Actionable news
0
All posts from Actionable news
Actionable news in TEL: TE CONNECTIVITY Ltd,

TE Connectivity Reports Third Quarter 2017 Financial Results

Third Quarter Highlights

  • Net sales were $3.4 billion, up 8 percent, as reported and organically, from third quarter of 2016;
  • Orders, excluding the company's SubCom business, were $3.3 billion, up 12 percent from the prior year;
  • Diluted earnings per share from continuing operations were $1.21;
  • Cash flow from continuing operating activities was $524 million, with free cash flow of $408 million, and $324 million returned to shareholders.

Third Quarter Results

For the third quarter, the company reported net sales of $3.4 billion, with growth of 8 percent year-over-year. Diluted earnings per share (EPS) from continuing operations (GAAP EPS) were $1.21 and adjusted EPS were $1.24. Cash flow from continuing operating activities was $524 million, and free cash flow was $408 million. The company returned $324 million to shareholders in the quarter through dividends and share repurchases. Orders for the quarter, excluding the company's SubCom business, totaled $3.3 billion, up 12 percent from the prior year, with a book-to-bill ratio of 1.06.

"Our teams continued to deliver strong financial performance and growth across all segments and regions, reflecting our strategy to create safer, sustainable, productive and connected solutions for our customers," said TE Connectivity Chief Executive Officer Terrence Curtin. "This quarter's results were driven by content growth in Transportation Solutions; strength in our Industrial Solutions segment, particularly in factory automation and medical applications; and strong results in our Communications Solutions segment, especially in areas connected to cloud solutions.

"In connection with these results, we are raising the midpoint of our fiscal 2017 sales and adjusted EPS guidance to $12.9 billion and $4.73 respectively, representing 7 percent organic sales growth and 20 percent adjusted EPS growth versus the prior year," Curtin added. "This increase in our guidance is due to above market growth in all of our segments and strong execution of our strategy."

During the third quarter, the company announced a definitive agreement to acquire Hirschmann Car Communication, which focuses on vehicle connectivity technology used in antenna and infotainment systems and acquired MicroGroup, a producer of specialized shafts for medical applications. These acquisitions will enable further content growth in key applications for the automotive and medical markets.

2017 Outlook

For the fiscal fourth quarter of 2017, the company expects net sales of $3.2 billion to $3.3 billion, reflecting an increase of 5 percent on an as reported basis and 4 percent organically, at the midpoint versus the fourth quarter of 2016, excluding the additional week in fiscal year 2016. GAAP EPS are expected to be $1.07 to $1.09, including net restructuring, acquisition-related and other charges of $0.07. TE expects adjusted EPS of $1.14 to $1.16, which includes a $0.09 favorable impact from growth and margin improvements year-over-year, offset by a $0.08 tax rate impact due to an unusually low tax rate in the prior year.

For the full year, the company expects net sales of $12.85 billion to $12.95 billion, reflecting 8 percent growth on an as reported basis and 7 percent organically at the mid-point versus the prior year, excluding the additional week in fiscal year 2016. GAAP EPS are expected to be $4.54 to $4.56, including net restructuring, acquisition-related and other charges of $0.34 and a tax-related benefit of $0.16. TE expects adjusted EPS of $4.72 to $4.74 reflecting 20 percent growth at the mid-point compared to 2016, when excluding the additional week.

Information about TE Connectivity's use of non-GAAP financial measures is provided below. For reconciliations of these non-GAAP financial measures, see the attached tables.

Conference Call and Webcast

The company will hold a conference call today beginning at 8:30 a.m. ET. The dial-in information is provided here:

  • By telephone: For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the dial-in number in the United States is (800) 230-1059, and for international callers, the dial-in number is (612) 234-9959.
  • An audio replay of the conference call will be available beginning at 10:30 a.m. ET on July 26, 2017, and ending at 11:59 p.m. ET on August 2, 2017. The dial-in number for participants in the United States is (800) 475-6701. For participants outside the United States, the dial-in number is (320) 365-3844. The replay access code for all callers is 426345.

About TE Connectivity

TE Connectivity (NYSE: TEL) is a global technology leader with revenues of approximately $13 billion. Our commitment to innovation enables advancements in transportation, industrial applications, medical technology, energy, data communications, and the home. TE's unmatched breadth of connectivity and sensor solutions, proven in the harshest of environments, helps build a safer, greener, smarter and more connected world. With 75,000 people – including more than 7,000 engineers – working alongside customers in nearly 150 countries, we help ensure that EVERY CONNECTION COUNTS – www.TE.com

Non-GAAP Financial Measures

We present non-GAAP performance and liquidity measures as we believe it is appropriate for investors to consider adjusted financial measures in addition to results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP financial measures provide supplemental information and should not be considered replacements for results in accordance with GAAP. Management uses non-GAAP financial measures internally for planning and forecasting purposes and in its decision making processes related to the operations of our company. We believe these measures provide meaningful information to us and investors because they enhance the understanding of our operating performance, ability to generate cash, and the trends of our business. Additionally, we believe that investors benefit from having access to the same financial measures that management uses in evaluating our operations. The primary limitation of these measures is that they exclude the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using these non-GAAP financial measures in combination with the most directly comparable GAAP financial measures in order to better understand the amounts, character, and impact of any increase or decrease in reported amounts. These non-GAAP financial measures may not be comparable to similarly-titled measures reported by other companies.

The following provides additional information regarding our non-GAAP financial measures:

  • Organic Net Sales Growth – represents net sales growth (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic Net Sales Growth is a useful measure of our performance because it excludes items that are not completely under management's control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity. This measure is a significant component in our incentive compensation plans.
  • Adjusted Operating Income and Adjusted Operating Margin – represent operating income and operating margin, respectively, (the most comparable GAAP financial measures) before special items including restructuring and other charges, acquisition related charges, and other income or charges, if any. We utilize these measures to assess segment level operating performance and to provide insight to management in evaluating segment operating plan execution and market conditions. Adjusted Operating Income is a significant component in our incentive compensation plans.
  • Adjusted Other Income, Net – represents net other income (the most comparable GAAP financial measure) before special items including tax sharing income related to adjustments to prior period tax returns and other items, if any.
  • Adjusted Income Tax Expense and Adjusted Effective Tax Rate – represent income tax expense and effective tax rate, respectively (the most comparable GAAP financial measures) after adjusting for the tax effect of special items including restructuring and other charges, acquisition related charges, other income or charges, and certain significant tax items, if any.
  • Adjusted Income from Continuing Operations – represents income from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition related charges, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects.
  • Adjusted Earnings Per Share – represents diluted earnings per share from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition related charges, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects. This measure is a significant component in our incentive compensation plans.
  • Net Sales Excluding the Impact of the Additional Week, Net Sales Growth Excluding the Impact of the Additional Week, Organic Net Sales Growth Excluding the Impact of the Additional Week, Adjusted Operating Income Excluding the Impact of the Additional Week, Adjusted Operating Margin Excluding the Impact of the Additional Week, and Adjusted Earnings Per Share Excluding the Impact of the Additional Week – represent certain GAAP and non-GAAP financial measures excluding the impact of the additional week in the fourth quarter of the fiscal year for fiscal years which are 53 weeks in length. The impact of the additional week is estimated using an average weekly sales figure for the last month of the fiscal year.
  • Free Cash Flow (FCF) – is a useful measure of our ability to generate cash. The difference between net cash provided by continuing operating activities (the most comparable GAAP financial measure) and Free Cash Flow consists mainly of significant cash outflows and inflows that we believe are useful to identify. We believe Free Cash Flow provides useful information to investors as it provides insight into the primary cash flow metric used by management to monitor and evaluate cash flows generated from our operations.

Free Cash Flow is defined as net cash provided by continuing operating activities excluding voluntary pension contributions and the cash impact of special items, if any, minus net capital expenditures. Voluntary pension contributions are excluded from the GAAP financial measure because this activity is driven by economic financing decisions rather than operating activity. Certain special items, including net payments related to pre-separation tax matters and cash paid (collected) pursuant to collateral requirements related to cross currency swaps, are also excluded by management in evaluating Free Cash Flow. Net capital expenditures consist of capital expenditures less proceeds from the sale of property, plant, and equipment. These items are subtracted because they represent long-term commitments.

In the calculation of Free Cash Flow, we subtract certain cash items that are ultimately within management's and the Board of Directors' discretion to direct and may imply that there is less or more cash available for our programs than the most comparable GAAP financial measure indicates. It should not be inferred that the entire Free Cash Flow amount is available for future discretionary expenditures, as our definition of Free Cash Flow does not consider certain non-discretionary expenditures, such as debt payments. In addition, we may have other discretionary expenditures, such as discretionary dividends, share repurchases, and business acquisitions, that are not considered in the calculation of Free Cash Flow.

Forward-Looking Statements

This release contains certain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management's...


More