TE Connectivity Announces Fourth Quarter and Full Year Results for Fiscal Year 2017

Sales and earnings per share exceed guidance, driven by growth across all segments and regions; company reports record cash flow

Nov 1, 2017

SCHAFFHAUSEN, Switzerland, Nov. 1, 2017 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal fourth quarter and year ended September 29, 2017.

TE Connectivity Ltd. Logo. (PRNewsFoto/TE Connectivity Ltd.)

Fourth Quarter Highlights

  • Net sales were $3.5 billion, exceeding guidance range, with growth in all segments and regions
  • Diluted earnings per share (EPS) from continuing operations were $1.21 and adjusted EPS were $1.25, also above guidance range
  • Cash flow from continuing operating activities was $873 million and free cash flow was $691 million, both records for the company

Full Year Highlights

  • Net sales were $13.1 billion, up 7 percent year-over-year
  • Net sales were up 9 percent, and 8 percent organically, on a 52-week comparison basis
  • Diluted EPS from continuing operations were $4.67, down 11 percent, due to a tax benefit in 2016
  • Adjusted EPS were $4.83, up 22 percent versus the prior year, on a 52-week comparison basis
  • Cash flow from continuing operating activities was $2.3 billion and free cash flow was $1.7 billion, both records for the company
  • $1.2 billion returned to shareholders through dividends and share repurchases

Fourth Quarter Results

For the fourth quarter, the company reported net sales of $3.5 billion, with diluted EPS from continuing operations of $1.21. Adjusted EPS were $1.25, cash flow from continuing operating activities was $873 million, and free cash flow was a record for the company at $691 million. Excluding SubCom, total orders were $3.3 billion and the book-to-bill ratio was 1.02.

Full Year Results

For the full year, the company reported net sales of $13.1 billion and diluted EPS from continuing operations of $4.67. Adjusted EPS were $4.83, cash flow from continuing operating activities was $2.3 billion and free cash flow was $1.7 billion for the year.

"Our strong fourth quarter results capped off an exceptional fiscal year for TE, with sales up 9 percent and adjusted EPS up 22 percent from 2016, each on a comparable basis. For the year, we delivered above-market growth due to content gains and 100 points of adjusted operating margin expansion, with contributions from each of our segments. We continued to leverage our global presence and market-leading products to deliver strong results," said TE Connectivity CEO Terrence Curtin. "We also made two acquisitions in medical and automotive connectivity that will enable us to further capitalize on opportunities in those high-growth areas."

2018 Outlook

For the fiscal first quarter of 2018, the company expects net sales of $3.35 billion to $3.45 billion, reflecting an increase of 10 percent on an actual basis and 5 percent on an organic basis year over year at the mid-point. Diluted EPS from continuing operations are expected to be $1.12 to $1.16, including net restructuring, acquisition-related and other charges of $0.11. The company expects adjusted EPS of $1.23 to $1.27 which represents a 9 percent improvement at the mid-point versus the first quarter of 2017.

For the full year, the company expects net sales of $13.7 to $14.1 billion, reflecting 6 percent actual and 4 percent organic growth at the mid-point versus the prior year. Diluted EPS from continuing operations are expected to be $4.78 to $4.98, including net restructuring, acquisition-related and other charges of $0.35. The company expects adjusted EPS of $5.13 to 5.33, reflecting 8 percent growth at the mid-point compared to fiscal year 2017.

"We expect to continue to deliver above-market sales and strong EPS performance into 2018, fueled by positive momentum from 2017, confidence in our business model and a solid pipeline of growth opportunities. Our portfolio aligns with important trends in an increasingly connected world and we look forward to creating a safer, sustainable, productive and connected future for our customers, shareholders and employees," said Curtin.

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

Conference Call and Webcast

The company will hold a conference call today beginning at 8:30 a.m. ET. The dial-in information is provided here:

  • At TE Connectivity's website: http://investors.te.com.
  • By telephone: For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the dial-in number in the United States is (800) 230-1059, and for international callers, the dial-in number is (612) 234-9959.
  • An audio replay of the conference call will be available beginning at 10:30 a.m. ET on November 1, 2017, and ending at 11:59 p.m. ET on November 8, 2017. 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 431097.

About TE Connectivity

TE Connectivity Ltd. (NYSE: TEL) is a $13 billion global technology and manufacturing leader creating a safer, sustainable, productive, and connected future. For more than 75 years, our connectivity and sensor solutions, proven in the harshest environments, have enabled advancements in transportation, industrial applications, medical technology, energy, data communications, and the home. With 78,000 employees, including more than 7,000 engineers, working alongside customers in nearly 150 countries, TE ensures that EVERY CONNECTION COUNTS. Learn more at www.te.com and on LinkedIn, Facebook, WeChat and Twitter.

Non-GAAP Financial Measures

We present non-GAAP performance and liquidity measures as we believe it is appropriate for investors to consider adjusted financial measures in addition to results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP financial measures provide supplemental information and should not be considered replacements for results in accordance with GAAP. Management uses non-GAAP financial measures internally for planning and forecasting purposes and in its decision-making processes related to the operations of our company. We believe these measures provide meaningful information to us and investors because they enhance the understanding of our operating performance, ability to generate cash, and the trends of our business. Additionally, we believe that investors benefit from having access to the same financial measures that management uses in evaluating our operations. 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 financial measures in combination with the most directly comparable GAAP financial measures in order to better understand the amounts, character, and impact of any increase or decrease in reported amounts. These non-GAAP financial measures may not be comparable to similarly-titled measures reported by other companies.

The following provides additional information regarding our non-GAAP financial measures:

  • Organic Net Sales Growth – represents net sales growth (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic Net Sales Growth is a useful measure of our performance because it excludes items that are not completely under management's control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity. This measure is a significant component in our incentive compensation plans.
  • Adjusted Operating Income and Adjusted Operating Margin – represent operating income and operating margin, respectively, (the most comparable GAAP financial measures) before special items including restructuring and other charges, acquisition related charges, and other income or charges, if any. We utilize these measures to assess segment level operating performance and to provide insight to management in evaluating segment operating plan execution and market conditions. Adjusted Operating Income is a significant component in our incentive compensation plans.
  • Adjusted Other Income, Net – represents net other income (the most comparable GAAP financial measure) before special items including tax sharing income related to adjustments to prior period tax returns and other items, if any.
  • Adjusted Income Tax Expense and Adjusted Effective Tax Rate – represent income tax expense and effective tax rate, respectively (the most comparable GAAP financial measures) after adjusting for the tax effect of special items including restructuring and other charges, acquisition related charges, other income or charges, and certain significant tax items, if any.
  • Adjusted Income from Continuing Operations – represents income from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition related charges, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects.
  • Adjusted Earnings Per Share – represents diluted earnings per share from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition related charges, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects. This measure is a significant component in our incentive compensation plans.
  • Net Sales Excluding the Impact of the Additional Week, Net Sales Growth Excluding the Impact of the Additional Week, Organic Net Sales Growth Excluding the Impact of the Additional Week, Adjusted Operating Income Excluding the Impact of the Additional Week, Adjusted Operating Margin Excluding the Impact of the Additional Week, and Adjusted Earnings Per Share Excluding the Impact of the Additional Week – represent certain GAAP and non-GAAP financial measures excluding the impact of the additional week in the fourth quarter of the fiscal year for fiscal years which are 53 weeks in length. The impact of the additional week is estimated using an average weekly sales figure for the last month of the fiscal year.
  • 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 financial 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 financial 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 and cash paid (collected) pursuant to collateral requirements related to cross currency swaps, 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 financial 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; and the possible effects on us of changes in tax laws, tax treaties and other legislation. 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. 30, 2016 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.

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


















For the Quarters Ended


For the Years Ended


September 29,


September 30,


September 29,


September 30,


2017


2016


2017


2016


(in millions, except per share data)

Net sales

$            3,456


$            3,332


$          13,113


$          12,238

Cost of sales 

2,317


2,228


8,663


8,205

Gross margin

1,139


1,104


4,450


4,033

Selling, general, and administrative expenses

395


389


1,591


1,463

Research, development, and engineering expenses

168


165


658


644

Acquisition and integration costs

1


3


6


22

Restructuring and other charges, net

23


30


148


2

   Operating income  

552


517


2,047


1,902

Interest income

6


7


20


19

Interest expense

(35)


(34)


(130)


(127)

Other expense, net

(3)


(1)


(9)


(632)

   Income from continuing operations before income taxes

520


489


1,928


1,162

Income tax (expense) benefit

(91)


(52)


(255)


779

   Income from continuing operations

429


437


1,673


1,941

Income from discontinued operations, net of income taxes

5


-


10


68

Net income

$               434


$               437


$            1,683


$            2,009









Basic earnings per share:








   Income from continuing operations

$              1.22


$              1.23


$              4.71


$              5.30

   Income from discontinued operations

0.01


-


0.03


0.19

   Net income  

1.23


1.23


4.74


5.49









Diluted earnings per share:








   Income from continuing operations

$              1.21


$              1.22


$              4.67


$              5.26

   Income from discontinued operations

0.01


-


0.03


0.18

   Net income  

1.22


1.22


4.70


5.44









Dividends paid per common share

$              0.40


$              0.37


$              1.54


$              1.40









Weighted-average number of shares outstanding: 








   Basic

353


355


355


366

   Diluted

356


359


358


369

 

 

 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)










September 29,


September 30,


2017


2016


(in millions, except share data)

Assets




Current assets:




Cash and cash equivalents

$            1,218


$               647

Accounts receivable, net of allowance for doubtful accounts of $21 and $17, respectively

2,290


2,046

Inventories

1,813


1,596

Prepaid expenses and other current assets

605


486

  Total current assets

5,926


4,775

Property, plant, and equipment, net

3,400


3,052

Goodwill

5,651


5,492

Intangible assets, net

1,841


1,879

Deferred income taxes

2,141


2,111

Other assets

444


299

Total Assets

$          19,403


$          17,608





Liabilities and Shareholders' Equity




Current liabilities:




Short-term debt

$               710


$               331

Accounts payable

1,436


1,090

Accrued and other current liabilities

1,626


1,437

Deferred revenue

75


208

Total current liabilities

3,847


3,066

Long-term debt

3,634


3,739

Long-term pension and postretirement liabilities

1,160


1,502

Deferred income taxes

236


207

Income taxes

293


247

Other liabilities

482


362

Total Liabilities

9,652


9,123

Commitments and contingencies




Shareholders' equity:




Common shares, CHF 0.57 par value, 357,069,981 shares authorized and issued, and




382,835,381 shares authorized and issued, respectively

157


168

Contributed surplus

-


1,801

Accumulated earnings 

10,175


8,682

Treasury shares, at cost, 5,356,369 and 27,554,005 shares, respectively

(421)


(1,624)

Accumulated other comprehensive loss

(160)


(542)

Total Shareholders' Equity

9,751


8,485

Total Liabilities and Shareholders' Equity

$          19,403


$          17,608

 

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


















For the Quarters Ended


For the Years Ended


September 29,


September 30,


September 29,


September 30, 


2017


2016


2017


2016


(in millions)

Cash Flows From Operating Activities:








Net income

$               434


$               437


$            1,683


$            2,009

Income from discontinued operations, net of income taxes

(5)


-


(10)


(68)

Income from continuing operations

429


437


1,673


1,941

Adjustments to reconcile income from continuing operations to net cash 








provided by operating activities:








Depreciation and amortization

166


147


635


585

Deferred income taxes

71


16


(75)


178

Provision for losses on accounts receivable and inventories

4


(10)


19


17

Tax sharing expense

2


-


8


632

Share-based compensation expense

26


25


99


91

Gain on divestiture

-


(1)


-


(144)

Other 

(7)


18


10


102

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








and divestitures:








Accounts receivable, net

7


101


(253)


116

Inventories

(16)


18


(211)


16

Prepaid expenses and other current assets

(66)


(20)


(72)


282

Accounts payable

91


(71)


308


(75)

Accrued and other current liabilities

169


64


225


(4)

Deferred revenue

13


48


(137)


26

Income taxes

(47)


(29)


7


(1,764)

Other

31


39


86


45

Net cash provided by continuing operating activities

873


782


2,322


2,044

Net cash used in discontinued operating activities

-


(98)


(1)


(97)

Net cash provided by operating activities

873


684


2,321


1,947

Cash Flows From Investing Activities:








Capital expenditures

(250)


(208)


(702)


(628)

Proceeds from sale of property, plant, and equipment

7


5


19


8

Acquisition of businesses, net of cash acquired

(173)


(342)


(250)


(1,336)

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

-


7


4


333

Other

22


14


(3)


42

Net cash used in investing activities

(394)


(524)


(932)


(1,581)

Cash Flows From Financing Activities:








Net increase (decrease) in commercial paper

(168)


30


(330)


330

Proceeds from issuance of debt

500


2


589


352

Repayment of debt

-


(1)


-


(501)

Proceeds from exercise of share options

31


13


117


90

Repurchase of common shares

(238)


(130)


(614)


(2,787)

Payment of common share dividends to shareholders

(141)


(132)


(546)


(509)

Transfers to discontinued operations 

(1)


(98)


(1)


(97)

Other

(6)


-


(30)


(30)

Net cash used in continuing financing activities

(23)


(316)


(815)


(3,152)

Net cash provided by discontinued financing activities

-


98


1


97

Net cash used in financing activities

(23)


(218)


(814)


(3,055)

Effect of currency translation on cash

7


11


(4)


7

Net increase (decrease) in cash and cash equivalents

463


(47)


571


(2,682)

Cash and cash equivalents at beginning of period

755


694


647


3,329

Cash and cash equivalents at end of period

$            1,218


$               647


$            1,218


$               647









Supplemental Cash Flow Information:








Interest paid

$                 22


$                 15


$               128


$               117

Income taxes paid, net of refunds

67


64


323


806

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF FREE CASH FLOW (UNAUDITED)


















For the Quarters Ended


For the Years Ended


September 29,


September 30, 


September 29,


September 30, 


2017


2016


2017


2016


(in millions)

Net cash provided by continuing operating activities

$               873


$               782


$            2,322


$            2,044

Excluding:








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








tax matters, net

-


5


(23)


150

Payments related to income taxes on the sale of the








Broadband Network Solutions business

-


10


-


36

Cash paid pursuant to collateral requirements related








to cross currency swaps

61


10


80


29

Capital expenditures, net

(243)


(203)


(683)


(620)

Free cash flow (1)

$               691


$               604


$            1,696


$            1,639









(1) Free cash flow is a non-GAAP financial measure. See description of non-GAAP financial measures.

 

 

TE CONNECTIVITY LTD.

CONSOLIDATED SEGMENT DATA (UNAUDITED)


























For the Quarters Ended 


For the Years Ended 


September 29,


September 30,


September 29,


September 30,


2017


2016


2017


2016


($ in millions)


Net Sales



Net Sales



Net Sales



Net Sales


Transportation Solutions

$          1,844



$          1,736



$          7,039



$          6,503


Industrial Solutions

954



919



3,507



3,215


Communications Solutions

658



677



2,567



2,520


Total

$          3,456



$          3,332



$        13,113



$        12,238



























Operating

Operating


Operating

Operating


Operating

Operating


Operating

Operating


Income

Margin


Income

Margin


Income

Margin


Income

Margin

Transportation Solutions

$             328

17.8%


$             344

19.8%


$          1,299

18.5%


$          1,191

18.3%

Industrial Solutions

113

11.8


119

12.9


364

10.4


343

10.7

Communications Solutions

111

16.9


54

8.0


384

15.0


368

14.6

Total

$             552

16.0%


$             517

15.5%


$          2,047

15.6%


$          1,902

15.5%


























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

$             336

18.2%


$             341

19.6%


$          1,369

19.4%


$          1,246

19.2%

Industrial Solutions

132

13.8


123

13.4


445

12.7


397

12.3

Communications Solutions

108

16.4


87

12.9


392

15.3


293

11.6

Total

$             576

16.7%


$             551

16.5%


$          2,206

16.8%


$          1,936

15.8%













(1) Adjusted operating income and adjusted operating margin are non-GAAP financial measures. See description of non-GAAP financial measures.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NET SALES GROWTH (UNAUDITED)






















Change in Net Sales for the Quarter Ended September 29, 2017


 versus Net Sales for the Quarter Ended September 30, 2016


Net


Organic Net






Sales Growth


Sales Growth (1)


Translation (2)


Acquisitions


($ in millions)

Transportation Solutions (3):










Automotive

$                 39

3.0%


$                 19

1.5%


$                 20


$                    -

Commercial transportation

59

27.4


58

26.9


1


-

Sensors

10

4.8


5

2.2


5


-

Total

108

6.2


82

4.7


26


-

Industrial Solutions (3):










Industrial equipment

63

14.8


21

5.0


7


35

Aerospace, defense, oil, and gas

(15)

(5.0)


(18)

(6.0)


3


-

Energy

(13)

(6.7)


(17)

(8.5)


4


-

Total

35

3.8


(14)

(1.5)


14


35

Communications Solutions (3):










Data and devices

(8)

(3.1)


(7)

(2.4)


(1)


-

Subsea communications

(17)

(7.1)


(17)

(7.1)


-


-

Appliances

6

3.4


4

2.9


2


-

Total

(19)

(2.8)


(20)

(2.9)


1


-

Total 

$               124

3.7%


$                 48

1.4%


$                 41


$                 35






















Change in Net Sales for the Year Ended September 29, 2017


 versus Net Sales for the Year Ended September 30, 2016


Net


Organic Net




Acquisitions


Sales Growth


Sales Growth (1)


Translation (2)


(Divestiture)


($ in millions)

Transportation Solutions (3):










Automotive

$               316

6.4%


$               349

7.1%


$                (33)


$                    -

Commercial transportation

172

20.8


181

21.9


(9)


-

Sensors

48

6.3


23

3.0


(5)


30

Total

536

8.2


553

8.5


(47)


30

Industrial Solutions (3):










Industrial equipment

328

23.1


77

5.5


(10)


261

Aerospace, defense, oil, and gas

(25)

(2.3)


(19)

(1.7)


(7)


1

Energy

(11)

(1.6)


(8)

(1.0)


(3)


-

Total

292

9.1


50

1.6


(20)


262

Communications Solutions (3):










Data and devices

(57)

(5.6)


23

2.3


(10)


(70)

Subsea communications

43

4.9


43

4.9


-


-

Appliances

61

9.9


67

10.8


(6)


-

Total

47

1.9


133

5.4


(16)


(70)

Total 

$               875

7.1%


$               736

6.0%


$                (83)


$               222











(1) Organic net sales growth is a non-GAAP financial measure. See description of non-GAAP financial measures.

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

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

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended September 29, 2017

(UNAUDITED)




















Adjustments







Restructuring






Acquisition


and Other






Related


Charges


Adjusted


U.S. GAAP


Charges (1)


(Credits), Net (1)


(Non-GAAP) (2)


($ in millions, except per share data)

Operating Income:








Transportation Solutions

$               328


$                   1


$                   7


$               336

Industrial Solutions

113


-


19


132

Communications Solutions

111


-


(3)


108

    Total 

$               552


$                   1


$                 23


$               576









Operating Margin

16.0%






16.7%









Other Expense, Net

$                  (3)


$                    -


$                    -


$                  (3)









Income Tax Expense

$                (91)


$                  (1)


$                  (7)


$                (99)









Effective Tax Rate

17.5%






18.2%









Income from Continuing Operations 

$               429


$                    -


$                 16


$               445









Diluted Earnings per Share from 








   Continuing Operations 

$              1.21


$                    -


$              0.04


$              1.25









(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) See description of non-GAAP financial measures.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended September 30, 2016

(UNAUDITED)




















Adjustments







Restructuring






Acquisition


and Other






Related


Charges


Adjusted


U.S. GAAP


Charges (1)


(Credits), Net (1)


(Non-GAAP) (2)


($ in millions, except per share data)

Operating Income:








Transportation Solutions

$               344


$                   3


$                  (6)


$               341

Industrial Solutions

119


1


3


123

Communications Solutions

54


-


33


87

    Total 

$               517


$                   4


$                 30


$               551









Operating Margin

15.5%






16.5%









Other Expense, Net

$                  (1)


$                    -


$                    -


$                  (1)









Income Tax Expense

$                (52)


$                 (1)


$                (15)


$                (68)









Effective Tax Rate

10.6%






13.0%









Income from Continuing Operations 

$               437


$                   3


$                 15


$               455









Diluted Earnings per Share from 








   Continuing Operations

$              1.22


$              0.01


$              0.04


$              1.27









(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) See description of non-GAAP financial measures.

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Year Ended September 29, 2017

(UNAUDITED)


































Adjustments






Acquisition


Restructuring








Related


and Other


Tax


Adjusted


U.S. GAAP


Charges (1)


Charges, Net (1)


Items (2)


(Non-GAAP) (3)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$            1,299


$                   3


$                 67


$                    -


$            1,369

Industrial Solutions

364


8


73


-


445

Communications Solutions

384


-


8


-


392

    Total 

$            2,047


$                 11


$               148


$                    -


$            2,206











Operating Margin

15.6%








16.8%











Other Expense, Net

$                  (9)


$                    -


$                    -


$                   7


$                  (2)











Income Tax Expense

$              (255)


$                  (3)


$                (40)


$                (66)


$              (364)











Effective Tax Rate

13.2%








17.4%











Income from Continuing Operations 

$            1,673


$                   8


$               108


$                (59)


$            1,730











Diluted Earnings per Share from 










   Continuing Operations

$              4.67


$              0.02


$              0.30


$             (0.16)


$              4.83











(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 income tax benefits associated with the tax impacts of certain intercompany transactions and the corresponding reduction in the valuation allowance for U.S. tax loss carryforwards. Also includes income tax benefits associated with pre-separation tax matters and the related impact to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.

(3) See description of non-GAAP financial measures.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Year Ended September 30, 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

$            1,191


$                   9


$                 46


$                    -


$            1,246

Industrial Solutions

343


23


31


-


397

Communications Solutions

368


-


(75)


-


293

    Total 

$            1,902


$                 32


$                   2


$                    -


$            1,936











Operating Margin

15.5%








15.8%











Other Income (Expense), Net

$              (632)


$                    -


$                    -


$               650


$                  18











Income Tax (Expense) Benefit

$               779


$                  (7)


$                  (2)


$           (1,111)


$              (341)











Effective Tax Rate

(67.0)%








18.5%











Income from Continuing Operations 

$            1,941


$                 25


$                    -


$              (461)


$            1,505











Diluted Earnings per Share from 










   Continuing Operations

$              5.26


$              0.07


$                    -


$             (1.25)


$              4.08











(1) Includes $22 million of acquisition and integration costs and $10 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 financial measures.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended December 30, 2016

(UNAUDITED)
























Adjustments






Acquisition


Restructuring








Related


and Other


Tax


Adjusted


U.S. GAAP


Charges (1)


Charges, Net (1)


Items (2)


(Non-GAAP) (3)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$               343


$                   1


$                 24


$                    -


$               368

Industrial Solutions

67


2


21


-


90

Communications Solutions

76


-


2


-


78

    Total 

$               486


$                   3


$                 47


$                    -


$               536











Operating Margin

15.9%








17.5%











Income Tax Expense

$                (54)


$                  (1)


$                (13)


$                (30)


$                (98)











Effective Tax Rate

11.7%








19.2%











Income from Continuing Operations 

$               406


$                   2


$                 34


$                (30)


$               412











Diluted Earnings per Share from 










   Continuing Operations 

$              1.13


$              0.01


$              0.09


$             (0.08)


$              1.15











(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) Income tax benefits associated with the tax impacts of certain intercompany restructurings and the corresponding reduction in the valuation allowance for U.S. tax loss carryforwards.

(3) See description of non-GAAP financial measures.

 

 

TE CONNECTIVITY LTD.

IMPACT OF ADDITIONAL WEEK (UNAUDITED)


















































Change in Net Sales for the Quarter Ended
September 29, 2017 versus Net Sales for the
Quarter Ended September 30, 2016


Change in Organic Net Sales for the Quarter Ended
September 29, 2017 versus Organic Net Sales for the
Quarter Ended September 30, 2016 (2)












For the
Quarter Ended
September 29, 2017


For the Quarter Ended September 30, 2016







Adjustment






Adjustment






Adjustment





14 Weeks


Impact of


13 Weeks


14 Weeks


Impact of


13 Weeks


14 Weeks


Impact of


13 Weeks



U.S. GAAP


14th Week


(Non-GAAP) (1)(2)


U.S. GAAP


14th Week


(Non-GAAP) (1)(2)


(Non-GAAP) (2)


14th Week


(Non-GAAP) (1)(2)


 ($ in millions)

Net Sales:




















Transportation Solutions




















Automotive

$            1,350


$            1,311


$              (102)


$            1,209


3.0%


8.7%


11.7%


1.5%


8.6%


10.1%

Commercial transportation

274


215


(15)


200


27.4


9.6


37.0


26.9


9.6


36.5

Sensors

220


210


(13)


197


4.8


6.9


11.7


2.2


6.4


8.6

Total

1,844


1,736


(130)


1,606


6.2


8.6


14.8


4.7


8.5


13.2

Industrial Solutions




















Industrial equipment

490


427


(32)


395


14.8


9.3


24.1


5.0


8.4


13.4

Aerospace, defense, oil, and gas

284


299


(20)


279


(5.0)


6.8


1.8


(6.0)


6.7


0.7

Energy

180


193


(13)


180


(6.7)


6.7


-


(8.5)


6.8


(1.7)

Total

954


919


(65)


854


3.8


7.9


11.7


(1.5)


7.5


6.0

Communications Solutions




















Data and devices

254


262


(21)


241


(3.1)


8.5


5.4


(2.4)


8.4


6.0

Subsea communications

222


239


(11)


228


(7.1)


4.5


(2.6)


(7.1)


4.5


(2.6)

Appliances

182


176


(11)


165


3.4


6.9


10.3


2.9


7.4


10.3

Total

658


677


(43)


634


(2.8)


6.6


3.8


(2.9)


6.7


3.8

Total

$            3,456


$            3,332


$              (238)


$            3,094


3.7%


8.0%


11.7%


1.4%


7.9%


9.3%










































For the Quarter Ended September 30, 2016
































Adjustments




Adjustment














Acquisition


Restructuring


14 Weeks




13 Weeks












Related


and Other


Adjusted


Impact of


Adjusted










U.S. GAAP


Charges


Charges, Net 


(Non-GAAP) (2)


14th Week


(Non-GAAP) (1)(2)










 ($ in millions, except per share data)





























Operating Income

$               517


$                   4


$                 30


$               551


$                (55)


$               496





























Operating Margin

15.5%






16.5%




16.0%





























Diluted Earnings per Share from 




















   Continuing Operations

$              1.22


$              0.01


$              0.04


$              1.27


$             (0.13)


$              1.14

















































(1) Excludes the impact of an additional week in the fourth quarter of fiscal 2016. The impact of the additional week was estimated using an average weekly sales figure for the last month of the fiscal year.

(2) See description of non-GAAP financial measures.

 

 

TE CONNECTIVITY LTD.

IMPACT OF ADDITIONAL WEEK (UNAUDITED)


















































Change in Net Sales for Fiscal 2017
versus Net Sales for Fiscal 2016


Change in Organic Net Sales for Fiscal 2017
versus Organic Net Sales for Fiscal 2016(2)


Fiscal 2017


Fiscal 2016







Adjustment






Adjustment






Adjustment





53 Weeks


Impact of


52 Weeks


53 Weeks


Impact of


52 Weeks


53 Weeks


Impact of


52 Weeks



U.S. GAAP


53rd Week


(Non-GAAP) (1)(2)


U.S. GAAP


53rd Week


(Non-GAAP) (1)(2)


(Non-GAAP) (2)


53rd Week


(Non-GAAP) (1)(2)


 ($ in millions)

Net Sales:




















Transportation Solutions




















Automotive

$            5,228


$            4,912


$              (102)


$            4,810


6.4%


2.3%


8.7%


7.1%


2.3%


9.4%

Commercial transportation

997


825


(15)


810


20.8


2.3


23.1


21.9


2.2


24.1

Sensors

814


766


(13)


753


6.3


1.8


8.1


3.0


1.7


4.7

Total

7,039


6,503


(130)


6,373


8.2


2.3


10.5


8.5


2.1


10.6

Industrial Solutions




















Industrial equipment

1,747


1,419


(32)


1,387


23.1


2.9


26.0


5.5


2.4


7.9

Aerospace, defense, oil, and gas

1,075


1,100


(20)


1,080


(2.3)


1.8


(0.5)


(1.7)


1.8


0.1

Energy

685


696


(13)


683


(1.6)


1.9


0.3


(1.0)


1.9


0.9

Total

3,507


3,215


(65)


3,150


9.1


2.2


11.3


1.6


2.1


3.7

Communications Solutions




















Data and devices

963


1,020


(21)


999


(5.6)


2.0


(3.6)


2.3


2.3


4.6

Subsea communications

928


885


(11)


874


4.9


1.3


6.2


4.9


1.3


6.2

Appliances

676


615


(11)


604


9.9


2.0


11.9


10.8


2.2


13.0

Total

2,567


2,520


(43)


2,477


1.9


1.7


3.6


5.4


1.8


7.2

Total

$          13,113


$          12,238


$              (238)


$          12,000


7.1%


2.2%


9.3%


6.0%


2.1%


8.1%










































For the Year Ended September 30, 2016






























Adjustments




Adjustment












Acquisition


Restructuring




53 Weeks




52 Weeks










Related


and Other




Adjusted


Impact of


Adjusted








U.S. GAAP


Charges (3)


Charges, Net 


Tax Items (4)


(Non-GAAP) (2)


53rd Week


(Non-GAAP) (1)(2)








 ($ in millions, except per share data)



























Operating Income

$            1,902


$                 32


$                   2


$                    -


$            1,936


$                (55)


$            1,881



























Operating Margin

15.5%








15.8%




15.7%



























Diluted Earnings per Share from 




















   Continuing Operations

$              5.26


$              0.07


$                    -


$             (1.25)


$              4.08


$             (0.13)


$              3.95















































(1) Excludes the impact of an additional week in the fourth quarter of fiscal 2016. The impact of the additional week was estimated using an average weekly sales figure for the last month of the fiscal year.

(2) See description of non-GAAP financial measures.

(3) Includes $22 million of acquisition and integration costs and $10 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales.

(4) 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.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES

TO FORWARD-LOOKING GAAP FINANCIAL MEASURES

As of November 1, 2017

(UNAUDITED)






Outlook for




Quarter Ending




December 29,


 Outlook for 


2017


Fiscal 2018

Diluted earnings per share from continuing operations (GAAP)

 $1.12 - $1.16 


 $4.78 - $4.98 

Restructuring and other charges, net

0.10


0.31

Acquisition related charges

0.01


0.04

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

 $1.23 - $1.27 


 $5.13 - $5.33 









Net sales growth (GAAP)

9% - 12%


4% - 8%

Translation

(3)


(1)

(Acquisitions) divestitures, net

(2)


(1)

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

4% - 7%


2% - 6%









(1) See description of non-GAAP financial measures.

 

SOURCE TE Connectivity Ltd.

For further information: Media Relations: B.J. Talley , TE Connectivity , 610-893-9553 , bj.talley@te.com ; Investor Relations: Sujal Shah , TE Connectivity , 610-893-9790 , sujal.shah@te.com


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