01—Abstract
Summary
Summary of the 10-K filed November 12, 2019. Cited figures are marked; the original filing is the authoritative source.
TE Connectivity Ltd. (TEL) reported for the fiscal year ending September 26, 2019, a year that saw a slight decrease in net sales compared to the prior year, primarily driven by challenges in the Communications Solutions and Transportation Solutions segments.
Despite these headwinds, the company maintained a strong market position across its three core segments: Transportation, Industrial, and Communications Solutions. The company's diversified customer base and global operational footprint provided resilience, though foreign currency fluctuations presented a notable headwind.
Investments in acquisitions, particularly within the Transportation Solutions segment, and a focus on operational efficiency through restructuring initiatives were key strategic elements during the year. TEL continues to emphasize its role as a global industrial technology leader, providing essential connectivity and sensor solutions for a wide range of growing end markets.
02—Key points
Key Highlights
- Net sales decreased by 3.9% to $13.45 billion in fiscal 2019 compared to $13.99 billion in fiscal 2018, with organic net sales declining by 1.7%.
- The Transportation Solutions segment, the largest contributor at 58% of net sales, saw a 5.7% decrease, primarily due to a slowdown in the automotive end market.
- The Industrial Solutions segment showed resilience with a 2.5% increase in net sales, driven by growth in the aerospace, defense, oil, and gas end markets.
- The Communications Solutions segment experienced a significant 9.2% decline in net sales, affected by market weakness in both data and devices and appliance end markets.
- The company completed three acquisitions for a combined $296 million in fiscal 2019, primarily in the Transportation Solutions segment, and announced a pending acquisition of First Sensor AG.
- The company generated $2.45 billion in net cash from operating activities, demonstrating solid cash flow generation despite top-line pressures.
- TE Connectivity continues to return capital to shareholders, repurchasing approximately $1.01 billion of its common shares and paying $608 million in dividends in fiscal 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, TE Connectivity plc kept $0.14.
- Revenue$13.45B100.0%
- Cost of revenue−$9.05B67.3%
- Gross profit$4.39B32.7%
- Operating costs−$2.42B18.0%
- Operating income$1.98B14.7%
- Interest, other & tax−$134.0M1.0%
- Net income$1.84B13.7%
Where FY2019 revenue went
$13.45B- Cost of revenue: $9.05B, 67% of revenue
- Net income: $1.84B, 14% of revenue
- R&D: $572.0M, 4.3% of revenue
- SG&A: $1.49B, 11% of revenue
- Other operating costs: $354.0M, 2.6% of revenue
- Interest, other & tax: $134.0M, 1.0% of revenue
Kept 14% as net incomeOther operating costs $354.0M · 2.6%Interest, other & tax $134.0M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed November 12, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $13.45B$13.99B | −3.9% |
| Cost of Revenue | $9.05B$9.24B | −2.0% |
| Gross Profit | $4.39B$4.75B | −7.4% |
| R&D Expenses | $572.00M$606.00M | −5.6% |
| SG&A Expenses | $1.49B$1.59B | −6.5% |
| Operating Income | $1.98B$2.33B | −15.1% |
| Interest Expense | $68.00M$107.00M | −36.4% |
| Net Income | $1.84B$2.56B | −28.1% |
| EPS (Basic) | $5.46$7.33 | −25.5% |
| EPS (Diluted) | $5.42$7.27 | −25.4% |
| Shares Outstanding (Basic) | 338.00M350.00M | −3.4% |
| Shares Outstanding (Diluted) | 340.00M353.00M | −3.7% |
05—Questions
Frequently Asked Questions
What were the main drivers of TE Connectivity's sales performance in fiscal year 2019?
Sales in fiscal year 2019 decreased by 3.9% to $13.45 billion. This was primarily driven by sales declines in the Communications Solutions and Transportation Solutions segments. The automotive end market within Transportation Solutions saw a notable decrease. However, the Industrial Solutions segment experienced growth, partially offsetting the overall decline.
How did foreign currency exchange rates impact TE Connectivity's financial results?
Foreign currency exchange rates had a negative impact on TE Connectivity's results in fiscal year 2019. Approximately 60% of net sales were invoiced in currencies other than the U.S. dollar. The weakening of certain foreign currencies against the U.S. dollar resulted in a translation impact that reduced net sales by 3.0% ($409 million) and was a factor in the overall sales decrease. The company noted that its outlook for fiscal 2020 also anticipated negative impacts from foreign currency exchange rates.
What is the company's outlook for fiscal year 2020?
TE Connectivity provided an outlook indicating an expected decrease in net sales for fiscal year 2020, projecting sales between $12.7 billion and $13.3 billion, compared to $13.4 billion in fiscal 2019. This outlook anticipates continued sales declines in the Communications Solutions and Transportation Solutions segments due to market weakness. Diluted earnings per share from continuing operations were projected to be in the range of $4.21 to $4.61 for fiscal 2020.
What strategic initiatives did TE Connectivity pursue in fiscal year 2019?
In fiscal 2019, TE Connectivity continued its focus on strategic acquisitions, including three businesses acquired for $296 million and the initiation of a tender offer for First Sensor AG. The company also engaged in restructuring programs aimed at footprint consolidation and structural improvements to enhance competitiveness and operational leverage, incurring $255 million in net restructuring charges. Furthermore, TE Connectivity sold its Subsea Communications (SubCom) business.
06—Continue