Sensata Technologies Holding N.V. Announces Third Quarter 2014 Results

Oct 28, 2014
- Third quarter 2014 Net revenue was $577.1 million.
- Third quarter 2014 Net income was $82.0 million, or $0.48 per diluted share.
- Third quarter 2014 Adjusted net income1 was $107.7 million, or $0.63 per diluted share.

ALMELO, the Netherlands, Oct. 28, 2014 /PRNewswire/ -- Sensata Technologies Holding N.V. (NYSE: ST) (the "Company") announces results of its operations for the three and nine months ended September 30, 2014.

Sensata Technologies Logo

Highlights of the Three and Nine Months ended September 30, 2014

Net revenue for the third quarter 2014 was $577.1 million, an increase of $78.2 million, or 15.7%, from $498.9 million for the third quarter 2013. Net income for the third quarter 2014 was $82.0 million, or $0.48 per diluted share. This compares to Net income for the third quarter 2013 of $66.0 million, or $0.37 per diluted share. Adjusted net income1 for the third quarter 2014 was $107.7 million, or $0.63 per diluted share, which was 18.7% of Net revenue.  This was an increase of 10.1% compared to Adjusted net income1 for the third quarter 2013 of $97.9 million, or $0.55 per diluted share, which was 19.6% of Net revenue.  Integration charges related to acquisitions were $2.4 million for the third quarter of 2014 as compared to $0.6 million for the third quarter of 2013.

Net revenue for the nine months ended September 30, 2014 was $1,704.5 million, an increase of $228.8 million, or 15.5%, from $1,475.7 million for the nine months ended September 30, 2013. Net income for the nine months ended September 30, 2014 was $214.2 million, or $1.24 per diluted share. This compares to Net income for the nine months ended September 30, 2013 of $121.1 million, or $0.67 per diluted share. Adjusted net income1 for the nine months ended September 30, 2014 was $312.6 million, or $1.81 per diluted share, which was 18.3% of Net revenue. This was an increase of 11.5% compared to Adjusted net income1 for the nine months ended September 30, 2013 of $280.3 million, or $1.56 per diluted share, which was 19.0% of Net revenue.

"We continue to deliver on our promises of strong organic revenue growth driven by increasing content and superior capital deployment through high-returning acquisitions," said Martha Sullivan, President and Chief Executive Officer. "We are also excited to welcome the high-performance teams of both DeltaTech Controls and Schrader International.  These businesses will make great additions to Sensata."

The Company spent $38.0 million, or 6.6% of Net revenue, on research, development and engineering related costs in the third quarter of 2014 to fund growth initiatives.  These costs reside in both the Cost of revenue and the Research and development lines of the Condensed Consolidated Statements of Operations. 

The Company's ending cash balance at September 30, 2014 was $196.7 million.  During the first nine months of 2014, the Company generated cash of $280.1 million from operations, used cash of $391.7 million in investing activities and used cash of $9.6 million in financing activities.

The Company recorded an income tax benefit of $22.0 million for the third quarter 2014.  Approximately $7.0 million of the provision, or 5.1% of Adjusted EBIT, related to taxes that are payable in cash and approximately $(29.0) million related to deferred income tax expense and other income tax expense.

The Company's total indebtedness at September 30, 2014 was $1.9 billion.  The Company's Net debt2 was $1.7 billion, resulting in a Net leverage ratio2 of 2.9x as of September 30, 2014.  After the end of the quarter, the Company issued an additional $1.0 billion of debt comprised of new Senior Notes and Term Loans to fund the acquisition of Schrader International.

Segment Performance



Three months ended


Nine months ended

$ in 000s


September 30, 2014


September 30, 2013


September 30, 2014


September 30, 2013

Sensors net revenue


$

429,020



$

358,159



$

1,261,736



$

1,052,124


Sensors profit from operations


118,056



109,918



354,386



311,948


% of Sensors net revenue


27.5

%


30.7

%


28.1

%


29.6

%














Controls net revenue


$

148,075



$

140,727



$

442,806



$

423,593


Controls profit from operations


44,765



41,638



132,454



130,708


% of Controls net revenue


30.2

%


29.6

%


29.9

%


30.9

%

Guidance

The Company anticipates Net revenue of $680 to $705 million for the fourth quarter 2014, which, at the midpoint, is 37% higher than fourth quarter 2013 Net revenue of $505 million.  The Company further anticipates Adjusted EBITDA of $148 to $158 million for the fourth quarter 2014.  In addition, the Company expects Adjusted net income1 of $84 to $92 million, or $0.49 to $0.54 per diluted share for the fourth quarter 2014.  This guidance includes anticipated dilution of approximately $(0.09) to $(0.11) per diluted share associated with the acquisition of Schrader International.  This guidance assumes a diluted share count of 170.9 million for the fourth quarter 2014.

1See Non-GAAP Measures for discussion of Adjusted net income which includes a reconciliation of this measure to Net income.

2Net debt represents total indebtedness including Capital lease and other financing obligations, less Cash and cash equivalents.  The Net 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 ended September 30, 2014.  The U.S. dial in number is 877-486-0682 and the non-U.S. dial in number is 706-634-5536.  The passcode is 14443880.  A live webcast and a replay of the conference call will also be available on the investor relations page of 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 with operations and business centers in sixteen 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 website at www.sensata.com.

Safe Harbor Statement

This earnings release contains forward-looking statements within the meaning of the federal securities laws.  These statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable, and our future prospects, developments and business.  Such forward-looking statements include, among other things, the Company's anticipated results for the fourth quarter 2014.  Such statements involve risks or uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.  Factors that might cause these differences include, but are not limited to, risks associated with: worldwide economic conditions; general conditions in the automotive industry; continued fundamental changes in the industries in which the Company operates; the Company's ability to maintain existing relationships with customers and its exposure to industry and customer-specific demand fluctuations; pricing and other pressures from customers; resources required to integrate acquired companies; risks associated with the Company's non-US operations; the Company's ability to attract and retain key personnel; competitive pressures in the markets in which the Company competes, which could require the Company to lower its prices or result in reduced demand for its products; 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 the Company undertakes 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, www.sec.gov.

SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Statements of Operations

(Unaudited)

(In 000s, except per share amounts)















For the three months ended


For the nine months ended



September 30, 2014


September 30, 2013


September 30, 2014


September 30, 2013

Net revenue


$

577,095



$

498,886



$

1,704,542



$

1,475,717


Operating costs and expenses:













Cost of revenue


371,940



309,061



1,097,585



940,442


Research and development


19,525



15,189



55,681



43,113


Selling, general and administrative


52,985



40,355



148,295



121,430


Amortization of intangible assets


35,985



33,670



100,562



100,706


Restructuring and special charges


4,543



512



7,148



4,538


Total operating costs and expenses


484,978



398,787



1,409,271



1,210,229


Profit from operations


92,117



100,099



295,271



265,488


Interest expense


(23,874)



(23,476)



(70,973)



(71,573)


Interest income


321



232



910



780


Other, net


(8,578)



9,390



(4,108)



(25,411)


Income before taxes


59,986



86,245



221,100



169,284


(Benefit from)/provision for income taxes


(21,977)



20,223



6,871



48,226


Net income


$

81,963



$

66,022



$

214,229



$

121,058















Net income per share:













Basic


$

0.49



$

0.38



$

1.26



$

0.69


Diluted


$

0.48



$

0.37



$

1.24



$

0.67















Weighted-average ordinary shares outstanding:










Basic


168,554



175,941



170,463



176,362


Diluted


170,765



178,629



172,611



179,519


 

 

SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

($ in 000s)















For the three months ended


For the nine months ended



September 30, 2014


September 30, 2013


September 30, 2014


September 30, 2013

Net income


$

81,963



$

66,022



$

214,229



$

121,058


Other comprehensive income/(loss), net of tax:













Net unrealized gain/(loss) on derivative instruments designated and qualifying as cash flow hedges


18,044



(7,892)



22,097



(1,044)


Amortization of net loss and prior service (credit)/cost on defined benefit and retiree healthcare plans


(170)



434



(370)



1,306


Other comprehensive income/(loss)


17,874



(7,458)



21,727



262


Comprehensive income


$

99,837



$

58,564



$

235,956



$

121,320


 

 

SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Balance Sheets

(Unaudited)

($ in 000s)









September 30, 2014


December 31, 2013

Assets







Current assets:







Cash and cash equivalents


$

196,737



$

317,896


Accounts receivable, net of allowances


378,747



291,723


Inventories


274,306



183,395


Deferred income tax assets


25,408



20,975


Prepaid expenses and other current assets


56,131



41,642


Total current assets


931,329



855,631


Property, plant and equipment, net


419,461



344,657


Goodwill


1,886,002



1,756,049


Other intangible assets, net


592,920



502,388


Deferred income tax assets


10,623



10,623


Deferred financing costs


18,459



19,132


Other assets


21,846



10,344


Total assets


$

3,880,640



$

3,498,824









Liabilities and shareholders' equity







Current liabilities:







Current portion of long-term debt, capital lease and other financing obligations


$

168,379



$

8,100


Accounts payable


219,478



177,539


Income taxes payable


3,788



5,785


Accrued expenses and other current liabilities


172,301



123,239


Deferred income tax liabilities


2,012



3,829


Total current liabilities


565,958



318,492


Deferred income tax liabilities


322,440



281,364


Pension and post-retirement benefit obligations


32,343



19,508


Capital lease and other financing obligations, less current portion


46,525



48,845


Long-term debt, net of discount, less current portion


1,663,708



1,667,021


Other long-term liabilities


25,769



22,006


Total liabilities


2,656,743



2,357,236


Total shareholders' equity


1,223,897



1,141,588


Total liabilities and shareholders' equity


$

3,880,640



$

3,498,824


 

 

SENSATA TECHNOLOGIES HOLDING N.V.


Condensed Consolidated Statements of Cash Flows


(Unaudited)


($ in 000s)


For the nine months ended



September 30, 2014


September 30, 2013

Cash flows from operating activities:







Net income


$

214,229



$

121,058


Adjustments to reconcile net income to net cash provided by operating activities:







Depreciation


45,161



38,034


Amortization of deferred financing costs and original issue discounts


3,605



3,291


Currency remeasurement gain on debt


(2)



(354)


Share-based compensation


9,920



7,358


Loss on debt refinancing




7,111


Amortization of inventory step-up to fair value


1,658




Amortization of intangible assets


100,562



100,706


(Gain)/loss on disposition of assets


(578)



946


Deferred income taxes


(13,280)



24,598


Gains from insurance proceeds


(2,417)



(5,000)


Unrealized loss on hedges and other non-cash items


7,023



12,203


Changes in operating assets and liabilities, net of effects of acquisitions


(85,734)



(1,185)


Net cash provided by operating activities


280,147



308,766









Cash flows from investing activities:







Additions to property, plant and equipment and capitalized software


(101,104)



(55,523)


Insurance proceeds


2,417



6,400


Proceeds from the sale of assets


5,467



326


Acquisition payments, net of cash received


(298,525)



(411)


Net cash used in investing activities


(391,745)



(49,208)









Cash flows from financing activities:







Proceeds from exercise of stock options and issuance of ordinary shares


18,083



17,229


Proceeds from issuance of debt


195,000



500,000


Payments on debt


(40,993)



(709,816)


Repurchase of ordinary shares from SCA


(169,680)




Payments to repurchase ordinary shares


(11,971)



(126,155)


Payments of debt issuance costs




(6,156)


Net cash used in financing activities


(9,561)



(324,898)


Net change in cash and cash equivalents


(121,159)



(65,340)


Cash and cash equivalents, beginning of period


317,896



413,539


Cash and cash equivalents, end of period


$

196,737



$

348,199












Net Revenue by Business, Geography and End Market

(% of total net revenue)


Three months ended September 30,


Nine months ended September 30,



2014


2013


2014


2013

Sensors


74.3

%


71.8

%


74.0

%


71.3

%

Controls


25.7

%


28.2

%


26.0

%


28.7

%

Total


100.0

%


100.0

%


100.0

%


100.0

%

 

(% of total net revenue)


Three months ended September 30,


Nine months ended September 30,



2014


2013


2014


2013

Americas


40.8

%


37.8

%


39.4

%


37.9

%

Europe


27.4

%


29.0

%


28.5

%


29.6

%

Asia


31.8

%


33.2

%


32.1

%


32.5

%

Total


100.0

%


100.0

%


100.0

%


100.0

%

 

 

(% of total net revenue)


Three months ended September 30,


Nine months ended September 30,



2014


2013


2014


2013

European automotive


22.4

%


22.8

%


23.8

%


23.8

%

North American automotive


15.9

%


16.8

%


16.4

%


16.1

%

Asian automotive


19.9

%


20.0

%


20.0

%


19.9

%

Rest of world automotive


0.5

%


0.6

%


0.5

%


0.9

%

Heavy vehicle off-road


14.9

%


10.6

%


12.5

%


9.6

%

Appliance and heating, ventilation and air-conditioning


8.0

%


9.3

%


8.7

%


10.1

%

Industrial


7.7

%


9.2

%


7.8

%


9.2

%

All other


10.7

%


10.7

%


10.3

%


10.4

%

Total


100.0

%


100.0

%


100.0

%


100.0

%

Non-GAAP Measures

Adjusted net income is a non-GAAP financial measure.  The Company defines Adjusted net income as follows: Net income before costs associated with financing and other transaction costs; deferred (gain)/loss on other hedges and (gain)/loss on currency remeasurement on debt, net; depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory; deferred income tax and other tax expense; amortization of deferred financing costs; and restructuring and special charges.  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 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 to Adjusted net income for the three and nine months ended September 30, 2014 and 2013.

(In 000s, except per share amounts)


Three months ended September 30,


Nine months ended September 30,



2014


2013


2014


2013

Net income


$

81,963



$

66,022



$

214,229



$

121,058


Financing and other transaction costs


4,242





5,500



9,179


Deferred (gain)/loss on other hedges and (gain)/loss on currency remeasurement on debt, net


7,200



(12,723)



(3,424)



13,595


Depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory


36,951



34,130



105,001



101,997


Deferred income tax and other tax expense


(29,008)



12,594



(15,965)



25,560


Amortization of deferred financing costs


1,219



1,028



3,605



3,291


Restructuring and special charges


5,153



(3,188)



3,657



5,605


Total adjustments


$

25,757



$

31,841



$

98,374



$

159,227


Adjusted net income


$

107,720



$

97,863



$

312,603



$

280,285


Weighted average diluted shares outstanding used in Adjusted net income per share calculation


170,765



178,629



172,611



179,519


Adjusted net income per diluted share


$

0.63



$

0.55



$

1.81



$

1.56


The Company's definition of Adjusted net income includes the current tax expense (benefit) that will be payable (realized) on the Company's income tax return and excludes deferred income tax and other tax expense.  As the Company treats deferred income tax and other tax expense as an adjustment to compute Adjusted net income, the deferred income tax effect associated with the reconciling items would not change Adjusted net income for each period presented.  The theoretical current income tax expense/(benefit)associated with the reconciling items above would be as follows: Depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory:  $0.2 million and $0.3 million for the three months ended September 30, 2014 and 2013, respectively, and $1.0 million and $0.8 million for the nine months ended September 30, 2014 and 2013, respectively; Restructuring and special charges:  $0.3 million and ($1.0) million for the three months ended September 30, 2014 and 2013, respectively, and $0.3 million and $0.9 million for the nine months ended September 30, 2014 and 2013, respectively.

The following unaudited table identifies where in the Condensed Consolidated Statement of Operations the adjustments to reconcile Net income to Adjusted net income were recorded for the three and nine months ended September 30, 2014 and 2013.

($ in 000s)


Three months ended September 30,


Nine months ended September 30,



2014


2013


2014


2013

Cost of revenue


$

2,495



$

(2,841)



$

4,280



$

3,156


Selling, general and administrative


5,273





6,531



971


Amortization of intangible assets


35,095



33,327



98,943



99,657


Restructuring and special charges


3,483



456



4,404



4,789


Interest expense


1,219



1,028



3,605



3,291


Other, net


7,200



(12,723)



(3,424)



21,803


(Benefit from)/provision for income taxes


(29,008)



12,594



(15,965)



25,560


Total adjustments


$

25,757



$

31,841



$

98,374



$

159,227


The following unaudited table reconciles the Company's projected GAAP earnings per share to projected Adjusted net income per diluted share for the three months ended December 31, 2014 and full year ended December 31, 2014.  Amounts in the table below do not include the per share impact of depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory or deferred income tax and other tax expense associated with the acquisition of Schrader International.  The amounts in the table below have been calculated based on unrounded numbers.  Accordingly, certain amounts may not add due to the effect of rounding.



Three months ended

December 31, 2014


Full year ended

December 31, 2014



Low End


High End


Low End


High End














Projected GAAP earnings per diluted share


$

0.15



$

0.19



$

1.40



$

1.44


Financing and other transaction costs


0.06



0.07



0.09



0.10


Deferred gain on other hedges and gain on currency remeasurement on debt, net






(0.02)



(0.02)


Depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory


0.21



0.21



0.81



0.81


Deferred income tax and other tax expense


0.06



0.06



(0.04)



(0.04)


Amortization of deferred financing costs


0.01



0.01



0.03



0.03


Restructuring and special charges






0.03



0.03


Projected Adjusted net income per diluted share


$

0.49



$

0.54



$

2.30



$

2.35


Weighted average diluted shares outstanding used in Adjusted net income per share calculation (in 000s)


170,900



170,900



172,200



172,200


SENSATA TECHNOLOGIES HOLDING N.V.

Notes to unaudited Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows

Basis of Presentation

The accompanying unaudited Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Balance Sheets and Condensed Consolidated 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 Annual Report on Form 10-K for the year ended December 31, 2013 and the interim condensed consolidated financial statements included in the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2014.  U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements.  Estimates used may change as new events occur or additional information is obtained.  Actual results could differ from those estimates.

Contact:






Investors


News Media

Jacob Sayer


Linda Megathlin

(508) 236-3800


(508) 236-1761

investors@sensata.com


lmegathlin@sensata.com

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SOURCE Sensata Technologies Holding N.V.

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