SWINDON, England–(BUSINESS WIRE)–Sensata Technologies (NYSE: ST), a global industrial technology company and leading provider of sensor-rich solutions that create insights for customers, today announced financial results for its second quarter ended June 30, 2021.
Operating results for the second quarter of 2021 compared to the second quarter of 2020 are summarized below. These results include non-GAAP financial measures, each of which is defined and reconciled to the most directly comparable GAAP measure later in this press release.
Revenue:
Revenue was a record $992.7 million, an increase of $416.2 million, or 72.2%, compared to $576.5 million in the second quarter of 2020.
Revenue increased 62.9% from the second quarter of 2020 on an organic basis, which excludes a 4.9% increase from foreign currency exchange rates and a 4.4% increase from acquisitions versus the prior-year period.
Operating income/(loss):
Operating income was $164.8 million, or 16.6% of revenue, an increase of $166.6 million compared to an operating loss of $(1.9) million, or (0.3)% of revenue, in the second quarter of 2020.
Adjusted operating income was $209.3 million, or 21.1% of revenue, an increase of $134.3 million, or 179.1%, compared to adjusted operating income of $75.0 million, or 13.0% of revenue, in the second quarter of 2020.
Earnings/(loss) per share:
Earnings per share was $0.71, an increase of $0.98 compared to loss per share of $(0.27) in the second quarter of 2020.
Adjusted earnings per share was $0.95, an increase of $0.77, or 427.8%, compared to adjusted earnings per share of $0.18 in the second quarter of 2020.
Changes in foreign currency exchange rates increased Sensata’s adjusted earnings per share by $0.01 in the second quarter of 2021 compared to the prior-year period.
“Sensata’s record quarterly revenues reflect a continuation of strong growth associated with recovery across our automotive, heavy vehicle, and industrial markets combined with channel replenishment. Importantly, Sensata’s revenue growth significantly outpaced the growth of the automotive and the heavy vehicle markets,” said Jeff Cote, CEO and President of Sensata. “We are quickly and effectively adapting to continually evolving market conditions, delivering strong financial results despite lower automotive production and other broad disruptions stemming from semiconductor and other component shortages. In addition, we are continuing to execute well on our long-term growth strategy as evidenced by recent substantial business wins and very large pipelines of potential future designs in Sensata Insights and our Electrification growth areas.”
Operating results for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 are summarized below. These results include non-GAAP financial measures, each of which is defined and reconciled to the most directly comparable GAAP measure later in this press release.
Revenue:
Revenue was a record $1,935.2 million, an increase of $584.4 million, or 43.3%, compared to $1,350.8 million in the six months ended June 30, 2020.
Revenue increased 37.6% from the six months ended June 30, 2020 on an organic basis, which excludes a 3.8% increase from foreign currency exchange rates and a 1.9% increase from acquisitions versus the prior-year period.
Operating income:
Operating income was $322.2 million, or 16.7% of revenue, an increase of $265.5 million, or 468.0%, compared to operating income of $56.7 million, or 4.2% of revenue, in the six months ended June 30, 2020.
Adjusted operating income was $407.4 million, or 21.1% of revenue, an increase of $195.7 million, or 92.5%, compared to adjusted operating income of $211.7 million, or 15.7% of revenue, in the six months ended June 30, 2020.
Earnings/(loss) per share:
Earnings per share was $1.05, an increase of $1.27 compared to loss per share of $(0.22) in the six months ended June 30, 2020.
Adjusted earnings per share was $1.81, an increase of $1.11, or 158.6%, compared to adjusted earnings per share of $0.70 in the six months ended June 30, 2020.
Changes in foreign currency exchange rates increased Sensata’s adjusted earnings per share by $0.01 in the six months ended June 30, 2021 compared to the prior-year period.
Sensata generated $163.4 million of operating cash flow in the second quarter of 2021, compared to $71.7 million in the prior-year period. The Company’s free cash flow totaled $127.0 million in the second quarter of 2021 compared to $44.6 million in the prior-year period.
Sensata generated $267.9 million of operating cash flow in the six months ended June 30, 2021, compared to $170.3 million in the prior-year period. The Company’s free cash flow totaled $204.4 million in the six months ended June 30, 2021 compared to $113.6 million in the prior-year period.
Segment Performance
For the three months ended
June 30,
For the six months ended
June 30,
$ in 000s
2021
2020
2021
2020
Performance Sensing
Revenue
$
741,852
$
385,207
$
1,456,364
$
953,896
Operating income
$
202,064
$
60,756
$
397,908
$
195,802
% of Performance Sensing revenue
27.2
%
15.8
%
27.3
%
20.5
%
Sensing Solutions
Revenue
$
250,808
$
191,298
$
478,824
$
396,878
Operating income
$
76,549
$
55,787
$
143,443
$
112,316
% of Sensing Solutions revenue
30.5
%
29.2
%
30.0
%
28.3
%
Guidance
“Sensata delivered strong financial performance in the second quarter, posting 63% organic revenue growth and 179% adjusted operating income growth from the prior-year period,” said Paul Vasington, EVP and CFO of Sensata. “For the full year 2021, we are updating our revenue guidance to $3,770 to $3,840 million and expect adjusted EPS of $3.42 to $3.62. For the third quarter of 2021, we expect revenue of $920 to $950 million and adjusted EPS of $0.82 to $0.88.”
Full Year 2021 Guidance
$ in millions, except EPS
FY-21 Guidance
FY-20
Y/Y Change
Revenue
$3,770 – $3,840
$3,045.6
24% – 26%
organic growth
19% – 21%
Adjusted Operating Income
$782 – $818
$562.1
39% – 46%
Adjusted Net Income
$544 – $576
$349.2
56% – 65%
Adjusted EPS
$3.42 – $3.62
$2.21
55% – 64%
Versus the prior-year period, Sensata expects that changes in foreign currency exchange rates will increase revenues by approximately $71 million at the midpoint and adjusted EPS by approximately $0.05 at the midpoint for the full year 2021.
Q3 2021 Guidance
$ in millions, except EPS
Q3-21 Guidance
Q3-20
Y/Y Change
Revenue
$920 – $950
$788.3
17% – 21%
organic growth
12% – 16%
Adjusted Operating Income
$189 – $199
$154.8
22% – 29%
Adjusted Net Income
$130 – $140
$103.6
25% – 35%
Adjusted EPS
$0.82 – $0.88
$0.66
24% – 33%
Versus the prior-year period, Sensata expects that changes in foreign currency exchange rates will increase revenues by approximately $14 million at the midpoint and adjusted EPS by approximately $0.01 at the midpoint for the third quarter of 2021.
Conference Call and Webcast
Sensata will conduct a conference call today at 8:00 AM eastern time to discuss its second quarter 2021 financial results and its outlook for the third quarter and full year 2021. The dial-in numbers for the call are 1-844-784-1726 or 1-412-380-7411. Callers should reference the “Sensata Q2 2021 Financial Results Conference Call.” A live webcast of the conference call will also be available on the investor relations page of Sensata’s website at http://investors.sensata.com. Additionally, a replay of the call will be available until August 3, 2021. To access the replay, dial 1-877-344-7529 or 1-412-317-0088 and enter confirmation code: 10158391.
About Sensata Technologies
Sensata Technologies is a leading industrial technology company that develops sensors, sensor-based solutions, including controllers and software, and other mission-critical products to create valuable business insights for customers and end users. For more than 100 years, Sensata has provided a wide range of customized, sensor-rich solutions that address complex engineering requirements to help customers solve difficult challenges in the automotive, heavy vehicle & off-road, industrial, and aerospace industries. With more than 19,000 employees and operations in 13 countries, Sensata’s solutions help to make products safer, cleaner and more efficient, more electrified, and more connected. 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 the 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 earnings per share (“EPS”), adjusted operating income, adjusted operating margin, free cash flow, organic revenue growth, market outgrowth, adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), net debt, and net leverage ratio. We also refer to changes in certain non-GAAP measures, usually reported either as a percentage or number of basis points, between two periods and measured on either a reported, constant currency, or an organic basis, the latter of which excludes the net impact of acquisitions and divestitures for the 12-month period following the respective transaction date(s) and the effect of foreign currency exchange rate differences between the comparative periods. Such changes are also considered non-GAAP measures.
Adjusted net income is defined as net income (or loss), determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described in the accompanying reconciliation tables. 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 operating income is defined as operating income (or loss), determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described in the accompanying reconciliation tables. Adjusted operating margin is calculated by dividing adjusted operating income 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 for the accelerated repayment of debt obligations.
Organic revenue growth is defined as the reported percentage change in net revenue calculated in accordance with U.S. GAAP, excluding the period-over-period impact of foreign exchange rate differences as well as the net impact of acquisitions and divestitures for the 12-month period following the respective transaction date(s). We believe that this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.
Adjusted EBITDA is defined as net income (or loss) calculated in accordance with U.S. GAAP, excluding interest expense, net, provision for (or benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable: (1) restructuring related and other, (2) financing and transaction related, (3) deferred gain or loss on commodities and other derivative instruments, and (4) step-up inventory amortization.
Net debt is defined as total debt, finance lease, and other financing obligations less cash and cash equivalents. We believe net debt is a useful measure to management and investors in understanding trends in our overall financial condition.
Net leverage ratio is defined as net debt divided by last twelve months (LTM) adjusted EBITDA. We believe the net leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.
Safe Harbor Statement
This earnings release contains “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995, which relate to future events and are subject to risks and uncertainties. The forward-looking statements, which address the Company’s expected business and financial performance and financial condition, among other matters, may contain words or phrases such as: “believe,” “continue,” “expect,” “look ahead,” “predict,” or “will,” and other words and phrases of similar meaning. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about expected earnings, revenues, growth, liquidity or other financial matters, together with any statements related in any way to the COVID-19 pandemic including its impact on the Company. Although the Company believes the expectations reflected in its forward-looking statements are based upon reasonable assumptions, no assurance can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results, or other expectations expressed in this earnings release, including, without limitation, the following: future risks and existing uncertainties associated with the COVID-19 pandemic, which continues to have a significant adverse impact on our operations including, depending on the specific location, full or partial shutdowns of our facilities as mandated by government decree, government actions limiting our ability to adjust certain costs, significant travel restrictions, “work-from-home” orders, limited availability of our workforce, supplier constraints, supply chain interruptions, logistics challenges and limitations, and reduced demand from certain customers; uncertainties associated with a protracted economic slowdown that could negatively affect the financial condition of our customers and suppliers; uncertainties and volatility in the global capital markets; political, economic, military and other risks in countries outside of the United States; the impact of general economic conditions, geopolitical conditions and U.S. trade policies, legislation, trade disputes, treaties and tariffs, including those affecting China, on the Company’s business operations; risks associated with the improper conduct by any of our employees, customers, suppliers, distributors or any other business partners which could impair our business reputation and financial results and could result in our non-compliance with anti-corruption laws and regulations of the U.S. government and various foreign jurisdictions; changes in exchange rates of the various currencies in which the Company conducts business; the Company’s ability to obtain a consistent supply of materials, at stable pricing levels; changes in defense expenditures in the military market, including the impact of reductions or changes in the defense budgets of U.S. and foreign governments; the Company’s ability to compete successfully on the basis of technology innovation, product quality and performance, price, customer service and delivery time; the Company’s ability to continue to conceive, design, manufacture and market new products and upon continuing market acceptance of its existing and future product lines; difficulties and unanticipated expenses in connection with purchasing and integrating newly acquired businesses, including the potential for the impairment of goodwill and other intangible assets; events beyond the Company’s control that could lead to an inability to meet its financial covenants under its credit arrangements; the Company’s ability to access the capital markets on favorable terms, including as a result of significant deterioration of general economic or capital market conditions, or as a result of a downgrade in the Company’s credit rating; changes in interest rates; governmental export and import controls that certain of our products may be subject to, including export licensing, customs regulations, economic sanctions or other laws; cybersecurity threats or incidents that could arise on our information technology systems that could disrupt business operations and adversely impact our reputation and operating results and potentially lead to litigation and/or governmental investigations; changes in fiscal and tax policies, audits and examinations by taxing authorities, laws, regulations and guidance in the United States and foreign jurisdictions; any difficulties in protecting the Company’s intellectual property rights; and litigation, customer claims, product recalls, governmental investigations, criminal liability or environmental matters. In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.
A further description of these uncertainties and other risks can be found in the Company’s 2020 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and the Company’s other reports filed with the SEC. Copies of our filings are available from our Investor Relations department or from the SEC website, www.sec.gov.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
For the three months ended
June 30,
For the six months ended
June 30,
2021
2020
2021
2020
Net revenue
$
992,660
$
576,505
$
1,935,188
$
1,350,774
Operating costs and expenses:
Cost of revenue
658,285
412,443
1,293,634
978,849
Research and development
42,913
30,239
78,869
64,692
Selling, general and administrative
86,821
64,730
163,944
141,951
Amortization of intangible assets
34,857
32,743
66,921
65,835
Restructuring and other charges, net
5,029
38,218
9,611
42,716
Total operating costs and expenses
827,905
578,373
1,612,979
1,294,043
Operating income/(loss)
164,755
(1,868
)
322,209
56,731
Interest expense, net
(45,213
)
(40,808
)
(89,256
)
(80,211
)
Other, net
1,012
1,576
(38,385
)
(10,705
)
Income/(loss) before taxes
120,554
(41,100
)
194,568
(34,185
)
Provision for/(benefit from) income taxes
7,638
1,441
27,919
(75
)
Net income/(loss)
$
112,916
$
(42,541
)
$
166,649
$
(34,110
)
Net income/(loss) per share:
Basic
$
0.71
$
(0.27
)
$
1.05
$
(0.22
)
Diluted
$
0.71
$
(0.27
)
$
1.05
$
(0.22
)
Weighted-average ordinary shares outstanding:
Basic
158,208
157,186
157,986
157,392
Diluted
159,344
157,186
159,287
157,392
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30,
2021
December 31,
2020
Assets
Current assets:
Cash and cash equivalents
$
1,861,769
$
1,861,980
Accounts receivable, net of allowances
694,317
576,647
Inventories
503,641
451,005
Prepaid expenses and other current assets
117,401
90,340
Total current assets
3,177,128
2,979,972
Property, plant and equipment, net
801,342
803,825
Goodwill
3,308,939
3,111,349
Other intangible assets, net
892,521
691,549
Deferred income tax assets
79,625
84,785
Other assets
158,803
172,722
Total assets
$
8,418,358
$
7,844,202
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt, finance lease and other financing obligations
$
7,281
$
757,205
Accounts payable
473,932
393,907
Income taxes payable
25,663
19,215
Accrued expenses and other current liabilities
330,056
324,830
Total current liabilities
836,932
1,495,157
Deferred income tax liabilities
301,471
259,857
Pension and other post-retirement benefit obligations
44,146
48,002
Finance lease and other financing obligations, less current portion
27,220
27,931
Long-term debt, net
4,213,830
3,213,747
Other long-term liabilities
81,311
94,022
Total liabilities
5,504,910
5,138,716
Total shareholders’ equity
2,913,448
2,705,486
Total liabilities and shareholders’ equity
$
8,418,358
$
7,844,202
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
For the six months ended
June 30,
2021
2020
Cash flows from operating activities:
Net income/(loss)
$
166,649
$
(34,110
)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
62,833
65,288
Amortization of debt issuance costs
3,426
3,263
Share-based compensation
11,475
9,590
Loss on debt financing
30,066
—
Amortization of intangible assets
66,921
65,835
Deferred income taxes
(7,070
)
1,500
Loss on litigation judgment
—
41,314
Unrealized loss on derivative instruments and other
12,700
8,035
Changes in operating assets and liabilities, net of effects of acquisitions
(79,069
)
9,557
Net cash provided by operating activities
267,931
170,272
Cash flows from investing activities:
Acquisitions, net of cash received
(421,951
)
—
Additions to property, plant and equipment and capitalized software
(63,572
)
(56,697
)
Investment in debt and equity securities
(6,444
)
(5,817
)
Other
2,862
2,019
Net cash used in investing activities
(489,105
)
(60,495
)
Cash flows from financing activities:
Proceeds from exercise of stock options and issuance of ordinary shares
17,957
1,146
Payment of employee restricted stock tax withholdings
(7,948
)
(2,314
)
Proceeds from borrowings on debt
1,001,875
400,000
Payments on debt
(757,889
)
(4,604
)
Payments to repurchase ordinary shares
—
(35,175
)
Payments of debt financing costs
(33,032
)
—
Net cash provided by financing activities
220,963
359,053
Net change in cash and cash equivalents
(211
)
468,830
Cash and cash equivalents, beginning of period
1,861,980
774,119
Cash and cash equivalents, end of period
$
1,861,769
$
1,242,949
Revenue by Business, Geography, and End Market (Unaudited)
(percent of total revenue)
For the three months
ended June 30,
For the six months
ended June 30,
2021
2020
2021
2020
Performance Sensing
74.7
%
66.8
%
75.3
%
70.6
%
Sensing Solutions
25.3
%
33.2
%
24.7
%
29.4
%
Total
100.0
%
100.0
%
100.0
%
100.0
%
(percent of total revenue)
For the three months
ended June 30,
For the six months
ended June 30,
2021
2020
2021
2020
Americas
38.0
%
33.3
%
37.2
%
39.4
%
Europe
27.2
%
22.6
%
27.8
%
26.5
%
Asia/Rest of World
34.8
%
44.1
%
35.0
%
34.1
%
Total
100.0
%
100.0
%
100.0
%
100.0
%
(percent of total revenue)
For the three months
ended June 30,
For the six months
ended June 30,
2021
2020
2021
2020
Automotive*
53.4
%
51.0
%
55.7
%
54.8
%
Heavy vehicle and off-road
22.5
%
17.1
%
20.7
%
17.0
%
Industrial
10.6
%
13.7
%
10.1
%
11.8
%
Appliance and heating, ventilation and air-conditioning
6.4
%
7.6
%
6.4
%
6.6
%
Aerospace
3.3
%
4.7
%
3.4
%
5.1
%
All other
3.8
%
5.9
%
3.7
%
4.7
%
Total
100.0
%
100.0
%
100.0
%
100.0
%
* Includes amounts reflected in the Sensing Solutions segment as follows: $12.1 million and $7.3 million of revenue in the three months ended June 30, 2021 and 2020, respectively, and $23.6 million and $15.5 million of revenue in the six months ended June 30, 2021 and 2020, respectively.
Market Outgrowth (Unaudited)
For the three months ended
June 30, 2021
For the six months ended
June 30, 2021
Reported
Growth
Organic
Growth
End
Market
Growth
Reported
Growth
Organic
Growth
End
Market
Growth
Automotive
80.9
%
74.9
%
56.1
%
*
45.7
%
41.3
%
28.4
%
*
Heavy vehicle and off-road
126.4
%
95.7
%
57.6
%
74.7
%
59.8
%
37.3
%
* Excludes Toyota, adjusted for Sensata’s geographic mix.
GAAP to Non-GAAP Reconciliations
The following unaudited tables provide a reconciliation of the difference between each of the non-GAAP financial measures referenced herein and the most directly comparable U.S. GAAP financial measure. Amounts presented in these tables may not appear to recalculate due to the effect of rounding.
Operating income/(loss) and margin, income tax, net income/(loss), and earnings/(loss) per share
($ in thousands, except per share amounts)
For the three months ended June 30, 2021
Operating
Income
Operating
Margin
Income
Taxes
Net
Income
Diluted
EPS
Reported (GAAP)
$
164,755
16.6
%
$
7,638
$
112,916
$
0.71
Non-GAAP adjustments:
Restructuring related and other
5,738
0.6
%
(85
)
6,926
0.04
Financing and other transaction costs
2,544
0.3
%
(443
)
1,267
0.01
Step-up depreciation and amortization
33,684
3.4
%
—
33,684
0.21
Deferred loss/(gain) on derivative instruments
2,595
0.3
%
(352
)
1,057
0.01
Amortization of debt issuance costs
—
—
%
—
1,715
0.01
Deferred taxes and other tax related
—
—
%
(6,200
)
(6,200
)
(0.04
)
Total adjustments
44,561
4.5
%
(7,080
)
38,449
0.24
Adjusted (non-GAAP)
$
209,316
21.1
%
$
14,718
$
151,365
0.95
($ in thousands, except per share amounts)
For the three months ended June 30, 2020
Operating
(Loss)/Income
Operating
Margin
Income
Taxes
Net
(Loss)/Income
Diluted
EPS
Reported (GAAP)
$
(1,868
)
(0.3
%)
$
1,441
$
(42,541
)
$
(0.27
)
Non-GAAP adjustments:
Restructuring related and other (1)
40,839
7.1
%
(9,110
)
33,598
0.21
Financing and other transaction costs
3,619
0.6
%
—
3,619
0.02
Step-up depreciation and amortization
31,897
5.5
%
—
31,897
0.20
Deferred loss/(gain) on derivative instruments
500
0.1
%
—
(4,927
)
(0.03
)
Amortization of debt issuance costs
—
—
%
—
1,632
0.01
Deferred taxes and other tax related
—
—
%
4,400
4,400
0.03
Total adjustments
76,855
13.3
%
(4,710
)
70,219
0.45
Adjusted (non-GAAP)
$
74,987
13.0
%
$
6,151
$
27,678
$
0.18
Includes $12.1 million of prejudgment interest-related damages awarded by the court on a judgment against us in connection with a patent infringement case brought by Wasica Finance GmbH (“Wasica”) and $26.0 million of charges recognized related to a global restructuring program (the “Q2 2020 Global Restructure Program”) commenced in the second quarter of 2020. We settled the litigation brought by Wasica in the third quarter 2020; refer to our 2020 Annual Report on Form 10-K for additional information.
($ in thousands, except per share amounts)
For the six months ended June 30, 2021
Operating
Income
Operating
Margin
Income
Taxes
Net
Income
Diluted
EPS
Reported (GAAP)
$
322,209
16.7
%
$
27,919
$
166,649
$
1.05
Non-GAAP adjustments:
Restructuring related and other
10,263
0.5
%
(286
)
14,217
0.09
Financing and other transaction costs (1)
7,115
0.4
%
(3,546
)
34,072
0.21
Step-up depreciation and amortization
63,380
3.3
%
—
63,380
0.40
Deferred loss on derivative instruments
4,435
0.2
%
(1,100
)
3,302
0.02
Amortization of debt issuance costs
—
—
%
—
3,426
0.02
Deferred taxes and other tax related (2)
—
—
%
3,922
3,922
0.02
Total adjustments
85,193
4.4
%
(1,010
)
122,319
0.77
Adjusted (non-GAAP)
$
407,402
21.1
%
$
28,929
$
288,968
1.81
Includes a $30.1 million loss recognized in the first quarter of 2021 related to the early redemption of our 6.25% Senior Notes due 2026 at 103.125%. The loss primarily includes the payment of $23.4 million for the early redemption premium, with the remaining loss representing write-off of debt discounts and deferred financing costs. The loss is presented in other, net in our condensed consolidated statement of operations.
(2)
Includes $10.9 million of current tax expense related to the repatriation of profit from certain Asian subsidiaries to their parent company in the Netherlands. The decision to repatriate these profits was the result of our goal to reduce our balance sheet exposure and corresponding earnings volatility related to changes in foreign currency exchange rates as well as to fund our deployment of capital.
($ in thousands, except per share amounts)
For the six months ended June 30, 2020
Operating
Income
Operating
Margin
Income
Taxes
Net
(Loss)/Income
Diluted
EPS
Reported (GAAP)
$
56,731
4.2
%
$
(75
)
$
(34,110
)
$
(0.22
)
Non-GAAP adjustments:
Restructuring related and other (1)
84,596
6.3
%
(18,379
)
71,786
0.45
Financing and other transaction costs
5,353
0.4
%
—
5,353
0.03
Step-up depreciation and amortization
64,168
4.8
%
—
64,168
0.41
Deferred loss on derivative instruments
809
0.1
%
—
957
0.01
Amortization of debt issuance costs
—
—
%
—
3,263
0.02
Deferred taxes and other tax related
—
—
%
(531
)
(531
)
—
Total adjustments
154,926
11.5
%
(18,910
)
144,996
0.92
Adjusted (non-GAAP)
$
211,657
15.7
%
$
18,835
$
110,886
$
0.70
Includes a $29.2 million loss recorded through cost of revenue in the first quarter of 2020 related to the patent infringement case brought by Wasica, $12.1 million of prejudgment interest-related damages awarded by the court related to this judgment, and $26.0 million of charges recognized related to the Q2 2020 Global Restructure Program. We settled the litigation brought by Wasica in the third quarter 2020; refer to our 2020 Annual Report on Form 10-K for additional information.
Non-GAAP adjustments by location in statements of operations
(in thousands)
For the three months
ended June 30,
For the six months
ended June 30,
2021
2020
2021
2020
Cost of revenue (1)
$
3,038
$
1,331
$
5,453
$
37,325
Selling, general and administrative
3,253
6,240
7,641
12,422
Amortization of intangible assets
33,241
31,066
62,488
62,463
Restructuring and other charges, net (2)
5,029
38,218
9,611
42,716
Operating income/(loss) adjustments
44,561
76,855
85,193
154,926
Interest expense, net
1,715
1,632
3,426
3,263
Other, net (3)
(747
)
(3,558
)
34,710
5,717
Provision for/(benefit from) income taxes (4)
(7,080
)
(4,710
)
(1,010
)
(18,910
)
Net income/(loss) adjustments
$
38,449
$
70,219
$
122,319
$
144,996
The six months ended June 30, 2020 includes a $29.2 million loss related to a judgment against us in a patent infringement case with Wasica Finance GmbH. We settled this litigation in the third quarter 2020; refer to our 2020 Annual Report on Form 10-K for additional information.
(2)
The three months ended June 30, 2020 includes $24.1 million of charges recognized related to the Q2 2020 Global Restructure Program commenced in the second quarter of 2020. The six months ended June 30, 2020 also includes $12.1 million of prejudgment interest-related damages awarded in the patent infringement case brought by Wasica.
(3)
The six months ended June 30, 2021 includes a $30.1 million loss recognized in the first quarter of 2021 related to the early redemption of our 6.25% Senior Notes due 2026 at 103.125%. The loss primarily includes the payment of $23.4 million for the early redemption premium, with the remaining loss representing write-off of debt discounts and deferred financing costs.
(4)
The three and six months ended June 30, 2021 includes $10.1 million and $10.9 million, respectively, of current tax expense related to the repatriation of profit from certain Asian subsidiaries to their parent company in the Netherlands. The decision to repatriate these profits was the result of our goal to reduce our balance sheet exposure and corresponding earnings volatility related to changes in foreign currency exchange rates as well as to fund our deployment of capital.
Free cash flow
($ in thousands)
Three months ended
June 30,
% Change
Six months ended
June 30,
% Change
2021
2020
2021
2020
Net cash provided by operating activities
$
163,420
$
71,728
127.8
%
$
267,931
$
170,272
57.4
%
Additions to property, plant and equipment and capitalized software
(36,400
)
(27,150
)
(34.1
%)
(63,572
)
(56,697
)
(12.1
%)
Free cash flow
$
127,020
$
44,578
184.9
%
$
204,359
$
113,575
79.9
%
Adjusted EBITDA
Three months ended
June 30,
Six months ended
June 30,
(in thousands)
LTM
2021
2020
2021
2020
Net income/(loss)
$
365,029
$
112,916
$
(42,541
)
$
166,649
$
(34,110
)
Interest expense, net
180,802
45,213
40,808
89,256
80,211
Provision for/(benefit from) income taxes
29,349
7,638
1,441
27,919
(75
)
Depreciation expense
123,225
31,636
30,609
62,833
65,288
Amortization of intangible assets
130,635
34,857
32,743
66,921
65,835
EBITDA
829,056
232,260
63,060
413,578
177,149
Non-GAAP Adjustments
Restructuring related and other
22,229
7,011
42,708
14,377
85,265
Financing and other transaction costs
38,628
1,710
3,619
37,618
5,353
Deferred (gain)/loss on derivative instruments
(3,516
)
1,409
(4,927
)
4,402
957
Adjusted EBITDA
$
886,397
$
242,390
$
104,460
$
469,975
$
268,724
Net debt and leverage ratio
As of:
($ in thousands)
June 30,
2021
December 31,
2020
Current portion of long-term debt, finance lease and other financing obligations (1)
$
7,281
$
757,205
Finance lease and other financing obligations, less current portion
27,220
27,931
Long-term debt, net
4,213,830
3,213,747
Total debt, finance lease, and other financing obligations
4,248,331
3,998,883
Less: Discount, net of premium
(6,097
)
(9,605
)
Less: Deferred financing costs
(29,224
)
(28,114
)
Total Gross indebtedness
4,283,652
4,036,602
Less: Cash and cash equivalents
1,861,769
1,861,980
Net Debt
$
2,421,883
$
2,174,622
Adjusted EBITDA (LTM)
$
886,397
$
685,146
Net leverage ratio
2.7
3.2
On February 3, 2021, we announced that we intended to redeem in full the $750.0 million aggregate principal amount outstanding on our 6.25% Senior Notes due 2026. Because we had not issued our 2020 Annual Report on Form 10-K, we determined that these notes should be classified as current on our consolidated balance sheet as of December 31, 2020.
Guidance
For the three months ending September 30, 2021
($ in millions, except per share amounts)
Operating Income
Net Income
EPS
Low
High
Low
High
Low
High
GAAP
$
150.5
$
158.5
$
81.8
$
89.3
$
0.52
$
0.56
Restructuring related and other
4.5
5.0
4.5
5.0
0.03
0.03
Financing and other transaction costs
2.0
2.5
2.0
2.5
0.01
0.02
Step-up depreciation and amortization
32.0
33.0
32.0
33.0
0.20
0.21
Deferred (gain)/loss on derivative instruments (1)
—
—
—
—
—
—
Amortization of debt issuance costs
—
—
1.7
1.7
0.01
0.01
Deferred taxes and other tax related
—
—
8.0
8.5
0.05
0.05
Non-GAAP
$
189.0
$
199.0
$
130.0
$
140.0
$
0.82
$
0.88
Weighted-average diluted shares outstanding (in millions)
159
159
For the full year ending December 31, 2021
($ in millions, except per share amounts)
Operating Income
Net Income
EPS
Low
High
Low
High
Low
High
GAAP
$
620.6
$
652.6
$
326.7
$
352.7
$
2.06
$
2.22
Restructuring related and other
18.0
19.0
22.0
23.0
0.14
0.14
Financing and other transaction costs
12.0
13.0
40.0
41.0
0.25
0.26
Step-up depreciation and amortization
127.0
129.0
127.0
129.0
0.80
0.81
Deferred loss on derivative instruments(1)
4.4
4.4
3.3
3.3
0.02
0.02
Amortization of debt issuance costs
—
—
7.0
7.0
0.04
0.04
Deferred taxes and other tax related
—
—
18.0
20.0
0.11
0.13
Non-GAAP
$
782.0
$
818.0
$
544.0
$
576.0
$
3.42
$
3.62
Weighted-average diluted shares outstanding (in millions)
159
159
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 2021 operating results. In prior periods such adjustments have been significant in relation to our reported GAAP results.