TE Connectivity Reports Fiscal Fourth Quarter and Full Year Results

Oct 28, 2015

SCHAFFHAUSEN, Switzerland, Oct. 28, 2015 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal fourth quarter and year ended September 25, 2015.

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Fourth Quarter Highlights                                                                                        

  • Net sales were $2.98 billion, down 3 percent versus the prior year and flat organically, and up 6 percent in constant currency
  • Adjusted Earnings Per Share (EPS) from continuing operations were $0.90, up 2 percent versus the prior year and up 15 percent in constant currency
  • Diluted Earnings Per Share from continuing operations (GAAP EPS) were $0.34 versus $1.48 in the prior year primarily due to tax items
  • Returned $759 million to shareholders through dividends and share repurchases

Full Year Highlights

  • Net sales increased to $12.2 billion, up 4 percent organically versus the prior year; up 10 percent in constant currency
  • Adjusted Earnings Per Share (EPS) from continuing operations were $3.60, up 9 percent versus the prior year and up 19 percent in constant currency
  • Diluted Earnings Per Share from continuing operations (GAAP EPS) were $3.01 versus $3.87 in the prior year primarily due to tax items
  • Returned $1.7 billion to shareholders including $1.2 billion in share repurchases
  • Strengthened portfolio with four acquisitions and Broadband Network Solutions (BNS) divestiture; established TE as a leader in the attractive sensors market; increased harsh environment businesses to 80 percent of sales.

Tom Lynch, TE Connectivity Chairman and CEO stated, "For the full year, we delivered strong performance in a challenging macro environment. Sales were up 4 percent organically, and 10 percent on a constant currency basis due to the continued strength in our Automotive, Appliances, Commercial Air, SubCom and Sensors businesses. This more than offset approximately $1 billion in unfavorable foreign exchange translation, the precipitous decline in the Oil and Gas market, and a slowdown in China during the last two quarters of the fiscal year. We expanded adjusted operating margins by 80 bps and grew adjusted EPS 19 percent on a constant currency basis for the year due to strong execution, the strength of our harsh environment portfolio and productivity improvements driven by our TE Operating Advantage (TEOA) business system.

"In fiscal year 2015, we made good progress on our strategy," said Lynch. "We completed four acquisitions, strengthening our leadership position in harsh environment solutions and establishing a leading Sensors business. We also sold our BNS business for $3 billion and are returning the vast majority of proceeds to shareholders. We ended the year with 80 percent of our portfolio focused on harsh environment applications, and 90 percent of our sales driven by connectivity and sensor solutions.

"In fiscal year 2016, we expect sales between $12.0 and $12.8 billion, up 1 percent on an actual basis and 3 percent organically at the midpoint of the range," said Lynch. "This guidance reflects continued growth in the majority of our harsh environment businesses for the year, offset by softness in China and several Industrial markets in the first half of the fiscal year. We expect inventories to get back in balance and China markets to return to growth in our second half. Despite this challenging environment, we expect to deliver fiscal 2016 adjusted EPS of $3.80 to $4.20, up 11 percent at the midpoint of the range."

FISCAL FOURTH QUARTER RESULTS
The company reported net sales of $2.98 billion compared to prior year sales of $3.07 billion. Adjusted EPS were $0.90, compared to $0.88 in the prior year. GAAP EPS were $0.34, compared to $1.48 in the prior year. GAAP EPS included $228 million of tax items, acquisition related charges, and restructuring and other charges. Free cash flow was $389 million for the quarter.

Excluding SubCom, total company orders were $2.6 billion and the book-to-bill ratio was 0.95.

OUTLOOK 
For the fiscal first quarter 2016, the company expects net sales of $2.7 billion to $2.9 billion, reflecting a decline of 8 percent on an actual basis and down 4 percent on an organic basis year over year at the mid-point. The company expects adjusted EPS of $0.72 to $0.80 which represents a 15 percent decline at the mid-point. GAAP EPS are expected to be $0.62 to $0.70, including restructuring and other charges of $0.08 and acquisition related charges of $0.02. This outlook includes foreign exchange headwinds, reducing expected sales by $167 million and adjusted EPS by $0.05 year over year.

For the full year, the company expects net sales of $12.0 to $12.8 billion, reflecting 1 percent actual and 3 percent organic growth versus prior year at the mid-point; and adjusted EPS of $3.80 to $4.20 reflecting double-digit growth versus the prior year. GAAP EPS are expected to be $3.61 to $4.01, including restructuring and other charges of $0.16, and acquisition related charges of $0.03. The outlook includes foreign exchange headwinds, reducing expected sales by $262 million and adjusted EPS by $0.10 year over year as well as the impact of a 53rd week. 

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 today beginning at 8:30 a.m. EDT. The dial-in information is provided here:

  • 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 dial-in number in the United States is (800) 230-1074, 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. EDT on October 28, 2015, and ending at 11:59 p.m. EST on November 4, 2015. 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 367168.

NON-GAAP MEASURES 
"Organic Sales Growth," "Sales in Constant Currency," "Adjusted Operating Income," "Adjusted Operating Income in Constant Currency," "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.
  • Sales in Constant Currency – represents net sales (the most comparable GAAP measure) excluding the impact of fluctuations in foreign currency exchange rates between periods. We believe constant currency information provides valuable supplemental information regarding our net sales.
  • 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 Income in Constant Currency – represents Adjusted Operating Income excluding the impact of fluctuations in foreign currency exchange rates between periods. We believe constant currency information provides valuable supplemental information regarding our operating income.
  • 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 constant currency information provides valuable supplemental information regarding our earnings per share.
  • 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 expected use of proceeds received from the 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 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 we do not realize the anticipated benefits from the sale of the Broadband Network Solutions business. 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.

ABOUT TE CONNECTIVITY    
TE Connectivity (NYSE: TEL) is a $12 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 72,000 people, including 7,200 engineers, partner with customers in approximately 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 Years Ended

 

September 25,

 

September 26,

 

September 25,

 

September 26,

 

2015

 

2014

 

2015

 

2014

 

(in millions, except per share data)

Net sales

$            2,984

 

$            3,072

 

$          12,233

 

$          11,973

Cost of sales 

2,016

 

2,058

 

8,146

 

8,001

Gross margin

968

 

1,014

 

4,087

 

3,972

Selling, general, and administrative expenses

334

 

380

 

1,504

 

1,534

Research, development, and engineering expenses

148

 

150

 

627

 

583

Acquisition and integration costs

9

 

29

 

55

 

31

Restructuring and other charges, net

70

 

4

 

152

 

19

   Operating income  

407

 

451

 

1,749

 

1,805

Interest income

4

 

6

 

17

 

19

Interest expense

(32)

 

(34)

 

(136)

 

(127)

Other income (expense), net

9

 

6

 

(55)

 

63

   Income from continuing operations before income taxes

388

 

429

 

1,575

 

1,760

Income tax (expense) benefit

(252)

 

185

 

(337)

 

(146)

   Income from continuing operations

136

 

614

 

1,238

 

1,614

Income from discontinued operations, net of income taxes

904

 

49

 

1,182

 

167

Net income attributable to TE Connectivity Ltd.

$            1,040

 

$               663

 

$            2,420

 

$            1,781

               

Basic earnings per share attributable to TE Connectivity Ltd.:

             

   Income from continuing operations

$              0.34

 

$              1.50

 

$              3.06

 

$              3.94

   Income from discontinued operations

2.26

 

0.12

 

2.92

 

0.41

   Net income  

2.60

 

1.62

 

5.98

 

4.34

               

Diluted earnings per share attributable to TE Connectivity Ltd.:

             

   Income from continuing operations

$              0.34

 

$              1.48

 

$              3.01

 

$              3.87

   Income from discontinued operations

2.23

 

0.12

 

2.88

 

0.40

   Net income  

2.57

 

1.59

 

5.89

 

4.27

               

Dividends paid per common share

$              0.33

 

$              0.29

 

$              1.24

 

$              1.08

               

Weighted-average number of shares outstanding: 

             

   Basic

400

 

409

 

405

 

410

   Diluted

405

 

416

 

411

 

417

 

 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

       
       
 

September 25,

 

September 26,

 

2015

 

2014

 

(in millions, except share data)

Assets

     

Current assets:

     

Cash and cash equivalents

$            3,329

 

$            2,457

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

2,120

 

2,057

Inventories

1,615

 

1,509

Prepaid expenses and other current assets

478

 

519

Deferred income taxes

345

 

324

Assets held for sale

-

 

2,013

  Total current assets

7,887

 

8,879

Property, plant, and equipment, net

2,920

 

2,920

Goodwill

4,824

 

3,726

Intangible assets, net

1,555

 

1,087

Deferred income taxes

2,144

 

2,047

Receivable from Tyco International plc and Covidien plc

964

 

1,037

Other assets

314

 

456

Total Assets

$          20,608

 

$          20,152

       

Liabilities and Equity

     

Current liabilities:

     

Current maturities of long-term debt

$               500

 

$               577

Accounts payable

1,143

 

1,230

Accrued and other current liabilities

1,749

 

1,594

Deferred revenue

185

 

176

Liabilities held for sale

-

 

416

Total current liabilities

3,577

 

3,993

Long-term debt

3,403

 

3,281

Long-term pension and postretirement liabilities

1,327

 

1,280

Deferred income taxes

329

 

229

Income taxes

1,954

 

2,044

Other liabilities

433

 

312

Total Liabilities

11,023

 

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

4,359

 

5,231

Accumulated earnings 

6,673

 

4,253

Treasury shares, at cost, 20,071,089 and 11,383,631 shares, respectively

(1,256)

 

(644)

Accumulated other comprehensive loss

(373)

 

(17)

Total TE Connectivity Ltd. shareholders' equity

9,585

 

9,007

Noncontrolling interests

-

 

6

Total Equity

9,585

 

9,013

Total Liabilities and Equity

$          20,608

 

$          20,152

 

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 
 

For the Quarters Ended

 

For the Years Ended

 

September 25,

 

September 26,

 

September 25,

 

September 26,

 

2015

 

2014

 

2015

 

2014

 

(in millions)

Cash Flows From Operating Activities:

             

Net income

$            1,040

 

$               663

 

$            2,420

 

$            1,781

Income from discontinued operations, net of income taxes

(904)

 

(49)

 

(1,182)

 

(167)

Income from continuing operations

136

 

614

 

1,238

 

1,614

Adjustments to reconcile income from continuing operations to net cash 

             

provided by operating activities:

             

Depreciation and amortization

161

 

143

 

616

 

551

Non-cash restructuring charges

6

 

2

 

21

 

16

Deferred income taxes

146

 

(333)

 

40

 

(281)

Provision for losses on accounts receivable and inventories

1

 

-

 

36

 

34

Tax sharing (income) expense

(10)

 

(6)

 

52

 

(65)

Share-based compensation expense

24

 

19

 

89

 

77

Other 

46

 

4

 

105

 

50

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

             

Accounts receivable, net

(85)

 

(15)

 

(210)

 

(182)

Inventories

(2)

 

(10)

 

(220)

 

(98)

Prepaid expenses and other current assets

1

 

15

 

36

 

(14)

Accounts payable

7

 

17

 

(22)

 

71

Accrued and other current liabilities

51

 

77

 

(155)

 

(280)

Deferred revenue

8

 

61

 

12

 

113

Income taxes

38

 

72

 

(52)

 

167

Other

12

 

2

 

33

 

31

Net cash provided by continuing operating activities

540

 

662

 

1,619

 

1,804

Net cash provided by discontinued operating activities

84

 

87

 

294

 

279

Net cash provided by operating activities

624

 

749

 

1,913

 

2,083

Cash Flows From Investing Activities:

             

Capital expenditures

(175)

 

(190)

 

(600)

 

(635)

Proceeds from sale of property, plant, and equipment

7

 

104

 

17

 

129

Acquistion of businesses, net of cash acquired

1

 

(504)

 

(1,725)

 

(522)

Proceeds from sale of discontinued operations, net of cash retained by sold operations

2,957

 

-

 

2,957

 

-

Other

14

 

(6)

 

12

 

(10)

Net cash provided by (used in) continuing investing activities

2,804

 

(596)

 

661

 

(1,038)

Net cash used in discontinued investing activities

(3)

 

(8)

 

(25)

 

(37)

Net cash provided by (used in) investing activities

2,801

 

(604)

 

636

 

(1,075)

Cash Flows From Financing Activities:

             

Net decrease in commercial paper

(131)

 

(48)

 

(328)

 

(23)

Proceeds from issuance of long-term debt

-

 

999

 

617

 

1,322

Repayment of long-term debt

-

 

-

 

(473)

 

(360)

Proceeds from exercise of share options

6

 

16

 

103

 

156

Repurchase of common shares

(512)

 

(126)

 

(1,023)

 

(578)

Payment of common share dividends to shareholders

(132)

 

(119)

 

(502)

 

(443)

Transfer from discontinued operations

81

 

79

 

269

 

242

Other

2

 

(7)

 

-

 

(9)

Net cash provided by (used in) continuing financing activities

(686)

 

794

 

(1,337)

 

307

Net cash used in discontinued financing activities

(81)

 

(79)

 

(269)

 

(242)

Net cash provided by (used in) financing activities

(767)

 

715

 

(1,606)

 

65

Effect of currency translation on cash

(30)

 

(16)

 

(71)

 

(19)

Net increase in cash and cash equivalents

2,628

 

844

 

872

 

1,054

Cash and cash equivalents at beginning of period

701

 

1,613

 

2,457

 

1,403

Cash and cash equivalents at end of period

$            3,329

 

$            2,457

 

$            3,329

 

$            2,457

               

Supplemental Cash Flow Information:

             

Interest paid

$                 18

 

$                 10

 

$               128

 

$               118

Income taxes paid, net of refunds

69

 

74

 

350

 

259

               

Reconciliation to Free Cash Flow:

             

Net cash provided by continuing operating activities

$               540

 

$               662

 

$            1,619

 

$            1,804

Capital expenditures, net

(168)

 

(86)

 

(583)

 

(506)

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

17

 

-

 

40

 

179

Free cash flow (1)

$               389

 

$               576

 

$            1,076

 

$            1,477

               

(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 Years Ended 

 

September 25,

 

September 26,

 

September 25,

 

September 26,

 

2015

 

2014

 

2015

 

2014

 

($ in millions)

Net Sales:

                             

Transportation Solutions

$            1,508

     

$            1,493

     

$            6,351

     

$            6,090

   

Industrial Solutions

792

     

901

     

3,179

     

3,302

   

Communications Solutions

684

     

678

     

2,703

     

2,581

   

Total

$            2,984

     

$            3,072

     

$          12,233

     

$          11,973

   
                               
                               

Operating Income:

                             

Transportation Solutions

$               272

18.0

%

 

$               297

19.9

%

 

$            1,193

18.8

%

 

$            1,245

20.4

%

Industrial Solutions

84

10.6

   

113

12.5

   

352

11.1

   

431

13.1

 

Communications Solutions

51

7.5

   

41

6.0

   

204

7.5

   

129

5.0

 

Total

$               407

13.6

%

 

$               451

14.7

%

 

$            1,749

14.3

%

 

$            1,805

15.1

%

                               
                               

Adjusted Operating Income (1):

                             

Transportation Solutions

$               306

20.3

%

 

$               305

20.4

%

 

$            1,293

20.4

%

 

$            1,253

20.6

%

Industrial Solutions

110

13.9

   

142

15.8

   

429

13.5

   

469

14.2

 

Communications Solutions

72

10.5

   

41

6.0

   

270

10.0

   

137

5.3

 

Total

$               488

16.4

%

 

$               488

15.9

%

 

$            1,992

16.3

%

 

$            1,859

15.5

%

                               

(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

 

Change in Net Sales for the Quarter Ended September 25, 2015

 

Segment's Total

 

 versus Net Sales for the Quarter Ended September 26, 2014

 

Net Sales for the

                         

Quarter Ended

 

Organic (1) 

   

Translation (2)

 

Acquisitions

 

Total

   

September 25, 2015

 

($ in millions)

     

Transportation Solutions (3):

                               

Automotive

$                 39

 

3.1

%

$              (135)

 

$                    -

 

$                (96)

 

(7.8)

%

75

%

Commercial Transportation

(8)

 

(3.8)

   

(18)

 

-

 

(26)

 

(12.2)

   

12

 

Sensors

(4)

 

(7.0)

   

(5)

 

146

 

137

 

263.5

   

13

 

Total

27

 

1.8

   

(158)

 

146

 

15

 

1.0

   

100

%

Industrial Solutions (3):

                               

Industrial Equipment

(12)

 

(3.1)

   

(28)

 

20

 

(20)

 

(5.5)

   

43

 

Aerospace, Defense, Oil, and Gas

(37)

 

(11.1)

   

(19)

 

5

 

(51)

 

(15.6)

   

35

 

Energy

(10)

 

(4.9)

   

(28)

 

-

 

(38)

 

(18.0)

   

22

 

Total

(59)

 

(6.5)

   

(75)

 

25

 

(109)

 

(12.1)

   

100

%

Communications Solutions (3):

                               

Data and Devices

(82)

 

(19.5)

   

(19)

 

-

 

(101)

 

(23.8)

   

47

 

Appliances

2

 

0.8

   

(11)

 

-

 

(9)

 

(5.4)

   

23

 

Subsea Communications

116

 

134.9

   

-

 

-

 

116

 

134.9

   

30

 

Total

36

 

5.3

   

(30)

 

-

 

6

 

0.9

   

100

%

Total 

$                   4

 

0.1

%

 

$              (263)

 

$               171

 

$                (88)

 

(2.9)

%

     
                                 
                               
                               
                             

Percentage of

 

Change in Net Sales for the Year Ended September 25, 2015

 

Segment's Total

 

 versus Net Sales for the Year Ended September 26, 2014

 

Net Sales for the

                             

Year Ended

 

Organic (1) 

   

Translation (2)

 

Acquisitions

 

Total

   

September 25, 2015

 

($ in millions)

     

Transportation Solutions (3):

                               

Automotive

$               256

 

5.1

%

$              (472)

 

$                    -

 

$              (216)

 

(4.3)

%

75

%

Commercial Transportation

(9)

 

(1.0)

   

(63)

 

-

 

(72)

 

(8.2)

   

13

 

Sensors

3

 

1.5

   

(21)

 

567

 

549

 

274.5

   

12

 

Total

250

 

4.1

   

(556)

 

567

 

261

 

4.3

   

100

%

Industrial Solutions (3):

                               

Industrial Equipment

12

 

0.9

   

(96)

 

43

 

(41)

 

(3.0)

   

42

 

Aerospace, Defense, Oil, and Gas

(17)

 

(1.5)

   

(71)

 

99

 

11

 

1.0

   

36

 

Energy

(2)

 

(0.3)

   

(91)

 

-

 

(93)

 

(11.7)

   

22

 

Total

(7)

 

(0.2)

   

(258)

 

142

 

(123)

 

(3.7)

   

100

%

Communications Solutions (3):

                               

Data and Devices

(224)

 

(13.6)

   

(60)

 

-

 

(284)

 

(17.3)

   

50

 

Appliances

15

 

2.3

   

(35)

 

-

 

(20)

 

(3.0)

   

24

 

Subsea Communications

426

 

150.5

   

-

 

-

 

426

 

150.5

   

26

 

Total

217

 

8.4

   

(95)

 

-

 

122

 

4.7

   

100

%

Total 

$               460

 

3.8

%

 

$              (909)

 

$               709

 

$               260

 

2.2

%

     
                                 

(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 September 25, 2015

(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

$               272

 

$                   5

 

$                 29

 

$                    -

 

$               306

Industrial Solutions

84

 

6

 

20

 

-

 

110

Communications Solutions

51

 

-

 

21

 

-

 

72

    Total 

$               407

 

$                 11

 

$                 70

 

$                    -

 

$               488

                   

Operating Margin

13.6%

             

16.4%

                   

Other Income, Net

$                   9

 

$                    -

 

$                    -

 

$                  (5)

 

$                   4

                   

Income Tax Expense

$              (252)

 

$                   1

 

$                (17)

 

$               168

 

$              (100)

                   

Income from Continuing Operations 

                 

   Attributable to TE Connectivity Ltd.

$               136

 

$                 12

 

$                 53

 

$               163

 

$               364

                   

Diluted Earnings per Share from 

                 

   Continuing Operations Attributable 

                 

   to TE Connectivity Ltd.

$              0.34

 

$              0.03

 

$              0.13

 

$              0.40

 

$              0.90

                   

(1) Includes $9 million of acquisition and integration costs and $2 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales. 

(2) Includes $216 million of income tax charges associated with the tax impacts of certain intercompany legal entity restructurings made in connection with our integration of Measurement Specialties, Inc.  Also includes $63 million of income tax benefits associated with the settlement of audits of prior year income tax returns.

(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 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 25, 2015

(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

$            1,193

 

$                 61

 

$                 39

 

$                    -

 

$            1,293

Industrial Solutions

352

 

33

 

44

 

-

 

429

Communications Solutions

204

 

-

 

66

 

-

 

270

    Total 

$            1,749

 

$                 94

 

$               149

 

$                    -

 

$            1,992

                   

Operating Margin

14.3%

             

16.3%

                   

Other Income (Expense), Net

$                (55)

 

$                    -

 

$                    -

 

$                 84

 

$                 29

                   

Income Tax Expense

$              (337)

 

$                (22)

 

$                (29)

 

$                (36)

 

$              (424)

                   

Income from Continuing Operations 

                 

   Attributable to TE Connectivity Ltd.

$            1,238

 

$                 72

 

$               120

 

$                 48

 

$            1,478

                   

Diluted Earnings per Share from 

                 

   Continuing Operations Attributable 

                 

   to TE Connectivity Ltd.

$              3.01

 

$              0.18

 

$              0.29

 

$              0.12

 

$              3.60

                   

(1) Includes $55 million of acquisition and integration costs, $36 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 $264 million of income tax benefits associated with the settlement of audits of prior year income tax returns as well as the related impact of $84 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes $216 million of income tax charges associated with the tax impacts of certain intercompany legal entity restructurings made in connection with our integration of Measurement Specialties, Inc. and $29 million of income tax charges for the tax impacts of certain intercompany dividends related to the restructuring and sale of the Broadband Network Solutions business.

(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 NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended December 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

$               295

 

$                 41

 

$                   1

 

$                    -

 

$               337

Industrial Solutions

86

 

10

 

2

 

-

 

98

Communications Solutions

44

 

-

 

22

 

-

 

66

    Total 

$               425

 

$                 51

 

$                 25

 

$                    -

 

$               501

                   

Operating Margin

13.9%

             

16.4%

                   

Other Income (Expense), Net

$                (70)

 

$                    -

 

$                    -

 

$                 83

 

$                 13

                   

Income Tax (Expense) Benefit

$               109

 

$                (14)

 

$                  (1)

 

$              (211)

 

$              (117)

                   

Income from Continuing Operations 

                 

   Attributable to TE Connectivity Ltd.

$               435

 

$                 37

 

$                 24

 

$              (128)

 

$               368

                   

Diluted Earnings per Share from 

                 

   Continuing Operations Attributable 

                 

   to TE Connectivity Ltd.

$              1.05

 

$              0.09

 

$              0.06

 

$             (0.31)

 

$              0.89

                   

(1) Includes $24 million of acquisition and integration costs and $27 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales.

(2) Includes $189 million of income tax benefits associated with the settlement of audits of prior year income tax returns as well as the related impact of $83 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.

(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 October 28, 2015

(UNAUDITED)

       
 

Outlook for

   
 

Quarter Ending

   
 

December 25,

 

 Outlook for 

 

2015

 

 Fiscal 2016 

Diluted earnings per share from continuing operations attributable to TE 

     

    Connectivity Ltd. (GAAP)

 $0.62 - $0.70 

 

 $3.61 - $4.01 

Restructuring and other charges, net

0.08

 

0.16

Acquisition related charges

0.02

 

0.03

Adjusted diluted earnings per share from continuing operations attributable to TE 

     

    Connectivity Ltd. (non-GAAP) (1)

 $0.72 -$0.80 

 

 $3.80 - $4.20 

       

Net sales growth (GAAP)

 (11) - (5)% 

 

 (2) - 4% 

Translation

 5 - 6 

 

2

(Acquisitions) divestitures

(1)

 

-

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

 (7) - 0% 

 

 0 - 6% 

       

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

     

 

 

TE CONNECTIVITY LTD.

IMPACT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES

(UNAUDITED)

 
           
           
     

Adjusted

   
     

Operating

   
 

Net Sales

 

Income (1)

 

Adjusted EPS (1)

 

(in millions, except per share data)

Quarter ended September 26, 2014

$               3,072

 

$                  488

 

$                 0.88

   Impact of changes in foreign currency exchange rates

(274)

(2)

(57)

 

(0.11)

   Operational performance

186

 

57

 

0.13

Quarter ended September 25, 2015

$               2,984

 

$                  488

 

$                 0.90

           
           
     

Adjusted

   
     

Operating

   
 

Net Sales

 

Income (1)

 

Adjusted EPS (1)

 

(in millions, except per share data)

Year ended September 26, 2014

$             11,973

 

$               1,859

 

$                 3.31

   Impact of changes in foreign currency exchange rates

(955)

(3)

(177)

 

(0.33)

   Operational performance

1,215

 

310

 

0.62

Year ended September 25, 2015

$             12,233

 

$               1,992

 

$                 3.60

           
           
 

Net Sales

 

Adjusted EPS (1)

   
 

(in millions, except per share data)

   

Quarter ended December 26, 2014

$               3,049

 

$                 0.89

   

   Impact of changes in foreign currency exchange rates

(167)

 

(0.05)

   

   Operational performance

(82)

 

(0.08)

   

Outlook for the quarter ending December 25, 2015 (4)

$               2,800

 

$                 0.76

   
           
           
 

Net Sales

 

Adjusted EPS (1)

   
 

(in millions, except per share data)

   

Year ended September 25, 2015

$             12,233

 

$                 3.60

   

   Impact of changes in foreign currency exchange rates

(262)

 

(0.10)

   

   Operational performance

429

 

0.50

   

Outlook for the year ending September 30, 2016 (4)

$             12,400

 

$                 4.00

   
           
           

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

(2) Includes $11 million impact of changes in foreign currency exchange rates on sales from acquisitions.

(3) Includes $46 million impact of changes in foreign currency exchange rates on sales from acquisitions.

(4) Outlook is as of October 28, 2015.

 

 

TE Connectivity Chairman & CEO Tom Lynch

 

TE Connectivity CFO Bob Hau

 

TE Connectivity President Terrence Curtin

 

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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