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

ALMELO, Netherlands, Oct. 27, 2015 /PRNewswire/ -- Sensata Technologies Holding N.V. (NYSE: ST) (the "Company") announces results of its operations for the third quarter ended September 30, 2015.

Highlights of the Three and Nine Months ended September 30, 2015

Net revenue for the third quarter 2015 was $727.4 million, an increase of $150.3 million, or 26.0%, from $577.1 million for the third quarter 2014. Net income for the third quarter 2015 was $53.2 million, or $0.31 per diluted share. This compares to Net income for the third quarter 2014 of $82.0 million, or $0.48 per diluted share. Adjusted net income¹ for the third quarter 2015 was $123.3 million which was 17.0% of Net revenue, or $0.72 per diluted share.  This was an increase of 14.5% compared to Adjusted net income¹ for the third quarter 2014 of $107.7 million which was 18.7% of Net revenue, or $0.63 per diluted share.  Integration charges related to acquisitions were $4.1 million for the third quarter of 2015.

Net revenue for the nine months ended September 30, 2015 was $2,248.5 million, an increase of $543.9 million, or 31.9% from $1,704.5 million for the nine months ended September 30, 2014.  Net income for the nine months ended September 30, 2015 was $129.4 million, or $0.75 per diluted share. This compares to Net income for the nine months ended September 30, 2014 of $214.2 million, or $1.24 per diluted share. Adjusted net income¹ for the nine months ended September 30, 2015 was $358.7 million which was 16.0% of Net revenue, or $2.09 per diluted share.  This was an increase of 14.8% compared to Adjusted net income¹ for the nine months ended September 30, 2014 of $312.6 million which was 18.3% of Net revenue, or $1.81 per diluted share.

"We delivered strong free cash flow and Adjusted net income for the third quarter in line with our expectations, despite increased headwinds in our end-markets," said Martha Sullivan, President and Chief Executive Officer.  "We are undertaking certain cost-containment activities to ensure profitability remains high for the fourth quarter and into 2016."

The Company spent $54.7 million, or 7.5% of Net revenue, on research, development and engineering related costs in the third 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 September 30, 2015 was $258.2 million.  During the first nine months of 2015, the Company generated cash of $363.7 million from operations, used cash of $127.2 million in investing activities and used cash of $189.6 million in financing activities.

The Company recorded a provision for income taxes of $13.2 million for the third quarter 2015.  Approximately $8.7 million of the provision, or 5.4% of Adjusted EBIT, related to taxes that are payable in cash and approximately $4.5 million related to deferred and other income tax expense.

The Company's total indebtedness at September 30, 2015 was $2.7 billion, a reduction of $174 million from December 31, 2014 as a result of debt repayment.  The Company's Net debt² was $2.4 billion, resulting in a Net leverage ratio² of 3.5x as of September 30, 2015.

Segment Performance

Guidance

Inclusive of the assumed close of the acquisition of the sensing portfolio of Custom Sensors & Technologies, Inc. on December 1st, the Company anticipates Net revenue of $700 to $740 million for the fourth quarter 2015 as compared to fourth quarter 2014 Net revenue of $705.3 million.  The Company further anticipates Adjusted EBITDA³ of $176 to $188 million for the fourth quarter 2015.  In addition, the Company expects Adjusted net income¹ of $106 to $118 million, or $0.62 to $0.69 per diluted share including anticipated dilution of approximately ($0.05) to ($0.06) per diluted share associated with the anticipated acquisition of the sensing portfolio of Custom Sensors & Technologies, Inc. for the fourth quarter 2015, which, at the midpoint, is 15% higher than fourth quarter 2014 Adjusted net income per diluted share of $0.57.  This guidance assumes a diluted share count of 171.7 million for the fourth quarter 2015.

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, 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 60665779.  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 fourth quarter 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 contemplated acquisition of the sensing portfolio of Custom Sensors & Technologies, Inc. and the related financing; 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.

Net Revenue by Business, Geography and End Market

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 nine months ended September 30, 2015 and 2014.

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:  $0.1 million and $0.2 million for the three months ended September 30, 2015 and 2014, respectively, and $0.4 million and $1.0 million for the nine months ended September 30, 2015 and 2014, respectively; Restructuring and special charges:  $0.9 million and $0.3 million for the three months ended September 30, 2015 and 2014, respectively, and $2.0 million and $0.3 million for the nine months ended September 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 nine months ended September 30, 2015 and 2014.

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, 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.

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 June 30, 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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