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Financial Press Release

Sensata Technologies Reports Third Quarter 2017 Financial Results
Strength in industrial and heavy vehicle & off road markets continue to drive revenue growth

HENGELO, the Netherlands, Oct. 24, 2017 (GLOBE NEWSWIRE) -- Sensata Technologies (NYSE:ST) today announced financial results for its third quarter and nine months ended September 30, 2017.

Revenue in the third quarter of 2017 was $819.1 million, an increase of $29.3 million, or 3.7%, from revenue of $789.8 million in the third quarter of 2016.  Excluding a 0.1% positive effect from changes in foreign exchange rates, Sensata reported organic revenue growth of 3.6% in the third quarter of 2017.

Net income in the third quarter of 2017 grew 26.2%, totaling $88.0 million, which was 10.7% of revenue or $0.51 per diluted share, compared to net income of $69.8 million in the third quarter of 2016, which was 8.8% of revenue or $0.41 per diluted share. Adjusted net income in the third quarter of 2017 grew 9.9%, totaling $138.8 million, which was 16.9% of revenue, or $0.81 per diluted share, compared to adjusted net income of $126.3 million in the third quarter of 2016, which was 16.0% of revenue, or $0.74 per diluted share. Changes in foreign exchange rates increased Sensata's adjusted earnings per share by $0.01 in the third quarter of 2017 compared to the prior year period.

“We delivered a strong combination of organic revenue growth and adjusted EBIT margin expansion in the third quarter of 2017,” said Martha Sullivan, President and Chief Executive Officer.  “Our heavy vehicle & off road business generated organic revenue growth of approximately 20% and we continued to see strong demand from our industrial customers.  M&A cost synergies helped to drive our margin expansion, which reflects the value we are creating from previous acquisitions.   During the quarter, we also announced our intention to re-domicile from the Netherlands to the U.K.  As we continue to strengthen our balance sheet, our move to the U.K. will provide more flexibility to effectively deploy capital that creates shareholder value.”

Revenue in the nine months ended September 30, 2017 was $2,466.2 million, an increase of $52.3 million, or 2.2%, from revenue of $2,413.9 million in the nine months ended September 30, 2016. Excluding a 1.4% negative effect from changes in foreign exchange rates, Sensata reported organic revenue growth of 3.6% in the nine months ended September 30, 2017.

Net income in the nine months ended September 30, 2017 grew 22.1% totaling $239.2 million, which was 9.7% of revenue or $1.39 per diluted share, compared to net income of $195.9 million in the nine months ended September 30, 2016, which was 8.1% of revenue, or $1.14 per diluted share.  Adjusted net income in the nine months ended September 30, 2017 grew 9.7% totaling $399.3 million, which was 16.2% of revenue or $2.32 per diluted share compared to adjusted net income of $363.9 million in the nine months ended September 30, 2016, which was 15.1% of revenue or $2.12 per diluted share. Changes in foreign exchange rates reduced Sensata's adjusted earnings per share by ($0.04) in the nine months ended September 30, 2017 compared to the prior year period.

Sensata’s ending cash balance at September 30, 2017 was $613.0 million, an improvement from $351.4 million as of December 31, 2016, demonstrating Sensata’s cash generation capabilities. During the nine months ended September 30, 2017, the Company generated operating cash flow of $372.3 million and free cash flow of $268.7 million.  The Company’s net debt at September 30, 2017 was $2.701 billion, a reduction of $272.8 million from December 31, 2016.

Segment Performance

      Three months ended   Nine months ended
$ in 000s   September 30,
2017
      September 30,
2016
      September 30,
2017
      September 30, 
2016
Performance Sensing revenue   $ 603,932      $ 584,650      $ 1,825,904      $ 1,797,395  
Performance Sensing profit   162,655     155,228     483,491     453,540  
% of Performance Sensing revenue   26.9%     26.6%     26.5%     25.2%  
                 
Sensing Solutions revenue   $ 215,122      $ 205,148      $ 640,295      $ 616,497  
Sensing Solutions profit   72,372     67,314     209,911     198,737  
% of Sensing Solutions revenue   33.6%     32.8%     32.8%     32.2%  

Performance Sensing’s profit as a percentage of revenue totaled 26.9% in the third quarter of 2017. Excluding the impact of changes in foreign exchange rates, Performance Sensing’s profit as a percentage of revenue was 27.1% in the third quarter of 2017, representing an increase of 50 basis points from the third quarter of 2016. Sensing Solutions’ profit as a percentage of revenue totaled 33.6% in the third quarter of 2017. Excluding the impact of changes in foreign exchange rates, Sensing Solutions’ profit as a percentage of revenue was 33.9% in the third quarter of 2017, an increase of 110 basis points compared to the third quarter of 2016.

Guidance

For the fourth quarter ending December 31, 2017, Sensata anticipates revenue to total between $808 million and $832 million, compared to $788.4 million in the fourth quarter of 2016, representing organic revenue growth of 2 to 3 percent.  Additionally, the Company expects adjusted net income to be between $142 and $149 million and adjusted earnings per share to be between $0.82 and $0.86 in the fourth quarter of 2017, representing organic growth of 7 to 12 percent.

For the full year 2017, Sensata is raising guidance for organic revenue growth and narrowing the range of its guidance for adjusted EBIT, adjusted net income and adjusted EPS.  The Company expects revenues of $3.274 to $3.298 billion, which assumes organic revenue growth of approximately 3 to 4 percent, up from its previous guidance of 2 to 3 percent. For the full year 2017, Sensata expects adjusted EBIT to be between $744 and $751 million. Additionally, the Company expects adjusted net income to be between $541 million and $548 million and adjusted earnings per share to be between $3.14 and $3.18 for full year 2017, which assumes organic earnings growth of 10 to 11 percent.

Conference Call & Webcast

Sensata will conduct a conference call today at 8:00 AM eastern time to discuss its third quarter 2017 financial results and its outlook for the remainder of the year. The dial-in numbers for the call are 1-877-317-6789 or +1-412-317-6789 and callers can reference the Sensata Q3 2017 Earnings Call. 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. Additionally, a replay of the call will be available until November 1st, 2017. To access the replay dial 1-877-344-7529 or 1-412-317-0088 and enter confirmation code: 10108464.

About Sensata Technologies

Sensata Technologies is one of the world's leading suppliers of sensing, electrical protection, control and power management solutions with operations and business centers in twelve countries. Sensata's products improve safety, efficiency, and comfort for millions of people every day in automotive, appliance, aircraft, industrial, military, heavy vehicle, heating, ventilation and air conditioning, data, telecommunications, recreational vehicle, and marine applications. 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 our 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 net income margin, adjusted earnings per share (“EPS”), adjusted earnings before interest and taxes (“EBIT”), adjusted EBIT margin, free cash flow, net debt, organic revenue growth, and segment profit margin measured on a constant currency basis.  We also refer to the change of certain non-GAAP measures, usually reported either as a percentage or number of basis points, between two periods and measured on either a reported or an organic basis, the latter of which excludes the impact of acquisitions, net of exited businesses that occurred within the previous 12 months and the effect of foreign currency exchange rate differences between the comparative periods.  Such reported 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 net income margin is calculated by dividing adjusted net income by net revenue. 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 EBIT is defined as net income, determined in accordance with U.S. GAAP, excluding interest expense, net, provision for/(benefit from) income taxes, and certain non-GAAP adjustments which are described in the accompanying reconciliation tables. Adjusted EBIT margin is calculated by dividing adjusted EBIT 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 accelerate the repayment of debt obligations.

Net debt is defined as total debt, capital lease and other financing obligations, determined in accordance with U.S. GAAP, less cash and cash equivalents. We believe that this measure is useful to investors and management as an indicator of trends in our overall financial condition.

Organic revenue growth is defined as the reported percentage change in net revenue, determined in accordance with U.S. GAAP, excluding the impact of acquisitions, net of exited businesses that occurred within the previous 12 months and the effect of foreign currency exchange rate differences between the comparative periods. We believe that this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Segment profit margin measured on a constant currency basis is defined as segment profit, excluding the favorable or unfavorable impact of foreign currency exchange rate differences with the comparative (prior) period, divided by segment revenue, also adjusted to exclude the favorable or unfavorable impact of foreign currency exchange rate differences with the comparative (prior) period. 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 the federal securities laws. These forward-looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These forward-looking statements also relate to our future prospects, developments, and business strategies and include, among other things, our anticipated results for the fourth quarter and full year 2017. Forward-looking statements contained herein, or in other statements made by us, are made based on management’s expectations and beliefs concerning future events impacting us, and are subject to uncertainties and other important factors relating to our operations and business environment, all of which are difficult to predict, and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by 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-U.S. 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 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 SEC filings. Copies of our filings are available from our Investor Relations department or from the SEC website, www.sec.gov.


 
SENSATA TECHNOLOGIES HOLDING N.V. 
Condensed Consolidated Statements of Operations
(Unaudited)
 
($ in 000s, except per share amounts)
    For the three months ended   For the nine months ended
      September 30, 2017   September 30, 2016   September 30, 2017   September 30, 2016
Net revenue   $ 819,054      $ 789,798      $ 2,466,199      $ 2,413,892  
Operating costs and expenses:                
Cost of revenue   527,432     508,944     1,601,190     1,574,763  
Research and development   34,002     31,601     97,032     95,240  
Selling, general and administrative                    75,972     75,046     227,256     224,637  
Amortization of intangible assets   40,317     50,562     121,578     151,572  
Restructuring and special charges   1,329     837     18,768     3,167  
Total operating costs and expenses   679,052     666,990     2,065,824     2,049,379  
Profit from operations   140,002     122,808     400,375     364,513  
Interest expense, net   (40,263 )   (41,176 )   (120,578 )   (125,201 )
Other, net   3,112     (726 )   7,190     4,892  
Income before taxes   102,851     80,906     286,987     244,204  
Provision for income taxes   14,816     11,121     47,759     48,297  
Net income   $ 88,035      $ 69,785      $ 239,228      $ 195,907  
                 
Net income per share:                
Basic   $ 0.51      $ 0.41      $ 1.40      $ 1.15  
Diluted   $ 0.51      $ 0.41      $ 1.39      $ 1.14  
                 
Weighted-average ordinary shares outstanding:            
Basic   171,269     170,840     171,116     170,656  
Diluted             172,245     171,478     172,023     171,359  
 


SENSATA TECHNOLOGIES HOLDING N.V. 
Condensed Consolidated Statements of Comprehensive Income 
(Unaudited)
 
($ in 000s)                
    For the three months ended   For the nine months ended
      September 30, 
2017
    September 30, 
2016
    September 30, 
2017
    September 30, 
2016
Net income   $ 88,035      $ 69,785      $ 239,228      $ 195,907  
Other comprehensive loss, net of tax:                
Deferred loss on derivative instruments, net of reclassifications   (6,784 )   (8,485 )   (17,820 )   (25,010 )
Defined benefit and retiree healthcare plans   274     24     1,489     291  
Other comprehensive loss   (6,510 )   (8,461 )   (16,331 )   (24,719 )
Comprehensive income   $ 81,525      $ 61,324      $ 222,897      $ 171,188  


 
SENSATA TECHNOLOGIES HOLDING N.V. 
Condensed Consolidated Balance Sheets 
(Unaudited)
 
($ in 000s)        
                        September 30, 2017      December 31, 2016 
Assets        
Current assets:        
Cash and cash equivalents   $ 612,972      $ 351,428  
Accounts receivable, net of allowances   569,881     500,211  
Inventories   447,486     389,844  
Prepaid expenses and other current assets   100,935     100,002  
Total current assets   1,731,274     1,341,485  
Property, plant and equipment, net   735,924     724,046  
Goodwill   3,005,464     3,005,464  
Other intangible assets, net   958,972     1,075,431  
Deferred income tax assets   26,678     20,695  
Other assets   79,625     73,855  
Total assets   $ 6,537,937      $ 6,240,976  
         
Liabilities and shareholders’ equity        
Current liabilities:        
Current portion of long-term debt, capital lease and other financing obligations              $ 13,176      $ 14,643  
Accounts payable   324,119     299,198  
Income taxes payable   27,031     23,889  
Accrued expenses and other current liabilities   263,611     245,566  
Total current liabilities   627,937     583,296  
Deferred income tax liabilities   404,575     392,628  
Pension and other post-retirement benefit obligations   36,192     34,878  
Capital lease and other financing obligations, less current portion   29,990     32,369  
Long-term debt, net   3,224,684     3,226,582  
Other long-term liabilities   32,034     29,216  
Total liabilities   4,355,412     4,298,969  
Total shareholders’ equity   2,182,525     1,942,007  
Total liabilities and shareholders’ equity   $ 6,537,937      $ 6,240,976  


 
SENSATA TECHNOLOGIES HOLDING N.V. 
Condensed Consolidated Statements of Cash Flows 
(Unaudited)
 
($ in 000s)   For the nine months ended
                                    September 30, 2017     September 30, 2016
Cash flows from operating activities:        
Net income   $ 239,228      $ 195,907  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation   82,014     77,649  
Amortization of deferred financing costs and original issue discounts   5,528     5,501  
Gain on sale of assets   (1,180 )    
Share-based compensation   15,106     13,279  
Amortization of inventory step-up to fair value       2,319  
Amortization of intangible assets   121,578     151,572  
Deferred income taxes   11,836     15,706  
Unrealized loss on hedges and other non-cash items   5,844     660  
Changes in operating assets and liabilities, net of effects of acquisitions   (107,675 )   (66,242 )
Net cash provided by operating activities   372,279     396,351  
         
Cash flows from investing activities:        
Acquisition of CST, net of cash received       4,688  
Additions to property, plant and equipment and capitalized software   (103,536 )   (94,584 )
Investment in equity securities       (50,000 )
Proceeds from the sale of assets   8,862     751  
Other   (3,000 )    
Net cash used in investing activities   (97,674 )   (139,145 )
         
Cash flows from financing activities:        
Proceeds from exercise of stock options and issuance of ordinary shares   5,332     3,306  
Payments on debt   (14,459 )   (297,698 )
Payments to repurchase ordinary shares   (2,817 )   (4,672 )
Payments of debt issuance costs   (137 )   (518 )
Other   (980 )    
Net cash used in financing activities   (13,061 )   (299,582 )
Net change in cash and cash equivalents   261,544     (42,376 )
Cash and cash equivalents, beginning of period   351,428     342,263  
Cash and cash equivalents, end of period   $ 612,972      $ 299,887  


 
Revenue by Business, Geography, and End Market (Unaudited)
 
(% of total revenue)   Three months ended September 30,   Nine months ended September 30,
    2017   2016   2017   2016
Performance Sensing        73.7 %   74.0 %   74.0 %   74.5 %
Sensing Solutions   26.3 %   26.0 %   26.0 %   25.5 %
Total   100.0 %   100.0 %   100.0 %   100.0 %


(% of total revenue)            Three months ended September 30,   Nine months ended September 30,
    2017   2016   2017   2016
Americas   41.8 %   43.7 %   41.9 %   43.2 %
Europe   31.5 %   31.1 %   31.7 %   32.6 %
Asia/Rest of World   26.7 %   25.2 %   26.4 %   24.2 %
Total   100.0 %   100.0 %   100.0 %   100.0 %


(% of total revenue)1   Three months ended
September 30,
    Nine months ended
September 30, 
    2017   2016   2017   2016
Europe automotive   24.2 %   24.4 %   24.2 %   25.3 %
North America automotive   18.0 %   20.6 %   18.9 %   20.3 %
Asia automotive   18.2 %   17.5 %   17.8 %   16.8 %
Rest of world automotive   0.3 %   0.3 %   0.3 %   0.3 %
Heavy vehicle and off-road   14.5 %   12.8 %   14.4 %   13.3 %
Appliance and heating, ventilation and air-conditioning   6.3 %   6.1 %   6.5 %   5.8 %
Industrial   9.6 %   9.1 %   9.6 %   9.1 %
Aerospace   4.7 %   4.6 %   4.6 %   4.6 %
All other   4.2 %   4.6 %   3.7 %   4.5 %
Total   100.0 %   100.0 %   100.0 %   100.0 %

1 Reclassification of certain acquired product lines has led to retrospective adjustments of certain prior period end-market percentages.

The following unaudited table reconciles Sensata’s net income to adjusted net income for the three and nine months ended September 30, 2017 and 2016.

(In 000s, except per share amounts)   Three months ended
September 30,
  Nine months ended
September 30,
    2017   2016   2017   2016
Net income   $ 88,035      $ 69,785      $ 239,228      $ 195,907  
Restructuring and special charges   3,107     4,197     18,299     10,997  
Financing and other transaction costs   4,538     452     4,538     1,508  
Deferred gain on other hedges   (2,503 )   (2,930 )   (5,241 )   (24,497 )
Depreciation and amortization expense related to the step-up in fair value of fixed and
intangible assets and inventory
  41,380     52,531     124,746     158,288  
Deferred income tax and other tax expense/(benefit)   2,374     451     12,187     16,150  
Amortization of deferred financing costs           1,835     1,823     5,528     5,501  
Total adjustments   $ 50,731      $ 56,524      $ 160,057      $ 167,947  
Adjusted net income   $ 138,766      $ 126,309      $ 399,285      $ 363,854  
Weighted average diluted shares outstanding   172,245     171,478     172,023     171,359  
Adjusted EPS   $ 0.81      $ 0.74      $ 2.32      $ 2.12  
 

Sensata's definition of adjusted net income excludes the deferred provision for/(benefit from) income taxes and other tax expense/(benefit). Sensata's deferred provision for/(benefit from) income taxes includes:  adjustments for book-to-tax basis differences, due primarily to the step-up in fair value of fixed and intangible assets and goodwill, the 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 Sensata treats deferred income taxes 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: $(0.0) million and $(0.0) million for the three months ended September 30, 2017 and 2016, respectively, and $(0.0) million and $(0.1) million for the nine months ended September 30, 2017 and 2016, respectively; and Restructuring and special charges: $(0.1) million and $(0.1) million for the three months ended September 30, 2017 and 2016, respectively, and $(0.3) million and $(0.4) million for the nine months ended September 30, 2017 and 2016, 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, 2017 and 2016.

 
($ in 000s)    Three months ended September 30,     Nine months ended September 30, 
    2017   2016   2017   2016
Cost of revenue           $ 5,127      $ 5,938      $ 15,764      $ 12,862  
Selling, general and administrative   4,269     1,158     7,367     3,878  
Amortization of intangible assets   38,896     49,016     117,409     147,214  
Restructuring and special charges   733     268     7,043     1,972  
Interest expense, net   1,835     1,823     5,528     5,501  
Other, net   (2,503 )   (2,130 )   (5,241 )   (19,630 )
Provision for income taxes   2,374     451     12,187     16,150  
Total adjustments   $ 50,731      $ 56,524      $ 160,057      $ 167,947  

The following unaudited tables reconcile the Company’s net cash provided by operating activities to free cash flow.

($ in 000s)   Three months ended
September 30,
    % Change  Nine months
ended September 30,
    % Change 
      2017   2016     2017   2016    
Net cash provided by operating activities   $ 138,430      $ 149,720     (7.5 )%  $ 372,279      $ 396,351     (6.1 )%
Additions to property, plant and equipment and capitalized software   (36,344 )   (30,118 )   (20.7 )% (103,536 )   (94,584 )   (9.5 )%
Free cash flow   $ 102,086      $ 119,602     (14.6 )%  $ 268,743      $ 301,767     (10.9 )%
 

The following unaudited table reconciles Sensata’s diluted net income per share to organic adjusted EPS growth for the three and nine months ended September 30, 2017 and 2016. The amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding.

     
                          Three months ended 
September 30,
    Nine months ended 
September 30,
    2017   2016   2017   2016
                 
Diluted net income per share   $ 0.51      $ 0.41      $ 1.39      $ 1.14  
Non-GAAP adjustments:                
Restructuring and special charges   0.02     0.02     0.11     0.06  
Financing and other transaction costs   0.03     0.00     0.03     0.01  
Deferred gain on other hedges   (0.01 )   (0.02 )   (0.03 )   (0.14 )
Depreciation and amortization expense related to the step-up in fair value of fixed and
intangible assets and inventory
  0.24     0.31     0.73     0.92  
Deferred income tax expense and other tax expense/(benefit)   0.01     0.00     0.07     0.09  
Amortization of deferred financing costs   0.01     0.01     0.03     0.03  
Adjusted EPS   $ 0.81      $ 0.74      $ 2.32      $ 2.12  
                 
Percentage change in adjusted EPS   9.5 %       9.4 %    
Less: year-over-year impact due to:                
Foreign exchange rate differences   1.4 %       (1.9 )%    
Organic adjusted EPS growth   8.1 %       11.3 %    

The following unaudited table reconciles Sensata’s total debt, capital lease and other financing obligations to net debt.

         
                  Balance as of    
($ in 000s)   September 30, 2017     December 31, 2016      Change ($) 
Current portion of long-term debt, capital lease and other financing obligations        $ 13,176      $ 14,643      $ (1,467 )
Capital lease and other financing obligations, less current portion   29,990     32,369     (2,379 )
Long-term debt, net   3,224,684     3,226,582     (1,898 )
Total debt, capital lease and other financing obligations   3,267,850     3,273,594     (5,744 )
Less: Discounts   (15,812 )   (17,655 )   1,843  
Less: Deferred financing costs   (29,971 )   (33,656 )   3,685  
Gross indebtedness   3,313,633     3,324,905     (11,272 )
Less: Cash and cash equivalents   612,972     351,428     261,544  
Net debt   $ 2,700,661      $ 2,973,477      $ (272,816 )

The following unaudited tables reconcile Sensata’s net income to adjusted EBIT for the three and nine months ended September 30, 2017 and 2016. Percentage amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding.

  $ in thousands % of net revenue
  Three months ended
September 30,
   Three months ended   
September 30,
  2017   2016 2017   2016
Net income $ 88,035     $ 69,785   10.7 %   8.8 %
Interest expense, net 40,263     41,176   4.9 %   5.2 %
Provision for income taxes 14,816     11,121   1.8 %   1.4 %
Earnings before interest and taxes (“EBIT”) 143,114     122,082   17.5 %   15.5 %
Non-GAAP adjustments:            
Restructuring and special charges 3,107     4,197   0.4 %   0.5 %
Financing and other transaction costs 4,538     452   0.6 %   0.1 %
Deferred gain on other hedges (2,503 )   (2,930 (0.3 )%   (0.4 )%
Depreciation and amortization expense related to the step-up in fair value of fixed and
intangible assets and inventory
41,380     52,531   5.1 %   6.7 %
Adjusted EBIT $ 189,636     $ 176,332   23.2 %   22.3 %
             
Year-over-year change 7.5 %     90 bps    
Less: year-over-year impact due to:            
Foreign exchange rate differences 0.4 %     10 bps    
Organic adjusted EBIT growth 7.1 %     80 bps    


 
    $ in thousands % of net revenue
      Nine months ended
September 30, 
  Nine months ended
September 30, 
    2017 2016 2017 2016
Net income   $ 239,228    $ 195,907   9.7 % 8.1 %
Interest expense, net   120,578   125,201   4.9 % 5.2 %
Provision for income taxes   47,759   48,297   1.9 % 2.0 %
EBIT   407,565   369,405   16.5 % 15.3 %
Non-GAAP adjustments:          
Restructuring and special charges   18,299   10,997   0.7 % 0.5 %
Financing and other transaction costs   4,538   1,508   0.2 % 0.1 %
Deferred gain on other hedges   (5,241 ) (24,497 ) (0.2 )% (1.0 )%
Depreciation and amortization expense related to the step-up in fair value of fixed and
intangible assets and inventory
  124,746   158,288   5.1 % 6.6 %
Adjusted EBIT   $ 549,907    $ 515,701   22.3 % 21.4 %
           
Year-over-year change   6.6 %   90 bps  
Less: year-over-year impact due to:            
Foreign exchange rate differences   (1.3 )%   0 bps  
Organic adjusted EBIT growth   7.9 %   90 bps  
 

The following unaudited table reconciles Sensata’s projected (GAAP) diluted net income per share to its projected adjusted EPS for the three months and full year ended December 31, 2017. The amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding.

              Three months ended
December 31, 2017
  Full year ended
December 31, 2017
          Low End     High End      Low End      High End 
                 
Projected diluted net income per share   $ 0.51      $ 0.53      $ 1.90      $ 1.92  
Restructuring and special charges       0.01     0.11     0.12  
Financing and other transaction costs   0.01     0.01     0.04     0.04  
Deferred (gain)/loss on other hedges *           (0.03 )   (0.03 )
Depreciation and amortization expense related to the step-up in fair value of fixed
and intangible assets and inventory
  0.24     0.24     0.96     0.96  
Deferred income tax and other tax expense/(benefit)   0.05     0.06     0.12     0.13  
Amortization of deferred financing costs   0.01     0.01     0.04     0.04  
Projected adjusted EPS   $ 0.82      $ 0.86      $ 3.14      $ 3.18  
Weighted average diluted shares outstanding (in 000s)   172,600     172,600     172,200     172,200  

* 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 2017 diluted net income per share. In prior periods, such adjustments have been significant to our reported GAAP earnings.

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

 

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