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8-K - FORM 8-K - Sensata Technologies Holding plcform8k1302013.htm

Contact:
 
 
 
 
 
 
 
 
 
Investors
 
 
News Media
 
Maggie Morris
 
 
Linda Megathlin
 
(508)236-1069
 
 
(508)236-1761
 
mmorris2@sensata.com
 
 
lmegathlin@sensata.com
 



SENSATA TECHNOLOGIES HOLDING N.V. ANNOUNCES
FOURTH QUARTER AND FULL YEAR 2012 RESULTS

Full year 2012 net revenue was $1,913.9 million, an increase of 4.8% from the full year 2011 net revenue of $1,826.9 million.

Full year 2012 net income was $177.5 million, or $0.98 per diluted share, versus full year 2011 net income of $6.5 million, or $0.04 per diluted share.

Full year 2012 Adjusted net income1 was $356.6 million, or $1.96 per diluted share, versus full year 2011 Adjusted net income1 of $355.5 million, or $1.96 per diluted share.


Almelo, the Netherlands – January 30, 2013 - Sensata Technologies Holding N.V. (NYSE: ST) (the “Company”) announces results of its operations for the fourth quarter and full year ended December 31, 2012.

Highlights of the Fourth Quarter and Full Year Ended December 31, 2012

Net revenue for the fourth quarter 2012 was $445.4 million, a decrease of $(8.0) million, or (1.8%), from net revenue for the fourth quarter 2011 of $453.4 million. Net income for the fourth quarter 2012 was $70.9 million, or $0.39 per diluted share. This compares to net income for the fourth quarter 2011 of $24.4 million, or $0.13 per diluted share. Adjusted net income1 for the fourth quarter 2012 was $85.3 million, or $0.47 per diluted share, which was 19.2% of net revenue. This compares to Adjusted net income1 for the fourth quarter 2011 of $82.0 million, or $0.45 per diluted share, which was 18.1% of net revenue. The Company also reported that it repurchased 0.5 million ordinary shares, at an average price of $29.75 per share, during the fourth quarter of 2012.

Net revenue for the full year ended December 31, 2012 was $1,913.9 million, an increase of $87.0 million, or 4.8%, from $1,826.9 million for the full year ended December 31, 2011. Net income for the full year ended December 31, 2012 was $177.5 million, or $0.98 per diluted share. This compares to net income for the full year ended December 31, 2011 of $6.5 million, or $0.04 per diluted share. Adjusted net income1 for the full year ended December 31, 2012 was $356.6 million,

1


or $1.96 per diluted share, which was 18.6% of net revenue. This compares to Adjusted net income1 for the full year ended December 31, 2011 of $355.5 million, or $1.96 per diluted share, which was 19.5% of net revenue.

"We are satisfied by the performance of the business during a challenging fourth quarter of 2012,” said Martha Sullivan, President and Chief Executive Officer. “While our top line growth opportunities will continue to be challenged by near-term economic weakness in 2013, our disciplined focus on margin improvement will result in higher earnings growth. We remain confident our long-term growth drivers are still intact.”
  
The Company spent $28.3 million, or 6.4% of net revenue, in the fourth quarter of 2012 on research, development and engineering related costs. These costs reside in the Cost of revenue and the Research and development lines of the Condensed Consolidated Statements of Operations.

The Company recorded a benefit from income tax of $(63.9) million for the fourth quarter 2012. Approximately $3.7 million of the provision, or 3.3% of Adjusted EBIT, related to taxes that are payable in cash and approximately $(67.6) million related to deferred income tax benefit and other income tax expense. The deferred income tax benefit related primarily to the release of a valuation allowance associated with deferred tax assets in its subsidiaries in the Netherlands, including the deferred tax asset related to its net operating loss and other carryforwards.
 
The Company’s ending cash balance at December 31, 2012 was $413.5 million. During the full year 2012, the Company generated cash of $397.3 million from operations, used cash of $62.5 million for investing activities, and used cash of $13.4 million for financing activities.

The Company’s total indebtedness at December 31, 2012 was $1.82 billion. The Company’s Net debt2 was $1.41 billion resulting in a Net leverage ratio2 of 2.7X.
 

Segment Performance

 
For the three months ended December 31,
For the full year ended December 31,
$ in 000s
2012
2011
2012
2011
Sensors net revenue
$
315,637

$
340,047

$
1,375,170

$
1,292,817

Sensors profit from operations
$
91,028

$
96,938

$
384,667

$
389,926

% of Sensors net revenue
28.8
%
28.5
%
28.0
%
30.2
%
 
 
 
 
 
Controls net revenue
$
129,719

$
113,318

$
538,740

$
534,128

Controls profit from operations
$
38,124

$
31,829

$
167,534

$
175,771

% of Controls net revenue
29.4
%
28.1
%
31.1
%
32.9
%


Guidance

For the full year 2013, the Company anticipates net revenue of $1.93 to $2.03 billion which, at the midpoint, represents growth of 3.5% compared to the full year 2012 net revenue of $1.91 billion. The Company expects to achieve earnings per diluted share calculated in accordance with U.S. generally accepted accounting principles (“GAAP”) of $1.03 to $1.22 for the full year 2013.
In addition, the Company expects Adjusted net income1 of $365 to $400 million, or $2.00 to $2.20 per diluted share for the full year 2013. At the midpoint, this represents 7% growth compared to the full year 2012 Adjusted net income1 of $356.6 million. This guidance assumes a diluted share count of 181.9 million for the full year 2013.

The Company anticipates net revenue of $450 million to $470 million for the first quarter 2013, which, at the midpoint, represents a decline of (6.5%) compared to the first quarter 2012 net revenue of $492.0 million. The Company expects to achieve earnings per diluted share calculated in accordance with GAAP of $0.17 to $0.22 in the first quarter of 2013. In addition, the Company expects Adjusted net income1 of $78 million to $86 million, or $0.43 to $0.47 per diluted share, for the first quarter 2013. This guidance assumes a diluted share count of 181.9 million for the first quarter of 2013.

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 fourth quarter and full year ended December 31, 2012. 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 89309169. A live webcast of the conference call will also be available on the investor relations page of the Company’s website at http://investors.sensata.com.

For those unable to participate in the conference call, a replay will be available for one week following the call. To access the replay, the U.S. dial in number is 855-859-2056 and the non-U.S. dial in number is 404-537-3406. The replay passcode is 89309169. A replay of the call will be available by webcast for an extended period of time at 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 eleven 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.



2


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 first quarter and full year of 2013 and any future actions relating to our share repurchase authorization.  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; adverse developments in the automotive industry; competitive pressures; pricing and other pressures from customers; fluctuations in foreign currency exchange, commodity and interest rates; governmental regulations, policies, and practices relating to the Company’s non-US operations and international business; integration of acquired companies; litigation and disputes involving the Company, including the extent of product liability and warranty claims asserted against the Company; non-performance by suppliers; the loss of one or more suppliers of raw materials; 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.



3


SENSATA TECHNOLOGIES HOLDING N.V.
Condensed Consolidated Statements of Operations
(Unaudited)

(In 000s, except per share amounts)
 
 
 
 
 
For the three months ended
For the full year ended
 
 
 
 
 
 
December 31, 2012
December 31, 2011
December 31, 2012
December 31, 2011
Net revenue
$
445,356

$
453,365

$
1,913,910

$
1,826,945

Operating costs and expenses:
 
 
 
 
Cost of revenue
297,501

298,562

1,257,547

1,166,842

Research and development
12,923

11,503

52,072

44,597

Selling, general and administrative
31,700

34,833

141,894

164,790

Amortization of intangible assets and capitalized software
36,370

36,628

144,777

141,575

Restructuring and special charges
25,215

12,182

40,152

15,012

Total operating costs and expenses
403,709

393,708

1,636,442

1,532,816

Profit from operations
41,647

59,657

277,468

294,129

Interest expense
(24,927
)
(25,672
)
(100,037)

(99,557)

Interest income
146

77

815

813

Currency translation loss and other, net
(9,820
)
(1,535
)
(5,581)

(120,050)

Income before taxes
7,046

32,527

172,665

75,335

(Benefit from) / provision for income taxes
(63,895
)
8,148

(4,816)

68,861

Net income
$
70,941

$
24,379

$
177,481

$
6,474

 
 
 
 
 
Net income per share:
 
 
 
 
Basic
$
0.40

$
0.14

$
1.00

$
0.04

Diluted
$
0.39

$
0.13

$
0.98

$
0.04

 
 
 
 
 
Weighted-average ordinary shares outstanding:
 
 
 
 
Basic
177,908

176,356

177,473

175,307

Diluted
181,550

181,288

181,623

181,212

 
 
 
 
 

4


SENSATA TECHNOLOGIES HOLDING N.V.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

($ in 000s)
 
 
 
 
 
For the three months ended
For the full year ended
 
 
 
 
 
 
December 31, 2012
December 31, 2011
December 31, 2012
December 31, 2011
Net income
$
70,941

$
24,379

$
177,481

$
6,474

Other comprehensive (loss)/income, net of tax:
 
 
 
 
Net unrealized (loss)/gain on derivative instruments designated and qualifying as cash flow hedges
(197
)
124

(1,668
)
63

Defined benefit and retiree healthcare plans
(14,823
)
3,550

(14,514
)
4,171

Other comprehensive (loss)/income
(15,020
)
3,674

(16,182
)
4,234

Comprehensive income
$
55,921

$
28,053

$
161,299

$
10,708


5


SENSATA TECHNOLOGIES HOLDING N.V.
Condensed Consolidated Balance Sheets
(Unaudited)

($ in 000s)
 
 
 
December 31, 2012
December 31, 2011
Assets
 
 
Current assets:
 
 
Cash and cash equivalents
$
413,539

$
92,127

Accounts receivable, net of allowances
258,114

261,425

Inventories
176,233

197,542

Deferred income tax assets
12,271

9,989

Prepaid expenses and other current assets
37,080

32,083

Total current assets
897,237

593,166

Property, plant and equipment, net
328,199

331,175

Goodwill
1,754,107

1,746,821

Other intangible assets, net
603,883

737,560

Deferred income tax assets
37,671

4,086

Deferred financing costs
22,119

26,477

Other assets
6,432

17,366

Total assets
$
3,649,648

$
3,456,651

 
 
 
Liabilities and shareholders’ equity
 
 
Current liabilities:
 
 
Current portion of long-term debt, capital lease and other financing obligations
$
12,878

$
13,741

Accounts payable
155,675

155,346

Income taxes payable
9,409

6,012

Accrued expenses and other current liabilities
100,033

100,674

Deferred income tax liabilities
3,125

3,479

Total current liabilities
281,120

279,252

Deferred income tax liabilities
270,402

262,091

Pension and post-retirement benefit obligations
32,747

22,287

Capital lease and other financing obligations, less current portion
43,425

43,478

Long-term debt, net of discount, less current portion
1,768,352

1,778,491

Other long-term liabilities
31,308

26,101

Total liabilities
2,427,354

2,411,700

Total shareholders’ equity
1,222,294

1,044,951

Total liabilities and shareholders’ equity
$
3,649,648

$
3,456,651



6


SENSATA TECHNOLOGIES HOLDING N.V.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

($ in 000s)
 
 
 
For the full year ended
 
December 31, 2012
December 31, 2011
Cash flows from operating activities:
 
 
Net income
$
177,481

$
6,474

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation
54,688

44,373

Amortization of deferred financing costs and original issue discounts
5,108

6,925

Currency translation loss on debt
433

60,106

Losses on repurchase or refinancing of debt
2,216

44,014

Share-based compensation
14,714

8,012

Amortization of inventory step-up to fair value
23

1,725

Amortization of intangible assets and capitalized software
144,777

141,575

(Gain)/loss on disposition of assets, net
(214
)
2,495

Deferred income taxes
(26,381
)
48,662

Other non-cash items
2,614

13,098

Increase/(decrease) from changes in operating assets and liabilities, net of effects of acquisitions
21,854

(71,592
)
Net cash provided by operating activities
397,313

305,867

 
 
 
Cash flows from investing activities:
 
 
Acquisition of High Temperature Sensing, net of cash received

(319,920
)
Acquisition of Magnetic Speed and Position, net of cash received

(145,331
)
Other acquisitions, net of cash received
(13,346
)

Additions to property, plant and equipment and capitalized software
(54,786
)
(89,807
)
Proceeds from sale of assets
5,631

600

Net cash used in investing activities
(62,501
)
(554,458
)
 
 
 
Cash flows from financing activities:
 
 
Proceeds from exercise of stock options and issuance of ordinary shares
16,520

20,091

Proceeds from revolving credit facility, net


Proceeds from issuance of debt

1,794,500

Payments on debt
(13,349
)
(1,933,035
)
Payments to repurchase ordinary shares
(15,190
)

Payments of debt issuance costs
(1,381
)
(34,500
)
Net cash used in financing activities
(13,400
)
(152,944
)
Net change in cash and cash equivalents
321,412

(401,535
)
Cash and cash equivalents, beginning of period
92,127

493,662

Cash and cash equivalents, end of period
$
413,539

$
92,127


7


Net Revenue by Business, Geography and End Market

(% of total net revenue)
Three months ended
December 31,
Full year ended
December 31,
 
2012
2011
2012
2011
Sensors
70.9
%
75.0
%
71.9
%
70.8
%
Controls
29.1
%
25.0
%
28.1
%
29.2
%
Total
100.0
%
100.0
%
100.0
%
100.0
%


(% of total net revenue)
Three months ended
December 31,
Full year ended
December 31,
 
2012
2011
2012
2011
Americas
35.2
%
35.7
%
37.0
%
37.6
%
Europe
27.1
%
31.7
%
28.6
%
29.2
%
Asia
37.7
%
32.6
%
34.4
%
33.2
%
Total
100.0
%
100.0
%
100.0
%
100.0
%



(% of total net revenue)
Three months ended
December 31,
Full year ended
December 31,
 
2012
2011
2012
2011
European automotive
22.6
%
28.2
%
24.2
%
25.2
%
North American automotive
16.0
%
16.4
%
16.6
%
16.2
%
Asian automotive
25.0
%
22.1
%
21.9
%
20.3
%
Rest of world automotive
0.8
%
0.7
%
0.8
%
0.9
%
Heavy vehicle off-road
7.1
%
7.0
%
7.6
%
6.8
%
Appliance and heating, ventilation and air-conditioning
9.0
%
7.9
%
9.9
%
10.6
%
Industrial
9.2
%
8.8
%
9.1
%
10.2
%
All other
10.3
%
8.9
%
9.9
%
9.8
%
Total
100.0
%
100.0
%
100.0
%
100.0
%



8


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 debt refinancing and other financing activities, unrealized loss/(gain) on other hedges and loss on currency translation on debt, amortization of inventory step-up to fair value, amortization and depreciation expense related to the step-up in fair value of fixed and intangible assets, deferred income tax and other tax expense, amortization of deferred financing costs, restructuring and special charges, and other costs. 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 months and full year ended December 31, 2012 and 2011.

(In 000s, except per share amounts)
Three months ended
December 31,
Full year ended
December 31,
 
2012
2011
2012
2011
 
 
 
 
 
Net income
$
70,941

$
24,379

$
177,481

$
6,474

Debt refinancing costs and other financing transactions
2,916


2,916

44,014

Unrealized loss/(gain) on other hedges and loss on currency translation on debt, net
6,550

2,082

(8,925
)
91,033

Amortization of inventory step-up to fair value
23


23

1,725

Amortization and depreciation expense related to the step-up in fair value of fixed and intangible assets
37,060

37,272

150,923

142,924

Deferred income tax and other tax expense
(67,553
)
4,992

(22,868
)
50,703

Amortization of deferred financing costs
1,247

1,532

5,108

6,925

Restructuring and special charges
34,163

11,694

51,901

11,694

Total adjustments
$
14,406

$
57,572

$
179,078

$
349,018

Adjusted net income
$
85,347

$
81,951

$
356,559

$
355,492

Weighted average diluted shares outstanding used in Adjusted net income per diluted share calculation
181,550

181,288

181,623

181,212

Adjusted net income per diluted share
$
0.47

$
0.45

$
1.96

$
1.96


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 associated with the reconciling items above would be as follows: Amortization and depreciation expense related to the step-up in fair value of fixed and intangible assets: $0.3 million and $1.1 million for the three months and full year ended December 31, 2012, respectively; Restructuring and special charges: $4.0 million and $5.5 million for the three months and full year ended December 31, 2012, respectively. Amortization and depreciation expense related to the step-up in fair value of fixed and intangible assets: $0.2 million and $0.6 million for the three months and full year ended December 31, 2011, respectively; Restructuring and special charges: $0.3 million for the three months and full year ended December 31, 2011.

9


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 months and full year ended December 31, 2012 and 2011.
($ in 000s)
Three months ended
December 31,
Full year ended
December 31,
 
2012
2011
2012
2011
 
 
 
 
 
Cost of revenue
$
10,305

$
1,110

$
17,865

$
4,855

Selling, general and administrative
721


721

596

Amortization of intangible assets and capitalized software
35,971

36,162

142,983

139,794

Restructuring and special charges
24,949

11,694

37,405

11,694

Interest expense
1,247

1,532

5,108

6,925

Currency translation loss/(gain) and other, net
8,766

2,082

(1,818
)
135,047

(Benefit from) / provision for income taxes
(67,553
)
4,992

(23,186
)
50,107

Total adjustments
$
14,406

$
57,572

$
179,078

$
349,018


The following unaudited table reconciles the Company’s Projected GAAP earnings per diluted share to Projected Adjusted net income per diluted share for the first quarter ended March 31, 2013 and full year ended December 31, 2013. The amounts in the tables below have been calculated based on unrounded numbers. Accordingly, certain amounts may not add due to the effect of rounding.
 
Three months ended
March 31, 2013
Full year ended
December 31, 2013
 
Low End
High End
Low End
High End
 
 
 
 
 
Projected GAAP earnings per diluted share
$
0.17

$
0.22

$
1.03

$
1.22

Amortization and depreciation expense related to the step-up in fair value of fixed and intangible assets
0.19

0.19

0.75

0.75

Deferred income tax and other tax expense
0.05

0.05

0.20

0.20

Amortization of deferred financing costs
0.01

0.01

0.03

0.03

Restructuring and special charges
0.01

0.01



Projected Adjusted net income per diluted share
$
0.43

$
0.47

$
2.00

$
2.20

Weighted average diluted shares outstanding used in Adjusted net income per share calculation (in 000s)
181,900

181,900

181,900

181,900

 
 
 
 
 

10


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, 2011 and the interim condensed consolidated financial statements included in the Company’s Form 10-Q for the period ended September 30, 2012. 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. Certain reclassifications have been made to prior periods to conform to current period presentation.


11