10-QPeriod: Q3 FY2017

TE Connectivity plc Quarterly Report for Q3 Ended Jun 30, 2017

Filed July 26, 2017For Securities:TEL

Summary

TE Connectivity Ltd. (TEL) reported strong financial performance for the nine months ended June 30, 2017. Net sales increased by 8.4% year-over-year to $9.66 billion, driven by solid growth across all three reporting segments: Transportation Solutions, Industrial Solutions, and Communications Solutions. Organic net sales, excluding the impact of currency fluctuations and acquisitions/divestitures, grew by 7.7%. The company demonstrated improved profitability, with gross margin expanding to 34.3% and operating income rising to $1.495 billion. This robust performance reflects effective cost management, higher volumes, and benefits from recent acquisitions, partially offset by price erosion and currency headwinds. The company maintained a healthy cash flow from operations, generating $1.448 billion in the nine-month period. TE Connectivity also continued to return capital to shareholders through dividends and share repurchases, with $716 million remaining under its share repurchase authorization. Looking ahead, TE Connectivity provided an outlook for the fourth quarter and full fiscal year 2017, anticipating continued net sales growth, albeit with some segment-specific expectations for deceleration in the fourth quarter due to comparability with the prior year's extra week. The company remains focused on innovation and operational efficiency to drive future performance.

Financial Highlights

53 data points
Beta

Revenue

$3.10B

34.2% Gross Margin

Net Income

$435.00M

14.1% Net Margin

EPS (Diluted)

$1.22

Total Assets

$18.52B

Cash & Equivalents

$755.00M

Free Cash Flow

$360.00M

Financial Statements
Beta
Revenue$3.10B
Cost of Revenue$2.23B
Gross Profit$1.06B
SG&A Expenses$408.00M
Operating Income$544.00M
Interest Expense$32.00M
Net Income$435.00M
EPS (Basic)$1.23
EPS (Diluted)$1.22
Shares Outstanding (Basic)355.00M
Shares Outstanding (Diluted)358.00M

Key Highlights

  • 1Net sales for the nine months ended June 30, 2017, increased 8.4% to $9.657 billion compared to $8.906 billion in the prior year period.
  • 2Gross margin improved to 34.3% for the nine months ended June 30, 2017, up from 32.9% in the prior year period, indicating better cost control and pricing power.
  • 3Operating income for the nine months increased by $110 million to $1.495 billion, driven by sales growth and improved gross margins, though offset by higher SG&A and restructuring charges.
  • 4Net cash provided by operating activities for the nine months was strong at $1.448 billion, demonstrating healthy cash generation capabilities.
  • 5The Transportation Solutions segment showed robust growth, with net sales up 9.0% year-over-year for the nine-month period, driven by automotive and commercial transportation markets.
  • 6The company announced a new restructuring program in fiscal 2017, impacting all segments, with expected annualized cost savings of approximately $145 million.
  • 7TE Connectivity continued to return capital to shareholders, with $386 million in share repurchases and $405 million in dividend payments during the first nine months of fiscal 2017.

Frequently Asked Questions

For the third quarter ended June 30, 2017, TE Connectivity's net sales increased by 7.9% to $3.367 billion compared to $3.121 billion in the prior year. For the first nine months ended June 30, 2017, net sales grew by 8.4% to $9.657 billion compared to $8.906 billion in the prior year. Organic net sales growth was 8.3% for the quarter and 7.7% for the nine-month period.

Profitability was driven by higher sales volumes and improved gross margins, which increased from 32.7% to 33.8% in the third quarter and from 32.9% to 34.3% in the nine-month period. These improvements were partially offset by increased selling, general, and administrative expenses and restructuring charges.

TE Connectivity generated strong operating cash flow, with $1.448 billion for the first nine months of fiscal 2017. The company made capital expenditures of $452 million for property, plant, and equipment, acquired businesses for $77 million, and continued to return capital to shareholders through $405 million in dividend payments and $386 million in share repurchases. The company has $716 million remaining under its share repurchase authorization and maintains a $1.5 billion unsecured senior revolving credit facility.

TE Connectivity expects net sales for the fourth quarter of fiscal 2017 to be between $3.2 billion and $3.3 billion. For the full fiscal year 2017, net sales are expected to be between $12.85 billion and $12.95 billion. Diluted earnings per share from continuing operations are projected to be in the range of $4.54 to $4.56 for the full year. The outlook anticipates sales declines in certain segments in Q4 due to comparisons with the prior year's additional week and currency impacts.