 per diluted share.
- December 31, 2010 ending cash balance was $493.7 million.

ALMELO, Netherlands, Jan. 24, 2011 /PRNewswire via COMTEX/ --

Sensata Technologies Holding N.V. (NYSE: ST) (the "Company") announces results of its operations for the fourth quarter and full year ended December 31, 2010.

 

(Logo: http://photos.prnewswire.com/prnh/20070227/CLTU192LOGO )

Highlights of the Fourth Quarter and Full Year Ended December 31, 2010

Fourth quarter 2010 net revenue was $387.8 million, an increase of $49.8 million, or 14.7%, from the fourth quarter 2009 net revenue of $338.1 million. Fourth quarter 2010 net income was $68.6 million, or $0.38 per diluted share, versus net income of $13.9 million or $0.10 per diluted share for the same time period in 2009. Fourth quarter Adjusted Net Income(1) was $80.6 million, or $0.45 per diluted share, which is 20.8% of net revenue, versus the fourth quarter 2009 Adjusted Net Income(1) of $50.3 million, or $0.34 per diluted share, which is 14.9% of net revenue.

For the full year ended December 31, 2010, net revenue was $1,540.1 million, which was an increase of $405.1 million, or 35.7%, from $1,134.9 million for the same time period in 2009. Net income was $130.1 million, or $0.75 per diluted share, versus a net loss of $27.7 million or $(0.19) per share for the full year ended December 31, 2009. Adjusted Net Income(1) was $306.4 million, or $1.77 per diluted share, which is 19.9% of net revenue versus Adjusted Net Income(1) of $124.1 million, or $0.86 per diluted share, which is 10.9% of net revenue for the same time period in 2009.

Tom Wroe, Chairman and Chief Executive Officer, said, "We believe that our strong fourth quarter and full year results demonstrate the success of our strategy, our business model and the strength of our execution."Mr. Wroe added, "For 2011, we will continue to execute on our objectives of maintaining Sensata's leadership position and growing revenues through increasing content, growth in both emerging and mature markets and identifying accretive acquisitions."

The Company spent $22.2 million, or 5.7% of net revenue, on research, development and engineering related costs in the fourth 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 December 31, 2010 was $493.7 million. During the fourth quarter, the Company generated cash of $98.4 million from operations, used cash of $17.8 million in investing activities and generated cash of $10.2 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 49.3 days at the end of the fourth quarter compared to 53.4 days at September 30, 2010.

The Company recorded an income tax provision of $2.3 million for the fourth quarter 2010. Approximately $4.9 million of the provision, or 6.1% of Adjusted Net Income(1), relates to taxes that are payable in cash, offset by a net tax benefit of approximately $2.6 million related to other tax expense and a net deferred tax benefit. During the fourth quarter, the Company recognized a deferred tax benefit of $18.5 million related to the release of a valuation allowance associated with deferred tax assets in its subsidiary in Japan including the deferred tax asset related to its net operating loss.

The Company's indebtedness at December 31, 2010 was $1.9 billion. The Company's net debt(2) was $1.4 billion resulting in a leverage ratio of 3.1x. As of December 31, 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 Administrative and Financial Officer, said "Sensata delivered a solid fourth quarter driven by continued growth in sensors and controls across geographies and product categories.Gross margin increased to a record 39.2%, while our robust cash generating capability allowed us to decrease our leverage in line with the targets we outlined earlier this year. We remain on track to further reduce leverage and drive profitable growth in 2011."

Guidance

For the full year 2011, the Company anticipates net revenue of $1.70 to $1.74 billion which represents 14 to 17% growth over the full year 2010 net revenue of $1.54 billion after adjusting for approximately $50 million of inventory replenishment which occurred during the first half of 2010. The Company also expects to achieve earnings per diluted share calculated in accordance with generally accepted accounting principles of $0.92 to $1.02 for the full year 2011. In addition, the Company expects Adjusted Net Income(1) of $372 to $390 million, or $2.05 to $2.15 per diluted share for the full year 2011. This guidance assumes a share count of 181.2 million for the full year 2011.

The Company anticipates net revenue of $410 to $430 million for the first quarter 2011, which represents growth of 18 to 24% over the first quarter 2010 net revenue of $377.1 million, adjusted for approximately $30 million of inventory replenishment which occurred during the first quarter of 2010. The Company also expects to achieve net income of $36 to $43 million, or earnings per share calculated in accordance with generally accepted accounting principles of $0.20 - $0.24 per diluted share in the first quarter 2011. In addition, the Company expects Adjusted Net Income(1) of $87 million to $94 million, or $0.48 - $0.52 per diluted share, for the first quarter 2011. This guidance assumes a share count of 180.9 million for the first quarter 2011.

The Company's guidance excludes the impact of acquired net revenue related to its previously announced acquisition of the Honeywell Automotive on Board business which would add $10 to $11 million per month to net revenue and would be breakeven at EBITDA and slightly dilutive to Adjusted Net Income(1) in 2011.

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 Income/(Loss).

(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 fourth quarter and full year ended December 31, 2010. The U.S. dial in number is 877-486-0682 and the non-U.S. number is 706-634-5536. The passcode is 38106602. 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 38106602. 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 and ventilation, 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 first quarter and full year of 2011.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; the loss of one or more suppliers of raw materials; non-performance by suppliers; 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; integration of acquired companies; 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 the Company's SEC filings.Copies of the Company's filings are available from its 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

December 31,

Full Year Ended

December 31,

2010

2009

2010

2009






Net revenue

$387,842

$338,089

$1,540,079

$1,134,944

Operating costs and expenses:





Cost of revenue

236,051

220,926

948,070

742,080

Research and development

7,411

4,104

24,664

16,796

Selling, general and administrative

38,610

31,651

194,623

126,952

Amortization of intangible assets and capitalized software

36,205

38,021

144,514

153,081

Impairment of goodwill and intangible assets

-

-

-

19,867

Restructuring

(334)

53

(138)

18,086

Total operating costs and expenses

317,943

294,755

1,311,733

1,076,862

Profit from operations

69,899

43,334

228,346

58,082

Interest expense, net

(23,844)

(35,114)

(105,380)

(150,016)

Currency translation gain and other, net

24,863

13,594

45,388

107,695

Income from continuing operations before taxes

70,918

21,814

168,354

15,761

Provision for income taxes

2,308

7,882

38,304

43,047

Income / (loss) from continuing operations, net of taxes

68,610

13,932

130,050

(27,286)

Loss from discontinued operations, net of taxes

-

-

-

(395)

Net income / (loss)

$68,610

$13,932

$130,050

$(27,681)






Net income / (loss) per share:





Basic

$0.40

$0.10

$0.78

$(0.19)

Diluted

$0.38

$0.10

$0.75

$(0.19)

Weighed average shares outstanding





Basic

172,745

144,057

166,278

144,057

Diluted

179,830

146,317

172,946

144,057

SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Balance Sheets

(Unaudited)

($ in 000s)




December 31,

2010

December 31,

2009

Assets



Current assets:



Cash and cash equivalents

$ 493,662

$ 148,468

Accounts receivable, net of allowances

198,245

180,839

Inventories

140,949

125,375

Deferred income tax assets

6,566

12,419

Prepaid expenses and other current assets

25,006

19,627

Assets held for sale

559

559

Total current assets

864,987

487,287

Property, plant and equipment, net

234,813

219,617

Goodwill

1,528,954

1,530,570

Other intangible assets, net

723,144

865,531

Deferred income tax asset

4,526

5,543

Deferred financing costs

25,742

41,147

Other assets

5,831

17,175

Total assets

$ 3,387,997

$ 3,166,870




Liabilities and shareholders' equity



Current liabilities:



Current portion of long-term debt, capital lease and

other financing obligations

$ 16,779

$ 17,139

Accounts payable

132,828

122,834

Income taxes payable

6,855

8,384

Accrued expenses and other current liabilities

94,030

92,341

Deferred income tax liabilities

4,608

823

Total current liabilities

255,100

241,521

Deferred income tax liabilities

179,089

165,477

Pension and post-retirement benefit obligations

43,021

49,525

Capital lease and other financing obligations, less current portion

39,544

40,001

Long-term debt, less current portion

1,833,370

2,243,686

Other long-term liabilities

30,092

39,502

Total liabilities

2,380,216

2,779,712

Total shareholders' equity

1,007,781

387,158

Total liabilities and shareholders' equity

$ 3,387,997

$ 3,166,870


SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

($ in 000s)




For the full year ended


December 31,

2010

December 31,

2009

Cash flows from operating activities:



Net income / (loss)

$130,050

$(27,681)

Net loss from discontinued operations

-

(395)

Net income / (loss) from continuing operations

130,050

(27,286)

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



Depreciation

38,628

48,427

Amortization of deferred financing costs

8,564

9,055

Currency translation (gain) / loss on debt

(72,816)

13,559

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

23,474

(120,123)

Share-based compensation

25,421

2,233

Amortization of intangible assets and capitalized software

144,514

153,081

Loss on sale and disposal of assets

119

3,665

Deferred income taxes

24,267

25,763

Impairment of goodwill and intangible assets

-

19,867

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

(22,175)

59,739

Net cash provided by operating activities from continuing operations

300,046

187,980

Net cash used in operating activities from discontinued operations

-

(403)

Net cash provided by operating activities

300,046

187,577




Cash flows from investing activities:



Additions to property, plant and equipment and capitalized software

(52,912)

(14,959)

Proceeds from sale of assets

364

585

Payments on Euro call option

-

(1,075)

Net cash provided by investing activities from discontinued operations

-

372

Net cash used in investing activities

(52,548)

(15,077)




Cash flows from financing activities:



Proceeds from issuance of ordinary shares and restricted securities

433,539

6

Proceeds from exercise of stock options

21,855

-

Payments on U.S. and Euro term loan facilities

(14,717)

(15,087)

Payments on capitalized lease and other financing obligations

(4,638)

(4,159)

Payments for repurchase of outstanding Senior and Senior Subordinated Notes

(338,343)

(57,242)

Advance to shareholder

-

(266)

Payments on revolving credit facility, net

-

(25,000)

Net cash provided by / (used in) financing activities

97,696

(101,748)

Net change in cash and cash equivalents

345,194

70,752

Cash and cash equivalents, beginning of period

148,468

77,716

Cash and cash equivalents, end of period

$493,662

$148,468


Non-GAAP Measures

Adjusted Net Income is a non-GAAP financial measure. We define Adjusted Net Income as follows: net income / (loss) before acquisition, integration and financing costs, impairment of goodwill and intangible assets, restructuring associated with downsizing, stock compensation and management fees, costs related to our initial public offering, gain on extinguishment of debt, currency translation (gain)/loss on debt and (gain)/loss on other hedges, asset step-up and intangible asset depreciation and amortization expenses, deferred income tax and other tax expense, amortization of deferred financing costs and interest expense associated with uncertain tax positions, and other costs. The Company believes Adjusted Net Income provides investors with helpful information with respect to the performance of the Company's 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 Income / (Loss) 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 Income / (Loss) to Adjusted Net Income for the fourth quarters and full years ended December 31, 2010 and 2009.

($ in 000s)

Three Months Ended

December 31,

Full Year Ended

December 31,


2010

2009

2010

2009






Net income / (loss)

$68,610

$13,932

$130,050

$(27,681)

Acquisition, integration & financing costs and other significant items

-

2,331

-

22,985

Impairment of goodwill and intangible assets

-

-

-

19,867

Restructuring associated with downsizing

-

155

-

12,276

Stock compensation and management fees

-

2,059

-

6,233

IPO related costs

-

-

66,772

-

Gain on extinguishment of debt

-

-

-

(120,123)

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

(24,011)

(12,021)

(74,010)

15,867

Asset step-up and intangible asset depreciation and amortization expense

35,904

40,120

145,184

157,797

Deferred income tax and other tax expense

(2,631)

1,303

28,863(1)

26,999

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

2,684

2,439

9,548

9,878

Total adjustments

11,946

36,386

176,357

151,779

Adjusted net income

$80,556

$50,318

$306,407

$124,098

Weighted average diluted shares outstanding used in adjusted net income per share calculation(2)

179,830

146,317

172,946

145,128

Adjusted net income per share

$0.45

$0.34

$1.77

$0.86


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


(2) The 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

December 31,

Full Year Ended

December 31,


2010

2009

2010

2009






GAAP - diluted shares

179,830

146,317

172,946

144,057

Shares excluded from calculation due to net loss

-

-

-

1,071

Adjusted Net Income - diluted shares

179,830

146,317

172,946

145,128

Due to the nature of the Company's adjustments, the Company believes the following (unaudited) reconciliations of Net Income/(Loss) to Adjusted Net Income for the fourth quarters and full years ended December 31, 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

December 31, 2010

Full Year Ended

December 31, 2010


GAAP P&L

Adjustments

Adjusted

P&L

GAAP P&L

Adjustments

Adjusted

P&L








Net Revenue

$387,842

$ -

$387,842

$1,540,079

$ -

$1,540,079

Operating costs and expenses:







Cost of revenue

236,051

(143)

235,908

948,070

(2,102)

945,968

Research and development

7,411

-

7,411

24,664

-

24,664

Selling, general and administrative

38,610

-

38,610

194,623

(43,300)

151,323

Amortization of intangible assets and capitalized software

36,205

(35,761)

444

144,514

(143,082)

1,432

Restructuring

(334)

-

(334)

(138)

-

(138)

Total operating costs and expenses

317,943

(35,904)

282,039

1,311,733

(188,484)

1,123,249

Profit from operations

69,899

35,904

105,803

228,346

188,484

416,830

Interest expense, net

(23,844)

2,684

(21,160)

(105,380)

9,548

(95,832)

Currency translation gain and other, net

24,863

(24,011)

852

45,388

(45,317)

71

Income from operations before taxes

70,918

14,577

85,495

168,354

152,715

321,069

Provision for income taxes

2,308

2,631

4,939

38,304

(23,642)

14,662

Net Income

$68,610

$11,946

$80,556

$130,050

$176,357

$306,407



Three Months Ended

December 31, 2009

Full Year Ended

December 31, 2009


GAAP P&L

Adjustments

Adjusted

P&L

GAAP P&L

Adjustments

Adjusted

P&L








Net Revenue

$338,089

$ -

$338,089

$1,134,944

$ -

$1,134,944

Operating costs and expenses:







Cost of revenue

220,926

(3,744)

217,182

742,080

(15,483)

726,597

Research and development

4,104

-

4,104

16,796

-

16,796

Selling, general and administrative

31,651

(3,623)

28,028

126,952

(12,440)

114,512

Amortization of intangible assets and capitalized software

38,021

(37,652)

369

153,081

(151,426)

1,655

Impairment of goodwill and intangible assets

-

-

-

19,867

(19,867)

-

Restructuring

53

(53)

-

18,086

(18,086)

-

Total operating costs and expenses

294,755

(45,072)

249,683

1,076,862

(217,302)

859,560

Profit from operations

43,334

45,072

88,406

58,082

217,302

275,384

Interest expense, net

(35,114)

2,439

(32,675)

(150,016)

9,878

(140,138)

Currency translation gain and other, net

13,594

(12,021)

1,573

107,695

(101,993)

5,702

Income from continuing operations before taxes

21,814

35,490

57,304

15,761

125,187

140,948

Provision for income taxes

7,882

(896)

6,986

43,047

(26,592)

16,455

Income / (loss) from continuing operations, net of taxes

13,932

36,386

50,318

(27,286)

151,779

124,493

Loss from discontinued operations, net of taxes

-

-

-

(395)

-

(395)

Net Income / (loss)

$13,932

$36,386

$50,318

$(27,681)

$151,779

$124,098


The following (unaudited) table reconciles the Company's projected GAAP earnings per share to projected Adjusted Net Income per share for the first quarter and full year of 2011:



Three Months Ended

March 31, 2011

Full Year Ended

December 31, 2011


Low End

High End

Low End

High End






Projected GAAP earnings per share

$0.20

$0.24

$0.92

$1.02

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

-

-

-

-

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

0.18

0.18

0.73

0.73

Deferred income tax and other tax expense

0.09

0.09

0.35

0.35

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

0.01

0.01

0.05

0.05

Projected Adjusted Net Income per share

$0.48

$0.52

$2.05

$2.15

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

180,900

180,900

181,200

181,200


*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. This information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's registration statement on Form S-1 filed on November 9, 2010 and the interim financial statements included in the Company's Form 10-Q for the periods ended March 31, June 30, and 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.