TE Connectivity Posts Solid Fiscal 2016 Second Quarter Results

Adjusted EPS of $0.90, above the mid-point of guidance; GAAP EPS of $1.06

Apr 20, 2016

SCHAFFHAUSEN, Switzerland, April 20, 2016 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal second quarter ended March 25, 2016.

Experience the interactive Multimedia News Release here: http://www.multivu.com/players/English/7815551-te-connectivity-q2-2016-earnings/

Tom Lynch, Chairman & CEO

Second Quarter Highlights

  • Net sales of $2.95 billion
  • Adjusted Earnings Per Share (EPS) were $0.90, above the mid-point of guidance
  • Diluted Earnings Per Share from Continuing Operations (GAAP EPS) were $1.06
  • Free cash flow was $165 million
  • Returned $1.2 billion to shareholders through share buybacks and dividends
  • Completed the acquisition of Creganna Medical Group (closed April 4, 2016), and the sale of the Circuit Protection business
  • Named a 2016 World's Most Ethical Company by Ethisphere Institute

"I am pleased we exceeded the midpoint of our adjusted EPS guidance range. The company continues to execute well in a sluggish global economic environment," said TE Connectivity Chairman and CEO Tom Lynch. "Organic growth in our Transportation Solutions segment and SubCom business was offset by continued weakness in industrial-related markets.

"We strengthened our harsh environment portfolio with the acquisition of Creganna and the sale of the Circuit Protection business. The Creganna acquisition doubles our medical business to about $500 million in revenue and establishes TE as a leader in the high-growth minimally invasive medical device market.

"For the full year, we are reiterating our adjusted EPS guidance of $4.00 at the midpoint, an increase of 11 percent over the prior year. This outlook reflects a return to sales growth in the second half of the fiscal year and continued benefits from our strong operating model."   

FISCAL SECOND QUARTER RESULTS

The company reported net sales of $2.95 billion, compared to prior year sales of $3.08 billion. Adjusted EPS were $0.90, compared to $0.91 in the prior year. GAAP EPS were $1.06, compared to $0.77 in the prior year. Free cash flow was $165 million for the quarter.

GAAP EPS included $64 million of income from net restructuring and other charges (credits) partially offset by $6 million of expense from acquisition related charges and tax items. 

Total company orders were $2.7 billion, up 1 percent sequentially, excluding SubCom. The book-to-bill ratio was 1.00, excluding SubCom.

OUTLOOK

For the fiscal third quarter 2016, the company expects net sales of $3.0 billion to $3.2 billion and adjusted EPS of $1.00 to $1.06. GAAP EPS are expected to be $0.90 to $0.96, including acquisition related charges of $0.03, and restructuring and other charges of $0.07.

For the full year, the company expects net sales of $12.1 billion to $12.5 billion and adjusted EPS of $3.90 to $4.10. GAAP EPS are expected to be $3.92 to $4.12, including acquisition related charges of $0.06, net restructuring and other credits of $0.01, and tax-related income of $0.07. The outlook includes the Creganna acquisition, reduced impact from foreign exchange headwinds and the impact of a 53rd week.

The outlook assumes foreign exchange and commodity rates that are consistent with current levels. 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.

OTHER ITEMS

Earlier today, the company announced the acquisition of Jaquet Technology Group AG (JAQUET), a sensor company with speed sensing products for the automotive and industrial markets. The transaction is subject to obtaining the necessary regulatory approvals and is expected to close later in the company's fiscal year. Learn more at http://www.te.com/usa-en/products/sensors.html

CONFERENCE CALL AND WEBCAST

  • Internet users will be able to access the company's earnings webcast, including slide materials, at the Investors section of TE Connectivity's website: http://investors.te.com.
  • The company will hold a conference call for investors today at 8:30 a.m. ET. 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) 234-9960.
  • An audio replay of the conference call will be available beginning at 10:30 a.m. ET on April 20, 2016, and ending at 11:59 p.m. ET on April 27, 2016. 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 390294.

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" 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 (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 (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 insight into our underlying operating results, trends and the comparability of these results between periods since it excludes the impact of special items, which may recur, but tend to be irregular as to timing. It also is a significant component in our incentive compensation plans.
  • 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, are also 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. 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 and data and 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 conditions precedent to our proposed tax litigation settlement with the IRS relating to our intercompany debt dispute are not met and the intercompany debt dispute is not settled; the risk that Creganna's operations will not be successfully integrated into ours; and the risk that revenue opportunities, cost savings and other anticipated synergies from the Creganna acquisition may not be fully realized or may take longer to realize than expected. 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. 25, 2015 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 over 7,000 engineers, partner with customers in close to 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 Six Months Ended


March 25,


March 27,


March 25,


March 27,


2016


2015


2016


2015


(in millions, except per share data)

Net sales

$            2,952


$            3,082


$            5,785


$            6,131

Cost of sales 

1,990


2,031


3,878


4,060

Gross margin

962


1,051


1,907


2,071

Selling, general, and administrative expenses

367


391


707


777

Research, development, and engineering expenses

156


160


318


320

Acquisition and integration costs

3


14


8


38

Restructuring and other charges (credits), net

(99)


38


(59)


63

   Operating income  

535


448


933


873

Interest income

4


4


10


9

Interest expense

(32)


(37)


(62)


(71)

Other income (expense), net

12


(5)


20


(75)

   Income from continuing operations before income taxes

519


410


901


736

Income tax (expense) benefit

(130)


(94)


(188)


15

   Income from continuing operations

389


316


713


751

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

(9)


283


20


320

Net income

$               380


$               599


$               733


$            1,071









Basic earnings per share:








   Income from continuing operations

$              1.07


$              0.78


$              1.90


$              1.85

   Income (loss) from discontinued operations

(0.02)


0.70


0.05


0.79

   Net income  

1.04


1.47


1.95


2.63









Diluted earnings per share:








   Income from continuing operations

$              1.06


$              0.77


$              1.88


$              1.82

   Income (loss) from discontinued operations

(0.02)


0.69


0.05


0.77

   Net income  

1.03


1.45


1.93


2.59









Dividends paid per common share

$              0.33


$              0.29


$              0.66


$              0.58









Weighted-average number of shares outstanding: 








   Basic

364


407


375


407

   Diluted

368


413


379


413

 

 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)










March 25,


September 25,


2016


2015


(in millions, except share data)

Assets




Current assets:




Cash and cash equivalents

$            1,150


$            3,329

Accounts receivable, net of allowance for doubtful accounts of $17 and $18, respectively

2,095


2,120

Inventories

1,635


1,615

Prepaid expenses and other current assets

534


476

Deferred income taxes

-


345

  Total current assets

5,414


7,885

Property, plant, and equipment, net

2,899


2,920

Goodwill

4,673


4,824

Intangible assets, net

1,435


1,555

Deferred income taxes

2,458


2,144

Receivable from Tyco International plc and Covidien plc

679


964

Other assets

283


297

Total Assets

$          17,841


$          20,589





Liabilities and Shareholders' Equity




Current liabilities:




Current maturities of long-term debt

$               152


$               498

Accounts payable

1,116


1,143

Accrued and other current liabilities

1,719


1,749

Deferred revenue

110


185

Total current liabilities

3,097


3,575

Long-term debt

3,732


3,386

Long-term pension and postretirement liabilities

1,315


1,327

Deferred income taxes

291


329

Income taxes

1,552


1,954

Other liabilities

448


433

Total Liabilities

10,435


11,004

Commitments and contingencies




Shareholders' Equity:




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

182


182

Contributed surplus

3,765


4,359

Accumulated earnings 

7,406


6,673

Treasury shares, at cost, 56,563,475and 20,071,089 shares, respectively

(3,498)


(1,256)

Accumulated other comprehensive loss

(449)


(373)

Total Shareholders' Equity

7,406


9,585

Total Liabilities and Equity

$          17,841


$          20,589

 

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)







For the Quarters Ended


For the Six Months Ended


March 25,


March 27,


March 25,


March 27,


2016


2015


2016


2015


(in millions)

Cash Flows From Operating Activities:








Net income

$               380


$               599


$               733


$            1,071

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

9


(283)


(20)


(320)

Income from continuing operations

389


316


713


751

Adjustments to reconcile income from continuing operations to net cash








provided by operating activities:








Depreciation and amortization

144


147


290


307

Non-cash restructuring charges

6


-


8


15

Deferred income taxes

6


25


(52)


(54)

Provision for losses on accounts receivable and inventories

2


10


23


28

Tax sharing (income) expense

(11)


5


(19)


74

Share-based compensation expense

21


21


43


44

Gain on divestiture

(146)


-


(146)


-

Other 

39


16


54


46

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








Accounts receivable, net

(228)


(53)


9


(19)

Inventories

38


(19)


(61)


(180)

Prepaid expenses and other current assets

286


8


302


11

Accounts payable

14


(19)


(41)


(11)

Accrued and other current liabilities

(8)


(39)


(138)


(241)

Deferred revenue

1


(24)


(70)


(80)

Income taxes

(424)


(17)


(396)


(132)

Other

26


(27)


3


(4)

Net cash provided by continuing operating activities

155


350


522


555

Net cash provided by (used in) discontinued operating activities

(1)


48


(2)


138

Net cash provided by operating activities

154


398


520


693

Cash Flows From Investing Activities:








Capital expenditures

(131)


(156)


(270)


(291)

Proceeds from sale of property, plant, and equipment

-


1


1


6

Acquisition of businesses, net of cash acquired

(6)


(218)


(6)


(1,729)

Proceeds from divestiture of business, net of cash retained by business sold

261


-


261


-

Other

12


1


29


(2)

Net cash provided by (used in) continuing investing activities

136


(372)


15


(2,016)

Net cash used in discontinued investing activities

-


(7)


-


(14)

Net cash provided by (used in) investing activities

136


(379)


15


(2,030)

Cash Flows From Financing Activities:








Net increase (decrease) in commercial paper

150


(362)


150


(92)

Proceeds from issuance of long-term debt

350


617


350


617

Repayment of long-term debt

(500)


(250)


(500)


(473)

Proceeds from exercise of share options

27


72


61


88

Repurchase of common shares

(1,274)


(130)


(2,523)


(285)

Payment of common share dividends to shareholders

(118)


(118)


(245)


(236)

Transfers (to) from discontinued operations

(1)


41


(2)


124

Other

(1)


(3)


(5)


(2)

Net cash used in continuing financing activities

(1,367)


(133)


(2,714)


(259)

Net cash provided by (used in) discontinued financing activities

1


(41)


2


(124)

Net cash used in financing activities

(1,366)


(174)


(2,712)


(383)

Effect of currency translation on cash

3


(16)


(2)


(40)

Net decrease in cash and cash equivalents

(1,073)


(171)


(2,179)


(1,760)

Cash and cash equivalents at beginning of period

2,223


868


3,329


2,457

Cash and cash equivalents at end of period

$            1,150


$               697


$            1,150


$               697









Supplemental Cash Flow Information:








Interest paid

$                 20


$                 18


$                 62


$                 64

Income taxes paid, net of refunds

547


85


635


170









Reconciliation to Free Cash Flow:








Net cash provided by continuing operating activities

$               155


$               350


$               522


$               555

Capital expenditures, net

(131)


(155)


(269)


(285)

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

139


22


140


26

Payments related to income taxes on the sale of the Broadband Network Solutions business

2


-


9


-

Free cash flow (1)

$               165


$               217


$               402


$               296









(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 Six Months Ended 


March 25,


March 27,


March 25,


March 27,


2016


2015


2016


2015


($ in millions)


Net Sales





Net Sales





Net Sales





Net Sales




Transportation Solutions

$          1,608





$          1,610





$          3,115





$          3,222




Industrial Solutions

738





797





1,447





1,581




Communications Solutions

606





675





1,223





1,328




Total

$          2,952





$          3,082





$          5,785





$          6,131













































Operating


Operating


Operating


Operating


Operating


Operating


Operating


Operating


Income


Margin


Income


Margin


Income


Margin


Income


Margin

Transportation Solutions

$             289


18.0

%


$             323


20.1

%


$             550


17.7

%


$             618


19.2

%

Industrial Solutions

63


8.5



84


10.5



129


8.9



170


10.8


Communications Solutions

183


30.2



41


6.1



254


20.8



85


6.4


Total

$             535


18.1

%


$             448


14.5

%


$             933


16.1

%


$             873


14.2

%










































Adjusted


Adjusted


Adjusted


Adjusted


Adjusted


Adjusted


Adjusted


Adjusted


Operating


Operating


Operating


Operating


Operating


Operating


Operating


Operating


Income (1)


Margin (1)


Income (1)


Margin (1)


Income (1)


Margin (1)


Income (1)


Margin (1)

Transportation Solutions

$             305


19.0

%


$             333


20.7

%


$             585


18.8

%


$             670


20.8

%

Industrial Solutions

84


11.4



112


14.1



162


11.2



210


13.3


Communications Solutions

51


8.4



61


9.0



137


11.2



127


9.6


Total

$             440


14.9

%


$             506


16.4

%


$             884


15.3

%


$          1,007


16.4

%





















(1)Adjusted operating income and adjusted operating margin are non-GAAP measures. 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 March 25, 2016


Segment's Total


 versus Net Sales for the Quarter Ended March 27, 2015


Net Sales for the







Acquisitions







Quarter Ended


Organic (1) 



Translation (2)


(Divestiture)


Total



March 25, 2016


($ in millions)




Transportation Solutions(3):

















Automotive

$                 47


3.9

%

$                (43)


$                    -


$                   4


0.3

%

76

%

Commercial Transportation

1


0.7



(4)


-


(3)


(1.4)



13


Sensors

4


1.9



(7)


-


(3)


(1.6)



11


Total

52


3.2



(54)


-


(2)


(0.1)



100

%

Industrial Solutions (3):

















Industrial Equipment

(26)


(7.9)



(4)


14


(16)


(4.9)



42


Aerospace, Defense, Oil, and Gas

(29)


(9.6)



(3)


2


(30)


(9.9)



37


Energy

(4)


(2.4)



(9)


-


(13)


(7.6)



21


Total

(59)


(7.4)



(16)


16


(59)


(7.4)



100

%

Communications Solutions (3):

















Data and Devices

(72)


(24.2)



(3)


(12)


(87)


(25.1)



43


Subsea Communications

30


17.6



-


-


30


17.6



33


Appliances

(10)


(6.4)



(2)


-


(12)


(7.5)



24


Total

(52)


(8.3)



(5)


(12)


(69)


(10.2)



100

%

Total 

$                (59)


(2.0)

%


$                (75)


$                   4


$              (130)


(4.2)

%





















































Percentage of


Change in Net Sales for the Six Months Ended March 25, 2016


Segment's Total


 versus Net Sales for the Six Months Ended March 27, 2015


Net Sales for the







Acquisitions







Six Months Ended


Organic (1) 



Translation (2)


(Divestiture)


Total



March 25, 2016


($ in millions)




Transportation Solutions(3):

















Automotive

$                 58


2.4

%

$              (138)


$                    -


$                (80)


(3.3)

%

75

%

Commercial Transportation

(9)


(2.1)



(17)


-


(26)


(6.2)



13


Sensors

19


5.3



(20)


-


(1)


(0.3)



12


Total

68


2.1



(175)


-


(107)


(3.3)



100

%

Industrial Solutions (3):

















Industrial Equipment

(49)


(7.6)



(19)


30


(38)


(6.0)



41


Aerospace, Defense, Oil, and Gas

(62)


(10.3)



(15)


7


(70)


(11.8)



36


Energy

2


0.5



(28)


-


(26)


(7.4)



23


Total

(109)


(6.9)



(62)


37


(134)


(8.5)



100

%

Communications Solutions (3):

















Data and Devices

(142)


(23.8)



(11)


(31)


(184)


(26.0)



43


Subsea Communications

119


39.1



-


-


119


39.1



34


Appliances

(31)


(9.8)



(9)


-


(40)


(12.6)



23


Total

(54)


(4.4)



(20)


(31)


(105)


(7.9)



100

%

Total 

$                (95)


(1.6)

%


$              (257)


$                   6


$              (346)


(5.6)

%





















(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 March 25, 2016

(UNAUDITED)
























Adjustments








Restructuring








Acquisition


and Other








Related


Charges


Tax


Adjusted


U.S. GAAP


Charges (1)


(Credits), Net (1)(2)


Items


(Non-GAAP) (3)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$               289


$                   1


$                       15


$                    -


$               305

Industrial Solutions

63


3


18


-


84

Communications Solutions

183


-


(132)


-


51

    Total 

$               535


$                   4


$                     (99)


$                    -


$               440











Operating Margin

18.1%








14.9%











Other Income, Net

$                 12


$                    -


$                         -


$                    -


$                 12











Income Tax Expense

$              (130)


$                  (1)


$                       35


$                   3


$                (93)











Income from Continuing Operations 

$               389


$                   3


$                     (64)


$                   3


$               331











Diluted Earnings per Share from 










   Continuing Operations 

$              1.06


$              0.01


$                  (0.17)


$              0.01


$              0.90











(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(2) Includes the gain on the divestiture of our Circuit Protection Devices 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 Quarter Ended March 27, 2015

(UNAUDITED)


































Adjustments






Acquisition


Restructuring








Related


and Other


Tax


Adjusted


U.S. GAAP


Charges (1)(2)


Charges, Net (2)


Items(3)


(Non-GAAP) (4)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$               323


$                 10


$                    -


$                    -


$               333

Industrial Solutions

84


12


16


-


112

Communications Solutions

41


-


20


-


61

    Total 

$               448


$                 22


$                 36


$                    -


$               506











Operating Margin

14.5%








16.4%











Other Income (Expense), Net

$                  (5)


$                    -


$                    -


$                 11


$                   6











Income Tax Expense

$                (94)


$                  (4)


$                (10)


$                   5


$              (103)











Income from Continuing Operations 

$               316


$                 18


$                 26


$                 16


$               376











Diluted Earnings per Share from 










   Continuing Operations

$              0.77


$              0.04


$              0.06


$              0.04


$              0.91











(1) Includes $6 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, $14 million of acquisition and integration costs, and $2 million of restructuring costs. 

(2) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(3) 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. Also includes an income tax benefit associated with the settlement of audits of prior year income tax returns and the related impact to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.

(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 Six Months Ended March 25, 2016

(UNAUDITED)
























Adjustments








Restructuring








Acquisition


and Other








Related


Charges


Tax


Adjusted


U.S. GAAP


Charges (1)


(Credits), Net (1)(2)


Items (3)


(Non-GAAP) (4)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$               550


$                   4


$                       31


$                    -


$               585

Industrial Solutions

129


6


27


-


162

Communications Solutions

254


-


(117)


-


137

    Total 

$               933


$                 10


$                     (59)


$                    -


$               884











Operating Margin

16.1%








15.3%











Other Income, Net

$                 20


$                    -


$                         -


$                    -


$                 20











Income Tax Expense

$              (188)


$                  (3)


$                       23


$                (25)


$              (193)











Income from Continuing Operations 

$               713


$                   7


$                     (36)


$                (25)


$               659











Diluted Earnings per Share from 










   Continuing Operations

$              1.88


$              0.02


$                  (0.09)


$             (0.07)


$              1.74











(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(2) Includes the gain on the divestiture of our Circuit Protection Devices business.

(3) Includes income tax benefits related to deferred tax assets recognized in connection with the sale of the Circuit Protection Devices business.

(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 Six Months Ended March 27, 2015

(UNAUDITED)


































Adjustments






Acquisition


Restructuring








Related


and Other


Tax


Adjusted


U.S. GAAP


Charges(1)(2)


Charges, Net(2)


Items(3)


(Non-GAAP)(4)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$               618


$                 51


$                   1


$                    -


$               670

Industrial Solutions

170


22


18


-


210

Communications Solutions

85


-


42


-


127

    Total 

$               873


$                 73


$                 61


$                    -


$            1,007











Operating Margin

14.2%








16.4%











Other Income (Expense), Net

$                (75)


$                    -


$                    -


$                 94


$                 19











Income Tax (Expense) Benefit

$                 15


$                (18)


$                (11)


$              (206)


$              (220)











Income from Continuing Operations 

$               751


$                 55


$                 50


$              (112)


$               744











Diluted Earnings per Share from 










   Continuing Operations

$              1.82


$              0.13


$              0.12


$             (0.27)


$              1.80











(1) Includes $33 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, $38 million of acquisition and integration costs, and $2 million of restructuring costs. 

(2) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(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 $94 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 and 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.

(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 Quarter Ended June 26, 2015

(UNAUDITED)


































Adjustments






Acquisition


Restructuring








Related


and Other


Tax


Adjusted


U.S. GAAP


Charges (1)(2)


Charges, Net (2)


Items


(Non-GAAP) (3)


($ 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)


$                   2


$              (104)











Income from Continuing Operations 

$               351


$                   5


$                 17


$                  (3)


$               370











Diluted Earnings per Share from 










   Continuing Operations

$              0.85


$              0.01


$              0.04


$             (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) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(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)(2)


Charges, Net (2)


Items (3)


(Non-GAAP) (4)


($ 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 

$            1,238


$                 72


$               120


$                 48


$            1,478











Diluted Earnings per Share from 










   Continuing Operations

$              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) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(3) 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.

(4) 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 April 20, 2016

(UNAUDITED)






Outlook for




Quarter Ending




June 24,


 Outlook for 


2016


 Fiscal 2016 

Diluted earnings per share from continuing operations (GAAP)

$0.90 - $0.96


 $3.92 - $4.12 

Restructuring and other charges (credits), net

0.07


(0.01)

Acquisition related charges

0.03


0.06

Tax items

-


(0.07)

Adjusted diluted earnings per share from continuing operations (non-GAAP) (1)

 $1.00 - $1.06 


 $3.90 - $4.10 





Net sales growth (GAAP)

(3) - 4%


(1) - 2%

Translation

1


2

(Acquisitions) divestitures

(1)


-

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

(3) - 4%


1 - 4%





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




 

Mario Calastri, Chief Financial Officer (Interim) and Treasurer

 

Terrence Curtin, President

 

TE Connectivity Ltd. Logo

 

SOURCE TE Connectivity Ltd.

For further information: Media Relations: Amy Shah, TE Connectivity, 610-893-9555, media@te.com; or Investor Relations: Sujal Shah, TE Connectivity, 610-893-9790, Sujal.shah@te.com


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