- Sales Up 4 Percent and Up 6 Percent Organically;
- Adjusted EPS Up 6 Percent; GAAP EPS Down 6 Percent;
- Company Maintains Full Year Adjusted EPS Guidance of $3.60 to $3.74;
- Strong Business Performance More Than Offsets Foreign Exchange Headwinds
TE Connectivity Ltd. (NYSE: TEL) reported results for the fiscal second quarter ended March 27, 2015. On January 28, 2015, TE announced the sale of its Broadband Network Solutions (BNS) business. The financial results of the BNS business have been classified as discontinued operations. TE's ongoing business, results and guidance are included below and classified as continuing operations.
Second Quarter Highlights
Net sales increased to $3.1 billion, up 4 percent versus the prior year and up 6 percent organically
Adjusted Earnings Per Share (EPS) from continuing operations were $0.91, up 6 percent versus the prior year
Diluted Earnings Per Share from continuing operations (GAAP EPS) were $0.77
Free cash flow of $217 million; returned $261 million to shareholders
Acquisition of AdvancedCath completed, expanding TE's position in the medical device market
On track to complete the sale of the Broadband Network Solutions (BNS) business by December 2015
Tom Lynch, TE Connectivity Chairman and CEO stated, "I am very pleased with our performance for the quarter. We delivered revenue growth of 4 percent, adjusted EPS growth of 6 percent and adjusted operating margins of 16.4 percent, overcoming significant foreign exchange headwinds. Our growth in the quarter was led by strong performance in automotive, commercial aerospace, industrial equipment, appliances and SubCom. Our TEOA (TE Operating Advantage) business system continued to drive higher profitability, with adjusted operating margins up 50 basis points year over year.
"We also made good progress on our strategy to expand our leadership position in connectivity and sensor solutions," said Lynch. "Our plan to divest BNS is on track and the integration of our recent acquisitions – Measurement Specialties, American Sensor Technologies, and AdvancedCath – is going well. These transactions support our strategy to focus on the growing $165 billion connectivity and sensor markets, and strengthen our portfolio in harsh environment applications.
"The increasing demand for connectivity continues to drive the need for more electronics and TE products," said Lynch. "For the full year, we expect to deliver 6 percent organic growth and double-digit adjusted EPS growth, consistent with prior guidance. New product introductions and continued strong performance in our harsh environment and SubCom businesses more than offset $1 billion of revenue foreign exchange headwinds."
NEW SEGMENT STRUCTURE
Following the announced divestiture of BNS, effective for the second quarter of fiscal 2015, we are reporting our results under three segments. The following represents the new segment structure. The Transportation Solutions and Industrial Solutions segments remain unchanged:
Transportation Solutions—the Automotive, Commercial Transportation, and Sensors businesses are included in this segment.
Industrial Solutions—this segment contains the Industrial Equipment; Aerospace, Defense, Oil, and Gas; and Energy businesses.
Communications Solutions—the Data and Devices, Appliances, and Subsea Communications businesses are included in this segment.
FISCAL SECOND QUARTER RESULTS
The company reported net sales of $3.1 billion, compared to prior year sales of $3.0 billion. Adjusted EPS were $0.91, compared to $0.86 in the prior year. GAAP EPS were $0.77, compared to $0.82 in the prior year. Free cash flow was $217 million for the quarter.
GAAP EPS included $60 million of acquisition related, restructuring and other charges.
Total company orders were $3.0 billion, flat year over year, and up 1 percent excluding SubCom. The book-to-bill ratio was 1.03, excluding SubCom.
OUTLOOK
For the fiscal third quarter 2015, the company expects net sales of $3.13 billion to $3.23 billion, reflecting 3 percent year over year growth at the mid-point, and adjusted EPS of $0.85 to $0.89. GAAP EPS are expected to be $0.80 to $0.84, including acquisition related charges of $0.04, and restructuring and other charges of $0.01. This outlook includes foreign exchange headwinds, reducing expected sales by $330 million and adjusted EPS by $0.13.
For the full year, the company expects net sales of $12.35 to $12.65 billion, reflecting 4 percent growth versus prior year at the mid-point; and adjusted EPS of $3.60 to $3.74 reflecting double-digit growth versus the prior year. GAAP EPS are expected to be $3.51 to $3.65, including acquisition related charges of $0.22, restructuring and other charges of $0.18, and income from tax related items of $0.31. The outlook includes foreign exchange headwinds, reducing expected sales by $1.01 billion and adjusted EPS by $0.38.
www.te.com
