01—Abstract
Summary
Summary of the 10-K filed November 10, 2015. Cited figures are marked; the original filing is the authoritative source.
TE Connectivity Ltd. (TEL) for the fiscal year ended September 25, 2015, reported net sales of $12.23 billiona, a 2.2% increase year-over-year, driven by growth in its Transportation Solutions and Communications Solutions segments.
The company's strategic focus remains on designing and manufacturing connectivity and sensor solutions, operating across three core segments: Transportation, Industrial, and Communications. Significant events during the fiscal year included the acquisition of Measurement Specialties, Inc. for approximately $1.7 billionb, and the divestiture of its Broadband Network Solutions (BNS) business for $3.0 billion, resulting in a substantial gain. The company demonstrated strong free cash flow generation and continued its share repurchase program, reflecting a commitment to returning value to shareholders.
Despite overall sales growth, the company experienced negative impacts from foreign currency translation. The Transportation Solutions segment, representing 52%c of net sales, saw organic growth of 4.1%, largely driven by the automotive sector.
The Industrial Solutions segment experienced a slight organic sales decline, while the Communications Solutions segment showed robust organic growth of 8.4%d, primarily due to its subsea communications business. Looking ahead, management provided guidance for fiscal 2016, anticipating continued market weakness in certain areas, particularly China, and ongoing inventory adjustments in the supply chain.
02—Key points
Key Highlights
- Net sales increased by 2.2% to $12.23 billion in fiscal year 2015.
- Acquired Measurement Specialties, Inc. for approximately $1.7 billion to enhance sensor capabilities.
- Divested Broadband Network Solutions (BNS) business for $3.0 billion, recognizing a significant pre-tax gain.
- Transportation Solutions segment, driven by automotive, showed robust organic growth of 4.1%.
- Communications Solutions segment saw strong organic growth of 8.4%, boosted by subsea communications.
- Generated $1.076 billion in free cash flow.
- The company's share repurchase program remained active, with $2.7 billion in remaining authorization as of September 25, 2015.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, TE Connectivity plc kept $0.20.
- Revenue$12.23B100.0%
- Cost of revenue−$8.15B66.6%
- Gross profit$4.09B33.4%
- Operating costs−$2.34B19.1%
- Operating income$1.75B14.3%
- Interest, other & tax$671.0M5.5%
- Net income$2.42B19.8%
Where FY2015 revenue went
$12.23B- Cost of revenue: $8.15B, 67% of revenue
- Operating income: $1.75B, 14% of revenue
- SG&A: $1.50B, 12% of revenue
- R&D: $540.0M, 4.4% of revenue
- Other operating costs: $294.0M, 2.4% of revenue
Kept 14% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed November 10, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $12.23B$11.97B | +2.2% |
| Cost of Revenue | $8.15B$8.00B | +1.8% |
| Gross Profit | $4.09B$3.97B | +2.9% |
| R&D Expenses | $540.00M$484.00M | +11.6% |
| SG&A Expenses | $1.50B$1.53B | −2.0% |
| Operating Income | $1.75B$1.80B | −3.1% |
| Interest Expense | $136.00M$127.00M | +7.1% |
| Net Income | $2.42B$1.78B | +35.9% |
| EPS (Basic) | $5.98$4.34 | +37.8% |
| EPS (Diluted) | $5.89$4.27 | +37.9% |
| Shares Outstanding (Basic) | 405.00M410.00M | −1.2% |
| Shares Outstanding (Diluted) | 411.00M417.00M | −1.4% |
05—Questions
Frequently Asked Questions
What were the key drivers of TE Connectivity's revenue growth in fiscal year 2015?
TE Connectivity's revenue growth in fiscal year 2015 was primarily driven by the strong performance of its Transportation Solutions segment, particularly in the automotive market, and the Communications Solutions segment, notably its subsea communications business. The acquisition of Measurement Specialties also contributed to the overall increase in net sales.
How did the acquisition of Measurement Specialties and the divestiture of BNS impact the company's financial results?
The acquisition of Measurement Specialties added approximately $548 million in net sales during fiscal year 2015 and $1.064 billion in goodwill. The divestiture of the BNS business generated $3.0 billion in cash and resulted in a pre-tax gain of $1.105 billion, significantly boosting net income for the year and reclassifying prior period results as discontinued operations.
What is the company's outlook for fiscal year 2016, and what are the primary concerns?
For fiscal year 2016, TE Connectivity anticipates net sales between $12.0 billion and $12.8 billion. Key concerns include continued market weakness in China, inventory adjustments in the supply chain, and the impact of foreign currency exchange rates. The company expects sales declines in the Industrial and Communications segments, partially offset by growth in the Transportation segment.
How does TE Connectivity manage its financial risks, such as currency fluctuations and commodity prices?
TE Connectivity uses derivative financial instruments, including cross-currency swap contracts, foreign currency forward contracts, and commodity swap contracts, to manage exposures to foreign currency exchange rates and commodity price fluctuations. A portion of these instruments are designated as cash flow hedges to minimize impacts on cash flows and profitability.
06—Continue