10-QPeriod: Q1 FY2017

TE Connectivity plc Quarterly Report for Q1 Ended Dec 30, 2016

Filed January 26, 2017For Securities:TEL

Summary

TE Connectivity plc reported a strong first quarter of fiscal year 2017, with net sales increasing by 8.1% to $3.06 billion compared to the prior year period. This growth was driven by robust performance in the Transportation Solutions and Industrial Solutions segments, with organic net sales increasing by 6.6%. The company also saw an improvement in gross margin and operating income. Despite a slight decrease in sales for the Communications Solutions segment, overall profitability and sales momentum were positive. The company maintained a solid cash flow from operations and provided an optimistic outlook for the second quarter and full fiscal year 2017, anticipating continued growth driven by key markets and strategic acquisitions, while also managing potential headwinds from foreign currency fluctuations.

Financial Highlights

51 data points
Beta

Revenue

$2.85B

35.6% Gross Margin

Net Income

$409.00M

14.4% Net Margin

EPS (Diluted)

$1.14

Total Assets

$17.61B

Cash & Equivalents

$665.00M

Free Cash Flow

$274.00M

Financial Statements
Beta
Revenue$2.85B
Cost of Revenue$2.00B
Gross Profit$1.01B
SG&A Expenses$367.00M
Operating Income$495.00M
Interest Expense$31.00M
Net Income$409.00M
EPS (Basic)$1.15
EPS (Diluted)$1.14
Shares Outstanding (Basic)356.00M
Shares Outstanding (Diluted)359.00M

Key Highlights

  • 1Net sales increased by 8.1% to $3.06 billion, driven by strong performance in Transportation and Industrial Solutions.
  • 2Organic net sales grew by 6.6%, indicating healthy underlying business performance.
  • 3Gross margin improved to 34.8% from 33.4% year-over-year, reflecting higher volume and lower material costs.
  • 4Operating income increased by $88 million to $486 million, with an improved operating margin of 15.9%.
  • 5The company generated $404 million in net cash from continuing operating activities.
  • 6TE Connectivity raised its diluted earnings per share outlook for fiscal year 2017 to a range of $0.97 to $1.01 for Q2 and $4.04 to $4.24 for the full year.
  • 7The company is actively managing its capital structure, including $1.0 billion in remaining share repurchase authorization and $1.5 billion revolving credit facility.

Frequently Asked Questions

Sales growth was primarily driven by the Transportation Solutions segment, which saw an 11.1% increase due to strong performance in the Automotive market, and the Industrial Solutions segment, which grew 12.1% driven by acquisitions and strength in the Industrial Equipment market. Organic growth across these segments, combined with contributions from acquisitions, fueled the overall increase.

The Communications Solutions segment experienced a 3.9% decrease in net sales, largely due to the divestiture of the Circuit Protection Devices (CPD) business and a decline in the subsea communications market. However, organic growth was positive at 2.5%, driven by the Appliances market. The outlook for this segment anticipates continued sales declines in the Data and Devices market due to the CPD divestiture, partially offset by growth in Appliances and Subsea Communications.

The company provided a positive outlook, expecting net sales between $3.025 billion and $3.125 billion for the second quarter of fiscal 2017. For the full fiscal year 2017, net sales are projected to be between $12.2 billion and $12.6 billion. Diluted earnings per share from continuing operations are expected to be in the range of $0.97 to $1.01 for Q2 and $4.04 to $4.24 for the full year. This outlook accounts for potential negative impacts from foreign currency exchange rates.

TE Connectivity demonstrated strong operating cash flow generation. The company has a substantial $1.0 billion remaining under its share repurchase authorization and a $1.5 billion revolving credit facility, indicating robust liquidity. Total debt remained stable, and the company was in compliance with all debt covenants, suggesting a stable financial position.