Sensata Technologies Reports Fourth Quarter and Full Year 2019 Financial Results

Feb 11, 2020

SWINDON, United Kingdom, Feb. 11, 2020 (GLOBE NEWSWIRE) -- Sensata Technologies (NYSE: ST), a global industrial technology company and a leading provider of sensor-rich solutions that create insights for customers, today announced financial results for its fourth quarter and full year ended December 31, 2019.

Operating results for the fourth quarter of 2019 compared to the fourth quarter of 2018 are summarized below. These results include non-GAAP financial measures, each of which is defined and reconciled to the most directly comparable GAAP measure later in this press release.

Revenue:

  • Revenue was $846.7 million, a decrease of ($1.2) million, or (0.1%), compared to $847.9 million in the fourth quarter of 2018.
  • Revenue declined (0.8%) on an organic basis, which excludes the effects of the following:
    • Foreign currency exchange rates: (0.3%) change versus the prior year period.
    • Acquisitions and divestitures, net: 1.0% change versus the prior year period.

Operating income:

  • Operating income was $120.7 million (14.3% of revenue), a decrease of ($41.6) million, or (26%), compared to $162.4 million (19.1% of revenue) in the fourth quarter of 2018.
  • Adjusted operating income was $192.5 million (22.7% of revenue), a decrease of ($17.6) million, or (8%), compared to $210.1 million (24.8% of revenue) in the fourth quarter of 2018.

Earnings per share:

  • Earnings per share were $0.34, a decrease of (78%) compared to $1.54 per share in the fourth quarter of 2018.
  • Adjusted earnings per share were $0.89, a decrease of (6%) compared to $0.95 per share in the fourth quarter of 2018.
  • Changes in foreign currency exchange rates increased Sensata's adjusted earnings per share by $0.01 in the fourth quarter of 2019 compared to the prior year period. The net effect of acquisitions and divestitures had a negligible effect on the company's adjusted earnings per share during the fourth quarter of 2019.

"We exceeded our revenue and EPS guidance in the fourth quarter as a result of strong secular growth and better than expected performance in China and our Industrial business," said Martha Sullivan, Chief Executive Officer of Sensata. "While our end-markets were weak throughout 2019, we continued to generate attractive content growth, outgrowing our automotive end-market by 490 basis points and outgrowing our HVOR end-market by 1190 basis points in the fourth quarter of 2019."

Jeffrey Cote, President & CEO-elect of Sensata added, "I am honored to be named as the next CEO of Sensata effective March 1st, and I am thrilled to lead such a talented group of individuals during this exciting time for our company. I appreciate the support that Martha, the senior management team and the board have provided me. I see a bright future ahead for Sensata and I am eager to help drive the company forward and capture strategic opportunities in megatrends and continue to diversify our business."

He added, "As we look ahead to 2020, our strong base of new business wins will enable us to sustain the attractive end-market outgrowth that we have generated over the past several years. We expect to maintain our industry-leading margin profile while continuing to invest in attractive long-term growth opportunities, such as our Smart & Connected initiative for fleet management, which represents incremental content and a new potential customer base for Sensata."

During the fourth quarter of 2019, Sensata repurchased approximately 1.6 million ordinary shares for total consideration of $84.2 million as part of a previously announced share repurchase program. As of December 31, 2019, approximately $337.5 million remained available for future share repurchases.

Paul Vasington, Chief Financial Officer of Sensata added, "Our first quarter 2020 guidance includes our best estimate of the business impact related to the recent CoronaVirus outbreak, which is quickly changing and highly uncertain. Furthermore, it is very difficult to predict when the government imposed quarantines will end, when travel restrictions will be lifted, when our plants will be fully operational, and the ultimate impact on end-market demand. That said, we estimate for both the first quarter and full year 2020 guidance a $40 million revenue and $20 million operating profit negative impact in the first quarter with minimal recovery over the balance of the year. The profit decline reflects the normal impact from expected lost revenue as well as underutilized and stranded costs related to this sudden event. We will continue to monitor the situation closely and we are doing everything possible to protect our employees and serve our customers."

Full Year Ended December 31, 2019

Operating results for the full year ended December 31, 2019 compared to the full year ended December 31, 2018 are summarized below. These results include non-GAAP financial measures, each of which is defined and reconciled to the most directly comparable GAAP measure later in this press release.

Revenue:

  • Revenue was $3,450.6 million, a decrease of ($71.0) million, or (2.0%), compared to $3,521.6 million in the full year ended December 31, 2018.
  • Revenue declined (1.1%) on an organic basis, which excludes the effects of the following:
    • Foreign currency exchange rates: (0.7%) change versus the prior year period.
    • Acquisitions and divestitures, net: (0.2%) change versus the prior year period.

Operating income:

  • Operating income was $556.9 million (16.1% of revenue), a decrease of ($153.5) million, or (22%), compared to $710.4 million (20.2% of revenue) in the full year ended December 31, 2018.
  • Adjusted operating income was $785.7 million (22.8% of revenue), a decrease of ($46.3) million, or (6%), compared to $832.0 million (23.6% of revenue) in the full year ended December 31, 2018.

Earnings per share:

  • Earnings per share were $1.75, a decrease of (50%) compared to $3.53 per share in the full year ended December 31, 2018.
  • Adjusted earnings per share were $3.56, a decrease of (2%) compared to $3.65 per share in the full year ended December 31, 2018.
  • Changes in foreign currency exchange rates increased Sensata's adjusted earnings per share by $0.15 in the full year ended December 31, 2019 compared to the prior year. The net effect of acquisitions and divestitures decreased Sensata's adjusted earnings per share by $0.11 in the full year ended December 31, 2019 compared to the prior year.

Sensata generated $619.6 million of operating cash flow in full year 2019, which was approximately flat with the previous year. The Company's free cash flow totaled $458.3 million in full year 2019 compared to $460.8 million in full year 2018.

Segment Performance

    For the three months ended
December 31,
  For the full year ended
December 31,
$ in 000s   2019   2018   2019   2018
Performance Sensing revenue   $ 632,879     $ 638,994     $ 2,546,016     $ 2,627,651  
Performance Sensing operating income   $ 165,087     $ 177,516     $ 648,744     $ 712,682  
% of Performance Sensing revenue   26.1 %   27.8 %   25.5 %   27.1 %
                 
Sensing Solutions revenue   $ 213,812     $ 208,928     $ 904,615     $ 893,976  
Sensing Solutions operating income   $ 68,225     $ 68,760     $ 291,261     $ 293,009  
% of Sensing Solutions revenue   31.9 %   32.9 %   32.2 %   32.8 %

Performance Sensing reported a 26.1% operating margin in the fourth quarter of 2019. Excluding the impact of changes in foreign currency exchange rates, Performance Sensing's operating margin was 25.9%. Sensing Solutions reported a 31.9% operating margin in the fourth quarter of 2019. Excluding the impact of changes in foreign currency exchange rates, Sensing Solutions' operating margin was 32.0%.

Performance Sensing reported a 25.5% operating margin in the full year ended December 31, 2019. Excluding the impact of changes in foreign currency exchange rates, Performance Sensing's operating margin was 24.7%. Sensing Solutions reported a 32.2% operating margin in the full year ended December 31, 2019. Excluding the impact of changes in foreign exchange rates, Sensing Solutions' operating margin was 32.2%.

Guidance

Fiscal Year 2020 Guidance
$ in millions, except EPS FY-19 FY-20 Guidance Y/Y Change
Revenue $3,450.6 $3,399 - $3,499 (1%) - 1%
organic growth     (1%) - 2%
Adjusted Operating Income $785.7 $753 - $781 (4%) - (1%)
Adjusted Net Income $575.9 $539 - $564 (6%) - (2%)
Adjusted EPS $3.56 $3.42 - $3.58 (4%) - 1%

Sensata expects that changes in foreign currency exchange rates will decrease revenues between $13 and $17 million and will decrease adjusted earnings per share by $0.03 - $0.04 for the full year 2020.

Q1 2020 Guidance
$ in millions, except EPS Q1-19 Q1-20 Guidance Y/Y Change
Revenue $870.5 $793 - $817 (9%) - (6%)
organic growth     (8%) - (6%)
Adjusted Operating Income $188.6 $149 - $155 (21%) - (18%)
Adjusted Net Income $139.3 $98 - $104 (30%) - (25%)
Adjusted EPS $0.85 $0.62 - $0.66 (27%) - (22%)

Sensata expects that changes in foreign currency exchange rates will decrease revenues $5 million and will decrease adjusted earnings per share by $0.01.

Conference Call and Webcast

Sensata will conduct a conference call today at 8:00 AM eastern time to discuss its fourth quarter and full year 2019 financial results and its outlook for the first quarter and full year 2020. The dial-in numbers for the call are 1-844-784-1726 or +1-412-380-7411. Callers should reference the "Sensata Fourth Quarter and Full Year 2019 Earnings Call". A live webcast and a replay of the conference call will also be available on the investor relations page of Sensata’s website at http://investors.sensata.com. Additionally, a replay of the call will be available until February 18, 2020. To access the replay dial 1-877-344-7529 or 1-412-317-0088 and enter confirmation code: 10138324.

About Sensata Technologies

Sensata Technologies is a leading industrial technology company that develops sensors, sensor-based solutions, including controllers and software, and other mission-critical products to create valuable business insights for customers and end users. For more than 100 years, Sensata has provided a wide range of customized, sensor-rich solutions that address complex engineering requirements to help customers solve difficult challenges in the automotive, heavy vehicle & off-road, industrial and aerospace industries. With more than 21,000 employees and operations in 11 countries, Sensata’s solutions help to make products safer, cleaner and more efficient, more electrified, and more connected. For more information, please visit Sensata’s website at www.sensata.com.

Non-GAAP Financial Measures

We supplement the reporting of our financial information determined in accordance with U.S. generally accepted accounting principles (“GAAP”) with certain non-GAAP financial measures. We use these non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance, and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures is useful for period-over-period comparisons of underlying business trends and our ongoing business performance. We also believe presenting these non-GAAP measures provides additional transparency into how management evaluates the business.

Non-GAAP financial measures should be considered as supplemental in nature and are not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not be the same as, or comparable to, similar non-GAAP measures presented by other companies.

The non-GAAP financial measures referenced by Sensata in this release include: adjusted net income, adjusted earnings per share (“EPS”), adjusted operating income, adjusted operating margin, free cash flow, organic revenue growth, and segment operating margin measured on a constant currency basis. We also refer to changes in certain non-GAAP measures, usually reported either as a percentage or number of basis points, between two periods and measured on either a reported, constant currency, or an organic basis, the latter of which excludes the net impact of acquisitions and divestitures for the 12-month period following the respective transaction date(s) and the effect of foreign currency exchange rate differences between the comparative periods. Such changes are also considered non-GAAP measures.

Adjusted net income is defined as net income, determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described in the accompanying reconciliation tables. Adjusted EPS is calculated by dividing adjusted net income by the number of diluted weighted-average ordinary shares outstanding in the period. We believe that these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Adjusted operating income is defined as operating income, determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described in the accompanying reconciliation tables. Adjusted operating margin is calculated by dividing adjusted operating income by net revenue. We believe that these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Free cash flow is defined as net cash provided by operating activities, determined in accordance with U.S. GAAP, less additions to property, plant and equipment and capitalized software. We believe that this measure is useful to investors and management as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to fund acquisitions, repurchase ordinary shares, or for the accelerated repayment of debt obligations.

Organic revenue growth is defined as the reported percentage change in net revenue calculated in accordance with U.S. GAAP, excluding the period-over-period impact of foreign exchange rate differences as well as the net impact of acquisitions and divestitures for the 12-month period following the respective transaction date(s). We believe that this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Safe Harbor Statement

This earnings release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Sensata believes that its expectations are based on reasonable assumptions. No assurance, however, can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results, or other expectations expressed in this earnings release, including, without limitation: risks associated with regulatory, legal, governmental, political, economic, and military matters; adverse conditions in the automotive industry; competition in our industry, including pressure from customers to reduce prices; supplier interruptions, which could limit access to manufactured components or raw materials; business disruptions due to natural disasters; labor disruptions; difficulties with or failures integrating acquired businesses; market acceptance of new products; fluctuations in foreign currency exchange rates; and our level of 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 we undertake no obligation to publicly update or revise any forward-looking statements, whether to reflect any future events or circumstances or otherwise. See "Risk Factors" in the Company's 2019 Annual Report on Form 10-K and other public filings and press releases. Copies of our filings are available from our Investor Relations department or from the SEC website, www.sec.gov.

SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)


    For the three months ended     For the full year ended
    December 31,
2019
    December 31,
2018
    December 31,
2019
    December 31,
2018
Net revenue   $ 846,691       $ 847,922       $ 3,450,631       $ 3,521,627  
Operating costs and expenses:                      
Cost of revenue   556,482       543,563       2,267,433       2,266,863  
Research and development   38,455       35,498       148,425       147,279  
Selling, general and administrative   70,709       69,877       281,442       305,558  
Amortization of intangible assets   34,807       35,752       142,886       139,326  
Restructuring and other charges, net   25,520       870       53,560       (47,818 )
Total operating costs and expenses   725,973       685,560       2,893,746       2,811,208  
Operating income   120,718       162,362       556,885       710,419  
Interest expense, net   (40,137 )     (38,871 )     (158,554 )     (153,679 )
Other, net   17       (4,098 )     (7,908 )     (30,365 )
Income before taxes   80,598       119,393       390,423       526,375  
Provision for/(benefit from) income taxes   27,060       (134,706 )     107,709       (72,620 )
Net income   $ 53,538       $ 254,099       $ 282,714       $ 598,995  
                       
Net income per share:                      
Basic   $ 0.34       $ 1.55       $ 1.76       $ 3.55  
Diluted   $ 0.34       $ 1.54       $ 1.75       $ 3.53  
                       
Weighted-average ordinary shares outstanding:                      
Basic   158,462       164,148       160,946       168,570  
Diluted   159,564       165,291       161,968       169,859  


SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)


    December 31,
2019
    December 31,
2018
Assets          
Current assets:          
Cash and cash equivalents   $ 774,119       $ 729,833  
Accounts receivable, net of allowances   557,874       581,769  
Inventories   506,678       492,319  
Prepaid expenses and other current assets   126,981       113,234  
Total current assets   1,965,652       1,917,155
 
Property, plant and equipment, net   830,998       787,178  
Goodwill   3,093,598       3,081,302  
Other intangible assets, net   770,904       897,191  
Deferred income tax assets   21,150       27,971  
Other assets   152,217       86,890  
Total assets   $ 6,834,519       $ 6,797,687  
           
Liabilities and shareholders’ equity          
Current liabilities:          
Current portion of long-term debt, finance lease and other financing obligations   $ 6,918       $ 14,561  
Accounts payable   376,968       379,824  
Income taxes payable   35,234       27,429  
Accrued expenses and other current liabilities   215,626       218,130  
Total current liabilities   634,746       639,944
 
Deferred income tax liabilities   251,033       225,694  
Pension and other post-retirement benefit obligations   36,100       33,958  
Finance lease and other financing obligations, less current portion   28,810       30,618  
Long-term debt, net   3,219,885       3,219,762  
Other long-term liabilities   90,190       39,277  
Total liabilities   4,260,764       4,189,253
 
Total shareholders’ equity   2,573,755       2,608,434  
Total liabilities and shareholders’ equity   $ 6,834,519       $ 6,797,687  


SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)


    For the full year ended
    December 31,
2019
    December 31,
2018
Cash flows from operating activities:          
Net income   $ 282,714       $ 598,995  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   115,862       106,014  
Amortization of debt issuance costs   7,804       7,317  
Gain on sale of business         (64,423 )
Share-based compensation   18,757       23,825  
Loss on debt financing   4,364       2,350  
Amortization of intangible assets   142,886       139,326  
Deferred income taxes   27,623       (144,068 )
Unrealized loss on derivative instruments and other   30,292       18,176  
Changes in operating assets and liabilities   (10,740 )     (66,949 )
Net cash provided by operating activities   619,562       620,563  
           
Cash flows from investing activities:          
Acquisitions, net of cash received   (32,465 )     (228,307 )
Additions to property, plant and equipment and capitalized software   (161,259 )     (159,787 )
Investment in debt and equity securities   (9,950 )      
Proceeds from the sale of business, net of cash sold         149,777  
Other   (5,103 )     711  
Net cash used in investing activities   (208,777 )     (237,606 )
           
Cash flows from financing activities:          
Proceeds from exercise of stock options and issuance of ordinary shares   15,150       6,093  
Payment of employee restricted stock tax withholdings   (6,990 )     (3,674 )
Proceeds from issuance of debt   450,000        
Payments on debt   (464,605 )     (15,653 )
Payments to repurchase ordinary shares   (350,004 )     (399,417 )
Payments of debt and equity issuance costs   (10,050 )     (9,931 )
Other         16,369  
Net cash used in financing activities   (366,499 )     (406,213 )
Net change in cash and cash equivalents   44,286       (23,256 )
Cash and cash equivalents, beginning of period   729,833       753,089  
Cash and cash equivalents, end of period   $ 774,119       $ 729,833  

Revenue by Business, Geography, and End-Market (Unaudited)

(percent of total revenue)   Three months ended
December 31,
  Full year ended
December 31,
    2019   2018   2019   2018
Performance Sensing   74.7 %   75.4 %   73.8 %   74.6 %
Sensing Solutions   25.3 %   24.6 %   26.2 %   25.4 %
Total   100.0 %   100.0 %   100.0 %   100.0 %


(percent of total revenue)   Three months ended
December 31,
  Full year ended
December 31,
    2019   2018   2019   2018
Americas   38.9 %   41.2 %   42.3 %   42.0 %
Europe   27.0 %   28.3 %   28.1 %   29.2 %
Asia/Rest of World   34.1 %   30.5 %   29.6 %   28.8 %
Total   100.0 %   100.0 %   100.0 %   100.0 %


(percent of total revenue)   Three months ended December 31,
    2019   2018
Automotive*   60.5 %   61.1 %
Heavy vehicle and off-road   15.4 %   15.6 %
Appliance and heating, ventilation and air-conditioning   5.3 %   5.2 %
Industrial   9.4 %   9.8 %
Aerospace   5.5 %   4.8 %
All other   3.9 %   3.5 %
Total   100.0 %   100.0 %

*    Includes amounts reflected in the Sensing Solutions segment as follows: $9.6 million and $11.6 million of revenue in the three months ended December 31, 2019 and 2018, respectively.

(percent of total revenue)   Full year ended
December 31,
    2019   2018
European Automotive*   20.6 %   22.0 %
Asia Automotive*   19.8 %   19.8 %
NA Automotive*   18.1 %   18.3 %
ROW Automotive*   0.3 %   0.3 %
Heavy vehicle and off-road   16.2 %   15.6 %
Appliance and heating, ventilation and air-conditioning   5.8 %   5.9 %
Industrial   10.2 %   9.6 %
Aerospace   5.1 %   4.7 %
All other   3.9 %   3.8 %
Total   100.0 %   100.0 %

*    Contains revenue reflected in Sensing Solutions segment related to electrical protection products sold into automotive industry. Total impact from all geographies totals $42.4 million for full year 2019 and $50.0 million for full year 2018.

End-Market Growth (Unaudited)

    For the three months ended
December 31, 2019
  For the full year ended
December 31, 2019
    Reported
Growth
  Organic
Growth
  End
Market
Growth
  Reported
Growth
  Organic
Growth
  End
Market
Growth
Automotive *   (0.8 %)   (1.1 %)   (6.0 %)   (4.3 %)   (0.9 %)   (5.6 %)
Heavy vehicle and off-road   (1.6 %)   (1.9 %)   (13.8 %)   1.6 %   0.9 %   (5.5 %)

*     Excludes Toyota, adjusted for Sensata's geographic mix.

The following unaudited tables reconcile Sensata's GAAP to non-GAAP financial measures for the three month and full year periods ended December 31, 2019 and 2018. Amounts presented in these tables may not sum due to the effect of rounding.

Non-GAAP Reconciliation - Three Months Ended December 31, 2019 and 2018

($ in thousands, except per share amounts) For the three months ended December 31, 2019
  Operating
Income
  Operating
Margin
  Income
Tax
Expense
  Net
Income
  Diluted
EPS
Reported (GAAP) $ 120,718     14.3 %   $ 27,060     $ 53,538     $ 0.34  
Non-GAAP adjustments:                  
Restructuring related and other 17,000     2.0 %   (343 )   18,794     0.12  
Financing and other transaction costs* 20,842     2.5 %       20,842     0.13  
Step-up depreciation and amortization 33,823     4.0 %       33,823     0.21  
Deferred loss/(gain) on derivative instruments 149     0.0 %       (1,932 )   (0.01 )
Amortization of debt issuance costs     %       2,231     0.01  
Deferred taxes and other tax related     %   14,403     14,403     0.09  
Total adjustments 71,814     8.5 %   14,060     88,161     0.55  
Adjusted (non-GAAP) $ 192,532     22.7 %   $ 13,000     $ 141,699     $ 0.89  

*Includes $17.8 million of costs relating to exiting an unfavorable long-term supplier agreement

($ in thousands, except per share amounts) For the three months ended December 31, 2018
  Operating
Income
  Operating
Margin
  Income
Tax
(Benefit)/
Expense
  Net
Income
  Diluted
EPS
Reported (GAAP) $ 162,362     19.1 %   $ (134,706 )   $ 254,099     $ 1.54  
Non-GAAP adjustments:                  
Restructuring related and other 7,127     0.8 %       9,764     0.06  
Financing and other transaction costs 5,324     0.6 %       6,070     0.04  
Step-up depreciation and amortization 36,170     4.3 %       36,170     0.22  
Deferred gain on derivative instruments (880 )   (0.1 %)       (1,253 )   (0.01 )
Amortization of debt issuance costs     %       1,837     0.01  
Deferred taxes and other tax related     %   (149,044 )   (149,044 )   (0.90 )
Total adjustments 47,741     5.6 %   (149,044 )   (96,456 )   (0.58 )
Adjusted (non-GAAP) $ 210,103     24.8 %   $ 14,338     $ 157,643     $ 0.95  

We treat deferred taxes as a non-GAAP adjustment. Accordingly, the tax effect of the non-GAAP adjustments above refers only to the current tax effect, if applicable. With respect to the three months ended December 31, 2018, the current tax effect of the related non-GAAP adjustments was not material, individually or in the aggregate.

Non-GAAP Reconciliation - Full year ended December 31, 2019 and 2018

($ in thousands, except per share amounts) For the full year ended December 31, 2019
  Operating
Income
  Operating Margin   Income Tax Expense   Net Income   Diluted EPS
Reported (GAAP) $ 556,885     16.1 %   $ 107,709     $ 282,714     $ 1.75  
Non-GAAP adjustments:                  
Restructuring related and other 61,916     1.8 %   (1,843 )   62,210     0.38  
Financing and other transaction costs* 28,911     0.8 %       34,851     0.22  
Step-up depreciation and amortization 139,587     4.0 %       139,587     0.86  
Deferred gain on derivative instruments (1,604 )   0.0 %       (6,492 )   (0.04 )
Amortization of debt issuance costs     %       7,804     0.05  
Deferred taxes and other tax related     %   55,242     55,242     0.34  
Total adjustments 228,810     6.6 %   53,399     293,202     1.81  
Adjusted (non-GAAP) $ 785,695     22.8 %   $ 54,310     $ 575,916     $ 3.56  

*Includes $17.8 million of costs relating to exiting an unfavorable long-term supplier agreement

($ in thousands, except per share amounts) For the full year ended December 31, 2018
  Operating
Income
  Operating
Margin
  Income
Tax
(Benefit)/
Expense
  Net
Income
  Diluted
EPS
Reported (GAAP) $ 710,419     20.2 %   $ (72,620 )   $ 598,995     $ 3.53  
Non-GAAP adjustments:                  
Restructuring related and other 25,398     0.7 %       28,035     0.17  
Financing and other transaction costs (47,040 )   (1.3 %)       (40,344 )   (0.24 )
Step-up depreciation and amortization 141,193     4.0 %       141,193     0.83  
Deferred loss on derivative instruments 1,988     0.1 %       12,499     0.07  
Amortization of debt issuance costs     %       7,317     0.04  
Deferred taxes and other tax related     %   (128,261 )   (128,261 )   (0.76 )
Total adjustments 121,539     3.5 %   (128,261 )   20,439     0.12  
Adjusted (non-GAAP) $ 831,958     23.6 %   $ 55,641     $ 619,434     $ 3.65  

We treat deferred taxes as a non-GAAP adjustment. Accordingly, the tax effect of the non-GAAP adjustments above refers only to the current tax effect, if applicable. With respect to the full year ended December 31, 2018, the current tax effect of the related non-GAAP adjustments was not material, individually or in the aggregate.

The following unaudited table identifies where in the Condensed Consolidated Statements of Operations the adjustments to reconcile operating income and net income to adjusted operating income and adjusted net income were recorded for the three month and full year periods ended December 31, 2019 and 2018:

($ in thousands) Three months ended
December 31,
    Full year ended
December 31,
  2019     2018     2019     2018
                     
Cost of revenue $ 7,577       $ 7,366       $ 25,115       $ 22,741  
Selling, general and administrative 5,618       5,445       14,048       13,025  
Amortization of intangible assets 33,099       34,060       136,087       132,706  
Restructuring and other charges, net 25,520       870       53,560       (46,933 )
Operating income adjustments 71,814       47,741       228,810       121,539  
Interest expense, net 2,231       1,837       7,804       7,317  
Other, net 56       3,010       3,189       19,844  
Provision for/(benefit from) income taxes 14,060       (149,044 )     53,399       (128,261 )
Net income adjustments $ 88,161       $ (96,456 )     $ 293,202       $ 20,439  

Cash Flow Reconciliation

Reconciliation of net cash provided by operating activities to free cash flow.

($ in thousands) Three months ended
December 31,
  %
Change
  Full year ended
December 31,
  %
Change
  2019   2018       2019   2018    
Net cash provided by operating activities $ 186,035     $ 200,424     (7.2 %)   $ 619,562     $ 620,563     (0.2 %)
Additions to property, plant and equipment and capitalized software (38,053 )   (48,512 )   21.6 %   (161,259 )   (159,787 )   (0.9 %)
Free cash flow $ 147,982     $ 151,912     (2.6 %)   $ 458,303     $ 460,776     (0.5 %)

The following unaudited table reconciles Sensata’s projected (GAAP) diluted EPS per share to its projected adjusted EPS for the three months ending March 31, 2020 and the full year ending December 31, 2020. The amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.

Non-GAAP Reconciliation of EPS Guidance

    Three months ending March 31, 2020   Full year ending December 31, 2020
    Low End   High End   Low End   High End
                 
Projected GAAP Earnings per diluted share   $ 0.33     $ 0.34     $ 2.24     $ 2.33  
Restructuring related and other   0.05     0.06     0.17     0.19  
Financing and other transaction costs   0.01     0.01     0.01     0.02  
Deferred (gain)/loss on derivative instruments*                
Step-up depreciation and amortization   0.20     0.20     0.79     0.79  
Deferred taxes and other tax related   0.02     0.04     0.15     0.19  
Amortization of debt issuance costs   0.01     0.01     0.04     0.04  
Projected adjusted EPS per diluted share   $ 0.62     $ 0.66     $ 3.42     $ 3.58  
Weighted-average diluted shares outstanding (in 000s)   157.0     157.0     157.8     157.8  

* We are unable to predict movements in commodity prices and, therefore, the impact of mark-to-market adjustments on our commodity forward contracts to our projected 2020 diluted net income per share. In prior periods, such adjustments have been significant to our reported GAAP earnings.

Contact:    
     
Investors:   Media:
Joshua Young   Alexia Taxiarchos
(508) 236-2196   (508) 236-1761
joshua.young@sensata.com   ataxiarchos@sensata.com

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Source: Sensata Technologies

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