10-QPeriod: Q1 FY2016

TE Connectivity plc Quarterly Report for Q1 Ended Dec 25, 2015

Filed January 22, 2016For Securities:TEL

Summary

TE Connectivity Ltd. (TEL) reported a decrease in net sales for the first quarter of fiscal 2016, with a 7.1% decline compared to the prior year, primarily driven by the negative impact of foreign currency translation. On an organic basis, net sales saw a 1.8% decrease, with notable declines in the Industrial Solutions and Communications Solutions segments. However, the Transportation Solutions segment showed slight organic growth. The company's operating income also experienced a decline, impacted by lower sales volumes and foreign currency headwinds. Despite these challenges, TE Connectivity highlighted improvements in operating margin for the Communications Solutions segment. The company continued its strategic divestiture efforts with an agreement to sell its Circuit Protection Devices (CPD) business. Cash flow from operations showed improvement, with net cash provided by continuing operating activities increasing significantly due to better accounts receivable collections, leading to a substantial rise in free cash flow. The company also continued its share repurchase program and paid dividends, indicating a focus on returning capital to shareholders while managing its debt levels and liquidity.

Financial Highlights

52 data points
Beta

Revenue

$2.83B

33.4% Gross Margin

Net Income

$353.00M

12.5% Net Margin

EPS (Diluted)

$0.91

Total Assets

$19.22B

Cash & Equivalents

$2.22B

Free Cash Flow

$251.00M

Financial Statements
Beta
Revenue$2.83B
Cost of Revenue$1.89B
Gross Profit$945.00M
SG&A Expenses$340.00M
Operating Income$398.00M
Interest Expense$30.00M
Net Income$353.00M
EPS (Basic)$0.92
EPS (Diluted)$0.91
Shares Outstanding (Basic)385.00M
Shares Outstanding (Diluted)390.00M

Key Highlights

  • 1Net sales decreased by 7.1% year-over-year to $2.83 billion, largely due to foreign currency translation effects.
  • 2Organic net sales declined by 1.8%, with the Industrial Solutions (-6.3%) and Communications Solutions (-3.0%) segments experiencing notable decreases, while Transportation Solutions saw a modest increase of 0.9%.
  • 3Operating income fell to $398 million from $425 million in the prior year's comparable quarter.
  • 4The company is proceeding with the planned divestiture of its Circuit Protection Devices (CPD) business.
  • 5Net cash provided by continuing operating activities increased significantly to $367 million from $205 million in the prior year.
  • 6Free cash flow improved to $237 million from $79 million in the prior year's comparable quarter.
  • 7The company repurchased approximately 20.8 million shares for $1.3 billion during the quarter.

Frequently Asked Questions

The primary driver for the decrease in net sales was the negative impact of foreign currency translation, which reduced net sales by 6.0%. Organic net sales also declined by 1.8%.

Transportation Solutions saw a slight organic sales increase of 0.9%, driven by automotive and sensors. Industrial Solutions experienced a 6.3% organic sales decline due to weakness in aerospace, defense, oil, and gas markets. Communications Solutions' organic sales decreased by 3.0%, primarily due to declines in data and devices and appliance end markets.

For the second quarter of fiscal 2016, TE Connectivity expects net sales between $2.88 billion and $3.08 billion and diluted EPS between $0.78 and $0.86. For the full fiscal year 2016, net sales are projected to be between $11.9 billion and $12.7 billion, with diluted EPS in the range of $3.66 to $4.06.

TE Connectivity has entered into an agreement to sell its Circuit Protection Devices (CPD) business for $350 million, with the transaction expected to close in the second quarter of fiscal 2016.