TE Connectivity Posts Solid Fiscal 2015 Third Quarter Results

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

Jul 22, 2015

SCHAFFHAUSEN, Switzerland, July 22, 2015 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter ended June 26, 2015.

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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.  

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

CONFERENCE CALL AND WEBCAST

  • The company will hold a conference call for investors today beginning at 8:30 a.m. EDT. Information about the conference call is available at TE Connectivity's website: http://investors.te.com.
  • 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 telephone dial-in number in the United States is (800) 230-1085. The telephone dial-in number for participants outside the United States is (612) 288-0337.
  • An audio replay of the conference call will be available beginning at 10:30 a.m. on July 22, 2015, and ending at 11:59 p.m. on July 29, 2015. The dial-in number for participants in the United States is (800) 475-6701. For participants outside the United States, the replay dial-in number is (320) 365-3844. The replay access code for all callers is 360684.

NON-GAAP MEASURES

"Organic Sales Growth," "Adjusted Operating Income," "Adjusted Operating Margin," "Adjusted Other Income, Net," "Adjusted Income Tax Expense," "Adjusted Income from Continuing Operations," "Adjusted Earnings Per Share," "Adjusted Earnings Per Share in Constant Currency," and "Free Cash Flow" are non-GAAP measures and should not be considered replacements for results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP measures may not be comparable to similarly-titled measures reported by other companies. 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 measures in combination with the most directly comparable GAAP measures in order to better understand the amounts, character and impact of any increase or decrease in reported amounts. The following provides additional information regarding these non-GAAP measures:  

  • Organic Sales Growth – is a useful measure of our underlying results and trends in the business. It is also a significant component in our incentive compensation plans. The difference between reported net sales growth (the most comparable GAAP measure) and Organic Sales Growth consists of the impact from foreign currency exchange rates and acquisitions and divestitures, if any. Organic Sales Growth is a useful measure of our performance because it excludes items that: i) are not completely under management's control, such as the impact of changes in foreign currency exchange rates; or ii) do not reflect the underlying growth of the company, such as acquisition and divestiture activity.
  • Adjusted Operating Income – represents operating income (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any. We utilize Adjusted Operating Income to assess segment level core operating performance and to provide insight to management in evaluating segment operating plan execution and underlying market conditions. It also is a significant component in our incentive compensation plans. Adjusted Operating Income is a useful measure for investors because it provides insight into our underlying operating results, trends, and the comparability of these results between periods.
  • Adjusted Operating Margin – represents operating margin (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any. We present Adjusted Operating Margin before special items to give investors a perspective on the underlying business results. This measure should be considered in conjunction with operating margin calculated using our GAAP results in order to understand the amounts, character and impact of adjustments to operating margin.
  • Adjusted Other Income, Net – represents other income, net (the most comparable GAAP measure) before special items including tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, if any. We present Adjusted Other Income, Net as we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP.
  • Adjusted Income Tax Expense – represents income tax expense (the most comparable GAAP measure) after adjusting for the tax effect of special items including charges related to restructuring and other charges, acquisition related charges, impairment charges, other income or charges, and certain significant special tax items, if any. We present Adjusted Income Tax Expense to provide investors further information regarding the tax effects of adjustments used in determining the non-GAAP financial measure Adjusted Income from Continuing Operations (as defined below).
  • Adjusted Income from Continuing Operations – represents income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, if any, and, if applicable, the related tax effects. We present Adjusted Income from Continuing Operations as we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP. Adjusted Income from Continuing Operations provides additional information regarding our underlying operating results, trends and the comparability of these results between periods.
  • Adjusted Earnings Per Share – represents diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) before special items, including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, if any, and, if applicable, the related tax effects. We present Adjusted Earnings Per Share because we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP. We believe such a measure provides a picture of our results that is more comparable among periods since it excludes the impact of special items, which may recur, but tend to be irregular as to timing, thereby making comparisons between periods more difficult. It also is a significant component in our incentive compensation plans.
  • Adjusted Earnings Per Share in Constant Currency – represents Adjusted Earnings Per Share excluding the impact of fluctuations in foreign currency exchange rates between periods. We believe providing constant currency information provides valuable supplemental information regarding our earnings per share growth.
  • 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 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. 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. Voluntary pension contributions are excluded from the GAAP 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, also are considered by management in evaluating Free Cash Flow.

Free Cash Flow subtracts 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 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 current expectations and are subject to risks, uncertainty and changes in circumstances, which may cause actual results, performance, financial condition or achievements to differ materially from anticipated results, performance, financial condition or achievements. All statements contained herein that are not clearly historical in nature are forward-looking and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. We have no intention and are under no obligation to update or alter (and expressly disclaim any such intention or obligation to do so) our forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by law. The forward-looking statements in this release include statements addressing our future financial condition and operating results and our planned sale of the Broadband Network Solutions business. Examples of factors that could cause actual results to differ materially from those described in the forward-looking statements include, among others, business, economic, competitive and regulatory risks, such as conditions affecting demand for products, particularly in the automotive industry and the telecommunications networks and consumer devices industries; competition and pricing pressure; fluctuations in foreign currency exchange rates and commodity prices; natural disasters and political, economic and military instability in countries in which we operate; developments in the credit markets; future goodwill impairment; compliance with current and future environmental and other laws and regulations; the possible effects on us of changes in tax laws, tax treaties and other legislation; the risk that the operations of Measurement Specialties will not be successfully integrated into ours; the risk that revenue opportunities, cost savings and other anticipated synergies from the Measurement Specialties acquisition may not be fully realized or may take longer to realize than expected; and the risk that the sale of the Broadband Network Solutions business may not be consummated, or if consummated, we do not realize the anticipated benefits from such transaction. More detailed information about these and other factors is set forth in TE Connectivity Ltd.'s Annual Report on Form 10-K for the fiscal year ended Sept. 26, 2014 as well as in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports filed by us with the U.S. Securities and Exchange Commission.

Sale of Broadband Network Solutions to CommScope

On January 28, 2015, TE announced the entry into a definitive agreement to sell its Broadband Network Solutions (BNS) business unit to CommScope (NASDAQ: COMM) for $3.0 billion. The BNS business, which consists of TE's Telecommunications, Enterprise Networks and Wireless businesses, had revenue of $1.9 billion in fiscal year 2014. CommScope is a global provider of telecommunications infrastructure solutions for wireless, business enterprise and residential broadband networks.  The transaction is expected to close by December 31, 2015, and is subject to completion of transaction financing, regulatory approvals and customary closing conditions.

ABOUT TE CONNECTIVITY     

TE Connectivity (NYSE: TEL) is a $14 billion global technology leader. Our connectivity and sensor solutions are essential in today's increasingly connected world. We collaborate with engineers to transform their concepts into creations – redefining what's possible using intelligent, efficient and high-performing TE products and solutions proven in harsh environments. Our 80,000 people, including 7,500 design engineers, partner with customers in 150 countries across a wide range of industries. We believe EVERY CONNECTION COUNTS – www.TE.com.   

 

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

               
               
 

For the Quarters Ended

 

For the Nine Months Ended

 

June 26,

 

June 27,

 

June 26,

 

June 27,

 

2015

 

2014

 

2015

 

2014

 

(in millions, except per share data)

Net sales

$            3,118

 

$            3,075

 

$            9,249

 

$            8,901

Cost of sales 

2,070

 

2,057

 

6,130

 

5,943

Gross margin

1,048

 

1,018

 

3,119

 

2,958

Selling, general, and administrative expenses

393

 

396

 

1,170

 

1,154

Research, development, and engineering expenses

159

 

147

 

479

 

433

Acquisition and integration costs

8

 

1

 

46

 

2

Restructuring and other charges, net

19

 

10

 

82

 

15

   Operating income  

469

 

464

 

1,342

 

1,354

Interest income

4

 

4

 

13

 

13

Interest expense

(33)

 

(28)

 

(104)

 

(93)

Other income (expense), net

11

 

9

 

(64)

 

57

   Income from continuing operations before income taxes

451

 

449

 

1,187

 

1,331

Income tax expense

(100)

 

(102)

 

(85)

 

(331)

   Income from continuing operations

351

 

347

 

1,102

 

1,000

Income (loss) from discontinued operations, net of income taxes

(42)

 

56

 

278

 

118

  Net income attributable to TE Connectivity Ltd.

$               309

 

$               403

 

$            1,380

 

$            1,118

               

Basic earnings per share attributable to TE Connectivity Ltd.:

             

   Income from continuing operations

$              0.86

 

$              0.85

 

$              2.71

 

$              2.44

   Income (loss) from discontinued operations

(0.10)

 

0.14

 

0.68

 

0.29

   Net income  

0.76

 

0.99

 

3.39

 

2.73

               

Diluted earnings per share attributable to TE Connectivity Ltd.:

             

   Income from continuing operations

$              0.85

 

$              0.83

 

$              2.67

 

$              2.40

   Income (loss) from discontinued operations

(0.10)

 

0.13

 

0.67

 

0.28

   Net income  

0.75

 

0.97

 

3.34

 

2.68

               

Dividends paid per common share

$              0.33

 

$              0.29

 

$              0.91

 

$              0.79

               

Weighted-average number of shares outstanding: 

             

   Basic

406

 

409

 

407

 

410

   Diluted

412

 

416

 

413

 

417

 

 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

       
       
 

June 26,

 

September 26,

 

2015

 

2014

 

(in millions, except share data)

Assets

     

Current assets:

     

Cash and cash equivalents

$               701

 

$            2,457

Accounts receivable, net of allowance for doubtful accounts of $18 and $14, respectively

2,185

 

2,057

Inventories

1,717

 

1,509

Prepaid expenses and other current assets

617

 

519

Deferred income taxes

619

 

324

Assets held for sale

1,897

 

2,013

Total current assets

7,736

 

8,879

Property, plant, and equipment, net

2,925

 

2,920

Goodwill

4,841

 

3,726

Intangible assets, net

1,597

 

1,087

Deferred income taxes

2,054

 

2,047

Receivable from Tyco International plc and Covidien plc

962

 

1,037

Other assets

326

 

456

Total Assets

$          20,441

 

$          20,152

       

Liabilities and Equity

     

Current liabilities:

     

Current maturities of long-term debt

$               631

 

$               577

Accounts payable

1,206

 

1,230

Accrued and other current liabilities

1,660

 

1,594

Deferred revenue

179

 

176

Liabilities held for sale

365

 

416

Total current liabilities

4,041

 

3,993

Long-term debt

3,395

 

3,281

Long-term pension and postretirement liabilities

1,192

 

1,280

Deferred income taxes

299

 

229

Income taxes

1,936

 

2,044

Other liabilities

443

 

312

Total Liabilities

11,306

 

11,139

Commitments and contingencies

     

Equity:

     

TE Connectivity Ltd. shareholders' equity:

     

Common shares, 414,064,381 shares authorized and issued, CHF 0.57 par value, and

     

419,070,781 shares authorized and issued, CHF 0.57 par value, respectively

182

 

184

Contributed surplus

4,338

 

5,231

Accumulated earnings 

5,633

 

4,253

Treasury shares, at cost, 10,181,684 and 11,383,631 shares, respectively

(651)

 

(644)

Accumulated other comprehensive loss

(373)

 

(17)

Total TE Connectivity Ltd. shareholders' equity

9,129

 

9,007

Noncontrolling interests

6

 

6

Total Equity

9,135

 

9,013

Total Liabilities and Equity

$          20,441

 

$          20,152

 

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 
 

For the Quarters Ended

 

For the Nine Months Ended

 

June 26,

 

June 27,

 

June 26,

 

June 27,

 

2015

 

2014

 

2015

 

2014

 

(in millions)

Cash Flows From Operating Activities:

             

Net income

$               309

 

$               403

 

$            1,380

 

$            1,118

(Income) loss from discontinued operations, net of income taxes

42

 

(56)

 

(278)

 

(118)

Income from continuing operations

351

 

347

 

1,102

 

1,000

Adjustments to reconcile income from continuing operations to net cash 

             

provided by operating activities:

             

Depreciation and amortization

148

 

138

 

455

 

408

Non-cash restructuring charges

-

 

8

 

15

 

14

Deferred income taxes

(52)

 

8

 

(106)

 

52

Provision for losses on accounts receivable and inventories

7

 

5

 

35

 

34

  Tax sharing (income) expense

(12)

 

(8)

 

62

 

(59)

Share-based compensation expense

21

 

18

 

65

 

58

Other 

13

 

11

 

59

 

46

Changes in assets and liabilities, net of the effects of acquisitions and divestitures:

             

Accounts receivable, net

(106)

 

(63)

 

(125)

 

(167)

Inventories

(38)

 

7

 

(218)

 

(88)

Prepaid expenses and other current assets

24

 

(10)

 

35

 

(29)

Accounts payable

(18)

 

4

 

(29)

 

54

Accrued and other current liabilities

35

 

(148)

 

(206)

 

(357)

Deferred revenue

84

 

62

 

4

 

52

Income taxes

42

 

23

 

(90)

 

95

Other

25

 

-

 

21

 

29

Net cash provided by continuing operating activities

524

 

402

 

1,079

 

1,142

Net cash provided by discontinued operating activities

72

 

98

 

210

 

192

Net cash provided by operating activities

596

 

500

 

1,289

 

1,334

Cash Flows From Investing Activities:

             

Capital expenditures

(134)

 

(164)

 

(425)

 

(445)

Proceeds from sale of property, plant, and equipment

4

 

4

 

10

 

25

Acquisition of businesses, net of cash acquired

3

 

-

 

(1,726)

 

(18)

Other

-

 

(4)

 

(2)

 

(4)

Net cash used in continuing investing activities

(127)

 

(164)

 

(2,143)

 

(442)

Net cash used in discontinued investing activities

(8)

 

(9)

 

(22)

 

(29)

Net cash used in investing activities

(135)

 

(173)

 

(2,165)

 

(471)

Cash Flows From Financing Activities:

             

Net increase (decrease) in commercial paper

(105)

 

-

 

(197)

 

25

Proceeds from issuance of long-term debt

-

 

-

 

617

 

323

Repayment of long-term debt

-

 

-

 

(473)

 

(360)

Proceeds from exercise of share options

9

 

31

 

97

 

140

Repurchase of common shares

(226)

 

(60)

 

(511)

 

(452)

Payment of common share dividends to shareholders

(134)

 

(119)

 

(370)

 

(324)

Transfer from discontinued operations

64

 

89

 

188

 

163

Other

-

 

(2)

 

(2)

 

(2)

Net cash used in continuing financing activities

(392)

 

(61)

 

(651)

 

(487)

Net cash used in discontinued financing activities

(64)

 

(89)

 

(188)

 

(163)

Net cash used in financing activities

(456)

 

(150)

 

(839)

 

(650)

Effect of currency translation on cash

(1)

 

7

 

(41)

 

(3)

Net increase (decrease) in cash and cash equivalents

4

 

184

 

(1,756)

 

210

Cash and cash equivalents at beginning of period

697

 

1,429

 

2,457

 

1,403

Cash and cash equivalents at end of period

$               701

 

$            1,613

 

$               701

 

$            1,613

               

Supplemental Cash Flow Information:

             

Interest paid

$                 46

 

$                 46

 

$               110

 

$               108

Income taxes paid, net of refunds

111

 

71

 

281

 

185

               

Reconciliation to Free Cash Flow:

             

Net cash provided by continuing operating activities

$               524

 

$               402

 

$            1,079

 

$            1,142

Capital expenditures, net

(130)

 

(160)

 

(415)

 

(420)

Payments (receipts) related to pre-separation U.S. tax matters, net

(3)

 

200

 

23

 

179

Free cash flow (1)

$               391

 

$               442

 

$               687

 

$               901

               

(1) Free cash flow is a non-GAAP measure.  See description of non-GAAP measures contained in this release.

 

 

TE CONNECTIVITY LTD.

 

CONSOLIDATED SEGMENT DATA (UNAUDITED)

 
                               
                               
 

For the Quarters Ended 

   

For the Nine Months Ended 

 
 

June 26,

   

June 27,

   

June 26,

   

June 27,

 
 

2015

   

2014

   

2015

   

2014

 
 

($ in millions)

   

Net Sales:

                             

Transportation Solutions

$            1,621

     

$            1,586

     

$            4,843

     

$            4,597

   

Industrial Solutions

806

     

849

     

2,387

     

2,401

   

Communications Solutions

691

     

640

     

2,019

     

1,903

   

Total

$            3,118

     

$            3,075

     

$            9,249

     

$            8,901

   
                               
                               

Operating Income:

                             

Transportation Solutions

$               303

18.7

%

$               325

20.5

%

$               921

19.0

%

$               948

20.6

%

Industrial Solutions

98

12.2

   

121

14.3

   

268

11.2

   

318

13.2

 

Communications Solutions

68

9.8

   

18

2.8

   

153

7.6

   

88

4.6

 

Total

$               469

15.0

%

$               464

15.1

%

$            1,342

14.5

%

$            1,354

15.2

%

                               
                               

Adjusted Operating Income (1):

                             

Transportation Solutions

$               317

19.6

%

$               325

20.5

%

$               987

20.4

%

$               948

20.6

%

Industrial Solutions

109

13.5

   

123

14.5

   

319

13.4

   

327

13.6

 

Communications Solutions

71

10.3

   

27

4.2

   

198

9.8

   

96

5.0

 

Total

$               497

15.9

%

$               475

15.4

%

$            1,504

16.3

%

$            1,371

15.4

%

                               

(1) Adjusted operating income is a non-GAAP measure. See description of non-GAAP measures contained in this release.

   

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NET SALES GROWTH (UNAUDITED)

                                 
                                 
                                 
                             

Percentage of

                             

Segment's Total

 

Change in Net Sales for the Quarter Ended June 26, 2015

 

Net Sales for the

 

 versus Net Sales for the Quarter Ended June 27, 2014

 

Quarter Ended

 

Organic (1) 

   

Translation (2)

 

Acquisitions

 

Total

   

June 26, 2015

 

($ in millions)

     

Transportation Solutions (3):

                               

Automotive

$               73

 

5.7

%

$            (149)

 

$                  -

 

$             (76)

 

(5.9)

%

75

%

Commercial Transportation

(13)

 

(5.2)

   

(20)

 

-

 

(33)

 

(13.8)

   

13

 

Sensors

2

 

4.3

   

(5)

 

147

 

144

 

288.0

   

12

 

Total

62

 

3.9

   

(174)

 

147

 

35

 

2.2

   

100

%

Industrial Solutions (3):

                               

Industrial Equipment

4

 

1.0

   

(28)

 

20

 

(4)

 

(1.1)

   

43

 

Aerospace, Defense, Oil, and Gas

(15)

 

(5.0)

   

(23)

 

25

 

(13)

 

(4.5)

   

35

 

Energy

-

 

-

   

(26)

 

-

 

(26)

 

(12.5)

   

22

 

Total

(11)

 

(1.3)

   

(77)

 

45

 

(43)

 

(5.1)

   

100

%

Communications Solutions (3):

                               

Data and Devices

(66)

 

(16.1)

   

(17)

 

-

 

(83)

 

(20.2)

   

48

 

Appliances

(6)

 

(3.3)

   

(10)

 

-

 

(16)

 

(9.0)

   

23

 

Subsea Communications

150

 

288.5

   

-

 

-

 

150

 

288.5

   

29

 

Total

78

 

12.2

   

(27)

 

-

 

51

 

8.0

   

100

%

Total 

$             129

 

4.2

%

 

$            (278)

 

$             192

 

$               43

 

1.4

%

     
                                 
                               
                             

Percentage of

                             

Segment's Total

 

Change in Net Sales for the Nine Months Ended June 26, 2015

 

Net Sales for the

 

 versus Net Sales for the Nine Months Ended June 27, 2014

 

Nine Months Ended

 

Organic (1) 

   

Translation (2)

 

Acquisitions

 

Total

   

June 26, 2015

 

($ in millions)

     

Transportation Solutions (3):

                               

Automotive

$             216

 

5.8

%

$            (336)

 

$                  -

 

$           (120)

 

(3.2)

%

75

%

Commercial Transportation

(1)

 

(0.1)

   

(46)

 

-

 

(47)

 

(7.0)

   

13

 

Sensors

6

 

4.5

   

(14)

 

421

 

413

 

280.9

   

12

 

Total

221

 

4.8

   

(396)

 

421

 

246

 

5.4

   

100

%

Industrial Solutions (3):

                               

Industrial Equipment

23

 

2.4

   

(67)

 

23

 

(21)

 

(2.1)

   

41

 

Aerospace, Defense, Oil, and Gas

19

 

2.4

   

(52)

 

94

 

61

 

7.5

   

37

 

Energy

8

 

1.4

   

(62)

 

-

 

(54)

 

(9.2)

   

22

 

Total

50

 

2.1

   

(181)

 

117

 

(14)

 

(0.6)

   

100

%

Communications Solutions (3):

                               

Data and Devices

(141)

 

(11.6)

   

(40)

 

-

 

(181)

 

(14.9)

   

51

 

Appliances

14

 

2.8

   

(25)

 

-

 

(11)

 

(2.2)

   

24

 

Subsea Communications

308

 

155.6

   

-

 

-

 

308

 

155.6

   

25

 

Total

181

 

9.5

   

(65)

 

-

 

116

 

6.1

   

100

%

Total 

$             452

 

5.1

%

 

$            (642)

 

$             538

 

$             348

 

3.9

%

     
                                 

(1) Represents the change in net sales resulting from volume and price changes, before consideration of acquisitions, divestitures, and the impact of changes in foreign currency exchange rates. Organic net sales growth is a non-GAAP measure. See description of non-GAAP measures contained in this release.

 

(2) Represents the change in net sales resulting from changes in foreign currency exchange rates.

 

(3) Industry end market information is presented consistently with our internal management reporting and may be periodically revised as management deems necessary.

 

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended June 26, 2015

(UNAUDITED)

                   
                   
                   
     

Adjustments

   
     

Acquisition

 

Restructuring

       
     

Related

 

and Other

 

Tax

 

Adjusted

 

U.S. GAAP

 

Charges (1)

 

Charges, Net

 

Items

 

(Non-GAAP) (2)

 

($ in millions, except per share data)

Operating Income:

                 

Transportation Solutions

$               303

 

$                   5

 

$                   9

 

$                    -

 

$               317

Industrial Solutions

98

 

5

 

6

 

-

 

109

Communications Solutions

68

 

-

 

3

 

-

 

71

    Total 

$               469

 

$                 10

 

$                 18

 

$                    -

 

$               497

                   

Operating Margin

15.0%

             

15.9%

                   

Other Income, Net

$                 11

 

$                    -

 

$                    -

 

$                  (5)

 

$                   6

                   

Income Tax Expense

$              (100)

 

$                  (5)

 

$                   1

 

$                    -

 

$              (104)

                   

Income from Continuing Operations 

                 

   Attributable to TE Connectivity Ltd.

$               351

 

$                   5

 

$                 19

 

$                  (5)

 

$               370

                   

Diluted Earnings per Share from 

                 

   Continuing Operations Attributable 

                 

   to TE Connectivity Ltd.

$              0.85

 

$              0.01

 

$              0.05

 

$             (0.01)

 

$              0.90

                   

(1) Includes $8 million of acquisition and integration costs, $1 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, and $1 million of restructuring costs. 

(2) See description of non-GAAP measures contained in this release.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended June 27, 2014

(UNAUDITED)

               
               
               
     

Adjustments

   
     

Acquisition

 

Restructuring

   
     

Related

 

and Other

 

Adjusted

 

U.S. GAAP

 

Charges

 

Charges, Net

 

(Non-GAAP) (1)

 

($ in millions, except per share data)

Operating Income:

             

Transportation Solutions

$               325

 

$                    -

 

$                    -

 

$               325

Industrial Solutions

121

 

1

 

1

 

123

Communications Solutions

18

 

-

 

9

 

27

    Total 

$               464

 

$                   1

 

$                 10

 

$               475

               

Operating Margin

15.1%

         

15.4%

               

Other Income, Net

$                   9

 

$                    -

 

$                    -

 

$                   9

               

Income Tax Expense

$              (102)

 

$                    -

 

$                  (3)

 

$              (105)

               

Income from Continuing Operations 

             

   Attributable to TE Connectivity Ltd.

$               347

 

$                   1

 

$                   7

 

$               355

               

Diluted Earnings per Share from 

             

   Continuing Operations Attributable 

             

   to TE Connectivity Ltd.

$              0.83

 

$                    -

 

$              0.02

 

$              0.85

               

(1) See description of non-GAAP measures contained in this release.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Nine Months Ended June 26, 2015

(UNAUDITED)

                   
                   
                   
     

Adjustments

   
     

Acquisition

 

Restructuring

       
     

Related

 

and Other

 

Tax

 

Adjusted

 

U.S. GAAP

 

Charges (1)

 

Charges, Net (2)

 

Items (3)

 

(Non-GAAP) (4)

 

($ in millions, except per share data)

Operating Income:

                 

Transportation Solutions

$               921

 

$                 56

 

$                 10

 

$                    -

 

$               987

Industrial Solutions

268

 

27

 

24

 

-

 

319

Communications Solutions

153

 

-

 

45

 

-

 

198

    Total 

$            1,342

 

$                 83

 

$                 79

 

$                    -

 

$            1,504

                   

Operating Margin

14.5%

             

16.3%

                   

Other Income (Expense), Net

$                (64)

 

$                    -

 

$                    -

 

$                 89

 

$                 25

                   

Income Tax Expense

$                (85)

 

$                (23)

 

$                   8

 

$              (224)

 

$              (324)

                   

Income from Continuing Operations 

                 

   Attributable to TE Connectivity Ltd.

$            1,102

 

$                 60

 

$                 87

 

$              (135)

 

$            1,114

                   

Diluted Earnings per Share from 

                 

   Continuing Operations Attributable 

                 

   to TE Connectivity Ltd.

$              2.67

 

$              0.15

 

$              0.21

 

$             (0.33)

 

$              2.70

                   

(1) Includes $46 million of acquisition and integration costs, $34 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, and $3 million of restructuring costs. 

(2) Includes an income tax charge for the estimated tax impacts of certain intercompany dividends related to the restructuring and anticipated sale of the Broadband Network Solutions business.

(3) Includes $202 million of income tax benefits associated with the settlement of audits of prior year income tax returns as well as the related impact of $89 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax benefits related to the impacts of certain non-U.S. tax law changes and the associated reduction in the valuation allowance for tax loss carryforwards.

(4) See description of non-GAAP measures contained in this release.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Nine Months Ended June 27, 2014

(UNAUDITED)

                   
                   
                   
     

Adjustments

   
     

Acquisition

 

Restructuring

       
     

Related

 

and Other

 

Tax

 

Adjusted

 

U.S. GAAP

 

Charges

 

Charges, Net

 

Items (1)

 

(Non-GAAP) (2)

 

($ in millions, except per share data)

Operating Income:

                 

Transportation Solutions

$               948

 

$                    -

 

$                    -

 

$                    -

 

$               948

Industrial Solutions

318

 

2

 

7

 

-

 

327

Communications Solutions

88

 

-

 

8

 

-

 

96

    Total 

$            1,354

 

$                   2

 

$                 15

 

$                    -

 

$            1,371

                   

Operating Margin

15.2%

             

15.4%

                   

Other Income, Net

$                 57

 

$                    -

 

$                    -

 

$                (39)

 

$                 18

                   

Income Tax Expense

$              (331)

 

$                    -

 

$                  (7)

 

$                 43

 

$              (295)

                   

Income from Continuing Operations 

                 

   Attributable to TE Connectivity Ltd.

$            1,000

 

$                   2

 

$                   8

 

$                   4

 

$            1,014

                   

Diluted Earnings per Share from 

                 

   Continuing Operations Attributable 

                 

   to TE Connectivity Ltd.

$              2.40

 

$                    -

 

$              0.02

 

$              0.01

 

$              2.43

                   

(1) Includes income tax expense related to adjustments to prior year income tax returns. In addition, other income includes amounts related to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters, including $18 million related to our share of a settlement agreement entered into by Tyco International with a former subsidiary.

(2) See description of non-GAAP measures contained in this release.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended September 26, 2014

(UNAUDITED)

                   
                   
                   
     

Adjustments

   
     

Acquisition

 

Restructuring

       
     

Related

 

and Other

 

Tax

 

Adjusted

 

U.S. GAAP

 

Charges (1)

 

Charges, Net

 

Items (2)

 

(Non-GAAP) (3)

 

($ in millions, except per share data)

Operating Income:

                 

Transportation Solutions

$               297

 

$                   4

 

$                   4

 

$                    -

 

$               305

Industrial Solutions

113

 

29

 

-

 

-

 

142

Communications Solutions

41

 

-

 

-

 

-

 

41

    Total 

$               451

 

$                 33

 

$                   4

 

$                    -

 

$               488

                   

Operating Margin

14.7%

             

15.9%

                   

Other Income, Net

$                   6

 

$                    -

 

$                    -

 

$                    -

 

$                   6

                   

Income Tax (Expense) Benefit

$               185

 

$                  (7)

 

$                   3

 

$              (282)

 

$              (101)

                   

Income from Continuing Operations 

                 

   Attributable to TE Connectivity Ltd.

$               614

 

$                 26

 

$                   7

 

$              (282)

 

$               365

                   

Diluted Earnings per Share from 

                 

   Continuing Operations Attributable 

                 

   to TE Connectivity Ltd.

$              1.48

 

$              0.06

 

$              0.02

 

$             (0.68)

 

$              0.88

                   

(1) Includes $29 million of acquisition and integration costs and $4 million of non-cash amortization associated with fair value adjustments primarily related to acquired inventories and customer order backlog recorded in cost of sales.

(2) Income tax benefits recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards.

(3) See description of non-GAAP measures contained in this release.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Year Ended September 26, 2014

(UNAUDITED)

                   
                   
                   
     

Adjustments

   
     

Acquisition

 

Restructuring

       
     

Related

 

and Other

 

Tax

 

Adjusted

 

U.S. GAAP

 

Charges (1)

 

Charges, Net

 

Items (2)

 

(Non-GAAP) (3)

 

($ in millions, except per share data)

Operating Income:

                 

Transportation Solutions

$            1,245

 

$                   4

 

$                   4

 

$                    -

 

$            1,253

Industrial Solutions

431

 

31

 

7

 

-

 

469

Communications Solutions

129

 

-

 

8

 

-

 

137

    Total 

$            1,805

 

$                 35

 

$                 19

 

$                    -

 

$            1,859

                   

Operating Margin

15.1%

             

15.5%

                   

Other Income, Net

$                 63

 

$                    -

 

$                    -

 

$                (39)

 

$                 24

                   

Income Tax Expense

$              (146)

 

$                  (7)

 

$                  (4)

 

$              (239)

 

$              (396)

                   

Income from Continuing Operations 

                 

   Attributable to TE Connectivity Ltd.

$            1,614

 

$                 28

 

$                 15

 

$              (278)

 

$            1,379

                   

Diluted Earnings per Share from 

                 

   Continuing Operations Attributable 

                 

   to TE Connectivity Ltd.

$              3.87

 

$              0.07

 

$              0.04

 

$             (0.67)

 

$              3.31

                   

(1) Includes $31 million of acquisition and integration costs and $4 million of non-cash amortization associated with fair value adjustments primarily related to acquired inventories and customer order backlog recorded in cost of sales.

(2) Includes income tax benefits of $282 million recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards and income tax expense related to adjustments to prior year income tax returns. In addition, other income includes amounts related to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters, including $18 million related to our share of a settlement agreement entered into by Tyco International with a former subsidiary.

(3) See description of non-GAAP measures contained in this release.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES

TO FORWARD-LOOKING GAAP FINANCIAL MEASURES

As of July 22, 2015

(UNAUDITED)

       
 

Outlook for the

   
 

Quarter Ending

   
 

September 25,

 

 Outlook for 

 

2015

 

 Fiscal 2015 

Diluted earnings per share from continuing operations attributable to TE 

     

    Connectivity Ltd. (GAAP)

 $0.81 - 0.87 

 

 $3.48 - 3.54 

Restructuring and other charges, net

0.06

 

0.27

Acquisition related charges

0.03

 

0.18

Tax items

-

 

(0.33)

 Adjusted diluted earnings per share from continuing operations attributable to TE 

     

    Connectivity Ltd. (non-GAAP) (1)

 $0.90 - 0.96 

 

 $3.60 - 3.66 

       
       

Net sales growth (GAAP)

 (2) - 3% 

 

 3 - 4% 

Translation

8

 

8

(Acquisitions) divestitures

(6)

 

(7)

 Organic net sales growth (non-GAAP) (1)

 0 - 5% 

 

 4 - 5% 

       
       

(1) See description of non-GAAP measures contained in this release.

     

 

 

TE CONNECTIVITY LTD.

IMPACT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES

(UNAUDITED)

 
     

As of July 22, 2015

 

For the

 

Outlook for the

   
 

Quarter Ended

 

Quarter Ending

   
 

June 26,

 

September 25,

 

 Outlook for 

 

2015

 

2015

 

 Fiscal 2015 

           

Adjusted diluted earnings per share from continuing operations

         

    attributable to TE Connectivity Ltd., excluding the impact of changes in

         

    foreign currency exchange rates (non-GAAP) (1)

$1.00

 

 $1.00 - 1.06 

 

 $3.92 - 3.98 

Impact of changes in foreign currency exchange rates

(0.10)

 

(0.10)

 

(0.32)

Adjusted diluted earnings per share from continuing operations

         

       attributable to TE Connectivity Ltd. (non-GAAP) (1)

$0.90

 

 $0.90 - 0.96 

 

 $3.60 - 3.66 

           
           

(1) See description of non-GAAP measures contained in this release.

 

 

 

TE Connectivity Ltd. Logo.

 

TE Connectivity Chairman & CEO Tom Lynch

 

TE Connectivity CFO Bob Hau

 

SOURCE TE Connectivity Ltd.

For further information: Media Relations: Jane Crawford, TE Connectivity, 610-893-9689, Jane.crawford@te.com; Investor Relations: Sujal Shah, TE Connectivity, 610-893-9790, Sujal.shah@te.com


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