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Tyco Electronics Reports First Quarter Results

Jan 28, 2009

First Quarter Results

Net Sales Decreased 21 Percent to $2.8 Billion; Organic Sales Declined 18 Percent

Loss Per Share From Continuing Operations of $0.08 on a GAAP Basis; Adjusted Earnings Per Share (EPS) of $0.22

Second Quarter Outlook

Company Expects Sales to Decline 32 to 35 Percent With an Organic Sales Decline of 28 to 31 Percent

GAAP Loss From Continuing Operations Expected to be $0.10 to $0.15; Adjusted EPS Expected to be $0.05 to $0.10

PEMBROKE, Bermuda, Jan. 28 /PRNewswire-FirstCall/ Tyco Electronics Ltd. today reported results for the fiscal first quarter ended Dec. 26, 2008. The company reported net sales of $2.8 billion for the fiscal first quarter, a decrease of 21 percent compared to the prior-year period. Excluding currency effects, the organic sales decline was 18 percent. The GAAP loss per share from continuing operations was $0.08 for the quarter, compared to diluted EPS of $1.74 in the prior-year period. Included in the loss per share from continuing operations were $0.30 per share of charges $0.15 per share of costs associated with the termination of a contract by the State of New York, $0.12 per share of restructuring costs and $0.03 per share of charges related to other items. This compares to $1.15 per share of tax sharing income and $0.03 of restructuring charges in the prior-year quarter. Adjusted EPS from continuing operations were $0.22 in the quarter, a decrease of 65 percent from last year's adjusted EPS of $0.62.

"We are in a very challenging and, in many ways, unprecedented environment," said Tyco Electronics Chief Executive Officer Tom Lynch. "Our business is experiencing a significant deterioration in demand, especially in the global consumer markets served by our Electronic Components segment. In automotive our largest market sales declined 31 percent on an organic basis compared to the prior year. In addition to weak end-user demand, inventory adjustments across the supply chain contributed to our overall sales declines. Despite these circumstances, I am confident that we will improve our competitive position by staying close to our customers, continuing to invest in key technologies, reducing our cost structure and maintaining our financial strength."

The GAAP operating loss was $21 million, compared to $472 million of income in the prior-year period. Included in the current quarter operating income were restructuring costs of $78 million and other items of $128 million. Included in prior-year operating income were $21 million of restructuring costs. Excluding these items in both periods, adjusted operating income was $185 million compared to $493 million a year ago, a decrease of 62 percent. The adjusted operating margin was 6.6 percent, compared to 13.9 percent a year ago reflecting a 21 percent decline in sales, primarily in the company's Electronic Components segment, as well as approximately $50 million of losses related to foreign currency hedging activity.

CASH FLOW

Free cash flow was a use of $79 million in the quarter. Cash from continuing operations was $33 million versus $387 million in the prior-year quarter, primarily reflecting lower operating income and increased cash restructuring costs.

ADDITIONAL ITEMS

  • On Jan. 14, 2009, the company announced that its Board of Directors had unanimously approved a proposed change of the company's place of incorporation from Bermuda to Switzerland. If approved by the company's shareholders, Tyco Electronics intends to implement the change as soon as practicable.

  • As disclosed on Jan. 15, 2009, the New York State Office for Technology terminated a master agreement for construction, operation and maintenance of the Statewide Wireless Network. First fiscal quarter results include charges of $111 million related to this termination. The charges include a $61 million asset impairment, as well as a $50 million request for payment under a standby letter of credit. Tyco Electronics believes that the termination was improper and is currently pursuing legal remedies to protect its rights under the contract.

ORDERS

Total company orders declined 35 percent compared to the prior year. On an organic basis, excluding the effects of currency translation, orders declined 33 percent and the book-to-bill ratio was 0.96. Order rates in the Electronic Components segment declined 34 percent organically compared to the prior year and the book-to-bill ratio was 0.88, reflecting declines in all regions and nearly all end markets.

SECOND QUARTER FISCAL 2009 OUTLOOK

For the second quarter of fiscal 2009, the company expects a sales decline of 32 to 35 percent below prior-year sales of $3.7 billion, with an organic sales decline of 28 to 31 percent. The company further expects a GAAP loss from continuing operations of $0.10 to $0.15, which includes restructuring costs of approximately $0.20 per share. Adjusted EPS from continuing operations are expected to be $0.05 to $0.10, compared to adjusted EPS of $0.67 in the prior-year period. This outlook assumes current foreign exchange rates.

SEGMENT RESULTS

Tyco Electronics is comprised of four reporting segments: Electronic Components, Network Solutions, Undersea Telecommunications and Wireless Systems.

Electronic Components

The Electronic Components segment is one of the world's largest suppliers of passive electronic components, including connectors and interconnect systems, relays, switches, circuit protection devices, touchscreens, sensors, and wire and cable.

Sales in the segment declined 25 percent compared to the prior-year quarter and declined 22 percent organically. On an organic basis, the company experienced declines in the automotive (-31 percent), computer (-30 percent), communications (-19 percent) and industrial (-9 percent) markets. Specifically in automotive, Europe declined 36 percent, North America declined 33 percent, and Asia declined 22 percent.

Operating income decreased by $340 million and adjusted operating income decreased by $291 million. The adjusted operating margin decreased due to the sales declines, as well as an approximately $50 million loss related to currency hedging activities. Excluding the losses associated with these hedging activities, the adjusted operating margin was 6.3 percent. Restructuring costs in the quarter were $56 million and other charges were $8 million, compared to $15 million of restructuring costs in the prior-year quarter.

Network Solutions

The Network Solutions segment is one of the world's largest suppliers of infrastructure components and systems for the communication service provider, building networks and energy markets.

Segment sales declined 11 percent compared to the prior-year quarter and declined 2 percent organically. On an organic basis, sales to the energy market grew 3 percent, while sales to the communication service provider and building networks markets each declined 5 percent.

Operating income decreased by $24 million and adjusted operating income decreased by $10 million. The decrease in the adjusted operating margin was primarily due to the overall sales decline. Restructuring costs in the quarter were $19 million, compared to $5 million in the prior-year quarter.

ABOUT TYCO ELECTRONICS

Tyco Electronics Ltd. is a leading global provider of engineered electronic components, network solutions, undersea telecommunication systems and wireless systems, with 2008 sales of US$14.8 billion to customers in more than 150 countries. We design, manufacture and market products for customers in industries from automotive, appliance and aerospace and defense to telecommunications, computers and consumer electronics. With nearly 8,000 engineers and worldwide manufacturing, sales and customer service capabilities, Tyco Electronics' commitment is our customers' advantage. More information on Tyco Electronics can be found at http://www.tycoelectronics.com.

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