01—Abstract
Summary
Summary of the 10-K filed November 13, 2018. Cited figures are marked; the original filing is the authoritative source.
TE Connectivity Ltd. (TEL) reported strong performance in its fiscal year 2018, concluding on September 27, 2018.
The company experienced a significant increase in net sales, up 14.8% year-over-year to $13.99 billiona, driven by broad-based growth across all three segments: Transportation Solutions, Industrial Solutions, and Communications Solutions. Organic net sales, excluding currency fluctuations and acquisitions/divestitures, grew by a healthy 9.2%, indicating robust underlying business performance. The Transportation Solutions segment remains the largest contributor, with a 17.8% increase in net sales, largely fueled by the automotive market and content gains from acquisitions.
The Industrial Solutions segment saw a 10.0%b increase, supported by strong performance in industrial equipment and contributions from aerospace, defense, and energy markets. The Communications Solutions segment also posted solid growth of 12.4%, driven by demand in data and devices and appliances. The company also highlighted its commitment to shareholder returns, with increased dividend payments and an active share repurchase program.
Looking ahead, TE Connectivity provided an outlook for fiscal year 2019 anticipating moderate growth, though acknowledging potential headwinds from foreign currency exchange rates and moderating automotive production. Overall, the 2018 report demonstrates a company with diversified revenue streams, a strong market position, and a focus on profitable growth.
02—Key points
Key Highlights
- Net sales increased by 14.8% to $13.99 billion in fiscal year 2018, driven by growth in all segments.
- Organic net sales grew by 9.2%, indicating strong underlying business performance across segments.
- Transportation Solutions segment was the largest contributor to net sales, increasing by 17.8%, with notable growth in automotive.
- Industrial Solutions segment saw a 10.0% net sales increase, driven by industrial equipment and aerospace/defense markets.
- Communications Solutions segment increased net sales by 12.4%, benefiting from data/devices and appliances markets.
- The company declared dividends of $1.76 per share for fiscal year 2018 and continued its share repurchase program.
- The company announced an agreement to sell its Subsea Communications (SubCom) business for $325 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, TE Connectivity plc kept $0.18.
- Revenue$13.99B100.0%
- Cost of revenue−$9.24B66.1%
- Gross profit$4.75B33.9%
- Operating costs−$2.41B17.3%
- Operating income$2.33B16.7%
- Interest, other & tax$234.0M1.7%
- Net income$2.56B18.3%
Where FY2018 revenue went
$13.99B- Cost of revenue: $9.24B, 66% of revenue
- Operating income: $2.33B, 17% of revenue
- R&D: $606.0M, 4.3% of revenue
- SG&A: $1.59B, 11% of revenue
- Other operating costs: $214.0M, 1.5% of revenue
Kept 17% as operating incomeOther operating costs $214.0M · 1.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed November 13, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $13.99B$12.19B | +14.8% |
| Cost of Revenue | $9.24B$8.00B | +15.5% |
| Gross Profit | $4.75B$4.18B | +13.4% |
| R&D Expenses | $606.00M$548.00M | +10.6% |
| SG&A Expenses | $1.59B$1.54B | +3.3% |
| Operating Income | $2.33B$1.88B | +24.3% |
| Interest Expense | $107.00M$130.00M | −17.7% |
| Net Income | $2.56B$1.68B | +52.4% |
| EPS (Basic) | $7.33$4.74 | +54.6% |
| EPS (Diluted) | $7.27$4.70 | +54.7% |
| Shares Outstanding (Basic) | 350.00M355.00M | −1.4% |
| Shares Outstanding (Diluted) | 353.00M358.00M | −1.4% |
05—Questions
Frequently Asked Questions
What were the main drivers of TE Connectivity's revenue growth in fiscal year 2018?
TE Connectivity's revenue growth in fiscal year 2018 was driven by a combination of organic growth across its three segments (Transportation, Industrial, and Communications Solutions), the positive impact of foreign currency translation, and contributions from acquisitions. Specifically, the automotive sector within Transportation Solutions, industrial equipment within Industrial Solutions, and data and devices within Communications Solutions were key contributors.
How did the company manage its costs and profitability?
The company managed its costs through continuous productivity improvements and restructuring initiatives aimed at optimizing its global manufacturing footprint. Despite price erosion in some markets, gross margin as a percentage of net sales remained strong at 33.9% in fiscal 2018. Operating income increased by 24.3% year-over-year, demonstrating effective cost management alongside revenue growth.
What is the company's outlook for fiscal year 2019, and what are the key factors influencing it?
For fiscal year 2019, TE Connectivity projected net sales between $13.9 billion and $14.3 billion, indicating moderate growth. Key factors influencing the outlook include expected sales increases in the sensors end market (Transportation Solutions), industrial equipment (Industrial Solutions), and data and devices (Communications Solutions). However, the company anticipates headwinds from negative foreign currency exchange rates and a projected decline in global automotive production, which are expected to impact overall results.
What significant divestiture did TE Connectivity announce in fiscal year 2018?
In fiscal year 2018, TE Connectivity entered into a definitive agreement to sell its Subsea Communications (SubCom) business for $325 million. This business was classified as held for sale and reported as a discontinued operation.
06—Continue