ALMELO,
Revenue for the second quarter 2016 was
Net income for the second quarter 2016 was
On a sequential basis,
Revenue for the six months ended June 30, 2016 was
Net income for the six months ended June 30, 2016 was
"
Sensata's ending cash balance at June 30, 2016 was
| Segment Performance | |||||||||||||||
| Three months ended | Six months ended | ||||||||||||||
| $ in 000s | June 30, 2016 |
June 30, 2015 |
June 30, 2016 |
June 30, 2015 |
|||||||||||
| Performance Sensing net revenue | $ | 615,570 | $ | 606,353 | $ | 1,212,745 | $ | 1,197,605 | |||||||
| Performance Sensing profit from operations | 152,525 | 153,008 | 298,312 | 296,880 | |||||||||||
| % of Performance Sensing revenue | 24.8% | 25.2% | 24.6% | 24.8% | |||||||||||
| Sensing Solutions net revenue | $ | 211,975 | $ | 164,092 | $ | 411,349 | $ | 323,525 | |||||||
| Sensing Solutions profit from operations | 68,175 | 52,117 | 131,423 | 101,335 | |||||||||||
| % of Sensing Solutions revenue | 32.2% | 31.8% | 31.9% | 31.3% | |||||||||||
Performance Sensing's profit from operations as a percentage of revenue totaled 24.8 percent in the second quarter of 2016. The impact of changes in foreign exchange rates and the CST acquisition lowered Performance Sensing's profit from operations as a percentage of revenue by 120 basis points in the second quarter of 2016. Sensing Solution's profit from operations as a percentage of revenue totaled 32.2 percent in the second quarter of 2016. The impact of changes in foreign exchange rates and the CST acquisition lowered Sensing Solution's profit from operations as a percentage of revenue by 80 basis points in the second quarter of 2016.
Guidance
For the full year 2016, the Company anticipates net revenue of
Conference Call & Webcast
The Company will conduct a conference call today at
About
Use of Non-GAAP Financial Measures
The non-GAAP financial measures referenced by
Adjusted net income is defined as net income excluding certain non-GAAP adjustments which are described in the accompanying reconciliation tables. Adjusted net income margin is calculated by dividing adjusted net income by net revenue. Adjusted earnings per share is calculated by dividing adjusted net income by the number of diluted weighted average ordinary shares outstanding in the period. We define free cash flow as net cash provided by operating activities less additions to property, plant, and equipment and capitalized software.
There are limitations in using non-GAAP financial measures as they are not prepared in accordance with U.S. generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. We believe that the non-GAAP financial measures provide useful and supplementary information to investors regarding our quarterly and annual performance. We regularly use non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures. For the same reasons, we also use this information for our forecasting activities.
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 strategies. Such forward-looking statements include, among other things, our anticipated results for the third quarter and full year 2016. Such statements involve risks and 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 conditions in the automotive industry; competitive pressures that could require us to lower prices or could result in reduced demand for our products; integration of acquired companies, including CST and Schrader; the assumption of known and unknown liabilities in the acquisition of CST and Schrader; risks associated with our non-US operations and international business; litigation and disputes involving us, including the extent of intellectual property, product liability, warranty, and recall claims asserted against us; risks associated with our historical and future tax positions; risks associated with labor disruptions or increased labor costs; risks associated with our substantial indebtedness; and risks associated with breaches and other disruptions to our information technology infrastructure. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak to results only as of the date the statements were made; and we undertake no obligation to publicly update or revise any forward-looking statements, whether to reflect any future events or circumstances or otherwise. For a discussion of potential risks and uncertainties, please refer to the risk factors listed in our
| 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, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||||
| Net revenue | $ | 827,545 | $ | 770,445 | $ | 1,624,094 | $ | 1,521,130 | ||||||||
| Operating costs and expenses: | ||||||||||||||||
| Cost of revenue | 537,441 | 517,875 | 1,065,819 | 1,024,508 | ||||||||||||
| Research and development | 32,288 | 31,242 | 63,639 | 61,978 | ||||||||||||
| Selling, general and administrative | 77,660 | 73,008 | 149,591 | 137,404 | ||||||||||||
| Amortization of intangible assets | 50,563 | 45,075 | 101,010 | 90,884 | ||||||||||||
| Restructuring and special charges | 1,475 | 10,089 | 2,330 | 10,809 | ||||||||||||
| Total operating costs and expenses | 699,427 | 677,289 | 1,382,389 | 1,325,583 | ||||||||||||
| Profit from operations | 128,118 | 93,156 | 241,705 | 195,547 | ||||||||||||
| Interest expense, net | (41,757) | (31,562) | (84,025) | (66,323) | ||||||||||||
| Other, net | 130 | (12,085) | 5,618 | (33,842) | ||||||||||||
| Income before taxes | 86,491 | 49,509 | 163,298 | 95,382 | ||||||||||||
| Provision for income taxes | 20,981 | 8,609 | 37,176 | 19,127 | ||||||||||||
| Net income | $ | 65,510 | $ | 40,900 | $ | 126,122 | $ | 76,255 | ||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | 0.38 | $ | 0.24 | $ | 0.74 | $ | 0.45 | ||||||||
| Diluted | $ | 0.38 | $ | 0.24 | $ | 0.74 | $ | 0.44 | ||||||||
| Weighted-average ordinary shares outstanding: | ||||||||||||||||
| Basic | 170,723 | 170,007 | 170,563 | 169,747 | ||||||||||||
| Diluted | 171,343 | 171,667 | 171,299 | 171,464 | ||||||||||||
| 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, 2016 |
June 30, 2015 |
June 30, 2016 |
June 30, 2015 |
|||||||||||||
| Net income | $ | 65,510 | $ | 40,900 | $ | 126,122 | $ | 76,255 | ||||||||
| Other comprehensive income/(loss), net of tax: | ||||||||||||||||
| Deferred gain/(loss) on derivative instruments, net of reclassifications | 178 | (17,132) | (16,525) | 4,372 | ||||||||||||
| Defined benefit and retiree healthcare plans | 59 | 407 | 267 | 18 | ||||||||||||
| Other comprehensive income/(loss) | 237 | (16,725 | ) | (16,258 | ) | 4,390 | ||||||||||
| Comprehensive income | $ | 65,747 | $ | 24,175 | $ | 109,864 | $ | 80,645 | ||||||||
| SENSATA TECHNOLOGIES HOLDING N.V. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (Unaudited) | ||||||||
| ($ in 000s) | ||||||||
| June 30, 2016 |
December 31, 2015 |
|||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 309,120 | $ | 342,263 | ||||
| Accounts receivable, net of allowances | 535,488 | 467,567 | ||||||
| Inventories | 346,120 | 358,701 | ||||||
| Prepaid expenses and other current assets | 105,593 | 109,392 | ||||||
| Total current assets | 1,296,321 | 1,277,923 | ||||||
| Property, plant and equipment, net | 709,260 | 694,155 | ||||||
| Goodwill | 3,013,693 | 3,019,743 | ||||||
| Other intangible assets, net | 1,168,301 | 1,262,572 | ||||||
| Deferred income tax assets | 32,034 | 26,417 | ||||||
| Other assets | 69,312 | 18,100 | ||||||
| Total assets | $ | 6,288,921 | $ | 6,298,910 | ||||
| Liabilities and shareholders' equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt, capital lease and other financing obligations | $ | 139,203 | $ | 300,439 | ||||
| Accounts payable | 323,062 | 290,779 | ||||||
| Income taxes payable | 19,137 | 21,968 | ||||||
| Accrued expenses and other current liabilities | 247,867 | 251,989 | ||||||
| Total current liabilities | 729,269 | 865,175 | ||||||
| Deferred income tax liabilities | 405,344 | 390,490 | ||||||
| Pension and other post-retirement benefit obligations | 33,966 | 34,314 | ||||||
| Capital lease and other financing obligations, less current portion | 34,341 | 36,219 | ||||||
| Long-term debt, net of discount and deferred financing costs, less current portion | 3,263,061 | 3,264,333 | ||||||
| Other long-term liabilities | 34,981 | 39,803 | ||||||
| Total liabilities | 4,500,962 | 4,630,334 | ||||||
| Total shareholders' equity | 1,787,959 | 1,668,576 | ||||||
| Total liabilities and shareholders' equity | $ | 6,288,921 | $ | 6,298,910 | ||||
| SENSATA TECHNOLOGIES HOLDING N.V. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (Unaudited) | ||||||||
| ($ in 000s) | For the six months ended | |||||||
| June 30, 2016 |
June 30, 2015 |
|||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 126,122 | $ | 76,255 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 51,345 | 48,808 | ||||||
| Amortization of deferred financing costs and original issue discounts | 3,678 | 3,231 | ||||||
| Currency remeasurement gain on debt | (39) | (654) | ||||||
| Share-based compensation | 8,522 | 7,581 | ||||||
| Loss on debt financing | — | 25,538 | ||||||
| Amortization of inventory step-up to fair value | 2,319 | — | ||||||
| Amortization of intangible assets | 101,010 | 90,884 | ||||||
| Deferred income taxes | 15,599 | 6,844 | ||||||
| Unrealized (gain)/loss on hedges and other non-cash items | (2,004) | 2,335 | ||||||
| Changes in operating assets and liabilities, net of effects of acquisitions | (59,921) | (48,623) | ||||||
| Net cash provided by operating activities | 246,631 | 212,199 | ||||||
| Cash flows from investing activities: | ||||||||
| Acquisition of CST, net of cash received | 4,688 | — | ||||||
| Acquisition of Schrader, net of cash received | — | (958) | ||||||
| Other acquisitions, net of cash received | — | 3,881 | ||||||
| Additions to property, plant and equipment and capitalized software | (64,466) | (86,801) | ||||||
| Investment in equity securities | (50,000) | — | ||||||
| Proceeds from the sale of assets | 650 | — | ||||||
| Net cash used in investing activities | (109,128) | (83,878) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from exercise of stock options and issuance of ordinary shares | 3,067 | 13,266 | ||||||
| Proceeds from issuance of debt | — | 1,795,120 | ||||||
| Payments on debt | (168,679) | (1,892,263) | ||||||
| Payments to repurchase ordinary shares | (4,516) | (50) | ||||||
| Payments of debt issuance costs | (518) | (28,928) | ||||||
| Net cash used in financing activities | (170,646) | (112,855) | ||||||
| Net change in cash and cash equivalents | (33,143) | 15,466 | ||||||
| Cash and cash equivalents, beginning of period | 342,263 | 211,329 | ||||||
| Cash and cash equivalents, end of period | $ | 309,120 | $ | 226,795 | ||||
| Net Revenue by Business, Geography and End Market | ||||||||||||
| (% of total net revenue) | Three months ended June 30, |
Six months ended June 30, |
||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||
| Performance Sensing | 74.4% | 78.7% | 74.7% | 78.7% | ||||||||
| Sensing Solutions | 25.6% | 21.3% | 25.3% | 21.3% | ||||||||
| Total | 100.0% | 100.0% | 100.0% | 100.0% | ||||||||
| (% of total net revenue) | Three months ended June 30, |
Six months ended June 30, |
||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||
| Americas | 42.8% | 41.2% | 43.2% | 41.0% | ||||||||
| Europe | 33.0% | 33.1% | 33.2% | 33.1% | ||||||||
| Asia | 24.2% | 25.7% | 23.6% | 25.9% | ||||||||
| Total | 100.0% | 100.0% | 100.0% | 100.0% | ||||||||
| (% of total net revenue)1 | Three months ended June 30, |
Six months ended June 30, |
||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||
| European automotive | 25.5% | 28.4% | 25.5% | 28.2% | ||||||||
| North American automotive | 20.0% | 21.3% | 20.0% | 21.2% | ||||||||
| Asian automotive | 16.8% | 17.3% | 16.5% | 17.3% | ||||||||
| Rest of world automotive | 0.2% | 0.9% | 0.2% | 0.9% | ||||||||
| Heavy vehicle off-road | 13.6% | 12.6% | 14.1% | 12.8% | ||||||||
| Appliance and heating, ventilation and air-conditioning | 5.7% | 6.2% | 5.7% | 6.2% | ||||||||
| Industrial | 9.0% | 5.4% | 9.5% | 5.4% | ||||||||
| All other | 9.2% | 7.9% | 8.5% | 8.0% | ||||||||
| Total | 100.0% | 100.0% | 100.0% | 100.0% | ||||||||
1 Reclassification of certain acquired product lines has led to retrospective adjustments of certain end-market percentages. Revenues have shifted from Industrial into the European, North American and Asian automotive end markets.
The following unaudited table reconciles the Company's net income to adjusted net income for the three and six months ended June 30, 2016 and 2015.
| (In 000s, except per share amounts) | Three months ended June 30, |
Six months ended June 30, |
||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net income | $ | 65,510 | $ | 40,900 | $ | 126,122 | $ | 76,255 | ||||||||
| Restructuring and special charges | 3,161 | 22,023 | 6,800 | 23,179 | ||||||||||||
| Financing and other transaction costs | 275 | 5,974 | 1,056 | 25,796 | ||||||||||||
| Deferred (gain)/loss on other hedges | (8,294) | 2,424 | (21,567) | 6,462 | ||||||||||||
| Depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory | 51,891 | 46,308 | 105,757 | 93,654 | ||||||||||||
| Deferred income tax and other tax expense | 9,942 | 5,368 | 15,699 | 6,854 | ||||||||||||
| Amortization of deferred financing costs | 1,834 | 1,578 | 3,678 | 3,231 | ||||||||||||
| Total adjustments | $ | 58,809 | $ | 83,675 | $ | 111,423 | $ | 159,176 | ||||||||
| Adjusted net income | $ | 124,319 | $ | 124,575 | $ | 237,545 | $ | 235,431 | ||||||||
| Weighted average diluted shares outstanding | 171,343 | 171,667 | 171,299 | 171,464 | ||||||||||||
| Adjusted net income per diluted share | $ | 0.73 | $ | 0.73 | $ | 1.39 | $ | 1.37 | ||||||||
The Company's definition of adjusted net income excludes the deferred provision for/(benefit from) income taxes and other tax expense/(benefit). The Company's deferred provision for/(benefit from) income taxes includes adjustments in book-to-tax basis differences primarily related to the step-up in fair value of fixed and intangible assets and goodwill, utilization of net operating losses and adjustments to our U.S. valuation allowance in connection with certain acquisitions. Other tax expense/(benefit) includes certain adjustments to unrecognized tax positions.
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, above, would not change adjusted net income for any period presented.
The current income tax (benefit)/expense associated with the reconciling items above, which is included in adjusted net income, would be as follows: Depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory:
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, 2016 and 2015.
| ($ in 000s) | Three months ended June 30, |
Six months ended June 30, |
|||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Cost of revenue | $ | 3,551 | $ | 14,121 | $ | 6,924 | $ | 23,326 | |||||||
| Selling, general and administrative | 1,075 | 5,644 | 2,720 | 5,902 | |||||||||||
| Amortization of intangible assets | 49,130 | 43,719 | 98,198 | 88,335 | |||||||||||
| Restructuring and special charges | 904 | 9,847 | 1,704 | 9,945 | |||||||||||
| Interest expense, net | 1,834 | 1,578 | 3,678 | 3,231 | |||||||||||
| Other, net | (7,627) | 8,398 | (17,500) | 26,583 | |||||||||||
| Provision for income taxes | 9,942 | 368 | 15,699 | 1,854 | |||||||||||
| Total adjustments | $ | 58,809 | $ | 83,675 | $ | 111,423 | $ | 159,176 | |||||||
The following unaudited table reconciles the Company's net cash provided by operating activities to free cash flow.
| ($ in 000s) | Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 110,429 | $ | 109,089 | $ | 246,631 | $ | 212,199 | |||||||||||||||||||||||
| Additions to property, plant and equipment and capitalized software | (30,231) | (48,923) | (64,466) | (86,801) | |||||||||||||||||||||||||||
| Free cash flow | $ | 80,198 | $ | 60,166 | $ | 182,165 | $ | 125,398 | |||||||||||||||||||||||
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
| Three months ended September 30, 2016 |
Full year ended December 31, 2016 |
|||||||||||||||
| Low End | High End | Low End | High End | |||||||||||||
| Projected GAAP earnings per diluted share | $ | 0.32 | $ | 0.37 | $ | 1.41 | $ | 1.54 | ||||||||
| Restructuring and special charges | 0.01 | 0.02 | 0.05 | 0.06 | ||||||||||||
| Financing and other transaction costs | — | — | 0.01 | 0.01 | ||||||||||||
| Deferred (gain)/loss on other hedges | — | — | (0.13) | (0.13) | ||||||||||||
| Depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory | 0.30 | 0.30 | 1.21 | 1.21 | ||||||||||||
| Deferred income tax and other tax expense/(benefit) | 0.06 | 0.06 | 0.21 | 0.21 | ||||||||||||
| Amortization of deferred financing costs | 0.01 | 0.01 | 0.04 | 0.04 | ||||||||||||
| Projected Adjusted net income per diluted share | $ | 0.70 | $ | 0.76 | $ | 2.80 | $ | 2.94 | ||||||||
| Weighted average diluted shares outstanding | 171,600 | 171,600 | 171,500 | 171,500 | ||||||||||||
Contacts: Investors: Joshua Young (508) 236-2196 [email protected] News Media: Alexia Taxiarchos (508) 236-1761 [email protected]