10-QPeriod: Q3 FY2014

TE Connectivity plc Quarterly Report for Q3 Ended Jun 27, 2014

Filed July 24, 2014For Securities:TEL

Summary

TE Connectivity Ltd. (TEL) reported strong financial results for the fiscal third quarter and the first nine months of 2014. Net sales saw a notable increase driven by robust performance in the Transportation Solutions segment, particularly in the automotive market across all regions, and growth in Industrial Solutions, especially in aerospace, defense, oil, and gas. While Network Solutions experienced a decline, primarily due to softness in subsea and data communications, overall organic sales demonstrated resilience. The company is strategically expanding its reach with the planned acquisition of Measurement Specialties for approximately $1.7 billion and the recent acquisition of SEACON Group for $452 million, indicating a focus on inorganic growth. Significant restructuring efforts are underway, with planned charges of approximately $65 million for fiscal 2014 to improve efficiency and competitiveness. Despite ongoing global economic uncertainties, TE Connectivity maintains a positive outlook for the remainder of fiscal 2014, projecting continued sales growth and earnings per share within the expected range.

Financial Highlights

56 data points
Beta

Revenue

$3.08B

33.1% Gross Margin

Net Income

$403.00M

13.1% Net Margin

EPS (Diluted)

$0.97

Total Assets

$18.87B

Cash & Equivalents

$1.61B

Free Cash Flow

$336.00M

Financial Statements
Beta
Revenue$3.08B
Cost of Revenue$2.06B
Gross Profit$1.02B
SG&A Expenses$396.00M
Operating Income$464.00M
Interest Expense$28.00M
Net Income$403.00M
EPS (Basic)$0.99
EPS (Diluted)$0.97
Shares Outstanding (Basic)409.00M
Shares Outstanding (Diluted)416.00M

Key Highlights

  • 1Net sales increased by 3.8% year-over-year to $3.58 billion in Q3 fiscal 2014, with organic net sales up 2.6%.
  • 2The Transportation Solutions segment showed strong performance, with net sales up 10.2% year-over-year, driven by automotive demand globally.
  • 3Industrial Solutions also contributed positively, with net sales up 5.7% year-over-year, supported by aerospace, defense, oil, and gas markets.
  • 4The company announced a significant planned acquisition of Measurement Specialties for approximately $1.7 billion, aiming for strategic expansion.
  • 5TE Connectivity recently acquired the SEACON Group for $452 million, enhancing its underwater connector technology offerings.
  • 6Restructuring charges were $14 million in Q3 fiscal 2014, with ongoing initiatives expected to yield annualized cost savings of approximately $30 million.
  • 7Diluted earnings per share for Q3 fiscal 2014 were $0.97, an improvement from $0.80 in the prior year quarter.

Frequently Asked Questions

For the fiscal third quarter of 2014, TE Connectivity reported net sales of $3.58 billion, an increase of 3.8% compared to $3.45 billion in the prior year quarter. Organic net sales grew by 2.6%. For the first nine months of fiscal 2014, net sales were $10.34 billion, up 5.0% from $9.85 billion in the same period of fiscal 2013, with organic net sales increasing by 5.2%. Diluted earnings per share were $0.97 for the quarter, up from $0.80 a year ago.

Revenue growth is primarily driven by the Transportation Solutions segment, which saw a 10.2% increase in net sales due to strong demand in the automotive market across all regions. The Industrial Solutions segment also contributed positively with a 5.7% increase in net sales, boosted by growth in aerospace, defense, oil, and gas markets. These increases were partially offset by declines in the Network Solutions segment.

TE Connectivity is pursuing both organic and inorganic growth. Strategically, the company has entered into an agreement to acquire Measurement Specialties for approximately $1.7 billion, expected to close in calendar year 2014. Additionally, they recently acquired the SEACON Group for $452 million to strengthen their underwater connector technology business.

The company is actively engaged in restructuring initiatives aimed at improving global manufacturing footprint, reducing fixed costs, and eliminating excess capacity. Net restructuring charges were $14 million for the quarter. Total annualized cost savings from fiscal 2014 actions are estimated at $30 million. The company also incurs restructuring charges related to prior year actions.