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Electronics Production | January 28, 2010

Tyco swings to profit in Q1

The company reported net sales of $2.9 billion, a 7 percent increase sequentially and a 7 percent increase compared to the prior-year period.
"The first quarter was a very good start to the year for us," said Tyco Electronics Chief Executive Officer Tom Lynch. "We had another quarter of sequentially improving sales in our Electronic Components markets due to stronger end demand and inventory replenishment in the supply chain. This, coupled with the footprint restructuring we began over two years ago and the aggressive cost actions we took last year, enabled us to improve our adjusted operating margin to 11.5 percent, up from 8.2 percent last quarter.

"In the second quarter, we expect the trends we experienced in the first quarter to continue, and overall sales to be similar to first quarter levels. We anticipate that our adjusted operating margin will approach 12 percent in the second quarter."

Sales grew 7 percent, both sequentially and compared to the prior-year quarter. Organically, sales increased 5 percent sequentially and 2 percent compared to the prior year. The sequential organic sales increase was driven by a 14 percent increase in the Electronic Components segment, where sales were up across all end markets. The company's growth was particularly strong in the Automotive business, where sales grew 17 percent due to increased global production levels and inventory replenishment. Organic sales declined 6 percent sequentially in the Network Solutions segment, and 3 percent in the Specialty Products segment, as these businesses continued to be affected by low levels of capital spending. In Undersea Telecommunications, sales declined 25 percent sequentially, in line with our expectations as a result of lower project activity.

The adjusted operating margin improved to 11.5 percent, compared to 8.2 percent in the prior quarter and 6.6 percent a year ago, reflecting the benefits of higher sales, footprint restructuring and cost reduction actions. In addition, last year's first quarter included approximately $50 million of foreign currency losses on hedging activity.

Total company orders increased 2 percent sequentially in the first quarter. On a year-over-year basis, orders increased 15 percent. The book-to-bill ratio was 1.02 in the quarter. Excluding the company's Undersea Telecommunications segment, which is a project-oriented business with uneven order patterns, orders increased 15 percent sequentially and increased 34 percent year-over-year, and the book-to-bill ratio was 1.09. The 15 percent sequential order increase was broad-based across most of the company's end markets.

For the second fiscal quarter, the company expects sales of $2.85 to $2.95 billion and GAAP operating income of $315 to $350 million, which includes restructuring and other charges of approximately $20 million. Adjusted operating income is expected to be $335 to $370 million. GAAP EPS are expected to be $0.46 to $0.51, including restructuring and other charges of approximately $0.03 per share. Adjusted EPS are expected to be $0.49 to $0.54, compared to adjusted EPS of $0.14 in the prior-year period. This outlook assumes current foreign exchange rates.

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