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Form 8-K Sensata Technologies For: Oct 25

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October 25, 2016 6:35 AM EDT

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 __________________________________________
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 25, 2016
 
__________________________________________ 
SENSATA TECHNOLOGIES HOLDING N.V.
(Exact name of Registrant as specified in its charter)
 
 __________________________________________


The Netherlands
 
001-34652
 
98-0641254
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
Kolthofsingel 8, 7602 EM Almelo
The Netherlands
(Address of Principal executive offices, including Zip Code)
31-546-879-555
(Registrant's telephone number, including area code)
 
(Former name or former address, if changed since last report)
 
 __________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 


o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 


 





Item 2.02
Results of Operations and Financial Condition.
On October 25, 2016, Sensata Technologies Holding N.V. (the "Company") issued a press release announcing its financial results for the quarter ended September 30, 2016. The press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.
The Company will conduct a webcast on October 25, 2016 at 8:00 AM eastern time to discuss the financial results for its third quarter ended September 30, 2016 and its outlook for the remainder of the year. The dial-in numbers for the call are 1-877-486-0682 (toll-free) or +1-706-634-5536 (international) and the conference ID is 85372621. Additional information relating to the Company's financial results will be contained in a presentation that will be referenced during the webcast, and that is being made available on the investor relations page of the Company’s website at www.investors.sensata.com. The live webcast and a replay will be available on the investor relations page of the Company’s website.
The information contained in, or incorporated into, this Current Report on Form 8-K is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities under that section, nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in any such filing.

Item 9.01
Financial Statements and Exhibits.
(d) Exhibits
99.1
 
October 25, 2016 press release entitled "Sensata Technologies Reports Third Quarter 2016 Financial Results" (furnished pursuant to Item 2.02).



2


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 


 
 
 
 
SENSATA TECHNOLOGIES HOLDING N.V.
 
 
 
 
 
 
 
/s/ Paul Vasington
Date: October 25, 2016
 
 
 
Name: Paul Vasington
 
 
 
 
Title: Executive Vice President and Chief Financial Officer
 



3


EXHIBIT INDEX

Exhibit No.
 
Description
 
 
99.1
 
October 25, 2016 press release entitled "Sensata Technologies Reports Third Quarter 2016 Financial Results" (furnished pursuant to Item 2.02).




4


graphic01a02a01a01a01a07.jpg
SENSATA TECHNOLOGIES REPORTS THIRD QUARTER 2016 FINANCIAL RESULTS

Almelo, the Netherlands – October 25, 2016 - Sensata Technologies (NYSE: ST) today announced financial results for its third quarter and nine months ended September 30, 2016.
Revenue was $789.8 million in the third quarter of 2016, an increase of $62.4 million, or 8.6%, from revenue of $727.4 million in the third quarter of 2015. Excluding an 8.6% positive effect from acquisitions, net of exited businesses, and a 1.7% negative effect from changes in foreign exchange rates, Sensata reported organic revenue growth of 1.7% in the third quarter of 2016.
Net income was $69.8 million in the third quarter 2016, which was 8.8% of revenue, or $0.41 per diluted share. This compares to net income of $53.2 million in the third quarter 2015, which was 7.3% of revenue or $0.31 per diluted share. Adjusted net income was $126.3 million in the third quarter of 2016 which was 16.0% of revenue or $0.74 per diluted share. This compares to adjusted net income of $123.3 million in the third quarter of 2015, which was 17.0% of revenue, or $0.72 per diluted share. Changes in foreign exchange rates reduced Sensata's earnings per share by ($0.05) in the third quarter of 2016 compared to the prior year period.
On a sequential basis, Sensata's adjusted net income margin of 16.0% for the third quarter increased by 100 basis points compared to an adjusted net income margin of 15.0% in the second quarter of 2016.
Revenue for the nine months ended September 30, 2016 was $2.41 billion, an increase of $165.4 million, or 7.4% from $2.25 billion for the nine months ended September 30, 2015. Excluding an 8.7% positive effect from acquisitions, net of exited businesses, and a 1.6% negative effect from changes in foreign exchange rates, Sensata reported flat organic revenue growth in the first nine months of 2016.
Net income for the nine months ended September 30, 2016 was $195.9 million, which was 8.1% of revenue, or $1.14 per diluted share. This compares to net income for the nine months ended September 30, 2015 of $129.4 million, which was 5.8% of revenue, or $0.75 per diluted share. Adjusted net income for the nine months ended September 30, 2016 was $363.9 million which was 15.1% of revenue, or $2.12 per diluted share. This was an increase of 1.4% compared to adjusted net income for the nine months ended September 30, 2015 of $358.7 million which was 16.0% of revenue, or $2.09 per diluted share. Changes in foreign exchange rates reduced Sensata's earnings per share by ($0.14) in the first nine months of 2016 compared to the prior year period.
Sensata’s ending cash balance at September 30, 2016 was $299.9 million. During the first nine months of 2016, operating cash flow grew 9 percent year over year totaling $396.4 million and free cash flow grew 29% year over year, totaling $301.8 million. The Company’s total gross indebtedness at September 30, 2016 was $3.4 billion, a reduction of $296.4 million from December 31, 2015 as a result of debt repayment.
"We delivered strong sequential margin expansion and eleven percent year over year organic earnings growth in the third quarter despite sustained weakness in some of our markets," said

1

Martha Sullivan, President and Chief Executive Officer. "Our free cash flow has been strong, which has enabled us to pay down our debt and move closer toward achieving our targeted FY-16 net leverage ratio. As we enter the fourth quarter, we are well-positioned to deliver on our full year 2016 earnings guidance and continue our trend of margin expansion and strong free cash flow."
Segment Performance
 
 
Three months ended
Nine months ended
$ in 000s
 
September 30, 2016
 
September 30, 2015
September 30, 2016
 
September 30, 2015
Performance Sensing net revenue
 
$
584,650

 
$
576,476

$
1,797,395

 
$
1,774,081

Performance Sensing profit from operations
 
155,228

 
150,782

453,540

 
447,662

    % of Performance Sensing revenue
 
26.6
%
 
26.2
%
25.2
%
 
25.2
%
 
 
 
 
 
 
 
 
Sensing Solutions net revenue
 
$
205,148

 
$
150,884

$
616,497

 
$
474,409

Sensing Solutions profit from operations
 
67,314

 
49,734

198,737

 
151,069

    % of Sensing Solutions revenue
 
32.8
%
 
33.0
%
32.2
%
 
31.8
%
Performance Sensing’s profit from operations as a percentage of revenue totaled 26.6 percent in the third quarter of 2016. Excluding the impact of changes in foreign exchange rates and the CST acquisition, Performance Sensing’s profit from operations as a percentage of revenue was 27.6 percent in the third quarter of 2016, representing an increase of 140 basis points from the third quarter of 2015. Sensing Solutions' profit from operations as a percentage of revenue totaled 32.8 percent in the third quarter of 2016. Excluding the impact of changes in foreign exchange rates and the CST acquisition, Sensing Solutions' profit from operations as a percentage of revenue was 33.8 percent in the third quarter of 2016, representing an increase of 80 basis points compared to the third quarter of 2015.
Guidance
Sensata anticipates revenue to be between $765 and $805 million in the fourth quarter of 2016 compared to $726.5 million in the fourth quarter of 2015. Additionally, the Company expects adjusted net income to be between $123 and $133 million and adjusted earnings per share to be between $0.71 and $0.77 in the fourth quarter of 2016.
For the full year 2016, the Company anticipates revenue to be between $3.18 and $3.22 billion compared to $2.98 billion in full year 2015. Additionally, the Company expects adjusted net income to be between $487 and $497 million and adjusted earnings per share to be between $2.84 and $2.90 for the full year 2016. Changes in foreign exchange rates are expected to reduce adjusted earnings per share by ($0.19) to ($0.20) in 2016, compared to the previous year.
Conference Call & Webcast
The Company will conduct a conference call today at 8:00 AM eastern time to discuss the financial results and its outlook for the remainder of the year. The dial-in numbers for the call are 1-877-486-0682 (toll-free) or +1-706-634-5536 (international) and the Conference ID is 85372621. 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.


2

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 thirteen 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.
Use of Non-GAAP Financial Measures
A definition of non-GAAP measures and a reconciliation of GAAP to non-GAAP financial measures is provided in the financial tables accompanying this press release. The non-GAAP financial measures referenced by Sensata in this press release include organic revenue growth; adjusted net income; adjusted net income margin; adjusted net income per diluted share; organic earnings growth; and free cash flow.

Organic revenue growth is defined as the percentage change in net revenue calculated in accordance with U.S. GAAP, excluding the impact of acquisitions, net of exited businesses that occurred in the previous twelve months, and the effects of changes in foreign currency exchange rates.

Adjusted net income is defined as net income 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 net income per share is calculated by dividing adjusted net income by the number of diluted weighted average ordinary shares outstanding in the period.

We define organic earnings growth as the percentage change in adjusted net income per share, excluding the impact of acquisitions, net of exited businesses that occurred within the previous 12 months, and the effects of changes in foreign currency exchange rates. We define free cash flow as net cash provided by operating activities less additions to property, plant, and equipment and capitalized software.

There are limitations in using non-GAAP financial measures as they are not prepared in accordance with U.S. generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should be considered as supplemental in nature and are not intended to be considered in isolation or as a substitute for financial measures prepared in accordance with US GAAP. We believe that the non-GAAP financial measures provide useful and supplementary information to investors regarding our quarterly and annual performance. We regularly use non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures. For the same reasons, we also use this information for our forecasting activities.
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 strategies. Such forward-looking statements include, among other things, our anticipated results for the fourth quarter and full year 2016. Such

3

statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Factors that might cause these differences include, but are not limited to, risks associated with: adverse 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-US 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 substantial 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.


4


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, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
Net revenue
 
$
789,798

 
$
727,360

 
$
2,413,892

 
$
2,248,490

Operating costs and expenses:
 
 
 
 
 
 
 
 
Cost of revenue
 
508,944

 
476,634

 
1,574,763

 
1,501,142

Research and development
 
31,601

 
30,816

 
95,240

 
92,794

Selling, general and administrative
 
75,046

 
66,233

 
224,637

 
203,637

Amortization of intangible assets
 
50,562

 
45,184

 
151,572

 
136,068

Restructuring and special charges
 
837

 
1,615

 
3,167

 
12,424

Total operating costs and expenses
 
666,990

 
620,482

 
2,049,379

 
1,946,065

Profit from operations
 
122,808

 
106,878

 
364,513

 
302,425

Interest expense, net
 
(41,176
)
 
(29,706
)
 
(125,201
)
 
(96,029
)
Other, net
 
(726
)
 
(10,805
)
 
4,892

 
(44,647
)
Income before taxes
 
80,906

 
66,367

 
244,204

 
161,749

Provision for income taxes
 
11,121

 
13,215

 
48,297

 
32,342

Net income
 
$
69,785

 
$
53,152

 
$
195,907

 
$
129,407

 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.41

 
$
0.31

 
$
1.15

 
$
0.76

Diluted
 
$
0.41

 
$
0.31

 
$
1.14

 
$
0.75

 
 
 
 
 
 
 
 
 
Weighted-average ordinary shares outstanding:
 
 
 
 
 
 
Basic
 
170,840

 
170,147

 
170,656

 
169,880

Diluted
 
171,478

 
171,608

 
171,359

 
171,512



5


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, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
Net income
 
$
69,785

 
$
53,152

 
$
195,907

 
$
129,407

Other comprehensive loss, net of tax:
 
 
 
 
 
 
 
 
Deferred loss on derivative instruments, net of reclassifications
 
(8,485
)
 
(17,430
)
 
(25,010
)
 
(13,058
)
Defined benefit and retiree healthcare plans
 
24

 
742

 
291

 
760

Other comprehensive loss
 
(8,461
)
 
(16,688
)
 
(24,719
)
 
(12,298
)
Comprehensive income
 
$
61,324

 
$
36,464

 
$
171,188

 
$
117,109



6


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

($ in 000s)
 
 
 
 
 
 
September 30, 2016
 
December 31, 2015
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
299,887

 
$
342,263

Accounts receivable, net of allowances
 
532,571

 
467,567

Inventories
 
372,968

 
358,701

Prepaid expenses and other current assets
 
90,901

 
109,392

Total current assets
 
1,296,327

 
1,277,923

Property, plant and equipment, net
 
722,429

 
694,155

Goodwill
 
3,008,894

 
3,019,743

Other intangible assets, net
 
1,118,861

 
1,262,572

Deferred income tax assets
 
34,102

 
26,417

Other assets
 
70,380

 
18,100

Total assets
 
$
6,250,993

 
$
6,298,910

 
 
 
 
 
Liabilities and shareholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of long-term debt, capital lease and other financing obligations
 
$
14,475

 
$
300,439

Accounts payable
 
324,273

 
290,779

Income taxes payable
 
17,566

 
21,968

Accrued expenses and other current liabilities
 
265,631

 
251,989

Total current liabilities
 
621,945

 
865,175

Deferred income tax liabilities
 
410,019

 
390,490

Pension and other post-retirement benefit obligations
 
34,518

 
34,314

Capital lease and other financing obligations, less current portion
 
33,255

 
36,219

Long-term debt, net of discount and deferred financing costs, less current portion
 
3,262,409

 
3,264,333

Other long-term liabilities
 
34,610

 
39,803

Total liabilities
 
4,396,756

 
4,630,334

Total shareholders’ equity
 
1,854,237

 
1,668,576

Total liabilities and shareholders’ equity
 
$
6,250,993

 
$
6,298,910



7

SENSATA TECHNOLOGIES HOLDING N.V.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
($ in 000s)
 
For the nine months ended
 
 
September 30, 2016
 
September 30, 2015
Cash flows from operating activities:
 
 
 
 
Net income
 
$
195,907

 
$
129,407

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation
 
77,649

 
71,162

Amortization of deferred financing costs and original issue discounts
 
5,501

 
4,755

Currency remeasurement gain on debt
 
(66
)
 
(2,082
)
Share-based compensation
 
13,279

 
11,093

Loss on debt financing
 
—

 
25,538

Amortization of inventory step-up to fair value
 
2,319

 
—

Amortization of intangible assets
 
151,572

 
136,068

Deferred income taxes
 
15,706

 
11,237

Unrealized loss on hedges and other non-cash items
 
726

 
13,541

Changes in operating assets and liabilities, net of effects of acquisitions
 
(66,242
)
 
(37,006
)
Net cash provided by operating activities
 
396,351

 
363,713

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Acquisition of CST, net of cash received
 
4,688

 
—

Acquisition of Schrader, net of cash received
 
—

 
(958
)
Other acquisitions, net of cash received
 
—

 
3,881

Additions to property, plant and equipment and capitalized software
 
(94,584
)
 
(130,243
)
Investment in equity securities
 
(50,000
)
 
—

Proceeds from the sale of assets
 
751

 
102

Net cash used in investing activities
 
(139,145
)
 
(127,218
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from exercise of stock options and issuance of ordinary shares
 
3,306

 
15,361

Proceeds from issuance of debt
 
—

 
1,795,120

Payments on debt
 
(297,698
)
 
(1,970,685
)
Payments to repurchase ordinary shares
 
(4,672
)
 
(50
)
Payments of debt issuance costs
 
(518
)
 
(29,361
)
Net cash used in financing activities
 
(299,582
)
 
(189,615
)
Net change in cash and cash equivalents
 
(42,376
)
 
46,880

Cash and cash equivalents, beginning of period
 
342,263

 
211,329

Cash and cash equivalents, end of period
 
$
299,887

 
$
258,209


8

Revenue by Business, Geography and End Market (Unaudited)

(% of total net revenue)
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Performance Sensing
 
74.0
%
 
79.3
%
 
74.5
%
 
78.9
%
Sensing Solutions
 
26.0
%
 
20.7
%
 
25.5
%
 
21.1
%
Total
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%


(% of total net revenue)
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Americas
 
43.7
%
 
42.7
%
 
43.2
%
 
41.1
%
Europe
 
31.1
%
 
33.3
%
 
32.6
%
 
33.6
%
Asia/Rest of World
 
25.2
%
 
24.0
%
 
24.2
%
 
25.3
%
Total
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%


(% of total net revenue)1
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2016
 
2015
 
2016
 
2015
European automotive
 
24.4
%
 
29.3
%
 
25.1
%
 
28.6
%
North American automotive
 
20.6
%
 
22.5
%
 
20.3
%
 
21.7
%
Asian automotive
 
17.5
%
 
16.2
%
 
16.7
%
 
16.9
%
Rest of world automotive
 
0.3
%
 
0.9
%
 
0.3
%
 
0.9
%
Heavy vehicle off-road
 
12.8
%
 
12.1
%
 
13.4
%
 
12.6
%
Appliance and heating, ventilation and air-conditioning
 
6.1
%
 
5.8
%
 
5.8
%
 
6.0
%
Industrial
 
9.1
%
 
5.3
%
 
9.4
%
 
5.3
%
Aerospace
 
4.6
%
 
2.9
%
 
4.6
%
 
2.9
%
All other
 
4.6
%
 
5.0
%
 
4.4
%
 
5.1
%
Total
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%

1 Reclassification of certain acquired product lines has led to retrospective adjustments of certain of end-market percentages. Revenues have shifted from Industrial into the European, North American and Asian automotive end-markets.


9

The following unaudited table reconciles the Company’s net income to adjusted net income for the three and nine months ended September 30, 2016 and 2015.
(In 000s, except per share amounts)
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Net income
 
$
69,785

 
$
53,152

 
$
195,907

 
$
129,407

Restructuring and special charges
 
4,197

 
8,502

 
10,997

 
31,681

Financing and other transaction costs
 
452

 
3,659

 
1,508

 
29,455

Deferred (gain)/loss on other hedges
 
(2,930
)
 
5,576

 
(24,497
)
 
12,038

Depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory
 
52,531

 
46,403

 
158,288

 
140,057

Deferred income tax and other tax expense/(benefit)
 
451

 
4,485

 
16,150

 
11,339

Amortization of deferred financing costs
 
1,823

 
1,524

 
5,501

 
4,755

Total adjustments
 
$
56,524

 
$
70,149

 
$
167,947

 
$
229,325

Adjusted net income
 
$
126,309

 
$
123,301

 
$
363,854

 
$
358,732

Weighted average diluted shares outstanding
 
171,478

 
171,608

 
171,359

 
171,512

Adjusted net income per diluted share
 
$
0.74

 
$
0.72

 
$
2.12

 
$
2.09

The Company’s definition of adjusted net income excludes the deferred provision for/(benefit from) income taxes and other tax expense/(benefit). The Company’s deferred provision for/(benefit from) income taxes includes adjustments for book-to-tax basis differences primarily related to the step-up in fair value of fixed and intangible assets and goodwill, 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 the Company treats deferred income tax and other tax expense/(benefit) as an adjustment to compute adjusted net income, the deferred income tax effect associated with the reconciling items, 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 ($0.1) million for the three months ended September 30, 2016 and 2015, respectively, and ($0.1) million and ($0.4) million for the nine months ended September 30, 2016 and 2015, respectively; and Restructuring and special charges ($0.1) million and ($0.9) million for the three months ended September 30, 2016 and 2015, respectively, and ($0.4) million and ($2.0) million for the nine months ended September 30, 2016 and 2015, respectively.

10

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, 2016 and 2015.

($ in 000s)
 
Three months ended September 30,
Nine months ended September 30,
 
 
2016
 
2015
2016
 
2015
Cost of revenue
 
$
5,938

 
$
8,654

$
12,862

 
$
31,980

Selling, general and administrative
 
1,158

 
5,420

3,878

 
11,322

Amortization of intangible assets
 
49,016

 
43,839

147,214

 
132,174

Restructuring and special charges
 
268

 
651

1,972

 
10,596

Interest expense, net
 
1,823

 
1,524

5,501

 
4,755

Other, net
 
(2,130
)
 
5,576

(19,630
)
 
32,159

Provision for income taxes
 
451

 
4,485

16,150

 
6,339

Total adjustments
 
$
56,524

 
$
70,149

$
167,947

 
$
229,325

The following unaudited table reconciles the Company’s net cash provided by operating activities to free cash flow.
($ in 000s)
 
Three months ended September 30,
Nine months ended September 30,
 
 
2016
 
2015
2016
 
2015
Net cash provided by operating activities
 
$
149,720

 
$
151,514

$
396,351

 
$
363,713

Additions to property, plant and equipment and capitalized software
 
(30,118
)
 
(43,442
)
(94,584
)
 
(130,243
)
Free cash flow
 
$
119,602

 
$
108,072

$
301,767

 
$
233,470


11

The following unaudited table reconciles the Company’s diluted net income per share to organic earnings growth. The amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not foot due to the effects of rounding.
 
 
Three months ended September 30,
 
 
2016
 
2015
 
 
 
 
 
Diluted net income per share
 
$
0.41

 
$
0.31

Non-GAAP adjustments:
 
 
 
 
Restructuring and special charges
 
0.02

 
0.05

Financing and other transaction costs
 
0.00

 
0.02

Deferred (gain)/loss on other hedges
 
(0.02
)
 
0.03

Depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory
 
0.31

 
0.27

Deferred income tax expense and other tax expense/(benefit)
 
0.00

 
0.03

Amortization of deferred financing costs
 
0.01

 
0.01

Adjusted net income per share
 
0.74

 
0.72

 
 
 
 
 
Percentage change in adjusted earnings per share
 
2.8
 %
 
 
Non-GAAP adjustments:
 
 
 
 
Effects of foreign currency exchange movements
 
(6.9
)%
 
 
Acquisitions, net of exited businesses that occurred within the previous 12 months
 
(1.4
)%
 
 
Organic earnings growth
 
11.1
 %
 




12

The following unaudited table reconciles the Company’s projected GAAP earnings per diluted share to projected adjusted net income per diluted share for the three months ended December 31, 2016 and full year ended December 31, 2016. The amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not add due to the effect of rounding.
 
 
Three months ended December 31, 2016
 
Full year ended December 31, 2016
 
 
Low End
 
High End
 
Low End
 
High End
 
 
 
 
 
 
 
 
 
Projected GAAP earnings per diluted share
 
$
0.33

 
$
0.38

 
$
1.48

 
$
1.53

Restructuring and special charges
 
0.01

 
0.02

 
0.07

 
0.08

Financing and other transaction costs
 
—

 
—

 
0.01

 
0.01

Deferred (gain)/loss on other hedges
 
—

 
—

 
(0.14
)
 
(0.14
)
Depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory
 
0.30

 
0.30

 
1.22

 
1.22

Deferred income tax and other tax expense/(benefit)
 
0.06

 
0.06

 
0.16

 
0.16

Amortization of deferred financing costs
 
0.01

 
0.01

 
0.04

 
0.04

Projected Adjusted net income per diluted share
 
$
0.71

 
$
0.77

 
$
2.84

 
$
2.90

Weighted average diluted shares outstanding
 
171,600

 
171,600

 
171,400

 
171,400



# # #
Contacts:
 
 
 
 
 
Investors:
 
Media:
Joshua Young
 
Alexia Taxiarchos
(508) 236-2196
 
(508) 236-1761
 


13

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