10-QPeriod: Q2 FY2018

TE Connectivity plc Quarterly Report for Q2 Ended Mar 30, 2018

Filed April 25, 2018For Securities:TEL

Summary

TE Connectivity Ltd. (TEL) reported strong financial performance for the second quarter and the first six months of fiscal year 2018, ending March 30, 2018. Net sales increased significantly year-over-year, driven by robust growth in the Transportation Solutions and Industrial Solutions segments. This growth was supported by both organic expansion and favorable foreign currency exchange rates. The company also demonstrated solid operational efficiency, with operating income improving substantially, reflecting higher volumes and effective cost management. Despite some localized challenges, such as production delays in the Subsea Communications business, the overall outlook for fiscal 2018 remains positive, with projected sales and earnings per share increases. Financially, TE Connectivity maintained a healthy cash flow from operations and managed its debt effectively, including repaying a significant portion of its senior notes. The company also continued its commitment to shareholder returns through dividends and an active share repurchase program. Management expressed confidence in the company's ability to fund its ongoing operations and strategic initiatives, signaling resilience and a positive trajectory for the remainder of the fiscal year.

Financial Highlights

52 data points
Beta

Revenue

$3.56B

34.0% Gross Margin

Net Income

$490.00M

13.8% Net Margin

EPS (Diluted)

$1.38

Total Assets

$19.25B

Cash & Equivalents

$559.00M

Free Cash Flow

$175.00M

Financial Statements
Beta
Revenue$3.56B
Cost of Revenue$2.35B
Gross Profit$1.21B
SG&A Expenses$409.00M
Operating Income$621.00M
Interest Expense$28.00M
Net Income$490.00M
EPS (Basic)$1.40
EPS (Diluted)$1.38
Shares Outstanding (Basic)351.00M
Shares Outstanding (Diluted)354.00M

Key Highlights

  • 1Net sales grew by 16.1% to $3.75 billion in Q2 FY18 and by 14.9% to $7.23 billion in the first six months of FY18 compared to the prior year periods.
  • 2Transportation Solutions segment showed robust growth, with net sales increasing by 21.6% in Q2 FY18 and 21.5% in the first six months, driven by strong performance in the automotive and commercial transportation markets.
  • 3Industrial Solutions segment also experienced significant growth, with net sales up 14.0% in Q2 FY18 and 12.5% in the first six months, primarily due to increased sales in industrial equipment.
  • 4Operating income increased by 29.7% to $624 million in Q2 FY18 and by 23.5% to $1.21 billion in the first six months of FY18, indicating improved profitability.
  • 5The company generated $727 million in net cash from operating activities in the first six months of FY18.
  • 6TE Connectivity actively returned capital to shareholders, with dividend payments of $0.40 per share in Q2 FY18 and $0.80 per share in the first six months, alongside a significant share repurchase program totaling $383 million in the first six months of FY18.

Frequently Asked Questions

Sales growth was primarily driven by strong performance in the Transportation Solutions and Industrial Solutions segments. Organic net sales growth of 6.9% in Q2 FY18 and 7.4% in the first six months of FY18, combined with a positive impact from foreign currency exchange rates (7.3% in Q2 and 5.5% in the first six months) and contributions from acquisitions, fueled the overall increase in net sales.

Transportation Solutions saw substantial growth (21.6% in Q2), led by automotive and commercial transportation. Industrial Solutions also performed well, with sales up 14.0% in Q2, driven by industrial equipment. Communications Solutions experienced more modest growth of 3.2% in Q2, with mixed performance across its sub-markets, including a decline in Subsea Communications due to production delays.

TE Connectivity expects net sales to be between $3.65 billion and $3.7 billion for the third quarter of fiscal 2018. For the full fiscal year 2018, net sales are projected to be between $14.5 billion and $14.7 billion. Diluted earnings per share from continuing operations are expected to be in the range of $3.70 to $3.76 for the full year.

The company generated $727 million in operating cash flow in the first six months of fiscal 2018. TE Connectivity repaid $708 million of senior notes and has access to a $1.5 billion revolving credit facility. They are actively managing capital expenditures, which are expected to be around 6% of net sales for fiscal 2018, and are committed to returning capital to shareholders through dividends and share repurchases.