Sensata Technologies Holding N.V. Announces Second Quarter 2010 Results

ALMELO, Netherlands, July 21 /PRNewswire-FirstCall/ -- Sensata Technologies Holding N.V. (NYSE: ST) (the "Company") announces results of its operations for the second quarter and six months ended June 30, 2010.

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Highlights of the Second Quarter and Six Months Ended June 30, 2010

Second quarter 2010 net revenue was $391.8 million, an increase of $136.4 million, or 53.4%, from the second quarter 2009 net revenue of $255.4 million.  Second quarter 2010 net income was $82.5 million, or $0.46 per diluted share, versus $22.6 million or $0.16 per diluted share for the same time period in 2009.  Second quarter Adjusted Net Income(1) was $77.5 million, or $0.44 per diluted share, which is 19.8% of net revenue, versus the second quarter 2009 Adjusted Net Income(1) of $24.2 million, or $0.17 per diluted share, which is 9.5% of net revenue.  

For the six months ended June 30, 2010, net revenue was $768.9 million, which was an increase of $274.6 million, or 55.5%, from $494.4 million from the same time period in 2009.  Net income was $109.8 million, or $0.66 per diluted share, versus net income of $12.4 million or $0.09 per diluted share for the six months ended June 30, 2009.  Adjusted Net Income(1) was $146.6 million, or $0.88 per diluted share, which is 19.1% of net revenue versus Adjusted Net Income(1) of $29.8 million, or $0.21 per diluted share, which is 6.0% of net revenue for the same time period in 2009.

Tom Wroe, Chairman and Chief Executive Officer, said, "We had a strong second quarter and we are pleased with our results for the first half of 2010.  We continue to execute well by driving both growth and profitability against a backdrop of macro-economic indicators that continue to create uncertainty in the global markets.  We are experiencing strong demand for our products and our business model provides good visibility."  Mr. Wroe added, "Looking ahead to the third and fourth quarter, we expect to see our normal seasonality combined with growth in demand for our content and emerging market penetration that should enable us to achieve our targeted double-digit growth rate independent of demand levels in the mature markets."

The Company spent $20.3 million, or 5.2% of net revenue, on research, development and engineering related costs in the second quarter of 2010.  These costs reside in both the cost of revenue and the research and development lines of the Statement of Operations.  

Ending cash balance at June 30, 2010 was $311.2 million.  This is significantly lower than the March 31, 2010 ending cash balance of $508.2 million as a result of our use of proceeds from the IPO to pay down debt.  During the second quarter the Company generated cash of $53.2 million from operations, used cash of $12.1 million in investing activities and used cash of $238.1 million from financing activities.  

The Company's cash conversion cycle, which is defined as days sales outstanding (DSO) plus days on hand inventory (DOH) less days payable outstanding (DPO), was 50.7 days at the end of the second quarter compared to 47.0 days at March 31, 2010.  

The Company recorded a tax provision of $14.8 million for the second quarter 2010.  Of the $14.8 million, approximately $3.3 million, or 4.2% of Adjusted Net Income(1), relates to taxes that are payable in cash and the remaining tax provision relates primarily to deferred tax expense attributable to amortization of tax deductible goodwill.

The Company's indebtedness at June 30, 2010 was $1.8 billion, excluding capital leases.  The Company's net debt(2) was $1.5 billion resulting in a leverage ratio of 3.5x.  As of June 30, 2010, the Company was in compliance with all of its financial ratios and reporting covenants included in its debt agreements related to its primary operating subsidiary, Sensata Technologies B.V.

Jeff Cote, Chief Financial Officer, said "We are executing well, and I'm very pleased with our financial results.  While we saw some impact to our business as the U.S. dollar strengthened against the Euro during the quarter, we were able to produce strong results.  We believe we are very well positioned to stay on track for the remainder of the year and beyond."

Recent Developments

On May 1, 2010, Sensata Technologies B.V. ("ST B.V."), a wholly-owned subsidiary of the Company, completed the announced call of a portion of its 8% Senior Notes and all of its 11.25% Senior Subordinated Notes.  The Company redeemed approximately $225 million of principal.  

Guidance

The Company said it anticipates net revenue of $360 to $380 million for the third quarter 2010, which represents growth of 19 to 26% over the third quarter 2009 net revenue of $302.5 million.  The Company also said it expects to achieve net income of $24 to $28 million, or earnings per share calculated in accordance with generally accepted accounting principles of $0.13 - $0.16 per diluted share in the third quarter 2010.  In addition, the Company expects Adjusted Net Income(1) of $72 million to $76 million, or $0.40 - $0.43 per diluted share, for the third quarter 2010.  This guidance assumes a share count of 177.8 million for the third quarter 2010.  Given the Company's expectation of normal seasonality of a 2 to 4% increase sequentially in the fourth quarter, this translates to full year net revenue of $1.5 to $1.55 billion, which represents a 32 to 37 percent increase from 2009.

The earnings per share guidance in accordance with U.S. generally accepted accounting principles ("GAAP") excludes any potential gain or loss resulting from the movement of the Euro to U.S. dollar exchange rate and the impact on our Euro denominated debt.

(1) See Non-GAAP Measures for discussion of Adjusted Net Income which includes a reconciliation of this measure to Net Income.

(2) Net debt represents total indebtedness, excluding capital lease obligations and other financing arrangements, less cash and cash  equivalents.  The 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 second quarter 2010.  The U.S. dial in number is 877-486-0682 and the non-U.S. number is 706-634-5536.  The passcode is 85985691.  A live webcast of the conference call will also be available on the investor relations page of the Company's web site 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 800-642-1687 and the non-U.S. dial in number is 706-645-9291.  The replay passcode is 85985691.  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.  Majority-owned by affiliates of Bain Capital Partners, LLC, a leading global private investment firm, and its co-investors, Sensata employs approximately 10,000 people in nine 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, data, telecommunications, recreational vehicle and marine applications. For more information, please visit Sensata's web site at www.sensata.com.

Safe Harbor Statement

This earnings release contains forward-looking statements which may involve risks or uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.  Such forward-looking statements include, among other things, our anticipated results for the third quarter of 2010.  Factors that might cause these differences include, but are not limited to, risks associated with: worldwide economic conditions; adverse developments in the automotive industry; fluctuations in foreign currency exchange, commodity and interest rates; competitive pressures; pricing and other pressures from customers; fundamental changes in the industries in which the Company operates; litigation and disputes involving the Company, including the extent of product liability and warranty claims asserted against the Company; labor disruptions and increased labor costs; the loss of one or more suppliers of raw materials; non-performance by suppliers; the Company's ability to protect its intellectual property; the Company's failure to comply with the covenants contained in the credit agreement governing its subsidiary's senior secured credit facility or its other debt agreements; the Company's dependence on third parties for transportation, warehousing and logistics services; compliance with Section 404 of the Sarbanes-Oxley Act of 2002; environmental, safety and governance regulations or concerns; changes in existing environmental and/or safety laws, regulations and programs; integration of acquired companies; unfunded benefit obligations; 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 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 SEC filings.  Copies of our filings are available from our Investor Relations department or from the SEC website, www.sec.gov.

Non-GAAP Measures

Adjusted Net Income is a non-GAAP financial measure.  We calculate Adjusted Net Income by adjusting GAAP Net Income to exclude charges associated with becoming a stand-alone company and an SEC registrant following the April 27, 2006 sale of the sensors and controls business of Texas Instruments Incorporated to affiliates of Bain Capital Partners LLP, gains and losses on currency translation on debt and other hedges, expenses incurred in connection with acquisitions, other significant items, non-cash interest, deferred income taxes and depreciation and amortization expense related to asset step-up and intangible assets.  We believe Adjusted Net Income provides investors with helpful information with respect to the performance of our 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 second quarter and six months ended June 30, 2010 and 2009.

Due to the nature of the Company's adjustments, the Company believes the following (unaudited) reconciliation of Net Income to Adjusted Net Income for the second quarter and six months ended June 30, 2010 and 2009 is meaningful to investors as it identifies where in the Statement of Operations these items are classified.

The following (unaudited) table reconciles the Company's projected GAAP earnings per share to projected Adjusted Net Income per share for the third quarter 2010:

SENSATA TECHNOLOGIES HOLDING N.V.

Notes to (unaudited) Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows

Basis of Presentation

The accompanying (unaudited) Condensed Consolidated Statements of Operations, Condensed Balance Sheets and Condensed 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. The accompanying financial information reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results of our operations for the interim periods presented. This information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's registration statement on our Form S-1 and the interim financial statements included in the Company's Form 10-Q for the period ended March 31, 2010 and the interim financial statements that will be filed for the period ended June 30, 2010.

U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements.  Estimates used will change as new events occur or additional information is obtained.  Actual results could differ from those estimates.  

SOURCE Sensata Technologies Holding N.V.