TE Connectivity Reports Fiscal Second Quarter Results and Updates Full Year Outlook for Impact of Japan Earthquake

Second Quarter Results

- Net Sales of $3.5 Billion, Up 17 Percent Year-Over-Year

- GAAP EPS of $0.67; Adjusted EPS of $0.71, Up From $0.64 in Prior Year

- Free Cash Flow of $447 Million, Up From $422 Million in Prior Year

Outlook

- Third Quarter:

* Sales of $3.50 to $3.65 Billion; Up 13 to 18 Percent From Prior Year

* Adjusted EPS of $0.68 to $0.74; Compared to $0.70 in the Prior Year

* Negative Impact From Japan Earthquake Approximately $135 Million of Sales and $0.09 of EPS

- Full Year:

Apr 21, 2011

SCHAFFHAUSEN, Switzerland, April 21, 2011 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal second quarter ended Mar. 25, 2011.  The company reported a net sales increase of 17 percent year-over-year, and 9 percent sequentially, to $3.5 billion.  Earnings Per Share from Continuing Operations (GAAP EPS) were $0.67 for the quarter, compared to $0.66 in the prior-year period.  Included in the GAAP EPS were $0.05 per share of ADC acquisition-related charges and $0.01 per share of restructuring and other credits.  This compares to $0.02 per share of restructuring and other charges and $0.04 per share of income related to tax items in the prior-year quarter.  Adjusted EPS were $0.71 in the quarter, up 11 percent compared to $0.64 in the prior-year quarter.  In the fiscal second quarter, the acquisition of ADC contributed $279 million of revenues and approximately $0.02 to adjusted EPS.  

(Logo: http://photos.prnewswire.com/prnh/20110310/PH62357LOGO )

"Our second quarter overall was solid with double-digit sales and adjusted earnings growth versus the prior year and continued orders growth in most of our markets, especially automotive, industrial and telecom networks,” said TE Connectivity Chief Executive Officer Tom Lynch.  “In addition, the benefits of the ADC acquisition began to materialize during the quarter as sales and earnings were on track and we were awarded a $400 million contract to supply network connectivity products for the Australian government’s National Broadband Network.  

“Our company, like many others, is being impacted by the earthquake in Japan.  We feel fortunate that all 2,000 of our people there came through the earthquake safely and I want to thank them for their commitment to keeping our operations running and supporting our customers during these trying times,” Lynch continued.  “The situation is creating disruptions to some of our customers’ operations and we expect the majority of this impact to be in our third quarter.”  

UPDATED 2011 OUTLOOK

“Despite the negative impact from the earthquake in Japan, the strength in our automotive, network infrastructure and industrial markets, coupled with the contribution of the ADC acquisition, is driving strong year-over-year adjusted earnings growth of 16 to 21 percent,” Lynch said.  

For the third quarter, the company expects net sales of $3.50 to $3.65 billion, an increase of 13 to 18 percent over the prior-year period.  GAAP EPS are expected to be $0.65 to $0.71, including acquisition-related and restructuring charges of $0.03.  Adjusted EPS are expected to be $0.68 to $0.74, compared to adjusted EPS of $0.70 in the prior-year period.  Included in this guidance are approximately $320 million of sales and $0.05 of adjusted EPS related to the ADC acquisition, as well as a negative impact of $135 million of sales and $0.09 of EPS due to the Japan earthquake.

For the full fiscal year, which includes 53 weeks, the company expects sales of $14.0 to $14.3 billion, an increase of 16 to 18 percent over the prior year.  GAAP EPS are expected to be $2.73 to $2.85, including acquisition-related and restructuring charges of approximately $0.22 per share.  Adjusted EPS are expected to be $2.95 to $3.07, up 16 to 21 percent compared to adjusted EPS of $2.54 in the prior year.  This guidance includes approximately $1.0 billion of sales and $0.12 of adjusted EPS due to the ADC acquisition, $240 million of sales and $0.05 of EPS due to the impact of the additional week in the fiscal year 2011, as well as the negative impact of approximately $220 million of sales and $0.14 of EPS due to the Japan earthquake.

This outlook assumes current foreign exchange and commodity rates.  

Information about TE Connectivity’s use of non-GAAP financial measures is described at the end of this press release.  For a reconciliation of these non-GAAP financial measures, see the attached tables.  

FISCAL SECOND QUARTER 2011 RESULTS

All dollar amounts are pre-tax and stated in millions.  


($ in millions)


Mar. 25, 2011


Dec. 24, 2010


Mar. 26, 2010

% Change

Sequential

% Change

YoY

Net Sales

$3,472

$3,200

$2,957

9%

17%

Operating Income

$405

$400

$398

1%

2%

Restructuring and Other Credits (Charges)

$4

$(4)

$(12)



Acquisition Related Charges

$(48)

$(59)

$0



Adjusted Operating Income

$449

$463

$410

(3)%

10%

Operating Margin

11.7%

12.5%

13.5%



Adjusted Operating Margin

12.9%

14.5%

13.9%





Sales grew 17 percent compared to the prior-year quarter and 9 percent sequentially.  Organically, sales increased 7 percent compared to the prior-year and 1 percent sequentially.  By segment, and on an organic basis, sales in the Transportation Solutions segment were up 14 percent compared to the prior year, primarily driven by continued growth in global automotive production and increased content.  Sales in the Communications and Industrial Solutions segment were up 3 percent compared to the prior year driven by the industrial market.  Sales were up 3 percent compared to the prior year in the Network Solutions segment driven by double-digit improvement in all end markets except our Subsea Communications business, which declined as expected.    

The adjusted operating margin was 12.9 percent in the quarter, down 100 basis points versus the prior year and 160 basis points sequentially primarily as a result of the acquisition of ADC.

CASH FLOW

Cash from continuing operations was $557 million during the quarter.  Free cash flow was $447 million.  The company now expects free cash flow in excess of $1.3 billion in fiscal 2011, excluding the estimated $105 million of cash expenditures related to the ADC acquisition.

ORDERS

Total company orders were $3.5 billion, an increase of 16 percent compared to the prior year and up 11 percent sequentially.  Orders were up 6 percent organically compared to the prior year and up 4 percent sequentially.  The book-to-bill ratio was 1.02 overall and 1.05, excluding the Subsea Communications business.

ADDITIONAL ITEMS

  • In April, the company’s Subsea Communications business finalized an agreement with the SJC consortium to participate in the construction of a major undersea communications network in Southeast Asia.  The value of the contract is estimated to be approximately $180 million.
  • In April, the company completed a $75 million sale of non-core patents acquired as part of ADC.
  • In March, the company’s shareholders approved a 12.5 percent increase in the dividend to $0.18 for the four fiscal quarters beginning with the June quarter of 2011.  Shareholders also approved the company’s name change to TE Connectivity Ltd.

ABOUT TE CONNECTIVITY

TE Connectivity is a global, $12.1 billion company that designs and manufactures over 500,000 products that connect and protect the flow of power and data inside the products that touch every aspect of our lives. Our nearly 100,000 employees partner with customers in virtually every industry -- from consumer electronics, energy and healthcare, to automotive, aerospace and communication networks -- enabling smarter, faster, better technologies to connect products to possibilities. More information on TE Connectivity can be found at http://www.te.com.

CONFERENCE CALL AND WEBCAST

  • The company will hold a conference call for investors today beginning at 8:30 a.m. EDT.
  • Internet users will be able to access the company’s earnings webcast, including slide materials, at the “Investors” section of TE Connectivity’s website: http://investors.te.com.
  • For both “listen-only” participants and those participants who wish to take part in the question-and-answer portion of the call, the telephone dial-in number in the United States is (800) 553-5275. The telephone dial-in number for participants outside the United States is (612) 332-0725.
  • An audio replay of the conference call will be available beginning at 10:30 a.m. EDT on Apr. 21, 2011 and ending at 11:59 p.m. EDT on Apr. 28, 2011. The dial-in number for participants in the United States is (800) 475-6701.  For participants outside the United States, the replay dial-in number is (320) 365-3844. The replay access code for all callers is 193182.

NON-GAAP MEASURES

“Organic Sales Growth,” “Adjusted Operating Income,” “Adjusted Operating Margin,” “Adjusted Other Income, Net,” “Adjusted Income Tax Expense,” “Adjusted Income from Continuing Operations,” “Adjusted Earnings Per Share,” and “Free Cash Flow” (FCF) are non-GAAP measures and should not be considered replacements for GAAP results.  

“Organic Sales Growth” is a useful measure used by the company to measure the underlying results and trends in the business.  The difference between reported net sales growth (the most comparable GAAP measure) and Organic Sales Growth (the non-GAAP measure) consists of the impact from foreign currency, acquisitions and divestitures.  Organic Sales Growth is a useful measure of the company’s performance because it excludes items that:  i) are not completely under management’s control, such as the impact of foreign currency exchange; or ii) do not reflect the underlying growth of the company, such as acquisition and divestiture activity.  The limitation of this measure is that it excludes items that have an impact on the company’s sales.  This limitation is best addressed by using organic sales growth in combination with the GAAP results.  See the accompanying tables to this release for the reconciliation presenting the components of Organic Sales Growth.

The company has presented its operating income before special items including charges or income related to legal settlements and reserves, restructuring and other charges, and acquisition related charges (“Adjusted Operating Income”).  The company utilizes 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 is also a significant component in the company’s incentive compensation plans.  Adjusted Operating Income is a useful measure for investors because it better reflects the company’s underlying operating results, trends, and the comparability of these results between periods.  The difference between Adjusted Operating Income and operating income (the most comparable GAAP measure) consists of the impact of charges or income related to legal settlements and reserves, restructuring and other charges, and acquisition related charges that may mask the underlying operating results and/or business trends.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease the company’s reported operating income.  This limitation is best addressed by using Adjusted Operating Income in combination with operating income (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.

The company has presented its operating margin before special items including charges or income related to legal settlements and reserves, restructuring and other charges, and acquisition related charges (“Adjusted Operating Margin”).  The company presents Adjusted Operating Margin before special items to give investors a perspective on the underlying business results.  Because the company cannot predict the amount and timing of such items and the associated charges or gains that will be recorded in the company’s financial statements, it is difficult to include the impact of those items in the forecast.

The company has presented other income, net before special items including tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items (“Adjusted Other Income, Net”).  The company presents Adjusted Other Income, Net as it believes that it is appropriate for investors to consider results excluding these items in addition to its results in accordance with GAAP.  The difference between Adjusted Other Income, Net and other income, net (the most comparable GAAP measure) consists of tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease other income, net.  This limitation is best addressed by using Adjusted Other Income, Net in combination with other income, net (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

The company has presented income tax expense after adjusting for the tax effect of special items including charges related to restructuring and other charges, acquisition related charges, and certain significant special tax items (“Adjusted Income Tax Expense”).  The company presents 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).  The difference between Adjusted Income Tax Expense and income tax expense (the most comparable GAAP measure) is the tax effect of adjusting items and certain significant special tax items.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease income tax expense.  This limitation is best addressed by using Adjusted Income Tax Expense in combination with income tax expense (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

The company has presented income from continuing operations attributable to TE Connectivity Ltd. before special items including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, and, if applicable, related tax effects (“Adjusted Income from Continuing Operations”).  The company presents Adjusted Income from Continuing Operations as it believes that it is appropriate for investors to consider results excluding these items in addition to its results in accordance with GAAP.  Adjusted Income from Continuing Operations provides additional information regarding the company’s underlying operating results, trends and the comparability of these results between periods.  The difference between Adjusted Income from Continuing Operations and income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) consists of the impact of charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, and, if applicable, related tax effects.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease the company’s reported results.  This limitation is best addressed by using Adjusted Income from Continuing Operations in combination with income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

The company has presented diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. before special items, including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, and, if applicable, related tax effects (“Adjusted Earnings Per Share”).  The company presents Adjusted Earnings Per Share because it believes that it is appropriate for investors to consider results excluding these items in addition to its results in accordance with GAAP.  The company believes such a measure provides a picture of its results that is more comparable among periods since it excludes the impact of special items, which may recur, but tend to be irregular as to timing, thereby making comparisons between periods more difficult.  This limitation is best addressed by using Adjusted Earnings Per Share in combination with diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.

“Free Cash Flow” (FCF) is a useful measure of the company’s cash generation which is free from any significant existing obligation.  The difference between cash flows from operating activities (the most comparable GAAP measure) and FCF (the non-GAAP measure) consists mainly of significant cash outflows that the company believes are useful to identify.  FCF permits management and investors to gain insight into the amount that management employs to measure cash that is free from any significant existing obligation.  The difference reflects the impact from:

  • net capital expenditures,
  • voluntary pension contributions, and
  • cash impact of special items.

Net capital expenditures are subtracted because they represent long-term commitments.  Voluntary pension contributions are subtracted from the GAAP measure because this activity is driven by economic financing decisions rather than operating activity.  The company forecasts its cash flow results excluding any voluntary pension contributions because it has not yet made a determination about the amount and timing of any such future contributions.  In addition, the company’s forecast excludes the cash impact of special items because the company cannot predict the amount and timing of such items.

The limitation associated with using FCF is that it subtracts cash items that are ultimately within management’s and the Board of Directors’ discretion to direct and that therefore may imply that there is less or more cash that is available for the company's programs than the most comparable GAAP measure.  This limitation is best addressed by using FCF in combination with the GAAP cash flow results.

FCF as presented herein may not be comparable to similarly-titled measures reported by other companies.  The measure should be used in conjunction with other GAAP financial measures.  Investors are urged to read the company’s financial statements as filed with the Securities and Exchange Commission, as well as the accompanying tables to this release that show all the elements of the GAAP measures of Cash Flows from Operating Activities, Cash Flows from Investing Activities, Cash Flows from Financing Activities and a reconciliation of the company's total cash and cash equivalents for the period.  See the accompanying tables to this release for a cash flow statement presented in accordance with GAAP and a reconciliation presenting the components of FCF.

Because the company does not predict the amount and timing of special items that might occur in the future, and its forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, the company does not provide reconciliations to GAAP of its forward-looking financial measures.

FORWARD-LOOKING STATEMENTS

This release may contain certain “forward-looking statements” within the meaning of the United States 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. TE Connectivity has no intention and is under no obligation to update or alter (and expressly disclaims any such intention or obligation to do so) its 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 developments in the credit markets; conditions affecting demand for products, particularly the automotive industry and the telecommunications, computer and consumer electronics industries; future goodwill impairment; competition and pricing pressure; fluctuations in foreign currency exchange rates and commodity prices, natural disasters; political, economic and military instability in countries in which the company operates; 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 ADC will not be integrated successfully into TE Connectivity; and the risk that revenue opportunities, cost savings and other anticipated synergies from the transaction 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’s Annual Report on Form 10-K for the fiscal year ended Sept. 24, 2010 and Quarterly Report on Form 10-Q for the quarterly period ended Dec. 24, 2010, as well as in TE Connectivity’s Current Reports on Form 8-K and other reports filed by TE Connectivity with the Securities and Exchange Commission.

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


















For the Quarters Ended


For the Six Months Ended


March 25,


March 26,


March 25,


March 26,


2011


2010


2011


2010


(in millions, except per share data)









Net sales

$     3,472


$     2,957


$     6,672


$     5,849

Cost of sales

2,428


1,999


4,607


4,050

Gross margin

1,044


958


2,065


1,799

Selling, general, and administrative expenses

445


406


847


774

Research, development, and engineering expenses

180


142


343


280

Acquisition and integration costs

1


-


18


-

Restructuring and other charges, net

13


12


52


78

  Operating income  

405


398


805


667

Interest income

6


6


11


10

Interest expense

(43)


(38)


(78)


(77)

Other income, net

6


75


18


83

  Income from continuing operations before income taxes

374


441


756


683

Income tax expense

(74)


(135)


(187)


(204)

  Income from continuing operations

300


306


569


479

Loss from discontinued operations, net of income taxes

-


-


(3)


-

  Net income  

300


306


566


479

Less: net income attributable to noncontrolling interests

(1)


(2)


(2)


(3)

Net income attributable to TE Connectivity Ltd.

$        299


$        304


$        564


$        476









Amounts attributable to TE Connectivity Ltd.:








Income from continuing operations

$        299


$        304


$        567


$        476

Loss from discontinued operations

-


-


(3)


-

Net income  

$        299


$        304


$        564


$        476









Basic earnings (loss) per share attributable to TE Connectivity Ltd.:








  Income from continuing operations

$       0.67


$       0.67


$       1.28


$       1.04

  Loss from discontinued operations

-


-


(0.01)


-

  Net income  

$       0.67


$       0.67


$       1.27


$       1.04









Diluted earnings (loss) per share attributable to TE Connectivity Ltd.:








  Income from continuing operations

$       0.67


$       0.66


$       1.26


$       1.03

  Loss from discontinued operations

-


-


-


-

  Net income  

$       0.67


$       0.66


$       1.26


$       1.03









Cash distributions paid per common share of TE Connectivity Ltd.

$       0.16


$       0.16


$       0.32


$       0.32









Weighted-average number of shares outstanding:








  Basic

443


457


444


458

  Diluted

449


461


449


461



TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)










March 25,


September 24,


2011


2010


(in millions, except share data)

Assets




Current Assets:




Cash and cash equivalents

$     1,239


$              1,990

Accounts receivable, net of allowance for doubtful accounts of $32 and $44, respectively

2,495


2,259

Inventories

1,912


1,583

Prepaid expenses and other current assets

834


651

Deferred income taxes

263


248

 Total current assets

6,743


6,731

Property, plant, and equipment, net

3,129


2,867

Goodwill

3,602


3,211

Intangible assets, net

670


392

Deferred income taxes

2,547


2,447

Receivable from Tyco International Ltd. and Covidien plc

1,150


1,127

Other assets

239


217

Total Assets

$   18,080


$            16,992





Liabilities and Shareholders' Equity




Current Liabilities:




Current maturities of long-term debt

$        185


$                 106

Accounts payable

1,558


1,386

Accrued and other current liabilities

1,875


1,804

Deferred revenue

132


164

 Total current liabilities

3,750


3,460

Long-term debt

2,559


2,307

Long-term pension and postretirement liabilities

1,387


1,280

Deferred income taxes

285


285

Income taxes

2,223


2,152

Other liabilities

540


452

Total Liabilities

10,744


9,936

Commitments and contingencies




Shareholders' Equity:




Common shares, 468,215,574 shares authorized and issued, CHF 1.37 par value and




CHF 1.73 par value, respectively

599


599

Contributed surplus

7,726


8,085

Accumulated deficit

(596)


(1,161)

Treasury shares, at cost, 28,542,459 and 24,845,929 shares, respectively

(851)


(721)

Accumulated other comprehensive income

447


246

Total TE Connectivity Ltd. shareholders' equity

7,325


7,048

Noncontrolling interests

11


8

Total Shareholders' Equity

7,336


7,056

Total Liabilities and Shareholders' Equity

$   18,080


$            16,992



TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



For the Quarters Ended


For the Six Months Ended


March 25,


March 26,


March 25,


March 26,


2011


2010


2011


2010


(in millions)

Cash Flows From Operating Activities:








Net income

$        300


$        306


$        566


$        479

   Loss from discontinued operations, net of income taxes

-


-


3


-

Income from continuing operations

300


306


569


479

Adjustments to reconcile net cash provided by operating activities:








Non-cash restructuring and other charges, net

5


(3)


5


16

Depreciation and amortization

148


128


281


266

Deferred income taxes

(1)


102


104


155

Provision for losses on accounts receivable and inventories

7


5


13


-

Tax sharing income

(4)


(75)


(17)


(83)

Other

26


18


49


38

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








Accounts receivable, net

(19)


(70)


(12)


(146)

Inventories

(71)


(109)


(177)


(129)

Inventoried costs on long-term contracts

32


(5)


31


(25)

Prepaid expenses and other current assets

6


(1)


49


26

Accounts payable

25


98


29


260

Accrued and other current liabilities

87


101


(258)


4

Income taxes

13


-


13


-

Deferred revenue

(26)


(12)


(38)


(40)

Long-term pension and postretirement liabilities

22


21


44


15

Other

7


(4)


26


(6)

Net cash provided by operating activities

557


500


711


830

Cash Flows From Investing Activities:








Capital expenditures

(114)


(81)


(231)


(157)

Proceeds from sale of property, plant, and equipment

4


3


12


5

Proceeds from sale of short-term investments

118


-


155


1

Acquisition of business, net of cash acquired

-


(55)


(717)


(55)

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

-


-


-


12

Other

(5)


(2)


(9)


(5)

Net cash provided by (used in) investing activities

3


(135)


(790)


(199)

Cash Flows From Financing Activities:








Decrease in commercial paper

-


-


(100)


-

Proceeds from long-term debt

-


-


249


-

Repayment of long-term debt

(470)


-


(470)


-

Proceeds from exercise of share options

41


2


65


3

Repurchase of common shares

(236)


(147)


(281)


(165)

Payment of cash distributions to shareholders

(70)


(72)


(141)


(146)

Other

(2)


(3)


(6)


(5)

Net cash used in financing activities

(737)


(220)


(684)


(313)

Effect of currency translation on cash

9


(1)


12


-

Net increase (decrease) in cash and cash equivalents

(168)


144


(751)


318

Cash and cash equivalents at beginning of period

1,407


1,695


1,990


1,521

Cash and cash equivalents at end of period

$     1,239


$     1,839


$     1,239


$     1,839









Supplemental Cash Flow Information:








Income taxes paid, net of refunds

$          61


$          32


$          69


$          48









Reconciliation to Free Cash Flow:








Net cash provided by continuing operating activities

$        557


$        500


$        711


$        830

Capital expenditures, net

(110)


(78)


(219)


(152)

Free cash flow (1)

$        447


$        422


$        492


$        678









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



TE CONNECTIVITY LTD.

CONSOLIDATED SEGMENT DATA (UNAUDITED)


























For the Quarters Ended



For the Six Months Ended



March 25,



March 26,



March 25,



March 26,



2011



2010



2011



2010



($ in millions)


Net Sales:












Transportation Solutions

$     1,357



$     1,198



$     2,668



$     2,377


Communications and Industrial Solutions

1,208



1,157



2,431



2,247


Network Solutions

907



602



1,573



1,225


Total

$     3,472



$     2,957



$     6,672



$     5,849


























Operating Income:












Transportation Solutions

$        211

15.5%


$        149

12.4%


$        400

15.0%


$        248

10.4%

Communications and Industrial Solutions

146

12.1%


162

14.0%


327

13.5%


277

12.3%

Network Solutions

48

5.3%


87

14.5%


78

5.0%


142

11.6%

Total

$        405

11.7%


$        398

13.5%


$        805

12.1%


$        667

11.4%



TE CONNECTIVITY LTD.

NET SALES GROWTH RECONCILIATION (UNAUDITED)


















































Percentage


Change in Net Sales for the

Quarter Ended March 25, 2011



of Segment's

Total


versus Net Sales for the

Quarter Ended March 26, 2010



Net Sales

for the


Organic (1)



Translation (2)


Acquisition

(Divestiture)


Total



Quarter

Ended

March 25,

2011


($ in millions)




Transportation

Solutions (3):

















Automotive

$ 157


15.1%



$             12


$              (21)


$ 148


14.1%



88%


Aerospace, Defense, and Marine

10


7.3



1


-


11


7.2



12


Total

167


14.0



13


(21)


159


13.3



100%


Communications

and Industrial

Solutions (3):

















Industrial

34


10.3



5


-


39


11.5



31


Data Communications

20


9.5



6


-


26


11.7



21


Appliance

9


4.9



2


-


11


5.9



16


Consumer Devices

(30)


(15.0)



5


(5)


(30)


(14.9)



14


Computer

(3)


(2.6)



1


-


(2)


(1.7)



10


Touch Solutions

7


7.5



-


-


7


7.8



8


Total

37


3.3



19


(5)


51


4.4



100%


Network

Solutions (3):

















Telecom Networks

35


32.9



4


232


271


242.0



43


Energy

19


11.6



4


-


23


13.4



21


Enterprise Networks

20


19.7



3


47


70


63.6



20


Subsea Communications

(59)


(28.4)



-


-


(59)


(28.4)



16


Total

15


2.6



11


279


305


50.7



100%


  Total

$ 219


7.4%



$             43


$              253


$ 515


17.4%







































Percentage


Change in Net Sales for the

Six Months Ended March 25, 2011



of Segment's

Total


versus Net Sales for the

Six Months Ended March 26, 2010



Net Sales

for the


Organic (1)



Translation (2)


Acquisition (Divestitures)


Total



Six Months

Ended

March 25,

2011


($ in millions)




Transportation

Solutions (3):

















Automotive

$ 322


15.6%



$           (12)


$              (44)


$ 266


12.8%



88%


Aerospace, Defense, and Marine

26


9.4



(1)


-


25


8.5



12


Total

348


14.7



(13)


(44)


291


12.2



100%


Communications

and Industrial

Solutions (3):

















Industrial

106


16.7



(1)


(1)


104


16.2



31


Data Communications

62


14.3



7


-


69


15.9



21


Appliance

40


11.3



-


-


40


11.4



16


Consumer Devices

(35)


(8.5)



8


(9)


(36)


(8.8)



15


Computer

(2)


(0.7)



4


-


2


0.9



10


Touch Solutions

6


3.6



(1)


-


5


2.8



7


Total

177


7.9



17


(10)


184


8.2



100%


Network

Solutions (3):

















Telecom Networks

71


33.3



2


277


350


155.6



37


Energy

41


12.2



(1)


(12)


28


7.5



25


Enterprise Networks

29


14.7



4


53


86


39.1



19


Subsea Communications

(116)


(28.5)



-


-


(116)


(28.4)



19


Total

25


2.1



5


318


348


28.4



100%


  Total

$ 550


9.4%



$               9


$              264


$ 823


14.1%






















(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 about net sales is presented consistently with our internal management reporting and may be periodically revised as management deems necessary.



TE CONNECTIVITY LTD.

NET SALES GROWTH RECONCILIATION (UNAUDITED)

































Percentage
















of Segment's

Total


Change in Net Sales for the

Quarter Ended March 25, 2011



Net Sales

for the


versus Net Sales for the

Quarter Ended December 24, 2010



Quarter

Ended


Organic (1)



Translation (2)


Acquisition


Total



March 25,

2011


($ in millions)




Transportation

Solutions (3):

















Automotive

$ 37


3.2%



$               3


$                -


$   40


3.5%



88%


Aerospace, Defense, and Marine

6


3.7



-


-


6


3.8



12


Total

43


3.3



3


-


46


3.5



100%


Communications

and Industrial

Solutions (3):

















Industrial

9


2.2



(1)


-


8


2.2



31


Data Communications

(8)


(3.1)



1


-


(7)


(2.7)



21


Appliance

4


2.0



-


-


4


2.1



16


Consumer Devices

(34)


(16.6)



1


-


(33)


(16.2)



14


Computer

1


1.0



-


-


1


0.9



10


Touch Solutions

11


13.5



1


-


12


14.1



8


Total

(17)


(1.4)



2


-


(15)


(1.2)



100%


Network

Solutions (3):

















Telecom Networks

4


2.3



-


187


191


99.5



43


Energy

(11)


(5.5)



1


-


(10)


(4.9)



21


Enterprise Networks

14


11.2



(1)


41


54


42.9



20


Subsea Communications

6


4.1



-


-


6


4.2



16


Total

13


2.0



-


228


241


36.2



100%


  Total

$ 39


1.2%



$               5


$           228


$ 272


8.5%






















(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 about net sales is presented consistently with our internal management reporting and may be periodically revised as management deems necessary.



TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended March 25, 2011

(UNAUDITED)




























Adjustments






Acquisition


Restructuring






Related


and Other


Adjusted


U.S. GAAP


Charges (1)


Charges, Net


(Non-GAAP) (2)


($ in millions, except per share data)

Operating Income:








Transportation Solutions

$        211


$                -


$                  (6)


$               205

Communications and Industrial Solutions

146


-


1


147

Network Solutions

48


48


1


97

   Total

$        405


$             48


$                  (4)


$               449









Operating Margin

11.7%






12.9%









Other Income, Net

$            6


$                -


$                    -


$                   6









Income Tax Expense

$         (74)


$           (26)


$                    -


$             (100)









Income from Continuing Operations








  Attributable to TE Connectivity Ltd.

$        299


$             22


$                  (4)


$               317









Diluted Earnings per Share from








  Continuing Operations Attributable








  to TE Connectivity Ltd.

$       0.67


$          0.05


$             (0.01)


$              0.71









(1) Includes $30 million of non-cash amortization associated with fair value adjustments primarily related to acquired inventories and customer order backlog recorded in cost of sales, $17 million of restructuring charges, and $1 million of ADC acquisition and integration costs.

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



TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended March 26, 2010

(UNAUDITED)




























Adjustments






Restructuring








and Other


Tax


Adjusted


U.S. GAAP


Charges, Net


Items (1)


(Non-GAAP) (2)


($ in millions, except per share data)

Operating Income:








Transportation Solutions

$        149


$                    -


$         -


$               149

Communications and Industrial Solutions

162


12


-


174

Network Solutions

87


-


-


87

   Total

$        398


$                  12


$         -


$               410









Operating Margin

13.5%






13.9%









Other Income, Net

$          75


$                    -


$     (64)


$                 11









Income Tax Expense

$       (135)


$                  (1)


$       46


$               (90)









Income from Continuing Operations








  Attributable to TE Connectivity Ltd.

$        304


$                  11


$     (18)


$               297









Diluted Earnings per Share from








  Continuing Operations Attributable








  to TE Connectivity Ltd.

$       0.66


$               0.02


$  (0.04)


$              0.64









(1) Includes income tax expense related to certain proposed adjustments to prior year tax returns and the related impact to other income pursuant to the Tax Sharing Agreement with Tyco International and Covidien.  Also includes an income tax benefit recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards.

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



TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Six Months Ended March 25, 2011

(UNAUDITED)




























Adjustments






Acquisition


Restructuring






Related


and Other


Adjusted


U.S. GAAP


Charges (1)


Charges, Net


(Non-GAAP) (2)


($ in millions, except per share data)

Operating Income:








Transportation Solutions

$        400


$                -


$                  (5)


$               395

Communications and Industrial Solutions

327


-


4


331

Network Solutions

78


107


1


186

Total

$        805


$           107


$                    -


$               912









Operating Margin

12.1%






13.7%









Other Income, Net

$          18


$                -


$                    -


$                 18









Income Tax Expense

$       (187)


$           (26)


$                  (1)


$              (214)









Income from Continuing Operations








  Attributable to TE Connectivity Ltd.

$        567


$             81


$                  (1)


$               647









Diluted Earnings per Share from








  Continuing Operations Attributable








  to TE Connectivity Ltd.

$       1.26


$          0.18


$                    -


$              1.44









(1) Includes $52 million of restructuring charges, $37 million of non-cash amortization associated with fair value adjustments primarily related to acquired inventories and customer order backlog recorded in cost of sales, and $18 million of ADC acquisition and integration costs.

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



TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Six Months Ended March 26, 2010

(UNAUDITED)




























Adjustments






Restructuring








and Other


Tax


Adjusted


U.S. GAAP


Charges, Net (1)


Items (2)


(Non-GAAP) (3)


($ in millions, except per share data)

Operating Income:








Transportation Solutions

$        248


$                    37


$         -


$               285

Communications and Industrial Solutions

277


19


-


296

Network Solutions

142


19


-


161

   Total

$        667


$                    75


$         -


$               742









Operating Margin

11.4%






12.7%









Other Income, Net

$          83


$                      -


$     (64)


$                 19









Income Tax Expense

$       (204)


$                  (17)


$       46


$             (175)









Income from Continuing Operations








  Attributable to TE Connectivity Ltd.

$        476


$                    58


$     (18)


$               516









Diluted Earnings per Share from








  Continuing Operations Attributable








  to TE Connectivity Ltd.

$       1.03


$                 0.13


$  (0.04)


$              1.12









(1) Includes $78 million recorded in net restructuring and other charges and a $3 million credit recorded in cost of sales.

(2) Includes income tax expense related to certain proposed adjustments to prior year tax returns and the related impact to other income pursuant to the Tax Sharing Agreement with Tyco International and Covidien.  Also includes an income tax benefit recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards.

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



TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended December 24, 2010

(UNAUDITED)




























Adjustments






Acquisition


Restructuring






Related


and Other


Adjusted


U.S. GAAP


Charges (1)


Charges, Net


(Non-GAAP) (2)


($ in millions, except per share data)

Operating Income:








Transportation Solutions

$        189


$                -


$                    1


$               190

Communications and Industrial Solutions

181


-


3


184

Network Solutions

30


59


-


89

Total

$        400


$             59


$                    4


$               463









Operating Margin

12.5%






14.5%









Other Income, Net

$          12


$                -


$                    -


$                 12









Income Tax Expense

$       (113)


$                -


$                  (1)


$              (114)









Income from Continuing Operations








  Attributable to TE Connectivity Ltd.

$        268


$             59


$                    3


$               330









Diluted Earnings per Share from








  Continuing Operations Attributable








  to TE Connectivity Ltd.

$       0.60


$          0.13


$               0.01


$              0.73









(1) Includes $35 million of restructuring charges, $17 million of ADC acquisition and integration costs, and $7 million of non-cash amortization associated with fair value adjustments to acquired inventories and customer order backlog recorded in cost of sales.

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



TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended June 25, 2010

(UNAUDITED)


































Adjustments






Restructuring










and Other


Tax


Other Items,


Adjusted


U.S. GAAP


Charges, Net


Items (1)


Net (2)


(Non-GAAP) (3)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$        159


$                    6


$         -


$                  -


$               165

Communications and Industrial Solutions

205


(1)


-


-


204

Network Solutions

96


(2)


-


-


94

Pre-separation litigation income

7


-


-


(7)


-

Total

$        467


$                    3


$         -


$                (7)


$               463











Operating Margin

15.1%








15.0%











Other Income, Net

$          42


$                    -


$     (33)


$                  -


$                   9











Income Tax Expense

$       (144)


$                    -


$       26


$                  -


$             (118)











Income from Continuing

  Operations Attributable

  to TE Connectivity Ltd.










$        330


$                    3


$       (7)


$                (7)


$               319











Diluted Earnings per Share

  from Continuing

  Operations Attributable to

  TE Connectivity Ltd.



















$       0.72


$               0.01


$  (0.02)


$           (0.02)


$              0.70











(1) Includes income tax expense related to certain proposed adjustments to prior year tax returns and income tax benefits associated with the completion of an audit of prior year tax returns.  Also includes the related impact to other income pursuant to the Tax Sharing Agreement with Tyco International and Covidien.

(2) Consists of $7 million of income related to pre-separation securities litigation.

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



TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Year Ended September 24, 2010

(UNAUDITED)


































Adjustments






Restructuring










and Other


Tax


Other Items,


Adjusted


U.S. GAAP


Charges, Net (1)


Items (2)


Net (3)


(Non-GAAP) (4)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$        515


$                    94


$         -


$                  -


$               609

Communications and Industrial Solutions

682


20


-


-


702

Network Solutions

312


20


-


8


340

Pre-separation litigation income

7


-


-


(7)


-

Total

$     1,516


$                  134


$         -


$                 1


$            1,651











Operating Margin

12.6%








13.7%











Other Income, Net

$        177


$                      -


$   (137)


$                  -


$                 40











Income Tax Expense

$       (493)


$                  (30)


$     134


$                  -


$              (389)











Income from Continuing

  Operations Attributable

  to TE Connectivity Ltd.

$     1,059


$                  104


$       (3)


$                 1


$            1,161











Diluted Earnings per Share

  from Continuing

  Operations Attributable to

  TE Connectivity Ltd.

$       2.32


$                 0.23


$  (0.01)


$                  -


$              2.54











(1) Includes $137 million recorded in net restructuring and other charges and a $3 million credit recorded in cost of sales.

(2) Includes income tax expense related to certain proposed adjustments to prior year tax returns and income tax benefits associated with the settlement of an audit of prior year tax returns as well as the related impact to other income pursuant to the Tax Sharing Agreement with Tyco International and Covidien.  Also includes an income tax benefit recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards.

(3) Consists of $8 million of acquisition and integration costs and $7 million of credits related to pre-separation securities litigation.

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



SOURCE TE Connectivity Ltd.


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