10-QPeriod: Q3 FY2015

TE Connectivity plc Quarterly Report for Q3 Ended Jun 26, 2015

Filed July 23, 2015For Securities:TEL

Summary

TE Connectivity plc (TEL) reported its financial results for the fiscal quarter and nine months ended June 26, 2015. The company demonstrated modest net sales growth, driven by its Transportation Solutions and Communications Solutions segments, while Industrial Solutions faced headwinds. A significant event during the period was the acquisition of Measurement Specialties, Inc. for approximately $1.7 billion, which is expected to enhance TE's sensor offerings. Operationally, the company is managing costs effectively, with selling, general, and administrative expenses remaining largely flat year-over-year. However, research, development, and engineering expenses saw an increase due to acquisitions and growth initiatives. Investors should note the ongoing restructuring efforts aimed at improving efficiency, as well as the ongoing divestiture of the Broadband Network Solutions (BNS) business, which is expected to close in calendar 2015. The company also continues its share repurchase program and dividend payments, reflecting a commitment to returning value to shareholders.

Financial Highlights

56 data points
Beta

Revenue

$3.12B

33.6% Gross Margin

Net Income

$309.00M

9.9% Net Margin

EPS (Diluted)

$0.75

Total Assets

$20.44B

Cash & Equivalents

$701.00M

Free Cash Flow

$462.00M

Financial Statements
Beta
Revenue$3.12B
Cost of Revenue$2.07B
Gross Profit$1.05B
SG&A Expenses$393.00M
Operating Income$469.00M
Interest Expense$33.00M
Net Income$309.00M
EPS (Basic)$0.76
EPS (Diluted)$0.75
Shares Outstanding (Basic)406.00M
Shares Outstanding (Diluted)412.00M

Key Highlights

  • 1Net sales for the quarter increased by 1.4% to $3.12 billion, driven by strength in Transportation and Communications Solutions.
  • 2The company acquired Measurement Specialties, Inc. for approximately $1.7 billion, enhancing its sensor capabilities, primarily within the Transportation Solutions segment.
  • 3Organic net sales growth was positive at 4.2% for the quarter, indicating underlying business expansion excluding currency and acquisition impacts.
  • 4Operating income for the quarter was $469 million, largely consistent with the prior year's $464 million, showing stable profitability despite some segment pressures.
  • 5The company continues to actively repurchase shares, with $3.3 billion remaining under its authorization, and paid a quarterly dividend of $0.33 per share.
  • 6TE Connectivity is in the process of divesting its Broadband Network Solutions (BNS) business, which is expected to close in calendar 2015.

Frequently Asked Questions

Revenue growth was primarily driven by the Transportation Solutions segment, benefiting from increased sales in the automotive end market, and the Communications Solutions segment, largely due to a significant increase in subsea communications project activity.

The acquisition of Measurement Specialties, completed in October 2014, contributed $143 million in net sales for the quarter and $406 million for the nine-month period. It also resulted in increased acquisition and integration costs and added $1.07 billion in goodwill to the balance sheet.

TE Connectivity has entered into a definitive agreement to sell its BNS business for $3.0 billion, subject to a working capital adjustment. The transaction is expected to close during calendar 2015, pending regulatory approvals and customary closing conditions.

The company is appealing a court verdict of $126 million related to a contingent purchase price commitment for its former Wireless Systems business. Additionally, there are ongoing tax matters related to pre-separation transactions with Tyco International and Covidien, which could have a material impact depending on the outcome of IRS audits and tax court proceedings.