10-QPeriod: Q3 FY2012

TE Connectivity plc Quarterly Report for Q3 Ended Jun 29, 2012

Filed July 26, 2012For Securities:TEL

Summary

TE Connectivity Ltd. (TEL) reported its fiscal third quarter and nine-month results for the period ending June 29, 2012. The company experienced a slight decrease in net sales year-over-year for both the quarter and the nine-month period, primarily driven by softness in the Communications and Industrial Solutions and Network Solutions segments, partially offset by growth in Transportation Solutions. A significant event during the period was the acquisition of Deutsch Group SAS in April 2012, which expanded TE Connectivity's product portfolio and market reach, particularly in harsh environment applications within the Transportation Solutions segment. The company also continued its efforts to streamline operations, including ongoing restructuring and manufacturing simplification initiatives. Financially, the company navigated a complex environment marked by global economic uncertainties and foreign currency fluctuations, which negatively impacted reported sales. Despite these headwinds, TE Connectivity demonstrated resilience, with improvements in certain operational metrics and a focus on managing costs and capital resources. The company also completed the divestiture of its Touch Solutions and TE Professional Services businesses, classifying them as discontinued operations. Management provided an outlook for the fourth quarter and full fiscal year 2012, anticipating continued challenges in some segments but expecting benefits from the Deutsch acquisition.

Financial Statements
Beta

Key Highlights

  • 1Net sales for the quarter ended June 29, 2012 decreased by 2.2% to $3,499 million compared to the prior year period, with organic net sales down 3.1%.
  • 2Acquisition of Deutsch Group SAS completed on April 3, 2012, contributing $174 million in net sales for the quarter and significantly expanding the Transportation Solutions segment.
  • 3Operating income for the quarter decreased to $371 million from $460 million in the prior year, impacted by acquisition-related charges (amortization of fair value adjustments, integration costs, and restructuring).
  • 4The company divested its Touch Solutions and TE Professional Services businesses, classifying them as discontinued operations.
  • 5For the first nine months of fiscal 2012, net sales decreased by 1.1% to $9,918 million, with organic net sales down 2.5%.
  • 6Free cash flow for the first nine months of fiscal 2012 was $865 million, an increase from $802 million in the prior year period.
  • 7The company provided an outlook for the fourth quarter of fiscal 2012, expecting net sales between $3.325 billion and $3.425 billion and diluted EPS between $0.64 and $0.68.

Frequently Asked Questions

The acquisition of Deutsch Group SAS on April 3, 2012, significantly impacted the results. Deutsch contributed $174 million in net sales for the fiscal third quarter of 2012 and $174 million for the first nine months. However, it also resulted in $68 million in amortization of acquisition-accounting related fair value adjustments, $15 million in acquisition and integration costs for the quarter, and $11 million in restructuring charges for the quarter, totaling $94 million in acquisition-related charges impacting operating income for the quarter.

Net sales decreased in the Communications and Industrial Solutions segment (-11.7% for the quarter) and the Network Solutions segment (-12.6% for the quarter). The Transportation Solutions segment showed growth, increasing by 12.7% for the quarter, largely driven by organic growth and the contribution from the Deutsch acquisition.

TE Connectivity expects net sales for the fourth quarter of fiscal 2012 to be between $3.325 billion and $3.425 billion. Diluted earnings per share for the fourth quarter are projected to be in the range of $0.64 to $0.68. For the full fiscal year 2012, net sales are expected to be between $13.25 billion and $13.35 billion, with diluted EPS in the range of $2.41 to $2.45.

Yes, TE Connectivity sold its Touch Solutions business and its TE Professional Services business. These businesses have been classified as discontinued operations in the financial statements for all periods presented.