TE Connectivity Posts Fiscal 2016 Third Quarter Results

GAAP EPS and Adjusted EPS above high end of guidance range

Jul 20, 2016

SCHAFFHAUSEN, Switzerland, July 20, 2016 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter ended June 24, 2016.

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Tom Lynch, Chairman & CEO

Third Quarter Highlights

  • Net sales of $3.12 billion were at the midpoint of the guidance range.
  • Diluted Earnings Per Share from Continuing Operations (GAAP EPS) were $2.19.
  • Adjusted Earnings Per Share (EPS) were $1.08, up 20% versus the prior year.
  • Both GAAP EPS and Adjusted EPS were records for the company and above the high end of guidance.
  • Cash Flow from Continuing Operating Activities was $715 million; Free Cash Flow was $589 million.
  • Returned $231 million to shareholders through share buybacks and dividends.
  • Continued to expand harsh environment portfolio:
    • Completed the acquisition of Jaquet Technology Group AG (Jaquet), a sensor company addressing the automotive and industrial markets;
    • Signed a definitive agreement to acquire Intercontec Group, a provider of connectivity solutions for the industrial market.

"I am pleased with our third quarter performance, with adjusted EPS up 20 percent and exceeding the high end of our guidance range," said TE Connectivity Chairman and CEO Tom Lynch. "Sales grew in the majority of our harsh environment businesses including Automotive, Commercial Transportation, Medical, Aerospace and Appliances, and in our SubCom business. This growth was offset by weakness in our Oil and Gas, Data and Devices and Industrial Equipment businesses. We continued to drive strong operating margins due to the expansion of our harsh environment portfolio and ongoing productivity improvements, despite an uncertain macro environment.

"Our targeted M&A strategy has enabled us to further strengthen our harsh environment portfolio. In the quarter, we bolstered TE's position in the minimally-invasive interventional segment of the medical device market with the closing of the Creganna acquisition. We closed Jaquet, broadening our product offering in the automotive and industrial markets. Additionally, today we announced an agreement to acquire Intercontec Group, adding an important range of connector technology for industrial customers.

"In the third quarter, orders grew approximately seven percent sequentially and our book to bill, excluding SubCom, was 1.01. For the fourth quarter, we expect adjusted EPS of $1.17 to $1.23 on sales of $3.25 billion to $3.45 billion. For the full year, we are reiterating our adjusted EPS guidance of $4.00 at the midpoint on sales of $12.15 billion to $12.35 billion, an increase of 11 percent over the prior year."

FISCAL THIRD QUARTER RESULTS

The company reported net sales of $3.1 billion, flat compared to the prior year. GAAP EPS were $2.19, compared to $0.85 in the prior year. Adjusted EPS were $1.08, compared to $0.90 in the prior year. Cash flow from continuing operating activities was $715 million. Free cash flow was $589 million.

GAAP EPS included income from tax items of $436 million partially offset by $36 million of acquisition, restructuring and other charges.

Total company orders were $2.9 billion, up seven percent sequentially, excluding SubCom. The book-to-bill ratio was 1.01, excluding SubCom.

OUTLOOK

For the fiscal fourth quarter 2016, the company expects net sales of $3.25 billion to $3.45 billion, GAAP EPS of $1.10 to $1.16 and adjusted EPS of $1.17 to $1.23. GAAP EPS includes acquisition related charges of $0.01, and restructuring and other charges of $0.06.

For the full year, the company expects net sales of $12.15 billion to $12.35 billion. GAAP EPS are expected to be $5.13 to $5.19, including acquisition related charges of $0.07, net restructuring and other charges of $0.01, and tax-related income of $1.24. Adjusted EPS are expected to be $3.97 to $4.03.

The outlook includes the Jaquet and Creganna acquisitions 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

The company entered into an agreement with the IRS to resolve all disputes related to the previously disclosed intercompany debt issues. The impact of this agreement is reflected in the company's GAAP EPS results. All disputes with the IRS related to pre-separation from Tyco International are now closed.

The company signed a definitive agreement to acquire Intercontec Group. Intercontec, based in Germany, is a leading manufacturer of high-quality industrial metric circular connectors. The acquisition strengthens TE's position in harsh connectivity applications for factory automation customers. Adding Intercontec's capabilities offers customers a more comprehensive range of products, technologies and services in the industry.

The transaction is expected to close in September 2016, following the completion of customary regulatory approvals and the finalization of various administrative matters. Upon closing, Intercontec will be reported as part of TE's Industrial Solutions segment.

CONFERENCE CALL AND WEBCAST

  • Internet users will be able to access the company's earnings webcast, including slide materials, on 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) 230-1085, and for international callers, the dial-in number is (612) 288-0329.              
  • An audio replay of the conference call will be available beginning at 10:30 a.m. ET on July 20, 2016, and ending at 11:59 p.m. ET on July 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 396124.

NON-GAAP MEASURES

"Organic Net 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 Net 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 Net Sales Growth consists of the impact from foreign currency exchange rates and acquisitions and divestitures, if any. Organic Net 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. 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 excluded by management in evaluating Free Cash Flow. 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.

    In the calculation of Free Cash Flow, we subtract 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 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.  

# # #

 

Contacts:

Media Relations:

Investor Relations:


Amy Shah

Sujal Shah


TE Connectivity

TE Connectivity


610-893-9555

610-893-9790


media@te.com

Sujal.shah@te.com

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


















For the Quarters Ended


For the Nine Months Ended


June 24,


June 26,


June 24,


June 26,


2016


2015


2016


2015


(in millions, except per share data)

Net sales

$            3,121


$            3,118


$            8,906


$            9,249

Cost of sales 

2,099


2,070


5,977


6,130

Gross margin

1,022


1,048


2,929


3,119

Selling, general, and administrative expenses

367


393


1,074


1,170

Research, development, and engineering expenses

161


159


479


479

Acquisition and integration costs

11


8


19


46

Restructuring and other charges (credits), net

31


19


(28)


82

   Operating income  

452


469


1,385


1,342

Interest income

2


4


12


13

Interest expense

(31)


(33)


(93)


(104)

Other income (expense), net

(651)


11


(631)


(64)

   Income (loss) from continuing operations before income taxes

(228)


451


673


1,187

Income tax (expense) benefit

1,019


(100)


831


(85)

   Income from continuing operations

791


351


1,504


1,102

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

48


(42)


68


278

Net income

$               839


$               309


$            1,572


$            1,380









Basic earnings per share:








   Income from continuing operations

$              2.22


$              0.86


$              4.08


$              2.71

   Income (loss) from discontinued operations

0.13


(0.10)


0.18


0.68

   Net income  

2.35


0.76


4.26


3.39









Diluted earnings per share:








   Income from continuing operations

$              2.19


$              0.85


$              4.03


$              2.67

   Income (loss) from discontinued operations

0.13


(0.10)


0.18


0.67

   Net income  

2.32


0.75


4.21


3.34









Dividends paid per common share

$              0.37


$              0.33


$              1.03


$              0.91









Weighted-average number of shares outstanding: 








   Basic

357


406


369


407

   Diluted

361


412


373


413









 

 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)










June 24,


September 25,


2016


2015


(in millions, except share data)

Assets




Current assets:




Cash and cash equivalents

$               694


$            3,329

Accounts receivable, net of allowance for doubtful accounts of $16 and $18, respectively

2,158


2,120

Inventories

1,610


1,615

Prepaid expenses and other current assets

467


476

Deferred income taxes

-


345

  Total current assets

4,929


7,885

Property, plant, and equipment, net

2,976


2,920

Goodwill

5,251


4,824

Intangible assets, net

1,792


1,555

Deferred income taxes

2,208


2,144

Receivable from Tyco International plc and Covidien plc

11


964

Other assets

333


297

Total Assets

$          17,500


$          20,589





Liabilities and Shareholders' Equity




Current liabilities:




Current maturities of long-term debt

$               302


$               498

Accounts payable

1,157


1,143

Accrued and other current liabilities

1,692


1,749

Deferred revenue

160


185

Total current liabilities

3,311


3,575

Long-term debt

3,734


3,386

Long-term pension and postretirement liabilities

1,334


1,327

Deferred income taxes

326


329

Income taxes

199


1,954

Other liabilities

331


433

Total Liabilities

9,235


11,004

Commitments and contingencies




Shareholders' Equity:




Common shares, 382,835,381 shares authorized and issued, CHF 0.57 par value, and




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

168


182

Contributed surplus

1,786


4,359

Accumulated earnings 

8,245


6,673

Treasury shares, at cost, 26,432,510and 20,071,089 shares, respectively

(1,559)


(1,256)

Accumulated other comprehensive loss

(375)


(373)

Total Shareholders' Equity

8,265


9,585

Total Liabilities and Equity

$          17,500


$          20,589

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)







For the Quarters Ended


For the Nine Months Ended


June 24,


June 26,


June 24,


June 26,


2016


2015


2016


2015


(in millions)

Cash Flows From Operating Activities:








Net income

$               839


$               309


$            1,572


$            1,380

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

(48)


42


(68)


(278)

Income from continuing operations

791


351


1,504


1,102

Adjustments to reconcile income from continuing operations to net cash








provided by operating activities:








Depreciation and amortization

148


148


438


455

Non-cash restructuring charges

5


-


13


15

Deferred income taxes

214


(52)


162


(106)

Provision for losses on accounts receivable and inventories

4


7


27


35

Tax sharing (income) expense

651


(12)


632


62

Share-based compensation expense

23


21


66


65

(Gain) loss on divestiture

3


-


(143)


-

Other 

17


13


71


59

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








Accounts receivable, net

6


(106)


15


(125)

Inventories

59


(38)


(2)


(218)

Prepaid expenses and other current assets

-


24


302


35

Accounts payable

12


(18)


(29)


(29)

Accrued and other current liabilities

70


35


(68)


(206)

Deferred revenue

48


84


(22)


4

Income taxes

(1,339)


42


(1,735)


(90)

Other

3


25


6


21

Net cash provided by continuing operating activities

715


524


1,237


1,079

Net cash provided by discontinued operating activities

3


72


1


210

Net cash provided by operating activities

718


596


1,238


1,289

Cash Flows From Investing Activities:








Capital expenditures

(150)


(134)


(420)


(425)

Proceeds from sale of property, plant, and equipment

2


4


3


10

Acquisition of businesses, net of cash acquired

(988)


3


(994)


(1,726)

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

65


-


326


-

Other

(1)


-


28


(2)

Net cash used in continuing investing activities

(1,072)


(127)


(1,057)


(2,143)

Net cash used in discontinued investing activities

-


(8)


-


(22)

Net cash used in investing activities

(1,072)


(135)


(1,057)


(2,165)

Cash Flows From Financing Activities:








Net increase (decrease) in commercial paper

150


(105)


300


(197)

Proceeds from issuance of long-term debt

-


-


350


617

Repayment of long-term debt

-


-


(500)


(473)

Proceeds from exercise of share options

16


9


77


97

Repurchase of common shares

(134)


(226)


(2,657)


(511)

Payment of common share dividends to shareholders

(132)


(134)


(377)


(370)

Transfers from discontinued operations

3


64


1


188

Other

-


-


(5)


(2)

Net cash used in continuing financing activities

(97)


(392)


(2,811)


(651)

Net cash used in discontinued financing activities

(3)


(64)


(1)


(188)

Net cash used in financing activities

(100)


(456)


(2,812)


(839)

Effect of currency translation on cash

(2)


(1)


(4)


(41)

Net increase (decrease) in cash and cash equivalents

(456)


4


(2,635)


(1,756)

Cash and cash equivalents at beginning of period

1,150


697


3,329


2,457

Cash and cash equivalents at end of period

$               694


$               701


$               694


$               701









Supplemental Cash Flow Information:








Interest paid

$                 40


$                 46


$               102


$               110

Income taxes paid, net of refunds

107


111


742


281

 

TE CONNECTIVITY LTD.

RECONCILIATION OF FREE CASH FLOW (UNAUDITED)


























For the Quarters Ended


For the Nine Months Ended


June 24,


June 26,


June 24,


June 26,


2016


2015


2016


2015


(in millions)

Net cash provided by continuing operating activities

$               715


$               524


$            1,237


$            1,079

Excluding:








Payments (receipts) related to pre-separation U.S.








tax matters, net

5


(3)


145


23

Payments related to income taxes on the sale of the








Broadband Network Solutions business

17


-


26


-

Capital expenditures, net

(148)


(130)


(417)


(415)

Free cash flow (1)

$               589


$               391


$               991


$               687









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

 

TE CONNECTIVITY LTD.

CONSOLIDATED SEGMENT DATA (UNAUDITED)










































For the Quarters Ended 


For the Nine Months Ended 


June 24,


June 26,


June 24,


June 26,


2016


2015


2016


2015


($ in millions)


Net Sales





Net Sales





Net Sales





Net Sales




Transportation Solutions

$          1,652





$          1,621





$          4,767





$          4,843




Industrial Solutions

849





806





2,296





2,387




Communications Solutions

620





691





1,843





2,019




Total

$          3,121





$          3,118





$          8,906





$          9,249













































Operating


Operating


Operating


Operating


Operating


Operating


Operating


Operating


Income


Margin


Income


Margin


Income


Margin


Income


Margin

Transportation Solutions

$             297


18.0

%


$             303


18.7

%


$             847


17.8

%


$             921


19.0

%

Industrial Solutions

95


11.2



98


12.2



224


9.8



268


11.2


Communications Solutions

60


9.7



68


9.8



314


17.0



153


7.6


Total

$             452


14.5

%


$             469


15.0

%


$          1,385


15.6

%


$          1,342


14.5

%










































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

$             320


19.4

%


$             317


19.6

%


$             905


19.0

%


$             987


20.4

%

Industrial Solutions

112


13.2



109


13.5



274


11.9



319


13.4


Communications Solutions

69


11.1



71


10.3



206


11.2



198


9.8


Total

$             501


16.1

%


$             497


15.9

%


$          1,385


15.6

%


$          1,504


16.3

%





















(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 June 24, 2016


Segment's Total


 versus Net Sales for the Quarter Ended June 26, 2015


Net Sales for the







Acquisitions







Quarter Ended


Organic (1) 



Translation (2)


(Divestiture)


Total



June 24, 2016


($ in millions)




Transportation Solutions(3):

















Automotive

$                 33


2.7

%

$                  (5)


$                    -


$                 28


2.3

%

75

%

Commercial Transportation

7


3.3



-


-


7


3.3



13


Sensors

(4)


(2.1)



(2)


2


(4)


(2.1)



12


Total

36


2.2



(7)


2


31


1.9



100

%

Industrial Solutions (3):

















Industrial Equipment

(24)


(6.8)



4


70


50


14.5



47


Aerospace, Defense, Oil, and Gas

(5)


(1.9)



1


1


(3)


(1.1)



32


Energy

-


(0.2)



(4)


-


(4)


(2.2)



21


Total

(29)


(3.6)



1


71


43


5.3



100

%

Communications Solutions (3):

















Data and Devices

(50)


(16.7)



2


(45)


(93)


(28.4)



38


Subsea Communications

21


10.4



-


-


21


10.4



36


Appliances

3


1.6



(2)


-


1


0.6



26


Total

(26)


(3.7)



-


(45)


(71)


(10.3)



100

%

Total 

$                (19)


(0.6)

%


$                  (6)


$                 28


$                   3


0.1

%





















































Percentage of


Change in Net Sales for the Nine Months Ended June 24, 2016


Segment's Total


 versus Net Sales for the Nine Months Ended June 26, 2015


Net Sales for the







Acquisitions







Nine Months Ended


Organic (1) 



Translation (2)


(Divestiture)


Total



June 24, 2016


($ in millions)




Transportation Solutions(3):

















Automotive

$                 90


2.5

%

$              (141)


$                    -


$                (51)


(1.4)

%

75

%

Commercial Transportation

(3)


(0.3)



(17)


-


(20)


(3.2)



13


Sensors

14


2.7



(21)


2


(5)


(0.9)



12


Total

101


2.1



(179)


2


(76)


(1.6)



100

%

Industrial Solutions (3):

















Industrial Equipment

(72)


(7.3)



(16)


100


12


1.2



43


Aerospace, Defense, Oil, and Gas

(66)


(7.6)



(15)


8


(73)


(8.4)



35


Energy

2


0.3



(32)


-


(30)


(5.6)



22


Total

(136)


(5.7)



(63)


108


(91)


(3.8)



100

%

Communications Solutions (3):

















Data and Devices

(189)


(21.5)



(12)


(76)


(277)


(26.8)



41


Subsea Communications

140


27.7



-


-


140


27.7



35


Appliances

(28)


(5.9)



(11)


-


(39)


(8.2)



24


Total

(77)


(4.2)



(23)


(76)


(176)


(8.7)



100

%

Total 

$              (112)


(1.3)

%


$              (265)


$                 34


$              (343)


(3.7)

%





















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

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

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

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended June 24, 2016

(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

$               297


$                   2


$                 21


$                    -


$               320

Industrial Solutions

95


16


1


-


112

Communications Solutions

60


-


9


-


69

    Total 

$               452


$                 18


$                 31


$                    -


$               501











Operating Margin

14.5%








16.1%











Other Expense, Net

$              (651)


$                    -


$                    -


$               650


$                  (1)











Income Tax (Expense) Benefit

$            1,019


$                  (3)


$                (10)


$           (1,086)


$                (80)











Income from Continuing Operations 

$               791


$                 15


$                 21


$              (436)


$               391











Diluted Earnings per Share from 










   Continuing Operations 

$              2.19


$              0.04


$              0.06


$             (1.21)


$              1.08











(1) Includes $11 million of acquisition and integration costs and $7 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales.

(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 $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all aspects of the disputed debt matter with the IRS through the year 2007, as well as the related impact of $604 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax charges related to a $91 million increase in the valuation allowance for certain U.S. deferred tax assets; and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions, as well as the related impact of $46 million 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 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 Nine Months Ended June 24, 2016

(UNAUDITED)
























Adjustments








Restructuring








Acquisition


and Other








Related


Charges


Tax


Adjusted


U.S. GAAP


Charges (1)(2)


(Credits), Net (2)


Items (3)


(Non-GAAP) (4)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$               847


$                   6


$                       52


$                    -


$               905

Industrial Solutions

224


22


28


-


274

Communications Solutions

314


-


(108)


-


206

    Total 

$            1,385


$                 28


$                     (28)


$                    -


$            1,385











Operating Margin

15.6%








15.6%











Other Income (Expense), Net

$              (631)


$                    -


$                         -


$               650


$                 19











Income Tax (Expense) Benefit

$               831


$                  (6)


$                       13


$           (1,111)


$              (273)











Income from Continuing Operations 

$            1,504


$                 22


$                     (15)


$              (461)


$            1,050











Diluted Earnings per Share from 










   Continuing Operations

$              4.03


$              0.06


$                  (0.04)


$             (1.24)


$              2.82











(1) Includes $19 million of acquisition and integration costs and $9 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales.

(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 $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all aspects of the disputed debt matter with the IRS through the year 2007, as well as the related impact of $604 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax charges related to a $91 million increase in the valuation allowance for certain U.S. deferred tax assets; and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions, as well as the related impact of $46 million 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 Nine Months Ended June 26, 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

$               921


$                 56


$                 10


$                    -


$               987

Industrial Solutions

268


27


24


-


319

Communications Solutions

153


-


45


-


198

    Total 

$            1,342


$                 83


$                 79


$                    -


$            1,504











Operating Margin

14.5%








16.3%











Other Income (Expense), Net

$                (64)


$                    -


$                    -


$                 89


$                 25











Income Tax Expense

$                (85)


$                (23)


$                (12)


$              (204)


$              (324)











Income from Continuing Operations 

$            1,102


$                 60


$                 67


$              (115)


$            1,114











Diluted Earnings per Share from 










   Continuing Operations

$              2.67


$              0.15


$              0.16


$             (0.28)


$              2.70











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

(2) 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 $89 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax benefits related to the impacts of certain non-U.S. tax law changes and the associated reduction in the valuation allowance for tax loss carryforwards 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 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

$               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 

$               136


$                 12


$                 53


$               163


$               364











Diluted Earnings per Share from 










   Continuing Operations

$              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) 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 $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.

(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 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 July 20, 2016

(UNAUDITED)






Outlook for




Quarter Ending




September 30,


 Outlook for 


2016


 Fiscal 2016 

Diluted earnings per share from continuing operations (GAAP)

 $1.10 - $1.16 


 $5.13 - $5.19 

Restructuring and other charges, net

0.06


0.01

Acquisition related charges

0.01


0.07

Tax items

-


(1.24)

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

 $1.17 - $1.23 


 $3.97 - $4.03 





Net sales growth (GAAP)

9 - 15%


(1) - 1%

Translation

-


2

(Acquisitions) divestitures

(2)


-

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

7 - 13%


1 - 3%





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




 

Mario Calastri, Chief Financial Officer (Interim) and Treasurer

 

Terrence Curtin, Board Member and President

 

SOURCE TE Connectivity Ltd.


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