10-QPeriod: Q3 FY2008

TE Connectivity plc Quarterly Report for Q3 Ended Jun 27, 2008

Filed August 1, 2008For Securities:TEL

Summary

TE Connectivity Ltd. (TEL) reported robust financial performance for the fiscal quarter ending June 27, 2008, demonstrating significant year-over-year growth. Net sales surged by 18.7% to $3.91 billion, driven by strong organic growth across all segments, particularly in Undersea Telecommunications and Wireless Systems. The company also saw a substantial increase in operating income to $537 million from a loss in the prior year, reflecting improved operational efficiency and sales leverage. Key financial highlights include a considerable improvement in profitability with gross income rising to $997 million and operating income reaching $537 million. The company effectively managed its selling, general, and administrative expenses, which decreased as a percentage of net sales. While the company is actively managing its restructuring and legal settlement costs, the core business operations are showing strong momentum, indicating a positive trajectory for the company. Investors can take comfort in the substantial top-line growth and the company's ability to convert that growth into significantly improved operating profits.

Financial Highlights

30 data points
Beta

Revenue

$3.78B

29.1% Gross Margin

Net Income

$330.00M

8.7% Net Margin

EPS (Diluted)

$0.68

Cash & Equivalents

$731.00M

Free Cash Flow

-$94.00M

Financial Statements
Beta
Revenue$3.78B
Cost of Revenue$2.68B
Gross Profit$1.10B
SG&A Expenses$409.00M
Operating Income$515.00M
Interest Expense$44.00M
Net Income$330.00M
EPS (Basic)$0.69
EPS (Diluted)$0.68
Shares Outstanding (Basic)478.00M
Shares Outstanding (Diluted)482.00M

Key Highlights

  • 1Net sales increased by 18.7% to $3.91 billion in the third quarter of fiscal 2008 compared to the prior year's quarter.
  • 2Operating income improved significantly to $537 million, a substantial recovery from a loss of $507 million in the same quarter last year.
  • 3Gross income rose by $160 million to $997 million, with gross margin increasing slightly to 25.5%.
  • 4Selling, general, and administrative expenses decreased as a percentage of net sales, from 12.2% to 11.2%, demonstrating operating leverage.
  • 5The Electronic Components segment, the largest contributor, showed strong organic sales growth of 6.1% and a significant increase in operating income.
  • 6The company announced plans to divest its Radio Frequency Components and Subsystem and Automotive Radar Sensors businesses, aiming to streamline operations and focus on core areas.
  • 7Diluted earnings per share were $0.68, a significant improvement from a loss of $2.75 in the prior year's quarter.

Frequently Asked Questions

The primary driver of TE Connectivity's revenue growth was a broad-based increase in net sales, up 18.7% year-over-year, fueled by strong organic growth across all business segments. This growth was further bolstered by favorable foreign currency exchange rates, which positively impacted net sales.

Profitability saw a dramatic improvement. TE Connectivity reported an operating income of $537 million for the quarter, a significant turnaround from an operating loss of $507 million in the same period last year. This was driven by higher sales volumes, improved operational efficiency, and effective cost management.

TE Connectivity is actively managing its portfolio by planning to divest certain businesses, including the Radio Frequency Components and Subsystem and Automotive Radar Sensors businesses. They are also continuing with manufacturing simplification initiatives, which involve migrating facilities to lower-cost countries and consolidating operations. These actions are aimed at improving operating results and utilizing capital more effectively.

The company's financial results for the prior year (Q3 2007) were significantly impacted by an allocated charge of $891 million related to a class action settlement. While this charge negatively affected prior year results, the current quarter's performance shows a strong recovery and growth independent of this historical settlement.