- Sales grew 4 percent organically and 1 percent on an actual basis
- Adjusted EPS of $0.90 and above the high end of guidance; GAAP EPS of $0.85
TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter ended June 26, 2015.
Third Quarter Highlights
- Net sales increased to $3.12 billion, up 1 percent versus the prior year and up 4 percent organically
- Adjusted Earnings Per Share (EPS) from continuing operations were $0.90, up 6 percent versus the prior year and above the high end of guidance
- Diluted Earnings Per Share from continuing operations (GAAP EPS) were $0.85, up 2 percent versus the prior year
- Free cash flow of $391 million; returned $386 million to shareholders including $252 million of share repurchase
- SubCom business announced New Cross Pacific (NCP) program contract in force; total value of programs in force for SubCom reached $1.5 billion
Tom Lynch, TE Connectivity Chairman and CEO stated, “We delivered solid results in the quarter, with EPS above the high end of guidance despite a mixed macro environment. Organic sales were up 4 percent in the quarter led by continued strength in our Automotive, Sensors, Commercial Air and SubCom businesses. This 4 percent sales growth was slightly below our expectations due to weakness in China and supply chain adjustments in some industrial markets.
“For the fourth quarter, we expect sales to be up 3 percent organically over the prior year and adjusted EPS to be up 6 percent at the mid-point of guidance,” said Lynch. “For the full year, we expect to deliver 5 percent organic sales growth and 10 percent adjusted EPS growth. This guidance is down slightly from what we provided 90 days ago due to weaker orders in certain emerging markets, particularly China. In constant currency, adjusted EPS growth is expected to be 19 percent year over year.
“We had another good quarter of strategic progress,” said Lynch. “Our harsh environment businesses, which make up 80 percent of our portfolio, continue to perform well and deliver strong profitability. I am very pleased with the progress in our Sensors business which is winning programs in attractive automotive, consumer and security applications. The integration of the AdvancedCath acquisition, which expands our position in the growing medical device industry, is on track and gaining momentum.
“We expect to close the sale of the Broadband Network Solutions (BNS) business within the next 90 days,” said Lynch. “Upon the transaction close, 90 percent of our business will be connectivity and sensor solutions. The majority of the $3 billion in proceeds are expected to be used to fund share repurchases.”
FISCAL THIRD QUARTER RESULTS
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.
The company reported net sales of $3.12 billion, compared to prior year sales of $3.08 billion. Adjusted EPS were $0.90, compared to $0.85 in the prior year. GAAP EPS were $0.85, compared to $0.83 in the prior year. Free cash flow was $391 million for the quarter.
GAAP EPS included $19 million of acquisition related charges, restructuring and other charges, and tax items.
Excluding SubCom, total company orders were $2.9 billion and the book-to-bill ratio was 1.0.
OUTLOOK
For the fiscal fourth quarter 2015, the company expects net sales of $3.02 billion to $3.18 billion, reflecting 1 percent actual and 3 percent organic year over year growth at the mid-point, and adjusted EPS of $0.90 to $0.96, which represents 6 percent growth at the mid-point. GAAP EPS are expected to be $0.81 to $0.87, including restructuring and other charges of $0.06 and acquisition related charges of $0.03. This outlook includes foreign exchange headwinds, reducing expected sales by $244 million and adjusted EPS by $0.10 year over year.
For the full year, the company has reduced guidance, primarily due to slowdown in China, and expects net sales of $12.28 to $12.42 billion, reflecting 3 percent actual and 5 percent organic growth versus prior year at the mid-point; and adjusted EPS of $3.60 to $3.66 reflecting double-digit growth versus the prior year. GAAP EPS are expected to be $3.48 to $3.54, including acquisition related charges of $0.18, restructuring and other charges of $0.27, and income from tax related items of $0.33. The outlook includes foreign exchange headwinds, reducing expected sales by $925 million and adjusted EPS by $0.32 year over year.
