- Sales Up 4 Percent; GAAP EPS Up 34 Percent; Adjusted EPS Up 20 Percent
- Company Announces Divestiture of Broadband Network Solutions for $3.0 Billion
TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal first quarter ended December 26, 2014.
First Quarter Highlights
- Net sales increased to $3.47 billion, up 4 percent versus the prior year and up 3 percent organically
- Adjusted Earnings Per Share (EPS) were $0.98, up 20 percent versus the prior year and above the high end of the guidance range
- Diluted Earnings Per Share from Continuing Operations (GAAP EPS) were $1.14
- Sales from harsh environment applications increased 10 percent over the prior year
- Recent sensor acquisitions closed and performing ahead of plan
- Recognized as a Thomson Reuters 2014 Top 100 Global Innovator for fourth consecutive year
- Board of Directors recommended a fifth consecutive double-digit percentage increase in the annual dividend, subject to shareholder approval at the annual general meeting on March 3, 2015
"We are off to a very good start in the first quarter, with revenues up 4 percent, adjusted operating margins at record levels and EPS exceeding the high end of our guidance range," said Tom Lynch, TE Connectivity Chairman and CEO. "Our performance was led by our businesses focused on highly engineered harsh environment applications, which include automotive, commercial transportation, commercial aerospace and appliances. Sales from harsh environment businesses grew 10 percent over last year. These businesses also continued to drive content growth with their customers by leveraging TE's unmatched range of connectivity and sensor solutions. I am also encouraged with the progress of our SubCom business, which is in the early stages of a build cycle and gaining momentum. We delivered another quarter of strong margin performance driven by volume growth and productivity gains powered by our TEOA business system.
"This was also a quarter of good strategic progress as we closed the Measurement Specialties acquisition and established TE as a leader in the attractive sensor market with the broadest range of sensor technologies," said Lynch. "Our sensors business is off to a good start, with first quarter financial performance ahead of plan.
"Our decision to sell our Broadband Network Solutions (BNS) business reflects our strategy to continue focusing on and expanding our leadership position in the attractive connectivity and sensor markets, with particular emphasis on harsh environment applications," said Lynch. "These markets represent a $165 billion opportunity with strong growth rates and profit levels, and are driven by global trends of a safer, smarter, greener and more connected world.
"For the full year, we expect to deliver double digit adjusted EPS growth driven by continued strong performance in our harsh environment businesses and the improving SubCom market. Strength in these businesses will offset the impact of significant foreign exchange headwinds."
FISCAL FIRST QUARTER RESULTS
The company reported net sales of $3.47 billion, compared to prior year sales of $3.33 billion. Adjusted EPS were $0.98, compared to $0.82 in the prior year. GAAP EPS were $1.14, compared to $0.85 in the prior year. Free cash flow was $162 million for the quarter.
GAAP EPS included $62 million of acquisition related, restructuring and other charges, more than offset by $128 million of income related to tax items.
Total company orders were $3.7 billion, up 9 percent overall, and up 4 percent excluding SubCom. The book-to-bill ratio was 1.03, excluding SubCom.
OUTLOOK
For the fiscal second quarter 2015, the company expects net sales of $3.55 billion to $3.65 billion and adjusted EPS of $0.98 to $1.02. GAAP EPS are expected to be $0.89 to $0.93, including acquisition related charges of $0.05, and restructuring and other charges of $0.04.
For the full year, the company expects net sales of $14.45 to $14.85 billion and adjusted EPS of $4.05 to $4.35. GAAP EPS are expected to be $4.04 to $4.34, including acquisition related charges of $0.22, restructuring and other charges of $0.10, and income from tax related items of $0.31. The outlook includes foreign exchange headwinds, reducing sales by $900 million and adjusted EPS by $0.35.
The outlook includes the results of the company's BNS business, as well as foreign exchange and commodity rates that are consistent with current levels. Results related to the BNS business will be recast for prior periods and reported as discontinued operations on the company's financial statements beginning with its fiscal second quarter ending March 27, 2015.
Information about TE Connectivity's use of non-GAAP financial measures is provided below. For a reconciliation of these non-GAAP financial measures, see the attached tables.
BNS DIVESTITURE
In a separate news release issued today, the company announced it has reached a definitive agreement to sell its BNS business unit to CommScope (NASDAQ: COMM) for $3.0 billion. The BNS business, which consists of TE's Telecommunications, Enterprise Networks and Wireless businesses, had revenue of $1.9 billion in fiscal year 2014. CommScope is a global provider of telecommunications infrastructure solutions for wireless, business enterprise and residential broadband networks.
In the first quarter of fiscal year 2015, TE established itself as a leader in the high growth sensor market with two key acquisitions. These acquisitions, in conjunction with the sale of BNS, will result in approximately 90 percent of TE's revenue focused on providing OEM customers with leading connectivity and sensor solutions. Additionally, upon completion of the transaction, approximately 80 percent of TE's revenues will serve harsh environment applications.
TE intends to use the majority of the sale proceeds for share repurchase. TE's Board of Directors has authorized an expansion of its share repurchase program by an additional $3.0 billion. Sale proceeds will also be used to make strategic investments in the company's connectivity and sensor businesses.
This transaction is subject to customary closing conditions and regulatory approvals.
www.te.com
