10-KPeriod: FY2008

TE Connectivity plc Annual Report, Year Ended Sep 26, 2008

Filed November 20, 2008For Securities:TEL

Summary

TE Connectivity plc (formerly Tyco Electronics Ltd.) reported its fiscal year 2008 results, highlighting strong organic sales growth across most segments despite a challenging global economic environment. The company demonstrated resilience with a 7.9% organic net sales increase, driven by robust performance in its Undersea Telecommunications and Wireless Systems segments, and a solid 2.4% organic growth in Electronic Components. The company's diversified product portfolio and customer base across various end markets, including automotive, telecommunications, and industrial sectors, helped mitigate some of the economic headwinds. Despite the overall positive operational trends, the company faced significant headwinds from increased restructuring charges related to manufacturing footprint simplification, impairment charges in its Electronic Components segment, and ongoing legacy litigation settlements inherited from its separation from Tyco International. The company ended the fiscal year with a solid balance sheet and a strong cash flow from operations, underscoring its financial stability. Looking ahead, management expressed anticipation of a near-term slowdown, particularly in consumer-related end markets and automotive, but remained optimistic about long-term growth driven by innovation and strategic market penetration.

Financial Highlights

57 data points
Beta

Revenue

$14.37B

29.0% Gross Margin

Net Income

$1.69B

11.7% Net Margin

EPS (Diluted)

$3.47

Total Assets

$21.41B

Cash & Equivalents

$1.09B

Free Cash Flow

$379.00M

Financial Statements
Beta
Revenue$14.37B
Cost of Revenue$10.20B
Gross Profit$4.17B
R&D Expenses$482.00M
SG&A Expenses$1.57B
Operating Income$1.66B
Interest Expense$190.00M
Net Income$1.69B
EPS (Basic)$3.49
EPS (Diluted)$3.47
Shares Outstanding (Basic)483.00M
Shares Outstanding (Diluted)486.00M

Key Highlights

  • 1Achieved a 7.9% organic net sales growth in fiscal year 2008, demonstrating underlying business strength.
  • 2Undersea Telecommunications and Wireless Systems segments showed particularly strong organic growth (106.2% and 18.0%, respectively).
  • 3Electronic Components segment, the largest contributor to revenue, grew organically by 2.4%, with notable strength in industrial and communications markets.
  • 4Faced significant restructuring charges of $185 million and goodwill/long-lived asset impairment charges of $137 million, impacting profitability.
  • 5Successfully completed the sale of the Radio Frequency Components and Subsystem and Automotive Radar Sensors businesses, realizing gains.
  • 6Maintained a strong liquidity position with $1,014 million in net cash provided by continuing operating activities.
  • 7Continued share repurchase program, with approximately $1.24 billion repurchased in fiscal 2008.

Frequently Asked Questions

In fiscal year 2008, TE Connectivity reported net sales of $14.83 billion, an increase of 14.5% (or 7.9% organically) compared to fiscal year 2007. The company generated income from operations of $1.75 billion, but reported a net income of $1.78 billion, which was positively impacted by a $567 million gain related to tax sharing agreements and the divestiture of certain businesses. However, this was offset by significant restructuring charges ($185 million) and impairment charges ($137 million).

TE Connectivity acknowledged the challenging global economic environment and its potential impact on customer demand. The company specifically noted an anticipated 15-20% decrease in net sales for the first quarter of fiscal 2009 compared to the prior year, primarily due to slowing demand in consumer-related end markets and the automotive sector. The automotive market experienced a significant downturn, with major manufacturers reducing production forecasts.

The company incurred $185 million in restructuring and other charges, primarily related to migrating manufacturing to low-cost countries and exiting certain operations to simplify its footprint. Additionally, $137 million in impairment charges were recorded, mainly in the Electronic Components segment due to slower-than-expected growth and profitability in a reporting unit. These charges reflect the company's efforts to optimize its operations and cost structure in response to market dynamics.

TE Connectivity's strategy focuses on leveraging its market leadership to increase market share, achieving leadership in attractive and under-penetrated industries, extending leadership in emerging markets, pursuing strategic acquisitions, focusing its portfolio through divestitures, improving operating margins, and accelerating new product development through R&D excellence. The company plans to continue migrating manufacturing to low-cost countries and expects to incur up to $200 million in restructuring charges from fiscal 2009 through 2010 to support these initiatives.