Sensata Technologies Holding N.V. Announces Second Quarter 2015 Results

Jul 28, 2015
- Second quarter 2015 Net revenue was $770.4 million.
- Second quarter 2015 Net income was $40.9 million, or $0.24 per diluted share.
- Second quarter 2015 Adjusted net income(1) was $124.6 million, or $0.73 per diluted share.

ALMELO, Netherlands, July 28, 2015 /PRNewswire/ -- Sensata Technologies Holding N.V. (NYSE: ST) (the "Company") announces results of its operations for the second quarter ended June 30, 2015.

Sensata Technologies Logo. (PRNewsFoto/Sensata Technologies)

Highlights of the Three and Six Months ended June 30, 2015

Net revenue for the second quarter 2015 was $770.4 million, an increase of $194.6 million, or 33.8%, from $575.9 million for the second quarter 2014. Net income for the second quarter 2015 was $40.9 million, or $0.24 per diluted share. This compares to Net income for the second quarter 2014 of $63.9 million, or $0.37 per diluted share. Adjusted net income1 for the second quarter 2015 was $124.6 million which was 16.2% of Net revenue, or $0.73 per diluted share.  This was an increase of 16.6% compared to Adjusted net income1 for the second quarter 2014 of $106.8 million which was 18.6% of Net revenue, or $0.62 per diluted share.  Integration charges related to acquisitions were $4.2 million for the second quarter of 2015.

Net revenue for the six months ended June 30, 2015 was $1,521.1 million, an increase of $393.7 million, or 34.9% from $1,127.4 million for the six months ended June 30, 2014.  Net income for the six months ended June 30, 2015 was $76.3 million, or $0.44 per diluted share. This compares to Net income for the six months ended June 30, 2014 of $132.3 million, or $0.76 per diluted share. Adjusted net income1 for the six months ended June 30, 2015 was $235.4 million which was 15.5% of Net revenue, or $1.37 per diluted share.  This was an increase of 14.9% compared to Adjusted net income1 for the six months ended June 30, 2014 of $204.9 million which was 18.2% of Net revenue, or $1.18 per diluted share.

"Despite increased headwinds in certain of our end-markets, we delivered Adjusted net income for the second quarter in line with our expectations," said Martha Sullivan, President and Chief Executive Officer.  "We remain on-track for 2015 to be a year of strong double-digit growth and we are undertaking certain cost-containment activities to ensure profitability remains high for the balance of the year."

The Company spent $56.1 million, or 7.3% of Net revenue, on research, development and engineering related costs in the second quarter of 2015 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 June 30, 2015 was $226.8 million.  During the first six months of 2015, the Company generated cash of $212.2 million from operations, used cash of $83.9 million in investing activities and used cash of $112.9 million in financing activities.

The Company recorded a provision for income taxes of $8.6 million for the second quarter 2015.  Approximately $8.2 million of the provision, or 5.1% of Adjusted EBIT, related to taxes that are payable in cash and approximately $0.4 million related to deferred and other income tax expense.

The Company's total indebtedness at June 30, 2015 was $2.7 billion.  The Company's Net debt2 was $2.5 billion, resulting in a Net leverage ratio2 of 3.8x as of June 30, 2015.

Segment Performance



Three months ended


Six months ended

$ in 000s


June 30, 2015


June 30, 2014


June 30, 2015


June 30, 2014

Performance Sensing net revenue


$

606,353



$

400,847



$

1,197,605



$

795,473


Performance Sensing profit from operations


153,008



112,707



296,880



222,051


% of Performance Sensing net revenue


25.2

%


28.1

%


24.8

%


27.9

%










Sensing Solutions net revenue


$

164,092



$

175,006



$

323,525



$

331,974


Sensing Solutions profit from operations


52,117



53,945



101,335



101,968


% of Sensing Solutions net revenue


31.8

%


30.8

%


31.3

%


30.7

%

Guidance

The Company anticipates Net revenue of $715 to $755 million for the third quarter 2015 which, at the midpoint, is 27% higher than third quarter 2014 Net revenue of $577.1 million.  The Company further anticipates Adjusted EBITDA3 of $176 to $188 million for the third quarter 2015.  In addition, the Company expects Adjusted net income1 of $117 to $127 million, or $0.68 to $0.74 per diluted share for the third quarter 2015.  This guidance assumes a diluted share count of 171.8 million for the third quarter 2015.

For the full year 2015, the Company anticipates Net revenue of $2.99 to $3.07 billion which, at the midpoint, is 26% higher than the full year 2014 net revenue of $2.41 billion.  The Company further anticipates Adjusted EBITDA3 of $735 to $765 million for the full year 2015.  In addition, the Company expects Adjusted net income1 of $491 to $511 million, or $2.86 to $2.98 per diluted share for the full year 2015.  At the midpoint, this represents 23% growth compared to full year 2014 Adjusted net income1 per diluted share of $2.38.  This guidance assumes a diluted share count of 171.7 million for the full year 2015.

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.

3The Company defines Adjusted EBITDA as Adjusted net income excluding cash interest expense, cash tax expense, depreciation expense (excluding step-up depreciation expense related to acquisitions) and amortization expense (excluding amortization expense on acquisition related intangibles).

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 second quarter ended June 30, 2015.  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 76625944.  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 fifteen 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 the Company's future prospects, developments and business.  Such forward-looking statements include, among other things, the Company's anticipated results for the third quarter and full year 2015.  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: adverse developments in the automotive industry; competitive pressures that could require the Company to lower prices or result in reduced demand for the Company's products; integration of acquired companies, including Schrader; the assumption of known and unknown liabilities in the acquisition of Schrader; risks associated with the Company's non-US operations and international business; litigation and disputes involving the Company, including the extent of intellectual property, product liability, and warranty claims asserted against the Company; risks associated with the Company's historical and future tax positions; risks related to labor disruptions or costs; and risks associated with the Company's substantial indebtedness.  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.

 

Contact:






Investors


News Media

Jacob Sayer


Linda Megathlin

(508) 236-3800


(508) 236-1761

investors@sensata.com


lmegathlin@sensata.com

 

SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Statements of Operations

(Unaudited)

 

(In 000s, except per share amounts)











For the three months ended


For the six months ended



June 30, 2015


June 30, 2014


June 30, 2015


June 30, 2014

Net revenue


$

770,445



$

575,853



$

1,521,130



$

1,127,447


Operating costs and expenses:









Cost of revenue


517,875



368,446



1,024,508



725,645


Research and development


31,242



18,492



61,978



36,156


Selling, general and administrative


73,008



50,638



137,404



95,310


Amortization of intangible assets


45,075



32,561



90,884



64,577


Restructuring and special charges


10,089



1,740



10,809



2,605


Total operating costs and expenses


677,289



471,877



1,325,583



924,293


Profit from operations


93,156



103,976



195,547



203,154


Interest expense, net


(31,562)



(23,306)



(66,323)



(46,510)


Other, net


(12,085)



3,932



(33,842)



4,470


Income before taxes


49,509



84,602



95,382



161,114


Provision for income taxes


8,609



20,709



19,127



28,848


Net income


$

40,900



$

63,893



$

76,255



$

132,266











Net income per share:









Basic


$

0.24



$

0.37



$

0.45



$

0.77


Diluted


$

0.24



$

0.37



$

0.44



$

0.76











Weighted-average ordinary shares outstanding:







Basic


170,007



170,748



169,747



171,413


Diluted


171,667



172,918



171,464



173,531


 

SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

 

($ in 000s)











For the three months

ended


For the six months

ended



June 30, 2015


June 30, 2014


June 30, 2015


June 30, 2014

Net income


$

40,900



$

63,893



$

76,255



$

132,266


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









Deferred (loss)/gain on derivative instruments, net of reclassifications


(17,132)



1,888



4,372



4,053


Defined benefit and retiree healthcare plans


407



(129)



18



(200)


Other comprehensive (loss)/income


(16,725)



1,759



4,390



3,853


Comprehensive income


$

24,175



$

65,652



$

80,645



$

136,119


 

SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Balance Sheets

(Unaudited)

 

($ in 000s)







June 30,
2015


December 31,

2014

Assets





Current assets:





Cash and cash equivalents


$

226,795



$

211,329


Accounts receivable, net of allowances


499,101



444,852


Inventories


332,648



356,364


Deferred income tax assets


17,110



15,301


Prepaid expenses and other current assets


116,813



90,918


Total current assets


1,192,467



1,118,764


Property, plant and equipment, net


629,104



589,484


Goodwill


2,429,537



2,424,795


Other intangible assets, net


823,673



910,774


Deferred income tax assets


14,939



16,750


Deferred financing costs


27,733



29,102


Other assets


19,522



26,940


Total assets


$

5,136,975



$

5,116,609







Liabilities and shareholders' equity





Current liabilities:





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


$

144,532



$

145,979


Accounts payable


297,356



287,800


Income taxes payable


13,878



7,516


Accrued expenses and other current liabilities


226,712



222,781


Deferred income tax liabilities


12,546



13,430


Total current liabilities


695,024



677,506


Deferred income tax liabilities


371,961



362,738


Pension and post-retirement benefit obligations


33,157



35,799


Capital lease and other financing obligations, less current portion


46,100



45,113


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


2,556,397



2,650,744


Other long-term liabilities


30,009



41,817


Total liabilities


3,732,648



3,813,717


Total shareholders' equity


1,404,327



1,302,892


Total liabilities and shareholders' equity


$

5,136,975



$

5,116,609


 

SENSATA TECHNOLOGIES HOLDING N.V.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

($ in 000s)


For the six months ended



June 30, 2015


June 30, 2014

Cash flows from operating activities:





Net income


$

76,255



$

132,266


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





Depreciation


48,808



30,209


Amortization of deferred financing costs and discounts


3,231



2,386


Currency remeasurement (gain)/loss on debt


(654)



49


Share-based compensation


7,581



6,351


Loss on debt financing


25,538




Amortization of inventory step-up to fair value




907


Amortization of intangible assets


90,884



64,577


Deferred income taxes


6,844



16,695


Gains from insurance proceeds




(2,417)


Unrealized loss/(gain) on hedges and other non-cash items


2,335



(4,053)


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


(48,623)



(29,595)


Net cash provided by operating activities


212,199



217,375







Cash flows from investing activities:





Acquisition of Schrader, net of cash received


(958)




Other acquisitions, net of cash received


3,881



(117,085)


Additions to property, plant and equipment and capitalized software


(86,801)



(67,199)


Insurance proceeds




2,417


Proceeds from the sale of assets




5,467


Net cash used in investing activities


(83,878)



(176,400)







Cash flows from financing activities:





Proceeds from exercise of stock options and issuance of ordinary shares


13,266



11,197


Proceeds from issuance of debt


1,795,120



35,000


Payments on debt


(1,892,263)



(39,291)


Repurchase of ordinary shares from SCA




(169,680)


Payments to repurchase ordinary shares


(50)



(11,459)


Payments of debt issuance costs


(28,928)




Net cash used in financing activities


(112,855)



(174,233)


Net change in cash and cash equivalents


15,466



(133,258)


Cash and cash equivalents, beginning of period


211,329



317,896


Cash and cash equivalents, end of period


$

226,795



$

184,638


 

Net Revenue by Business, Geography and End Market

 

(% of total net revenue)


Three months ended

June 30,


Six months ended

June 30,



2015


2014


2015


2014

Performance Sensing


78.7

%


69.6

%


78.7

%


70.6

%

Sensing Solutions


21.3

%


30.4

%


21.3

%


29.4

%

Total


100.0

%


100.0

%


100.0

%


100.0

%

 

(% of total net revenue)


Three months ended

June 30,


Six months ended

June 30,



2015


2014


2015


2014

Americas


41.2

%


38.2

%


41.0

%


38.7

%

Europe


33.1

%


29.0

%


33.1

%


29.1

%

Asia


25.7

%


32.8

%


25.9

%


32.2

%

Total


100.0

%


100.0

%


100.0

%


100.0

%

 

(% of total net revenue)


Three months ended

June 30,


Six months ended

June 30,



2015


2014


2015


2014

European automotive


27.4

%


24.1

%


27.5

%


24.6

%

North American automotive


21.3

%


16.2

%


21.2

%


16.7

%

Asian automotive


17.3

%


20.1

%


17.3

%


20.1

%

Rest of world automotive


0.9

%


0.5

%


0.9

%


0.5

%

Heavy vehicle off-road


12.5

%


11.3

%


12.6

%


11.3

%

Appliance and heating,

ventilation and air-conditioning


6.2

%


9.1

%


6.2

%


8.9

%

Industrial


6.5

%


8.0

%


6.3

%


7.8

%

All other


7.9

%


10.7

%


8.0

%


10.1

%

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 certain restructuring and special charges, costs associated with financing and other transactions, deferred loss/(gain) on other hedges, 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 other costs. The Company believes Adjusted net income provides investors with helpful information with respect to the Company's operating performance, 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 six months ended June 30, 2015 and 2014.

 

(In 000s, except per share amounts)


Three months ended

June 30,


Six months ended

June 30,



2015


2014


2015


2014

Net income


$

40,900



$

63,893



$

76,255



$

132,266


Restructuring and special charges


22,023



921



23,179



(1,496)


Financing and other transaction costs


5,974



1,190



25,796



1,258


Deferred loss/(gain) on other hedges


2,424



(6,430)



6,462



(10,624)


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


46,308



33,428



93,654



68,050


Deferred income tax and other tax expense


5,368



12,430



6,854



13,043


Amortization of deferred financing costs


1,578



1,400



3,231



2,386


Total adjustments


$

83,675



$

42,939



$

159,176



$

72,617


Adjusted net income


$

124,575



$

106,832



$

235,431



$

204,883


Weighted average diluted shares

outstanding used in Adjusted net

income per share calculation


171,667



172,918



171,464



173,531


Adjusted net income per diluted share


$

0.73



$

0.62



$

1.37



$

1.18


 

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/(benefit).  As the Company treats deferred income tax and other tax expense/(benefit) 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 any 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 $0.2 million for the three months ended June 30, 2015 and 2014, respectively, and $0.3 million and $0.8 million for the six months ended June 30, 2015 and 2014, respectively; Restructuring and special charges:  $1.0 million and $0.0 million for the three months ended June 30, 2015 and 2014, respectively, and $1.1 million and $0.0 million for the six months ended June 30, 2015 and 2014, respectively.

The following unaudited table identifies where in the Condensed Consolidated Statements of Operations the adjustments to reconcile Net income to Adjusted net income were recorded for the three and six months ended June 30, 2015 and 2014.

($ in 000s)


Three months ended

June 30,


Six months ended

June 30,



2015


2014


2015


2014

Cost of revenue


$

14,121



$

1,228



$

23,326



$

1,785


Selling, general and administrative


5,644



1,190



5,902



1,258


Amortization of intangible assets


43,719



32,200



88,335



63,848


Restructuring and special charges


9,847



921



9,945



921


Interest expense


1,578



1,400



3,231



2,386


Other, net


8,398



(6,430)



26,583



(10,624)


Provision for income taxes


368



12,430



1,854



13,043


Total adjustments


$

83,675



$

42,939



$

159,176



$

72,617


 

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 September 30, 2015 and full year ended December 31, 2015.  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

September 30, 2015


Full year ended

December 31, 2015



Low End


High End


Low End


High End










Projected GAAP earnings per diluted share


$

0.35



$

0.41



$

1.27



$

1.39


Restructuring and special charges






0.13



0.13


Financing and other transaction costs






0.15



0.15


Deferred (gain)/loss on other hedges






0.04



0.04


Depreciation and amortization expense

related to the step-up in fair value of fixed

and intangible assets and inventory


0.26



0.26



1.07



1.07


Deferred income tax and other tax (benefit)/expense


0.06



0.06



0.16



0.16


Amortization of deferred financing costs


0.01



0.01



0.04



0.04


Projected Adjusted net income per diluted share


$

0.68



$

0.74



$

2.86



$

2.98


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


171,800



171,800



171,700



171,700


 

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, 2014 and the interim condensed consolidated financial statements included in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015. 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.

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SOURCE Sensata Technologies Holding N.V.

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