Tyco Electronics Ltd (TEL)
F2Q09 (Qtr End 03/27/09) Earnings Call
April 29, 2009 8:30 am ET
Tom Lynch - Chief Executive Officer
Terrence Curtin - Chief Financial Officer
John Roselli - Vice President, Investor Relations
Amit Daryanani - RBC Capital Markets
Brian White - Collins Stewart
Matt Sheerin - Thomas Weisel
Jim Suva - Citi
William Stein - Credit Suisse
Shawn Harrison - Longbow Research
Steven Fox - CLSA
Amitabh Passi - UBS
Previous Statements by TEL
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I would now like to turn the conference over to your host, Vice President, Investor Relations, Mr. John Roselli. Please go ahead.
Thanks, Rochelle and good morning. Thank you for joining our conference call to discuss Tyco Electronics' second quarter results for fiscal year 2009 and our outlook for the third quarter.
With me today is our Chief Executive Officer, Tom Lynch and our Chief Financial Officer, Terrence Curtin.
During the course of this call, we will be providing certain forward-looking information. We ask you to look at today's press release and read through the forward-looking cautionary statements that we have included there. In addition, we will use certain non-GAAP measures in our discussion this morning and we ask you to read through the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and all related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at tycoelectronics.com.
Now let me turn the call over to Tom for some opening comments.
Thanks, John and good morning, everyone. Today, we are introducing a slide show to accompany our review here, so hopefully that's helpful for you and if you can move to slide 2, we will get started.
As we expected, the weak global economic conditions did have a significant impact on our business this quarter as our sales declined 28% organically year-over-year and our adjusted operating earnings declined 85%. So it was a tough quarter from that perspective, although what we expected going into the quarter.
Our adjusted earnings per share for the quarter were $0.14 and that does include a $0.07 benefit from a tax rate that was more favorable than our guidance rate. If you were to use our guidance tax rate of 30%, our adjusted earnings per share would have been in the middle of the guidance range we provided last quarter. The tax rate will tend to fluctuate a little bit at these income levels. Terrence will expound on that when he walks you through the financials in more detail in a few minutes.
Our business conditions remain weak and visibility is limited, but we have seen our order rates stabilize over the last two months, last March and April, as compared to the weakening trends we were seeing at the time of our last call.
In our businesses that serve consumer markets, which includes automotive, order rates have picked up over the last couple months. In our industrial markets, orders are still soft and weakening a bit. The good news is we are seeing stabilization in orders, but it is off a much lower base than the prior year, but things do feel a little bit better now than they did three months ago as inventories in the supply chain, particularly in the consumer market and most especially in the automotive markets we serve, have been reduced considerably.
So feeling better; visibility still limited, however, and I think most of what we are seeing is, the inventories getting back in line.
Now I want to spend a few minutes updating you on the progress we are making with the strategy we laid out almost two years ago when we separated the company and then, as today, the strategy has three main elements to it: positioning the company for accelerated growth, improving our operating leverage and focusing the portfolio. Notwithstanding the weak business conditions that are out there, we still have our eye clearly on the ball of positioning this business for growth.
Our strategy there really has four key points: Accelerating new product introductions and better leveraging our technology portfolio, and I'm going to talk about a couple of key new wins for us in a minute; expanding our reach and service levels through the distribution and web channels. We are very strong with the large OEMs. That has always been our strength and we put a lot of resources in front of those customers and have a lot of success there. We want to be as strong and as effective with the other half of our business, which tends to be the smaller customers. So we have a lot in process to improve our ability to reach customers through alternative channels.
Thirdly, as part of our growth, continue to strengthen our position in emerging markets. Naturally, that is where a lot of growth is going to continue to come from. We do have a very strong position in China, Russia, Eastern Europe and India. We are continuing to invest there and most importantly, continuing to build our talent there.
The fourth element of this growth strategy is to broaden our product range through strategic acquisitions. Now we haven't done any of that. We have been much more focused on cleaning up the portfolio that resulted from all the acquisitions that came before to form this business, but we do feel that our platform and infrastructure will lend itself to augmenting our current portfolio of products and technologies when the right opportunities come up at the right time and we are focused on building that pipeline.
So with respect to new products, I'd just like to give you a couple of good examples. The platforms are important. What's really important is broadening the markets we serve with the technology we have. The first one in our aerospace and defense and marine business; we recently won a very key award with Airbus in what is known as the Raceway program. This product provides a solution to protect the aircraft's electrical system from electrical interference and lightning strikes.